Vol. 76 Thursday, No. 231 December 1, 2011

Part II

Environmental Protection Agency

40 CFR Parts 85, 86, and 600

Department of Transportation

National Highway Traffic Safety Administration 49 CFR Parts 523, 531, 533 et al. 2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards; Proposed Rule

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ENVIRONMENTAL PROTECTION also proposing a minor change to the Ave. NW., Washington, DC, Attention AGENCY regulations applicable to MY 2012– Docket ID No. EPA–HQ–OAR–2010– 2016, with respect to air conditioner 0799. Such deliveries are only accepted 40 CFR Parts 85, 86, and 600 performance and measurement of during the Docket’s normal hours of nitrous oxides. operation, and special arrangements DATES: Comments: Comments must be should be made for deliveries of boxed DEPARTMENT OF TRANSPORTATION received on or before January 30, 2012. information. Under the Paperwork Reduction Act, • NHTSA: West Building, Ground National Highway Traffic Safety comments on the information collection Floor, Rm. W12–140, 1200 New Jersey Administration provisions must be received by the Avenue SE, Washington, DC 20590, Office of Management and Budget between 9 a.m. and 4 p.m. Eastern Time, 49 CFR Parts 523, 531, 533, 536, and (OMB) on or before January 3, 2012. See Monday through Friday, except Federal 537 the SUPPLEMENTARY INFORMATION section Holidays. [EPA–HQ–OAR–2010–0799; FRL–9495–2; on ‘‘Public Participation’’ for more Instructions: Direct your comments to NHTSA–2010–0131] information about written comments. Docket ID No. EPA–HQ–OAR–2010– Public Hearings: NHTSA and EPA RIN 2060–AQ54; RIN 2127–AK79 0799 and/or NHTSA–2010–0131. See will jointly hold three public hearings the SUPPLEMENTARY INFORMATION section on the following dates: January 17, 2017 and Later Model Year Light-Duty on ‘‘Public Participation’’ for more 2012, in Detroit, Michigan; January 19, Vehicle Greenhouse Gas Emissions information about submitting written 2012 in Philadelphia, Pennsylvania; and and Corporate Average Fuel Economy comments. January 24, 2012, in San Francisco, Standards . EPA and NHTSA will Docket: All documents in the dockets are listed in the http:// AGENCY: Environmental Protection announce the addresses for each hearing www.regulations.gov index. Although Agency (EPA) and National Highway location in a supplemental Federal listed in the index, some information is Traffic Safety Administration (NHTSA). Register Notice. The agencies will not publicly available, e.g., confidential ACTION: Proposed rule. accept comments to the rulemaking documents, and NHTSA will also accept business information (CBI) or other information whose disclosure is SUMMARY: EPA and NHTSA, on behalf of comments to the Draft Environmental restricted by statute. Certain other the Department of Transportation, are Impact Statement (EIS) at these hearings material, such as copyrighted material, issuing this joint proposal to further and to Docket No. NHTSA–2011–0056. will be publicly available in hard copy reduce greenhouse gas emissions and The hearings will start at 10 a.m. local in EPA’s docket, and electronically in improve fuel economy for light-duty time and continue until everyone has NHTSA’s online docket. Publicly vehicles for model years 2017–2025. had a chance to speak. See the available docket materials are available This proposal extends the National SUPPLEMENTARY INFORMATION section on either electronically in Program beyond the greenhouse gas and ‘‘Public Participation.’’ for more www.regulations.gov or in hard copy at corporate average fuel economy information about the public hearings. the following locations: EPA: EPA standards set for model years 2012– ADDRESSES: Submit your comments, Docket Center, EPA/DC, EPA West, 2016. On May 21, 2010, President identified by Docket ID No. EPA–HQ– Room 3334, 1301 Constitution Ave. Obama issued a Presidential OAR–2010–0799 and/or NHTSA–2010– NW., Washington, DC. The Public Memorandum requesting that NHTSA 0131, by one of the following methods: Reading Room is open from 8:30 a.m. to and EPA develop through notice and • Online: www.regulations.gov: 4:30 p.m., Monday through Friday, comment rulemaking a coordinated Follow the on-line instructions for excluding legal holidays. The telephone National Program to reduce greenhouse submitting comments. number for the Public Reading Room is gas emissions of light-duty vehicles for • Email: [email protected] (202) 566–1744. NHTSA: Docket model years 2017–2025. This proposal, • Fax: EPA: (202) 566–9744; NHTSA: Management Facility, M–30, U.S. consistent with the President’s request, (202) 493–2251. Department of Transportation, West responds to the country’s critical need • Mail: Building, Ground Floor, Rm. W12–140, to address global climate change and to • EPA: Environmental Protection 1200 New Jersey Avenue SE., reduce oil consumption. NHTSA is Agency, EPA Docket Center (EPA/DC), Washington, DC 20590. The Docket proposing Corporate Average Fuel Air and Radiation Docket, Mail Code Management Facility is open between 9 Economy standards under the Energy 28221T, 1200 Pennsylvania Avenue a.m. and 5 p.m. Eastern Time, Monday Policy and Conservation Act, as NW., Washington, DC 20460, Attention through Friday, except Federal holidays. amended by the Energy Independence Docket ID No. EPA–HQ–OAR–2010– and Security Act, and EPA is proposing 0799. In addition, please mail a copy of FOR FURTHER INFORMATION CONTACT: greenhouse gas emissions standards your comments on the information EPA: Christopher Lieske, Office of under the Clean Air Act. These collection provisions to the Office of Transportation and Air Quality, standards apply to passenger , light- Information and Regulatory Affairs, Assessment and Standards Division, duty trucks, and medium-duty Office of Management and Budget Environmental Protection Agency, 2000 passenger vehicles, and represent a (OMB), Attn: Desk Officer for EPA, 725 Traverwood Drive, Ann Arbor, MI continued harmonized and consistent 17th St., NW., Washington, DC 20503. 48105; telephone number: (734) 214– National Program. Under the National • NHTSA: Docket Management 4584; fax number: (734) 214–4816; Program for model years 2017–2025, Facility, M–30, U.S. Department of email address: automobile manufacturers would be Transportation, West Building, Ground [email protected], or contact able to continue building a single light- Floor, Rm. W12–140, 1200 New Jersey the Assessment and Standards Division; duty national fleet that satisfies all Avenue SE, Washington, DC 20590. email address: [email protected]. requirements under both programs • Hand Delivery: NHTSA: Rebecca Yoon, Office of the while ensuring that consumers still have • EPA: Docket Center, (EPA/DC) EPA Chief Counsel, National Highway Traffic a full range of vehicle choices. EPA is West, Room B102, 1301 Constitution Safety Administration, 1200 New Jersey

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Avenue SE., Washington, DC 20590. A. Does this action apply to me? defined under EPA’s CAA regulations,1 Telephone: (202) 366–2992. and passenger automobiles (passenger This action affects companies that cars) and non-passenger automobiles SUPPLEMENTARY INFORMATION: manufacture or sell new light-duty (light trucks) as defined under NHTSA’s vehicles, light-duty trucks, and CAFE regulations.2 Regulated categories medium-duty passenger vehicles, as and entities include:

This list is not intended to be How do I prepare and submit submitted for consideration by one exhaustive, but rather provides a guide comments? agency should be identified as such, and regarding entities likely to be regulated comments that are submitted for by this action. To determine whether In this joint proposal, there are many consideration by both agencies should particular activities may be regulated by issues common to both EPA’s and be identified as such. Absent such this action, you should carefully NHTSA’s proposals. For the identification, each agency will exercise examine the regulations. You may direct convenience of all parties, comments its best judgment to determine whether submitted to the EPA docket will be questions regarding the applicability of a comment is submitted on its proposal. considered comments submitted to the this action to the person listed in FOR Further instructions for submitting NHTSA docket, and vice versa. An FURTHER INFORMATION CONTACT. comments to either the EPA or NHTSA exception is that comments submitted to docket are described below. B. Public Participation the NHTSA docket on NHTSA’s Draft EPA: Direct your comments to Docket Environmental Impact Statement (EIS) ID No EPA–HQ–OAR–2010–0799. EPA’s NHTSA and EPA request comment on will not be considered submitted to the policy is that all comments received all aspects of this joint proposed rule. EPA docket. Therefore, the public only will be included in the public docket This section describes how you can needs to submit comments to either one without change and may be made participate in this process. of the two agency dockets, although available online at http:// they may submit comments to both if www.regulations.gov, including any they so choose. Comments that are personal information provided, unless

1 ‘‘Light-duty vehicle,’’ ‘‘light-duty truck,’’ and vehicle, or of up to 8,500 lbs gross vehicle rating. Medium-duty passenger vehicles do not ‘‘medium-duty passenger vehicle’’ are defined in weight rating, and ‘‘medium-duty passenger include pick-up trucks. 40 CFR 86.1803–01. Generally, the term ‘‘light-duty vehicle’’ means a sport-utility vehicle or passenger 2 ‘‘Passenger ’’ and ‘‘light truck’’ are defined in vehicle’’ means a passenger car, the term ‘‘light- from 8,500 to 10,000 lbs gross vehicle weight 49 CFR part 523. duty truck’’ means a pick-up truck, sport-utility

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the comment includes information you to consult the guidelines in information that is claimed as CBI. In claimed to be Confidential Business preparing your comments. OMB’s addition to one complete version of the Information (CBI) or other information guidelines may be accessed at http:// comment that includes information whose disclosure is restricted by statute. www.whitehouse.gov/omb/fedreg/ claimed as CBI, a copy of the comment Do not submit information that you reproducible.html. DOT’s guidelines that does not contain the information consider to be CBI or otherwise may be accessed at http://www.dot.gov/ claimed as CBI must be submitted for protected through http:// dataquality.htm. inclusion in the public docket. www.regulations.gov or email. The Information so marked will not be Tips for Preparing Your Comments http://www.regulations.gov Web site is disclosed except in accordance with an ‘‘anonymous access’’ system, which When submitting comments, please procedures set forth in 40 CFR Part 2. means EPA will not know your identity remember to: NHTSA: If you wish to submit any or contact information unless you • Identify the rulemaking by docket information under a claim of provide it in the body of your comment. number and other identifying confidentiality, you should submit three If you send an email comment directly information (subject heading, Federal copies of your complete submission, to EPA without going through http:// Register date and page number). including the information you claim to • www.regulations.gov your email address Explain why you agree or disagree, be confidential business information, to will be automatically captured and suggest alternatives, and substitute the Chief Counsel, NHTSA, at the included as part of the comment that is language for your requested changes. address given above under FOR FURTHER • placed in the public docket and made Describe any assumptions and INFORMATION CONTACT. When you send a available on the Internet. If you submit provide any technical information and/ comment containing confidential or data that you used. business information, you should an electronic comment, EPA • recommends that you include your If you estimate potential costs or include a cover letter setting forth the name and other contact information in burdens, explain how you arrived at information specified in our the body of your comment and with any your estimate in sufficient detail to confidential business information allow for it to be reproduced. regulation.5 disk or CD–ROM you submit. If EPA • cannot read your comment due to Provide specific examples to In addition, you should submit a copy technical difficulties and cannot contact illustrate your concerns, and suggest from which you have deleted the alternatives. claimed confidential business you for clarification, EPA may not be • able to consider your comment. Explain your views as clearly as information to the Docket by one of the Electronic files should avoid the use of possible, avoiding the use of profanity methods set forth above. special characters, any form of or personal threats. • Make sure to submit your Will the agencies consider late encryption, and be free of any defects or comments by the comment period comments? viruses. For additional information deadline identified in the DATES NHTSA and EPA will consider all about EPA’s public docket visit the EPA section above. comments received before the close of Docket Center homepage at http:// business on the comment closing date www.epa.gov/epahome/dockets.htm. How can I be sure that my comments indicated above under DATES. To the NHTSA: Your comments must be were received? extent practicable, we will also consider written and in English. To ensure that NHTSA: If you submit your comments comments received after that date. If your comments are correctly filed in the by mail and wish Docket Management interested persons believe that any Docket, please include the Docket to notify you upon its receipt of your information that the agencies place in number NHTSA–2010–0131 in your comments, enclose a self-addressed, the docket after the issuance of the comments. Your comments must not be stamped postcard in the envelope NPRM affects their comments, they may more than 15 pages long.3 NHTSA containing your comments. Upon submit comments after the closing date established this limit to encourage you receiving your comments, Docket concerning how the agencies should to write your primary comments in a Management will return the postcard by consider that information for the final concise fashion. However, you may mail. rule. However, the agencies’ ability to attach necessary additional documents consider any such late comments in this to your comments, and there is no limit How do I submit confidential business rulemaking will be limited due to the on the length of the attachments. If you information? time frame for issuing a final rule. are submitting comments electronically Any confidential business If a comment is received too late for as a PDF (Adobe) file, we ask that the information (CBI) submitted to one of us to practicably consider in developing documents submitted be scanned using the agencies will also be available to the a final rule, we will consider that the Optical Character Recognition (OCR) other agency. However, as with all comment as an informal suggestion for process, thus allowing the agencies to public comments, any CBI information future rulemaking action. search and copy certain portions of your only needs to be submitted to either one submissions.4 Please note that pursuant of the agencies’ dockets and it will be How can I read the comments submitted to the Data Quality Act, in order for the available to the other. Following are by other people? substantive data to be relied upon and specific instructions for submitting CBI You may read the materials placed in used by the agency, it must meet the to either agency. the docket for this document (e.g., the information quality standards set forth EPA: Do not submit CBI to EPA comments submitted in response to this in the OMB and Department of through http://www.regulations.gov or document by other interested persons) Transportation (DOT) Data Quality Act email. Clearly mark the part or all of the at any time by going to http:// guidelines. Accordingly, we encourage information that you claim to be CBI. www.regulations.gov. Follow the online For CBI information in a disk or CD instructions for accessing the dockets. 3 See 49 CFR 553.21. ROM that you mail to EPA, mark the You may also read the materials at the 4 Optical character recognition (OCR) is the process of converting an image of text, such as a outside of the disk or CD ROM as CBI EPA Docket Center or NHTSA Docket scanned paper document or electronic fax file, into and then identify electronically within computer-editable text. the disk or CD ROM the specific 5 See 49 CFR part 512.

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Management Facility by going to the information. You may make E. Joint Economic and Other Assumptions street addresses given above under arrangements for copies of the transcript F. Air Conditioning Efficiency CO2 Credits ADDRESSES. directly with the court reporter. and Fuel Consumption Improvement Values, Off-cycle Reductions, and Full- How do I participate in the public Table of Contents size Pickup Trucks hearings? 1. Proposed Air Conditioning CO2 Credits I. Overview of Joint EPA/NHTSA Proposed and Fuel Consumption Improvement NHTSA and EPA will jointly host 2017–2025 National PROGRAM A. Introduction Values three public hearings on the dates and 2. Off-Cycle CO Credits locations described in the DATES 1. Continuation of the National Program 2 2. Additional Background on the National 3. Advanced Technology Incentives for section above. At all hearings, both Full Sized Pickup Trucks agencies will accept comments on the Program 3. California’s Greenhouse Gas Program G. Safety Considerations in Establishing rulemaking, and NHTSA will also 4. Stakeholder Engagement CAFE/GHG Standards accept comments on the EIS. B. Summary of the Proposed 2017–2025 1. Why do the agencies consider safety? If you would like to present testimony National Program 2. How do the agencies consider safety? at the public hearings, we ask that you 1. Joint Analytical Approach 3. What is the current state of the research notify the EPA and NHTSA contact 2. Level of the Standards on statistical analysis of historical crash persons listed under FOR FURTHER 3. Form of the Standards data? INFORMATION CONTACT at least ten days 4. Program Flexibilities for Achieving 4. How do the agencies think technological before the hearing. Once EPA and Compliance solutions might affect the safety estimates indicated by the statistical NHTSA learn how many people have 5. Mid-Term Evaluation analysis? registered to speak at the public hearing, 6. Coordinated Compliance 7. Additional Program Elements 5. How have the agencies estimated safety we will allocate an appropriate amount C. Summary of Costs and Benefits for the effects for the proposed standards? of time to each participant, allowing Proposed National Program III. EPA Proposal For MYS 2017–2025 time for lunch and necessary breaks 1. Summary of Costs and Benefits for the Greenhouse Gas Vehicle Standards throughout the day. For planning Proposed NHTSA CAFE Standards A. Overview of EPA Rule purposes, each speaker should 2. Summary of Costs and Benefits for the 1. Introduction anticipate speaking for approximately Proposed EPA GHG Standards 2. Why is EPA Proposing this Rule? ten minutes, although we may need to D. Background and Comparison of NHTSA 3. What is EPA Proposing? adjust the time for each speaker if there and EPA Statutory Authority 4. Basis for the GHG Standards under is a large turnout. We suggest that you 1. NHTSA Statutory Authority Section 202(a) 2. EPA Statutory Authority bring copies of your statement or other 5. Other Related EPA Motor Vehicle 3. Comparing the Agencies’ Authority Regulations material for the EPA and NHTSA II. Joint Technical Work Completed for This B. Proposed Model Year 2017–2025 GHG panels. It would also be helpful if you Proposal Standards for Light-duty Vehicles, Light- send us a copy of your statement or A. Introduction duty Trucks, and Medium duty other materials before the hearing. To B. Developing the Future Fleet for Passenger Vehicles accommodate as many speakers as Assessing Costs, Benefits, and Effects 1. What Fleet-wide Emissions Levels 1. Why Did the Agencies Establish a possible, we prefer that speakers not use Correspond to the CO2 Standards? Baseline and Reference Vehicle Fleet? technological aids (e.g., audio-visuals, 2. What Are the Proposed CO2 Attribute- computer slideshows). However, if you 2. How Did the Agencies Develop the based Standards? Baseline Vehicle Fleet? 3. Mid-Term Evaluation plan to do so, you must notify the 3. How Did the Agencies Develop the contact persons in the FOR FURTHER 4. Averaging, Banking, and Trading Projected MY 2017–2025 Vehicle Provisions for CO Standards INFORMATION CONTACT section above. 2 Reference Fleet? 5. Small Volume Manufacturer Standards C. Development of Attribute-Based Curve You also must make arrangements to 6. Nitrous Oxide, Methane, and CO - Shapes 2 provide your presentation or any other equivalent Approaches 1. Why are standards attribute-based and aids to NHTSA and EPA in advance of 7. Small Entity Exemption defined by a mathematical function? the hearing in order to facilitate set-up. 8. Additional Leadtime Issues 2. What attribute are the agencies In addition, we will reserve a block of 9. Police and Emergency Vehicle proposing to use, and why? time for anyone else in the audience 3. What mathematical functions have the Exemption From CO2 Standards who wants to give testimony. The agencies previously used, and why? 10. Test Procedures agencies will assume that comments 4. How have the agencies changed the C. Additional Manufacturer Compliance made at the hearings are directed to the mathematical functions for the proposed Flexibilities NPRM unless commenters specifically MYs 2017–2025 standards, and why? 1. Air Conditioning Related Credits 2. Incentive for Electric Vehicles, Plug-in reference NHTSA’s EIS in oral or 5. What are the agencies proposing for the MYs 2017–2025 curves? Hybrid Electric Vehicles, and written testimony. Vehicles The hearing will be held at a site 6. Once the agencies determined the appropriate slope for the sloped part, 3. Incentives for ‘‘Game-Changing’’ accessible to individuals with how did the agencies determine the rest Technologies Including use of disabilities. Individuals who require of the mathematical function? Hybridization and Other Advanced accommodations such as sign language 7. Once the agencies determined the Technologies for Full-Size Pickup interpreters should contact the persons complete mathematical function shape, Trucks listed under FOR FURTHER INFORMATION how did the agencies adjust the curves 4. Treatment of Plug-in Hybrid Electric CONTACT section above no later than ten to develop the proposed standards and Vehicles, Dual Fuel Compressed Natural days before the date of the hearing. regulatory alternatives? Gas Vehicles, and Ethanol Flexible Fuel NHTSA and EPA will conduct the D. Joint Vehicle Technology Assumptions Vehicles for GHG Emissions Compliance hearing informally, and technical rules 1. What Technologies did the Agencies 5. Off-cycle Technology Credits Consider? D. Technical Assessment of the Proposed of evidence will not apply. We will 2. How did the Agencies Determine the CO2 Standards arrange for a written transcript of the Costs of Each of these Technologies? 1. How did EPA develop a reference and hearing and keep the official record of 3. How Did the Agencies Determine the control fleet for evaluating standards? the hearing open for 30 days to allow Effectiveness of Each of these 2. What are the Effectiveness and Costs of you to submit supplementary Technologies? CO2-reducing technologies?

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3. How were technologies combined into A. Executive Overview of NHTSA 2. National Environmental Policy Act ‘‘packages’’ and what is the cost and Proposed Rule 3. Regulatory Flexibility Act effectiveness of packages? 1. Introduction 4. Executive Order 13132 (Federalism) 4. How does EPA Project how a 2. Why does NHTSA set CAFE standards 5. Executive Order 12988 (Civil Justice manufacturer would decide between for passenger cars and light trucks? Reform) options to improve CO2 performance to 3. Why is NHTSA proposing CAFE 6. Unfunded Mandates Reform Act meet a fleet average standard? standards for MYs 2017–2025 now? 7. Regulation Identifier Number 5. Projected Compliance Costs and B. Background 8. Executive Order 13045 Technology Penetrations 1. Chronology of events since the MY 9. National Technology Transfer and 6. How does the technical assessment 2012–2016 final rule was issued Advancement Act support the proposed CO2 standards as 2. How has NHTSA developed the 10. Executive Order 13211 compared to the alternatives has EPA proposed CAFE standards since the 11. Department of Energy Review considered? President’s announcement? 12. Plain Language 7. To what extent do any of today’s C. Development and Feasibility of the 13. Privacy Act vehicles meet or surpass the proposed Proposed Standards I. Overview of Joint EPA/NHTSA MY 2017–2025 CO2 footprint-based 1. How was the baseline vehicle fleet targets with current powertrain designs? developed? Proposed 2017–2025 National Program E. Certification, Compliance, and 2. How were the technology inputs Executive Summary Enforcement developed? 1. Compliance Program Overview 3. How did NHTSA develop its economic EPA and NHTSA are each announcing 2. Compliance With Fleet-Average CO2 assumptions? proposed rules that call for strong and Standards 4. How does NHTSA use the assumptions coordinated Federal greenhouse gas and 3. Vehicle Certification in its modeling analysis? fuel economy standards for passenger 4. Useful Life Compliance D. Statutory Requirements cars, light-duty trucks, and medium- 5. Credit Program Implementation 1. EPCA, as Amended by EISA duty passenger vehicles (hereafter light- 6. Enforcement 2. Administrative Procedure Act duty vehicles or LDVs). Together, these 7. Other Certification Issues 3. National Environmental Policy Act vehicle categories, which include 8. Warranty, Defect Reporting, and Other E. What are the proposed CAFE standards? Emission-related Components Provisions 1. Form of the Standards passenger cars, sport utility vehicles, 9. Miscellaneous Technical Amendments 2. Passenger Car Standards for MYs 2017– utility vehicles, , and and Corrections 2025 pickup trucks, among others, are 10. Base Tire Definition 3. Minimum Domestic Passenger Car presently responsible for approximately 11. Treatment of Driver-Selectable Modes Standards 60 percent of all U.S. transportation- and Conditions 4. Light Truck Standards related greenhouse gas (GHG) emissions F. How Would This Proposal Reduce GHG F. How do the proposed standards fulfill and fuel consumption. This proposal Emissions and Their Associated Effects? NHTSA’s statutory obligations? would extend the National Program of 1. Impact on GHG Emissions 1. What are NHTSA’s statutory obligations? Federal light-duty vehicle GHG 2. Climate Change Impacts From GHG 2. How did the agency balance the factors emissions and corporate average fuel Emissions for this NPRM? 3. Changes in Global Climate Indicators G. Impacts of the Proposed CAFE economy (CAFE) standards to model Associated With the Proposal’s GHG Standards years (MYs) 2017–2025. This proposed Emissions Reductions 1. How will these standards improve fuel coordinated program would achieve G. How would the proposal impact non- economy and reduce GHG emissions for important reductions in GHG emissions GHG emissions and their associated MY 2017–2025 vehicles? and fuel consumption from the light- effects? 2. How will these standards improve fleet- duty vehicle part of the transportation 1. Inventory wide fuel economy and reduce GHG sector, based on technologies that either 2. Health Effects of Non-GHG Pollutants emissions beyond MY 2025? are commercially available or that the 3. Environmental Effects of Non-GHG 3. How will these proposed standards agencies project will be commercially Pollutants impact non-GHG emissions and their available in the rulemaking timeframe 4. Air Quality Impacts of Non-GHG associated effects? Pollutants 4. What are the estimated costs and and that can be incorporated at a 5. Other Unquantified Health and benefits of these proposed standards? reasonable cost. Higher initial vehicle Environmental Effects 5. How would these proposed standards costs will be more than offset by H. What are the estimated cost, economic, impact vehicle sales? significant fuel savings for consumers and other impacts of the proposal? 6. Social Benefits, Private Benefits, and over the lives of the vehicles covered by 1. Conceptual Framework for Evaluating Potential Unquantified Consumer this rulemaking. Consumer Impacts Welfare Impacts of the Proposed This proposal builds on the success of 2. Costs Associated With the Vehicle Standards the first phase of the National Program Standards 7. What other impacts (quantitative and to regulate fuel economy and GHG 3. Cost per ton of Emissions Reduced unquantifiable) will these proposed emissions from U.S. light-duty vehicles, 4. Reduction in Fuel Consumption and its standards have? Impacts H. Vehicle Classification which established strong and coordinated standards for model years 5. CO2 Emission Reduction Benefits I. Compliance and Enforcement 6. Non-Greenhouse Gas Health and 1. Overview (MY) 2012–2016. As with the first phase Environmental Impacts 2. How does NHTSA determine of the National Program, collaboration 7. Energy Security Impacts compliance? with California Air Resources Board 8. Additional Impacts 3. What compliance flexibilities are (CARB) and with automobile 9. Summary of Costs and Benefits available under the CAFE program and manufacturers and other stakeholders 10. U.S. Vehicle Sales Impacts and Payback how do manufacturers use them? has been a key element in developing Period 4. What new incentives are being added to the agencies’ proposed rules. 11. Employment Impacts the CAFE program for MYs 2017–2025? I. Statutory and Executive Order Reviews 5. Other CAFE enforcement issues Continuing the National Program would J. Statutory Provisions and Legal Authority J. Regulatory notices and analyses ensure that all manufacturers can build IV. NHTSA Proposed Rule for Passenger car 1. Executive Order 12866, Executive Order a single fleet of U.S. vehicles that would and Light Truck Cafe Standards for 13563, and DOT Regulatory Policies and satisfy all requirements under both Model Years 2017–2025 Procedures programs as well as under California’s

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program, helping to reduce costs and both the long time frame and NHTSA’s choose from the same mix of vehicles regulatory complexity while providing obligation to conduct a separate that are currently in the marketplace. significant energy security and rulemaking in order to establish final The agencies’ believe there is a wide environmental benefits. standards for vehicles for those model range of technologies available for Combined with the standards already years. manufacturers to consider in reducing in effect for MYs 2012–2016, as well as From a societal standpoint, this GHG emissions and improving fuel the MY 2011 CAFE standards, the second phase of the National Program is economy. The proposals allow for long- proposed standards would result in MY projected to save approximately 4 term planning by manufacturers and 2025 light-duty vehicles with nearly billion barrels of oil and 2 billion metric suppliers for the continued double the fuel economy, and tons of GHG emissions over the development and deployment across approximately one-half of the GHG lifetimes of those vehicles sold in MY their fleets of fuel saving and emissions- emissions compared to MY 2010 2017–2025. The agencies estimate that reducing technologies. The agencies vehicles—representing the most fuel savings will far outweigh higher believe that advances in gasoline significant federal action ever taken to vehicle costs, and that the net benefits engines and transmissions will continue reduce GHG emissions and improve fuel to society of the MYs 2017–2025 for the foreseeable future, and that there economy in the U.S. EPA is proposing National Program will be in the range of will be continual improvement in other standards that are projected to require, $311 billion to $421 billion (7 and 3 technologies, including vehicle weight on an average industry fleet wide basis, percent discount rates, respectively) reduction, lower tire rolling resistance, 163 grams/mile of carbon dioxide (CO2) over the lifetimes of those vehicles sold improvements in vehicle aerodynamics, in model year 2025, which is equivalent in MY 2017–2025. diesel engines, and more efficient to 54.5 mpg if this level were achieved These proposed standards would have vehicle accessories. The agencies also solely through improvements in fuel expect to see increased electrification of 6 significant savings for consumers at the efficiency. Consistent with its statutory pump. Higher costs for new vehicle the fleet through the expanded authority, NHTSA is proposing technology will add, on average, about production of stop/start, hybrid, plug-in passenger car and light truck standards $2000 for consumers who buy a new hybrid and electric vehicles. Finally, the for MYs 2017–2025 in two phases. The vehicle in MY 2025. Those consumers agencies expect that vehicle air first phase, from MYs 2017–2021, who drive their MY 2025 vehicle for its conditioners will continue to improve includes proposed standards that are entire lifetime will save, on average, by becoming more efficient and by projected to require, on an average $5200 to $6600 (7 and 3 percent increasing the use of alternative industry fleet wide basis, 40.9 mpg in discount rates, respectively) in fuel refrigerants. Many of these technologies MY 2021. The second phase of the savings, for a net lifetime savings of are already available today, and CAFE program, from MYs 2022–2025, $3000 to $4400. For those consumers manufacturers will be able to meet the represents conditional 7 proposed who purchase their new MY 2025 standards through significant efficiency standards that are projected to require, vehicle with cash, the discounted fuel improvements in these technologies, as on an average industry fleet wide basis, well as a significant penetration of these 49.6 mpg in model year 2025. Both the savings will offset the higher vehicle cost in less than 4 years, and fuel and other technologies across the fleet. EPA and NHTSA standards are Auto manufacturers may also introduce projected to be achieved through a range savings will continue for as long as the consumer owns the vehicle. Those new technologies that we have not of technologies, including considered for this rulemaking analysis, improvements in air conditioning consumers that buy a new vehicle with a typical 5-year loan will benefit from which could make possible alternative, efficiency, which reduces both GHG more cost-effective paths to compliance. emissions and fuel consumption; the an average monthly cash flow savings of EPA standards also are projected to be about $12 during the loan period, or A. Introduction about $140 per year, on average. So the achieved with the use of air 1. Continuation of the National Program conditioning refrigerants with a lower consumer would benefit beginning at global warming potential (GWP), which the time of purchase, since the EPA and NHTSA are each announcing reduce GHGs (i.e., hydrofluorocarbons) increased monthly fuel savings would proposed rules that call for strong and but do not improve fuel economy. The more than offset the higher monthly coordinated Federal greenhouse gas and agencies are proposing separate payment due to the higher incremental fuel economy standards for passenger standards for passenger cars and trucks, vehicle cost. cars, light-duty trucks, and medium- based on a vehicle’s size or ‘‘footprint.’’ The agencies have designed the duty passenger vehicles (hereafter light- For the MYs 2022–2025 standards, EPA proposed standards to preserve duty vehicles or LDVs). Together, these and NHTSA are proposing a consumer choice—that is, the proposed vehicle categories, which include comprehensive mid-term evaluation and standards should not affect consumers’ passenger cars, sport utility vehicles, agency decision-making process, given opportunity to purchase the size of crossover utility vehicles, minivans, and vehicle with the performance, utility pickup trucks, are presently responsible 6 Real-world CO2 is typically 25 percent higher and safety features that meets their for approximately 60 percent of all U.S. and real-world fuel economy is typically 20 percent needs. The standards are based on a transportation-related greenhouse gas lower than the CO2 and CAFE compliance values vehicle’s size, or footprint—that is, emissions and fuel consumption. The discussed here. The reference to CO2 here refers to CO2 equivalent reductions, as this included some consistent with their general proposal would extend the National degree of reductions in greenhouse gases other than performance and utility needs, larger Program of Federal light-duty vehicle CO2, as one part of the air conditioning related vehicles have numerically less stringent greenhouse gas (GHG) emissions and reductions. fuel economy/GHG emissions targets corporate average fuel economy (CAFE) 7 By ‘‘conditional,’’ NHTSA means to say that the proposed standards for MYs 2022–2025 represent and smaller vehicles have more standards to model years (MYs) 2017– the agency’s current best estimate of what levels of stringent fuel economy/GHG emissions 2025. The coordinated program being stringency would be maximum feasible in those targets, although since the standards are proposed would achieve important model years, but in order for the standards for those fleet average standards, no specific reductions of greenhouse gas (GHG) model years to be legally binding a subsequent rulemaking must be undertaken by the agency at a vehicle must meet a target. Thus, emissions and fuel consumption from later time. See Section IV for more information. consumers will be able to continue to the light-duty vehicle part of the

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transportation sector, based on well as many consumer and and suppliers.12 The agencies also technologies that either are environmental groups. As envisioned in believe that there will be continual commercially available or that the the Presidential announcement and improvement in other technologies agencies project will be commercially Supplemental NOI, this proposal sets including reductions in vehicle weight, available in the rulemaking timeframe forth proposed MYs 2017–2025 lower tire rolling resistance, and that can be incorporated at a standards as well as detailed supporting improvements in vehicle aerodynamics, reasonable cost. analysis for those standards and diesel engines, and more efficient In working together to develop the regulatory alternatives for public review vehicle accessories. The agencies also next round of standards for MYs 2017– and comment. The program that the expect to see increased electrification of 2025, NHTSA and EPA are building on agencies are proposing will spur the the fleet through the expanded the success of the first phase of the development of a new generation of production of stop/start, hybrid, plug-in National Program to regulate fuel clean cars and trucks through hybrid and electric vehicles.13 Finally, economy and GHG emissions from U.S. innovative technologies and the agencies expect that vehicle air light-duty vehicles, which established manufacturing that will, in turn, spur conditioners will continue to improve the strong and coordinated standards for economic growth and create high- by becoming more efficient and by model years (MY) 2012–2016. As for the quality domestic jobs, enhance our increasing the use of alternative MYs 2012–2016 rulemaking, energy security, and improve our refrigerants. Many of these technologies collaboration with California Air environment. Consistent with Executive are already available today, and EPA’s Resources Board (CARB) and with Order 13563, this proposal was and NHTSA’s assessments are that industry and other stakeholders has developed with early consultation with manufacturers will be able to meet the been a key element in developing the stakeholders, employs flexible standards through significant efficiency agencies’ proposed rules. Continuing regulatory approaches to reduce improvements in these technologies as the National Program would ensure that burdens, maintains freedom of choice well as a significant penetration of these all manufacturers can build a single for the public, and helps to harmonize and other technologies across the fleet. fleet of U.S. vehicles that would satisfy federal and state regulations. We project that these potential all requirements under both programs as As described below, NHTSA and EPA compliance pathways for manufacturers well as under California’s program, are proposing a continuation of the will result in significant benefits to helping to reduce costs and regulatory National Program that the agencies consumers and to society, as quantified complexity while providing significant believe represents the appropriate levels below. Manufacturers may also energy security and environmental of fuel economy and GHG emissions introduce new technologies that we benefits. standards for model years 2017–2025, have not considered for this rulemaking The agencies have been developing given the technologies that the agencies analysis, which could make possible the basis for these joint proposed anticipate will be available for use on alternative, more cost-effective paths to standards almost since the conclusion of these vehicles and the agencies’ compliance. the rulemaking establishing the first understanding of the cost and As discussed further below, as with phase of the National Program. After manufacturers’ ability to apply these the standards for MYs 2012–2016, the much research and deliberation by the technologies during that time frame, and agencies believe that the proposed agencies, along with CARB and other consideration of other relevant factors. standards would continue to preserve stakeholders, President Obama Under this joint rulemaking, EPA is consumer choice, that is, the proposed announced plans for these proposed proposing GHG emissions standards standards should not affect consumers’ rules on July 29, 2011 and NHTSA and under the Clean Air Act (CAA), and opportunity to purchase the size of EPA issued a Supplemental Notice of NHTSA is proposing CAFE standards vehicle that meets their needs. NHTSA Intent (NOI) outlining the agencies’ under EPCA, as amended by the Energy and EPA are proposing to continue plans for proposing the MY 2017–2025 Independence and Security Act of 2007 standards based on vehicle footprint, standards and program.8 This July NOI (EISA). This joint rulemaking proposal where smaller vehicles have relatively built upon the extensive analysis reflects a carefully coordinated and more stringent standards, and larger conducted by the agencies over the past harmonized approach to implementing vehicles have less stringent standards, year, including an initial technical these two statutes, in accordance with so there should not be a significant assessment report and NOI issued in all substantive and procedural effect on the relative availability of September 2010, and a supplemental requirements imposed by law.11 different size vehicles in the fleet. NOI issued in December 2010 The proposed approach allows for (discussed further below). The State of long-term planning by manufacturers 12 There are a number of competing gasoline California and thirteen auto and suppliers for the continued engine technologies, with one in particular that the manufacturers representing over 90 agencies project will be common beyond 2016. This development and deployment across is the gasoline direct injection and downsized percent of U.S. vehicle sales provided their fleets of fuel saving and emissions- engines equipped with turbochargers and cooled letters of support for the program reducing technologies. NHTSA’s and exhaust gas recirculation, which has performance concurrent with the Supplemental EPA’s technology assessment indicates characteristics similar to that of larger, less efficient NOI.9 The United Auto Workers (UAW) engines. Paired with these engines, the agencies there is a wide range of technologies project that advanced transmissions (such as 10 also supported the announcement, as available for manufacturers to consider automatic and dual clutch transmissions with eight in reducing GHG emissions and forward speeds) and higher efficiency gearboxes 8 76 FR 48758 (August 9, 2011). improving fuel economy. The agencies will provide significant improvements. 9 Transmissions with eight or more speeds can be Commitment letters are available at http:// believe that advances in gasoline www.epa.gov/otaq/climate/regulations.htm and at found in the fleet today in very limited production, http://www.nhtsa.gov/fuel-economy (last accessed engines and transmissions will continue and while they are expected to penetrate further by Aug. 24, 2011). for the foreseeable future, which is a 2016, we anticipate that by 2025 these will be the 10 The UAW’s support was expressed in a view that is supported in the literature dominant transmissions in new vehicle sales. 13 statement on July 29, 2011, which can be found at and amongst the vehicle manufacturers For example, while today less than three http://www.uaw.org/articles/uaw-supports- percent of annual vehicle sales are strong hybrids, administration-proposal-light-duty-vehicle-cafe- plug-in hybrids and all electric vehicles, by 2025 and-greenhouse-gas-emissions-r (last accessed 11 For NHTSA, this includes the requirements of we estimate these technologies could represent September 19, 2011). the National Environmental Policy Act (NEPA). nearly 15 percent of new sales.

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Additionally, as with the standards for (at either 7 percent or 3 percent source GHGs. For light-duty vehicles in MYs 2012–2016, the agencies believe discount rate) of owning a MY 2025 2007, CO2 emissions represent about 94 that the proposed standards should not vehicle to offset the higher upfront percent of all greenhouse emissions have a negative effect on vehicle safety, vehicle costs, while consumers who buy (including HFCs), and the CO2 as it relates to vehicle footprint and with a 5-year loan would save more emissions measured over the EPA tests mass as described in Section II.C and each month on fuel than the increased used for fuel economy compliance II.G below, respectively. amount they would spend on the higher represent about 90 percent of total light- We note that as part of this monthly loan payment, beginning in the duty vehicle GHG emissions.18 19 rulemaking, given the long time frame at first month of ownership. Improving our energy and national issue in setting standards for MY 2022– Continuing the National Program has security by reducing our dependence on 2025 light-duty vehicles, the agencies both energy security and climate change foreign oil has been a national objective are discussing a comprehensive mid- benefits. Climate change is widely since the first oil price shocks in the term evaluation and agency decision- viewed as a significant long-term threat 1970s. Net petroleum imports accounted making process. NHTSA has a statutory to the global environment. EPA has for approximately 51 percent of U.S. obligation to conduct a separate de novo found that elevated atmospheric petroleum consumption in 2009.20 rulemaking in order to establish final concentrations of six greenhouse World crude oil production is highly standards for vehicles for the 2022–2025 gases—carbon dioxide, methane, nitrous concentrated, exacerbating the risks of model years and would conduct the oxide, hydrofluorocarbons, supply disruptions and price shocks as mid-term evaluation as part of that perflurocarbons, and sulfur the recent unrest in North Africa and rulemaking, and EPA is proposing hexafluoride—taken in combination the Persian Gulf highlights. Recent tight regulations that address the mid-term endanger both the public health and the global oil markets led to prices over evaluation. The mid-term evaluation public welfare of current and future $100 per barrel, with gasoline reaching will assess the appropriateness of the generations. EPA further found that the as high as $4 per gallon in many parts MY 2022–2025 standards considered in combined emissions of these of the U.S., causing financial hardship this rulemaking, based on an updated greenhouse gases from new motor for many families and businesses. The assessment of all the factors considered vehicles and new motor vehicle engines export of U.S. assets for oil imports in setting the standards and the impacts contribute to the greenhouse gas air continues to be an important component of those factors on the manufacturers’ pollution that endangers public health of the historically unprecedented U.S. ability to comply. NHTSA and EPA and welfare. 74 FR 66496 (Dec. 15, trade deficits. Transportation accounted fully expect to conduct this mid-term 2009). As summarized in EPA’s for about 71 percent of U.S. petroleum evaluation in coordination with the Endangerment and Cause or Contribute consumption in 2009.21 Light-duty California Air Resources Board, given Findings under Section 202(a) of the vehicles account for about 60 percent of our interest in a maintaining a National Clear Air Act, anthropogenic emissions transportation oil use, which means that Program to address GHGs and fuel of GHGs are very likely (90 to 99 percent they alone account for about 40 percent economy. Further discussion of the mid- probability) the cause of most of the of all U.S. oil consumption. term evaluation is found later in this observed global warming over the last 15 The automotive market is becoming section, as well as in Sections III and IV. 50 years. Mobile sources emitted 31 increasingly global. The U.S. auto Based on the agencies’ analysis, the percent of all U.S. GHGs in 2007 companies and U.S. suppliers produce National Program standards being (transportation sources, which do not and sell automobiles and automotive include certain off-highway sources, proposed are currently projected to components around the world, and account for 28 percent) and have been reduce GHGs by approximately 2 billion foreign auto companies produce and sell the fastest-growing source of U.S. GHGs metric tons and save 4 billion barrels of in the U.S. As a result, the industry has since 1990.16 Mobile sources addressed oil over the lifetime of MYs 2017–2025 become increasingly competitive. in the endangerment and contribution vehicles relative to the MY 2016 Staying at the cutting edge of findings under CAA section 202(a)— standard curves 14 already in place. The automotive technology while light-duty vehicles, heavy-duty trucks, average cost for a MY 2025 vehicle to maintaining profitability and consumer buses, and —accounted for meet the standards is estimated to be acceptance has become increasingly 23 percent of all U.S. GHG in 2007.17 about $2,000 compared to a vehicle that important for the sustainability of auto Light-duty vehicles emit CO , methane, would meet the level of the MY 2016 2 companies. The proposed standards nitrous oxide, and hydrofluorocarbons standards in MY 2025. However, fuel cover model years 2017–2025 for and are responsible for nearly 60 savings for consumers are expected to passenger cars and light-duty trucks percent of all mobile source GHGs and more than offset the higher vehicle sold in the . Many other over 70 percent of Section 202(a) mobile costs. The typical driver would save a countries and regions around the world total of $5,200 to $6,600 (7 percent and 15 74 FR 66,496,–66,518, December 18, 2009; have in place fuel economy or CO2 3 percent discount rate, respectively) in ‘‘Technical Support Document for Endangerment fuel costs over the lifetime of a MY 2025 and Cause or Contribute Findings for Greenhouse 18 U.S. Environmental Protection Agency. 2009. vehicle and, even after accounting for Gases Under Section 202(a) of the Clean Air Act’’ Inventory of U.S. Greenhouse Gas Emissions and the higher vehicle cost, consumers Docket: EPA–HQ–OAR–2009–0472–11292, http:// Sinks: 1990–2007. EPA 430–R–09–004. Available at epa.gov/climatechange/endangerment.html. http://epa.gov/climatechange/emissions/ would save a net $3,000 to $4,400 (7 _ 16 U.S. Environmental Protection Agency. 2009. downloads09/GHG2007entire report-508.pdf. percent and 3 percent discount rate, Inventory of U.S. Greenhouse Gas Emissions and 19 U.S. Environmental Protection Agency. RIA, respectively) over the vehicle’s lifetime. Sinks: 1990–2007. EPA 430–R–09–004. Available at Chapter 2. Further, consumers who buy new http://epa.gov/climatechange/emissions/ 20 Energy Information Administration, ‘‘How _ vehicles with cash would save enough downloads09/GHG2007entire report-508.pdf. dependent are we on foreign oil?’’ Available at 17 U.S. EPA. 2009 Technical Support Document http://www.eia.gov/energy_in_brief/ in lower fuel costs after less than 4 years for Endangerment and Cause or Contribute Findings foreign_oil_dependence.cfm (last accessed August for Greenhouse Gases under Section 202(a) of the 28, 2011). 14 The calculation of GHG reductions and oil Clean Air Act. Washington, DC. pp. 180–194. 21 Energy Information Administration, Annual savings is relative to a future in which the MY 2016 Available at http://epa.gov/climatechange/ Energy Outlook 2011, ‘‘Oil/Liquids.’’ Available at standards remain in place for MYs 2017–2025 and endangerment/downloads/ http://www.eia.gov/forecasts/aeo/ manufacturers comply on average at those levels. Endangerment%20TSD.pdf. MT_liquidfuels.cfm (last accessed August 28, 2011).

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emission standards for light-duty cars and light-duty trucks of model The President’s memo requested that vehicles. In addition, the European years 2017–2025.’’ 22 The President the agencies, ‘‘work with the State of Union is currently discussing more recognized that our country could take California to develop by September 1, stringent CO2 standards for 2020, and a leadership role in addressing the 2010, a technical assessment to inform the Japanese government has recently global challenges of improving energy the rulemaking process * * *.’’ As a issued a draft proposal for new fuel security and reducing greenhouse gas first step in responding to the efficiency standards for 2020. The pollution, stating that ‘‘America has the President’s request, the agencies overall trend is clear—globally many of opportunity to lead the world in the collaborated with CARB to prepare an the major economic countries are development of a new generation of Interim Joint Technical Assessment increasing the stringency of their fuel clean cars and trucks through Report (TAR) to inform the rulemaking economy or CO2 emission standards for innovative technologies and process and provide an initial technical light-duty vehicles. When considering manufacturing that will spur economic assessment for that work. NHTSA, EPA, this common trend, the proposed CAFE growth and create high-quality domestic and CARB issued the joint Technical and CO2 standards for MY 2017–2025 jobs, enhance our energy security, and Assessment Report consistent with may offer some advantages for U.S.- improve our environment.’’ Section 2(a) of the Presidential based automotive companies and The Presidential Memorandum stated Memorandum.24 In developing the suppliers. In order to comply with the ‘‘The program should also seek to technical assessment, EPA, NHTSA, and proposed standards, U.S. firms will achieve substantial annual progress in CARB held numerous meetings with a need to invest significant research and reducing transportation sector wide variety of stakeholders including development dollars and capital in greenhouse gas emissions and the automobile original equipment order to develop and produce the consumption, consistent with my manufacturers (OEMs), automotive technologies needed to reduce CO2 Administration’s overall energy and suppliers, non-governmental emissions and improve fuel economy. climate security goals, through the organizations, states and local Companies have limited budgets for increased domestic production and use governments, infrastructure providers, research and development programs. As of existing, advanced, and emerging and labor unions. The Interim Joint TAR automakers seek greater commonality technologies, and should strengthen the provided an overview of key across the vehicles they produce for the industry and enhance job creation in the stakeholder input, addressed other domestic and foreign markets, United States.’’ Among other things, the topics noted in the Presidential improving fuel economy and reducing agencies were tasked with researching memorandum, and EPA’s and NHTSA’s GHGs in U.S. vehicles should have and then developing standards for MYs initial assessment of benefits and costs spillovers to foreign production, and 2017 through 2025 that would be of a range of stringencies of future vice versa, thus yielding the ability to appropriate and consistent with EPA’s standards. amortize investment in research and and NHTSA’s respective statutory In accordance with the Presidential production over a broader product and authorities, in order to continue to guide Memorandum, NHTSA and EPA also geographic spectrum. To the extent that the automotive sector along the road to issued a joint Notice of Intent to Issue the technologies needed to meet the reducing its fuel consumption and GHG a Proposed Rulemaking (NOI).25 The standards contained in this proposal can emissions, thereby ensuring September 2010 NOI highlighted the also be used to comply with the fuel corresponding energy security and results of the analyses contained in the economy and CO2 standards in other environmental benefits. During the Interim Joint TAR, provided an countries, this can help U.S. firms in the public comment period for the MY overview of key program design global automotive market, as the U.S. 2012–2016 proposed rulemaking, many elements, and announced plans for firms will be able to focus their stakeholders, including automakers, initiating the joint rulemaking to available research and development encouraged NHTSA and EPA to begin improve the fuel efficiency and reduce funds on a common set of technologies working toward standards for MY 2017 the GHG emissions of passenger cars that can be used both domestically as and beyond in order to maintain a single and light-duty trucks built in MYs well as internationally. nationwide program. Several major 2017–2025. The agencies requested automobile manufacturers and CARB comments on the September NOI and 2. Additional Background on the sent letters to EPA and NHTSA in National Program accompanying Interim Joint TAR. support of a MYs 2017 to 2025 The Interim Joint TAR contained an Following the successful adoption of rulemaking initiative as outlined in the initial fleet-wide analysis of a National Program of federal standards President’s May 21, 2010 improvements in overall average GHG 23 for greenhouse gas emissions (GHG) and announcement. emissions and equivalent fuel economy fuel economy standards for model years 22 The Presidential Memorandum is found at: (MY) 2012–2016 light duty vehicles, 24 This Interim Joint Technical Assessment President Obama issued a Memorandum http://www.whitehouse.gov/the-press-office/ presidential-memorandum-regarding-fuel- Report (TAR) is available at http://www.epa.gov/ on May 21, 2010 requesting that the efficiency-standards. For the reader’s reference, the otaq/climate/regulations/ldv-ghg-tar.pdf and http:// National Highway Traffic Safety www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/ President also requested the Administrators of EPA _ _ Administration (NHTSA), on behalf of and NHTSA to issue joint rules under the CAA and 2017+CAFE–GHG Interim TAR2.pdf.Section 2(a) of the Presidential Memorandum requested that EPA the Department of Transportation, and EISA to establish fuel efficiency and greenhouse gas emissions standards for commercial medium-and and NHTSA ‘‘Work with the State of California to the Environmental Protection Agency heavy-duty on-highway vehicles and work trucks develop by September 1, 2010, a technical (EPA) work together to develop a beginning with the 2014 model year. The agencies assessment to inform the rulemaking process, national program for model years 2017– recently promulgated final GHG and fuel efficiency reflecting input from an array of stakeholders on relevant factors, including viable technologies, 2025. Specifically, he requested that the standards for heavy duty vehicles and engines for MYs 2014–2018. 76 FR 57106 (September 15, 2011). costs, benefits, lead time to develop and deploy agencies develop ‘‘* * * a coordinated 23 These letters of support in response to the May new and emerging technologies, incentives and national program under the CAA [Clean 21, 2010 Presidential Memorandum are available at other flexibilities to encourage development and Air Act] and the EISA [Energy http://www.epa.gov/otaq/climate/ deployment of new and emerging technologies, impacts on jobs and the automotive manufacturing Independence and Security Act of 2007] regulations.htm#prez and http://www.nhtsa.gov/ Laws+&+Regulations/CAFE+-+Fuel+Economy/ base in the United States, and infrastructure for to improve fuel efficiency and to reduce Stakeholder+Commitment+Letters (last accessed advanced vehicle technologies.’’ greenhouse gas emissions of passenger August 28, 2011). 25 75 FR 62739, October 13, 2010.

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levels. For purposes of an initial TAR’s discussion of technology costs, to proceed with implementing the assessment, this range was intended to effectiveness, and feasibility. In California emission standards for MYs represent a reasonably broad range of response, the agencies and CARB spent 2009–2016. After EPA and NHTSA stringency increases for potential future the next several months continuing to issued their MYs 2012–2016 standards, GHG emissions standards, and was also gather information from the industry CARB revised its program such that consistent with the increases suggested and others in response to the agencies’ compliance with the EPA greenhouse by CARB in its letter of commitment in initial analytical efforts. To aid the gas standards will be deemed to be response to the President’s public’s understanding of some of the compliance with California’s GHG memorandum.26 27 The TAR evaluated a key issues facing the agencies in standards.31 This facilitates the National range of potential stringency scenarios developing the proposed rule, EPA and Program by allowing manufacturers to through model year 2025, representing a NHTSA also issued a follow-on meet all of the standards with a single 3, 4, 5, and 6 percent per year estimated Supplemental NOI in November 2010.29 national fleet. decrease in GHG levels from a model The Supplemental NOI highlighted year 2016 fleet-wide average of 250 many of the key comments the agencies As requested by the President and in gram/mile (g/mi). Thus, the model year received in response to the September the interest of maximizing regulatory 2025 scenarios analyzed in the Interim NOI and Interim Joint TAR, and harmonization, NHTSA and EPA have Joint TAR ranged from 190 g/mi on an summarized some of the key themes worked closely with CARB throughout estimated fleet-wide average (calculated from the comments and the additional the development of this proposal to to be equivalent to 47 miles per gallon, stakeholder meetings. We note, as develop a common technical basis. mpg, if all improvements were made highlighted in the November CARB is releasing a proposal for MY with fuel economy-improving Supplemental NOI, that there continued 2017–2025 GHG emissions standards technologies) under the 3 percent per to be widespread stakeholder support which are consistent with the standards year reduction scenario, to 143 g/mi on for continuing the National Program for being proposed by EPA and NHTSA. an estimated fleet-wide average improved fuel economy and greenhouse CARB recognizes the benefit for the (calculated to be equivalent to 62 mpg, gas standards for model years 2017– country of continuing the National if all improvements were made with 2025. The November Supplemental NOI Program and plans an approach similar fuel economy-improving technologies) also provided an overview of many of to the one taken for MYs 2012–2016. under the 6 percent per year scenario.28 the key technical analyses the agencies CARB has committed to propose to For each of these scenarios, the TAR planned in support the proposed rule. revise its GHG emissions standards for also evaluated four pre-defined After issuing the November 2010 MY 2017 and later such that compliance ‘‘technological pathways’’ by which Supplemental NOI, EPA, NHTSA and with EPA GHG emissions standards these levels could be attained. These CARB continued studies on technology shall be deemed compliance with the pathways were meant to represent ways cost and effectiveness and more in- California GHG emissions standards, as that the industry as a whole could depth and comprehensive analysis of long as EPA’s final GHG standards are increase fuel economy and reduce the issues. In addition to this work, the substantially as described in the July greenhouse gas emissions, and did not agencies continued meeting with 2011 Supplemental NOI.32 represent ways that individual stakeholders, including with manufacturers would be required to or manufacturers, manufacturer 4. Stakeholder Engagement necessarily would employ in organizations, automotive suppliers, a On July 29, 2010, President Obama responding to future standards. Each labor union, environmental groups, announced the support of thirteen major defined technology pathway consumer interest groups, and automakers to pursue the next phase in emphasized a different mix of advanced investment organizations. As discussed the Administration’s national vehicle technologies, by assuming various above, on July 29, 2011 President program, increasing fuel economy and degrees of penetration of advanced Obama announced plans for these reducing GHG emissions for passenger gasoline technologies, mass reduction, proposed rules and NHTSA and EPA cars and light trucks built in MYs 2017– hybrid electric vehicles (HEVs), plug-in issued a Supplemental Notice of Intent 2025.33 The President was joined by hybrids (PHEVs), and electric vehicles (NOI) outlining the agencies’ plans for Ford, GM, , BMW, Honda, (EVs). proposing the MY 2017–2025 standards Hyundai, Jaguar/Land Rover, , Manufacturers and others commented and program. , Mitsubishi, , Toyota and extensively on the NOI and Interim Joint 3. California’s Greenhouse Gas Program Volvo, which together account for over TAR on a variety of topics, including 90 percent of all vehicles sold in the the stringency of the standards, program In 2004, the California Air Resources United States. The California Air design elements, the effect of potential Board (CARB) approved standards for Resources Board (CARB), the United standards on vehicle safety, and the new light-duty vehicles, regulating the Auto Workers (UAW) and a number of emission of CO2 and other GHGs. 26 75 FR at 62744–45. Thirteen states and the District of 31 27 Statement of the California Air Resources Columbia, comprising approximately 40 See ‘‘California Exhaust Emission Standards Board Regarding Future Passenger Vehicle and Test Procedures for 2001 and Subsequent percent of the light-duty vehicle market, Model Passenger Cars, Light-Duty Trucks, and Greenhouse Gas Emissions Standards, California adopted California’s standards. On June Air Resources Board, May 21, 2010. Available at: Medium-Duty Vehicles as approved by OAL,’’ http://www.epa.gov/otaq/climate/regulations.htm. 30, 2009, EPA granted California’s March 29, 2010. Available at http:// 28 These levels correspond to on-road values of 37 request for a waiver of preemption www.arb.ca.gov/regact/2010/ghgpv10/oaltp.pdf to 50 mpg, respectively, recognizing that on-road under the CAA with respect to these (last accessed August 28, 2011). 32 fuel economy tends to be about 20 percent worse standards.30 The granting of the waiver See State of California July 28, 2011 letter than calculated mpg values based on the CAFE test available at: http://www.epa.gov/otaq/climate/ cycle. We note, however, that because these mpg permits California and the other states regulations.htm. 33 values are translated from CO2e values that include The President’s remarks are available at reductions in hydrofluorocarbon (HFC) leakage due 29 75 FR 76337, December 8, 2010. http://www.whitehouse.gov/the-press-office/2011/ to use of advanced refrigerants and leakage 30 74 FR 32744 (July 8, 2009). See also Chamber 07/29/remarks-president-fuel-efficiency-standards; improvements, therefore these numbers are not as of Commerce v. EPA, 642 F.3d 192 (DC Cir. 2011) see also http://www.nhtsa.gov/fuel-economy for representative of either CAFE test cycle or real- (dismissing petitions for review challenging EPA’s more information from the agency about the world mpg. grant of the waiver). announcement.

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environmental and consumer groups, possible to inform the proposed publication of the December 8 also announced their support. rulemaking. Supplemental NOI and that were On the same day as the President’s Throughout this period, the summarized in the Supplemental NOI. announcement, the agencies released a stakeholders repeated many of the broad The manufacturers provided the second SNOI (published in the Federal concerns and suggestions described in agencies with additional information Register on August 9, 2011) generally the TAR, NOI, and December 8 SNOI. related to their product plans for vehicle describing the joint proposal that the For example, stakeholders uniformly models and fuel efficiency improving EPA and NHTSA expected to issue to expressed interest in maintaining a technologies and associated cost establish the National Program for harmonized and coordinated national estimates. Detailed product plans model years 2017–2025, and which is program that would be supported by generally extend only five or six model set forth in this NPRM. The agencies CARB and allow auto makers to build years into the future. Manufacturers also explained that the proposal would be one fleet and preserve consumer choice. provided estimates of the amount of developed based on extensive technical The stakeholders also raised concerns improvement in CAFE and CO2 analyses, an examination of the factors about potential stringency levels, emissions they could reasonably required under their respective statutes consumer acceptance of some advanced achieve in model MYs 2017–2025; and discussions with and input from technologies and the potential structure feedback on the shape of MY 2012–2016 individual motor vehicle manufacturers of compliance flexibilities available regulatory stringency curves and curve and other stakeholders. The input of under EPCA (as amended by EISA) and cut points, regulatory program stakeholders, which is encouraged by the CAA. In addition, most of the flexibilities; recommendations for and Executive Order 13563, has been stakeholders wanted to discuss issues on the structure of one or more mid- invaluable to the agencies in developing concerning technology availability, cost term reviews of the later model year today’s NPRM. and effectiveness and economic standards; estimates of the cost, For background, as discussed above, practicability. The auto manufacturers, effectiveness and availability of some after publishing the Supplemental NOI in particular, sought to provide the fuel efficiency improving technologies; on December 8, 2010 (the December 8 agencies with a better understanding of and feedback on some of the cost and SNOI), NHTSA, EPA and CARB their respective strategies (and effectiveness assumptions used in the continued studies and conducted more associated costs) for improving fuel TAR analysis. In addition, in-depth and comprehensive economy while satisfying consumer manufacturers provided input on rulemaking analyses related to demand in the coming years. manufacturer experience with consumer technology cost and effectiveness, Additionally, some stakeholders acceptance of some advanced technological feasibility, reasonable expressed concern about potential safety technologies and raised concerns over timing for manufacturers to implement impacts associated with the standards, consumer acceptance if higher technologies, and economic factors, and consumer costs and consumer penetration of these technologies were other relevant considerations. In acceptance, and potential disparate needed in the future, consumer’s addition to this ongoing and more in- treatment of cars and trucks. Some willingness to pay for improved fuel depth work, the agencies continued stakeholders also stressed the economy, and ideas on enablers and meeting with stakeholders and received importance of investing in infrastructure incentives that would increase additional input and feedback to help to support more widespread consumer acceptance. Many inform the rulemaking. Meetings were deployment of alternative vehicles and manufacturers stated that technology is held with and relevant information was fuels. Many stakeholders also asked the available to significantly improve fuel obtained from manufacturers, agencies to acknowledge prevailing economy and CO2 emissions; however, manufacturer organizations, suppliers, a economic uncertainties in developing they maintained that the biggest labor union, environmental groups, proposed standards. In addition, many challenges relate to the cost of the consumer interest groups, and stakeholders discussed the number of technologies, consumer willingness to investment organizations. years to be covered by the program and pay and consumer acceptance. This section summarizes NHTSA and what they considered to be important During this first phase NHTSA and EPA stakeholder engagement between features of a mid-term review of any EPA continued to meet with other December 2010 and July 29, 2011, the standards set or proposed for MY 2022– stakeholders, who provided their own date on which President Obama 2025. In all of these meetings, NHTSA perspectives on issues of importance to announced the agencies’ plans for and EPA sought additional data and them. They also provided data to the proposing standards for MY2017–2025, information from the stakeholders that extent available to them. Information and the support of thirteen major would allow them to refine their initial obtained from stakeholders during this automakers and other stakeholders for analyses and determine proposed 34 phase is contained in the docket. these plans. Information that the standards that are consistent with the The second stage of meetings agencies presented to stakeholders is agencies’ respective statutory and occurred between June 21, 2011 and posted in the docket and referenced in regulatory requirements. The general July 14, 2011, during which time EPA, multiple places in this section. issues raised by those stakeholders are NHTSA, CARB and several White House The agencies’ engagement with the addressed in the sections of this NPRM Offices kicked-off an intensive series of large and diverse group of stakeholders discussing the topics to which the described above between December meetings, primarily with manufacturers, issues pertain (e.g., the form of the to share tentative regulatory concepts 2010 and July 29, 2011 shared the single standards, technology cost and aim of ensuring that the agencies developed by EPA, NHTSA and CARB, effectiveness, safety impacts, impact on which included concept stringency possessed the most complete and U.S. vehicle sales and other economic comprehensive set of information curves and program flexibilities based considerations, costs and benefits). on the analyses completed by the The first stage of the meetings agencies as of June 21,35 and requested 34 NHTSA has prepared a list of stakeholder occurred between December 2010 and meeting dates and participants, found in a June 20, 2011. These meetings covered memorandum to the docket, titled ‘‘2017–2025 35 The agencies consider a range of standards that CAFE Stakeholders Meetings List,’’ at NHTSA– topics that were generally similar to the may satisfy applicable legal criteria, taking into 2010–0131. meetings that were held prior to the account the complete record before them . The

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feedback.36 In particular, the agencies interests stressed the need to carefully economic inputs used to calculate the requested that the manufacturers consider economic impacts and the costs and benefits of the proposed rules, provide detailed and reliable opportunity to create and support new a description of air conditioner and information on how they might comply jobs, and consumer advocates other off-cycle technologies, and the with the concepts and, if they projected emphasized the economic and practical agencies’ assessment of the effects of the they could not comply, information benefits to consumers of improved fuel proposed standards on vehicle safety. supporting their belief that they would economy and the need to preserve This comprehensive joint analytical be unable to comply. Additionally, EPA consumer choice. In addition, a number approach has provided a sound and and NHTSA sought detailed input from of stakeholders stated that the standards consistent technical basis for both the manufacturers regarding potential under development should not have an agencies in developing their proposed changes to the concept stringency levels adverse impact on safety. standards, which are summarized in the and program flexibilities available On July 29, 2011, EPA and NHTSA sections below. under EPA’s and NHTSA’s respective the agencies issued a new SNOI with 2. Level of the Standards authority that might facilitate concept stringency curves and program compliance. In addition, manufacturers provisions based on refined analyses EPA and NHTSA are each proposing provided input related to consumer and further consideration of the record two separate sets of standards, each acceptance and adoption of some before the agencies. The agencies have under its respective statutory advanced technologies and program received letters of support for the authorities. Both the proposed CO2 and costs based on their independent concepts laid out in the SNOI from CAFE standards for passenger cars and assessments or information previously BMW, Chrysler, Ford, , light trucks would be footprint-based, submitted to the agencies. Global Automakers, Honda, Hyundai, similar to the standards currently in In these second stage meetings, the Jaguar Land Rover, Kia, Mazda, effect through model year 2016, and agencies received considerable input Mitsubishi, Nissan, Toyota, Volvo and would become more stringent on from the manufacturers. The agencies CARB. Numerous other stakeholders, average in each model year from 2017 carefully considered the manufacturer including labor, environmental and through 2025. The basis for measuring information along with information consumer groups, have expressed their performance relative to standards would from the agencies’ independent support for the agencies’ plans to move continue to be based predominantly on analyses. The agencies used all available forward. the EPA city and highway test cycles (2- information to refine their assessment of The agencies have considered all of cycle test). However, EPA is proposing the range of program concept this stakeholder input in developing optional air conditioning and off-cycle stringencies and provisions that the this proposal, and look forward to credits for the GHG program and agencies determined were consistent continuing the productive dialogue adjustments to calculated fuel economy with their statutory mandates. through the comment period following for the CAFE programs that would be The third stage of meetings occurred this proposal. based on test procedures other than the between July 15, 2011 and July 28, 2011. 2-cycle tests. During this time period the agencies B. Summary of the Proposed 2017–2025 EPA is proposing standards that are continued to refine concept stringencies National Program projected to require, on an average and compliance flexibilities based on 1. Joint Analytical Approach industry fleet wide basis, 163 grams/ further consideration of the information mile of CO2 in model year 2025. This is available to them. They also met with This proposed rulemaking continues projected to be achieved through approximately 13 manufacturers who the collaborative analytical effort improvements in fuel efficiency with expressed ongoing interest in engaging between NHTSA and EPA, which began some additional reductions achieved 37 with the MYs 2012–2016 rulemaking. with the agencies. through reductions in non-CO2 GHG Throughout all three stages, EPA and NHTSA and EPA have worked together, emissions from reduced AC system NHTSA continued to engage other and in close coordination with CARB, leakage and the use of lower global stakeholders to ensure that the agencies on nearly every aspect of the technical warming potential (GWP) refrigerants. analysis supporting these joint proposed were obtaining the most comprehensive The level of 163 grams/mile CO2 would and reliable information possible to rules. The results of this collaboration be equivalent on a mpg basis to 54.5 guide the agencies in developing are reflected in the elements of the mpg, if this level was achieved solely proposed standards for MY 2017–2025. respective NHTSA and EPA proposed through improvements in fuel Many of these stakeholders reiterated rules, as well as in the analytical work efficiency.38 comments previously presented to the contained in the Draft Joint NHTSA and For passenger cars, the CO2 agencies. For instance, environmental EPA Technical Support Document (Joint compliance values associated with the organizations consistently stated that TSD). The agencies have continued to footprint curves would be reduced on stringent standards are technically develop and refine supporting analyses average by 5 percent per year from the achievable and critical to important since issuing the NOI and Interim Joint model year 2016 projected passenger car national interests, such as improving TAR last September. The Joint TSD, in industry-wide compliance level through energy independence, reducing climate particular, describes important details of model year 2025. In recognition of change, and enabling the domestic the analytical work that are common, as manufacturers’ unique challenges in automobile industry to remain well as highlighting any key differences improving the fuel economy and GHG competitive in the global market. Labor in approach. The joint analyses include emissions of full-size pickup trucks as the build-up of the baseline and we transition from the MY 2016 initial concepts shared with stakeholders were reference fleets, the derivation of the 38 within the range the agencies were considering, shape of the footprint-based attribute Real-world CO2 is typically 25 percent higher based on the information then available to the curves that define the agencies’ and real-world fuel economy is typically 20 percent agencies. lower than the CO2 and CAFE values discussed 36 respective standards, a detailed ‘‘Agency Materials Provided to Manufacturers’’ here. The reference to CO2 here refers to CO2 Memo to docket NHTSA–2010–0131. description of the estimated costs and equivalent reductions, as this included some degree 37 ‘‘Agency Materials Provided to Manufacturers’’ effectiveness of the technologies that are of reductions in greenhouse gases other than CO2, Memo to docket NHTSA–2010–0131. available to vehicle manufacturers, the as one part of the AC related reductions.

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standards to MY 2017 and later, while improvement for smaller light trucks in mathematical functions depending on preserving the utility (e.g., towing and MYs 2017–2021 higher than 2.9 percent, vehicle footprint.40 Footprint is one payload capabilities) of those vehicles, and the annual rate of improvement for measure of vehicle size, and is EPA is proposing a lower annual rate of larger light trucks over that time period determined by multiplying the vehicle’s improvement for light-duty trucks in the lower than 2.9 percent. wheelbase by the vehicle’s average track early years of the program. For light- The second phase of the CAFE width. The standards that must be met duty trucks, the proposed average program runs from MYs 2022–2025 and by each manufacturer’s fleet would be 39 annual rate of CO2 emissions reduction represents conditional proposed determined by computing the in model years 2017 through 2021 is 3.5 standards that are projected to require, production-weighted average of the percent per year. EPA is also proposing on an average industry fleet wide basis, targets applicable to each of the 49.6 mpg in model year 2025. For to change the slopes of the CO2-footprint manufacturer’s fleet of passenger cars passenger cars, the annual increase in curves for light-duty trucks from those and light trucks.41 Under these in the 2012–2016 rule, in a manner that the stringency of the target curves between model years 2022 and 2025 is footprint-based standards, the average effectively means that the annual rate of levels required of individual improvement for smaller light-duty expected to average 4.3 percent, and for light trucks, the annual increase during manufacturers will depend, as noted trucks in model years 2017 through above, on the mix and volume of 2021 would be higher than 3.5 percent, those model years is expected to average vehicles the manufacturer produces. and the annual rate of improvement for 4.7 percent. For the first time, NHTSA The values in the tables below reflect larger light-duty trucks over the same is proposing to increase the stringency the agencies’ projection of the time period would be lower than 3.5 of standards by the amount (in mpg corresponding average fleet levels that percent. For model years 2022 through terms) that industry is expected to will result from these attribute-based 2025, EPA is proposing an average improve air conditioning system efficiency, and EPA is proposing, under curves given the agencies’ current annual rate of CO2 emissions reduction for light-duty trucks of 5 percent per EPCA, to allow manufacturers to assumptions about the mix of vehicles year. include air conditioning system that will be sold in the model years NHTSA is proposing two phases of efficiency improvements in the covered by the proposed standards. passenger car and light truck standards calculation of fuel economy for CAFE As shown in Table I–1, NHTSA’s in this NPRM. The first phase runs from compliance. NHTSA notes that the fleet-wide required CAFE levels for MYs 2017–2021, with proposed proposed rates of increase in stringency passenger cars under the proposed standards that are projected to require, for CAFE standards are lower than standards are estimated to increase from on an average industry fleet wide basis, EPA’s proposed rates of increase in 40.0 to 56.0 mpg between MY 2017 and 40.9 mpg in MY 2021. For passenger stringency for GHG standards. As in the MY 2025. Fleet-wide required CAFE MYs 2012–2016 rulemaking, this is for cars, the annual increase in the levels for light trucks, in turn, are purposes of harmonization and in stringency of the target curves between estimated to increase from 29.4 to 40.3 reflection of several statutory model years 2017 to 2021 is expected to mpg. For the reader’s reference, Table average 4.1 percent. In recognition of constraints in EPCA/EISA. As a primary example, NHTSA’s proposed standards, I–1 also provides the estimated average manufacturers’ unique challenges in unlike EPA’s, do not reflect the fleet-wide required levels for the improving the fuel economy and GHG inclusion of air conditioning system combined car and truck fleets, emissions of full-size pickup trucks as refrigerant and leakage improvements, culminating in an estimated overall fleet we transition from the MY 2016 but EPA’s proposed standards would average required CAFE level of 49.6 standards to MY 2017 and later, while allow consideration of such A/C mpg in MY 2025. Considering these preserving the utility (e.g., towing and refrigerant improvements which reduce combined car and truck increases, the payload capabilities) of those vehicles, GHGs but do not affect fuel economy. proposed standards together represent NHTSA is also proposing a slower As with the MYs 2012–2016 approximately a 4.0 percent annual rate annual rate of improvement for light 42 standards, NHTSA and EPA’s proposed of increase, on average, relative to the trucks in the first phase of the program. MYs 2017–2025 passenger car and light MY 2016 required CAFE levels. For light trucks, the proposed annual truck standards are expressed as increase in the stringency of the target 40 NHTSA is required to set attribute-based CAFE curves in model years 2017 through 39 By ’’conditional,’’ NHTSA means to say that the standards for passenger cars and light trucks. 49 2021 would be 2.9 percent per year on proposed standards for MYs 2022–2025 represent U.S.C. 32902(b)(3). average. NHTSA is proposing to change the agency’s current best estimate of what levels of 41 For CAFE calculations, a harmonic average is the slopes of the fuel economy footprint stringency would be maximum feasible in those used. model years, but in order for the standards for those 42 This estimated average percentage increase curves for light trucks from those in the model years to be legally reviewable a subsequent includes the effect of changes in standard MYs 2012–2016 final rule, which would rulemaking must be undertaken by the agency at a stringency and changes in the forecast fleet sales effectively make the annual rate of later time. See Section IV for more information. mix.

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The estimated average required mpg would cause the actual achieved fuel compliance prior to MY 2020, and the levels for cars and trucks under the economy to be lower than the required ability to transfer and carry-forward proposed standards shown in Table I–1 levels in the table above. The credits. When accounting for these above include the use of A/C efficiency flexibilities and credits that NHTSA flexibilities and credits, NHTSA improvements, as discussed above, but cannot consider include the ability of estimates that the proposed CAFE do not reflect a number of proposed manufacturers to pay civil penalties standards would lead to the following flexibilities and credits that rather than achieving required CAFE average achieved fuel economy levels, manufacturers could use for compliance levels, the ability to use FFV credits, the based on the projections of what each that NHTSA cannot consider in ability to count electric vehicles for manufacturer’s fleet will comprise in establishing standards based on EPCA/ compliance, the operation of plug-in each year of the program: 43 EISA constraints. These flexibilities hybrid electric vehicles on electricity for

43 The proposed CAFE program includes technologies or performance levels at volumes that manufacturers use this incentive. NHTSA has incentives for full size pick-up trucks that have meet or exceed proposed penetration levels conducted a sensitivity study that estimates the mild HEV or strong HEV systems, and for full size (percentage of full size pick-up truck volume). This effects for manufacturers’ potential use of this pick-up trucks that have fuel economy performance incentive is described in detail in Section IV.1. The flexibility in Chapter X of the PRIA. that is better than the target curve by more than NHTSA estimates in Table I–2 do not account for proposed levels. To receive these incentives, the reduction in estimated average achieved fleet- manufacturers must produce vehicles with these wide CAFE fuel economy that would occur if

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NHTSA is also required by EISA to set Secretary for the combined domestic it represents a fleet average requirement, a minimum fuel economy standard for and non-domestic passenger automobile not a requirement for each individual domestically manufactured passenger fleets manufactured for sale in the vehicle within the fleet). cars in addition to the attribute-based United States by all manufacturers in Based on NHTSA’s current market passenger car standard. The minimum the model year * * *,’’ and applies to forecast, the agency’s estimates of these standard ‘‘shall be the greater of (A) 27.5 each manufacturer’s fleet of proposed minimum standards for miles per gallon; or (B) 92 percent of the domestically manufactured passenger domestic passenger cars for MYs 2017– average fuel economy projected by the cars (i.e., like the other CAFE standards, 2025 are presented below in Table I–3.

EPA is proposing GHG emissions manufacturers’ projected CO2 technology vehicle multipliers, and standards, and Table I–4 provides compliance target levels from the car hybrid and performance-based estimates of the projected overall fleet- and truck footprint curves, but do not incentives for full-size pickup trucks). wide CO2 emission compliance target account for EPA’s projection of how EPA’s projection of fleet-wide emissions levels. The values reflected in Table I– manufactures will implement two of the levels that do reflect these incentives is 4 are those that correspond to the proposed incentive programs (advanced shown in Table I–5 below.

44 The projected fleet compliance levels for 2016 truck value of 252 g/mi. That is because the compliance levels for any model year will not be are different for trucks and the fleet than were standards are footprint based and the fleet known until the end of that model year based on projected in the 2012–2016 rule. Our assessment for projections, hence the footprint distributions, actual vehicle sales. this proposal is based on a predicted 2016 truck change slightly with each update of our projections, value of 297 and a projected combined car and as described below. In addition, the actual fleet

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As shown in Table I–4, projected program credits and incentives, such as the emissions levels shown in Tables I– fleet-wide CO2 emission compliance car/truck credit transfers, air 4 and I–5 reflect the impact on targets for cars increase in stringency conditioning credits, off-cycle credits, stringency due to the advanced from 213 to 144 g/mi between MY 2017 advanced technology vehicle technology vehicle multipliers and the and MY 2025. Similarly, projected fleet- multipliers, and hybrid and full size pick-up hybrid/performance wide CO2 equivalent emission performance-based incentives for full incentives, but do not reflect car-truck compliance targets for trucks increase in size pick-up trucks. Two of these trading, air conditioning credits, or off- stringency from 295 to 203 g/mi. As flexibility provisions—advanced cycle credits, because, while those shown, the overall fleet average CO2 technology vehicle multipliers and the credit provisions should help reduce full size pick-up hybrid/performance level targets are projected to increase in manufacturers’ costs of the program, incentives—are expected to have an stringency from 243 g/mi in MY 2017 to EPA believes that they will result in 163 g/mi in MY 2025, which is impact on the fleet-wide emissions real-world emission reductions that will equivalent to 54.5 mpg if all reductions levels that manufacturers will actually not affect the achieved level of emission were made with fuel economy achieve. Therefore, Table I–5 shows reductions. These estimates are more improvements. EPA’s projection of the achieved EPA anticipates that manufacturers emission levels of the fleet for MY 2017 fully discussed in III.B would take advantage of proposed through 2025. The differences between BILLING CODE 4910–59–P

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A more detailed description of how use vehicle footprint as the attribute. speaking, smaller vehicles are more the agencies arrived at the year by year Footprint is defined as a vehicle’s capable of achieving lower levels of CO2 progression of the stringency of the wheelbase multiplied by its track and higher levels of fuel economy than proposed standards can be found in width—in other words, the area larger vehicles. Although a Sections III and IV of this preamble. enclosed by the points at which the manufacturer’s fleet average standards Both agencies also considered other wheels meet the ground. NHTSA and could be estimated throughout the alternative standards as part of their EPA adopted an attribute-based model year based on projected respective Regulatory Impact Analyses approach based on vehicle footprint for production volume of its vehicle fleet, that span a reasonable range of MYs 2012–2016 light-duty vehicle the standards to which the manufacturer alternative stringencies both more and standards.47 The agencies continue to must comply will be based on its final less stringent than the standards being believe that footprint is the most model year production figures. A proposed. EPA’s and NHTSA’s analyses appropriate attribute on which to base manufacturer’s calculation of its fleet of these regulatory alternatives (and the proposed standards, as discussed average standards as well as its fleets’ explanation of why we are proposing later in this notice and in Chapter 2 of average performance at the end of the the standards proposed and not the the Joint TSD. model year will thus be based on the regulatory alternatives) are contained in Under the footprint-based standards, production-weighted average target and Sections III and IV of this preamble, the curve defines a GHG or fuel performance of each model in its fleet.48 respectively, as well as in EPA’s DRIA economy performance target for each While the concept is the same, the and NHTSA’s PRIA. separate car or truck footprint. Using the proposed curve shapes for MYs 2017– curves, each manufacturer thus will 2025 are somewhat different from the 3. Form of the Standards have a GHG and CAFE average standard MYs 2012–2016 footprint curves. The As noted, NHTSA and EPA are that is unique to each of its fleets, passenger car curves are similar in proposing to continue attribute-based depending on the footprints and shape to the car curves for MYs 2012– standards for passenger cars and light production volumes of the vehicle 2016. However, the agencies are trucks, as required by EISA and as models produced by that manufacturer. proposing more significant changes to allowed by the CAA, and continue to A manufacturer will have separate the light trucks curves for MYs 2017– footprint-based standards for cars and 2025 compared to the light truck curves 45 Electric vehicles are assumed at 0 gram/mile in for trucks. The curves are mostly sloped, for MYs 2012–2016. The agencies are this analysis. so that generally, larger vehicles (i.e., proposing changes to the light-truck 46 The projected fleet compliance levels for 2016 are different for the fleet than were projected in the vehicles with larger footprints) will be curve to increase the slope and to 2012–2016 rule. Our assessment for this proposal is subject to less stringent targets (i.e., based on a predicted 2016 truck value of 297 and higher CO2 grams/mile targets and lower 48 As in the MYs 2012–2016 rule, a manufacturer a projected combined car and truck value of 252 g/ CAFE mpg targets) than smaller may have some models that exceed their target, and mi. That is because the standards are footprint some that are below their target. Compliance with based and the fleet projections, hence the footprint vehicles. This is because, generally a fleet average standard is determined by comparing distributions, change slightly with each update of the fleet average standard (based on the sales our projections, as described below. In addition, the 47 NHTSA also uses the footprint attribute in its weighted average of the target levels for each actual fleet compliance levels for any model year Reformed CAFE program for light trucks for model model) with fleet average performance (based on will not be known until the end of that model year years 2008–2011 and passenger car CAFE standards the sales weighted average of the performance for based on actual vehicle sales. for MY 2011. each model).

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extend the large-footprint cutpoint over and each year, the These CO2 values would be production time to larger footprints, which we parameters of the curve equation differ weighted to determine each believe represent an appropriate balance for cars and trucks. Each parameter also manufacturer’s fleet average standard of both technical and policy issues, as changes on a model year basis, resulting for cars and trucks. As with the CAFE discussed in Section II.C below and in the yearly increases in stringency. curves, the general form of the equation Chapter 2 of the draft Joint TSD. Figure I–1 below illustrates the is the same for each vehicle category NHTSA is proposing the attribute passenger car CAFE standard curves for and each year, but the parameters of the curves below for assigning a fuel model years 2017 through 2025 while equation differ for cars and trucks. economy target level to an individual Figure I–2 below illustrates the light Again, each parameter also changes on car or truck’s footprint value, for model truck CAFE standard curves for model a model year basis, resulting in the years 2017 through 2025. These mpg years 2017 through 2025. yearly increases in stringency. Figure I– values will be production weighted to EPA is proposing the attribute curves 3 below illustrates the CO2 car standard determine each manufacturer’s fleet shown in Figure I–3 and Figure I–4 curves for model years 2017 through average standard for cars and trucks. below for assigning a CO2 target level to 2025 while Figure I–4 shows the CO2 Although the general model of the target an individual vehicle’s footprint value, truck standard curves for model years curve equation is the same for each for model years 2017 through 2025. 2017–2025.

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BILLING CODE 4910–59–C CAFE program will also be classified as continue to be harmonized across all NHTSA and EPA are proposing to use a car under the EPA GHG program, and vehicles for the National Program. the same vehicle category definitions for likewise for trucks.49 This approach of As just explained, generally speaking, determining which vehicles are subject using CAFE definitions allows the CO2 a smaller footprint vehicle will tend to to the car curve standards versus the standards and the CAFE standards to have higher fuel economy and lower truck curve standards as were used for CO2 emissions relative to a larger MYs 2012–2016 standards. As in the 49 See 49 CFR 523 for NHTSA’s definitions for footprint vehicle when both have the MYs 2012–2016 rulemaking, a vehicle passenger car and light truck under the CAFE same level of fuel efficiency classified as a car under the NHTSA program. improvement technology. Since the

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proposed standards apply to a compliance burdens of the standards maintain consumer choice during the manufacturer’s overall fleet, not to an among different manufacturers, based rulemaking timeframe. Consumers individual vehicle, if a manufacturer’s on their respective product offerings. should still be able to purchase the size fleet is dominated by small footprint With this footprint-based standard of vehicle that meets their needs. Table vehicles, then that fleet will have a approach, EPA and NHTSA continue to I–6 helps to illustrate the varying CO2 higher fuel economy requirement and a believe that the rules will not create emissions and fuel economy targets lower CO2 requirement than a significant incentives to produce under the proposed standards that manufacturer whose fleet is dominated vehicles of particular sizes, and thus different vehicle sizes will have, by large footprint vehicles. Compared to there should be no significant effect on although we emphasize again that these the non-attribute based CAFE standards the relative availability of different targets are not actual standards—the in place prior to MY 2011, the proposed vehicle sizes in the fleet due to the proposed standards are manufacturer- standards more evenly distribute the proposed standards, which will help to specific, rather than vehicle-specific.

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4. Program Flexibilities for Achieving EPA is proposing under its CAA program, also now codified at 49 CFR Compliance authority a one-time CO2 carry-forward Part 536, to allow credits to be traded beyond 5 years, such that any credits between vehicle manufacturers. EPA a. CO2/CAFE Credits Generated Based on Fleet Average Over-Compliance generated from MY 2010 through 2016 also allows credit trading in the light- will be able to be used any time through duty vehicle GHG program. These sorts The MYs 2012–2016 rules contain MY 2021. This provision would not of exchanges between averaging sets are several provisions which provide apply to early credits generated in MY typically allowed under EPA’s current flexibility to manufacturers in meeting 2009. NHTSA’s program will continue mobile source emission credit programs standards, many of which the agencies the 5-year carry-forward and 3-year (as well as EPA’s and NHTSA’s recently are not proposing to change for MYs carry-back, as required by statute. promulgated GHG and fuel efficiency 2017 and later. For example, the Credit ‘‘transfer’’ means the ability of standards for heavy-duty vehicles and agencies are proposing to continue manufacturers to move credits from engines). EISA also prohibits allowing manufacturers to generate their passenger car fleet to their light manufacturers from using traded credits credits for over-compliance with the truck fleet, or vice versa. EISA required to meet the minimum domestic 50 CO2 and CAFE standards. Under the NHTSA to establish by regulation a passenger car CAFE standard.54 agencies’ footprint-based approach to CAFE credits transferring program, now the standards, a manufacturer’s ultimate b. Air Conditioning Improvement codified at 49 CFR part 536, to allow a Credits/Fuel Economy Value Increases compliance obligations are determined manufacturer to transfer credits between at the end of each model year, when its car and truck fleets to achieve Air conditioning (A/C) systems production of the model year is compliance with the standards. For contribute to GHG emissions in two complete. Since the fleet average example, credits earned by over- ways. Hydrofluorocarbon (HFC) standards that apply to a manufacturer’s compliance with a manufacturer’s car refrigerants, which are powerful GHGs, car and truck fleets are based on the fleet average standard could be used to can leak from the A/C system applicable footprint-based curves, a offset debits incurred due to that (direct A/C emissions). In addition, production volume-weighted fleet manufacturer’s not meeting the truck operation of the A/C system places an average requirement will be calculated fleet average standard in a given year. additional load on the engine which for each averaging set (cars and trucks) However, EISA imposed a cap on the increases fuel consumption and thus based on the mix and volumes of the amount by which a manufacturer could results in additional CO2 tailpipe models manufactured for sale by the raise its CAFE through transferred emissions (indirect A/C related manufacturer. If a manufacturer’s car credits: 1 mpg for MYs 2011–2013; 1.5 emissions). In the MYs 2012–2016 and/or truck fleet achieves a fleet mpg for MYs 2014–2017; and 2 mpg for program, EPA allows manufacturers to generate credits by reducing either or average CO2/CAFE level better than the MYs 2018 and beyond.51 Under section car and/or truck standards, then the 202(a) of the CAA, in contrast, there is both types of GHG emissions related to manufacturer generates credits. no statutory limitation on car-truck A/C systems. The expected generation of A/C credits is accounted for in setting Conversely, if the fleet average CO2/ credit transfers, and EPA’s GHG CAFE level does not meet the standard, program allows unlimited credit the level of the overall CO2 standard. the fleet would incur debits (also transfers across a manufacturer’s car- For the current proposal, as with the MYs 2012–2016 program, manufacturers referred to as a shortfall). As in the MY truck fleet to meet the GHG standard. will be able to generate CO -equivalent 2011 CAFE program under EPCA/EISA, This is based on the expectation that 2 credits to use in complying with the and also in MYs 2012–2016 for the this flexibility will facilitate setting CO standards for improvements in air light-duty vehicle GHG and CAFE appropriate GHG standards that 2 conditioning (A/C) systems, both for program, a manufacturer whose fleet manufacturers’ can comply with in the efficiency improvements (reduces generates credits in a given model year lead time provided, and will allow the tailpipe CO and improves fuel would have several options for using required GHG emissions reductions to 2 consumption) and for leakage reduction those credits, including credit carry- be achieved in the most cost effective or alternative, lower GWP (global back, credit carry-forward, credit way. Therefore, EPA did not constrain warming potential) refrigerant use transfers, and credit trading. the magnitude of allowable car-truck Credit ‘‘carry-back’’ means that 52 (reduces hydrofluorocarbon (HFC) credit transfers, as doing so would emissions). EPA is proposing that the manufacturers are able to use credits to reduce the flexibility for lead time, and offset a deficit that had accrued in a maximum would increase costs with no A/C credit available for cars is 18.8 prior model year, while credit ‘‘carry- corresponding environmental benefit. forward’’ means that manufacturers can grams/mile CO2 and for trucks is 24.4 EISA also prohibits the use of grams/mile CO . The proposed test bank credits and use them toward transferred credits to meet the minimum 2 compliance in future model years. methods used to calculate these direct domestic passenger car fleet CAFE and indirect A/C credits are very similar EPCA, as amended by EISA, requires standard.53 These statutory limits will NHTSA to allow manufacturers to carry- to those of the MYs 2012–2016 program, necessarily continue to apply to the though EPA is seeking comment on a back credits for up to three model years, determination of compliance with the and to carry-forward credits for up to revised idle test as well as a new test CAFE standards. procedure. five model years. EPA’s MYs 2012–2016 Credit ‘‘trading’’ means the ability of light duty vehicle GHG program For the first time in the current manufacturers to sell credits to, or proposal, the agencies are proposing includes the same limitations and EPA purchase credits from, one another. is proposing to continue this limitation provisions that would account for EISA allowed NHTSA to establish by improvements in air conditioner in the MY 2017–2025 program. To regulation a CAFE credit trading facilitate the transition to the efficiency in the CAFE program. Improving A/C efficiency leads to real- increasingly more stringent standards, 51 49 U.S.C. 32903(g)(3). world fuel economy benefits, because as 52 EPA’s proposed program will continue to 50 This credit flexibility is required by EPCA/ adjust car and truck credits by vehicle miles explained above, A/C operation EISA, see 49 U.S.C. 32903, and allowed by the traveled (VMT), as in the MY 2012–2016 program. CAA. 53 49 U.S.C. 32903(g)(4). 54 49 U.S.C. 32903(f)(2).

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represents an additional load on the generate fuel consumption improvement EPA is proposing to retain the public engine, so more efficient A/C operation values for purposes of CAFE compliance comment process from the MYs 2012– imposes less of a load and allows the based on the use of off-cycle 2016 rule. vehicle to go farther on a gallon of gas. technologies. Increases in fuel economy d. Incentives for Electric Vehicles, Plug- Under EPCA, EPA has authority to under the CAFE program based on off- in Hybrid Electric Vehicles, and Fuel adopt procedures to measure fuel cycle technology will be equivalent to economy and calculate CAFE. Under the off-cycle credit allowed by EPA Cell Vehicles this authority EPA is proposing that under the GHG program, and these To facilitate market penetration of the manufacturers could generate fuel amounts will be determined using the most advanced vehicle technologies as consumption improvement values for same procedures and test methods as rapidly as possible, EPA is proposing an purposes of CAFE compliance based on are used in EPA’s GHG program. For the incentive multiplier for compliance air conditioning system efficiency reasons discussed in sections III and IV purposes for all electric vehicles (EVs), improvements for cars and trucks. This of this proposal, the ability to generate plug-in hybrid electric vehicles increase in fuel economy would be off-cycle credits and increases in fuel (PHEVs), and fuel cell vehicles (FCVs) allowed up to a maximum based on economy for use in compliance will not sold in MYs 2017 through 2021. This 0.000563 gallon/mile for cars and affect or change the level of the GHG or multiplier approach means that each 0.000810 gallon/mile for trucks. This is CAFE standards proposed by each EV/PHEV/FCV would count as more equivalent to the A/C efficiency CO2 agency. than one vehicle in the manufacturer’s credit allowed by EPA under the GHG Many automakers indicated that they compliance calculation. EPA is program. The same methods would be had a strong interest in pursuing off- proposing that EVs and FCVs start with used in the CAFE program to calculate cycle technologies, and encouraged the a multiplier value of 2.0 in MY 2017, the values for air conditioning efficiency agencies to refine and simplify the phasing down to a value of 1.5 in MY improvements for cars and trucks as are evaluation process to provide more 2021. PHEVs would start at a multiplier used in EPA’s GHG program. NHTSA is certainty as to the types of technologies value of 1.6 in MY 2017 and phase including in its proposed passenger car the agencies would approve for credit down to a value of 1.3 in MY 2021.55 and light truck CAFE standards an generation. For 2017 and later, EPA is The multiplier would be 1.0 for MYs increase in stringency in each model proposing to expand and streamline the 2022–2025. year from 2017–2025 by the amount MYs 2012–2016 off-cycle credit NHTSA currently interprets EPCA industry is expected to improve air provisions, including an approach by and EISA as precluding the agency from conditioning system efficiency in those which the agencies would provide offering additional incentives for EVs, years, in a manner consistent with specified amounts of credit and fuel FCVs and PHEVs, except as specified by EPA’s GHG standards. EPA is not consumption improvement values for a statute,56 and thus is not proposing proposing to allow generation of fuel subset of off-cycle technologies whose incentive multipliers comparable to the consumption improvement values for benefits are readily quantifiable. EPA is EPA incentive multipliers described CAFE purposes, nor is NHTSA proposing a list of technologies and above. proposing to increase stringency of the credit values, where sufficient data is For EVs, PHEVs and FCVs, EPA is CAFE standard, for the use of A/C available, that manufacturers could use proposing to set a value of 0 g/mile for systems that reduce leakage or employ without going through an advance the tailpipe compliance value for EVs, alternative, lower GWP refrigerant, approval process that would otherwise PHEVs (electricity usage) and FCVs for because those changes do not improve be required to generate credits. EPA MY 2017–2021, with no limit on the fuel economy. believes that our assessment of off-cycle quantity of vehicles eligible for 0 g/mi technologies and associated credit tailpipe emissions accounting. For MY c. Off-cycle Credits/Fuel Economy values on this proposed list is Value Increases 2022–2025, EPA is proposing that 0 conservative, and automakers may g/mi only be allowed up to a per- For MYs 2012–2016, EPA provided an apply for additional off-cycle credits company cumulative sales cap, tiered as option for manufacturers to generate beyond the minimum credit value if follows: 1) 600,000 vehicles for credits for employing new and they have sufficient supporting data. companies that sell 300,000 EV/PHEV/ innovative technologies that achieve Further, manufacturers may also apply FCVs in MYs 2019–2021; 2) 200,000 CO2 reductions that are not reflected on for off-cycle technologies beyond those vehicles for all other manufacturers. current test procedures. EPA noted in listed, again, if they have sufficient data. EPA believes the industry-wide impact the MYs 2012–2016 rulemaking that In addition, EPA is providing of such a tiered cap will be examples of such ‘‘off-cycle’’ additional detail on the process and approximately 2 million vehicles. EPA technologies might include solar panels timing for the credit/fuel consumption on hybrids, adaptive cruise control, and improvement values application and 55 The multipliers for EV/FCV would be: 2017– active aerodynamics, among other approval process. EPA is proposing a 2019—2.0, 2020—1.75, 2021—1.5; for PHEV: 2017– technologies. See generally 75 FR at timeline for the approval process, 2019—1.6, 2020—1.45, 2021—1.3. 25438–39. EPA’s current program including a 60-day EPA decision 56 Because 49 U.S.C. 32904(a)(2)(B) expressly allows off-cycle credits to be generated process from the time a manufacturer requires EPA to calculate the fuel economy of electric vehicles using the Petroleum Equivalency through MY 2016. submits a complete application. EPA is Factor developed by DOE, which contains an EPA is proposing that manufacturers also proposing a detailed, common, incentive for electric operation already, and because may continue to use off-cycle credits for step-by-step process, including a 49 U.S.C. 32905(a) expressly requires EPA to MY 2017 and later for the GHG program. specification of the data that calculate the fuel economy of FCVs using a specified incentive, NHTSA believes that Congress’ As with A/C efficiency, improving manufacturers must submit. For off- having provided clear incentives for these efficiency through the use of off-cycle cycle technologies that are both not technologies in the CAFE program suggests that technologies leads to real-world fuel covered by the pre-approved off-cycle additional incentives beyond those would not be economy benefits and allows the vehicle credit/fuel consumption improvement consistent with Congress’ intent. Similarly, because the fuel economy of PHEVs’ electric operation must to go farther on a gallon of gas. Thus, values list and that are not quantifiable also be calculated using DOE’s PEF, the incentive under its EPCA authority EPA is based on the 5-cycle test cycle option for electric operation appears to already be inherent proposing to allow manufacturers to provided in the 2012–2016 rulemaking, in the statutory structure.

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proposes to phase-in the change in hybrid electric vehicles (HEVs). EPA 10 g/mi credit, and those achieving 20 compliance value, from 0 grams per would provide the incentive for the percent below their target would receive mile to net upstream accounting, for any GHG program under EPA’s CAA a 20 g/mi credit. The 10 g/mi manufacturer that exceeds its authority and the incentive for the performance-based credit would be cumulative production cap for EV/ CAFE program under EPA’s EPCA available for MYs 2017 to 2021 and a PHEV/FCVs. EPA proposes that, starting authority. EPA’s GHG and NHTSA’s vehicle meeting the requirements would with MY 2022, the compliance value for CAFE proposed standards are set at receive the credit until MY 2021 unless EVs, FCVs, and the electric portion of levels that take into account this its CO2 level increases. The 20 g/mi PHEVs in excess of individual flexibility as an incentive for the performance-based credit would be automaker cumulative production caps introduction of advanced technology. available for a maximum of 5 years would be based on net upstream This provides the opportunity to begin within the model years of 2017 to 2025, accounting. to transform the most challenging provided the CO2 level does not For EVs and other dedicated category of vehicles in terms of the increase for those vehicles earning the alternative fuel vehicles, EPA is penetration of advanced technologies, credit. The credits would begin in the proposing to calculate fuel economy for which, if successful at incentivizing model year of the eligible vehicle’s the CAFE program using the same these ‘‘game changing technologies,’’ introduction, and could not extend past methodology as in the MYs 2012–2016 should allow additional opportunities to MY 2021 for the 10 g/mi credit and MY rulemaking, which aligns with EPCA/ successfully achieve the higher levels of 2025 for the 20 g/mi credit. EISA statutory requirements. For liquid truck stringencies in MYs 2022–2025. alternative fuels, this methodology EPA is proposing that access to this To avoid double-counting, the same generally counts 15 percent of the credit and fuel consumption vehicle would not receive credit under volume of fuel used in determine the improvement value be conditioned on a both the HEV and the performance mpg-equivalent fuel economy. For minimum penetration of the technology based approaches. gaseous alternative fuels, the in a manufacturer’s full size pickup 5. Mid-Term Evaluation methodology generally determines a truck fleet, and is proposing criteria for gasoline equivalent mpg based on the a full size (e.g., minimum Given the long time frame at issue in energy content of the gaseous fuel bed size and minimum towing or setting standards for MYs 2022–2025, consumed, and then adjusts the fuel payload capability). EPA is proposing and given NHTSA’s obligation to consumption by effectively only that mild HEV pickup trucks would be conduct a separate rulemaking in order counting 15 percent of the actual energy eligible for a per vehicle credit of 10 to establish final standards for vehicles consumed. For electricity, the g/mi 57 during MYs 2017–2021 if the for those model years, EPA and NHTSA methodology generally determines a technology is used on a minimum are proposing a comprehensive mid- gasoline equivalent mpg by measuring percentage of a company’s full size term evaluation and agency decision- the electrical energy consumed, and pickups, beginning with at least 30% of making process. As part of this then using a petroleum equivalency a company’s full size pickup production undertaking, both NHTSA and EPA will factor (PEF) to convert to an mpg- in 2017 and ramping up to at least 80% develop and compile up-to-date equivalent value. The PEF for electricity in MY 2021. Strong HEV pickup trucks information for the evaluation, through includes an adjustment that effectively would be eligible for a 20 g/mi per 58 a collaborative, robust and transparent only counts 15 percent of the actual vehicle credit during MYs 2017–2025 if process, including public notice and energy consumed. Counting 15 percent the technology is used on at least 10% comment. The evaluation will be based of the volume or energy provides an of the company’s full size pickups. on (1) a holistic assessment of all of the incentive for alternative fuels in the These volume thresholds are being factors considered by the agencies in CAFE program. proposed in order to encourage rapid setting standards, including those set The methodology that EPA is penetration of these technologies in this forth in the rule and other relevant proposing for dual fueled vehicles vehicle segment. EPA and NHTSA are factors, and (2) the expected impact of under the GHG program and to calculate proposing specific definitions of mild those factors on the manufacturers’ fuel economy for the CAFE program is and strong HEV pickup trucks. ability to comply, without placing discussed below in subsection I.B.7.a. Because there are other technologies decisive weight on any particular factor besides mild and strong hybrids which e. Incentives for ‘‘Game Changing’’ or projection. The comprehensive can significantly reduce GHG emissions Technologies Performance for Full-Size evaluation process will lead to final and fuel consumption in pickup trucks, Pickup Truck Including Hybridization agency action by both agencies. EPA is also proposing a performance- Consistent with the agencies’ The agencies recognize that the based incentive CO emissions credit 2 commitment to maintaining a single standards under consideration for MYs and equivalent fuel consumption national framework for regulation of 2017–2025 will be challenging for large improvement value for full size pickup vehicle emissions and fuel economy, the trucks, including full size pickup trucks. trucks that achieve a significant CO 2 agencies fully expect to conduct the In order to incentivize the penetration reduction below/fuel economy mid-term evaluation in close into the marketplace of ‘‘game improvement above the applicable coordination with the California Air changing’’ technologies for these target. This would be available for Resources Board (CARB). Moreover, the pickups, including their hybridization, vehicles achieving significant CO 2 agencies fully expect that any EPA is proposing a CO2 credit in the reductions/fuel economy improvements adjustments to the GHG standards will GHG program and an equivalent fuel through the use of technologies other be made with the participation of CARB consumption improvement value in the than hybrid drive systems. EPA is and in a manner that ensures continued CAFE program for manufacturers that proposing that eligible pickup trucks harmonization of state and federal employ significant quantities of achieving 15 percent below their vehicle standards. hybridization on full size pickup trucks, applicable CO2 target would receive a by including a per-vehicle CO2 credit Further discussion of the mid-term and fuel consumption improvement 57 0.001125 gallon/mile. evaluation can be found in section III value available for mild and strong 58 0.00225 gallon/mile. and IV of the proposal.

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6. Coordinated Compliance dollars to be able to use a fuel that is However, after further consideration of The MYs 2012–2016 final rules considerably cheaper than gasoline, it is this issue, EPA is proposing the same established detailed and comprehensive very likely that the consumer will seek type of exclusion provision for these regulatory provisions for compliance to use the cheaper fuel as much as vehicles for MY 2012 and later because and enforcement under the GHG and possible. Accordingly, for CO2 of the unique features of vehicles CAFE programs. These provisions emissions compliance, EPA is proposing designed specifically for law remain in place for model years beyond to use the Society of Automotive enforcement and emergency purposes, MY 2016 without additional action by Engineers ‘‘utility factor’’ methodology which have the effect of raising their the agencies and EPA and NHTSA are (based on vehicle range on the GHG emissions and calling into not proposing any significant alternative fuel and typical daily travel question the ability of manufacturers to modifications to them. In the MYs mileage) to determine the assumed sufficiently reduce the emissions from 2012–2016 final rule, NHTSA and EPA percentage of operation on gasoline and these vehicles without compromising established a program that recognizes, percentage of operation on the necessary vehicle features or dropping and replicates as closely as possible, the alternative fuel for both PHEVs and bi- vehicles from their fleets. compliance protocols associated with fuel CNG vehicles, along with the CO2 emissions test values on the alternative c. Small Businesses and Small Volume the existing CAA Tier 2 vehicle Manufacturers emission standards, and with earlier fuel and gasoline. model year CAFE standards. The EPA is proposing to account for EPA is proposing provisions to certification, testing, reporting, and use by flexible fueled vehicles (FFVs) as address two categories of smaller associated compliance activities in the existing MY 2016 and later manufacturers. The first category is established for the GHG program closely program, based on actual usage of E85 small businesses as defined by the track those in previously existing which represents a real-world reduction Small Business Administration (SBA). programs and are thus familiar to attributed to alternative fuels. Unlike For vehicle manufacturers, SBA’s manufacturers. EPA already oversees PHEV and bi-fuel CNG vehicles, there is definition of small business is any firm testing, collects and processes test data, not a significant cost differential with less than 1,000 employees. As with and performs calculations to determine between an FFV and a conventional the MYs 2012–2016 program, EPA is compliance with both CAFE and CAA gasoline vehicle and historically proposing to continue to exempt small standards. Under this coordinated consumers have only fueled these businesses from the GHG standards, for approach, the compliance mechanisms vehicles with E85 a very small any company that meets the SBA’s percentage of the time. for both programs are consistent and definition of a small business. EPA In the CAFE program for MYs 2017– non-duplicative. EPA also applies the believes this exemption is appropriate 2019, the fuel economy of dual fuel given the unique challenges small CAA authorities applicable to its vehicles will be determined in the same businesses would face in meeting the separate in-use requirements in this manner as specified in the MY 2012– GHG standards, and since these program. 2016 rule, and as defined by EISA. The compliance approach allows businesses make up less than 0.1% of Beginning in MY 2020, EISA does not manufacturers to satisfy the GHG total U.S. vehicle sales, and there is no specify how to measure the fuel program requirements in the same significant impact on emission economy of dual fuel vehicles, and EPA general way they comply with is proposing under its EPCA authority to reductions. previously existing applicable CAA and use the ‘‘utility factor’’ methodology for EPA’s proposal also addresses small CAFE requirements. Manufacturers will PHEV and CNG vehicles described volume manufacturers, with U.S. annual demonstrate compliance on a fleet- above to determine how to proportion sales of less than 5,000 vehicles. Under average basis at the end of each model the fuel economy when operating on the MYs 2012–2016 program, these year, allowing model-level testing to gasoline or diesel fuel and the fuel small volume manufacturers are eligible continue throughout the year as is the economy when operating on the for an exemption from the CO2 current practice for CAFE alternative fuel. For FFVs, EPA is standards. EPA is proposing to bring determinations. The compliance proposing to use the same methodology small volume manufacturers into the program design includes a single set of as it uses for the GHG program to CO2 program for the first time starting manufacturer reporting requirements determine how to proportion the fuel in MY 2017, and allow them to petition and relies on a single set of underlying economy, which would be based on EPA for alternative standards. data. This approach still allows each actual usage of E85. EPA is proposing to EPCA provides NHTSA with the agency to assess compliance with its continue to use Petroleum Equivalency authority to exempt from the generally respective program under its respective Factors and the 0.15 divisor used in the applicable CAFE standards statutory authority. The program also MY 2012–2016 rule for the alternative manufacturers that produce fewer than addresses EPA enforcement in cases of fuels, however with no cap on the 10,000 passenger cars worldwide in the noncompliance. amount of fuel economy increase model year each of the two years prior 7. Additional Program Elements allowed. This issue is discussed further to the year in which they seek an in Section III.B.10. exemption.60 If NHTSA exempts a a. Treatment of Compressed manufacturer, it must establish an (CNG), Plug-in Hybrid Electric Vehicles b. Exclusion of Emergency and Police alternate standard for that manufacturer (PHEVs), and Flexible Fuel Vehicles Vehicles for that model year, at the level that the (FFVs) Under EPCA, manufacturers are agency decides is maximum feasible for EPA is proposing that CO2 allowed to exclude emergency vehicles that manufacturer. The exemption and compliance values for plug-in hybrid from their CAFE fleet 59 and all alternative standard apply only if the electric vehicles (PHEVs) and bi-fuel manufacturers have historically done so. exempted manufacturer also produces (CNG) vehicles In the MYs 2012–2016 program, EPA’s fewer than 10,000 passenger cars will be based on estimated use of the GHG program applies to these vehicles. alternative fuels, recognizing that, once 60 49 U.S.C. 32902(d). Implementing regulations a consumer has paid several thousand 59 49 U.S.C. 32902(e). may be found in 49 CFR part 525.

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worldwide in the year for which the conservation. In addition, the CAFE and credit transfer and trading. NHTSA’s exemption was granted. GHG standards offer somewhat different primary analysis of costs, fuel savings, Further, the Temporary Lead-time program flexibilities and provisions, and related benefits from imposing Allowance Alternative Standards and the agencies’ analyses differ in their higher CAFE standards does not include (TLAAS) provisions included in EPA’s accounting for these flexibilities them. However, EPCA does not prohibit MYs 2012–2016 program for (examples include the treatment of EVs, NHTSA from considering the fact that manufacturers with MY 2009 U.S. sales dual-fueled vehicles, and civil manufacturers may pay civil penalties of less than 400,000 vehicles ends after penalties), primarily because NHTSA is rather than comply with CAFE MY 2015 for most eligible statutorily prohibited from considering standards, and NHTSA’s primary manufacturers.61 EPA is not proposing some flexibilities when establishing analysis accounts for some to extend or otherwise replace the CAFE standards,62 while EPA is not. manufacturers’ tendency to do so. The TLAAS provisions for the proposed These differences contribute to primary analysis is generally identified MYs 2017–2025 program. However, differences in the agencies’ respective in tables throughout this document by EPA is inviting comment on whether estimates of costs and benefits resulting the term ‘‘estimated required CAFE this or some other form of flexibility is from the new standards. Nevertheless, it levels.’’ warranted for lower volume, limited is important to note that NHTSA and To illustrate the effects of the line manufacturers, as further discussed EPA have harmonized the programs as flexibilities and technologies that in Section III.B.8. With the exception of much as possible, and this proposal to NHTSA is prohibited from including in the small businesses and small volume continue the National Program would its primary analysis, NHTSA performed manufacturers discussed above, the result in significant cost and other a supplemental analysis of these effects proposed MYs 2017–2025 standards advantages for the automobile industry on benefits and costs of the proposed would apply to all manufacturers. by allowing them to manufacture one CAFE standards that helps to fleet of vehicles across the U.S., rather demonstrate the real-world impacts. As C. Summary of Costs and Benefits for than comply with potentially multiple an example of one of the effects, the Proposed National Program state standards that may occur in the including the use of FFV credits reduces This section summarizes the projected absence of the National Program. estimated per-vehicle compliance costs costs and benefits of the proposed CAFE In summary, the projected costs and of the program, but does not and GHG emissions standards. These benefits presented by NHTSA and EPA significantly change the projected fuel projections helped inform the agencies’ are not directly comparable, because the savings and CO2 reductions, because choices among the alternatives levels being proposed by EPA include FFV credits reduce the fuel economy considered and provide further air conditioning-related improvements levels that manufacturers achieve not confirmation that the proposed in HFC reductions, and because of the only under the proposed standards, but standards are appropriate under their projection by EPA of complete also under the baseline MY 2016 CAFE respective statutory authorities. The compliance with the proposed GHG standards. As another example, costs and benefits projected by NHTSA standards, whereas NHTSA projects including the operation of PHEV to result from these CAFE standards are some manufacturers will pay civil vehicles on both electricity and presented first, followed by those from penalties as part of their compliance gasoline, and the expected use of EVs EPA’s analysis of the GHG emissions strategy, as allowed by EPCA. It should for compliance may raise the fuel standards. The agencies recognize that also be expected that overall EPA’s economy levels that manufacturers there are uncertainties regarding the estimates of GHG reductions and fuel achieve under the proposed standards. benefit and cost values presented in this savings achieved by the proposed GHG The supplemental analysis is generally proposal. Some benefits and costs are standards will be slightly higher than identified in tables throughout this not quantified. The value of other those projected by NHTSA only for the document by the term ‘‘estimated benefits and costs could be too low or CAFE standards because of the same achieved CAFE levels.’’ too high. reasons described above. For the same Thus, NHTSA’s primary analysis For several reasons, the estimates for reasons, EPA’s estimates of shows the estimates the agency costs and benefits presented by NHTSA manufacturers’ costs for complying with considered for purposes of establishing and EPA, while consistent, are not the proposed passenger car and light new CAFE standards, and its directly comparable, and thus should truck GHG standards are slightly higher supplemental analysis including not be expected to be identical. Most than NHTSA’s estimates for complying manufacturer use of flexibilities and important, NHTSA and EPA’s standards with the proposed CAFE standards. advanced technologies currently reflects would require slightly different fuel the agency’s best estimate of the 1. Summary of Costs and Benefits for potential real-world effects of the efficiency improvements. EPA’s the Proposed NHTSA CAFE Standards proposed GHG standard is more proposed CAFE standards. stringent in part due to its assumptions In reading the following section, we Without accounting for the about manufacturers’ use of air note that tables are identified as compliance flexibilities and advanced conditioning leakage credits, which reflecting ‘‘estimated required’’ values technologies that NHTSA is prohibited result from reductions in air and ‘‘estimated achieved’’ values. When from considering when determining the conditioning-related emissions of HFCs. establishing standards, EPCA allows maximum feasible level of new CAFE NHTSA is proposing standards at levels NHTSA to only consider the fuel standards, since manufacturers’ of stringency that assume improvements economy of dual-fuel vehicles (for decisions to use those flexibilities and in the efficiency of air conditioning example, FFVs and PHEVs) when technologies are voluntary, NHTSA systems, but that do not account for operating on gasoline, and prohibits estimates that the required fuel reductions in HFCs, which are not NHTSA from considering the use of economy increases would lead to fuel related to fuel economy or energy dedicated savings totaling 173 billion gallons credits (including for example EVs), throughout the lives of vehicles sold in 61 TLAAS ends after MY 2016 for manufacturers credit carry-forward and carry-back, and MYs 2017–2025. At a 3 percent discount with MY 2009 U.S. sales of less than 50,000 rate, the present value of the economic vehicles. 62 See 49 U.S.C. 32902(h). benefits resulting from those fuel

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savings is $451 billion; at a 7 percent the economic benefits from avoiding reductions. The two agencies standards private discount rate, the present value those emissions is $49 billion, based on together comprise the National Program, of the economic benefits resulting from a global social cost of carbon value of and this discussion of the costs and those fuel savings is $358 billion. $22 per metric ton (in 2010, and benefits of NHTSA’s CAFE standards The agency further estimates that growing thereafter).63 It is important to does not change the fact that both the these new CAFE standards would lead note that NHTSA’s CAFE standards and CAFE and GHG standards, jointly, are to corresponding reductions in CO2 EPA’s GHG standards will both be in the source of the benefits and costs of emissions totaling 1.8 billion metric effect, and each will lead to increases in the National Program. All costs are in tons during the lives of vehicles sold in average fuel economy and CO 2009 dollars. MYs 2017–2025. The present value of 2

63 NHTSA also estimated the benefits associated 64 The ‘‘Earlier’’ column shows benefits that some technologies, and achieve benefits during with three more estimates of a one ton GHG NHTSA forecasts manufacturers will implement in vehicle redesigns that occur prior to MY 2017 in reduction in 2009 ($5, $36, and $67), which will model years prior to 2017 that are in response to order to comply with MY 2017 and later standards likewise grow thereafter. See Section II for a more the proposed MY 2017–2025 standards. The CAFE in a cost effective manner. detailed discussion of the social cost of carbon. model forecasts that manufactures will implement

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Considering manufacturers’ ability to advanced technologies for meeting the following for fuel savings and avoided employ compliance flexibilities and standards, NHTSA estimates the CO2 emissions, assuming FFV credits

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would be used toward both the baseline and final standards:

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NHTSA estimates that the fuel economy drivers’ tendency to travel more when monetized benefits can be found in increases resulting from the proposed the cost of driving declines (as it does Section IV of this notice and in standards would produce other benefits when fuel economy increases). NHTSA NHTSA’s PRIA. Note that the benefit both to drivers (e.g., reduced time spent has estimated the total monetary value calculation in the following tables refueling) and to the U.S. as a whole to society of these benefits and includes the benefits of reducing CO2 (e.g., reductions in the costs of disbenefits, and estimates that the emissions,66 but not the benefits of petroleum imports beyond the direct proposed standards will produce reducing other GHG emissions. savings from reduced oil purchases),65 significant net benefits to society. Using

as well as some disbenefits (e.g., a 3 percent discount rate, NHTSA 66 CO2 benefits for purposes of these tables are increased traffic congestion) caused by estimates that the present value of these calculated using the $22/ton SCC values. Note that benefits would total more than $515 the net present value of reduced GHG emissions is 65 We note, of course, that reducing the amount billion over the lives of the vehicles sold calculated differently from other benefits. The same of fuel purchased also reduces tax revenue for the during MYs 2017–2025; using a 7 discount rate used to discount the value of damages Federal and state/local governments. NHTSA from future emissions (SCC at 5, 3, and 2.5 percent) discusses this issue in more detail in Chapter VIII percent discount rate, more than $419 is used to calculate net present value of SCC for of the PRIA. billion. More discussion regarding internal consistency.

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Considering manufacturers’ ability to advanced technologies for meeting the value of these benefits would be employ compliance flexibilities and standards, NHTSA estimates the present reduced as follows:

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NHTSA attributes most of these flexibilities and advanced technologies Information Administration’s (EIA) benefits (about $451 billion at a 3 for meeting the standards) to reductions reference case forecast from the Annual percent discount rate, or about $358 in fuel consumption, valuing fuel (for Energy Outlook (AEO) 2011. NHTSA’s billion at a 7 percent discount rate, societal purposes) at the future pre-tax PRIA accompanying this proposal excluding consideration of compliance prices projected in the Energy

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presents a detailed analysis of specific benefits of the rule.

NHTSA estimates that the increases in monetary outlays. The agency estimates and above those required to comply technology application necessary to that the incremental costs for achieving with the MY 2016 CAFE standards— achieve the projected improvements in the proposed CAFE standards—that is, will total about $157 billion (i.e., during fuel economy will entail considerable outlays by vehicle manufacturers over MYs 2017–2025).

However, NHTSA estimates that to meet the standards could manufacturers employing compliance significantly reduce these outlays: flexibilities and advanced technologies

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NHTSA projects that manufacturers increased outlays (and, to a much less increase in average new vehicle prices will recover most or all of these extent, the civil penalties that some ranging from $161 per vehicle in MY additional costs through higher selling manufacturers are expected to pay for 2017 to $1876 per vehicle in MY 2025: prices for new cars and light trucks. To non-compliance), the agency estimates allow manufacturers to recover these that the standards would lead to

And as before, NHTSA estimates that to meet the standards could manufacturers employing compliance significantly reduce these increases. flexibilities and advanced technologies

NHTSA estimates, therefore, that the over the useful lives of the vehicles sold 2017–2025. The benefits include total benefits of these proposed CAFE during MYs 2017–2025. impacts such as climate-related standards will be more than 2.5 times economic benefits from reducing 2. Summary of Costs and Benefits for the magnitude of the corresponding emissions of CO (but not other GHGs), the Proposed EPA GHG Standards 2 costs. As a consequence, the proposed reductions in energy security CAFE standards would produce net EPA has analyzed in detail the costs externalities caused by U.S. petroleum benefits of $358 billion at a 3 percent and benefits of the proposed GHG consumption and imports, the value of discount rate (with compliance standards. Table I–17 shows EPA’s certain health benefits, the value of flexibilities, $355 billion), or $262 estimated lifetime discounted cost, fuel additional driving attributed to the billion at a 7 percent discount rate (with savings, and benefits for all vehicles rebound effect, the value of reduced compliance flexibilities, $264 billion), projected to be sold in model years refueling time needed to fill up a more

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fuel efficient vehicle. The analysis also economic damages caused by accidents, social cost of carbon (SCC), as described includes economic impacts stemming congestion and noise. Note that benefits in Section III.H. from additional vehicle use, such as the depend on estimated values for the BLLING CODE 4910–59–P

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BLLING CODE 4910–59–C above with respect to NHTSA’s CAFE standards, jointly, are the source of the Table I–18 shows EPA’s estimated standards, it is important to note that benefits and costs of the National lifetime fuel savings and CO equivalent 2 NHTSA’s CAFE standards and EPA’s Program. In general though, in addition emission reductions for all vehicles sold GHG standards will both be in effect, to the added GHG benefit of HFC in the model years 2017–2025. The values in Table I–18 are projected and each will lead to increases in reductions from the EPA program, the lifetime totals for each model year and average fuel economy and reductions in fuel savings benefit are also somewhat are not discounted. As documented in CO2 emissions. The two agencies’ higher than that from CAFE, primarily EPA’s draft RIA, the potential credit standards together comprise the because of the possibility of paying civil transfer between cars and trucks may National Program, and this discussion of penalties in lieu of applying technology change the distribution of the fuel costs and benefits of EPA’s proposed in NHTSA’s program, which is required savings and GHG emission impacts GHG standards does not change the fact by EPCA. between cars and trucks. As discussed that both the proposed CAFE and GHG BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C Table I–19 shows EPA’s estimated vehicles sold in model years 2017–2025. lifetime discounted benefits for all Although EPA estimated the benefits

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associated with four different values of reductions and Section III.H presents security and other externalities such as a one ton GHG reduction ($5, $22 $36, the program benefits using each of the reduced refueling time and accidents, $67 in CY 2010 and in 2009 dollars), for four marginal values, which represent congestion and noise. The lifetime the purposes of this overview only a partial accounting of total discounted benefits are shown for one of presentation of estimated benefits EPA benefits due to omitted climate change four different social cost of carbon (SCC) is showing the benefits associated with impacts and other factors that are not values considered by EPA. The values one of these marginal values, $22 per readily monetized. The values in the in Table I–19 do not include costs ton of CO2, in 2009 dollars and 2010 table are discounted values for each associated with new technology emissions. Table I–19 presents benefits model year of vehicles throughout their required to meet the GHG standard and based on the $22 value. Section III.H projected lifetimes. The benefits include they do not include the fuel savings presents the four marginal values used all benefits considered by EPA such as expected from that technology. to estimate monetized benefits of GHG GHG reductions, PM benefits, energy

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Table I–20 shows EPA’s estimated vehicles sold in the model years 2017– discounted. The monetized values lifetime fuel savings, lifetime CO2 2025. The estimated fuel savings in shown in Table I–20 are the summed emission reductions, and the monetized billions of gallons and the GHG values of the discounted monetized fuel net present values of those fuel savings reductions in million metric tons of CO2 savings and monetized CO2 reductions and CO2 emission reductions. The fuel shown in Table I–20 are totals for the for the model years 2017–2025 vehicles savings and CO2 emission reductions nine model years throughout their throughout their lifetimes. The are projected lifetime values for all projected lifetime and are not monetized values in Table I–20 reflect

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both a 3 percent and a 7 percent discount rate as noted. BILLING CODE 4910–59–P

BILLING CODE 4910–59–C are for the industry as a whole and do shown are incremental to a baseline Table I–21 shows EPA’s estimated not account for fuel savings associated vehicle and are not cumulative. In other incremental and total technology with the program. Table I–22 shows words, the estimated increase for 2017 outlays for cars and trucks for each of EPA’s estimated incremental cost model year cars is $194 relative to a the model years 2017–2025. The increase of the average new vehicle for 2017 model year car meeting the MY technology outlays shown in Table I–21 each model year 2017–2025. The values 2016 standards. The estimated increase

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for a 2018 model year car is $353 meeting the MY 2016 standards (not relative to a 2018 model year car $194 plus $353).

D. Background and Comparison of which CAFE and GHG standards are 1. NHTSA Statutory Authority NHTSA and EPA Statutory Authority established. NHTSA establishes CAFE standards This section provides the agencies’ for passenger cars and light trucks for respective statutory authorities under each model year under EPCA, as amended by EISA. EPCA mandates a

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motor vehicle fuel economy regulatory standards for the industry as a whole. In a rulemaking such as the present one, program to meet the various facets of the Prior to this NPRM, some manufacturers looking out into the more distant future, need to conserve energy, including the raised with NHTSA the possibility of economic practicability is a way to environmental and foreign policy NHTSA and EPA setting alternate consider the uncertainty surrounding implications of petroleum use by motor standards for part of the industry that future market conditions and consumer vehicles. EPCA allocates the met certain (relatively low) sales volume demand for fuel economy in addition to responsibility for implementing the criteria—specifically, that separate other vehicle attributes. In an attempt to program between NHTSA and EPA as standards be set so that ‘‘intermediate- ensure the economic practicability of follows: NHTSA sets CAFE standards size,’’ limited-line manufacturers do not attribute-based standards, NHTSA for passenger cars and light trucks; EPA have to meet the same levels of considers a variety of factors, including establishes the procedures for testing, stringency that larger manufacturers the annual rate at which manufacturers tests vehicles, collects and analyzes have to meet until several years later. can increase the percentage of their fleet manufacturers’ data, and calculates the NHTSA seeks comment on whether or that employ a particular type of fuel- individual and average fuel economy of how EPCA, as amended by EISA, could saving technology, the specific fleet each manufacturer’s passenger cars and be interpreted to allow such alternate mixes of different manufacturers, and light trucks; and NHTSA enforces the standards for certain parts of the assumptions about the cost of the standards based on EPA’s calculations. industry. standards to consumers and consumers’ valuation of fuel economy, among other a. Standard Setting i. Factors That Must Be Considered in things. We have summarized below the most Deciding the Appropriate Stringency of It is important to note, however, that important aspects of standard setting CAFE Standards the law does not preclude a CAFE under EPCA, as amended by EISA. For (1) Technological Feasibility standard that poses considerable each future model year, EPCA requires challenges to any individual ‘‘Technological feasibility’’ refers to that NHTSA establish separate manufacturer. The Conference Report whether a particular method of passenger car and light truck standards for EPCA, as enacted in 1975, makes improving fuel economy can be at ‘‘the maximum feasible average fuel clear, and the case law affirms, ‘‘a available for commercial application in economy level that it decides the determination of maximum feasible the model year for which a standard is manufacturers can achieve in that average fuel economy should not be being established. Thus, the agency is model year,’’ based on the agency’s keyed to the single manufacturer which not limited in determining the level of consideration of four statutory factors: might have the most difficulty achieving new standards to technology that is technological feasibility, economic a given level of average fuel already being commercially applied at practicability, the effect of other economy.’’ 70 Instead, NHTSA is the time of the rulemaking, a standards of the Government on fuel compelled ‘‘to weigh the benefits to the consideration which is particularly economy, and the need of the nation to nation of a higher fuel economy relevant for a rulemaking with a conserve energy. EPCA does not define standard against the difficulties of timeframe as long as the present one. these terms or specify what weight to individual automobile For this rulemaking, NHTSA has give each concern in balancing them; manufacturers.’’ 71 The law permits considered all types of technologies that thus, NHTSA defines them and CAFE standards exceeding the projected improve real-world fuel economy, determines the appropriate weighting capability of any particular including air-conditioner efficiency, due that leads to the maximum feasible manufacturer as long as the standard is to EPA’s proposal to allow generation of standards given the circumstances in economically practicable for the fuel consumption improvement values each CAFE standard rulemaking.67 For industry as a whole. Thus, while a for CAFE purposes based on MYs 2011–2020, EPCA further requires particular CAFE standard may pose improvements to air-conditioner that separate standards for passenger difficulties for one manufacturer, it may efficiency that improves fuel efficiency. cars and for light trucks be set at levels also present opportunities for another. high enough to ensure that the CAFE of (2) Economic Practicability NHTSA has long held that the CAFE program is not necessarily intended to the industry-wide combined fleet of ‘‘Economic practicability’’ refers to maintain the competitive positioning of new passenger cars and light trucks whether a standard is one ‘‘within the each particular company. Rather, it is reaches at least 35 mpg not later than financial capability of the industry, but intended to enhance the fuel economy MY 2020. For model years after 2020, not so stringent as to’’ lead to ‘‘adverse of the vehicle fleet on American roads, standards need simply be set at the economic consequences, such as a while protecting motor vehicle safety maximum feasible level. significant loss of jobs or the and being mindful of the risk to the Because EPCA states that standards unreasonable elimination of consumer overall United States economy. must be set for ‘‘* * * automobiles choice.’’ 68 The agency has explained in manufactured by manufacturers,’’ and the past that this factor can be especially (3) The Effect of Other Motor Vehicle because Congress provided specific important during rulemakings in which Standards of the Government on Fuel direction on how small-volume the automobile industry is facing Economy manufacturers could obtain exemptions significantly adverse economic from the passenger car standards, ‘‘The effect of other motor vehicle conditions (with corresponding risks to standards of the Government on fuel NHTSA has long interpreted its jobs). Consumer acceptability is also an authority as pertaining to setting economy,’’ involves an analysis of the element of economic practicability, one effects of compliance with emission, which is particularly difficult to gauge 67 See Center for Biological Diversity v. NHTSA, 69 538 F.3d. 1172, 1195 (9th Cir. 2008) (‘‘The EPCA during times of uncertain fuel prices. reasonable); Public Citizen v. NHTSA, 848 F.2d 256 clearly requires the agency to consider these four (Congress established broad guidelines in the fuel factors, but it gives NHTSA discretion to decide 68 67 FR 77015, 77021 (Dec. 16, 2002). economy statute; agency’s decision to set lower how to balance the statutory factors—as long as 69 See, e.g., Center for Auto Safety v. NHTSA standard was a reasonable accommodation of NHTSA’s balancing does not undermine the (CAS), 793 F.2d 1322 (D.C. Cir. 1986) conflicting policies). fundamental purpose of the EPCA: energy (Administrator’s consideration of market demand as 70 CEI–I, 793 F.2d 1322, 1352 (D.C. Cir. 1986). conservation.’’). component of economic practicability found to be 71 Id.

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safety, noise, or damageability standards (5) Fuel Prices and the Value of Saving from higher fuel economy will increase on fuel economy capability and thus on Fuel emissions of these pollutants. Thus, the average fuel economy. In previous CAFE Projected future fuel prices are a net effect of stricter CAFE standards on rulemakings, the agency has said that critical input into the preliminary emissions of each pollutant depends on pursuant to this provision, it considers economic analysis of alternative CAFE the relative magnitudes of its reduced the adverse effects of other motor standards, because they determine the emissions in fuel refining and vehicle standards on fuel economy. It value of fuel savings both to new distribution, and increases in its said so because, from the CAFE vehicle buyers and to society, which is emissions from vehicle use. Fuel program’s earliest years 72 until present, related to the consumer cost (or rather, savings from stricter CAFE standards the effects of such compliance on fuel benefit) of our need for large quantities also result in lower emissions of CO2, economy capability over the history of of petroleum. In this rule, NHTSA relies the main greenhouse gas emitted as a the CAFE program have been negative on fuel price projections from the U.S. result of refining, distribution, and use of transportation fuels. Reducing fuel ones. For example, safety standards that Energy Information Administration’s consumption reduces carbon dioxide have the effect of increasing vehicle (EIA) most recent Annual Energy emissions directly, because the primary weight lower vehicle fuel economy Outlook (AEO) for this analysis. Federal government agencies generally use EIA’s source of transportation-related CO2 capability and thus decrease the level of emissions is fuel combustion in internal average fuel economy that the agency projections in their assessments of future energy-related policies. combustion engines. can determine to be feasible. NHTSA has considered In the wake of Massachusetts v. EPA (6) Petroleum Consumption and Import environmental issues, both within the and of EPA’s endangerment finding, Externalities context of EPCA and the National granting of a waiver to California for its U.S. consumption and imports of Environmental Policy Act, in making motor vehicle GHG standards, and its petroleum products impose costs on the decisions about the setting of standards own establishment of GHG standards, domestic economy that are not reflected from the earliest days of the CAFE NHTSA is confronted with the issue of in the market price for crude petroleum, program. As courts of appeal have noted how to treat those standards under or in the prices paid by consumers of in three decisions stretching over the 75 EPCA/EISA, such as in the context of petroleum products such as gasoline. last 20 years, NHTSA defined the the ‘‘other motor vehicle standards’’ These costs include (1) Higher prices for ‘‘need of the Nation to conserve energy’’ provision. To the extent the GHG petroleum products resulting from the in the late 1970s as including ‘‘the standards result in increases in fuel effect of U.S. oil import demand on the consumer cost, national balance of payments, environmental, and foreign economy, they would do so almost world oil price; (2) the risk of policy implications of our need for large exclusively as a result of inducing disruptions to the U.S. economy caused quantities of petroleum, especially manufacturers to install the same types by sudden reductions in the supply of imported petroleum.’’ 76 In 1988, of technologies used by manufacturers imported oil to the U.S.; and (3) NHTSA included climate change in complying with the CAFE standards. expenses for maintaining a U.S. military presence to secure imported oil supplies concepts in its CAFE notices and Comment is requested on whether from unstable regions, and for prepared its first environmental 77 and in what way the effects of the maintaining the strategic petroleum assessment addressing that subject. It California and EPA standards should be reserve (SPR) to provide a response cited concerns about climate change as considered under EPCA/EISA, e.g., option should a disruption in one of its reasons for limiting the extent under the ‘‘other motor vehicle commercial oil supplies threaten the of its reduction of the CAFE standard for 78 standards’’ provision, consistent with U.S. economy, to allow the United MY 1989 passenger cars. Since then, NHTSA’s independent obligation under States to meet part of its International NHTSA has considered the benefits of EPCA/EISA to issue CAFE standards. Energy Agency obligation to maintain reducing tailpipe carbon dioxide The agency has already considered emergency oil stocks, and to provide a emissions in its fuel economy EPA’s proposal and the harmonization national defense fuel reserve. Higher rulemakings pursuant to the statutory benefits of the National Program in U.S. imports of crude oil or refined requirement to consider the nation’s developing its own proposal. petroleum products increase the need to conserve energy by reducing fuel consumption. (4) The Need of the United States To magnitude of these external economic Conserve Energy costs, thus increasing the true economic ii. Other Factors Considered by NHTSA cost of supplying transportation fuels NHTSA considers the potential for above the resource costs of producing ‘‘The need of the United States to adverse safety consequences when them. Conversely, reducing U.S. imports conserve energy’’ means ‘‘the consumer establishing CAFE standards. This of crude petroleum or refined fuels or cost, national balance of payments, practice is recognized approvingly in reducing fuel consumption can reduce environmental, and foreign policy case law.79 Under the universal or ‘‘flat’’ implications of our need for large these external costs. quantities of petroleum, especially (7) Air Pollutant Emissions 75 Center for Auto Safety v. NHTSA, 793 F.2d imported petroleum.’’ 73 Environmental 1322, 1325 n. 12 (D.C. Cir. 1986); Public Citizen v. While reductions in domestic fuel implications principally include NHTSA, 848 F.2d 256, 262–3 n. 27 (D.C. Cir. 1988) refining and distribution that result (noting that ‘‘NHTSA itself has interpreted the reductions in emissions of carbon from lower fuel consumption will factors it must consider in setting CAFE standards dioxide and criteria pollutants and air reduce U.S. emissions of various as including environmental effects’’); and Center for toxics. Prime examples of foreign policy Biological Diversity v. NHTSA, 538 F.3d 1172 (9th pollutants, additional vehicle use implications are energy independence Cir. 2007). associated with the rebound effect 74 76 42 FR 63184, 63188 (Dec. 15, 1977) (emphasis and security concerns. added). 74 The ‘‘rebound effect’’ refers to the tendency of 77 53 FR 33080, 33096 (Aug. 29, 1988). 72 42 FR 63184, 63188 (Dec. 15, 1977). See also drivers to drive their vehicles more as the cost of 78 53 FR 39275, 39302 (Oct. 6, 1988). 42 FR 33534, 33537 (Jun. 30, 1977). doing so goes down, as when fuel economy 79 As the United States Court of Appeals pointed 73 42 FR 63184, 63188 (1977). improves. out in upholding NHTSA’s exercise of judgment in

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CAFE standards that NHTSA was provision limits, to some extent, the fuel 2020 must simply be set at the previously authorized to establish, the economy levels that NHTSA can find to maximum feasible level.87 primary risk to safety came from the be ‘‘maximum feasible’’—if NHTSA The standards for passenger cars and possibility that manufacturers would cannot consider the fuel economy of light trucks must also be based on one respond to higher standards by building electric vehicles, for example, NHTSA or more vehicle attributes, like size or smaller, less safe vehicles in order to cannot set a standards predicated on weight, which correlate with fuel ‘‘balance out’’ the larger, safer vehicles manufacturers’ usage of electric vehicles economy and must be expressed in that the public generally preferred to to meet the standards. terms of a mathematical function.88 Fuel buy. Under the attribute-based economy targets are set for individual standards being proposed in this action, iv. Weighing and Balancing of Factors vehicles and increase as the attribute that risk is reduced because building decreases and vice versa. For example, NHTSA has broad discretion in smaller vehicles tends to raise a footprint-based standards assign higher manufacturer’s overall CAFE obligation, balancing the above factors in fuel economy targets to smaller- rather than only raising its fleet average determining the average fuel economy footprint vehicles and lower ones to CAFE. However, even under attribute- level that the manufacturers can larger footprint-vehicles. The fleetwide based standards, there is still risk that achieve. Congress ‘‘specifically average fuel economy that a particular manufacturers will rely on down- delegated the process of setting * * * manufacturer is required to achieve weighting to improve their fuel fuel economy standards with broad depends on the footprint mix of its fleet, economy (for a given vehicle at a given guidelines concerning the factors that i.e., the proportion of the fleet that is footprint target) in ways that may the agency must consider.’’ 82 The small-, medium-, or large-footprint. reduce safety.80 breadth of those guidelines, the absence This approach can be used to require of any statutorily prescribed formula for virtually all manufacturers to increase iii. Factors That NHTSA Is Statutorily balancing the factors, the fact that the significantly the fuel economy of a Prohibited From Considering in Setting relative weight to be given to the various broad range of both passenger cars and Standards factors may change from rulemaking to light trucks, i.e., the manufacturer must EPCA provides that in determining rulemaking as the underlying facts improve the fuel economy of all the the level at which it should set CAFE change, and the fact that the factors may vehicles in its fleet. Further, this standards for a particular model year, often be conflicting with respect to approach can do so without creating an NHTSA may not consider the ability of whether they militate toward higher or incentive for manufacturers to make manufacturers to take advantage of lower standards give NHTSA discretion small vehicles smaller or large vehicles several EPCA provisions that facilitate to decide what weight to give each of larger, with attendant implications for compliance with the CAFE standards the competing policies and concerns safety. and thereby reduce the costs of and then determine how to balance b. Test Procedures for Measuring Fuel compliance. Specifically, in them—‘‘as long as NHTSA’s balancing Economy determining the maximum feasible level does not undermine the fundamental of fuel economy for passenger cars and purpose of the EPCA: energy EPCA provides EPA with the light trucks, NHTSA cannot consider conservation,’’ 83 and as long as that responsibility for establishing the fuel economy benefits of balancing reasonably accommodates procedures to measure fuel economy ‘‘dedicated’’ alternative fuel vehicles ‘‘conflicting policies that were and to calculate CAFE. Current test (like battery electric vehicles or natural committed to the agency’s care by the procedures measure the effects of nearly gas vehicles), must consider dual-fueled statute.’’ 84 Thus, EPCA does not all fuel saving technologies. EPA is automobiles to be operated only on mandate that any particular number be considering revising the procedures for gasoline or diesel fuel, and may not adopted when NHTSA determines the measuring fuel economy and calculating consider the ability of manufacturers to level of CAFE standards. average fuel economy for the CAFE use, trade, or transfer credits.81 This program, however, to account for four v. Other Requirements Related to impacts on fuel economy not currently setting the 1987–1989 passenger car standards, Standard Setting included in these procedures—increases ‘‘NHTSA has always examined the safety in fuel economy because of increases in consequences of the CAFE standards in its overall The standards for passenger cars and efficiency of the air conditioning consideration of relevant factors since its earliest for light trucks must increase ratably system; increases in fuel economy rulemaking under the CAFE program.’’ Competitive 85 Enterprise Institute v. NHTSA (CEI I), 901 F.2d 107, each year through MY 2020. This because of technology improvements 120 at n.11 (D.C. Cir. 1990). statutory requirement is interpreted, in that achieve ‘‘off-cycle’’ benefits; 80 For example, by reducing the mass of the combination with the requirement to set incentives for use of certain hybrid smallest vehicles rather than the largest, or by the standards for each model year at the reducing vehicle overhang outside the space technologies in a significant percentage measured as ‘‘footprint,’’ which results in less crush level determined to be the maximum of pickup trucks; and incentives for space. feasible level that manufacturers can achieving fuel economy levels in a 81 49 U.S.C. 32902(h). We note, as discussed in achieve for that model year, to mean significant percentage pickup trucks greater detail in Section IV, that NHTSA interprets that the annual increases should not be that exceeds the target curve by 32902(h) as reflecting Congress’ intent that disproportionately large or small in statutorily-mandated compliance flexibilities specified amounts, in the form of 86 remain flexibilities. When a compliance flexibility relation to each other. Standards after increased values assigned for fuel is not statutorily mandated, therefore, or when it economy. NHTSA has taken these ceases to be available under the statute, we interpret maximum feasible standards in MYs 2020 and proposed changes into account in 32902(h) as no longer binding the agency’s beyond. determination of the maximum feasible levels of determining the proposed fuel economy 82 Center for Auto Safety v. NHTSA, 793 F.2d fuel economy. For example, when the standards. These changes would be the 1322, at 1341 (D.C. Cir. 1986). manufacturing incentive for dual-fueled 83 CBD v. NHTSA, 538 F.3d at 1195 (9th Cir. same as program elements that are part automobiles under 49 U.S.C. 32905 and 32906 of EPA’s greenhouse gas performance expires in MY 2019, there is no longer a flexibility 2008). left to protect per 32902(h), so NHTSA considers 84 Id. the calculated fuel economy of plug-in hybrid 85 49 U.S.C. 32902(b)(2)(C). 87 49 U.S.C. 32902(b)(2)(B). electric vehicles for purposes of determining the 86 See 74 FR 14196, 14375–76 (Mar. 30, 2009). 88 49 U.S.C. 32902(b)(3).

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standards, discussed in Section III.B.10. volume of those vehicles in the affected these sweeping grants of authority, EPA As discussed below, these three fleet (i.e., import or domestic passenger considers such issues as technology elements would be implemented in the car, or light truck), manufactured for effectiveness, its cost (both per vehicle, same manner as in the EPA’s that model year. The amount of the per manufacturer, and per consumer), greenhouse gas program—a vehicle penalty may not be reduced except the lead time necessary to implement manufacturer would have the option to under the unusual or extreme the technology, and based on this the generate these fuel economy values for circumstances specified in the statute, feasibility and practicability of potential vehicle models that meet the criteria for which have never been exercised by standards; the impacts of potential these elements and to use these values NHTSA in the history of the CAFE standards on emissions reductions of in calculating their fleet average fuel program. both GHGs and non-GHGs; the impacts economy. This proposed revision to Unlike the National Traffic and Motor of standards on oil conservation and CAFE calculation is discussed in more Vehicle Safety Act, EPCA does not energy security; the impacts of detail in Sections III and IV below. provide for recall and remedy in the standards on fuel savings by consumers; event of a noncompliance. The presence the impacts of standards on the auto c. Enforcement and Compliance of recall and remedy provisions 90 in the industry; other energy impacts; as well Flexibility Safety Act and their absence in EPCA is as other relevant factors such as impacts NHTSA determines compliance with believed to arise from the difference in on safety the CAFE standards based on the application of the safety standards Pursuant to Title II of the Clean Air measurements of automobile and CAFE standards. A safety standard Act, EPA has taken a comprehensive, manufacturers’ CAFE from EPA. If a applies to individual vehicles; that is, integrated approach to mobile source manufacturer’s passenger car or light each vehicle must possess the requisite emission control that has produced truck CAFE level exceeds the applicable equipment or feature that must provide benefits well in excess of the costs of standard for that model year, the the requisite type and level of regulation. In developing the Title II manufacturer earns credits for over- performance. If a vehicle does not, it is program, the Agency’s historic, initial compliance. The amount of credit noncompliant. Typically, a vehicle does focus was on personal vehicles since earned is determined by multiplying the not entirely lack an item or equipment that category represented the largest number of tenths of a mpg by which a or feature. Instead, the equipment or source of mobile source emissions. Over manufacturer exceeds a standard for a features fails to perform adequately. time, EPA has established stringent particular category of automobiles by Recalling the vehicle to repair or replace emissions standards for large truck and the total volume of automobiles of that the noncompliant equipment or feature other heavy-duty engines, nonroad category manufactured by the can usually be readily accomplished. engines, and marine and locomotive manufacturer for a given model year. As In contrast, a CAFE standard applies engines, as well. The Agency’s initial discussed in more detail in Section IV.I, to a manufacturer’s entire fleet for a focus on personal vehicles has resulted credits can be carried forward for 5 model year. It does not require that a in significant control of emissions from model years or back for 3, and can also particular individual vehicle be these vehicles, and also led to be transferred between a manufacturer’s equipped with any particular equipment technology transfer to the other mobile fleets or traded to another manufacturer. or feature or meet a particular level of source categories that made possible the If a manufacturer’s passenger car or fuel economy. It does require that the stringent standards for these other light truck CAFE level does not meet the manufacturer’s fleet, as a whole, categories. applicable standard for that model year, comply. Further, although under the As a result of Title II requirements, NHTSA notifies the manufacturer. The attribute-based approach to setting new cars and SUVs sold today have manufacturer may use ‘‘banked’’ credits CAFE standards fuel economy targets emissions levels of hydrocarbons, to make up the shortfall, but if there are are established for individual vehicles oxides of nitrogen, and carbon no (or not enough) credits available, based on their footprints, the individual monoxide that are 98–99% lower than then the manufacturer has the option to vehicles are not required to meet or new vehicles sold in the 1960s, on a per submit a ‘‘carry back plan’’ to NHTSA. exceed those targets. However, as a mile basis. Similarly, standards A carry back plan describes what the practical matter, if a manufacturer established for heavy-duty highway and manufacturer plans to do in the chooses to design some vehicles that fall nonroad sources require emissions rate following three model years to earn below their target levels of fuel reductions on the order of 90% or more enough credits to make up for the economy, it will need to design other for particulate matter and oxides of shortfall through future over- vehicles that exceed their targets if the nitrogen. Overall ambient levels of compliance. NHTSA must examine and manufacturer’s overall fleet average is to automotive-related pollutants are lower determine whether to approve the plan. meet the applicable standard. now than in 1970, even as economic In the event that a manufacturer does Thus, under EPCA, there is no such growth and vehicle miles traveled have not comply with a CAFE standard, even thing as a noncompliant vehicle, only a nearly tripled. These programs have after the consideration of credits, EPCA noncompliant fleet. No particular resulted in millions of tons of pollution provides for the assessing of civil vehicle in a noncompliant fleet is any reduction and major reductions in penalties.89 The Act specifies a precise more, or less, noncompliant than any pollution-related deaths (estimated in formula for determining the amount of other vehicle in the fleet. the tens of thousands per year) and civil penalties for such a illnesses. The net societal benefits of the noncompliance. The penalty, as 2. EPA Statutory Authority mobile source programs are large. In its adjusted for inflation by law, is $5.50 for Title II of the Clean Air Act (CAA) annual reports on federal regulations, each tenth of a mpg that a provides for comprehensive regulation the Office of Management and Budget manufacturer’s average fuel economy of mobile sources, authorizing EPA to reports that many of EPA’s mobile falls short of the standard for a given regulate emissions of air pollutants from source emissions standards typically model year multiplied by the total all mobile source categories. Pursuant to have projected benefit-to-cost ratios of 5:1 to 10:1 or more. Follow-up studies 89 EPCA does not provide authority for seeking to 90 49 U.S.C. 30120, Remedies for defects and show that long-term compliance costs to enjoin violations of the CAFE standards. noncompliance. the industry are typically lower than the

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cost projected by EPA at the time of under CAA section 202(a)(1) are See George E. Warren Corp. v. EPA, 159 regulation, which result in even more technology-based, as the levels chosen F.3d 616, 623–624 (DC Cir. 1998) favorable real world benefit-to-cost must be premised on a finding of (ordinarily permissible for EPA to ratios.91 Pollution reductions technological feasibility. Thus, consider factors not specifically attributable to Title II mobile source standards promulgated under CAA enumerated in the Act). controls are critical components to section 202(a) are to take effect only In addition, EPA has clear authority to attainment of primary National Ambient ‘‘after providing such period as the set standards under CAA section 202(a) Air Quality Standards, significantly Administrator finds necessary to permit that are technology forcing when EPA reducing the national inventory and the development and application of the considers that to be appropriate, but is ambient concentrations of criteria requisite technology, giving appropriate not required to do so (as compared to pollutants, especially PM2.5 and ozone. consideration to the cost of compliance standards set under provisions such as See e.g. 69 FR 38958, 38967–68 (June within such period’’ (section 202 (a)(2); section 202(a)(3) and section 213(a)(3)). 29, 2004) (controls on non-road diesel see also NRDC v. EPA, 655 F. 2d 318, EPA has interpreted a similar statutory engines expected to reduce entire 322 (DC Cir. 1981)). EPA is afforded provision, CAA section 231, as follows: national inventory of PM2.5 by 3.3% considerable discretion under section While the statutory language of section 231 (86,000 tons) by 2020). Title II controls 202(a) when assessing issues of is not identical to other provisions in title II have also made enormous reductions in technical feasibility and availability of of the CAA that direct EPA to establish air toxics emitted by mobile sources. For lead time to implement new technology. technology-based standards for various types example, as a result of EPA’s 2007 Such determinations are ‘‘subject to the of engines, EPA interprets its authority under restraints of reasonableness’’, which section 231 to be somewhat similar to those mobile source air toxics standards, the provisions that require us to identify a cancer risk attributable to total mobile ‘‘does not open the door to ‘crystal ball’ reasonable balance of specified emissions source air toxics will be reduced by inquiry.’’ NRDC, 655 F. 2d at 328, reduction, cost, safety, noise, and other 30% in 2030 and the risk from mobile quoting Co. v. factors. See, e.g., Husqvarna AB v. EPA, 254 source benzene (a leukemogen) will be Ruckelshaus, 478 F. 2d 615, 629 (DC F.3d 195 (DC Cir. 2001) (upholding EPA’s reduced by 37% in 2030. (reflecting Cir. 1973). However, ‘‘EPA is not promulgation of technology-based standards reductions of over three hundred obliged to provide detailed solutions to for small non-road engines under section every engineering problem posed in the 213(a)(3) of the CAA). However, EPA is not thousand tons of mobile source air toxic compelled under section 231 to obtain the emissions) 72 FR 8428, 8430 (Feb. 26, perfection of the trap-oxidizer. In the ‘‘greatest degree of emission reduction 2007). absence of theoretical objections to the achievable’’ as per sections 213 and 202 of Title II emission standards have also technology, the agency need only the CAA, and so EPA does not interpret the stimulated the development of a much identify the major steps necessary for Act as requiring the agency to give broader set of advanced automotive development of the device, and give subordinate status to factors such as cost, technologies, such as on-board plausible reasons for its belief that the safety, and noise in determining what computers and fuel injection systems, industry will be able to solve those standards are reasonable for aircraft engines. Rather, EPA has greater flexibility under which are the building blocks of today’s problems in the time remaining. The section 231 in determining what standard is automotive designs and have yielded EPA is not required to rebut all most reasonable for aircraft engines, and is not only lower pollutant emissions, but speculation that unspecified factors may not required to achieve a ‘‘technology improved vehicle performance, hinder ‘real world’ emission control.’’ forcing’’ result.94 reliability, and durability. NRDC, 655 F. 2d at 333–34. In This interpretation was upheld as This proposal implements a specific developing such technology-based 92 reasonable in NACAA v. EPA, (489 F.3d provision from Title II, section 202(a). standards, EPA has the discretion to 1221, 1230 (DC Cir. 2007)). CAA section Section 202(a)(1) of the Clean Air Act consider different standards for 202(a) does not specify the degree of (CAA) states that ‘‘the Administrator appropriate groupings of vehicles weight to apply to each factor, and EPA shall by regulation prescribe (and from (‘‘class or classes of new motor accordingly has discretion in choosing time to time revise) * * * standards vehicles’’), or a single standard for a an appropriate balance among factors. applicable to the emission of any air larger grouping of motor vehicles See Sierra Club v. EPA, 325 F.3d 374, pollutant from any class or classes of (NRDC, 655 F. 2d at 338). 378 (DC Cir. 2003) (even where a new motor vehicles * * *, which in his Although standards under CAA provision is technology-forcing, the judgment cause, or contribute to, air section 202(a)(1) are technology-based, provision ‘‘does not resolve how the pollution which may reasonably be they are not based exclusively on Administrator should weigh all [the anticipated to endanger public health or technological capability. EPA has the statutory] factors in the process of welfare.’’ If EPA makes the appropriate discretion to consider and weigh finding the ‘greatest emission reduction endangerment and cause or contribute various factors along with technological achievable’ ’’). Also see Husqvarna AB findings, then section 202(a) authorizes feasibility, such as the cost of v. EPA, 254 F. 3d 195, 200 (DC Cir. EPA to issue standards applicable to compliance (see section 202(a) (2)), lead 2001) (great discretion to balance emissions of those pollutants. time necessary for compliance (section statutory factors in considering level of Any standards under CAA section 202(a)(2)), safety (see NRDC, 655 F. 2d technology-based standard, and 202(a)(1) ‘‘shall be applicable to such at 336 n. 31) and other impacts on statutory requirement ‘‘to [give vehicles * * * for their useful life.’’ 93 consumers, and energy impacts appropriate] consideration to the cost of Emission standards set by the EPA associated with use of the technology. applying * * * technology’’ does not mandate a specific method of cost 91 OMB, 2011. 2011 Report to Congress on the 93 Since its earliest Title II regulations, EPA has Benefits and Costs of Federal Regulations and considered the safety of pollution control analysis); see also Hercules Inc. v. EPA, Unfunded Mandates on State, Local, and Tribal technologies. See 45 Fed. Reg. 14,496, 14,503 598 F. 2d 91, 106 (DC Cir. 1978) (‘‘In Entities. Office of Information and Regulatory (1980). (‘‘EPA would not require a particulate reviewing a numerical standard we Affairs. June. http://www.whitehouse.gov/sites/ control technology that was known to involve must ask whether the agency’s numbers default/files/omb/inforeg/2011_cb/ serious safety problems. If during the development 2011_cba_report.pdf. Web site accessed on October of the trap-oxidizer safety problems are discovered, are within a zone of reasonableness, not 11, 2011. EPA would reconsider the control requirements 92 42 U.S.C. 7521 (a) implemented by this rulemaking’’). 94 70 FR 69664, 69676, November 17, 2005.

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whether its numbers are precisely average fuel economy are discussed in economy testing. EPA has also right’’); Permian Basin Area Rate Cases, section III.B.10. developed tests with additional cycles (the so-called 5-cycle test) which test is 390 U.S. 747, 797 (1968) (same); Federal b. EPA Enforcement Authority Power Commission v. Conway Corp., used for purposes of fuel economy 426 U.S. 271, 278 (1976) (same); Exxon Section 207 of the CAA grants EPA labeling and is also used in the EPA Mobil Gas Marketing Co. v. FERC, 297 broad authority to require program for extending off-cycle credits F. 3d 1071, 1084 (DC Cir. 2002) (same). manufacturers to remedy vehicles if under both the light-duty and (along EPA determines there are a substantial with NHTSA) heavy-duty vehicle GHG a. EPA’s Testing Authority number of noncomplying vehicles. In programs. See 75 FR at 25439; 76 FR at addition, section 205 of the CAA 57252. In this rule, EPA is proposing to Under section 203 of the CAA, sales authorizes EPA to assess penalties of up retain the FTP and HFET for purposes of vehicles are prohibited unless the to $37,500 per vehicle for violations of of testing the fleetwide average vehicle is covered by a certificate of various prohibited acts specified in the standards, and is further proposing conformity. EPA issues certificates of CAA. In determining the appropriate modifications to the N2O measurement conformity pursuant to section 206 of penalty, EPA must consider a variety of test procedures and the A/C CO2 the Act, based on (necessarily) pre-sale factors such as the gravity of the efficiency test procedures EPA initially testing conducted either by EPA or by violation, the economic impact of the adopted in the 2012–2016 rule. the manufacturer. The Federal Test violation, the violator’s history of Procedure (FTP or ‘‘city’’ test) and the compliance, and ‘‘such other matters as 3. Comparing the Agencies’ Authority Highway Fuel Economy Test (HFET or justice may require.’’ Unlike EPCA, the As the above discussion makes clear, ‘‘highway’’ test) are used for this CAA does not authorize vehicle there are both important differences purpose. Compliance with standards is manufacturers to pay fines in lieu of between the statutes under which each required not only at certification but meeting emission standards. agency is acting as well as several important areas of similarity. One throughout a vehicle’s useful life, so c. Compliance that testing requirements may continue important difference is that EPA’s post-certification. Useful life standards EPA oversees testing, collects and authority addresses various GHGs, may apply an adjustment factor to processes test data, and performs while NHTSA’s authority addresses fuel account for vehicle emission control calculations to determine compliance economy as measured under specified deterioration or variability in use with both CAA and CAFE standards. test procedures and calculated by EPA. (section 206(a)). CAA standards apply not only at the This difference is reflected in this time of certification but also throughout rulemaking in the scope of the two Pursuant to EPCA, EPA is required to the vehicle’s useful life, and EPA is standards: EPA’s proposal takes into measure fuel economy for each model accordingly is proposing in-use account reductions of direct air and to calculate each manufacturer’s standards as well as standards based on conditioning emissions, as well as 95 average fuel economy. EPA uses the testing performed at time of production. proposed standards for methane and same tests—the FTP and HFET—for fuel See section III.E. Both the CAA and N2O, but NHTSA’s does not, because economy testing. EPA established the EPCA provide for penalties should these things do not relate to fuel FTP for emissions measurement in the manufacturers fail to comply with their economy. A second important early 1970s. In 1976, in response to the fleet average standards, but, unlike difference is that EPA is proposing Energy Policy and Conservation Act EPCA, there is no option for certain compliance flexibilities, such as (EPCA) statute, EPA extended the use of manufacturers to pay fines in lieu of the multiplier for advanced technology the FTP to fuel economy measurement compliance with the standards. Under vehicles, and takes those flexibilities and added the HFET.96 The provisions the CAA, penalties are typically into account in its technical analysis in the 1976 regulation, effective with the determined on a vehicle-specific basis and modeling supporting its proposal. 1977 model year, established by determining the number of a EPCA specifies a number of particular procedures to calculate fuel economy manufacturer’s highest emitting vehicles compliance flexibilities for CAFE, and values both for labeling and for CAFE that cause the fleet average standard expressly prohibits NHTSA from purposes. Under EPCA, EPA is required violation. Penalties under Title II of the considering the impacts of those to use these procedures (or procedures CAA are capped at $25,000 per day of statutory compliance flexibilities in which yield comparable results) for violation and apply on a per vehicle setting the CAFE standard so that the measuring fuel economy for cars for basis. CAA section 205 (a). manufacturers’ election to avail CAFE purposes, but not for labeling themselves of the permitted flexibilities d. Test Procedures purposes.97 EPCA does not pose this remains strictly voluntary.98 The Clean restriction on CAFE test procedures for EPA establishes the test procedures Air Act, on the other hand, contains no light trucks, but EPA does use the FTP under which compliance with both the such prohibition. These considerations and HFET for this purpose. EPA CAA GHG standards and the EPCA fuel result in some differences in the determines fuel economy by measuring economy standards are measured. EPA’s technical analysis and modeling used to the amount of CO2 and all other carbon testing authority under the CAA is support EPA’s and NHTSA’s proposed compounds (e.g. total hydrocarbons flexible, but testing for fuel economy for standards. (THC) and carbon monoxide (CO)), and passenger cars is by statute is limited to Another important area where the two then, by mass balance, calculating the the Federal Test procedure (FTP) or test agencies’ authorities are similar but not amount of fuel consumed. EPA’s procedures which provide results which identical involves the transfer of credits proposed changes to the procedures for are equivalent to the FTP. 49 USC between a single firm’s car and truck measuring fuel economy and calculating section 32904 and section III.B, below. fleets. EISA revised EPCA to allow for EPA developed and established the FTP such credit transfers, but placed a cap 95 See 49 U.S.C. 32904(c). in the early 1970s and, after enactment on the amount of CAFE credits which 96 See 41 FR 38674 (Sept. 10, 1976), which is of EPCA in 1976, added the Highway can be transferred between the car and codified at 40 CFR part 600. Fuel Economy Test to be used in 97 See 49 U.S.C. 32904(c). conjunction with the FTP for fuel 98 49 U.S.C. 32902(h).

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truck fleets. 49 U.S.C. 32903(g)(3). same concerns, and each agency is cases are already in commercial Under CAA section 202(a), EPA is making a decision that at its core is application in the fleet to varying proposing to continue to allow CO2 answering the same basic question of degrees. Detailed modeling of the credit transfers between a single what kind and degree of technology technologies that could be employed by manufacturer’s car and truck fleets, with penetration is it appropriate to call for each manufacturer supports this initial no corresponding limits on such in light of all of the relevant factors in conclusion. The agencies also carefully transfers. In general, the EISA limit on a given rulemaking, for the model years assessed the costs of the proposed rules, CAFE credit transfers is not expected to concerned. Finally, each agency has the both for the industry as a whole and per have the practical effect of limiting the authority to take into consideration manufacturer, as well as the costs per amount of CO2 emission credits impacts of the standards of the other vehicle, and consider these costs to be manufacturers may be able to transfer agency. EPCA calls for NHTSA to take reasonable during the rulemaking time under the CAA program, recognizing into consideration the effects of EPA’s frame and recoverable (from fuel that manufacturers must comply with emissions standards on fuel economy savings). The agencies recognize the both the proposed CAFE standards and capability (see 49 U.S.C. 32902 (f)), and significant increase in the application of the proposed EPA standards. However, EPA has the discretion to take into technology that the proposed standards it is possible that in some specific consideration NHTSA’s CAFE standards would require across a high percentage circumstances the EPCA limit on CAFE in determining appropriate action under of vehicles, which will require the credit transfers could constrain the section 202(a). This is consistent with manufacturers to devote considerable ability of a manufacturer to achieve cost the Supreme Court’s statement that engineering and development resources savings through unlimited use of GHG EPA’s mandate to protect public health before 2017 laying the critical emissions credit transfers under the and welfare is wholly independent from foundation for the widespread CAA program. NHTSA’s mandate to promote energy deployment of upgraded technology These differences, however, do not efficiency, but there is no reason to across a high percentage of the 2017– change the fact that in many critical think the two agencies cannot both 2025 fleet. This clearly will be ways the two agencies are charged with administer their obligations and yet challenging for automotive addressing the same basic issue of avoid inconsistency. Massachusetts v. manufacturers and their suppliers, reducing GHG emissions and improving EPA, 549 U.S. 497, 532 (2007). especially in the current economic fuel economy. The agencies are looking In this context, it is in the Nation’s climate, and given the stringency of the at the same set of control technologies interest for the two agencies to continue recently-established MYs 2012–2016 (with the exception of the air to work together in developing their standards. However, based on all of the conditioning leakage-related respective proposed standards, and they analyses performed by the agencies, our technologies). The standards set by each have done so. For example, the agencies judgment is that it is a challenge that agency will drive the kind and degree of have committed considerable effort to can reasonably be met. penetration of this set of technologies develop a joint Technical Support The agencies also evaluated the across the vehicle fleet. As a result, each Document that provides a technical impacts of these standards with respect agency is trying to answer the same basis underlying each agency’s analyses. to the expected reductions in GHGs and basic question—what kind and degree of The agencies also have worked closely oil consumption and, found them to be technology penetration is necessary to together in developing and reviewing very significant in magnitude. The achieve the agencies’ objectives in the their respective modeling, to develop agencies considered other factors such rulemaking time frame, given the the best analysis and to promote as the impacts on noise, energy, and agencies’ respective statutory technical consistency. The agencies vehicular congestion. The impact on authorities? have developed a common set of safety was also given careful In making the determination of what attribute-based curves that each agency consideration. Moreover, the agencies standards are appropriate under the supports as appropriate both technically quantified the various costs and benefits CAA and EPCA, each agency is to and from a policy perspective. The of the proposed standards, to the extent exercise its judgment and balance many agencies have also worked closely to practicable. The agencies’ analyses to similar factors. NHTSA’s factors are ensure that their respective programs date indicate that the overall quantified provided by EPCA: technological will work in a coordinated fashion, and benefits of the proposed standards far feasibility, economic practicability, the will provide regulatory compatibility outweigh the projected costs. All of effect of other motor vehicle standards that allows auto manufacturers to build these factors support the reasonableness of the Government on fuel economy, a single national light-duty fleet that of the proposed standards. See section and the need of the United States to would comply with both the GHG and III (proposed GHG standards) and conserve energy. EPA has the discretion the CAFE standards. The resulting section IV (proposed CAFE standards) under the CAA to consider many related overall close coordination of the for a detailed discussion of each factors, such as the availability of proposed GHG and CAFE standards agency’s basis for its selection of its technologies, the appropriate lead time should not be surprising, however, as proposed standards. for introduction of technology, and each agency is using a jointly developed The fact that the benefits are based on this the feasibility and technical basis to address the closely estimated to considerably exceed their practicability of their standards; the intertwined challenges of energy costs supports the view that the impacts of their standards on emissions security and climate change. proposed standards represent an reductions (of both GHGs and non- As set out in detail in Sections III and appropriate balance of the relevant GHGs); the impacts of their standards on IV of this notice, both EPA and NHTSA statutory factors. In drawing this oil conservation; the impacts of their believe the agencies’ proposals are fully conclusion, the agencies acknowledge standards on fuel savings by consumers; justified under their respective statutory the uncertainties and limitations of the the impacts of their standards on the criteria. The proposed standards are analyses. For example, the analysis of auto industry; as well as other relevant feasible in each model year within the the benefits is highly dependent on the factors such as impacts on safety. lead time provided, based on the estimated price of fuel projected out Conceptually, therefore, each agency is agencies’ projected increased use of many years into the future. There is also considering and balancing many of the various technologies which in most significant uncertainty in the potential

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range of values that could be assigned process. The agencies intend to evaluate discusses the first two steps, to the social cost of carbon. There are a all such new information as it becomes development of the baseline fleet and variety of impacts that the agencies are available, and where appropriate to the reference fleet. unable to quantify, such as non-market update their analysis based on such EPA and NHTSA used a transparent damages, extreme weather, socially information for purposes of the final approach to developing the baseline and contingent effects, or the potential for rule. In addition, the agencies may make reference fleets, largely working from longer-term catastrophic events, or the new information and/or analyses publicly available data. Because both impact on consumer choice. The cost- available in the agencies’ respective input and output sheets from our benefit analyses are one of the important public dockets for this rulemaking prior modeling are public, stakeholders can things the agencies consider in making to the final rule, where that is verify and check EPA’s and NHTSA’s a judgment as to the appropriate appropriate, in order to facilitate public modeling, and perform their own standards to propose under their comment. We encourage all analyses with these datasets.100 respective statutes. Consideration of the stakeholders to periodically check the 2. How Did the Agencies Develop the results of the cost-benefit analyses by two agencies’ dockets between the Baseline Vehicle Fleet? the agencies, however, includes careful proposal and final rules for any consideration of the limitations potential new docket submissions from NHTSA and EPA developed a discussed above. the agencies. baseline fleet comprised of model year 2008 data gathered from EPA’s emission II. Joint Technical Work Completed for B. Developing the Future Fleet for and fuel economy database. This This Proposal Assessing Costs, Benefits, and Effects baseline fleet was originally developed A. Introduction 1. Why did the agencies establish a by EPA and NHTSA for the 2012–2016 baseline and reference vehicle fleet? final rule, and was updated for this In this section, NHTSA and EPA proposal.101 The new fleet has the discuss several aspects of their joint In order to calculate the impacts of model year 2008 vehicle’s volumes and technical analyses. These analyses are the EPA and NHTSA regulations, it is attributes along with the addition of common to the development of each necessary to estimate the composition of projected volumes from 2017 to 2025. It agency’s standards. Specifically we the future vehicle fleet absent these also has some expanded footprint data discuss: the development of the vehicle regulations, to provide a reference point for pickup trucks that was needed for a market forecast used by each agency for relative to which costs, benefits, and more detailed analysis of the truck assessing costs, benefits, and effects, the effects of the regulations are assessed. curve. development of the attribute-based As in the 2012–2016 light duty vehicle In this proposed rulemaking, the standard curve shapes, the technologies rulemaking, EPA and NHTSA have agencies are again choosing to use the agencies evaluated and their costs developed this comparison fleet in two model year 2008 vehicle data to be the and effectiveness, the economic parts. The first step was to develop a basis of the baseline fleet, but for assumptions the agencies included in baseline fleet based on model year 2008 different reasons than in the 2012–2016 their analyses, a description of the air data. This baseline includes vehicle final rule. Model year 2008 is now the conditioning and off-cycle technology sales volumes, GHG/fuel economy most recent model year for which the (credit) programs, as well as the effects performance, and contains a listing of industry had normal sales. Model year of the proposed standards on vehicle the base technologies on every 2008 2009 data is available, but the agencies safety. The Joint Technical Support vehicle sold. The second step was to believe that model year was disrupted Document (TSD) discusses the agencies’ project that baseline fleet volume into by the economic downturn and the joint technical work in more detail. model years 2017–2025. The vehicle bankruptcies of both General Motors The agencies have based today’s volumes projected out to MY 2025 is and Chrysler resulting in a significant proposal on a very significant body of referred to as the reference fleet reduction in the number of vehicles sold data and analysis that we believe is the volumes. The third step was to modify by both companies and the industry as best information currently available on that MY 2017–2025 reference fleet such a whole. These abnormalities led the the full range of technical and other that it reflects technology manufacturers agencies to conclude that 2009 data was inputs utilized in our respective could apply if MY 2016 standards are not representative for projecting the analyses. As noted in various places extended without change through MY future fleet. Model Year 2010 data was throughout this preamble, the draft Joint 2025.99 Each agency used its modeling not complete because not all TSD, the NHTSA preliminary RIA, and system to develop a modified or final manufacturers have yet submitted it to the EPA draft RIA, we expect new reference fleet, or adjusted baseline, for EPA, and was thus not available in time information will become available use in its analysis of regulatory for it to be used for this proposal. between the proposal and final alternatives, as discussed below and in Therefore, the agencies chose to use rulemaking. This new information will Chapter 1 of the EPA draft RIA. All of model year 2008 again as the baseline come from a range of sources: some is the agencies’ estimates of emission since it was the latest complete based on work the agencies have reductions, fuel economy representative and transparent data set underway (e.g., work on technology improvements, costs, and societal available. However, the agencies will costs and effectiveness, potentially impacts are developed in relation to the consider using Model Year 2010 for the updating our baseline year from model respective reference fleets. This section final rule, based on availability and an year 2008 to model year 2010); other sources are those we expect to be 99 EPA’s MY 2016 GHG standards under the CAA 100 EPA’s Omega Model and input sheets are released by others (e.g., the Energy continue into the future until they are changed. available at http://www.epa.gov/oms/climate/ While NHTSA must actively promulgate standards models.htm; DOT/NHTSA’s CAFE Compliance and Information Agency’s Annual Energy in order for CAFE standards to extend past MY Effects Modeling System (commonly known as the Outlook, which is published each year, 2016, the agency has, as in all recent CAFE ‘‘Volpe Model’’) and input and output sheets are and the most recent available version of rulemakings, defined a no-action (i.e., baseline) available at http://www.nhtsa.gov/fuel-economy. which we expect to use for the final regulatory alternative as an indefinite extension of 101 Further discussion of the development of the the last-promulgated CAFE standards for purposes 2008 baseline fleet for the MY2012–2016 rule can rule); and other information that will of the main analysis of the standards in this be found at 75 Fed. Reg. 25324, 25349 (May 7, likely come from the public comment preamble. 2010).

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analysis of the data representativeness. 3. How Did the Agencies Develop the mentioned sales-volume shifting To the extent the MY 2010 data becomes Projected MY 2017–2025 Vehicle methodology and then hold post-2017 available during the comment period Reference Fleet? CAFE standards constant at MY 2016 the agencies will place a copy of this As in the 2012–2016 light duty levels. As discussed in Chapter 1 of the data in our respective dockets. We vehicle rulemaking, EPA and NHTSA agencies’ joint Technical Support request comments on the relative merits have based the projection of total car Document, incorporating these changes of using MY 2008 and MY 2010 data, and total light truck sales for MYs 2017– reduced the NEMS-projected passenger and whether one provides a better 2025 on projections made by the car share of the light vehicle market by foundation than the other for purposes Department of Energy’s Energy an average of about 5% during 2017– of using such data as the foundation for Information Administration (EIA). See 2025. a market forecast extending through MY 75 FR at 25349. EIA publishes a mid- In the AEO 2011 Interim data, EIA projects that total light-duty vehicle 2025. term projection of national energy use called the Annual Energy Outlook sales will gradually recover from their The baseline fleet reflects all fuel (AEO). This projection utilizes a number currently depressed levels by around economy technologies in use on MY of technical and econometric models 2013. In 2017, car sales are projected to 2008 light duty vehicles. The 2008 which are designed to reflect both be 8.4 million (53 percent) and truck emission and fuel economy database economic and regulatory conditions sales are projected to be 7.3 million (47 included data on vehicle production expected to exist in the future. In percent). Although the total level of volume, fuel economy, engine size, support of its projection of fuel use by sales of 15.8 million units is similar to number of engine cylinders, light-duty vehicles, EIA projects sales of pre-2008 levels, the fraction of car sales transmission type, fuel type, etc., new cars and light trucks. EIA is projected to be higher than that however it did not contain complete published its Early Annual Energy existing in the 2000–2007 timeframe. information on technologies. Thus, the Outlook for 2011 in December 2010. EIA This projection reflects the impact of agencies relied on publicly available released updated data to NHTSA in assumed higher fuel prices. Sales data like the more complete technology February (Interim AEO). The final projections of cars and trucks for future descriptions from Ward’s Automotive release of AEO for 2011 came out in model years can be found in Chapter 1 Group.102 In a few instances when May 2011, but by that time EPA/NHTSA of the joint TSD. required vehicle information (such as had already prepared modeling runs for In addition to a shift towards more car sales, sales of segments within both the vehicle footprint) was not available from potential 2017–2025 standards using the car and truck markets have been these two sources, the agencies obtained interim data release to NHTSA. EPA and changing and are expected to continue this information from publicly NHTSA are using the interim data release for this proposal, but intend to to change. Manufacturers are accessible internet sites such as introducing more crossover utility 103 use the newest version of AEO available Motortrend.com and Edmunds.com. vehicles (CUVs), which offer much of A description of all of the technologies for the FRM. The agencies used the Energy the utility of sport utility vehicles used in modeling the 2008 vehicle fleet (SUVs) but use more car-like designs. and how it was constructed are Information Administration’s (EIA’s) National Energy Modeling System The AEO 2011 report does not, available in Chapter 1 of the Joint Draft (NEMS) to estimate the future relative however, distinguish such changes TSD. market shares of passenger cars and within the car and truck classes. In Footprint data for the baseline fleet light trucks. However, NEMS order to reflect these changes in fleet came mainly from internet searches, methodology includes shifting vehicle makeup, EPA and NHTSA used CSM though detailed information about the sales volume, starting after 2007, away Worldwide (CSM) as they did in the pickup truck footprints with volumes from fleets with lower fuel economy 2012–2016 rulemaking analysis. EPA was not available online. Where this (the light-truck fleet) towards vehicles and NHTSA believe that CSM is the best information was lacking, the agencies with higher fuel economies (the source available for a long range forecast used manufacturer product plan data for passenger car fleet) in order to facilitate for 2017–2025, though when EPA and 2008 model year to find out the correct projected compliance with CAFE and NHTSA contacted several forecasting firms none of them offered comparably- number footprint and distribution of GHG standards. Because we use our detailed forecasting for that time frame. footprints. The footprint data for pickup market projection as a baseline relative NHTSA and EPA decided to use the trucks was expanded from the original to which we measure the effects of new forecast from CSM for several reasons data used in the previous rulemaking. standards, and we attempt to estimate the industry’s ability to comply with presented in the Joint TSD chapter I. The agencies obtained this footprint The long range forecast from CSM data from MY 2008 product plans new standards without changing product mix (i.e., we analyze the effects Worldwide is a custom forecast covering submitted by the various manufacturers, the years 2017–2025 which the agencies which can be made public at this time of the proposed rules assuming manufacturers will not change fleet purchased from CSM in December of because by now all MY 2008 vehicle composition as a compliance strategy, as 2009. CSM provides quarterly sales models are already in production, opposed to changes that might happen forecasts for the , which makes footprint data about them due to market forces), the Interim AEO and updates their data on the industry essentially public information. A 2011-projected shift in passenger car quarter. For the public’s reference, a description of exactly how the agencies market share as a result of required fuel copy of CSM’s long range forecast has obtained all the footprints is available in economy improvements creates a been placed in the docket for this 104 Chapter 1 of the TSD. circularity. Therefore, for the current rulemaking. EPA and NHTSA hope to analysis, the agencies developed a new purchase and use an updated forecast, 102 projection of passenger car and light Note that WardsAuto.com is a fee-based 104 The CSM Sales Forecast Excel file (‘‘CSM service, but all information is public to subscribers. truck sales shares by running scenarios North America Sales Forecasts 2017–2025 for the 103 Motortrend.com and Edmunds.com are free, from the Interim AEO 2011 reference Docket’’) is available in the docket (Docket EPA– no-fee internet sites. case that first deactivate the above- HQ–OAR–2010–0799).

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whether from CSM or other appropriate The next step was to project the CSM reference 2025 model year and compare sources, before the final rulemaking. To forecasts for relative sales of cars and these to actual sales that occurred in the the extent that such a forecast becomes trucks by manufacturer and by market baseline 2008 model year. Both tables available during the comment period segment onto the total sales estimates of show sales using the traditional the agencies will place a copy in our AEO 2011. Table II–1 and Table II–2 definition of cars and light trucks. respective dockets. show the resulting projections for the BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C drive SUVs and CUVs to the car table shows the difference in 2008, As mentioned previously, NHTSA has category. Table II–3 shows the different 2021, and 2025 to give a feel for how the changed the definition of a truck for volumes for car and trucks based on the change in definition changes the car/ 2011 model year and beyond. The new new and old NHTSA definition. The truck split. definition has moved some 2 wheel

The CSM forecast provides estimates segments percentages by year. Table II– rulemaking. A detailed description of of car and truck sales by segment and 4 and Table II–5 are examples of the how the projection process was done is by manufacturer separately. The forecast data received from CSM. The task of found in Chapter 1 of the TSD. was broken up into two tables. One estimating future sales using these BILLING CODE 4910–59–P table with manufacturer volumes by tables is complex. We used the same year and the other with vehicle methodology as in the previous

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BILLING CODE 4910–59–C 2017–2025—the reference fleet—which and segment splits of the CSM forecast. The overall result was a projection of matched the total sales projections of These sales splits are shown in Table II– car and truck sales for model years the AEO forecast and the manufacturer 6 below.

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Given publicly- and commercially- using engine size as the attribute,106 in Third, attribute-based standards available sources that can be made the recent GHG standards for heavy provide a more equitable regulatory equally transparent to all reviewers, the duty pickups and using a work framework for different vehicle forecast described above represents the factor attribute,107 and in the MYs manufacturers.111 A single industry- agencies’ best technical judgment 2012–2016 GHG rule itself which used wide average standard imposes regarding the likely composition vehicle footprint as the attribute). Public disproportionate cost burdens and direction of the fleet. EPA and NHTSA comments on the MYs 2012–2016 compliance difficulties on the recognize that it is impossible to predict rulemaking widely supported attribute- manufacturers that need to change their with certainty how manufacturers’ based standards for both agencies’ product plans to meet the standards, product offerings and sales volumes will standards. and puts no obligation on those evolve through MY 2025 under baseline Under an attribute-based standard, manufacturers that have no need to conditions—that is, without further every vehicle model has a performance change their plans. As discussed above, attribute-based standards help to spread changes in standards after MY 2016. target (fuel economy and CO2 emissions the regulatory cost burden for fuel The agencies have not developed for CAFE and CO2 emissions standards, alternative market forecasts to examine respectively), the level of which economy more broadly across all of the corresponding sensitivity of analytical depends on the vehicle’s attribute (for vehicle manufacturers within the results discussed below, and have not this proposal, footprint, as discussed industry. varied the market forecast when below). Each manufacturers’ fleet Fourth, attribute-based standards conducting probabilistic uncertainty average standard is determined by the better respect economic conditions and analysis discussed in NHTSA’s production-weighted 108 average (for consumer choice, as compared to single- preliminary Regulatory Impact Analysis. CAFE, harmonic average) of those value standards. A flat, or single value The agencies invite comment regarding targets. standard, encourages a certain vehicle size fleet mix by creating incentives for alternative methods or projections to The agencies believe that an attribute- inform forecasts of the future fleet at the manufacturers to use vehicle based standard is preferable to a single- downsizing as a compliance strategy. level of specificity and technical industry-wide average standard in the completeness required by the agencies’ Under a footprint-based standard, context of CAFE and CO2 standards for respective modeling systems. manufacturers are required to invest in several reasons. First, if the shape is technologies that improve the fuel The final step in the construction of chosen properly, every manufacturer is the final reference fleet involves economy of the vehicles they sell rather more likely to be required to continue than shifting the product mix, because applying additional technology to adding more fuel efficient technology individual vehicle models—that is, reducing the size of the vehicle is each year across their fleet, because the generally a less viable compliance technology beyond that already present stringency of the compliance obligation in MY 2008—reflecting already- strategy given that smaller vehicles have will depend on the particular product more stringent regulatory targets. promulgated standards through MY mix of each manufacturer. Therefore a 2016, and reflecting the assumption that maximum feasible attribute-based 2. What attribute are the agencies MY 2016 standards would apply standard will tend to require greater fuel proposing to use, and why? through MY 2025. A description of the savings and CO2 emissions reductions As in the MYs 2012–2016 CAFE/GHG agencies’ modeling work to develop overall than would a maximum feasible rules, and as NHTSA did in the MY their respective final reference (or flat standard (that is, a single mpg or 2011 CAFE rule, NHTSA and EPA are adjusted baseline) fleets appear below in CO2 level applicable to every proposing to set CAFE and CO2 Sections III and IV of this preamble. manufacturer). standards that are based on vehicle C. Development of Attribute-Based Second, depending on the attribute, footprint, which has an observable Curve Shapes attribute-based standards reduce the correlation to fuel economy and incentive for manufacturers to respond emissions. There are several policy and 1. Why are standards attribute-based technical reasons why NHTSA and EPA and defined by a mathematical to CAFE and CO2 standards in ways 109 believe that footprint is the most function? harmful to safety. Because each vehicle model has its own target (based appropriate attribute on which to base As in the MYs 2012–2016 CAFE/GHG on the attribute chosen), properly fitted the standards, even though some other rules, and as NHTSA did in the MY attribute-based standards provide little, vehicle attributes (notably curb weight) 2011 CAFE rule, NHTSA and EPA are if any, incentive to build smaller are better correlated to fuel economy proposing to set attribute-based CAFE vehicles simply to meet a fleet-wide and emissions. and CO2 standards that are defined by average, because the smaller vehicles First, in the agencies’ judgment, from a mathematical function. EPCA, as will be subject to more stringent the standpoint of vehicle safety, it is amended by EISA, expressly requires compliance targets.110 important that the CAFE and CO2 that CAFE standards for passenger cars standards be set in a way that does not and light trucks be based on one or more 106 69 FR 38958 (June 29, 2004). encourage manufacturers to respond by vehicle attributes related to fuel 107 76 FR 57106, 57162–64, (Sept. 15, 2011). selling vehicles that are in any way less economy, and be expressed in the form 108 Production for sale in the United States. safe. While NHTSA’s research of of a mathematical function.105 The CAA 109 The 2002 NAS Report described at length and historical crash data also indicates that has no such requirement, although such quantified the potential safety problem with average reductions in vehicle mass that are an approach is permissible under fuel economy standards that specify a single accompanied by reductions in vehicle numerical requirement for the entire industry. See section 202 (a) and EPA has used the 2002 NAS Report at 5, finding 12. Ensuing analyses, footprint tend to compromise vehicle attribute-based approach in issuing including by NHTSA, support the fundamental safety, footprint-based standards standards under analogous provisions of conclusion that standards structured to minimize provide an incentive to use advanced the CAA (e.g., criteria pollutant incentives to downsize all but the largest vehicles lightweight materials and structures that will tend to produce better safety outcomes than flat standards for non-road diesel engines standards. would be discouraged by weight-based 110 Assuming that the attribute is related to 105 49 U.S.C. 32902(a)(3)(A). vehicle size. 111 Id. at 4–5, finding 10.

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standards, because manufacturers can based and weight-based systems can downward) to produce the promulgated use them to improve a vehicle’s fuel coexist internationally and not present standards. In the preceding rule, for economy and CO2 emissions without an undue burden for manufacturers if MYs 2008–2011 light truck standards, their use necessarily resulting in a they are carefully crafted. Different NHTSA examined a range of potential change in the vehicle’s fuel economy countries or regions may find different functional forms, and concluded that, and emissions targets. attributes appropriate for basing compared to other considered forms, the Further, although we recognize that standards, depending on the particular constrained logistic form provided the weight is better correlated with fuel challenges they face—from fuel prices, expected and appropriate trend economy and CO2 emissions than is to family size and land use, to safety (decreasing fuel economy as footprint footprint, we continue to believe that concerns, to fleet composition and increases), but avoided creating ‘‘kinks’’ there is less risk of ‘‘gaming’’ (changing consumer preference, to other the agency was concerned would the attribute(s) to achieve a more environmental challenges besides provide distortionary incentives for favorable target) by increasing footprint climate change. The agencies anticipate vehicles with neighboring footprints.114 under footprint-based standards than by working more closely with other b. MYs 2012–2016 Light Duty GHG/ increasing vehicle mass under weight- countries and regions in the future to CAFE (constrained/piecewise linear) based standards—it is relatively easy for consider how to address these issues in a manufacturer to add enough weight to a way that least burdens manufacturers For the MYs 2012–2016 rules, NHTSA a vehicle to decrease its applicable fuel while respecting each country’s need to and EPA re-evaluated potential methods economy target a significant amount, as meet its own particular challenges. for specifying mathematical functions to compared to increasing vehicle The agencies continue to find that define fuel economy and GHG footprint. We also continue to agree footprint is the most appropriate standards. The agencies concluded that with concerns raised in 2008 by some attribute upon which to base the the constrained logistic form, if applied commenters on the MY 2011 CAFE proposed standards, but recognizing to post-MY 2011 standards, would rulemaking that there would be greater strong public interest in this issue, we likely contain a steep mid-section that potential for gaming under multi- seek comment on whether the agencies would provide undue incentive to attribute standards, such as those that should consider setting standards for increase the footprint of midsize also depend on weight, torque, power, the final rule based on another attribute passenger cars.115 The agencies judged towing capability, and/or off-road or another combination of attributes. If that a range of methods to fit the curves capability. The agencies agree with the commenters suggest that the agencies would be reasonable, and used a assessment first presented in NHTSA’s should consider another attribute or minimum absolute deviation (MAD) MY 2011 CAFE final rule 112 that the another combination of attributes, the regression without sales weighting on a possibility of gaming is lowest with agencies specifically request that the technology-adjusted car and light truck footprint-based standards, as opposed to commenters address the concerns raised fleet to fit a linear equation. This weight-based or multi-attribute-based in the paragraphs above regarding the equation was used as a starting point to standards. Specifically, standards that use of other attributes, and explain how develop mathematical functions incorporate weight, torque, power, standards should be developed using defining the standards as discussed towing capability, and/or off-road the other attribute(s) in a way that above. The agencies then identified capability in addition to footprint would contributes more to fuel savings and footprints at which to apply minimum not only be more complex, but by CO2 reductions than the footprint-based and maximum values (rather than providing degrees of freedom with standards, without compromising letting the standards extend without respect to more easily-adjusted safety. limit) and transposed these constrained/ attributes, they could make it less piecewise linear functions vertically 3. What mathematical functions have certain that the future fleet would (i.e., on a gpm or CO2 basis, uniformly the agencies previously used, and why? actually achieve the average fuel downward) to produce the fleetwide economy and CO2 reduction levels a. NHTSA in MY 2008 and MY 2011 fuel economy and CO2 emission levels projected by the agencies. CAFE (constrained logistic) for cars and light trucks described in the 116 The agencies recognize that based on For the MY 2011 CAFE rule, NHTSA final rule. economic and consumer demand factors estimated fuel economy levels after 4. How have the agencies changed the that are external to this rule, the normalization for differences in mathematical functions for the proposed distribution of footprints in the future technology, but did not make MYs 2017–2025 standards, and why? may be different (either smaller or adjustments to reflect other vehicle By requiring NHTSA to set CAFE larger) than what is projected in this attributes (e.g., power-to-weight standards that are attribute-based and rule. However, the agencies continue to ratios).113 Starting with the technology defined by a mathematical function, believe that there will not be significant adjusted passenger car and light truck Congress appears to have wanted the shifts in this distribution as a direct fleets, NHTSA used minimum absolute post-EISA standards to be data-driven— consequence of this proposed rule. The deviation (MAD) regression without agencies also recognize that some a mathematical function defining the sales weighting to fit a logistic form as standards, in order to be ‘‘attribute- international attribute-based standards a starting point to develop mathematical use attributes other than footprint and based,’’ should reflect the observed functions defining the standards. relationship in the data between the that there could be benefits for a number NHTSA then identified footprints at of manufacturers if there was greater which to apply minimum and international harmonization of fuel 114 See 71 FR 17556, 17609–17613 (Apr. 6, 2006) maximum values (rather than letting the for NHTSA discussion of ‘‘kinks’’ in the MYs 2008– economy and GHG standards for light- standards extend without limit) and 2011 light truck CAFE final rule (there described as duty vehicles, but this is largely a transposed these functions vertically ‘‘edge effects’’). A ‘‘kink,’’ as used here, is a portion question of how stringent standards are of the curve where a small change in footprint (i.e., on a gpm basis, uniformly results in a disproportionally large change in and how they are tested and enforced. stringency. It is entirely possible that footprint- 113 See 74 FR 14196, 14363–14370 (Mar. 30, 2009) 115 75 FR at 25362. for NHTSA discussion of curve fitting in the MY 116 See generally 74 FR at 49491–96; 75 FR at 112 See 74 FR at 14359 (Mar. 30, 2009). 2011 CAFE final rule. 25357–62.

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117 attribute chosen and fuel economy. that define the fuel economy/CO2 levels adjusting the data for the effects of EPA is also proposing to set attribute- and footprints at each end of the curves weight-to-footprint, as described below. based CO2 standards defined by similar where the curves become flat. Data This represents a departure from the mathematical functions, for the informs these decisions, but how the statistical approach for fitting the curves reasonable technical and policy grounds agencies define and interpret the in MYs 2012–2016, as explained in the discussed below and in section II of the relevant data, and then the choice of next section. The agencies considered a preamble to the proposed rule, and methodology for fitting a curve to the wide variety of reasonable statistical which supports a harmonization with data, must include a consideration of methods in order to better understand the CAFE standards. both technical data and policy goals. the range of uncertainty regarding the The relationship between fuel The next sections examine the policy relationship between fuel consumption economy (and GHG emissions) and concerns that the agencies considered in (the inverse of fuel economy), CO2 footprint, though directionally clear developing the proposed target curves emission rates, and footprint, thereby (i.e., fuel economy tends to decrease and that define the proposed MYs 2017– providing a range within which CO emissions tend to increase with 2025 CAFE and CO standards, new 2 2 decisions about standards would be increasing footprint), is theoretically technical work (expanding on similar potentially supportable. vague and quantitatively uncertain; in analyses performed by NHTSA when other words, not so precise as to a priori the agency proposed MY 2011–2015 a. What concerns were the agencies yield only a single possible curve.118 standards, and by both agencies during looking to address that led them to There is thus a range of legitimate consideration of options for MY 2012– change from the approach used for the options open to the agencies in 2016 CAFE and GHG standards) that MYs 2012–2016 curves? developing curve shapes. The agencies was completed in the process of may of course consider statutory reexamining potential mathematical During the year and a half since the objectives in choosing among the many functions, how the agencies have MYs 2012–2016 final rule was issued, reasonable alternatives. For example, defined the data, and how the agencies NHTSA and EPA have received a curve shapes that might have some explored statistical curve-fitting number of comments from stakeholders theoretical basis could lead to perverse methodologies in order to arrive at on how curves should be fitted to the outcomes contrary to the intent of the proposed curves. passenger car and light truck fleets. statutes to conserve energy and protect 5. What are the agencies proposing for Some limited-line manufacturers have human health and the environment.119 the MYs 2017–2025 curves? argued that curves should generally be Thus, the decision of how to set the flatter in order to avoid discouraging target curves cannot always be just The proposed mathematical functions small vehicles, because steeper curves about most ‘‘clearly’’ using a for the proposed MYs 2017–2025 tend to result in more stringent targets mathematical function to define the standards are somewhat changed from for smaller vehicles. Most full-line relationship between fuel economy and the functions for the MYs 2012–2016 manufacturers have argued that a the attribute; it often has to have a standards, in response to comments passenger car curve similar in slope to normative aspect, where the agencies received from stakeholders and in order the MY 2016 passenger car curve would adjust the function that would define to address technical concerns and be appropriate for future model years, the relationship in order to avoid policy goals that the agencies judge but that the light truck curve should be perverse results, improve equity of more significant in this 9-year revised to be less difficult for rulemaking than in the prior one, which burden across manufacturers, preserve manufacturers selling the largest full- only included 5 years. This section consumer choice, etc. This is true both size pickup trucks. These manufacturers discusses the methodology the agencies for the decisions that guide the argued that the MY 2016 light truck selected as, at this time, best addressing mathematical function defining the curve was not ‘‘physics-based,’’ and that sloped portion of the target curves, and those technical concerns and policy goals, given the various technical inputs in order for future tightening of for the separate decisions that guide the standards to be feasible for full-line agencies’ choice of ‘‘cutpoints’’ (if any) to the agencies’ current analyses. Below the agencies discuss how the agencies manufacturers, the truck curve for later model years should be steeper and 117 A mathematical function can be defined, of determined the cutpoints and the flat course, that has nothing to do with the relationship portions of the MYs 2017–2025 target extended further (i.e., made less between fuel economy and the chosen attribute— curves. We also note that both of these stringent) into the larger footprints. The the most basic example is an industry-wide sections address only how the target agencies do not agree that the MY 2016 standard defined as the mathematical function light truck curve was somehow deficient average required fuel economy = X, where X is the curves were fit to fuel consumption and in lacking a ‘‘physics basis,’’ or that it single mpg level set by the agency. Yet a standard CO2 emission values determined using that is simply defined as a mathematical function the city and highway test procedures, was somehow overly stringent for that is not tied to the attribute(s) would not meet and that in determining respective manufacturers selling large pickups— the requirement of EISA. manufacturers making these arguments 118 In fact, numerous manufacturers have regulatory alternatives, the agencies confidentially shared with the agencies what they made further adjustments to the presented no ‘‘physics-based’’ model to describe as ‘‘physics based’’ curves, with each OEM resultant curves in order to account for explain how fuel economy should showing significantly different shapes, and depend on footprint.120 The same footprint relationships. The sheer variety of curves adjustments for improvements to mobile shown to the agencies further confirm the lack of air conditioners. manufacturers indicated that they an underlying principle of ‘‘fundamental physics’’ Thus, recognizing that there are many believed that the light truck standard driving the relationship between CO2 emission or reasonable statistical methods for fitting should be somewhat steeper after MY fuel consumption and footprint, and the lack of an 2016, primarily because, after more than underlying principle to dictate any outcome of the curves to data points that define agencies’ establishment of footprint-based vehicles in terms of footprint and fuel ten years of progressive increases in the standards. economy, the agencies have chosen for stringency of applicable CAFE 119 For example, if the agencies set weight-based this proposed rule to fit curves using an standards, large pickups would be less standards defined by a steep function, the standards capable of achieving further might encourage manufacturers to keep adding ordinary least-squares formulation, on weight to their vehicles to obtain less stringent sales-weighted data, using a fleet that targets. has had technology applied, and after 120 See footnote 118.

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improvements without compromising ways that would compromise highway assumptions are the subject of the load carrying and towing capacity. safety. following discussion. This process of In developing the curve shapes for • If cutpoints are adopted, given the performing many analyses using this proposed rule, the agencies were same industry-wide average required combinations of statistical methods aware of the current and prior technical fuel economy, moving large-vehicle generates many possible outcomes, each concerns raised by OEMs concerning cutpoints to the right (i.e., down in embodying different potentially the effects of the stringency on terms of fuel economy, up in terms of reasonable combinations of assumptions individual manufacturers and their CO2 emissions) better accommodates the and each thus reflective of the data as ability to meet the standards with unique design requirements of larger viewed through a particular lens. The available technologies, while producing vehicles—especially large pickups—and choice of a standard developed by a vehicles at a cost that allowed them to extends the size range over which given combination of these statistical recover the additional costs of the downsizing is discouraged. methods is consequently a decision technologies being applied. Although All of these were policy goals that based upon the agencies’ determination we continue to believe that the required trade-offs, and in determining of how, given the policy objectives for methodology for fitting curves for the the curves they also required balance this rulemaking and the agencies’ MY MY2012–2016 standards was against the comments from the OEMs 2008-based forecast of the market technically sound, we recognize discussed in the introduction to this through MY 2025, to appropriately manufacturers’ technical concerns section. Ultimately, the agencies do not reflect the current understanding of the regarding their abilities to comply with agree that the MY 2017 target curves for evolution of automotive technology and a similarly shallow curve after MY2016 this proposal, on a relative basis, should costs, the future prospects for the given the anticipated mix of light trucks be made significantly flatter than the vehicle market, and thereby establish in MYs 2017–2025. As in the MYs MY 2016 curve,121 as we believe that curves (i.e., standards) for cars and light 2012–2016 rules, the agencies this would undo some of the safety- trucks. considered these concerns in the related incentives and balancing of c. What information did the agencies analysis of potential curve shapes. The compliance burdens among use to estimate a relationship between agencies also considered safety concerns manufacturers—effects that attribute- fuel economy, CO and footprint? which could be raised by curve shapes based standards are intended to provide. 2 creating an incentive for vehicle Nonetheless, the agencies recognize For each fleet, the agencies began downsizing, as well as the potential loss full-line OEM concerns and have with the MY 2008-based market forecast to consumer welfare should vehicle tentatively concluded that further developed to support this proposal (i.e., upsizing be unduly disincentivized. In increases in the stringency of the light the baseline fleet), with vehicles’ fuel addition, the agencies sought to improve truck standards will be more feasible if economy levels and technological the balance of compliance burdens the light truck curve is made steeper characteristics at MY 2008 levels.122 among manufacturers. Among the than the MY 2016 truck curve and the The development, scope, and content of technical concerns and resultant policy right (large footprint) cut-point is this market forecast is discussed in trade-offs the agencies considered were extended over time to larger footprints. detail in Chapter 1 of the joint Technical the following: Support Document supporting this • This conclusion is supported by the Flatter standards (i.e., curves) agencies’ technical analyses of rulemaking. increase the risk that both the weight regulatory alternatives defined using the d. What adjustments did the agencies and size of vehicles will be reduced, curves developed in the manner compromising highway safety. evaluate? • described below. Flatter standards potentially impact The agencies believe one possible the utility of vehicles by providing an b. What methodologies and data did the approach is to fit curves to the incentive for vehicle downsizing. agencies consider in developing the • minimally adjusted data shown above Steeper footprint-based standards 2017–2025 curves? (the approach still includes sales mix may incentivize vehicle upsizing, thus In considering how to address the adjustments, which influence results of increasing the risk that fuel economy various policy concerns discussed in the sales-weighted regressions), much as and greenhouse gas reduction benefits previous sections, the agencies revisited DOT did when it first began evaluating will be less than expected. the data and performed a number of potential attribute-based standards in • Given the same industry-wide analyses using different combinations of 2003.123 However, the agencies have average required fuel economy or CO 2 the various statistical methods, found, as in prior rulemakings, that the standard, flatter standards tend to place weighting schemes, adjustments to the data are so widely spread (i.e., when greater compliance burdens on full-line data and the addition of technologies to graphed, they fall in a loose ‘‘cloud’’ manufacturers. rather than tightly around an obvious • Given the same industry-wide make the fleets less technologically line) that they indicate a relationship average required fuel economy or CO heterogeneous. As discussed above, in 2 between footprint and CO and fuel standard, steeper standards tend to the agencies’ judgment, there is no 2 consumption that is real but not place greater compliance burdens on single ‘‘correct’’ way to estimate the particularly strong. Therefore, as limited-line manufacturers (depending relationship between CO2 or fuel discussed below, the agencies also of course, on which vehicles are being consumption and footprint—rather, explored possible adjustments that produced). each statistical result is based on the • If cutpoints are adopted, given the underlying assumptions about the could help to explain and/or reduce the same industry-wide average required particular functional form, weightings ambiguity of this relationship, or could fuel economy, moving small-vehicle and error structures embodied in the help to produce policy outcomes the cutpoints to the left (i.e., up in terms of representational approach. These agencies judged to be more desirable. fuel economy, down in terms of CO2 121 While ‘‘significantly’’ flatter is subjective, the 122 While the agencies jointly conducted this emissions) discourages the introduction year over year change in curve shapes is discussed analysis, the coefficients ultimately used in the of small vehicles, and reduces the in greater detail in Section 0 and Chapter 2 of the slope setting analysis are from the CAFE model. incentive to downsize small vehicles in joint TSD. 123 68 FR 74920–74926.

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i. Adjustment to reflect differences in currently outweighs these prior considered this technique for purposes technology concerns. Therefore, the agencies also of fitting curves, the agencies are not As in prior rulemakings, the agencies evaluated curve fitting approaches proposing a multi-attribute standard, as consider technology differences through which fuel consumption and the proposed fuel economy and CO2 between vehicle models to be a CO2 levels were adjusted with respect to targets for each vehicle are still significant factor producing uncertainty weight-to-footprint alone, and in functions of footprint alone. No combination with power-to-weight. adjustment would be used in the regarding the relationship between CO2/ fuel consumption and footprint. Noting While the agencies examined these compliance process. that attribute-based standards are adjustments for purposes of fitting The agencies seek comment on the intended to encourage the application of curves, the agencies are not proposing a appropriateness of the adjustments as additional technology to improve fuel multi-attribute standard; the proposed described in Chapter 2 of the joint TSD, fuel economy and CO2 targets for each particularly regarding whether these efficiency and reduce CO2 emissions, the agencies, in addition to considering vehicle are still functions of footprint adjustments suggest that standards approaches based on the unadjusted alone. No adjustment would be used in should be defined in terms of other engineering characteristics of MY 2008 the compliance process. attributes in addition to footprint, and vehicle models, therefore also The agencies also examined some whether they may encourage changes considered approaches in which, as for differences between the technology- other than encouraging the application previous rulemakings, technology is adjusted car and truck fleets in order to of technology to improve fuel economy added to vehicles for purposes of the better understand the relationship and reduce CO2 emissions. The agencies curve fitting analysis in order to between footprint and CO2/fuel also seek comment regarding whether produce fleets that are less varied in consumption in the agencies’ MY 2008 these adjustments effectively ‘‘lock in’’ technology content. based forecast. The agencies through MY 2025 relationships that The agencies adjusted the baseline investigated the relationship between were observed in MY 2008. HP/WT and footprint in the agencies’ fleet for technology by adding all e. What statistical methods did the MY2008-based market forecast. On a technologies considered, except for the agencies evaluate? most advanced high-BMEP (brake mean sales weighted basis, cars tend to The above approaches resulted in effective pressure) gasoline engines, become proportionally more powerful three data sets each for (a) vehicles diesel engines, strong HEVs, PHEVs, as they get larger. In contrast, there is a without added technology and (b) EVs, and FCVs. The agencies included minimally positive relationship between vehicles with technology added to 15 percent mass reduction on all HP/WT and footprint for light trucks, reduce technology differences, any of vehicles. indicating that light trucks become only slightly more powerful as they get which may provide a reasonable basis ii. Adjustments reflecting differences in larger. for fitting mathematical functions upon performance and ‘‘density’’ This analysis, presented in chapter which to base the slope of the standard For the reasons discussed above 2.4.1.2 of the agencies’ joint TSD, curves: (1) Vehicles without any further regarding revisiting the shapes of the indicated that vehicle performance adjustments; (2) vehicles with curves, the agencies considered (power-to-weight ratio) and ‘‘density’’ adjustments reflecting differences in adjustments for other differences (curb weight divided by footprint) are ‘‘density’’ (weight/footprint); and (3) between vehicle models (i.e., inflating both correlated to fuel consumption vehicles with adjustments reflecting or deflating the fuel economy of each (and CO2 emission rate), and that these differences in ‘‘density,’’ and vehicle model based on the extent to vehicle attributes are also both related to adjustments reflecting differences in which one of the vehicle’s attributes, vehicle footprint. Based on these performance (power/weight). Using such as power, is higher or lower than relationships, the agencies explored these data sets, the agencies tested a average). Previously, NHTSA had adjusting the fuel economy and CO2 range of regression methodologies, each rejected such adjustments because they emission rates of individual vehicle judged to be possibly reasonable for imply that a multi-attribute standard models based on deviations from application to at least some of these data may be necessary, and the agencies ‘‘expected’’ performance or weight/ sets. judged multi-attribute standard to be footprint at a given footprint; the i. Regression Approach more subject to gaming than a footprint- agencies inflated fuel economy levels of In the MYs 2012–2016 final rules, the only standard.124 125 Having considered vehicle models with higher performance agencies employed a robust regression this issue again for purposes of this and/or weight/footprint than the average approach (minimum absolute deviation, rulemaking, NHTSA and EPA conclude of the fleet would indicate at that or MAD), rather than an ordinary least the need to accommodate in the target footprint, and deflated fuel economy squares (OLS) regression.128 MAD is curves the challenges faced by levels with lower performance and/or generally applied to mitigate the effect manufacturers of large pickups weight. Previously, NHTSA had rejected such adjustments because they imply of outliers in a dataset, and thus was employed in that rulemaking as part of 124 For example, in comments on NHTSA’s 2008 that a multi-attribute standard may be NPRM regarding MY 2011–2015 CAFE standards, necessary, and the agency judged multi- our interest in attempting to best Porsche recommended that standards be defined in attribute standard to be more subject to represent the underlying technology. terms of a ‘‘Summed Weighted Attribute’’, wherein NHTSA had used OLS in early the fuel economy target would calculated as gaming than a footprint-only 126 127 development of attribute-based CAFE follows: target = f(SWA), where target is the fuel standard. While the agencies economy target applicable to a given vehicle model and SWA = footprint + torque 1/1.5 + weight 1/2.5. 126 For example, in comments on NHTSA’s 2008 (NHTSA–2008–0089–0174). While the standards (NHTSA–2008–0089–0174). While the standards NPRM regarding MY 2011–2015 CAFE standards, the agencies are proposing for MY 2017–2025 are the agencies are proposing for MY 2017–2025 are Porsche recommended that standards be defined in not multi-attribute standards, that is the target is not multi-attributes, that is the target is only a terms of a ‘‘Summed Weighted Attribute’’, wherein only a function of footprint, we are proposing curve function of footprint, we are proposing curve the fuel economy target would calculated as shapes that were developed considering more than shapes that were developed considering more than follows: target = f(SWA), where target is the fuel one attribute. one attribute. economy target applicable to a given vehicle model 127 74 FR 14359. 125 74 FR 14359. and SWA = footprint + torque 1/1.5 + weight 1/2.5. 128 See 75 FR at 25359.

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standards, but NHTSA (and then ii. Sales Weighting demand.’’ 132 In reexamining the sales- NHTSA and EPA) subsequently chose Likewise, the agencies reconsidered weighting for this analysis, the agencies MAD instead of OLS for both the MY employing sales-weighting to represent note that there are low-volume model 2011 and the MYs 2012–2016 the data. As explained below, the types account for many of the passenger rulemakings. These decisions on decision to sales weight or not is car model types (50 percent of passenger regression technique were made both ultimately based upon a choice about car model types account for 3.3 percent because OLS gives additional emphasis how to represent the data, and not by an of sales), and it is unclear whether the to outliers 129 and because the MAD underlying statistical concern. Sales engineering characteristics of these approach helped achieve the agencies’ weighting is used if the decision is model types should equally determine policy goals with regard to curve slope made to treat each (mass produced) unit the standard for the remainder of the in those rulemakings.130 In the interest sold as a unique physical observation. market. In the interest of taking a fresh look of taking a fresh look at appropriate Doing so thereby changes the extent to at appropriate methodologies as which different vehicle model types are regression methodologies as promised promised in the last final rule, in in the 2012–2016 light duty rulemaking, emphasized as compared to a non-sales developing this proposal, the agencies in developing this proposal, the weighted regression. For example, while gave full consideration to both sales- agencies gave full consideration to both total General Motors Silverado (332,000) weighted and unweighted regressions. OLS and MAD. The OLS representation, and Ford F–150 (322,000) sales differ by as described, uses squared errors, while less than 10,000 in MY 2021 market iii. Analyses Performed MAD employs absolute errors and thus forecast, 62 F–150s models and 38 We performed regressions describing weights outliers less. Silverado models are reported in the the relationship between a vehicle’s agencies baselines. Without sales- As noted, one of the reasons stated for CO2/fuel consumption and its footprint, weighting, the F–150 models, because in terms of various combinations of choosing MAD over least square there are more of them, are given 63 regression in the MYs 2012–2016 factors: initial (raw) fleets with no percent more weight in the regression technology, versus after technology is rulemaking was that MAD reduced the despite comprising a similar portion of applied; sales-weighted versus non-sales weight placed on outliers in the data. the marketplace and a relatively weighted; and with and without two However, the agencies have further homogenous set of vehicle technologies. sets of normalizing factors applied to considered whether it is appropriate to The agencies did not use sales the observations. The agencies excluded classify these vehicles as outliers. weighting in the 2012–2016 rulemaking diesels and dedicated AFVs because the Unlike in traditional datasets, these analysis of the curve shapes. A decision agencies anticipate that advanced vehicles’ performance is not to not perform sales weighting reflects gasoline-fueled vehicles are likely to be mischaracterized due to errors in their judgment that each vehicle model dominant through MY 2025, based both measurement, a common reason for provides an equal amount of on our own assessment of potential outlier classification. Being certification information concerning the underlying standards (see Sections III and IV below) data, the chances of large measurement relationship between footprint and fuel as well as our discussions with large errors should be near zero, particularly economy. Sales-weighted regression number of automotive companies and towards high CO2 or fuel consumption. gives the highest sales vehicle model suppliers. Thus, they can only be outliers in the types vastly more emphasis than the Thus, the basic OLS regression on the sense that the vehicle designs are unlike lowest-sales vehicle model types thus initial data (with no technology applied) those of other vehicles. These outlier driving the regression toward the sales- and no sales-weighting represents one vehicles may include performance weighted fleet norm. For unweighted perspective on the relation between vehicles, vehicles with high ground regression, vehicle sales do not matter. footprint and fuel economy. Adding clearance, 4WD, or boxy designs. Given The agencies note that the light truck sales weighting changes the that these are equally legitimate on-road market forecast shows MY 2025 sales of interpretation to include the influence vehicle designs, the agencies concluded 218,000 units for Toyota’s 2WD Sienna, of sales volumes, and thus steps away that it would appropriate to reconsider and shows 66 model configurations from representing vehicle technology the treatment of these vehicles in the with MY 2025 sales of fewer than 100 alone. Likewise, MAD is an attempt to regression techniques. units. Similarly, the agencies’ market reduce the impact of outliers, but forecast shows MY 2025 sales of reducing the impact of outliers might Based on these considerations as well 267,000 for the Toyota Prius, and shows perhaps be less representative of as the adjustments discussed above, the 40 model configurations with MY2025 technical relationships between the agencies concluded it was not sales of fewer than 100 units. Sales- variables, although that relationship meaningful to run MAD regressions on weighted analysis would give the may change over time in reality. Each gpm data that had already been adjusted Toyota Sienna and Prius more than a combination of methods and data in the manner described above. thousand times the consideration of reflects a perspective, and the regression Normalizing already reduced the many vehicle model configurations. results simply reflect that perspective in variation in the data, and brought Sales-weighted analysis would, a simple quantifiable manner, expressed outliers towards average values. This therefore, cause a large number of as the coefficients determining the line was the intended effect, so the agencies vehicle model configurations to be through the average (for OLS) or the deemed it unnecessary to apply an virtually ignored in the regressions.131 median (for MAD) of the data. It is left additional remedy to resolve an issue However, the agencies did note in the to policy makers to determine an that had already been addressed, but we MYs 2012–2016 final rules that, ‘‘sales appropriate perspective and to interpret seek comment on the use of robust weighted regression would allow the the consequences of the various regression techniques under such difference between other vehicle alternatives. circumstances. attributes to be reflected in the analysis, We invite comments on the and also would reflect consumer application of the weights as described 129 Id. at 25362–63. 130 Id. at 25363. 131 75 FR at 25362 and n. 64. 132 75 FR at 25632/3.

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above, and the implications for adjustments will reduce load carrying 6. Once the agencies determined the interpreting the relationship between capability or vehicle performance). In appropriate slope for the sloped part, fuel efficiency (or CO2) and footprint. addition to reducing the variability, the how did the agencies determine the rest f. What results did the agencies obtain, truck curve is also steepened, and the of the mathematical function? which methodology did the agencies car curve flattened compared to curves The agencies continue to believe that choose for this proposal, and why is it fitted to sales weighted data that do not without a limit at the smallest reasonable? include these normalizations. The footprints, the function—whether agencies agree with manufacturers of Both agencies analyzed the same logistic or linear—can reach values that statistical approaches. For regressions full-size pick-up trucks that in order to would be unfairly burdensome for a against data including technology maintain towing and hauling utility, the manufacturer that elects to focus on the normalization, NHTSA used the CAFE engines on pick-up trucks must be more market for small vehicles; depending on modeling system, and EPA used EPA’s powerful, than their low ‘‘density’’ the underlying data, an unconstrained OMEGA model. The agencies obtained nature would statistically suggest based form could result in stringency levels similar regression results, and have on the agencies’ current MY2008-based that are technologically infeasible and/ based today’s joint proposal on those market forecast and the agencies’ or economically impracticable for those obtained by NHTSA. The draft Joint current estimates of the effectiveness of manufacturers that may elect to focus on TSD Chapter 2 contains a large set of different fuel-saving technologies. the smallest vehicles. On the other side illustrative of figures which show the Therefore, it may be more equitable (i.e., of the function, without a limit at the range of curves determined by the in terms of relative compliance largest footprints, the function may possible combinations of regression challenges faced by different light truck provide no floor on required fuel technique, with and without sales manufacturers) to adjust the slope of the economy. Also, the safety considerations that support the weighting, with and without the curve defining fuel economy and CO2 provision of a disincentive for application of technology, and with targets. various adjustments to the gpm variable downsizing as a compliance strategy prior to running a regression. As described above, however, other apply weakly, if at all, to the very largest The choice among the alternatives approaches are also technically vehicles. Limiting the function’s value presented in the draft Joint TSD Chapter reasonable, and also represent a way of for the largest vehicles thus leads to a 2 was to use the OLS formulation, on expressing the underlying relationships. function with an inherent absolute sales-weighted data, using a fleet that The agencies plan to revisit the analysis minimum level of performance, while has had technology applied, and after for the final rule, after updating the remaining consistent with safety adjusting the data for the effect of underlying market forecast and considerations. weight-to-footprint, as described above. estimates of technology effectiveness, Just as for slope, in determining the The agencies believe that this represents and based on relevant public comments appropriate footprint and fuel economy a technically reasonable approach for received. In addition, the agencies values for the ‘‘cutpoints,’’ the places purposes of developing target curves to intend to update the technology cost along the curve where the sloped define the proposed standards, and that estimates, which could alter the NPRM portion becomes flat, the agencies took it represents a reasonable trade-off analysis results and consequently alter a fresh look for purposes of this among various considerations balancing the balance of the trade-offs being proposal, taking into account the statistical, technical, and policy matters, weighed to determine the final curves. updated market forecast and new which include the statistical assumptions about the availability of representativeness of the curves g. Implications of the proposed slope technologies. The next two sections considered and the steepness of the compared to MY 2012–2016 discuss the agencies’ approach to curve chosen. The agencies judge the cutpoints for the passenger car and light application of technology prior to curve The proposed slope has several truck curves separately, as the policy fitting to provide a reasonable means— implications relative to the MY 2016 considerations for each vary somewhat. one consistent with the rule’s objective curves, with the majority of changes on of encouraging manufacturers to add the truck curve. With the agencies’ a. Cutpoints for PC curve technology in order to increase fuel current MY2008-based market forecast The passenger car fleet upon which economy—of reducing variation in the and the agencies’ current estimates of the agencies have based the target data and thereby helping to estimate a technology effectiveness, the curves for MYs 2017–2025 is derived relationship between fuel consumption/ combination of sales weighting and WT/ from MY 2008 data, as discussed above. CO2 and footprint. FP normalization produced a car curve In MY 2008, passenger car footprints Similarly, for the agencies’ current slope similar to that finalized in the MY ranged from 36.7 square feet, the Lotus MY 2008-based market-forecast and the 2012–2016 final rulemaking (4.7 g/mile Exige 5, to 69.3 square feet, the Daimler agencies’ current estimates of future in MY 2016, vs. 4.5 g/mile proposed in Maybach 62. In that fleet, several technology effectiveness, the inclusion MY 2017). By contrast, the truck curve manufacturers offer small, sporty of the weight-to-footprint data is steeper in MY 2017 than in MY 2016 below 41 square feet, such as the adjustment prior to running the BMW Z4 and Mini, Honda S2000, (4.0 g/mile in MY 2016 vs. 4.9 g/mile in regression also helps to improve the fit Mazda MX–5 Miata, Porsche Carrera MY 2017). As discussed previously, a of the curves by reducing the variation and 911, and Volkswagen New Beetle. steeper slope relaxes the stringency of in the data, and the agencies believe that Because such vehicles represent a small the benefits of this adjustment for this targets for larger vehicles relative to portion (less than 10 percent) of the proposed rule likely outweigh the those for smaller vehicles, thereby passenger car market, yet often have potential that resultant curves might shifting relative compliance burdens performance, utility, and/or structural somehow encourage reduced load among manufacturers based on their characteristics that could make it carrying capability or vehicle respective product mix. technologically infeasible and/or performance (note that the we are not economically impracticable for suggesting that we believe these manufacturers focusing on such

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vehicles to achieve the very challenging agencies received comments from some largest light trucks which represent a average requirements that could apply manufacturers that, combined with significant percentage of those in the absence of a constraint, EPA and slope and overall stringency, using 41 manufacturers light truck sales. At the NHTSA are again proposing to cut off square feet as the footprint at which to same time, in re-examining the light the sloped portion of the passenger car cap the target for small cars would truck fleet data, the agencies concluded function at 41 square feet, consistent result in unduly challenging targets for that aggregating pickup truck models in with the MYs 2012–2016 rulemaking. small cars. The agencies do not agree. the MYs 2012–2016 rule had led the The agencies recognize that for No specific vehicle need meet its target agencies to underestimate the impact of manufacturers who make small vehicles (because standards apply to fleet the different pickup truck model in this size range, putting the cutpoint average performance), and maintaining configurations above 66 square feet on at 41 square feet creates some incentive a sloped function toward the smaller manufacturers’ fleet average fuel to downsize (i.e., further reduce the size, end of the passenger car market is economy and CO2 levels (as discussed and/or increase the production of important to discourage unsafe immediately below). In disaggregating models currently smaller than 41 square downsizing, the agencies are thus the pickup truck model data, the impact feet) to make it easier to meet the target. proposing to again ‘‘cut off’’ the of setting the cutpoint at 66 square feet Putting the cutpoint here may also passenger car curve at 41 square feet, after model year 2016 became clearer to create the incentive for manufacturers notwithstanding these comments. the agencies. who do not currently offer such models The agencies seek comment on setting In the agencies’ view, there is to do so in the future. However, at the cutpoints for the MYs 2017–2025 legitimate basis for these comments. The same time, the agencies believe that passenger car curves at 41 square feet agencies’ market forecast includes about there is a limit to the market for cars and 56 square feet. 24 vehicle configurations above 74 smaller than 41 square feet—most b. Cutpoints for LT curve square feet with a total volume of about consumers likely have some minimum 50,000 vehicles or less during any MY expectation about interior volume, The light truck fleet upon which the in the 2017–2025 time frame. While a among other things. The agencies thus agencies have based the target curves for relatively small portion of the overall believe that the number of consumers MYs 2017–2025, like the passenger car truck fleet, for some manufacturers, who will want vehicles smaller than 41 fleet, is derived from MY 2008 data, as these vehicles are non-trivial portion of square feet (regardless of how they are discussed in Section 2.4 above. In MY sales. As noted above, the very largest priced) is small, and that the incentive 2008, light truck footprints ranged from light trucks have significant load- to downsize to less than 41 square feet 41.0 square feet, the Wrangler, to carrying and towing capabilities that in response to this proposal, if present, 77.5 square feet, the Toyota Tundra. For make it particularly challenging for will be at best minimal. On the other consistency with the curve for passenger manufacturers to add fuel economy- hand, the agencies note that some cars, the agencies are proposing to cut improving/CO -reducing technologies in manufacturers are introducing mini cars off the sloped portion of the light truck 2 a way that maintains the full not reflected in the agencies MY 2008- function at the same footprint, 41 square functionality of those capabilities. based market forecast, such as the Fiat feet, although we recognize that no light 500, to the U.S. market, and that the trucks are currently offered below 41 Considering manufacturer CBI and footprint at which the curve is limited square feet. With regard to the upper our estimates of the impact of the 66 may affect the incentive for cutpoint, the agencies heard from a square foot cutpoint for future model manufacturers to do so. number of manufacturers during the years, the agencies have initially Above 56 square feet, the only discussions leading up to this proposal determined to adopt curves that passenger car models present in the MY that the location of the cutpoint in the transition to a different cut point. While 2008 fleet were four luxury vehicles MYs 2012–2016 rules, 66 square feet, noting that no specific vehicle need with extremely low sales volumes—the meant that the same standard applied to meet its target (because standards apply Bentley Arnage and three versions of the all light trucks with footprints of 66 to fleet average performance), we Rolls Royce Phantom. As in the MYs square feet or greater, and that in fact believe that the information provided to 2012–2016 rulemaking, NHTSA and the targets for the largest light trucks in us by manufacturers and our own EPA therefore are proposing again to cut the later years of that rulemaking were analysis supports the gradual extension off the sloped portion of the passenger extremely challenging. Those of the cutpoint for large light trucks in car function at 56 square feet. manufacturers requested that the this proposal from 66 square feet in MY While meeting with manufacturers agencies extend the cutpoint to a larger 2016 out to a larger footprint square feet prior to issuing the proposal, the footprint, to reduce targets for the before MY 2025.

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The agencies are proposing to phase cycle curves. Stringency adjustments for above, that affect both the shape of the in the higher cutpoint for the truck air conditioning and other credits were curve, and the location of the curve, that curve in order to avoid any backsliding calculated after curves that did not cross helped the agencies determine curves from the MY 2016 standard. A target were determined in two cycle space. that defined the proposed standards. that is feasible in one model year should The year over year increase in these a. Adjusting for Year over Year never become less feasible in a adjustments cause neither the GHG nor Stringency subsequent model year—manufacturers CAFE curves (with A/C) to contact the should have no reason to remove fuel 2016 curves when charted. As in the MYs 2012–2016 rules, the economy-improving/CO -reducing agencies developed curves defining 2 7. Once the agencies determined the technology from a vehicle once it has regulatory alternatives for consideration complete mathematical function shape, been applied. Put another way, the by ‘‘shifting’’ these curves. For the MYs how did the agencies adjust the curves agencies are proposing to not allow 2012–2016 rules, the agencies did so on to develop the proposed standards and ‘‘curve crossing’’ from one model year to an absolute basis, offsetting the fitted regulatory alternatives? the next. In proposing MYs 2011–2015 curve by the same value (in gpm or g/ CAFE standards and promulgating MY The curves discussed above all reflect mi) at all footprints. In developing this 2011 standards, NHTSA proposed and the addition of technology to individual proposal, the agencies have requested comment on avoiding curve vehicle models to reduce technology reconsidered the use of this approach, crossing, as an ‘‘anti-backsliding differences between vehicle models and have concluded that after MY 2016, measure.’’ 133 The MY 2016 2 cycle test before fitting curves. This application of curves should be offset on a relative curves are therefore a floor for the MYs technology was conducted not to basis—that is, by adjusting the entire 2017–2025 curves. For passenger cars, directly determine the proposed gpm-based curve (and, equivalently, the which have minimal change in slope standards, but rather for purposes of CO2 curve) by the same percentage from the MY 2012–2016 rulemakings technology adjustments, and set aside rather than the same absolute value. The and no change in cut points, there are considerations regarding potential rates agencies’ estimates of the effectiveness no curve crossing issues in the proposed of application (i.e., phase-in caps), and of these technologies are all expressed standards. considerations regarding economic in relative terms—that is, each The minimum stringency implications of applying specific technology (with the exception of A/C) determination was done using the two technologies to specific vehicle models. is estimated to reduce fuel consumption The following sections describe further (the inverse of fuel economy) and CO2 133 74 Fed. Reg. at 14370 (Mar. 30, 2009). adjustments to the curves discussed emissions by a specific percentage of

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fuel consumption without the manufacturers to implement these contains a considerable amount of new technology. It is, therefore, more changes. For the proposed CAFE work on technologies included in this consistent with the agencies’ estimates standards and alternatives, an offset is rule, some of which were included in of technology effectiveness to develop included based on air conditioning prior rulemakings, and others that were the proposed standards and regulatory system efficiency improvements, as not. alternatives by applying a proportional these improvements are the only Notably, we have updated our battery offset to curves expressing fuel improvements that effect vehicle fuel costing methodology significantly since consumption or emissions as a function economy. For the proposed GHG the MYs 2012–2016 final rule and even of footprint. In addition, extended standards and alternatives, a stringency relative to the 2010 TAR. We are now indefinitely (and without other increase is included based on air using a peer reviewed model developed compensating adjustments), an absolute conditioning system efficiency, leakage by Argonne National Laboratory for the offset would eventually (i.e., at very and refrigerant improvements. As Department of Energy which provides high average stringencies) produce discussed above in Chapter 5 of the join us with more rigorous estimates for negative (gpm or g/mi) targets. Relative TSD, the air conditioning system battery costs and allows us to estimate offsets avoid this potential outcome. improvements affect a vehicle’s fuel future costs specific to hybrids, plug-in Relative offsets do cause curves to efficiency or CO2 emissions hybrids and electric vehicles all of become, on a fuel consumption and CO2 performance as an additive stringency which have different battery design basis, flatter at greater average increase, as compared to other fuel characteristics. stringencies; however, as discussed efficiency improving technologies We also have new cost data from more above, this outcome remains consistent which are multiplicative. Therefore, in recently completed tear down and other with the agencies’ estimates of adjusting target curves for cost studies by FEV which were not technology effectiveness. In other improvements in the air conditioning available in either the MYs 2012–2016 words, given a relative decrease in system performance, the agencies are final rule or the 2010 TAR. These new average required fuel consumption or adjusting the target curves by additive studies analyzed a 8-speed automatic CO2 emissions, a curve that is flatter by stringency increases (or vertical shifts) transmission replacing 6-speed the same relative amount should be in the curves. automatic transmission, a 8-speed dual equally challenging in terms of the For the GHG target curves, the offset clutch transmission replacing 6-speed potential to achieve compliance through for air conditioning system performance dual clutch transmission, a power-split the addition of fuel-saving technology. is being handled in the same manner as hybrid powertrain with an I4 engine On this basis, and considering that the for the MY 2012–2016 rules. For the replacing a conventional engine ‘‘flattening’’ occurs gradually for the CAFE target curves, NHTSA for the first powertrain with V6 engine, a mild regulatory alternatives the agencies have time is proposing to account for hybrid with stop-start technology and evaluated, the agencies tentatively potential improvements in air an I4 engine replacing a conventional I4 conclude that this approach to offsetting conditioning system performance. Using engine, and the Fiat Multi-Air engine the curves to develop year-by-year this methodology, the agencies first use technology. We discuss the new tear regulatory alternatives neither re-creates a multiplicative stringency adjustment down studies in Section II.D.2 of this a situation in which manufacturers are for the sloped portion of the curves to preamble. Based on this, we have likely to respond to standards in ways reflect the effectiveness on technologies updated some of the FEV-developed that compromise highway safety, nor other than air conditioning system costs relative to what we used in the undoes the attribute-based standard’s technologies, creating a series of curve 2012–2016 final rule, although these more equitable balancing of compliance shapes that are ‘‘fanned’’ based on two- costs are consistent with those used in burdens among disparate cycle performance. Then the curves are the 2010 TAR. Furthermore, we have manufacturers. The agencies invite offset vertically by the air conditioning completely re-worked our estimated comment on these conclusions, and on improvement by an equal amount at costs associated with mass reduction any other means that might avoid the every point. relative to both the MYs 2012–2016 potential outcomes—in particular, final rule and the 2010 TAR. D. Joint Vehicle Technology negative fuel consumption and CO As would be expected given that some 2 Assumptions targets—discussed above. of our cost estimates were developed For the past four to five years, the several years ago, we have also updated b. Adjusting for anticipated agencies have been working together all of our base direct manufacturing improvements to mobile air closely to follow the development of costs to put them in terms of more conditioning systems fuel consumption and GHG reducing recent dollars (2009 dollars for this The fuel economy values in the technologies. Two major analyses have proposal). We have also updated our agencies’ market forecast are based on been published jointly by EPA and methodology for calculating indirect the 2-cycle (i.e., city and highway) fuel NHTSA: The Technical Support costs associated with new technologies economy test and calculation Document to support the MYs 2012– since both the MYs 2012–2016 final rule procedures that do not reflect potential 2016 final rule and the 2010 Technical and the TAR. We continue to use the improvements in air conditioning Analysis Report (which supported the indirect cost multiplier (ICM) approach system efficiency, refrigerant leakage, or 2010 Notice of Intent). The latter of used in those analyses, but have made refrigerant Global Warming Potential these analyses was also done in important changes to the calculation (GWP). Recognizing that there are conjunction with CARB. Both of these methodology—changes done in significant and cost effective potential analyses have both been published response to ongoing staff evaluation and air conditioning system improvements within the past 18 months. As a result, public input. available in the rulemaking timeframe much of the work is still relevant and Lastly, we have updated many of the (discussed in detail in Chapter 5 of the we continue to rely heavily on these technologies’ effectiveness estimates draft joint TSD), the agencies are references. However, some largely based on new vehicle simulation increasing the stringency of the target technologies—and what we know about work conducted by Ricardo curves based on the agencies’ them—are changing so rapidly that the Engineering. This simulation work assessment of the capability of analysis supporting this proposal provides the effectiveness estimates for

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a number of the technologies most rule. For this rulemaking, given its time engines, with greater efficiencies and heavily relied on in the agencies’ frame, other technologies are also downsizing; continued significant analysis of potential standards for MYs considered that are not currently in efficiency improvements in 2017–2025. production, but that are beyond the transmissions; and ongoing levels of The agencies have also reviewed the initial research phase, and are under improvement to some of the seemingly findings and recommendations in the development and expected to be in more basic technologies such as lower updated NAS report ‘‘Assessment of production in the next 5–10 years. rolling resistance tires and aerodynamic Fuel Economy Technologies for Light- Examples of these technologies are treatments, which are among the most Duty Vehicles’’ that was completed after downsized and turbocharged engines cost effective technologies available for the MYs 2012–2016 final rule was operating at combustion pressures even reducing fuel consumption and GHGs. issued,134 and NHTSA has performed a higher than today’s turbocharged Not included in the list below are sensitivity analysis (contained in its engines, and an emerging hybrid technologies specific to air conditioning PRIA) to examine the impact of using architecture combined with an 8 speed system improvements and off-cycle some of the NAS cost and effectiveness dual clutch transmission, a combination controls, which are presented in Section estimates on the proposed standards. that is not available today. These are II.F of this NPRM and in Chapter 5 of Each of these changes is discussed technologies which the agencies believe the draft Joint TSD. briefly in the remainder of this section can, for the most part, be applied both a. Types of Engine Technologies and in much greater detail in Chapter 3 to cars and trucks, and which are Considered of the draft joint TSD. First we provide expected to achieve significant a brief summary of the technologies we improvements in fuel economy and Low-friction lubricants including low viscosity and advanced low friction have considered in this proposal before reductions in CO2 emissions at highlighting the above-mentioned items reasonable costs in the MYs 2017 to lubricant oils are now available with that are new for this proposal. We 2025 timeframe. The agencies did not improved performance. If manufacturers request comment on all aspects of our consider technologies that are currently choose to make use of these lubricants, analysis as discussed here and detailed in an initial stage of research because of they may need to make engine changes in the draft joint TSD. the uncertainty involved in the and conduct durability testing to availability and feasibility of accommodate the lubricants. The costs 1. What technologies did the Agencies in our analysis consider these engine Consider? implementing these technologies with significant penetration rates for this changes and testing requirements. This For this proposal, the agencies project analysis. The agencies recognize that level of low friction lubricants is that manufacturers can add a variety of due to the relatively long time frame expected to exceed 85 percent technologies to each of their vehicle between the date of this proposal and penetration by the 2017 MY. models and or platforms in order to 2025, it is very possible that new and Reduction of engine friction losses can improve the vehicles’ fuel economy and innovative technologies will make their be achieved through low-tension piston GHG performance. In order to analyze a way into the fleet, perhaps even in rings, roller cam followers, improved variety of regulatory alternative significant numbers, that we have not material coatings, more optimal thermal scenarios, it is essential to have a considered in this analysis. We expect management, piston surface treatments, thorough understanding of the to reconsider such technologies as part and other improvements in the design of technologies available to the of the mid-term evaluation, as engine components and subsystems that manufacturers. This analysis includes appropriate, and possibly could be used improve efficient engine operation. This an assessment of the cost, effectiveness, to generate credits under a number of level of engine friction reduction is availability, development time, and the proposed flexibility and incentive expected to exceed 85 percent manufacturability of various programs provided in the proposed penetration by the 2017 MY. Advanced Low Friction Lubricant and technologies within the normal redesign rules. and refresh periods of a vehicle line (or The technologies considered can be Second Level of Engine Friction in the design of a new vehicle). As we grouped into four broad categories: Reduction are new for this analysis. As describe in the draft Joint TSD, when a Engine technologies; transmission technologies advance between now and technology can be applied can affect the technologies; vehicle technologies (such the rulemaking timeframe, there will be cost as well as the technology as mass reduction, tires and further development in low friction penetration rates (or phase-in caps) that aerodynamic treatments); and lubricants and engine friction are projected in the analysis. electrification technologies (including reductions. The agencies grouped the The agencies considered dozens of hybridization and changing to full development in these two areas into a vehicle technologies that manufacturers electric drive).135 The specific single technology and applied them for could use to improve the fuel economy technologies within each broad group MY 2017 and beyond. Cylinder deactivation disables the and reduce CO2 emissions of their are discussed below. The list of intake and exhaust valves and prevents vehicles during the MYs 2017–2025 technologies presented below is nearly fuel injection into some cylinders timeframe. Many of the technologies identical to that presented in both the during light-load operation. The engine considered are available today, are well MYs 2012–2016 final rule and the 2010 runs temporarily as though it were a known, and could be incorporated into TAR, with the following new smaller engine which substantially vehicles once product development technologies added to the list since the decisions are made. These are ‘‘near- reduces pumping losses. last final rule: The P2 hybrid, a newly Variable valve timing alters the timing term’’ technologies and are identical or emerging hybridization technology that very similar to those anticipated in the of the intake valves, exhaust valves, or was also considered in the 2010 TAR; both, primarily to reduce pumping agencies’ analyses of compliance continued improvements in gasoline strategies for the MYs 2012–2016 final losses, increase specific power, and control residual gases. 135 NHTSA’s analysis considers these 134 ‘‘Assessment of Fuel Economy Technologies technologies in five groups rather than four— Discrete variable valve lift increases for Light-Duty Vehicles,’’ National Research hybridization is one category, and ‘‘electrification/ efficiency by optimizing air flow over a Council of the National Academies, June 2010. accessories’’ is another. broader range of engine operation which

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reduces pumping losses. This is a 24 bar BMEP engine and is an transmissions with fixed transmission accomplished by controlled switching enabling technology for 27 bar BMEP ratios, continuously variable between two or more cam profile lobe engines. transmissions can provide fully variable heights. Diesel engines have several and an infinite number of transmission Continuous variable valve lift is an characteristics that give superior fuel ratios that enable the engine to operate electromechanical or electrohydraulic efficiency, including reduced pumping in a more efficient operating range over system in which valve timing is losses due to lack of (or greatly reduced) a broader range of vehicle operating changed as lift height is controlled. This throttling, high pressure direct injection conditions. The CVT is maintained for yields a wide range of performance of fuel, a combustion cycle that operates existing baseline vehicles and not optimization and volumetric efficiency, at a higher compression ratio, and a very considered for future vehicles in this including enabling the engine to be lean air/fuel mixture relative to an proposal due to the availability of more valve throttled. equivalent-performance gasoline engine. cost effective transmission technologies. Stoichiometric gasoline direct- This technology requires additional Manual 6-speed transmission offers injection technology injects fuel at high enablers, such as a NOx adsorption an additional gear ratio, often with a pressure directly into the combustion catalyst system or a urea/ammonia higher overdrive gear ratio, than a 5- chamber to improve cooling of the air/ selective catalytic reduction system for speed manual transmission. fuel charge as well as combustion control of NOx emissions during lean High Efficiency Gearbox (automatic, quality within the cylinder, which (excess air) operation. DCT or manual)—continuous allows for higher compression ratios improvement in seals, bearings and and increased thermodynamic b. Types of Transmission Technologies clutches, super finishing of gearbox efficiency. Considered parts, and development in the area of Turbo charging and downsizing Improved automatic transmission lubrication, all aimed at reducing increases the available airflow and controls optimize the shift schedule to frictional and other parasitic load in the specific power level, allowing a reduced maximize fuel efficiency under wide system for an automatic or DCT type engine size while maintaining ranging conditions and minimizes transmission. performance. Engines of this type use losses associated with torque converter gasoline direct injection (GDI) and dual slip through lock-up or modulation. The c. Types of Vehicle Technologies cam phasing. This reduces pumping first level of controls is expected to Considered losses at lighter loads in comparison to exceed 85 percent penetration by the Lower-rolling-resistance tires have a larger engine. We continue to include 2017 MY. characteristics that reduce frictional an 18 bar brake mean effective pressure Shift optimization is a strategy losses associated with the energy (BMEP) technology (as in the MYs whereby the engine and/or transmission dissipated mainly in the deformation of 2012–2016 final rule) and are also controller(s) emulates a CVT by the tires under load, thereby improving including both 24 bar BMEP and 27 bar continuously evaluating all possible fuel economy and reducing CO2 BMEP technologies. The 24 bar BMEP gear options that would provide the emissions. New for this proposal (and technology would use a single-stage, necessary tractive power and select the also marking an advance over low variable geometry turbocharger which best gear ratio that lets the engine run rolling resistance tires considered would provide a higher intake boost in the most efficient operating zone. during the heavy duty greenhouse gas pressure available across a broader Six-, seven-, and eight-speed rulemaking, see 76 FR at 57207, 57229) range of engine operation than automatic transmissions are optimized is a second level of lower rolling conventional 18 bar BMEP engines. The by changing the gear ratio span to resistance tires that reduce frictional 27 bar BMEP technology requires enable the engine to operate in a more losses even further. The first level of additional boost and thus would use a efficient operating range over a broader low rolling resistance tires will have 10 two-stage turbocharger necessitating use range of vehicle operating conditions. percent rolling resistance reduction of cooled exhaust gas recirculation While a six speed transmission while the 2nd level would have 20 (EGR) as described below. The 18 bar application was most prevalent for the percent rolling resistance reduction BMEP technology is applied with 33 MYs 2012–2016 final rule, eight speed compared to 2008 baseline vehicle. The percent engine downsizing, 24 bar transmissions are expected to be readily first level of lower rolling resistance BMEP is applied with 50 percent engine available and applied in the MYs 2017 tires is expected to exceed 85 percent downsizing, and 27 bar BMEP is applied through 2025 timeframe. penetration by the 2017 MY. with 56 percent engine downsizing. Dual clutch or automated shift Low-drag brakes reduce the sliding Cooled exhaust-gas recirculation manual transmissions are similar to friction of disc brake pads on rotors (EGR) reduces the incidence of knocking manual transmissions, but the vehicle when the brakes are not engaged combustion with additional charge controls shifting and launch functions. because the brake pads are pulled away dilution and obviates the need for fuel A dual-clutch automated shift manual from the rotors. enrichment at high engine power. This transmission (DCT) uses separate Front or secondary axle disconnect for allows for higher boost pressure and/or clutches for even-numbered and odd- four-wheel drive systems provides a compression ratio and further reduction numbered gears, so the next expected torque distribution disconnect between in engine displacement and both gear is pre-selected, which allows for front and rear axles when torque is not pumping and friction losses while faster and smoother shifting. The 2012– required for the non-driving axle. This maintaining performance. Engines of 2016 final rule limited DCT applications results in the reduction of associated this type use GDI and both dual cam to a maximum of 6-speeds. For this parasitic energy losses. phasing and discrete variable valve lift. proposal we have considered both 6- Aerodynamic drag reduction can be The EGR systems considered in this speed and 8-speed DCT transmissions. achieved via two approaches, either assessment would use a dual-loop Continuously variable transmission reducing the drag coefficients or system with both high and low pressure commonly uses V-shaped pulleys reducing vehicle frontal area. To reduce EGR loops and dual EGR coolers. For connected by a metal belt rather than the drag coefficient, skirts, air dams, this proposal, cooled EGR is considered gears to provide ratios for operation. underbody covers, and more to be a technology that can be added to Unlike manual and automatic aerodynamic side view mirrors can be

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applied. In addition to the standard consists of the IACC technologies and P2 Hybrid is a newly emerging hybrid aerodynamic treatments, the agencies the addition of a mild regeneration technology that uses a transmission have included a second level of strategy and a higher efficiency integrated electric motor placed aerodynamic technologies which could alternator. The first level of IACC between the engine and a gearbox or include active grill shutters, rear visors, improvements is expected to be at more CVT, much like the IMA system and larger under body panels. The first than 85 percent penetration by the described above except with a wet or level of aero dynamic drag improvement 2017MY. dry separation clutch which is used to is estimated to reduce aerodynamic drag 12-volt Stop-Start, sometimes referred decouple the motor/transmission from by 10 percent relative to the baseline to as idle-stop or 12-volt micro hybrid the engine. In addition, a P2 hybrid 2008 vehicle while the second level is the most basic hybrid system that would typically be equipped with a would reduce aero dynamic drag by 20 facilitates idle-stop capability. These larger electric machine. Disengaging the percent relative to 2008 baseline systems typically incorporate an clutch allows all-electric operation and vehicles. The second level of enhanced performance battery and other more efficient brake-energy recovery. aerodynamic technologies was not features such as electric transmission Engaging the clutch allows efficient considered in the MYs 2012–2016 final and cooling pumps to maintain vehicle coupling of the engine and electric rule. systems during idle-stop. motor and, when combined with a DCT Mass Reduction can be achieved in Higher Voltage Stop-Start/Belt transmission, reduces gear-train losses many ways, such as material Integrated Starter Generator (BISG) relative to power-split or 2-mode hybrid substitution, design optimization, part sometimes referred to as a mild hybrid, systems. consolidation, improving manufacturing provides idle-stop capability and uses a 2–Mode Hybrid is a hybrid electric process, etc. The agencies applied mass higher voltage battery with increased drive system that uses an adaptation of reduction of up to 20 percent relative to energy capacity over typical automotive a conventional stepped-ratio automatic MY 2008 levels in this NPRM compared batteries. The higher system voltage transmission by replacing some of the to only 10 percent in 2012–2016 final allows the use of a smaller, more transmission clutches with two electric motors that control the ratio of engine rule. The agencies also determined powerful electric motor. This system effectiveness values for hybrid, plug-in speed to vehicle speed, while clutches replaces a standard alternator with an and electric vehicles based on net mass allow the motors to be bypassed. This enhanced power, higher voltage, higher reduction, or the delta between the improves both the transmission torque efficiency starter-alternator, that is belt applied mass reduction (capped at 20 capacity for heavy-duty applications driven and that can recover braking percent) and the added mass of and reduces fuel consumption and CO energy while the vehicle slows down 2 electrification components. In assessing emissions at highway speeds relative to (regenerative braking). This mild hybrid compliance strategies and in structuring other types of hybrid electric drive technology is not included by either the standards, the agencies only systems. The 2-mode hybrid technology agency as an enabling technology in the considered amounts of vehicle mass is not included by either agency as an analysis supporting this proposal, reduction that would result in what we enabling technology in the analysis estimated to be no adverse effect on although some automakers have supporting this proposal, although it is overall fleet safety. The agencies have expressed interest in possibly using the included as a baseline technology an extensive discussion of mass technology during the rulemaking time because it exists in our 2008 baseline reduction technologies as well as the frame. EPA and NHTSA are providing fleet. cost of mass reduction in chapter 3 of incentives to encourage this and similar Power-split Hybrid is a hybrid electric the draft joint TSD. hybrid technologies on pick-up trucks drive system that replaces the in particular, as described in Section traditional transmission with a single d. Types of Electrification/Accessory II.F, and the agencies are in the process planetary gearset and a motor/generator. and Hybrid Technologies Considered of including this technology for the final This motor/generator uses the engine to Electric power steering (EPS)/Electro- rule analysis as we expand our either charge the battery or supply hydraulic power steering (EHPS) is an understanding of the associated costs additional power to the drive motor. A electrically-assisted steering system that and limitations. second, more powerful motor/generator has advantages over traditional Integrated Motor Assist (IMA)/Crank is permanently connected to the hydraulic power steering because it integrated starter generator (CISG) vehicle’s final drive and always turns replaces a continuously operated provides idle-stop capability and uses a with the wheels. The planetary gear hydraulic pump, thereby reducing high voltage battery with increased splits engine power between the first parasitic losses from the accessory energy capacity over typical automotive motor/generator and the drive motor to drive. Manufacturers have informed the batteries. The higher system voltage either charge the battery or supply agencies that full EPS systems are being allows the use of a smaller, more power to the wheels. The power-split developed for all light-duty vehicles, powerful electric motor and reduces the hybrid technology is not included by including large trucks. However, the weight of the wiring harness. This either agency as an enabling technology agencies have applied the EHPS system replaces a standard alternator in the analysis supporting this proposal, technology to large trucks and the EPS with an enhanced power, higher (the agencies evaluate the P2 hybrid technology to all other light-duty voltage, higher efficiency starter- technology discussed above where vehicles. alternator that is crankshaft mounted power-split hybrids might otherwise Improved accessories (IACC) may and can recover braking energy while have been appropriate) although it is include high efficiency alternators, the vehicle slows down (regenerative included as a baseline technology electrically driven (i.e., on-demand) braking). The IMA technology is not because it exists in our 2008 baseline water pumps and cooling fans. This included by either agency as an fleet. excludes other electrical accessories enabling technology in the analysis Plug-in hybrid electric vehicles such as electric oil pumps and supporting this proposal, although it is (PHEV) are hybrid electric vehicles with electrically driven air conditioner included as a baseline technology the means to charge their battery packs compressors. New for this proposal is a because it exists in our 2008 baseline from an outside source of electricity second level of IACC (IACC2) which fleet. (usually the electric grid). These

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vehicles have larger battery packs with subsequently used in this proposal are of these briefly here and in more detail more energy storage and a greater fundamentally unchanged since the in the draft joint TSD. For the majority capability to be discharged than other MYs 2012–2016 final rule analysis and/ of the other technologies considered in hybrid electric vehicles. They also use or the 2010 TAR. We say this proposal and described above, the a control system that allows the battery ‘‘fundamentally’’ unchanged since the agencies have relied on the 2012–2016 pack to be substantially depleted under basis of the direct manufacturing cost final rule and sources described there electric-only or blended mechanical/ estimates have not changed; however, for estimates of DMC. electric operation and batteries that can the costs have been updated to more be cycled in charge sustaining operation recent dollars, the learning effects have i. Costs from Tear-down Studies at a lower state of charge than is typical resulted in further cost reductions for As a general matter, the agencies of other hybrid electric vehicles. These some technologies, the indirect costs are believe that the best method to derive vehicles are sometimes referred to as calculated using a modified technology cost estimates is to conduct Range Extended Electric Vehicles methodology and the impact of long- studies involving tear-down and (REEV). In this MYs 2017–2025 term ICMs is now present during the analysis of actual vehicle components. analysis, PHEVs with several all-electric rulemaking timeframe. Besides these A ‘‘tear-down’’ involves breaking down ranges—both a 20 mile and a 40 mile changes, there are also some other a technology into its fundamental parts all-electric range—have been included notable changes to the costs used in and manufacturing processes by as potential technologies. previous analyses. We highlight these completely disassembling actual Electric vehicles (EV) are equipped changes in Section II.D.2.a, below. We vehicles and vehicle subsystems and with all-electric drive and with systems highlight the changes to the indirect precisely determining what is required powered by energy-optimized batteries cost methodology and adjustments to for its production. The result of the tear- charged primarily from grid electricity. more recent dollars in Sections II.D.2.b down is a ‘‘bill of materials’’ for each EVs with several ranges—75 mile, 100 and c. Lastly, we present some updated and every part of the relevant vehicle mile and 150 mile range—have been terminology used for our approach to systems. This tear-down method of included as potential technologies. estimating learning effects in an effort to costing technologies is often used by e. Technologies Considered but Deemed eliminate confusion with our past manufacturers to benchmark their ‘‘Not Ready’’ in the MYs 2017–2025 terminology. This is discussed in products against competitive products. Timeframe Section II.D.2.d, below. Historically, vehicle and vehicle The agencies note that the technology component tear-down has not been Fuel cell electric vehicles (FCEVs) costs included in this proposal take into done on a large scale by researchers and utilize a full electric drive platform but account only those associated with the regulators due to the expense required consume electricity generated by an on- initial build of the vehicle. Although for such studies. While tear-down board fuel cell and hydrogen fuel. Fuel comments were received to the MYs studies are highly accurate at costing cells are electro-chemical devices that 2012–2016 rulemaking that suggested technologies for the year in which the directly convert reactants (hydrogen and there could be additional maintenance study is intended, their accuracy, like oxygen via air) into electricity, with the required with some new technologies that of all cost projections, may potential of achieving more than twice (e.g., turbocharging, hybrids, etc.), and diminish over time as costs are the efficiency of conventional internal that additional maintenance costs could extrapolated further into the future combustion engines. High pressure occur as a result, the agencies believe because of uncertainties in predicting gaseous hydrogen storage tanks are used that it is equally possible that commodities (and raw material) prices, by most automakers for FCEVs that are maintenance costs could decrease for labor rates, and manufacturing currently under development. The high some vehicles, especially when practices. The projected costs may be pressure tanks are similar to those used considering full electric vehicles (which higher or lower than predicted. for compressed gas storage in more than lack routine engine maintenance) or the Over the past several years, EPA has 10 million CNG vehicles worldwide, replacement of automatic transmissions contracted with FEV, Inc. and its except that they are designed to operate with simpler dual-clutch transmissions. subcontractor Munro & Associates, to at a higher pressure (350 bar or 700 bar The agencies request comment on the conduct tear-down cost studies for a vs. 250 bar for CNG). While we expect possible maintenance cost impacts number of key technologies evaluated there will be some limited introduction associated with this proposal, by the agencies in assessing the reminding potential commenters that of FCEVs into the market place in the feasibility of future GHG and CAFE increased warranty costs are already time frame of this rule, we expect this standards. The analysis methodology considered as part of the ICMs. introduction to be relatively small, and included procedures to scale the tear- thus FCEVs are not considered in the a. Direct Manufacturing Costs (DMC) down results to smaller and larger modeling analysis conducted for this For direct manufacturing costs (DMC) vehicles, and also to different proposal. technology configurations. FEV’s There are a number of other related to turbocharging, downsizing, methodology was documented in a technologies that the agencies have not gasoline direct injection, transmissions, report published as part of the MY considered in their analysis, but may be as well as non-battery-related costs on 2012–2016 rulemaking, detailing the considered for the final rule. These hybrid, plug-in hybrid and electric costing of the first tear-down conducted include HCCI, ‘‘multi-air’’, and camless vehicles, the agencies have relied on in this work (#1 in the below list).136 valve actuation, and other advanced costs derived from teardown studies. This report was peer reviewed by engines currently under development. For battery related DMC for HEVs, PHEVs and EVs, the agencies have experts in the industry and revised by 2. How did the agencies determine the relied on the BatPaC model developed FEV in response to the peer review costs of each of these technologies? by Argonne National Laboratory for the As noted in the introduction to this Department of Energy. For mass 136 U.S. EPA, ‘‘Light-Duty Technology Cost Analysis Pilot Study,’’ Contract No. EP–C–07–069, section, most of the direct cost estimates reduction DMC, the agencies have relied Work Assignment 1–3, December 2009, EPA–420– for technologies carried over from the on several studies as described in detail R–09–020, Docket EPA–HQ–OAR–2009–0472– MYs 2012–2016 final rule and in the draft Joint TSD. We discuss each 11282.

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comments.137 Subsequent tear-down have been performed thus far on the since both the 2012–2016 final rule and studies (#2–5 in the below list) were technologies listed below. These the 2010 TAR. First, electrified vehicle documented in follow-up FEV reports completed studies provide a thorough technologies are developing rapidly and made available in the public docket for evaluation of the new technologies’ the agencies sought to capture results the MY 2012–2016 rulemaking.138 costs relative to their baseline (or from the most recent analysis. Second, Since then, FEV’s work under this replaced) technologies. the 2012–2016 rule employed a single contract work assignment has 1. Stoichiometric gasoline direct $/kWhr estimate and did not consider continued. Additional cost studies have injection (SGDI) and turbocharging with the specific vehicle and technology been completed and are available for engine downsizing (T–DS) on a DOHC application for the battery when we public review.139 The most extensive (dual overhead cam) I4 engine, estimated the cost of the battery. study, performed after the MY 2012– replacing a conventional DOHC I4 Specifically, batteries used in HEVs 2016 Final Rule, involved whole-vehicle engine. (high power density applications) tear-downs of a 2010 Ford Fusion 2. SGDI and T–DS on a SOHC (single versus EVs (high energy density powersplit hybrid and a conventional overhead cam) on a V6 engine, replacing applications) need to be considered 2010 Ford Fusion. (The latter served as a conventional 3-valve/cylinder SOHC appropriately to reflect the design a baseline vehicle for comparison.) In V8 engine. differences, the chemical material usage addition to providing powersplit HEV 3. SGDI and T–DS on a DOHC I4 differences and differences in $/kWhr as costs, the results for individual engine, replacing a DOHC V6 engine. the power to energy ratio of the battery components in these vehicles were 4. 6-speed automatic transmission changes for different applications. subsequently used by FEV/Munro to (AT), replacing a 5-speed AT. To address these issues for this cost another hybrid technology, the P2 5. 6-speed wet dual clutch proposal, the agencies have done two hybrid, which employs similar transmission (DCT) replacing a 6-speed things. First, EPA has developed a hardware. This approach to costing P2 AT. spreadsheet tool that was used to size hybrids was undertaken because P2 6. 8-speed AT replacing a 6-speed AT. the motor and battery based on the HEVs were not yet in volume 7. 8-speed DCT replacing a 6-speed different road load of various vehicle production at the time of hardware DCT. classes. Second, the agencies have used procurement for tear-down. Finally, an 8. Power-split hybrid (Ford Fusion a battery cost model developed by automotive lithium-polymer battery was with I4 engine) compared to a Argonne National Laboratory (ANL) for torn down and costed to provide conventional vehicle (Ford Fusion with the Vehicle Technologies Program of the supplemental battery costing V6). The results from this tear-down U.S. Department of Energy (DOE) Office information to that associated with the were extended to address P2 hybrids. In of Energy Efficiency and Renewable NiMH battery in the Fusion. This HEV addition, costs from individual Energy.143 The model developed by cost work, including the extension of components in this tear-down study ANL allows users to estimate unique results to P2 HEVs, has been extensively were used by the agencies in developing battery pack costs using user documented in a new report prepared cost estimates for PHEVs and EVs. customized input sets for different by FEV.140 Because of the complexity 9. Mild hybrid with stop-start hybridization applications, such as and comprehensive scope of this HEV technology (Saturn Vue with I4 engine), strong hybrid, PHEV and EV. The DOE analysis, EPA commissioned a separate replacing a conventional I4 engine. has established long term industry goals peer review focused exclusively on it. (Although results from this cost study and targets for advanced battery systems Reviewer comments generally are included in the rulemaking docket, as it does for many energy efficient supported FEV’s methodology and they were not used by the agencies in technologies. ANL was funded by DOE results, while including a number of this rulemaking’s technical analyses.) to provide an independent assessment suggestions for improvement many of 10. Fiat Multi-Air engine technology. of Li-ion battery costs because of ANL’s which were subsequently incorporated (Although results from this cost study expertise in the field as one of the into FEV’s analysis and final report. The are included in the rulemaking docket, primary DOE National Laboratories peer review comments and responses they were not used by the agencies in responsible for basic and applied battery are available in the rulemaking this rulemaking’s technical analyses.) energy storage technologies for future docket.141 142 Items 6 through 10 in the list above HEV, PHEV and EV applications. Since Over the course of this work are new since the 2012–2016 final rule. publication of the 2010 TAR, ANL’s assignment, teardown-based studies In addition, FEV and EPA battery cost model has been peer- extrapolated the engine downsizing reviewed and ANL has updated the 137 FEV pilot study response to peer review costs for the following scenarios that model and documentation to document November 6, 2009, is at EPA–HQ–OAR– 2009–0472–11285. were based on the above study cases: incorporate suggestions from peer- 138 U.S. EPA, ‘‘Light-duty Technology Cost 1. Downsizing a SOHC 2 valve/ reviewers, such as including a battery Analysis—Report on Additional Case Studies,’’ cylinder V8 engine to a DOHC V6. management system, a battery EPA–HQ–OAR–2009–0472–11604. 2. Downsizing a DOHC V8 to a DOHC disconnect unit, a thermal management 139 FEV, Inc., ‘‘Light-Duty Technology Cost V6. 144 Analysis, Report on Additional Transmission, Mild system, etc. In this proposal, NHTSA Hybrid, and Valvetrain Technology Case Studies’’, 3. Downsizing a SOHC V6 engine to and EPA have used the recently revised November 2011. a DOHC 4 cylinder engine. version of this updated model. 140 FEV, Inc., ‘‘Light-Duty Technology Cost 4. Downsizing a DOHC 4 cylinder The agencies are using the ANL Analysis, Power-Split and P2 HEV Case Studies’’, engine to a DOHC 3 cylinder engine. model as the basis for estimating large- EPA–420–R–11–015, November 2011. The agencies have relied on the 141 ICF, ‘‘Peer Review of FEV Inc. Report Light Duty Technology Cost Analysis, Power-Split and P2 findings of FEV for estimating the cost 143 ANL BatPac model Docket number EPA–HQ– Hybrid Case Studies’’, EPA–420–R– of the technologies covered by the tear- OAR–2010–0799. 11–016, November 2011. down studies. 144 Nelson, P.A., Santinit, D.J., Barnes, J. ‘‘Factors 142 FEV and EPA, ‘‘FEV Inc. Report ‘Light Duty Determining the Manufacturing Costs of Lithium- Technology Cost Analysis, Power-Split and P2 ii. Costs of HEV, EV & PHEV Ion Batteries for PHEVs,’’ 24th World Battery, Case Studies’, Peer Review Hybrid and Fuel Cell Electric Vehicle Symposium Report—Response to Comments Document’’, EPA– The agencies have also reevaluated and Exposition EVS–24, Stavenger, , May 420–R–11–017, November 2011. the costs for HEVs, PHEVs, and EVs 13–16, 2009 (www.evs24.org).

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format lithium-ion batteries for this completed in time to inform the final for those technologies equaling or assessment for the following reasons. rule. These studies are discussed in TSD exceeding the averaged RPE for the The model was developed by scientists chapter 3. industry. at ANL who have significant experience There is some level of uncertainty b. Indirect Costs (IC) in this area. The model uses a bill of surrounding both the ICM and RPE materials methodology for developing i. Markup Factors to Estimate Indirect markup factors. The ICM estimates used cost estimates. The ANL model Costs in this proposed action group all appropriately considers the vehicle For this analysis, indirect costs are technologies into four broad categories application’s power and energy estimated by applying indirect cost and treat them as if individual requirements, which are two of the multipliers (ICM) to direct cost technologies within each of the fundamental parameters when estimates. ICMs were derived by EPA as categories (‘‘low’’, ‘‘medium’’, ‘‘high1’’ designing a lithium-ion battery for an a basis for estimating the impact on and ‘‘high2’’ complexity) will have the HEV, PHEV, or EV. The ANL model can indirect costs of individual vehicle same ratio of indirect costs to direct estimate production costs based on user technology changes that would result costs. This simplification means it is defined inputs for a range of production from regulatory actions. Separate ICMs likely that the direct cost for some volumes. The ANL model’s cost were derived for low, medium, and high technologies within a category will be estimates, while generally lower than complexity technologies, thus enabling higher and some lower than the estimate the estimates we received from the estimates of indirect costs that reflect for the category in general. More OEMs, are consistent with some of the the variation in research, overhead, and importantly, the ICM estimates have not supplier cost estimates that EPA other indirect costs that can occur been validated through a direct received from large-format lithium-ion among different technologies. ICMs accounting of actual indirect costs for battery pack manufacturers. This were also applied in the MYs 2012– individual technologies. Rather, the ICM includes data which was received from 2016 rulemaking. estimates were developed using on-site visits done by the EPA in the Prior to developing the ICM adjustment factors developed in two 2008–2011 time frame. Finally, the ANL methodology,145 EPA and NHTSA both separate occasions: the first, a consensus model has been described and presented applied a retail price equivalent (RPE) process, was reported in the RTI report; in the public domain and does not rely factor to estimate indirect costs. RPEs the second, a modified Delphi method, upon confidential business information are estimated by dividing the total was conducted separately and reported (which could not be reviewed by the revenue of a manufacturer by the direct in an EPA memo.146 Both these panels public). manufacturing costs. As such, it were composed of EPA staff members The potential for future reductions in includes all forms of indirect costs for with previous background in the battery cost and improvements in a manufacturer and assumes that the automobile industry; the memberships battery performance relative to current ratio applies equally for all of the two panels overlapped but were batteries will play a major role in technologies. ICMs are based on RPE not identical.147 The panels evaluated determining the overall cost and estimates that are then modified to each element of the industry’s RPE performance of future PHEVs and EVs. reflect only those elements of indirect estimates and estimated the degree to The U.S. Department of Energy manages costs that would be expected to change which those elements would be major battery-related R&D programs and in response to a regulatory-induced expected to change in proportion to partnerships, and has done so for many technology change. For example, changes in direct manufacturing costs. years, including the ANL model utilized warranty costs would be reflected in The method and estimates in the RTI in this report. DOE has reviewed the both RPE and ICM estimates, while report were peer reviewed by three battery cost projections underlying this marketing costs might only be reflected industry experts and subsequently by proposal and supports the use of the in an RPE estimate but not an ICM reviewers for the International Journal ANL model for the purposes of this estimate for a particular technology, if of Production Economics. RPEs rulemaking. the new regulatory-induced technology themselves are inherently difficult to We have also estimated cost change is not one expected to be estimate because the accounting associated with in-home chargers and marketed to consumers. Because ICMs statements of manufacturers do not installation of in-home chargers calculated by EPA are for individual neatly categorize all cost elements as expected to be necessary for PHEVs and technologies, many of which are small either direct or indirect costs. Hence, EVs. Charger costs are covered in more in scale, they often reflect a subset of each researcher developing an RPE detail in chapter 3 of the draft Joint RPE costs; as a result, for low estimate must apply a certain amount of TSD. complexity technologies, the RPE is judgment to the allocation of the costs. Since empirical estimates of ICMs are iii. Mass Reduction Costs typically higher than the ICM. This is not always the case, as ICM estimates ultimately derived from the same data The agencies have revised the costs for particularly complex technologies, used to measure RPEs, this affects both for mass reduction from the MYs 2012– specifically hybrid technologies (for measures. However, the value of RPE 2016 rule and the 2010 Technical near term ICMs), and plug-in hybrid has not been measured for specific Assessment Report. For this proposal, battery and full electric vehicle technologies, or for groups of specific the agencies are relying on a wide technologies (for near term and long technologies. Thus applying a single assortment of sources from the literature term ICMs), reflect higher than average as well as data provided from a number 146 indirect costs, with the resulting ICMs Helfand, Gloria, and Sherwood, Todd. of OEMs. Based on this review, the ‘‘Documentation of the Development of Indirect agencies have estimated a new cost Cost Multipliers for Three Automotive 145 The ICM methodology was developed by RTI Technologies.’’ Memorandum, Assessment and curve such that the costs increase as the International, under contract to EPA. The results of Standards Division, Office of Transportation and levels of mass reduction increase. For the RTI report were published in Alex Rogozhin, Air Quality, U.S. Environmental Protection Agency, the final rule the agencies will consider Michael Gallaher, Gloria Helfand, and Walter August 2009. any new studies that become available, McManus, ‘‘Using Indirect Cost Multipliers to 147 NHTSA staff participated in the development Estimate the Total Cost of Adding New Technology of the process for the second, modified Delphi including two studies that the agencies in the Automobile Industry.’’ International Journal panel, and reviewed the results as they were are sponsoring and expect will be of Production Economics 124 (2010): 360–368. developed, but did not serve on the panel.

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average RPE to any given technology by slightly higher and, importantly, we demand for certain vehicle types. It can definition overstates costs for very have changed the way in which the also be caused by new standards that simple technologies, or understates factors are applied. phase-in at a rate too rapid to them for advanced technologies. The first change—increased ICM accommodate planned replacement or In every recent GHG and fuel factors—has been done as a result of redisposition of existing capital to other economy rulemaking proposal, we have further thought among EPA and NHTSA activities. The lost value of capital requested comment on our ICM factors that the ICM factors presented in the equipment is then amortized in some and whether it is most appropriate to original RTI report for low and medium way over production of the new use ICMs or RPEs. We have generally complexity technologies should no technology components. received little to no comment on the longer be used and that we should rely It is difficult to quantify accurately issue specifically, other than basic solely on the modified-Delphi values for any capital stranding associated with comments that the ICM values are too these complexity levels. For that reason, new technology phase-ins under the low. In addition, in the June 2010 NAS we have eliminated the averaging of proposed standards because of the report, NAS noted that the under the original RTI values with modified- iterative dynamic involved—that is, the initial ICMs, no technology would be Delphi values and instead are relying new technology phase-in rate strongly assumed to have indirect costs as high solely on the modified-Delphi values for affects the potential for additional cost as the average RPE. NRC found that low and medium complexity due to stranded capital, but that ‘‘RPE factors certainly do vary technologies. The second change—the additional cost in turn affects the degree depending on the complexity of the task way the factors are applied—results in and rate of phase-in for other individual of integrating a component into a the warranty portion of the indirect competing technologies. In addition, vehicle system, the extent of the costs being applied as a multiplicative such an analysis is very company-, required changes to other components, factor (thereby decreasing going forward factory-, and manufacturing process- the novelty of the technology, and other as direct manufacturing costs decrease specific, particularly in regard to finding factors. However, until empirical data due to learning), and the remainder of alternative uses for equipment and derived by means of rigorous estimation the indirect costs being applied as an facilities. Nevertheless, in order to methods are available, the committee additive factor (thereby remaining account for the possibility of stranded prefers to use average markup constant year-over-year and not being capital costs, the agencies asked FEV to factors.’’ 148 The committee also stated reduced due to learning). This second perform a separate bounding analysis of that ‘‘The EPA (Rogozhin et al., 2009), change has a comparatively large impact potential stranded capital costs however, has taken the first steps in on the resultant technology costs and, associated with rapid phase-in of attempting to analyze this problem in a we believe, more appropriately technologies due to new standards, way that could lead to a practical estimates costs over time. In addition to using data from FEV’s primary method of estimating technology- these changes, a secondary-level change teardown-based cost analyses.152 specific markup factors’’ where ‘‘this was also made as part of this ICM The assumptions made in FEV’s problem’’ spoke to the issue of recalculation to ICMs. That change was stranded capital analysis with potential estimating technology-specific markup to revise upward the RPE level reported for major impacts on results are: factors and indirect cost multipliers.149 in the original RTI report from an • All manufacturing equipment was The agencies note that, since the original value of 1.46 to 1.5, to reflect bought brand new when the old committee completed their work, EPA the long term average RPE. The original technology started production (no has published its work in the Journal of RTI study was based on 2008 data. carryover of equipment used to make Production Economics 150 and has also However, an analysis of historical RPE the previous components that the old published a memorandum furthering data indicates that, although there is technology itself replaced). the development of ICMs,151 neither of year to year variation, the average RPE • 10-year normal production runs: which the committee had at their has remained roughly constant at 1.5. Manufacturing equipment used to make disposal. Further, having published two ICMs will be applied to future years’ old technology components is straight- final rulemakings—the 2012–2016 light- data and, therefore, NHTSA and EPA line depreciated over a 10-year life. duty rule (see 75 FR 25324) and the staffs believe that it would be • Factory managers do not optimize more recent heavy-duty GHG rule (see appropriate to base ICMs on the capital equipment phase-outs (that is, 76 FR 57106)—as well as the 2010 TAR historical average rather than a single they are assumed to routinely repair and where ICMs served as the basis for all year’s result. Therefore, ICMs have been replace equipment without regard to or most of the indirect costs, EPA adjusted to reflect this average level. whether or not it will soon be scrapped These changes to the ICMs and the believes that ICMs are indeed fully due to adoption of new vehicle methodology are described in greater developed for regulatory purposes. As technology). detail in Chapter 3 of the draft Joint thinking has matured, we have adjusted • Estimated stranded capital is TSD. our ICM factors such that they are amortized over 5 years of annual ii. Stranded Capital production at 450,000 units (of the new 148 NRC, Finding 3–2 at page 3–23. Because the production of automotive technology components). This annual 149 NRC at page 3–19. production is identical to that assumed 150 components is capital-intensive, it is Alex Rogozhin, Michael Gallaher, Gloria in FEV’s primary teardown-based cost Helfand, and Walter McManus, ‘‘Using Indirect possible for substantial capital Cost Multipliers to Estimate the Total Cost of investments in manufacturing analyses. The 5-year recovery period is Adding New Technology in the Automobile equipment and facilities to become chosen to help ensure a conservative Industry.’’ International Journal of Production ‘‘stranded’’ (where their value is lost, or analysis; the actual recovery would of Economics 124 (2010): 360–368. course vary greatly with market 151 Helfand, Gloria, and Sherwood, Todd. diminished). This would occur when ‘‘Documentation of the Development of Indirect the capital is rendered useless (or less conditions. Cost Multipliers for Three Automotive useful) by some factor that forces a Technologies.’’ Memorandum, Assessment and 152 FEV, Inc., ‘‘Potential Stranded Capital Standards Division, Office of Transportation and major change in vehicle design, plant Analysis on EPA Light-Duty Technology Cost Air Quality, U.S. Environmental Protection Agency, operations, or manufacturer’s product Analysis’’, Contract No. EP–C–07–069 Work August 2009. mix, such as a shift in consumer Assignment 3–3. November 2011.

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The stranded capital analysis was NHTSA in applying the results to the The factors used to update costs from performed for three transmission technology costs is described in 2007 and 2008 dollars to 2009 dollars technology scenarios, two engine NHTSA’s preliminary RIA section V. are shown below. For the final rule, we technology scenarios, and one hybrid c. Cost Adjustment to 2009 Dollars are considering moving to 2010 dollars technology scenario. The methodology but, for this analysis, given the timing used by EPA in applying the results to This simple change is to update any of conducting modeling runs and costs presented in earlier analyses to the technology costs is described in developing inputs to those runs, the 2009 dollars using the GDP price Chapter 3.8.7 and Chapter 5.1 of EPA’s factors for converting to 2010 dollars deflator as reported by the Bureau of draft RIA. The methodology used by Economic Analysis on January 27, 2011. were not yet available.

d. Cost Effects Due to Learning curve for newer technologies and ‘‘flat’’ draft Joint TSD. Note that, since the For many of the technologies portion of the curve for more mature agencies had to project how learning considered in this rulemaking, the technologies. The observed will occur with new technologies over agencies expect that the industry should phenomenon in the economic literature a long period of time, we request be able to realize reductions in their which supports manufacturer learning comments on the assumptions of costs over time as a result of ‘‘learning cost reductions are based on reductions learning costs and methodology. In effects,’’ that is, the fact that as in costs as production volumes increase particular, we are interested in input on manufacturers gain experience in with the highest absolute cost reduction the assumptions for advanced 27-bar production, they are able to reduce the occurring with the first doubling of BMEP cooled exhaust gas recirculation cost of production in a variety of ways. production. The agencies use the (EGR) engines, which are currently still The agencies continue to apply learning terminology ‘‘steep’’ and ‘‘flat’’ portion in the experimental stage and not effects in the same way as we did in of the curve to distinguish among newer expected to be available in volume both the MYs 2012–2016 final rule and technologies and more mature production until 2017. For our analysis, in the 2010 TAR. However, we have technologies, respectively, and how we have based estimates of the costs of employed some new terminology in an learning cost reductions are applied in this engine on current (or soon to be effort to eliminate some confusion that cost analyses. current) production technologies (e.g., existed with our old terminology. This Learning impacts have been gasoline direct injection fuel systems, new terminology was described in the considered on most but not all of the engine downsizing, cooled EGR, 18-bar recent heavy-duty GHG final rule (see technologies expected to be used BMEP capable turbochargers), and 76 FR 57320). Our old terminology because some of the expected assumed that, since learning (and the suggested we were accounting for two technologies are already used rather associated cost reductions) begins in completely different learning effects— widely in the industry and, presumably, 2012 for them that it also does for the one based on volume production and quantifiable learning impacts have similar technologies used in 27-bar the other based on time. This was not already occurred. The agencies have BMEP engines. We seek comment on the 153 the case since, in fact, we were actually applied the steep learning algorithm for appropriateness of this assumption. relying on just one learning only a handful of technologies 3. How did the agencies determine the phenomenon, that being the learning- considered to be new or emerging effectiveness of each of these by-doing phenomenon that results from technologies such as PHEV and EV technologies? cumulative production volumes. batteries which are experiencing heavy As a result, the agencies have also development and, presumably, rapid In 2007 EPA conducted a detailed considered the impacts of manufacturer cost declines in coming years. For most vehicle simulation project to quantify learning on the technology cost technologies, the agencies have the effectiveness of a multitude of estimates by reflecting the phenomenon considered them to be more established technologies for the MYs 2012–2016 of volume-based learning curve cost and, hence, the agencies have applied reductions in our modeling using two the lower flat learning algorithm. For 153 EPA notes that our modeling projections for algorithms depending on where in the more discussion of the learning the proposed CO2 standards show a technology penetration rate of 2% in the 2021MY and 5% in learning cycle (i.e., on what portion of approach and the technologies to which the 2025MY for 27-bar BMEP engines and, thus, our the learning curve) we consider a each type of learning has been applied cost estimates are not heavily reliant on this technology to be—‘‘steep’’ portion of the the reader is directed to Chapter 3 of the technology.

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rule (as well as the 2010 NOI). This technology effectiveness estimates, as 2016 final rule, the heavy-duty truck technical work was conducted by the adjusted depending on vehicle subclass, rule (to the extent relevant), and TAR global engineering consulting firm, is an appropriate way of recognizing the for most technologies, although revised Ricardo, Inc. and was peer reviewed and potential variation in the specific costs are used for batteries, mass then published in 2008. For this current benefits that individual manufacturers reduction, transmissions, and a few rule, EPA has conducted another peer (and individual vehicles) might obtain other technologies. Indirect costs are reviewed study with Ricardo to broaden from adding a fuel-saving technology. accounted for by applying near-term the scope of the original project in order E. Joint Economic and Other indirect cost multipliers ranging from to expand the range of vehicle classes Assumptions 1.24 to 1.77 to the estimates of vehicle and technologies considered, consistent manufacturers’ direct costs for with a longer-term outlook through The agencies’ analysis of CAFE and producing or acquiring each technology, model years MYs 2017–2025. The extent GHG standards for the model years depending on the complexity of the of the project was vast, including covered by this proposed rulemaking technology and the time frame over hundreds of thousands of vehicle rely on a range of forecast information, which costs are estimated. These values simulation runs. The results were, in estimates of economic variables, and are reduced to 1.19 to 1.50 over the long turn, employed to calibrate and update input parameters. This section briefly run as some aspects of indirect costs EPA’s lumped parameter model, which describes the agencies’ proposed decline. Indirect cost markup factors is used to quantify the synergies and estimates of each of these values. These have been revised from previous dis-synergies associated with combining values play a significant role in rulemakings and the Interim Joint TAR technologies together for the purposes of assessing the benefits of both CAFE and to reflect the agencies current thinking generating inputs for the agencies GHG standards. regarding a number of issues. These respective OMEGA and CAFE modeling. In reviewing these variables and the changes are discussed in detail in Additionally, there were a number of agencies’ estimates of their values for Section II.D.2 of this preamble and in technologies that Ricardo did not model purposes of this NPRM, NHTSA and Chapter 3 of the draft joint TSD. Details explicitly. For these, the agencies relied EPA reconsidered comments that the of the agencies’ technology cost on a variety of sources in the literature. agencies previously received on both assumptions and how they were derived A few of the values are identical to the Interim Joint TAR and during the can be found in Chapter 3 of the draft those presented in the MYs 2012–2016 MYs 2012–2016 light duty vehicle joint TSD. final rule, while others were updated rulemaking and also reviewed newly • Potential opportunity costs of based on the newer version of the available literature. As a consequence, improved fuel economy—This issue lumped parameter model. More details for today’s proposal, the agencies are addresses the possibility that achieving on the Ricardo simulation, lumped proposing to update some economic the fuel economy improvements parameter model, as well as the assumptions and parameter estimates, required by alternative CAFE or GHG effectiveness for supplemental while retaining a majority of values standards would require manufacturers technologies are described in Chapter 3 consistent with the Interim Joint TAR to compromise the performance, of the draft Joint TSD. and the MYs 2012–2016 final rule. To carrying capacity, safety, or comfort of The agencies note that the review the parameters and assumptions their vehicle models. If it did so, the effectiveness values estimated for the the agencies used in the 2012–2016 final resulting sacrifice in the value of these technologies considered in the modeling rule, please refer to 75 FR 25378 and attributes to consumers would represent analyses may represent average values, Chapter 4 of the Joint Technical Support an additional cost of achieving the and do not reflect the virtually Document that accompanied the final required improvements, and thus of 154 unlimited spectrum of possible values rule. The proposed values manufacturers’ compliance with stricter that could result from adding the summarized below are discussed in standards. Currently the agencies technology to different vehicles. For greater detail in Chapter 4 of the joint project that these vehicle attributes will example, while the agencies have TSD that accompanies this proposal and not change as a result of this rule. estimated an effectiveness of 0.6 to 0.8 elsewhere in the preamble and Section II.C above and Chapter 2 of the percent, depending on the vehicle respective RIAs. The agencies seek draft joint TSD describes how the subclass for low friction lubricants, each comment on all of the assumptions agency carefully selected an attribute- vehicle could have a unique discussed below. based standard to minimize effectiveness estimate depending on the • Costs of fuel economy-improving manufacturers’ incentive to reduce baseline vehicle’s oil viscosity rating. technologies—These inputs are vehicle capabilities. While Similarly, the reduction in rolling discussed in summary form above and resistance (and thus the improvement in manufacturers may choose to do this for in more detail in the agencies’ other reasons, the agencies continue to fuel economy and the reduction in CO2 respective sections of this preamble, in emissions) due to the application of low believe that the rule itself will not result Chapter 3 of the draft joint TSD, and in in such changes. Additionally, EPA and rolling resistance tires depends not only the agencies’ respective RIAs. The on the unique characteristics of the tires NHTSA have sought to include the cost technology direct manufacturing cost of maintaining these attributes as part of originally on the vehicle, but on the estimates used in this analysis are unique characteristics of the tires being the cost estimates for technologies that intended to represent manufacturers’ are included in the cost analysis for the applied, characteristics which must be direct costs for high-volume production balanced between fuel efficiency, safety, proposal. For example, downsized of vehicles with these technologies in engines are assumed to be turbocharged, and performance. Aerodynamic drag the year for which we state the cost is reduction is much the same—it can so that they provide the same considered ‘‘valid.’’ Technology direct performance and utility even though improve fuel economy and reduce CO2 manufacturing cost estimates are they are smaller.155 Nonetheless, it is emissions, but it is also highly fundamentally unchanged from those dependent on vehicle-specific employed by the agencies in the 2012– 155 The agencies do not believe that adding fuel- functional objectives. For purposes of saving technology should preclude future the proposal, NHTSA and EPA believe 154 See http://www.epa.gov/otaq/climate/ improvements in performance, safety, or other that employing average values for regulations/420r10901.pdf. attributes, though it is possible that the costs of

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possible that in some cases, the well as data derived from the 2006 EPA first five years of a new vehicle’s technology cost estimates may not fuel economy label rule, the agencies lifetime, and that buyers discount the include adequate allowance for the use a 30 percent gap for consumption of value of these future fuel savings. The necessary efforts by manufacturers to wall electricity for electric vehicles and five-year figure represents the current maintain vehicle acceleration plug-in hybrid electric vehicles.157 average term of consumer loans to performance, payload, or utility while • Fuel prices and the value of saving finance the purchase of new vehicles. improving fuel economy and reducing fuel—Projected future fuel prices are a • Vehicle sales assumptions—The GHG emissions. As described in Section critical input into the preliminary first step in estimating lifetime fuel III.D.3 and Section IV.G, there are two economic analysis of alternative consumption by vehicles produced possible exceptions in cases where some standards, because they determine the during a model year is to calculate the vehicle types are converted to hybrid or value of fuel savings both to new number that are expected to be full electric vehicles (EVs), but, in such vehicle buyers and to society, and fuel produced and sold. The agencies relied cases, we believe that sufficient options savings account for the majority of the on the AEO 2011 Reference Case for would exist for consumers concerned proposed rule’s estimated benefits. For forecasts of total vehicle sales, while the about the possible loss of utility (e.g., this proposed rule, the agencies are baseline market forecast developed by using the most recent fuel price they would purchase the non- the agencies (discussed in Section II.B projections from the U.S. Energy hybridized version of the vehicle or not and in Chapter 1 of the TSD) divided Information Administration’s (EIA) buy an EV) that welfare loss should not total projected sales into sales of cars Annual Energy Outlook (AEO) 2011 necessarily be assumed. Although and light trucks. reference case forecast. The forecasts of consumer vehicle demand models can • measure these effects, past analyses fuel prices reported in EIA’s AEO 2011 Vehicle lifetimes and survival using such models have not produced extend through 2035. Fuel prices rates—As in the 2012–2016 final rule consistent estimates of buyers’ beyond the time frame of AEO’s forecast and Interim Joint TAR, we apply willingness-to-pay for higher fuel were estimated using an average growth updated values of age-specific survival economy, and it is difficult to decide rate for the years 2017–2035 to each rates for cars and light trucks to adjusted whether one data source, model year after 2035. This is the same forecasts of passenger car and light truck specification, or estimation procedure is methodology used by the agencies in the sales to determine the number of these clearly preferred over another. Thus, the 2012–2016 rulemaking, in the heavy vehicles expected to remain in use agencies seek comment on how to duty truck and engine rule (76 FR during each year of their lifetimes. estimate explicitly the changes in 57106), and in the Interim Joint TAR. These values remain unchanged from vehicle buyers’ choices and welfare For example, these forecasts of gasoline prior analyses. from the combination of higher prices fuel prices in 2009$ include $3.25 per • Vehicle miles traveled—We for new vehicle models, increases in gallon in 2017, $3.39 in 2021 and $3.71 calculated the total number of miles that their fuel economy, and any in 2035. Extrapolating as described cars and light trucks produced in each accompanying changes in vehicle above, retail gasoline prices reach $4.16 model year will be driven during each attributes such as performance, per gallon in 2050 (measured in year of their lifetimes using estimates of passenger- and cargo-carrying capacity, constant 2009 dollars). As discussed in annual vehicle use by age tabulated or other dimensions of utility. Chapter 4 of the draft Joint TSD, while from the Federal Highway • The on-road fuel economy ‘‘gap’’— the agencies believe that EIA’s AEO Administration’s 2001 National Actual fuel economy levels achieved by reference case generally represents a Household Travel Survey (NHTS),158 light-duty vehicles in on-road driving reasonable forecast of future fuel prices adjusted to account for the effects on fall somewhat short of their levels for purposes of use in our analysis of the vehicle use of subsequent increases in measured under the laboratory test benefits of this rule, we recognize that fuel prices. In order to insure that the conditions used by EPA to establish there is a great deal of uncertainty in resulting mileage schedules imply compliance with the proposed CAFE any such forecast that could affect our reasonable estimates of future growth in and GHG standards. The modeling estimates. The agencies request total car and light truck use, we approach in this proposal follows the comment on how best to account for calculated the rate of future growth in 2012–2016 final rule and the Interim uncertainty in future fuel prices. annual mileage at each age that would • Joint TAR. In calculating benefits of the Consumer valuation of fuel be necessary for total car and light truck program, the agencies estimate that economy and payback period—In travel to increase at the rates forecast in actual on-road fuel economy attained by estimating the value of fuel economy the AEO 2011 Reference Case. The light-duty vehicles that operate on improvements to potential vehicle growth rate in average annual car and liquid fuels will be 20 percent lower buyers that would result from light truck use produced by this than published fuel economy ratings for alternative CAFE and GHG standards, calculation is approximately 1 percent vehicles that operate on liquid fuels. For the agencies assume that buyers value per year through 2030 and 0.5 percent example, if the measured CAFE fuel the resulting fuel savings over only part thereafter. We applied these growth economy value of a light truck is 20 of the expected lifetimes of the vehicles rates applied to the mileage figures mpg, the on-road fuel economy actually they purchase. Specifically, we assume derived from the 2001 NHTS to estimate achieved by a typical driver of that that buyers value fuel savings over the annual mileage by vehicle age during vehicle is expected to be 16 mpg each year of the expected lifetimes of 156 157 (20*.80). Based on manufacturer See 71 FR at 77887, and U.S. Environmental MY 2017–2025 vehicles. A similar confidential business information, as Protection Agency, Final Technical Support Document, Fuel Economy Labeling of Motor approach to estimating future vehicle Vehicle Revisions to Improve Calculation of Fuel use was used in the 2012–2016 final these additions may be affected by the presence of Economy Estimates, EPA420–R–06–017, December rule and Interim Joint TAR, but the fuel-saving technology. 2006 for general background on the analysis. See 156 U.S. Environmental Protection Agency, Final also EPA’s Response to Comments (EPA–420–R– Technical Support Document, Fuel Economy 11–005) to the 2011 labeling rule, page 189, first 158 For a description of the Survey, see http:// Labeling of Motor Vehicle Revisions to Improve paragraph, specifically the discussion of the derived www.bts.gov/programs/ Calculation of Fuel Economy Estimates, EPA420–R– five cycle equation and the non-linear adjustment national_household_travel_survey/ (last accessed 06–017, December 2006. with increasing MPG. Sept. 9, 2011).

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future growth rates in average vehicle facilities that are already heavily estimated to result from this program use have been revised for this proposal. traveled. These added delays impose exclude the value of this monopsony • Accounting for the rebound effect of higher costs on drivers and other effect. In contrast, the macroeconomic higher fuel economy—The rebound vehicle occupants in the form of disruption and adjustment costs that effect refers to the increase in vehicle increased travel time and operating arise from sudden reductions in the use that results if an increase in fuel expenses. At the same time, this travel supply of imported oil to the U.S. do not efficiency lowers the cost of driving. For also increases costs associated with have offsetting impacts outside of the purposes of this NPRM, the agencies traffic accidents, and increased traffic U.S., so the estimated reduction in their elected to continue to use a 10 percent noise. The agencies rely on estimates of expected value stemming from reduced rebound effect in their analyses of fuel congestion, accident, and noise costs U.S. petroleum imports is included in savings and other benefits from higher caused by automobiles and light trucks the energy security benefits estimated standards, consistent with the 2012– developed by the Federal Highway for this program. U.S. military costs are 2016 light-duty vehicle rulemaking and Administration to estimate these excluded from the analysis because the Interim Joint TAR. That is, we increased external costs caused by their attribution to particular missions 159 assume a 10 percent decrease in fuel added driving. This method is or activities is difficult. Also, historical cost per mile resulting from our consistent with the 2012–2016 final variation in U.S. military costs have not proposed standards would result in a 1 rule. been associated with changes in U.S. percent increase in the annual number • Petroleum consumption and import petroleum imports, although we of miles driven at each age over a externalities—U.S. consumption of recognize that more broadly, there may vehicle’s lifetime. In Chapter 4 of the imported petroleum products also be significant (if unquantifiable) benefits joint TSD, we provide a detailed impose costs on the domestic economy in improving national security by explanation of the basis for our rebound that are not reflected in the market price reducing oil imports. Similarly, since estimate, including a summary of new for crude petroleum, or in the prices literature published since the 2012– paid by consumers of petroleum the size or other factors affecting the 2016 rulemaking that lends further products such as gasoline. These costs cost of maintaining the SPR historically support to the 10 percent rebound include (1) higher prices for petroleum have not varied in response to changes estimate. We also refer the reader to products resulting from the effect of in U.S. oil import levels, changes in the Chapters X and XII of NHTSA’s PRIA increased U.S. demand for imported oil costs of the SPR are excluded from the and Chapter 4 of the EPA DRIA that on the world oil price (‘‘monopsony estimates of the energy security benefits accompanies this preamble for costs’’); (2) the expected costs associated of the program. To summarize, the sensitivity and uncertainty analyses of with the risk of disruptions to the U.S. agencies have included only the alternative rebound assumptions. economy caused by sudden reductions macroeconomic disruption and • Benefits from increased vehicle in the supply of imported oil to the U.S.; adjustment costs portion of the energy use—The increase in vehicle use from and (3) expenses for maintaining a U.S. security benefits to estimate the the rebound effect provides additional military presence to secure imported oil monetary value of the total energy benefits to drivers, who may make more supplies from unstable regions, and for security benefits of this program. Based frequent trips or travel farther to reach maintaining the strategic petroleum on a recent update of an earlier peer- more desirable destinations. This reserve (SPR) to cushion the U.S. reviewed Oak Ridge National Laboratory additional travel provides benefits to economy against the effects of oil study that was used in support of the drivers and their passengers by supply disruptions.160 Although the both the 2012–2016 light duty vehicle improving their access to social and reduction in the global price of and the 2014–2018 medium- and heavy- economic opportunities away from petroleum and refined products due to duty vehicle rulemaking, we estimate home. The analysis estimates the decreased demand for fuel in the U.S. that each gallon of fuel saved will economic benefits from increased resulting from this rule represents a reduce the expected macroeconomic rebound-effect driving as the sum of the benefit to the U.S. economy, it disruption and adjustment costs of fuel costs they incur in that additional simultaneously represents an economic sudden reductions in the supply of travel plus the consumer surplus drivers loss to other countries that produce and imported oil to the U.S. economy by receive from the improved accessibility sell oil or petroleum products to the $0.185 (2009$) in 2025. Each gallon of their travel provides. As in the 2012– U.S. Recognizing the redistributive fuel saved as a consequence of higher 2016 final rule we estimate the nature of this ‘‘monopsony effect’’ when standards is anticipated to reduce total economic value of this consumer viewed from a global perspective (which U.S. imports of crude petroleum or surplus using the conventional is consistent with the agencies’ use of a refined fuel by 0.95 gallons.161 The approximation, which is one half of the global estimate for the social cost of energy security analysis conducted for product of the decline in vehicle carbon to value reductions in CO2 this proposal also estimates that the operating costs per vehicle-mile and the emissions, the energy security benefits world price of oil will fall modestly in resulting increase in the annual number response to lower U.S. demand for of miles driven. 159 These estimates were developed by FHWA for refined fuel.162 163 The energy security • Added costs from congestion, use in its 1997 Federal Highway Cost Allocation Study; http://www.fhwa.dot.gov/policy/hcas/final/ accidents, and noise—Although it 161 index.htm (last accessed Sept. 9, 2011). Each gallon of fuel saved is assumed to reduce provides benefits to drivers as described 160 See, e.g., Bohi, Douglas R. and W. David imports of refined fuel by 0.5 gallons, and the above, increased vehicle use associated Montgomery (1982). Oil Prices, Energy Security, volume of fuel refined domestically by 0.5 gallons. with the rebound effect also contributes and Import Policy Washington, DC: Resources for Domestic fuel refining is assumed to utilize 90 percent imported crude petroleum and 10 percent to increased traffic congestion, motor the Future, Johns Hopkins University Press; Bohi, D. R., and M. A. Toman (1993). ‘‘Energy and domestically-produced crude petroleum as vehicle accidents, and highway noise. Security: Externalities and Policies,’’ Energy Policy feedstocks. Together, these assumptions imply that Depending on how the additional travel 21:1093–1109; and Toman, M. A. (1993). ‘‘The each gallon of fuel saved will reduce imports of is distributed over the day and where it Economics of Energy Security: Theory, Evidence, refined fuel and crude petroleum by 0.50 gallons + 0.50 gallons*90 percent = 0.50 gallons + 0.45 takes place, additional vehicle use can Policy,’’ in A. V. Kneese and J. L. Sweeney, eds. (1993). Handbook of Natural Resource and Energy gallons = 0.95 gallons. contribute to traffic congestion and Economics, Vol. III. Amsterdam: North-Holland, pp. 162 Leiby, Paul. Oak Ridge National Laboratory. delays by increasing traffic volumes on 1167–1218. ‘‘Approach to Estimating the Oil Import Security

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methodology used in this proposal is one ton of directly emitted PM2.5, or one year. It is intended to include (but is not the same as that used by the agencies in ton of other pollutants that contribute to limited to) changes in net agricultural both the 2012–2016 light duty vehicle atmospheric levels of PM2.5 (such as productivity, human health, property and 2014–2018 medium- and heavy- NOX, SOX, and VOCs), from a specified damages from increased flood risk, and duty vehicle rulemakings. In those source. These unit values remain the value of ecosystem services due to rulemakings, the agencies addressed unchanged from the 2012–2016 final climate change.’’ 166 Published estimates comments about the magnitude of their rule, and the agencies received no of the SCC vary widely as a result of energy security estimates and significant adverse comment on the uncertainties about future economic methodological issues such as whether analysis. Note that the agencies’ analysis growth, climate sensitivity to GHG to include the monopsony benefits in includes no estimates of the direct emissions, procedures used to model energy security calculations. health or other benefits associated with the economic impacts of climate change, • Air pollutant emissions— reductions in emissions of criteria and the choice of discount rates.167 The Æ Impacts on criteria air pollutant pollutants other than PM2.5. SCC estimates used in this analysis were emissions—Criteria air pollutants Æ Impacts on greenhouse gas (GHG) developed through an interagency emitted by vehicles and during fuel emissions—NHTSA estimates process that included EPA, DOT/ production and distribution include reductions in emissions of carbon NHTSA, and other executive branch carbon monoxide (CO), hydrocarbon dioxide (CO2) from passenger car and entities, and concluded in February compounds (usually referred to as light truck use by multiplying the 2010. We first used these SCC estimates ‘‘volatile organic compounds,’’ or VOC), estimated reduction in consumption of in the benefits analysis for the 2012– nitrogen oxides (NOX), fine particulate fuel (gasoline and diesel) by the 2016 light-duty vehicle rulemaking. We matter (PM2.5), and sulfur oxides (SOX). quantity or mass of CO2 emissions have continued to use these estimates in Although reductions in domestic fuel released per gallon of fuel consumed. other rulemaking analyses, including refining and distribution that result EPA directly calculates reductions in the Greenhouse Gas Emission Standards from lower fuel consumption will total CO2 emissions from the projected and Fuel Efficiency Standards for reduce U.S. emissions of these reductions in CO2 emissions by each Medium- and Heavy-Duty Engines and pollutants, additional vehicle use vehicle subject to the proposed rule.164 Vehicles (76 FR 57106, p. 57332) . The associated with the rebound effect, and Both agencies also calculate the impact SCC Technical Support Document (SCC additional electricity production will on CO2 emissions that occur during fuel TSD) provides a complete discussion of increase emissions. Thus the net effect production and distribution resulting the methods used to develop these SCC estimates. of stricter standards on emissions of from lower fuel consumption, as well as • each criteria pollutant depends on the the emission impacts due to changes in The value of changes in driving range—By reducing the frequency with relative magnitudes of reduced electricity production. Although CO2 emissions from fuel refining and emissions account for nearly 95 percent which drivers typically refuel their distribution, and increases in emissions of total GHG emissions that result from vehicles, and by extending the upper resulting from added vehicle use. The fuel combustion during vehicle use, limit of the range they can travel before agencies’ analysis assumes that the per- emissions of other GHGs are potentially requiring refueling, improving fuel mile emission rates for cars and light significant as well because of their economy and reducing GHG emissions trucks produced during the model years higher ‘‘potency’’ as GHGs than that of provides additional benefits to their owners. The primary benefits from the affected by the proposed rule will CO itself. EPA and NHTSA therefore 2 reduction in the number of required remain constant at the levels resulting also estimate the change in upstream refueling cycles are the value of time from EPA’s Tier 2 light duty vehicle and downstream emissions of non-CO 2 saved to drivers and other adult vehicle emissions standards. The agencies’ GHGs that occur during the occupants, as well as the savings to approach to estimating criteria air aforementioned processes due to their owners in terms of the cost of the fuel pollutant emissions is consistent with respective standards.165 The agencies that would have otherwise been the method used in the 2012–2016 final approach to estimating GHG emissions consumed in transit during those (now rule (where the agencies received no is consistent with the method used in no longer required) refueling trips. significant adverse comments), although the 2012–2016 final rule and the Interim Using recent data on vehicle owners’ the agencies employ a more recent Joint TAR. Æ refueling patterns gathered from a version of the EPA’s MOVES (Motor Economic value of reductions in survey conducted by the National Vehicle Emissions Simulator) model. CO2 emissions—EPA and NHTSA Æ Automotive Sampling System (NASS), Economic value of reductions in assigned a dollar value to reductions in NHTSA was able to better estimate criteria pollutant emissions—For the CO2 emissions using recent estimates of parameters associated with refueling purpose of the joint technical analysis, the ‘‘social cost of carbon’’ (SCC) trips. NASS data provided NHTSA with EPA and NHTSA estimate the economic developed by a federal interagency value of the human health benefits group that included the two agencies. 166 SCC TSD, see page 2. Docket ID EPA–HQ– associated with reducing population As that group’s report observed, ‘‘The OAR–2009–0472–114577, Technical Support exposure to PM2.5 using a ‘‘benefit-per- SCC is an estimate of the monetized Document: Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866, ton’’ method. These PM2.5-related damages associated with an incremental Interagency Working Group on Social Cost of benefit-per-ton estimates provide the increase in carbon emissions in a given Carbon, with participation by Council of Economic total monetized benefits to human Advisers, Council on Environmental Quality, 164 health (the sum of reductions in The weighted average CO2 content of Department of Agriculture, Department of premature mortality and premature certification gasoline is estimated to be 8,887 grams Commerce, Department of Energy, Department of per gallon, while that of diesel fuel is estimated to Transportation, Environmental Protection Agency, morbidity) that result from eliminating be approximately 10,200 grams per gallon. National Economic Council, Office of Energy and 165 There is, however, an exception. NHTSA does Climate Change, Office of Management and Budget, Premium for the MY 2017–2025 Light Duty Vehicle not and cannot claim benefit from reductions in Office of Science and Technology Policy, and Proposal’’ 2011. downstream emissions of HFCs because they do not Department of Treasury (February 2010). Also 163 Note that this change in world oil price is not relate to fuel economy, while EPA does because all available at http://epa.gov/otaq/climate/ reflected in the AEO projections described earlier GHGs are relevant for purposes of EPA’s Clean Air regulations.htm in this section. Act standards. 167 SCC TSD, see pages 6–7.

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the ability to estimate the average time expresses the percent decline in the a range of assumptions about each of required for a refueling trip, the average value of these future fuel-savings and these inputs, and present these time and distance drivers typically other benefits—as viewed from today’s sensitivity analyses in their respective travel out of their way to reach fueling perspective—for each year they are RIAs. For example, NHTSA conducted stations, the average number of adult deferred into the future. In evaluating separate sensitivity analyses for, among vehicle occupants, the average quantity the non-climate related benefits of the other things, discount rates, fuel prices, of fuel purchased, and the distribution final standards, the agencies have the social cost of carbon, the rebound of reasons given by drivers for refueling. employed discount rates of both 3 effect, consumers’ valuation of fuel From these estimates, NHTSA percent and 7 percent, consistent with economy benefits, battery costs, mass constructed an updated set of economic the 2012–2016 final rule and OMB reduction costs, the value of a statistical assumptions to update those used in the Circular A–4 guidance. life, and the indirect cost markup factor. 2012–2016 FRM in calculating For the reader’s reference, Table II–8 This list is similar in scope to the list refueling-related benefits. The 2012– and Table II–9 below summarize the that was examined in the MY 2012– 2016 FRM discusses NHTSA’s intent to values used to calculate the impacts of utilize the NASS data on refueling trip each proposed standard. The values 2016 final rule, but includes battery characteristics in future rulemakings. presented in this table are summaries of costs and mass reduction costs, while While the NASS data improve the the inputs used for the models; specific dropping military security and precision of the inputs used in the values used in the agencies’ respective monopsony costs. NHTSA’s sensitivity analysis of the benefits resulting from analyses may be aggregated, expanded, analyses are contained in Chapter X of fewer refueling cycles, the framework of or have other relevant adjustments. See NHTSA’s PRIA. EPA conducted the analysis remains essentially the Joint TSD 4 and each agency’s sensitivity analyses on the rebound same as in the 2012–2016 final rule. respective RIA for details. The agencies effect, battery costs, mass reduction Note that this topic and associated seek comment on the economic costs, the indirect cost markup factor benefits were not covered in the Interim assumptions presented in the table. and on the cost learning curves used in Joint TAR. Detailed discussion and In addition, the agencies analyzed the this analysis. These analyses are found examples of the agencies’ approach are sensitivity of their estimates of the in Chapters 3 and 4 of the EPA DRIA. provided in Chapter VIII of NHTSA’s benefits and costs associated with this In addition, NHTSA performs a PRIA and Chapter 8 of EPA’s DRIA. proposed rule to variation in the values • probabilistic uncertainty analysis Discounting future benefits and of many of these economic assumptions examining simultaneous variation in the costs—Discounting future fuel savings and other inputs. The values used in major model inputs including and other benefits is intended to these sensitivity analyses and their technology costs, technology benefits, account for the reduction in their value results are presented their agencies’ to society when they are deferred until fuel prices, the rebound effect, and respective RIAs. A wide range of military security costs. This information some future date, rather than received estimates is available for many of the immediately.168 The discount rate is provided in Chapter XII of NHTSA’s primary inputs that are used in the PRIA. These uncertainty parameters are agencies’ CAFE and GHG emissions 168 consistent with those used in the MY Because all costs associated with improving models. The agencies recognize that vehicles’ fuel economy and reducing CO2 emissions 2012–2016 final rule. The agencies will each of these values has some degree of are assumed to be incurred at the time they are consider conducting additional produced, these costs are already expressed in their uncertainty, which the agencies further present values as of each model year affected by the discuss in the draft Joint TSD. The sensitivity and uncertainty analyses for proposed rule, and require discounting only for the the final rule as appropriate. purpose of expressing them as present values as of agencies have tested the sensitivity of a common year. their estimates of costs and benefits to BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C 2016, nor to allow any compliance with are part of EPA’s CO2 equivalent

F. Air Conditioning Efficiency CO2 the CAFE program as a result of calculation) in Section III.C below. Credits and Fuel Consumption reductions in direct A/C emissions EPA, in coordination with NHTSA, is Improvement Values, Off-cycle resulting from leakage of HFCs from air also proposing to add for MYs 2017– Reductions, and Full-size Pickup Trucks conditioning systems, which remains a 2025 a new incentive for Advanced flexibility unique to the GHG program. Technology for Full Sized Pickup For MYs 2012–2016, EPA provided an The agencies believe that because of Trucks. Under its EPCA authority for option for manufacturers to generate the significant amount of credits and CAFE and under its CAA authority for credits for complying with GHG fuel consumption improvement values GHGs, EPA is proposing GHG credits standards by incorporating efficiency offered under the A/C program (up to and fuel economy improvement values improving vehicle technologies that 5.0 g/mi for cars and 7.2 g/mi for trucks for manufacturers that hybridize a would reduce CO2 and fuel which is equivalent to a fuel significant quantity of their full size consumption from air conditioning (A/ consumption improvement value of pickup trucks, or that use other C) operation or from other vehicle 0.000563 gal/mi for cars and 0.000586 technologies that significantly reduce operation that is not captured by the gal/mi for trucks) that manufacturers CO2 emissions and fuel consumption. Federal Test Procedure (FTP) and will maximize the benefits these credits Further discussions of the A/C, off- Highway Fuel Economy Test (HFET), and fuel consumption improvement cycle, and the advanced technology for also collectively known as the ‘‘two- values afford. Consistent with the 2012– pick-up truck incentive programs are cycle’’ test procedure. EPA referred to 2016 final rule, EPA will continue to provided below. these credits as ‘‘off-cycle credits.’’ adjust the stringency of the two-cycle 1. Proposed Air Conditioning CO2 For this proposal, EPA, in tailpipe CO2 standards in order to coordination with NHTSA, is proposing account for this projected widespread Credits and Fuel Consumption under their EPCA authorities to allow penetration of A/C credits (as described Improvement Values manufacturers to generate fuel more fully in Section III.C), and NHTSA The credits/fuel consumption consumption improvement values for has also accounted for expected A/C improvement values for higher- purposes of CAFE compliance based on efficiency improvements in determining efficiency air conditioning technologies the use of A/C efficiency and off-cycle the maximum feasible CAFE standards. are very similar to those EPA included technologies. This proposed expansion The agencies discuss these proposed in the 2012–2016 GHG final rule. The is a change from the 2012–16 final rule CO2 credits/fuel consumption proposed credits/fuel consumption where EPA only provided the A/C improvement values below and in more improvement values represent an efficiency and off-cycle credits for the detail in the Joint TSD (Chapter 5). EPA improved understanding of the GHG program. EPA is not proposing to discusses additional proposed GHG A/ relationships between A/C technologies allow these increases for compliance C leakage credits that are unrelated to and CO2 emissions and fuel with the CAFE program for MYs 2012– CO2 and fuel consumption (though they consumption. Much of this

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understanding results from a new conditioning usage through the test that EPA used for efficiency credits in vehicle simulation tool that EPA has cycle. The SC03 test is designed to the MY2012–2016 GHG rule. However developed and the agencies are using for identify any effect the air conditioning for MYs 2017–2025, EPA is proposing a this proposal. EPA designed this model system has on other emissions when it new test procedure to demonstrate the to simulate in an integrated way the is operating under extreme conditions, effectiveness of A/C efficiency dynamic behavior of the several key but is not designed to measure the small technologies and credits as described systems that affect vehicle efficiency: differences in CO2 due to different A/C below. For MYs 2014–2016, EPA The engine, electrical, transmission, and technologies. requests comment on substituting the vehicle systems. The simulation model At the time of the final rule for the Idle Test requirement with a reporting is supported by data from a wide range 2012–2016 GHG program, EPA requirement from this new test of sources; Chapter 2 of the Draft concluded that a practical, performance- procedure as described in Section Regulatory Impact Analysis discusses its based test procedure capable of III.C.1.b.i below. development in more detail. quantifying efficiency credits was not In order to correct the shortcomings of The agencies have identified several yet available. However, EPA introduced the available tests, EPA has developed technologies that are key to the amount a specialized new procedure that it a four-part performance test, called the of fuel a vehicle consumes and thus the believed would be appropriate for the AC17. The test includes the SC03 amount of CO2 it emits. Most of these more limited purpose of demonstrating driving cycle, the fuel economy technologies already exist on current that the design improvements for which highway cycle, in addition to a pre- vehicles, but manufacturers can a manufacturer was earning credits conditioning cycle, and a solar soak improve the energy efficiency of the produced actual efficiency period. EPA is proposing that technology designs and operation. For improvements. EPA’s test is a fairly manufacturers use this test to example, most of the additional air simple test, performed while the vehicle demonstrate that new or improved A/C conditioning related load on an engine is at idle. Beginning with the 2014 technologies actually result in efficiency is due to the compressor which pumps model year, the A/C Idle Test was to be improvements. Since the the refrigerant around the system loop. used to qualify a manufacturer to be appropriateness of the test is still being The less the compressor operates, the able to use the technology lookup table evaluated, EPA proposes that less load the compressor places on the (‘‘menu’’) approach to quantify credits. manufacturers continue to use the menu engine resulting in less fuel That is, a manufacturer would need to to determine credits and fuel consumption and CO2 emissions. Thus, achieve a certain CO2 level on the Idle consumption improvement values for optimizing compressor operation with Test in order to access the ‘‘menu’’ and the GHG and CAFE programs. This cabin demand using more sophisticated generate GHG efficiency credits. design-based approach would assign sensors, controls and control strategies, Since that final rule was published, CO2 credit to each efficiency-improving is one path to improving the overall several manufacturers have provided air conditioning technology that the efficiency of the A/C system. Additional data that raises questions about the manufacturer incorporates in a vehicle components or control strategies are ability of the Idle Test to fulfill its model. The sum of these values for all available to manufacturers to reduce the intended purpose. Especially for small, technologies would be the amount of air conditioning load on the engine lower-powered vehicles, the data also CO2 credit generated by that vehicle, up which are discussed in more detail in shows that it is difficult to achieve to a maximum of 5.0 g/mi for car and Chapter 5 of the joint TSD. Overall, the reasonable test-to-test repeatability. The 7.2 g/mi for trucks. As stated above, this agencies have concluded that these manufacturers have also informed EPA is equivalent to a fuel consumption improved technologies could together (in meetings subsequent to the 2012– value of 0.000563 gallons/mi for cars reduce A/C-related CO2 and fuel 2016 final rule) that the Idle Test does and 0.000586 gallons/mi for trucks. EPA consumption of today’s typical air not accurately capture the will consult with NHTSA on the conditioning systems by 42%. The improvements from many of the amount of fuel consumption agencies propose to use this level of technologies listed in the menu. EPA improvement value manufacturers may improvement to represent the maximum has been aware of all of these issues, factor into their CAFE calculations if efficiency credit available to a and proposing to modify the Idle Test there are adjustments that may be manufacturer. such that the threshold would be a required in the future. Table II–10 Demonstrating the degree of efficiency function of engine displacement, in presents the proposed CO2 credit and improvement that a manufacturer’s air contrast to the flat threshold from the CAFE fuel consumption improvement conditioning systems achieve—thus previous rule. EPA continues to values for each of the efficiency- quantifying the appropriate amount of consider this Idle Test to be a reasonable reducing air conditioning technologies GHG credit and CAFE fuel consumption measure of some A/C CO2 emissions as considered in this rule. More detail is improvement value the manufacturer is there is significant real-world driving provided on the calculation of indirect eligible for—would ideally involve a activity at idle, and the Idle Test A/C CAFE fuel consumption performance test. That is, a test that significantly exercises a number of the improvement values in chapter 5 of the would directly measure CO2 (and thus A/C technologies from the menu. Sec TSD. EPA is proposing very specific allow calculation of fuel consumption) III.C.1.b.i below and Chapter 5 (5.1.3.5) definitions of each of the technologies before and after the incorporation of the of the Joint TSD describe further the in the table below which are discussed improved technologies. Progress toward adjustments EPA is proposing to the in Chapter 5 of the draft joint TSD to such a test continues. As mentioned in Idle Test for manufacturers to qualify for ensure that the air conditioner the introduction to this section, the MYs 2014–2016 A/C efficiency credits. technology used by manufacturers primary vehicle emissions and fuel EPA proposes that manufacturers seeking these credits corresponds with consumption test, the Federal Test continue to use the menu for MYs 2014– the technology used to derive the credit/ Procedure (FTP) or ‘‘two-cycle’’ testing, 2016 to determine credits for the GHG fuel consumption improvement values. does not require or simulate air program. This was also the approach BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C potential of those technologies, the separately for cars and for trucks. These As mentioned above, EPA, working manufacturer would generate the improvement values would be with manufacturers and CARB, has appropriate credit based on the menu. subtracted from the manufacturer’s two- made significant progress in developing However, if the test result did not cycle-based fleet fuel consumption a more robust test that may eventually demonstrate the full menu-based value to yield a final new fleet fuel be capable of measuring differences in potential of the technology, partial consumption value, which would be A/C efficiency. While EPA believes that credit could still be earned, in inverted to determine a final fleet fuel more testing and development will be proportion to how far away the result CAFE value. EPA considered, but is not necessary before the new test could be was from the expected menu-based proposing, an approach where the fuel used directly to quantify efficiency credit amount. consumption improvement values credits and fuel consumption EPA discusses the new test in more would be accounted for at the improvement values, EPA is proposing detail in Section III.C.1.b below and in individual vehicle level. In this case a that the test be used to demonstrate that Chapter 5 (5.1.3.5) of the joint TSD. Due credit-adjusted MPG value would have new or improved A/C technologies to the length of time to conduct the test to be calculated for each vehicle that result in reductions in GHG emissions procedure, EPA is also proposing that accrues air conditioning, off-cycle, or and fuel consumption. EPA is proposing required testing on the new AC17 test pick-up truck credits, and a credit- the AC17 test as a reporting-only procedure be limited to a subset of adjusted CAFE would be calculated by alternative to the Idle Test for MYs vehicles. The agencies request comment sales-weighting each vehicle. EPA found 2014–2016, and as a prerequisite for on this approach to establishing A/C that a significant issue with this generating Efficiency Credits and fuel efficiency credits and fuel consumption approach is that the credit programs do consumption improvement values for improvement values and the use of the not align with the way fuel economy MY 2017 and later. To demonstrate that new A/C test. and GHG emissions are currently a vehicle’s A/C system is delivering the For the CAFE program, EPA is reported to EPA or to NHTSA, i.e., at the efficiency benefits of the new proposing to determine a fleet average model type level. Model types are technologies, manufacturers would run fuel consumption improvement value in similar in basic engine and transmission the AC17 test procedure on a vehicle a manner consistent with the way a fleet characteristics, but credits are expected that incorporates the new technologies, average CO2 credits will be determined. to vary within a model type, possibly with the A/C system off and then on, EPA would convert the metric tons of considerably. For example, within a and then compare that result to the CO2 credits for air conditioning, off- model type the credits could vary by result from a previous model year or cycle, and full size pick-up to fleet-wide body style, trim level, footprint, and the baseline vehicle with similar vehicle fuel consumption improvement values, type of air conditioning systems and characteristics, except that the consistent with the way EPA would other GHG reduction technologies comparison vehicle would not have the convert the improvements in CO2 installed. Manufacturers would have to new technologies. If the test result with performance to metric tons of credits. report sales volumes for each unique the new technology demonstrated an See discussion in section III. C. There combination of all of these factors in emission reduction that is greater than would be separate improvement values order to enable EPA to perform the or equal to the menu-based credit for each type of credit, calculated CAFE averaging calculations. This

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would require a dramatic and expensive During meetings with vehicle credits and fuel consumption overhaul of EPA’s data systems, and the manufacturers, EPA received comments improvement values. There are a manufacturers would likely face similar that the approval process for generating number of reasons for this. First, the impacts. The vehicle-specific approach off-cycle credits was complicated and agencies have limited technical would also likely introduce more did not provide sufficient certainty on information on the cost, development opportunities for errors resulting from the amount of credits that might be time necessary, and manufacturability data entry and rounding, since each approved. Commenters also maintained of many of these technologies. The vehicle’s base fuel economy would be that it is impractical to measure small analysis presented below (and in greater modified by multiple consumption incremental improvements on top of a detail in Chapter 5 of the joint TSD) is values reported to at least six decimal large tailpipe measurement, similar to limited to quantifying the effectiveness places. The proposed approach would comments received related to of the technology (for the purposes of instead focus on calculating the GHG quantifying air conditioner quantifying credits and fuel credits correctly and summing them for improvements. These same consumption improvement values). It is each of the car and truck fleets, and the manufacturers believed that such a based on a combination of data and step of transforming to a fuel process could stifle innovation and fuel engineering analysis for each consumption improvement value is efficient technologies from penetrating technology. Second, for most of these relatively straightforward. However, into the vehicle fleet. technologies the agencies have no data given that the vehicle-specific and fleet- In response to these concerns, EPA is on what the rates of penetration of these based approaches yield the same end proposing a menu with a number of technologies would be during the rule result, EPA requests comment on technologies that the agency believes timeframe. Thus, with the exception of whether one approach or the other is will show real-world CO2 and fuel active aerodynamic improvements and preferable, and if so, why a specific consumption benefits which can be stop start technology, the agencies do approach is preferable. reasonably quantified by the agencies at not have adequate information available this time. This list of pre-approved 2. Off-Cycle CO2 Credits to consider the technologies on the list technologies includes a quantified when determining the appropriate GHG For MYs 2012–2016, EPA provided an default value that would apply unless emissions or CAFE standards. The option for manufacturers to generate the manufacturer demonstrates to EPA agencies expect to continue to improve adjustments (credits) for employing new that a different value for a technology is their understanding of these and innovative technologies that appropriate. This list is similar to the technologies over time. If further achieve CO reductions which are not 2 menu driven approach described in the information is obtained during the reflected on current 2-cycle test previous section on A/C efficiency comment period that supports procedures. For this proposal, EPA, in credits. The estimates of these credits consideration of these technologies in coordination with NHTSA, is proposing were largely determined from research, setting the standards, EPA and NHTSA to apply the off-cycle credits and analysis and simulations, rather from will reevaluate their positions. equivalent fuel consumption full vehicle testing, which would have However, given the current lack of improvement values to both the CAFE been cost and time prohibitive. These detailed information about these and GHG programs. This proposed predefined estimates are somewhat technologies, the agencies do not expect expansion is a change from the 2012–16 conservative to avoid the potential for that it will be able to do more for the final rule where only EPA provided the windfall. If manufactures believe their final rule than estimate some general off-cycle credits for the GHG program. specific off-cycle technology achieves amount of reasonable projected cost For MY 2017 and later, EPA is larger improvement, they may apply for savings from generation of off-cycle proposing that manufacturers may greater credits and fuel consumption credits and fuel consumption continue to use off-cycle credits for improvement values with supporting improvement values. Therefore, GHG compliance and begin to use fuel data. For technologies not listed, EPA is effectively the off-cycle credits and fuel consumption improvement values for proposing a case-by-case approach for consumption improvement values allow CAFE compliance. In addition, EPA is approval of off-cycle credits and fuel manufacturers additional flexibility in proposing a set of defined (e.g. default) consumption improvement values, selecting technologies that may be used values for identified off-cycle similar to the approach in the 2012– to comply with GHG emission and technologies that would apply unless 2016 rule but with important the manufacturer demonstrates to EPA modifications to streamline the approval CAFE standards. that a different value for its technology process. EPA will also consult with Two technologies on the list—active is appropriate. NHTSA during the review process. See aerodynamic improvements and stop Starting with MY2008, EPA started section III.C below; technologies for start—are in a different position than employing a ‘‘five-cycle’’ test which EPA is proposing default off- the other technologies on the list. Both methodology to measure fuel economy cycle credit values and fuel of these technologies are included in the for the fuel economy label. However, for consumption improvement values are agencies’ modeling analysis of GHG and CAFE compliance, EPA shown in Table II—11 below. Fuel technologies projected to be available continues to use the established ‘‘two- consumption improvement values for use in achieving the reductions cycle’’ (city and highway test cycles, under the CAFE program based on off- needed for the standards. We have also known as the FTP and HFET) test cycle technology would be equivalent to information on their effectiveness, cost, methodology. As learned through the off-cycle credit allowed by EPA and availability for purposes of development of the ‘‘five-cycle’’ under the GHG program, and these considering them along with the various methodology and researching this amounts would be determined using the other technologies we consider in proposal, EPA and NHTSA recognize same procedures and test methods as determining the appropriate CO2 that there are technologies that provide are proposed for use in EPA’s GHG emissions standard. These technologies real-world GHG emissions and fuel program. are among those listed in Chapter 3 of consumption improvements, but those EPA and NHTSA are not proposing to the joint TSD and have measureable improvements are not fully reflected on adjust the stringency of the standards benefit on the 2-cycle test. However, in the ‘‘two-cycle’’ test. based on the availability of off-cycle the context of off-cycle credits and fuel

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consumption improvement values, stop recognizing that these technologies encouraging these kinds of technologies start is any technology which enables a would also generate off-cycle credits that might not otherwise be employed, vehicle to automatically turn off the and fuel consumption improvement beyond the level that the 2-cycle engine when the vehicle comes to a rest values. Section III.D has a more detailed standards already do, thus we are now and restart the engine when the driver discussion on the feasibility of the allowing credits and fuel consumption applies pressure to the accelerator or standards within the context of the improvement values to be generated releases the brake. This includes HEVs flexibilities (such as off-cycle credits where the technology achieves an and PHEVs (but not EVs). In addition, and fuel consumption improvement incremental benefit that is significantly active grill shutters is just one of various values) proposed in this rule. better than on the 2-cycle test, as is the technologies that can be used as part of For these technologies that provide a case for the technologies on the list. aerodynamic design improvements (as benefit on five-cycle testing, but show EPA and NHTSA evaluated many part of the ‘‘aero2’’ technology). The less benefit on two cycle testing, in more technologies for off-cycle credits modeling and other analysis developed order to quantify the emissions impacts for determining the appropriate of these technologies, EPA will simply and fuel consumption improvement emissions standard includes these subtract the two-cycle benefit from the values and decided that the following technologies, using the effectiveness five-cycle benefit for the purposes of technologies should be eligible for off- values on the 2-cycle test. This is assigning credit and fuel consumption cycle credits and fuel consumption consistent with our consideration of all improvement values for this pre- improvement values. These eleven of the other technologies included in approved list. Other technologies, such technologies eligible for credits and fuel these analyses. Including them on the as more efficient lighting show no consumption improvement values are list for off-cycle credit and fuel benefit over any test cycle. In these shown in Table II–11 below. EPA is consumption improvement value cases, EPA will estimate the average proposing that a CAFE improvement generation, for purposes of compliance amount of usage using MOVES 169 data value for off-cycle improvements be with the standards, would recognize if possible and use this to calculate a determined at the fleet level by that these technologies have a higher duty-cycle-weighted benefit (or credit converting the CO2 credits determined degree of effectiveness than reflected in and fuel consumption improvement under the EPA program (in metric tons their 2-cycle effectiveness. As discussed value). In the 2012–2016 rule, EPA of CO2) for each fleet (car and truck) to in Sections III.C and Chapter 5 of the stated a technology must have ‘‘real a fleet fuel consumption improvement joint TSD, the agencies have taken into world GHG reductions not significantly value. This improvement value would account the generation of off-cycle captured on the current 2-cycle then be used to adjust the fleet’s CAFE credits and fuel consumption tests* * *’’ For this proposal, EPA is level upward. See the proposed improvement values by these two proposing to modify this requirement to regulations at 40 CFR 600.510–12. Note technologies in determining the allow technologies as long as the that while the table below presents fuel appropriateness of the proposed incremental benefit in the real-world is consumption values equivalent to a standards, considering the amount of significantly better than on the 2-cycle given CO2 credit value, these credit and fuel consumption test. There are environmental benefits to consumption values are presented for improvement value, the projected informational purposes and are not degree of penetration of these 169 MOVES is EPA’s MOtor Vehicle Emissions meant to imply that these values will be Simulator. This model contains (in its database) a used to determine the fuel economy for technologies, and other factors. The wide variety of fleet and activity data as well as proposed standards are appropriate national ambient temperature conditions. individual vehicles.

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Table II–11 shows the proposed list of welcome any data to support an capture the amount of GHG reductions off-cycle technologies and credits and adjustment to this table, whether it is to provided by primarily off-cycle equivalent fuel consumption adjust the values or to add or remove technologies. improvement values for cars and trucks. technologies. There are a number of technologies The credits and fuel consumption that could bring additional GHG Vehicle Simulation Tool improvement values for engine heat reductions over the 5-cycle drive test (or recovery and solar roof panels are Chapter 2 of the RIA provides a in the real world) compared to the scalable, depending on the amount of detailed description of the vehicle combined FTP/Highway (or two) cycle energy these systems can generate for simulation tool that EPA has been test. These are called off-cycle the vehicle. The Solar/Thermal control developing. This tool is capable of technologies and are described in technologies are varied and are limited simulating a wide range of conventional chapter 5 of the Joint TSD in detail. to 3 and 4.3 g/mi (car and truck and advanced engines, transmissions, Among them are technologies related to respectively) total. and vehicle technologies over various reducing vehicle’s electrical loads, such To ensure that the off cycle driving cycles. It evaluates technology as High Efficiency Exterior Lights, technology used by manufacturers package effectiveness while taking into Engine Heat Recovery, and Solar Roof seeking these credits and fuel account synergy (and dis-synergy) Panels. In an effort to streamline the consumption improvement values effects among vehicle components and process for approving off-cycle credits, corresponds with the technology used to estimates GHG emissions for various we have set a relatively conservative derive the credit and fuel consumption combinations of technologies. For the estimate of the credit based on our improvement values, EPA is proposing 2017 to 2025 GHG proposal, this efficacy analysis. EPA seeks comment very specific definitions of each of the simulation tool was used to assist on utilizing the model in order to technologies in the table of the list of estimating the amount of GHG credits quantify the credits more accurately, if technologies in Chapter 5 of the draft for improved A/C systems and off-cycle actual data of electrical load reduction joint TSD. The agencies are requesting technologies. EPA seeks public and/or on-board electricity generation comment on all aspects of the off-cycle comments on this approach of using the by one or more of these technologies is credit and fuel consumption tool for directly generating and fine- available through data submission from improvement value program, and would tuning some of the credits in order to manufacturers. Similarly, there are

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technologies that would provide large trucks, including full size pickup smaller pickup trucks, which do not additional GHG reduction benefits in trucks that are often used for offer the same level of utility (e.g., bed the 5-cycle test by actively reducing the commercial purposes and have size, towing capability and/or payload vehicle’s aerodynamic drag forces. generally higher payload and towing capability) and thus may not face the These are referred to as active capabilities, and cargo volumes than same technical challenges to improving aerodynamic technologies, which other light-duty vehicles. In Section II.C fuel economy and reducing CO2 include but are not limited to active grill and Chapter 2 of the joint TSD, EPA and emissions as compared to full sized shutters and active suspension NHTSA describe the proposal to adjust pickup trucks, do not qualify.171 For lowering. Like the electrical load the slope of the truck curve compared this proposal, a full sized pickup truck reduction technologies, the vehicle to the 2012–2016 rule. In Sections III.B would be defined as meeting simulation tool can be used to more and IV.F, EPA and NHTSA describe the requirements 1 and 2, below, as well as accurately estimate the additional GHG progression of the truck standards. In either requirement 3 or 4, below: reductions (therefore the credits) this section, the agencies describe a 1. The vehicle must have an open provided by these active aerodynamic credit and fuel consumption cargo box with a minimum width technologies over the 5-cycle drive test. improvement value for full size pickup between the wheelhouses of 48 inches EPA seeks comment on using the trucks to incentivize advanced measured as the minimum lateral simulation tool in order to quantify technologies on this class of vehicles. distance between the limiting these credits. In order to do this The agencies’ goal is to incentivize interferences (pass-through) of the properly, manufacturers would be the penetration into the marketplace of wheelhouses. The measurement would expected to submit two sets of coast- ‘‘game changing’’ technologies for these exclude the transitional arc, local down coefficients (with and without the pickups, including their hybridization. protrusions, and depressions or pockets, active aerodynamic technologies). Or, For that reason, EPA, in coordination if present.172 An open cargo box means they could submit two sets of with NHTSA, is proposing credits and a vehicle where the cargo bed does not aerodynamic drag coefficient (with and corresponding equivalent fuel have a permanent roof or cover. without the active aerodynamic consumption improvement values for Vehicles sold with detachable covers are technologies) as a function of vehicle manufacturers that hybridize a considered ‘‘open’’ for the purposes of speed. significant quantity of their full size these criteria. There are other technologies that pickup trucks, or use other technologies 2. Minimum open cargo box length of would result in additional GHG that significantly reduce CO2 emissions 60 inches defined by the lesser of the reduction benefits that cannot be fully and fuel consumption. This proposed pickup bed length at the top of the body captured on the combined FTP/ credit and corresponding equivalent (defined as the longitudinal distance Highway cycle test. These technologies fuel consumption improvement value from the inside front of the pickup bed typically reduce engine loads by would be available on a per-vehicle to the inside of the closed endgate; this utilizing advanced engine controls, and basis for mild and strong HEVs, as well would be measured at the height of the they range from enabling the vehicle to as other technologies that significantly top of the open pickup bed along turn off the engine at idle, to reducing improve the efficiency of the full sized vehicle centerline and the pickup bed cabin temperature and thus A/C pickup class.170 The credits and fuel length at the floor) and the pickup bed compressor loading when the vehicle is consumption improvement values length at the floor (defined as the restarted. Examples include Engine would apply for purposes of compliance longitudinal distance from the inside Start-Stop, Electric Heater Circulation with both the GHG emissions standards front of the pickup bed to the inside of Pump, Active Engine/Transmission and the CAFE standards. This provides the closed endgate; this would be Warm-Up, and Solar Control. For these the incentive to begin transforming this measured at the cargo floor surface types of technologies, the overall GHG most challenging category of vehicles along vehicle centerline).173 reduction largely depends on the toward use of the most advanced 3. Minimum Towing Capability—the control and calibration strategies of technologies. vehicle must have a GCWR (gross individual manufacturers and vehicle Access to this credit and fuel combined weight rating) minus GVWR types. Also, the current vehicle consumption improvement value is (gross vehicle weight rating) value of at simulation tool does not have the conditioned on a minimum penetration least 5,000 pounds.174 capability to properly simulate the of the technologies in a manufacturer’s vehicle behaviors that depend on full size pickup truck fleet. To ensure its 171 As discussed in TSD Section 5.3.1, EPA is thermal conditions of the vehicle and its use for only full sized pickup trucks, seeking comment on expanding the scope of this surroundings, such as Active Engine/ EPA is proposing a very specific credit to somewhat smaller pickups, provided they have the towing and/or hauling capabilities of the Transmission Warm-Up and Solar definition for a full sized pickup truck larger full-size trucks. Control. Therefore, the vehicle based on minimum bed size and 172 This dimension is also known as dimension simulation may not provide full benefits minimum towing capability. The W202 as defined in Society of Automotive of the technologies on the GHG specifics of this proposed definition can Engineers Procedure J1100. reductions. For this reason, the agency be found in Chapter 5 of the draft joint 173 The pickup body length at the top of the body is also known as dimension L506 in Society of is not proposing to use the simulation TSD (see Section 5.3.1). This proposed Automotive Engineers Procedure J1100. The pickup tool to generate the GHG credits for definition is meant to ensure that body length at the floor is also known as dimension these technologies at this time, though L505 in Society of Automotive Engineers Procedure future versions of the model may be 170 Note that EPA’s proposed calculation J1100. 174 more capable of quantifying the efficacy methodology in 40 CFR 600.510–12 does not use Gross combined weight rating means the value vehicle-specific fuel consumption adjustments to specified by the vehicle manufacturer as the of these off-cycle technologies as well. determine the CAFE increase due to the various maximum weight of a loaded vehicle and trailer, 3. Advanced Technology Incentives for incentives allowed under the proposed program. consistent with good engineering judgment. Gross Instead, EPA would convert the total CO2 credits vehicle weight rating means the value specified by Full Sized Pickup Trucks due to each incentive program from metric tons of the vehicle manufacturer as the maximum design CO2 to a fleetwide CAFE improvement value. The loaded weight of a single vehicle, consistent with The agencies recognize that the fuel consumption values are presented to give the good engineering judgment. Curb weight is defined standards under consideration for MY reader some context and explain the relationship in 40 CFR 86.1803, consistent with the provisions 2017–2025 will be most challenging to between CO2 and fuel consumption improvements. of 40 CFR 1037.140.

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4. Minimum Payload Capability—the with the target would also include any G. Safety Considerations in Establishing vehicle must have a GVWR (gross A/C related credits generated by the CAFE/GHG Standards vehicle weight rating) minus curb vehicle. Further details on this 1. Why do the agencies consider safety? weight value of at least 1,700 pounds. performance-based incentive are in The technical basis for these proposed Section III.C below and in Chapter 5 of The primary goals of the proposed definitions is found in Section III.C the draft joint TSD (see Section 5.3.4). CAFE and GHG standards are to reduce below and Chapter 5 of the joint TSD. The 10 g/mi (equivalent to 0.001125 gal/ fuel consumption and GHG emissions EPA is proposing that mild HEV pickup mi) performance-based credit and fuel from the on-road light-duty vehicle trucks would be eligible for a per-truck consumption improvement value would fleet, but in addition to these intended 10 g/mi CO2 credit (equal to a 0.001125 be available for MYs 2017 to 2021 and effects, the agencies also consider the potential of the standards to affect gal/mi fuel consumption improvement a vehicle meeting the requirements value) during MYs 2017–2021 if the vehicle safety.176 As a safety agency, would receive the credit and fuel mild HEV technology is used on a NHTSA has long considered the consumption improvement value until minimum percentage of a company’s potential for adverse safety full sized pickups. That minimum MY 2021 unless its CO2 level increases consequences when establishing CAFE percentage would be 30 percent of a or fuel economy decreases. The 20 g/mi standards,177 and under the CAA, EPA company’s full sized pickup production CO2 (equivalent to 0.0023 gal/mi fuel considers factors related to public in MY 2017 with a ramp up to at least consumption improvement value) health and human welfare, and safety, 80 percent of production in MY 2021. performance-based credit would be in regulating emissions of air pollutants EPA is also proposing that strong HEV available for a maximum of 5 years from mobile sources.178 Safety trade-offs pickup trucks would be eligible for a within the model years of 2017 to 2025, associated with fuel economy increases per-truck 20 g/mi CO2 credit (equal to a provided its CO2 level and fuel have occurred in the past (particularly 0.002250 gal/mi fuel consumption consumption does not increase. The before NHTSA CAFE standards were improvement value) during MYs 2017– rationale for these limits is because of attribute-based), and the agencies must 2025 if the strong HEV technology is the year over year progression of the be mindful of the possibility of future used on a minimum percentage of a stringency of the truck target curves. ones. These past safety trade-offs may company’s full sized pickups. That The credits and fuel consumption have occurred because manufacturers minimum percentage would be 10 improvement values would begin in the chose, at the time, to build smaller and percent of a company’s full sized pickup model year of introduction, and could lighter vehicles—partly in response to production in each year over the model not extend past MY 2021 for the 10 CAFE standards—rather than adding years 2017–2025. g/mi credit (equivalent to 0.001125 gal/ more expensive fuel-saving technologies To ensure that the hybridization mi) and MY 2025 for the 20 g/mi credit (and maintaining vehicle size and technology used by manufacturers (equivalent to 0.002250 gal/mi). safety), and the smaller and lighter seeking one of these credits and fuel vehicles did not fare as well in crashes consumption improvement values meets As with the HEV-based credit and fuel as larger and heavier vehicles. the intent behind the incentives, EPA is consumption improvement value, the Historically, as shown in FARS data proposing very specific definitions of performance-based credit and fuel analyzed by NHTSA, the safest cars what qualifies as a mild and a strong consumption improvement value generally have been heavy and large, HEV. These definitions are described in requires that the technology be used on while the cars with the highest fatal- detail in Chapter 5 of the draft joint TSD a minimum percentage of a crash rates have been light and small. (see section 5.3.3). manufacturer’s full-size pickup trucks. The question, then, is whether past is For similar reasons, EPA is also That minimum percentage for the 10 necessarily prologue when it comes to proposing a performance-based g/mi GHG credit (equivalent to 0.001125 potential changes in vehicle size (both incentive credit and equivalent fuel gal/mi fuel consumption improvement footprint and ‘‘overhang’’) and mass in consumption improvement value for value) would be 15 percent of a response to these proposed future CAFE full size pickup trucks that achieve an company’s full sized pickup production and GHG standards. Manufacturers have emission level significantly below the in MY 2017 with a ramp up to at least stated that they will reduce vehicle applicable target.175 EPA, in 40 percent of production in MY 2021. mass as one of the cost-effective means coordination with NHTSA, proposes The minimum percentage for the 20 of increasing fuel economy and this credit to be either 10 g/mi CO2 g/mi credit (equivalent to 0.002250 gal/ reducing CO2 emissions in order to meet (equivalent to 0.001125 gal/mi for the mi fuel consumption improvement the proposed standards, and the CAFE program) or 20 g/mi CO2 value) would be 10 percent of a 176 In this rulemaking document, ‘‘vehicle safety’’ (equivalent to 0.002250 gal/mi for the company’s full sized pickup production CAFE program) for pickups achieving is defined as societal fatality rates per vehicle miles in each year over the model years 2017– 15 percent or 20 percent, respectively, traveled (VMT), which include fatalities to 2025. occupants of all the vehicles involved in the better CO2 than their footprint based collisions, plus any pedestrians. target in a given model year. Because Importantly, the same vehicle could 177 This practice is recognized approvingly in the footprint target curve has been not receive credit and fuel consumption case law. As the United States Court of Appeals for adjusted to account for A/C related improvement under both the HEV and the DC Circuit stated in upholding NHTSA’s exercise of judgment in setting the 1987–1989 credits, the CO2 level to be compared the performance-based approaches. EPA passenger car standards, ‘‘NHTSA has always and NHTSA request comment on all examined the safety consequences of the CAFE 175 The 15 and 20 percent thresholds would be aspects of this proposed pickup truck standards in its overall consideration of relevant based on CO2 performance compared to the incentive credit and fuel consumption factors since its earliest rulemaking under the CAFE applicable CO2 vehicle target for both CO2 credits program.’’ Competitive Enterprise Institute v. and corresponding CAFE fuel consumption improvement value, including the NHTSA (‘‘CEI I’’), 901 F.2d 107, 120 at n. 11 (DC improvement values. As with A/C and off-cycle proposed definitions for full sized Cir. 1990). 178 credits, EPA would convert the total CO2 credits pickup truck and mild and strong HEV. See NRDC v. EPA, 655 F. 2d 318, 332 n. 31 due to the pick-up incentive program from metric (DC Cir. 1981). (EPA may consider safety in tons of CO2 to a fleetwide equivalent CAFE developing standards under section 202 (a) and did improvement value. so appropriately in the given instance).

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agencies have incorporated this overall CAFE/GHG standard, as for maintain an acceptable occupant expectation into our modeling analysis example if the smaller vehicles are so compartment deceleration, the effective supporting the proposed standards. much lighter that they exceed their front end stiffness has to be managed Because the agencies discern a historical targets by much greater amounts. On such that the crash pulse does not relationship between vehicle mass, size, balance, however, we believe the target increase as stiffer yet lighter materials and safety, it is reasonable to assume curves and the incentives they provide are utilized. If the energy is not well that these relationships will continue in generally will not encourage down- managed, the occupants may have to the future. The question of whether sizing (or up-sizing) in terms of ‘‘ride down’’ a more severe crash pulse, vehicle design can mitigate the adverse footprint reductions (or increases).180 putting more burdens on the restraint effects of mass reduction is discussed Consequently, all of our analyses are systems to protect the occupants. There below. based on the assumption that this may be technological and physical Manufacturers are less likely than rulemaking, in and of itself, will not limitations to how much the restraint they were in the past to reduce vehicle result in any differences in the sales system may mitigate these effects. footprint in order to reduce mass for weighted distribution of vehicle sizes. The agencies must attempt to estimate increased fuel economy. The primary Given that we expect manufacturers now, based on the best information mechanism in this rulemaking for to reduce vehicle mass in response to currently available to us, how the mitigating the potential negative effects the proposed standards, and do not assumed levels of mass reduction on safety is the application of footprint- expect manufacturers to reduce vehicle based standards, which create a footprint in response to the proposed without additional changes (i.e. disincentive for manufacturers to standards, the agencies must attempt to footprint, performance, functionality) produce smaller-footprint vehicles. See predict the safety effects, if any, of the might affect the safety of vehicles, and section II. C.1, above. This is because, as proposed standards based on the best how lighter vehicles might affect the footprint decreases, the corresponding information currently available. This safety of drivers and passengers in the fuel economy/GHG emission target section explained why the agencies entire on-road fleet, as we are analyzing becomes more stringent. We also believe consider safety; the following section potential future CAFE and GHG that the shape of the footprint curves discusses how the agencies consider standards. The agencies seek to ensure themselves is approximately ‘‘footprint- safety. that the standards are designed to neutral,’’ that is, that it should neither encourage manufacturers to pursue a encourage manufacturers to increase the 2. How do the agencies consider safety? path toward compliance that is both footprint of their fleets, nor to decrease Assessing the effects of vehicle mass cost-effective and safe. it. Upsizing footprint is also discouraged reduction and size on societal safety is To estimate the possible safety effects through the curve ‘‘cut-off’’ at larger a complex issue. One part of estimating of the MY 2017–2025 standards, then, footprints.179 However, the footprint- potential safety effects involves trying to the agencies have undertaken research based standards do not discourage understand better the relationship that approaches this question from downsizing the portions of a vehicle in between mass and vehicle design. The several angles. First, we are using a front of the front axle and to the rear of extent of mass reduction that statistical approach to study the effect of the rear axle, or of other areas of the manufacturers may be considering to vehicle mass reduction on safety vehicle outside the wheels. The crush meet more stringent fuel economy and historically, as discussed in greater space provided by those portions of a GHG standards may raise different detail in section C below. Statistical vehicle can make important safety concerns from what the industry analysis is performed using the most contributions to managing crash energy. has previously faced. The principal recent historical crash data available, Additionally, simply because footprint- difference between the heavier vehicles, and is considered as the agencies’ best based standards create no incentive to especially truck-based LTVs, and the estimate of potential mass-safety effects. downsize vehicles does not mean that lighter vehicles, especially passenger The agencies recognize that negative manufacturers will not downsize if cars, is that mass reduction has a safety effects estimated based on the doing so makes it easier to meet the different effect in collisions with historical relationships could another car or LTV. When two vehicles potentially be tempered with safety 179 The agencies recognize that at the other end of unequal mass collide, the change in of the curve, manufacturers who make small cars technology advances in the future, and and trucks below 41 square feet (the small footprint velocity (delta V) is higher in the lighter may not represent the current or future cut-off point) have some incentive to downsize their vehicle, similar to the mass ratio fleet. Second, we are using an vehicles to make it easier to meet the constant proportion. As a result of the higher engineering approach to investigate target. That cut-off may also create some incentive change in velocity, the fatality risk may for manufacturers who do not currently offer what amount of mass reduction is models that size to do so in the future. However, also increase. Removing more mass from affordable and feasible while at the same time, the agencies believe that there is the heavier vehicle than in the lighter maintaining vehicle safety and other a limit to the market for cars and trucks smaller vehicle by amounts that bring the mass major functionalities such as NVH and than 41 square feet: most consumers likely have ratio closer to 1.0 reduces the delta V in some minimum expectation about interior volume, acceleration performance. Third, we are for example, among other things. Additionally, the lighter vehicle, possibly resulting in also studying the new challenges these vehicles in this segment are the lowest price point a net societal benefit. lighter vehicles might bring to vehicle for the light-duty automotive market, with several Another complexity is that if a vehicle safety and potential countermeasures models in the $10,000-$15,000 range. is made lighter, adjustments must be Manufacturers who find themselves incentivized by available to manage those challenges the cut-off will also find themselves adding made to the vehicle’s structure such that effectively. it will be able to manage the energy in technology to the lowest price segment vehicles, The sections below discuss more which could make it challenging to retain the price a crash while limiting intrusion into the specifically the state of the research on advantage. Because of these two reasons, the occupant compartment after adopting agencies believe that the incentive to increase the the mass-safety relationship, and how materials that may be stiffer. To sales of vehicles smaller than 41 square feet due to the agencies integrate that research into this rulemaking, if any, is small. See Section II.C.1 our assessment of the potential safety above and Chapter 1 of the draft Joint TSD for more 180 This statement makes no prediction of how information on the agencies’ choice of ‘‘cut-off’’ consumer choices of vehicle size will change in the effects of the MY 2017–2025 CAFE and points for the footprint-based target curves. future, independent of this proposal. GHG standards.

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3. What is the current state of the vehicle mass, size and safety, the enabling other researchers to analyze research on statistical analysis of agencies sought to identify vehicles that the same data and hopefully minimizing historical crash data? are using material substitution and discrepancies in the results that would a. Background smart design, and to try to assess if there have been due to inconsistencies across is sufficient crash data involving those databases.183 The agencies recognize, Researchers have been using vehicles for statistical analysis. If however, that the updated database may statistical analysis to examine the sufficient data exists, statistical analysis not represent the future fleet, because relationship of vehicle mass and safety would be conducted to compare the vehicles have continued and will in historical crash data for many years, relationship among mass, size and continue to change. and continue to refine their techniques safety of these smart design vehicles to over time. In the MY 2012–2016 final The agencies are aware that several vehicles of similar size and mass with studies have been initiated using rule, the agencies stated that we would more traditional designs. conduct further study and research into NHTSA’s 2011 newly established safety Significant progress has been made on database. In addition to a new Kahane the interaction of mass, size and safety these tasks since the MY 2012–2016 study, which is discussed in section to assist future rulemakings, and start to final rule, as follows: The independent II.G.4, other on-going studies include work collaboratively by developing an review of recent and updated statistical two by Wenzel at Lawrence Berkeley interagency working group between analyses of the relationship between National Laboratory (LBNL) under NHTSA, EPA, DOE, and CARB to vehicle mass, size, and crash fatality contract with the U.S. DOE, and one by evaluate all aspects of mass, size and rates has been completed. NHTSA Dynamic Research, Inc. (DRI) contracted safety. The team would seek to contracted with the University of by the International Council on Clean coordinate government supported Michigan Transportation Research Transportation (ICCT). These studies studies and independent research, to the Institute (UMTRI) to conduct this may take somewhat different greatest extent possible, to help ensure review, and the UMTRI team led by the work is complementary to previous Paul Green evaluated over 20 papers, approaches to examine the statistical and ongoing research and to guide including studies done by NHTSA’s relationship between fatality risk, further research in this area. Charles Kahane, Tom Wenzel of the US vehicle mass and size. In addition to a The agencies also identified three Department of Energy’s Lawrence detailed assessment of the NHTSA 2011 specific areas to direct research in Berkeley National Laboratory, Dynamic report, Wenzel is expected to consider preparation for future CAFE/GHG Research, Inc., and others. UMTRI’s the effect of mass and footprint rulemaking in regards to statistical basic findings will be discussed below. reduction on casualty risk per crash, analysis of historical data. Some commenters in recent CAFE using data from thirteen states. Casualty First, NHTSA would contract with an rulemakings, including some vehicle risk includes both fatalities and serious independent institution to review the manufacturers, suggested that the or incapacitating injuries. DRI is statistical methods that NHTSA and DRI designs and materials of more recent expected to use a two-stage approach to have used to analyze historical data model year vehicles may have separate the effect of mass reduction on related to mass, size and safety, and to weakened the historical statistical two components of fatality risk, crash provide recommendation on whether relationships between mass, size, and avoidance and crashworthiness. The the existing methods or other methods safety. The agencies agree that the LBNL assessment of the NHTSA 2011 should be used for future statistical statistical analysis would be improved report is available in the docket for this analysis of historical data. This study 184 by using an updated database that NPRM. The casualty risk effect study will include a consideration of potential reflects more recent safety technologies, was not available in time to inform this near multicollinearity in the historical vehicle designs and materials, and NPRM. The completed final peer data and how best to address it in a reflects changes in the overall vehicle reviewed-report on both assessments regression analysis. The 2010 NHTSA fleet. The agencies also believe, as will be available prior to the final rule. report was also peer reviewed by two UMTRI also found, that different DRI has also indicated that it expects its other experts in the safety field— statistical analyses may have had study to be publicly available prior to Charles Farmer (Insurance Institute for different results because they each used the final rule. The agencies will Highway Safety) and Anders Lie slightly different datasets for their consider these studies and any others (Swedish Transport Administration).181 analyses. In order to try to mitigate this that become available, and the results Second, NHTSA and EPA, in may influence the safety analysis for the consultation with DOE, would update problem and to support the current rulemaking, NHTSA has created a final rule. the MYs 1991–1999 database on which Other researchers are free to the safety analyses in the NPRM and common, updated database for statistical analysis that consists of crash download the database from NHTSA’s final rule are based with newer vehicle Web site, and we expect to see data, and create a common database that data of model years 2000–2007 vehicles in calendar years 2002–2008, as additional papers in the coming months could be made publicly available to and as comments to the rulemaking that help address concerns that differences compared to the database used in prior NHTSA analyses which was based on may also inform our consideration of in data were leading to different results these issues for the final rule. Kahane’s in statistical analyses by different model years 1991–1999 vehicles in calendar years 1995–2000. The new updated study for 2011 is currently researchers. undergoing peer-review, and is available And third, in order to assess if the database is the most up-to-date possible, design of recent model year vehicles given the processing lead time for crash that incorporate various mass reduction data and the need for enough crash Relationships Between Vehicles’ Fatality Risk, cases to permit statistically meaningful Mass, and Footprint.’’ methods affect the relationships among 183 75 Fed. Reg. 25324 (May 7, 2010); the analyses. NHTSA has made the new discussion of planned statistical analyses is on pp. 182 181 All three of the peer reviews are in docket, databases available to the public, 25395–25396. NHTSA–2010–0152. You can access the docket at 184 Wenzel, T.P. (2011b). Assessment of NHTSA’s http://www.regulations.gov/#!home by typing 182 The new databases are available at http:// Report ‘‘Relationships between Fatality Risk, Mass, ‘NHTSA–2010–0152’ where it says ‘‘enter keyword www.nhtsa.gov/fuel-economy (look for ‘‘Download and Footprint in Model Year 2000–2007 Passenger or ID’’ and then clicking on ‘‘Search.’’ Crash Databases for Statistical Analysis of Cars and LTVs’’, available at…

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in the docket for this rulemaking for Engineering, Koichi Kamiji of Honda, characteristics. Unfortunately, specialty review by commenters. John German of the International vehicle groups are usually adopted by Finally, EPA and NHTSA with DOT’s Council on Clean Transportation (ICCT), specific driver groups, often with Volpe Center, part of the Research and Scott Schmidt of the Alliance of outlying vehicle usage or driver Innovative Technology Administration Automobile Manufacturers, Guy behavior patterns. Green, who (RITA), attempted to investigate the Nusholtz of Chrysler, and Frank Field of conducted an independent review of the implications of ‘‘Smart Design,’’ by the Massachusetts Institute of previous statistical analyses, suggested identifying and describing the types of Technology. that evaluating residuals will give an ‘‘Smart Design’’ and methods for using The wide participation in the indication of whether or not a data ‘‘Smart Design’’ to result in vehicle mass workshop allowed the agencies to hear subset can be legitimately removed reduction, selecting analytical pairs of from a broad range of experts and without inappropriately affecting the vehicles, and using the appropriate stakeholders. The contributions were analytical results. crash database to analyze vehicle crash particularly relevant to the agencies’ It was recognized that the physics of data. The analysis identified several analysis of the effects of weight a two-vehicle crash require that the one-vehicle and two-vehicle crash reduction for this proposed rule. The lighter vehicle experience a greater datasets with the potential to shed light presentations were divided into two change in velocity, which often leads to on the issue, but the available data for sessions that addressed the two disproportionately more injury risk. specific crash scenarios was insufficient expansive sets of issues—statistical Lund noted persistent historical trends to produce consistent results that could evidence of the roles of mass and size that, in any time period, occupants of be used to support conclusions on safety, and engineering realities— the smallest and lightest vehicles had, regarding historical performance of structural crashworthiness, occupant on average, fatality rates approximately ‘‘smart designs.’’ injury and advanced vehicle design. twice those of occupants of the largest Undertaking these tasks has helped The first session focused on previous and heaviest vehicles but predicted ‘‘the the agencies come closer to resolving and ongoing statistical studies of crash sky will not fall’’ as the fleet downsizes, some of the ongoing debates in data that attempt to identify the relative we will not see an increase in absolute statistical analysis research of historical effects of vehicle mass and size on fleet injury risk because smaller cars will crash data. We intend to apply these safety. There was consensus that there become increasingly protective of their conclusions going forward, and we is a complicated relationship with many occupants. Padmanaban also noted in believe that the public discussion of the confounding influences in the data. her research of the historical trends that issues will be facilitated by the research Wenzel summarized a recent study he mass ratio and vehicle stiffness are conducted. The following sections conducted comparing four types of risk significant predictors with mass ratio discuss the findings from these studies (fatality or casualty risk, per vehicle consistently the dominant parameter and others in greater detail, to present registration-years or per crash) using when correlating harm. Reducing the a more nuanced picture of the current police-reported crash data from five mass of any vehicle may have state of the statistical research. states.186 He showed that the trends in competing societal effects as it increases risk for various classes of vehicles (e.g., b. NHTSA Workshop on Vehicle Mass, the injury risk in the lightened vehicle non- passenger cars, vans, Size and Safety and decreases them in the partner SUVs, crossover SUVs, pickups) were vehicle On February 25, 2011, NHTSA hosted similar regardless of what risk was being The separation of key parameters was a workshop on mass reduction, vehicle measured (fatality or casualty) or what also discussed as a challenge to the size, and fleet safety at the Headquarters exposure metric was used (e.g., analyses, as vehicle size has historically of the U.S. Department of registration years, police-reported been highly correlated with vehicle Transportation in Washington, DC.185 crashes, etc.). In general, most trends mass. Presenters had varying The purpose of the workshop was to showed a lower risk for drivers of larger, approaches for dealing with the provide the agencies with a broad heavier vehicles. potential multicollinearity between understanding of current research in the Although Wenzel’s analysis was these two variables. Van Auken of DRI field and provide stakeholders and the focused on differences in the four types stated that there was latitude in the public with an opportunity to weigh in of risk on the relative risk by vehicle value of Variance Inflation Factor (VIF, on this issue. NHTSA also created a type, he cautioned that, when analyzing a measure of multicollinearity) that public docket to receive comments from casualty risk per crash, analysts should would call results into question, and interested parties that were unable to control for driver age and gender, crash suggested that the large value of VIF for attend. location (urban vs. rural), and the state curb weight might imply ‘‘perhaps the The speakers included Charles in which the crash occurred (to account effect of weight is too small in Kahane of NHTSA, Tom Wenzel of for crash reporting biases). comparison to other factors.’’ Green, of Lawrence Berkeley National Laboratory, Several participants pointed out that UMTRI, stated that highly correlated R. Michael Van Auken of Dynamic analyses must also control for variables may not be appropriate for use Research Inc. (DRI), Jeya Padmanaban of individual technologies with significant in a predictive model and that JP Research, Inc., Adrian Lund of the safety effects (e.g., Electronic Stability ‘‘match[ing] on footprint’’ (i.e., Insurance Institute for Highway Safety, Control, airbags).It was not always conducting multiple analyses for data Paul Green of the University of conclusive whether a specialty vehicle subsets with similar footprint values) Michigan Transportation Research group (e.g., sports cars, two-door cars, may be the most effective way to resolve Institute (UMTRI), Stephen Summers of early crossover SUVs) were outliers that the issue. NHTSA, Gregg Peterson of Lotus confound the trend or unique datasets There was no consensus on the that isolate specific vehicle overall effect of the maneuverability of 185 A video recording, transcript, and the smaller, lighter vehicles. German noted presentations from the NHTSA workshop on mass 186 Wenzel, T.P. (2011a). Analysis of Casualty that lighter vehicles should have reduction, vehicle size and fleet safety is available Risk per Police-Reported Crash for Model Year 2000 improved handling and braking at http://www.nhtsa.gov/fuel-economy (look for to 2004 Vehicles, using Crash Data from Five States, ‘‘NHTSA Workshop on Vehicle Mass-Size-Safety on March 2011, LBNL–4897E, available at: http:// characteristics and ‘‘may be more likely Feb. 25’’) eetd.lbl.gov/EA/teepa/pub.html#Vehicle to avoid collisions’’. Lund presented

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crash involvement data that implied and also commented on previous impressive collection of files from that, among vehicles of similar function analyses that using weight and appropriate sources and the best ones and use rates, crash risk does not go wheelbase together in a logistic model available for answering the research down for more ‘‘nimble’’ vehicles. distorts the estimates, resulting in questions considered in this study. Several presenters noted the difficulties inflated variance with wrong signs and • In statistical analysis simpler of projecting past data into the future as magnitudes in the results. Her results models generally lead to improved new technologies will be used that were consistently showed that vehicle mass inference, assuming the data and model not available when the data were ratio was a more important parameter assumptions are appropriate. In that collected. The advances in technology than those describing vehicle geometry regard, the disaggregate logistic through the decades have dramatically or stiffness. Her ultimate conclusion regression model used by NHTSA in the improved safety for all weight and size was that removing mass (e.g., 100 lbs.) 2003 report 189 seems to be the most classes. A video of IIHS’s 50th from all passenger cars would cause an appropriate model, and valid for the anniversary crash test of a 1959 overall increase in fatalities in truck-to- analysis in the context that it was used: Bel Air and 2009 Chevrolet car crashes while removing the same finding general associations between Malibu graphically demonstrated that amount from light trucks would cause fatality risk and mass—and the general stark differences in design and an overall decrease in fatalities. directions of the reported associations technology that can possibly mask the are correct. discrete mass effects, while videos of c. Report by Green et al., UMTRI— • The two-stage logistic regression compatibility crash tests between ‘‘Independent Review: Statistical model in combination with the two-step smaller, lighter vehicles and Analyses of Relationship Between aggregate regression used by DRI seems contemporary larger, heavier vehicles Vehicle Curb Weight, Track Width, to be more complicated than is graphically showed the significance of Wheelbase and Fatality Rates,’’ April necessary based on the data being vehicle mass and size. 2011. analyzed, and summing regression Kahane presented results from his As explained above, NHTSA coefficients from two separate models to 2010 report187 that found that a scenario contracted with the University of arrive at conclusions about the effects of which took some mass out of heavier Michigan Transportation Research reductions in weight or size on fatality vehicles but little or no mass out of the Institute (UMTRI) to conduct an risk seems to add unneeded complexity lightest vehicles did not impact safety in independent review ;188 of a set of to the problem. • absolute terms. Kahane noted that if the statistical analyses of relationships One of the biggest issues regarding analyses were able to consider the mass between vehicle curb weight, the this work is the historical correlation of both vehicles in a two-vehicle crash, footprint variables (track width, between curb weight, wheelbase, and the results may be more indicative of wheelbase) and fatality rates from track width. Including three variables future crashes. There is apparent vehicle crashes. The purpose of this that are highly correlated in the same consistency with other presentations review was to examine analysis model can have adverse effects on the (e.g., Padmanaban, Nusholtz) that methods, data sources, and assumptions fit of the model, especially with respect reducing the overall ranges of masses of the statistical studies, with the to the parameter estimates, as discussed and mass ratios seems to reduce overall objective of identifying the reasons for by Kahane. UMTRI makes no societal harm. That is, the effect of mass any differences in results. Another conclusions about multicollinearity, reduction exclusively does not appear to objective was to examine the suitability other than to say that inferences made be a ‘‘zero sum game’’ in which any of the various methods for estimating in the presence of multicollinearity increase in harm to occupants of the the fatality risks of future vehicles. should be judged with great caution. At lightened vehicle is precisely offset by UMTRI reviewed a set of papers, the NHTSA workshop on size, safety a decrease in harm to the occupants of reports, and manuscripts provided by and mass, Paul Green suggested that a the partner vehicle. If the mass of the NHTSA (listed in Appendix A of matched analysis, in which regressions heavier vehicle is reduced by a larger UMTRI’s report, which is available in are run on the relationship between percentage, the changes in velocity from the docket to this rulemaking) that mass reduction and risk separately for the collision are more nearly equal and examined the statistical relationships vehicles of similar footprint, could be the injuries suffered in the lighter between fatality or casualty rates and undertaken to investigate the effect of vehicle are likely to be reduced more vehicle properties such as curb weight, multicollinearity between vehicle mass than the injuries in the heavier vehicle track width, wheelbase and other and size. Kahane has combined are increased. Alternatively, a fixed variables. wheelbase and track width into one mass reduction (say, 100 lbs) in all It is difficult to summarize a study of variable (footprint) to compare with vehicles could increase societal harm that length and complexity for purposes curb weight. NHTSA believes that the whereas a fixed percentage mass of this discussion, but fundamentally, 2011 Kahane analysis has done all it can reduction is more likely to be neutral. the UMTRI team concluded the to lessen concerns about Padmanaban described a series of following: multicollinearity, but a concern still studies conducted in recent years. She • Differences in data may have exists. In considering other studies included numerous vehicle parameters complicated comparisons of earlier provided by NHTSA for evaluation by including bumper height and several the UMTRI team: analyses, but if the methodology is Æ measures of vehicle size and stiffness robust, and the methods were applied in Papers by Wenzel, and Wenzel and a similar way, small changes in data Ross, addressing associations between 187 Kahane, C. J. (2010). ‘‘Relationships Between should not lead to different conclusions. fatality risk per vehicle registration-year, Fatality Risk, Mass, and Footprint in Model Year weight, and size by vehicle model 1991–1999 and Other Passenger Cars and LTVs,’’ The main conclusions and findings Final Regulatory Impact Analysis: Corporate should be reproducible. The data base contribute to understanding some of the Average Fuel Economy for MY 2012–MY 2016 created by Kahane appears to be an relationships between risk, weight, and Passenger Cars and Light Trucks. Washington, DC: size. However, least squares linear National Highway Traffic Safety Administration, pp. 464–542, available at http://www.nhtsa.gov/ 188 The review is independent in the sense that regression models, without staticfiles/rulemaking/pdf/cafe/CAFE_2012–2016_ it was conducted by an outside third party without FRIA_04012010.pdf. any interest in the reported outcome. 189

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modification, are not exposure-based d. Report by Dr. Charles Kahane, reductions only in the heavier LTVs, risk models and inference drawn from NHTSA—‘‘Relationships Between and benefits only in some types of these models tends to be weak since Fatality Risk, Mass, and Footprint in crashes for other vehicle types. Much of they do not account for additional Model Year 2000–2007 Passenger Cars NHTSA’s 2010 report, as well as recent differences in vehicles, drivers, or crash and LTVs,’’ 2011 work by DRI, involved sensitivity tests conditions that could explain the The relationship between a vehicle’s on the databases and models, which variance in risk by vehicle model. generated a range of estimates Æ mass, size, and fatality risk is complex, A 2009 J.P. Research paper focused and it varies in different types of somewhere between the initial DRI and 191 on the difficulties associated with crashes. NHTSA, along with others, has NHTSA results. separating out the contributions of been examining this relationship for Immediately after issuing the final weight and size variables when over a decade. The safety chapter of rule for MYs 2012–2016 CAFE and GHG analyzing fatality risk properly NHTSA’s April 2010 final regulatory standards in May 2010, NHTSA and recognized the problem arising from impact analysis (FRIA) of CAFE EPA began work on the next joint multicollinearity and included a clear standards for MY 2012–2016 passenger rulemaking to develop CAFE and GHG explanation of why fatality risk is cars and light trucks included a standards for MY 2017 to 2025 and expected to increase with increasing statistical analysis of relationships beyond. The preamble to the 2012–2016 mass ratio. UMTRI concluded that the between fatality risk, mass, and final rule stated that NHTSA, working increases in fatality risk associated with footprint in MY 1991–1999 passenger closely with EPA and the Department of a 100-pound reduction in weight Energy (DOE), would perform a new cars and LTVs (light trucks and vans), allowing footprint to vary with weight statistical analysis of the relationships based on calendar year (CY) 1995–2000 as estimated by Kahane and JP Research, between fatality rates, mass and crash and vehicle-registration data.190 are broadly more convincing than the footprint, updating the crash and The 2010 analysis used the same data as 6.7 percent reduction in fatality risk exposure databases to the latest the 2003 analysis, but included vehicle associated with mass reduction while available model years, refining the mass and footprint in the same holding footprint constant, as reported methodology in response to peer regression model. by DRI. The principal findings of NHTSA’s reviews of the 2010 report and taking Æ A paper by Nusholtz et al. focused into account changes in vehicle 2010 analysis were that mass reduction on the question of whether vehicle size technologies. The previous databases of in lighter cars, even while holding can reasonably be the dominant vehicle MY 1991–1999 vehicles in CY 1995– footprint constant, would significantly factor for fatality risk, and finding that 2000 crashes has become outdated as increase societal fatality risk, whereas changing the mean mass of the vehicle new safety technologies, vehicle designs mass reduction in the heavier LTVs population (leaving variability and materials were introduced. The new would significantly reduce net societal unchanged) has a stronger influence on databases comprising MY 2000–2007 fatality risk, because it would reduce the fatality risk than corresponding vehicles in CY 2002–2008 crashes with fatality risk of occupants in lighter (feasible) changes in mean vehicle the most up-to-date possible, given the vehicles which collide with the heavier dimensions, concluded unequivocally processing lead time for crash data and that reducing vehicle mass while LTVs. NHTSA concluded that, as a the need for enough crash cases to maintaining constant vehicle result, any reasonable combination of permit statistically meaningful analyses. dimensions will increase fatality risk. mass reductions while holding footprint NHTSA has made the new databases UMTRI concluded that if one accepts constant in MY 2012–2016 vehicles— available to the public,192 enabling other the methodology, this conclusion is concentrated, at least to some extent, in researchers to analyze the same data and robust against realistic changes that may the heavier LTVs and limited in the hopefully minimizing discrepancies in be made in the force vs. deflection lighter cars—would likely be the results due to inconsistencies across characteristics of the impacting approximately safety-neutral; it would the data used.193 vehicles. not significantly increase fatalities and One way to estimate these effects is Æ Two papers by Robertson, one a might well decrease them. via statistical analyses of societal fatality commentary paper and the other a peer- NHTSA’s 2010 report partially agreed reviewed journal article, were reviewed. and partially disagreed with analyses 191 Van Auken, R. M., and Zellner, J. W. (2003). The commentary paper did not fit published during 2003–2005 by A Further Assessment of the Effects of Vehicle separate models according to crash type, Dynamic Research, Inc. (DRI). NHTSA Weight and Size Parameters on Fatality Risk in and DRI both found a significant Model Year 1985–98 Passenger Cars and 1986–97 and included passenger cars, vans, and Light Trucks. Report No. DRI–TR–03–01. Torrance, SUVs in the same model. UMTRI protective effect for footprint, and that CA: Dynamic Research, Inc.; Van Auken, R. M., and concluded that some of the claims in the reducing mass and footprint together Zellner, J. W. (2005a). An Assessment of the Effects commentary paper appear to be (downsizing) on smaller vehicles was of Vehicle Weight and Size on Fatality Risk in 1985 harmful. DRI’s analyses estimated a to 1998 Model Year Passenger Cars and 1985 to overstated, and intermediate results and 1997 Model Year Light Trucks and Vans. Paper No. more documentation would help the significant overall reduction in fatalities 2005–01–1354. Warrendale, PA: Society of reader determine if these claims are from mass reduction in all light-duty Automotive Engineers; Van Auken, R. M., and vehicles if wheelbase and track width Zellner, J. W. (2005b). Supplemental Results on the valid. The second paper focused largely Independent Effects of Curb Weight, Wheelbase, on the effects of electronic stability were maintained, whereas NHTSA’s and Track on Fatality Risk in 1985–1998 Model control (ESC), but generally followed on report showed overall fatality Year Passenger Cars and 1986–97 Model Year from the first paper except that curb LTVs. Report No. DRI–TR–05–01. Torrance, CA: weight is not fit and fuel economy is 190 Kahane, C. J. (2010). ‘‘Relationships Between Dynamic Research, Inc.; Van Auken, R.M., and Fatality Risk, Mass, and Footprint in Model Year Zellner, J. W. (2011). ‘‘Updated Analysis of the used as a surrogate. 1991–1999 and Other Passenger Cars and LTVs,’’ Effects of Passenger Vehicle Size and Weight on The UMTRI study provided a number Final Regulatory Impact Analysis: Corporate Safety,’’ NHTSA Workshop on Vehicle Mass-Size- of useful suggestions that Kahane Average Fuel Economy for MY 2012–MY 2016 Safety, Washington, February 25, 2011, http:// Passenger Cars and Light Trucks. Washington, DC: www.nhtsa.gov/staticfiles/rulemaking/pdf/MSS/ considered in updating his 2011 _ National Highway Traffic Safety Administration, MSSworkshop VanAuken.pdf analysis, and that have been pp. 464–542, available at http://www.nhtsa.gov/ 192 http://www.nhtsa.gov/fuel-economy. incorporated into the safety effects staticfiles/rulemaking/pdf/cafe/CAFE_2012-2016_ 193 75 FR 25324 (May 7, 2010); the discussion of estimates for the current rulemaking. FRIA_04012010.pdf. planned statistical analyses is on pp. 25395–25396.

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rates per vehicle miles traveled (VMT), 1999 has been the increase in crossover effectiveness of electronic stability by vehicles’ mass and footprint, for the utility vehicles (CUV), which are SUVs control (ESC) in reduction the number current on-road vehicle fleet. The basic of unibody construction, often but not of fatalities in rollover crashes and analytical method used for the 2011 always built upon a platform shared crashes with a stationary object. The NHTSA report is the same as in with passenger cars. CUVs have blurred annual target population of fatalities or NHTSA’s 2010 report: Cross-sectional the distinction between cars and trucks. the annual fatality distribution analyses of the effect of mass and The new analysis treats CUVs and baseline 196 was not decreased in the footprint reductions on the societal minivans as a separate vehicle class, period between 2017 and 2025 for the fatality rate per billion vehicle miles of because they differ in some respects safety statistics analysis, but is taken travel (VMT), while controlling for from pickup-truck-based LTVs and in into account later in the Volpe model driver age and gender, vehicle type, other respects from passenger cars. In analysis, since all vehicles in the future vehicle safety features, crash times and the 2010 report, the many different will be equipped with ESC.197 locations, and other factors. Separate types of LTVs were combined into a logistic regression models are run for single analysis and NHTSA believes that For the 2011 report, vehicles are now three types of vehicles and nine types of this may have made the analyses too grouped into five classes rather than crashes. Societal fatality rates include complex and might have contributed to four: passenger cars (including both 2- occupants of all vehicles in the crash, as some of the uncertainty in the results. door and 4-door cars) are split in half by well as non-occupants, such as The new database has accurate VMT median weight; CUVs and minivans; pedestrians and cyclists. NHTSA’s 2011 estimates, derived from a file of and truck-based LTVs, which are also Report 194 analyzes MY 2000–2007 cars odometer readings by make, model, and split in half by median weight of the and LTVs in CY 2002–2008 crashes. model year recently developed by R.L. model year 2000–2007 vehicles. Table Fatality rates were derived from FARS Polk and purchased by NHTSA.195 For II–12 presents the estimated percent data, 13 State crash files, and the 2011 report, the relative distribution increase in U.S. societal fatality risk per registration and mileage data from R.L. of crash types has been changed to ten billion VMT for each 100-pound Polk. reflect the projected distribution of reduction in vehicle mass, while The most noticeable change in MY crashes during the period from 2017 to holding footprint constant, for each of 2000–2007 vehicles from MY 1991– 2025, based on the estimated the five classes of vehicles.

Only the 1.44 percent risk increase in significant. There are non-significant lighter truck-based LTVs, and non- the lighter cars is statistically increases in the heavier cars and the significant societal benefits for mass

194 Kahane, C. J. (2011). ‘‘Relationships Between ‘NHTSA–2010–0152’ where it says ‘‘enter keyword annual fatality distribution baseline in the Kahane Fatality Risk, Mass, and Footprint in Model Year or ID’’ and then clicking on ‘‘Search.’’ analysis. 2000–2007 Passenger Cars and LTVs,’’ July 2011. 195 In the 1991–1999 data base, VMT was 197 In the Volpe model, NHTSA assumed that the The report is available in the NHTSA docket, estimated only by vehicle class, based on NASS safety trend would result in 12.6 percent reduction NHTSA–2010–0152. You can access the docket at CDS data. between 2007 and 2020 due to the combination of 196 http://www.regulations.gov/#!home by typing MY 2004–2007 vehicles with fatal crashes ESC, new safety standard, and behavior changes occurred in CY 2004–2008 are selected as the anticipated.

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reduction in CUVs, minivans, and the societal effect of mass reduction while time frame, some of the lighter make- heavier truck-based LTVs. Based on maintaining footprint, if any, is small. models were discontinued; many these results, potential combinations of MY 2000–2007 vehicles of all types models were redesigned to be heavier mass reductions that maintain footprint are heavier and larger than their MY and larger; and consumers more often and are proportionately somewhat 1991–1999 counterparts. The average selected stretched versions such as crew higher for the heavier vehicles may be mass of passenger cars increased by 5 cabs in their new-vehicle purchases. safety-neutral or better as point percent from 2000 to 2007 and the It is interesting to compare the new estimates and, in any case, unlikely to average mass of pickup trucks increased results to NHTSA’s 2010 analysis of MY significantly increase fatalities. The by 19 percent. Other types of vehicles 1991–1999 vehicles in CY 1995–2000, primarily non-significant results are not became heavier, on the average, by especially the new point estimate to the due to a paucity of data, but because the intermediate amounts. There are several ‘‘actual regression result scenario’’ in reasons for these increases: during this the 2010 report:

The new results are directionally the lighter cars, safety benefit in the heavier weaker at both ends. (The agencies do same as in 2010: fatality increase in the LTVs, but the effects may have become not consider this conclusion to be

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definitive because of the relatively wide However, in some types of crashes, of mass reductions on the order of 10– confidence bounds of the estimates.) especially first event rollovers and 20 percent, if they occur in the future. The fatality increase in the lighter cars impacts with fixed objects, mass e. Report by Tom Wenzel, LBNL, ‘‘An tapered off from 2.21 percent to 1.44 reduction is usually not harmful and Assessment of NHTSA’s Report percent while the societal benefit of often beneficial, because the lighter ‘Relationships Between Fatality Risk, mass reduction in the heaviest LTVs vehicles respond more quickly to Mass, and Footprint in Model Year diminished from 1.90 percent to 0.39 braking and steering and are often more 2000–2007 Passenger Cars and LTVs’’ ’, percent and is no longer statistically stable because their center of gravity is 2011 significant. lower. Offsetting that benefit is the The agencies believe that the changes continuing historical tendency of lighter DOE contracted with Tom Wenzel of Lawrence Berkeley National Laboratory may be due to a combination of both and smaller vehicles to be driven less to conduct an assessment of NHTSA’s changes in the characteristics of newer well—although it continues to be updated 2011 study of the effect of mass vehicles and revisions to the analysis. unknown why that is so, and to what NHTSA believes, above all, that several and footprint reductions on U.S. fatality extent, if any, the lightness or smallness light, small car models with poor safety risk per vehicle miles traveled, and to of the vehicle contributes to people performance were discontinued by 2000 provide an analysis of the effect of mass driving it less safely. or during 2000–2007. Also, the and footprint reduction on casualty risk tendency of light, small vehicles to be The estimates of the model are per police-reported crash, using driven poorly is not as strong as it used formulated for each 100-pound independent data from thirteen states. to be—perhaps in part because safety reduction in mass; in other words, if The assessment has been completed and improvements in lighter and smaller risk increases by 1 percent for 100 reviewed by NHTSA and EPA staff, and vehicles have made some good drivers pounds reduction in mass, it would a draft final version is included in the more willing to buy them. Both agencies increase by 2 percent for a 200-pound docket of today’s rulemaking; the believe that at the other end of the reduction, and 3 percent for a 300- separate analysis of crash data from weight/size spectrum, blocker beams pound reduction (more exactly, 2.01 thirteen states will be completed and and other voluntary compatibility percent and 3.03 percent, because the included in the docket shortly. Both improvements in LTVs, as well as effects work like compound interest). reports will be peer reviewed by outside compatibility-related self-protection Confidence bounds around the point experts. improvements to cars, have made the estimates will grow wider by the same The LBNL report replicates Kahane’s heavier LTVs less aggressive in proportions. analysis for NHTSA, using the same collisions with lighter vehicles data and methods, and in many cases (although the effect of mass disparity The regression results are best suited using the same SAS programs. The remains). This report’s analysis of CUVs to predict the effect of a small change in Wenzel report finds that although mass and minivans as a separate class of mass, leaving all other factors, including reduction in lighter (less than 3,106 lbs) vehicles may have relieved some footprint, the same. With each cars leads to a statistically significant inaccuracies in the 2010 regression additional change from the current 1.44% increase in fatality risk per results for LTVs. Interestingly, the new environment, the model may become vehicle miles travelled (VMT), the actual-regression results are quite close somewhat less accurate and it is increase is small. He tests this result for to the previous report’s ‘‘lower-estimate difficult to assess the sensitivity to sensitivity to changes in specifications scenario,’’ which was an attempt to additional mass reduction greater than of the regression models and what data adjust for supposed inaccuracies in 100 pounds. The agencies recognize that are used. In addition Wenzel shows that some regressions and for a seemingly the light-duty vehicle fleet in the 2017– there is a wide range in fatality rates by excessive trend toward higher crash 2025 timeframe will be different than vehicle model for models that have the rates in smaller and lighter cars. the 2000–2007 fleet analyzed for this same mass, even after accounting for The principal difference between the study. Nevertheless, one consideration differences in drivers’ age and gender, heavier vehicles, especially truck-based provides some basis for confidence. safety features installed, and crash times LTVs, and the lighter vehicles, This is NHTSA’s fourth evaluation of and locations. This section summarizes especially passenger cars, is that mass the effects of mass reduction and/or the results of the Wenzel assessment of reduction has a different effect in downsizing, comprising databases the most recent NHTSA analysis. collisions with another car or LTV. ranging from MY 1985 to 2007. The The LBNL report highlights the effect When two vehicles of unequal mass results of the four studies are not of the other driver, vehicle, and crash collide, the delta V is higher in the identical, but they have been consistent control variables, in addition to the lighter vehicle, in the same proportion up to a point. During this time period, effect of mass and footprint reduction, as the mass ratio. As a result, the fatality many makes and models have increased on risk. Some of the other variables risk is also higher. Removing some mass substantially in mass, sometimes as NHTSA included in its regression from the heavy vehicle reduces delta V much as 30–40 percent.198 If the models have much larger effects on in the lighter vehicle, where fatality risk statistical analysis has, over the past fatality risk than mass or footprint is high, resulting in a large benefit, years, been able to accommodate mass reduction. For example, the models offset by a small penalty because delta increases of this magnitude, perhaps it indicate that a 100-lb increase in the V increases in the heavy vehicle, where will also succeed in modeling the effects mass of a lighter car results in a 1.44% fatality risk is low—adding up to a net reduction in fatality risk; this is the societal benefit. Removing some mass largest estimated effect of changes in 198 For example, one of the most popular models from the lighter vehicle results in a large of small 4-door sedans increased in curb weight vehicle mass, and the only one that is penalty offset by a small benefit— from 1,939 pounds in MY 1985 to 2,766 pounds in statistically significant. For comparison adding up to net harm. These MY 2007, a 43 percent increase. A high-sales mid- this reduction in fatality risk could also considerations drive the overall result: size grew from 2,385 to 3,354 pounds (41%); be achieved by a 13% increase in 4-door a best-selling pickup truck from 3,390 to 4,742 fatality increase in the lighter cars, pounds (40%) in the basic model with 2-door cab sedans equipped with ESC. reduction in the heavier LTVs, and little and rear-wheel drive; and a popular minivan from The 1.44% increase in risk from effect in the intermediate groups. 2,940 to 3,862 pounds (31%). reducing mass in the lighter cars was

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tested for sensitivity changes in the First, NHTSA ran a sensitivity model reduction on risk is that a standard specification of, or the data used in, the specification, where footprint is not statistic to measure the extent to which regression models. For example, using held constant, but rather allowed to vary the variables in the model explain the the current distribution of crashes, as mass varies (i.e. NHTSA ran a range in risk, equivalent to the R2≤ rather than adjusting the distribution to regression model which includes mass statistic in a linear regression model, that expected after full adoption of ESC, but not footprint). If the does not exist. (SAS does generate a reduces the effect to 1.18%; excluding multicollinearity was so great that pseudo-R2 value for logistic regression the calendar year variables from the including both variables in the same models; in almost all of the NHTSA model, which may be weakening the model gave misleading results, regression models this value is less than modeled benefits of vehicle safety removing footprint from the model 0.10). For this reason LBNL conducted technologies, reduces the effect to could give mass coefficients five or an analysis of risk versus mass by 1.39%; and including vehicle make in more percentage points different than vehicle model. LBNL used the results of the model increases the effect to 1.81%. keeping it in the model. NHTSA’s the NHTSA logistic regression model to The results also are sensitive to the sensitivity test indicates that when predict the number of fatalities expected selection of data to include in the footprint is allowed to vary with mass, after accounting for all vehicle, driver, analysis: Excluding bad drivers the effect of mass reduction on risk and crash variables included in the increases the effect to 2.03%, while increases from 1.44% to 2.64% for NHTSA regression model except for excluding crashes involving alcohol or lighter cars, and from a non-significant vehicle weight and footprint. LBNL then drugs increases the effect to 1.66%, and 0.47% to a statistically-significant plotted expected fatality risk per VMT 1.94% for heavier cars (changes of less by vehicle model against the mass of including sports, police, and all-wheel than two percentage points); however, each model, and analyzed the change in drive cars increases the effect to 1.64%. the effect of mass reduction on light risk as mass increases, as well as how Finally, changing the definition of risk trucks is unchanged, and is still not much of the change in risk was also affects the result for lighter cars: statistically significant for CUVs/ explained by all of the variables Using the number of fatalities per minivans. included in the model. induced exposure crash reduces the ¥ Second, NHTSA conducted a The analysis indicates that, after effect to 0.24% (that is, a 0.24% stratification analysis of the effect of accounting for all the variables, risk reduction in risk), while using the mass reduction on risk by dividing does decrease as mass increases; number of fatal crashes (rather than total vehicles into deciles based on their however, risk and mass are not strongly fatalities) per VMT increases the effect footprint, and running a separate correlated, with the R2 ranging from to 1.84%. These sensitivity tests, except regression model for each vehicle and 0.33 for CUVs to less than 0.15 for all one, changed the estimated coefficient crash type, for each footprint decile (3 other vehicle types (as shown in Figure by less than 1 percentage point, which vehicle types times 9 crash types times x). This means that, on average, risk is within its statistical confidence 10 deciles equals 270 regressions). This decreases as mass increases, but the bounds of 0.29 to 2.59 percent and may analysis estimates the effect of mass variation in risk among individual be considered compatible with the reduction on risk separately for vehicles vehicle models is stronger than the baseline result. Using two or more with similar footprint. The analysis trend in risk from light to heavy variables that are strongly correlated in indicates that mass reduction does not vehicles. For fullsize (i.e. 3/4- and 1-ton) the same regression model (referred to consistently increase risk across all pickups, risk increases as mass as multicollinearity) can lead to footprint deciles for any combination of increases, with an R2 of 0.43, consistent inaccurate results. However, the vehicle type and crash type. Mass with NHTSA’s basic regression results correlation between vehicle mass and reduction increases risk in a majority of for the heavier LTVs (societal risk footprint may not be strong enough to footprint deciles for 13 of the 27 crash increases as mass increases). LBNL also cause serious concern. Experts suggest and vehicle combinations, but few of examined the relationship between that a correlation of greater than 0.60 (or these increases are statistically residual risk, that is the remaining a variance inflation factor of 2.5) raises significant. On the other hand, mass unexplained risk after accounting for all concern about multicollinearity.199 The reduction decreases risk in a majority of vehicle, driver and crash variables, and correlation between vehicle mass and footprint deciles for 9 of the 27 crash mass, and found similarly poor footprint ranges from over 0.80 for four- and vehicle combinations; in some cases correlations. This implies that the door sedans, pickups, and SUVs, to these risk reductions are large and remaining factors not included in the about 0.65 for two-door cars and CUVs, statistically significant.200 If reducing regression model that account for the to 0.26 for minivans; when pickups and vehicle mass while maintaining observed range in risk by vehicle model SUVs are considered together, the footprint inherently leads to an increase also are not correlated with mass. (LBNL correlation between mass and footprint in risk, the coefficients on mass found similar results when the analysis is 0.65. Wenzel notes that the 2011 reduction should be more consistently compared risk to vehicle footprint.) NHTSA report recognizes that the positive, and with a larger R2, across the Figure II–2 indicates that some ‘‘near’’ multicollinearity between mass 27 vehicle/crash combinations, than vehicles on the road today have the and footprint may not be strong enough shown in the analysis. These findings same, or lower, fatality rates than to invalidate the results from a are consistent with the conclusion of the models that weigh substantially more, and are substantially larger in terms of regression model that includes both basic regression analyses, namely, that footprint. After accounting for variables. In addition, NHTSA included the effect of mass reduction while differences in driver age and gender, several analyses to address possible holding footprint constant, if any, is safety features installed, and crash times effects of the near-multicollinearity small. and locations, there are numerous between mass and footprint. One limitation of using logistic regression to estimate the effect of mass examples of different models with similar weight and footprint yet widely 199 Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy 200 And in 5 of the 27 crash and vehicle varying fatality rates. The variation of Standards; Final Rule, April 1, 2010, Section II.G.3., combinations, mass reduction increased risk in fatality rates among individual models page 139. 5 deciles and decreased risk in 5 deciles. may reflect differences in vehicle

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design, differences in the drivers who limited data for individual models. some of the changes in its regression choose such vehicles (beyond what can Differences in vehicle design can, and results between the 2003 study and the be explained by demographic variables already do, mitigate some safety 2011 study are due to the redesign or such as age and gender), and statistical penalties from reduced mass; this is removal of certain smaller and lighter variation of fatality rates based on consistent with NHTSA’s opinion that models of poor design.

f. Based on this information, what do maintaining footprint. Therefore, it is it publicly available, we are hopeful that the agencies consider to be the current possible that the analysis for 2000–2007 that aspect of the problem has been state of statistical research on vehicle vehicles may not be fully representative resolved, and moreover, the UMTRI mass and safety? of the vehicles that will be on the road review suggested that differences in data The agencies believe that statistical in 2017 and beyond. were probably less significant than the analysis of historical crash data While we recognize that statistical agencies may have thought. Statistical continues to be an informative and analysis of historical crash data may not analyses of historical crash data should important tool in assessing the potential be the only way to think about the be examined for potential safety impacts of the proposed future relationship between vehicle multicollinearity issues. The agencies standards. The effect of mass reduction mass and safety, we also recognize that will continue to monitor issues with while maintaining footprint is a other assessment methods are also multicollinearity in our analyses, and complicated topic and there are open subject to uncertainties, which makes hope that outside researchers will do questions whether future designs will statistical analysis of historical data an the same. And finally, based on the reduce the historical correlation important starting point if employed findings of the independent review, the between weight and size. It is important mindfully and recognized for how it can agencies continue to be confident that to note that while the updated database be useful and what its limitations may Kahane’s analysis is one of the best for represents more current vehicles with be. the purpose of analyzing potential safety technologies more representative of NHTSA undertook the independent effects of future CAFE and GHG vehicles on the road today, they still do review of statistical studies and held the standards. UMTRI concluded that not fully represent what vehicles will be mass-safety workshop in February 2011 Kahane’s approach is valid, and Kahane on the road in the 2017–2025 timeframe. in order to help the agencies sort has continued and refined that approach The vehicles manufactured in the 2000– through the ongoing debates over what for the current analysis. The NHTSA 2007 timeframe were not subject to statistical analysis of historical data is 2011 statistical fatality report finds footprint-based fuel economy standards. actually telling us. Previously, the directionally similar but less The agencies expect that the attribute- agencies have assumed that differences statistically significant relationships based standards will likely facilitate the in results were due in part to between vehicle mass, size, and design of vehicles such that inconsistent databases; by creating the footprint, as discussed above. Based on manufacturers may reduce mass while updated common database and making these findings, the agencies believe that

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in the future, fatalities due to mass standards, and have acted accordingly can mitigate the observed relationship reduction will be best reduced if mass in developing the proposed standards. between vehicle mass and safety in the reduction is concentrated in the historical data. 4. How do the agencies think heaviest vehicles. NHTSA considers Along with the California Air technological solutions might affect the part of the reason that more recent Resources Board (CARB), the agencies safety estimates indicated by the have initiated several projects to historical data shows a dampened effect statistical analysis? in the relationship between mass estimate the maximum potential for reduction and safety is that all vehicles, As mass reduction becomes a more advanced materials and improved including traditionally lighter ones, important technology option for designs to reduce mass in the MY 2017– grew heavier during that timeframe manufacturers in meeting future CAFE 2021 timeframe, while continuing to (2000s). As lighter vehicles might and GHG standards, manufacturers will meeting safety regulations and become more prevalent in the fleet again invest more and more resources in maintaining functionality of vehicles. over the next decade, it is possible that developing increasingly lightweight Another NHTSA-sponsored study will the trend could strengthen again. On the vehicle designs that meet their needs for estimate the effects of these design other hand, extensive use of new manufacturability and the public’s need changes on overall fleet safety. lightweight materials and optimized for vehicles that are also safe, useful, A. NHTSA has awarded a contract to vehicle design may weaken the affordable, and enjoyable to drive. There Electricore, with EDAG and George relationship. Future updated analyses are many different ways to reduce mass, Washington University (GWU) as will be necessary to determine how the as discussed in Chapter 3 of this TSD subcontractors, to study the maximum effect of mass reduction on risk changes and in Sections II, III, and IV of the feasible amount of mass reduction for a over time. preamble, and a considerable amount of mid-size car—specifically, a Honda information is available today on Accord. The study tore down a MY 2011 Both agencies agree that there are lightweight vehicle designs currently in Honda Accord, studied each component several identifiable safety trends already production and that may be able to be and sub-system, and then redesigned in place or expected to occur in the put into production in the rulemaking each component and sub-system trying foreseeable future that are not accounted timeframe. Discussion of lightweight to maximize the amount of mass for in the study, since they were not in material designs from NHTSA’s reduction with technologies that are effect at the time that the vehicles in workshop is presented below. considered feasible for 200,000 units per question were manufactured. For Besides ‘‘lightweighting’’ technologies year production volume during the time example, there are two important new themselves, though, there are a number frame of this rulemaking. Electricore safety standards that have already been of considerations when attempting to and its sub-contractors are consulting issued and will be phasing in after MY evaluate how future technological industry leaders and experts for each 2008. FMVSS No. 126 (49 CFR developments might affect the safety component and sub-system when § 571.126) requires electronic stability estimates indicated by the statistical deciding which technologies are control in all new vehicles by MY 2012, analysis. As discussed in the first part feasible. Electricore and its sub- and the upgrade to FMVSS No. 214 of this chapter, for example, careful contractors are also building detailed (Side Impact Protection, 49 CFR changes in design and/or materials used CAD/CAE/powertrain models to § 571.214) will likely result in all new might mitigate some of the potential validate vehicle safety, stiffness, NVH, vehicles being equipped with head- decrease in safety from mass durability, drivability and powertrain curtain air bags by MY 2014. reduction—through improved performance. For OEM-supplied parts, a Additionally, we anticipate continued distribution of crash pulse energy, etc.— detailed cost model is being built based improvements in driver (and passenger) but these techniques can sometimes on a Technical Cost Modeling (TCM) behavior, such as higher safety belt use cause other problems, such as increased approach developed by the rates. All of these may tend to reduce crash forces on vehicle occupants that Massachusetts Institute of Technology the absolute number of fatalities. On the have to be mitigated, or greater (MIT) Materials Systems Laboratory’s other hand, as crash avoidance aggressivity against other vehicles in research201 to estimate the costs to technology improves, future statistical crashes. Manufacturers may develop OEMs for manufacturing parts. The cost analysis of historical data may be new and better restraints—air bags, seat will be broken down into each of the complicated by a lower number of belts, etc.—to protect occupants in operations involved in the crashes. In summary, the agencies have lighter vehicles in crashes, but NHTSA’s manufacturing; for example, for a sheet relied on the coefficients in the Kahane current safety standards for restraint metal part, production costs will be 2011 study for estimating the potential systems are designed based on the estimated from the blanking of the steel safety effects of the proposed CAFE and current fleet, not the yet-unknown coil to the final operation to fabricate GHG standards for MYs 2017–2025, future fleet. The agency will need to the component. Total costs are then based on our assumptions regarding the monitor trends in the crash data to see categorized into fixed cost, such as amount of mass reduction that could be whether changes to the safety standards tooling, equipment, and facilities; and used to meet the standards in a cost- (or new safety standards) become variable costs such as labor, material, effective way without adversely necessary. Manufacturers are also energy, and maintenance. These costs affecting safety. Section E below increasingly investigating a variety of will be assessed through an interactive discusses the methodology used by the crash avoidance technologies—ABS, process between the product designer, agencies in more detail; while the electronic stability control (ESC), lane manufacturing engineers, and cost results of the safety effects analysis are departure warnings, vehicle-to-vehicle less significant than the results in the (V2V) communications—that, as they 201 Frank Field, Randolph Kirchain and Richard MY 2012–2016 final rule, the agencies become more prevalent in the fleet, are Roth, Process cost modeling: Strategic engineering still believe that any statistically expected to reduce the number of and economic evaluation of materials technologies, significant results warrant careful overall crashes, and fatal, crashes. Until JOM Journal of the Minerals, Metals and Materials Society, Volume 59, Number 10, 21–32. Available consideration of the assumptions about these technologies are present in the at http://msl.mit.edu/pubs/docs/Field_ appropriate levels of mass reduction on fleet in greater numbers, however, it KirchainCM_StratEvalMatls.pdf (last accessed Aug. which to base future CAFE and GHG will be difficult to assess whether they 22, 2011).

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analysts. For OEM-purchased parts, the D. NHTSA has contracted with George Chrysler, and Frank Field of the cost will be estimated by consultation Washington University (GWU) to build Massachusetts Institute of Technology. with experienced cost analysts and Tier a fleet simulation model to study the The second session explored what 1 system suppliers. This study will help impact and relationship of light-weight degree of weight reduction and to inform the agencies about the feasible vehicle design and injuries and occupant protection are feasible from amount of mass reduction and the cost fatalities. This study will also include technical, economic, and manufacturing associated with it. NHTSA intends to an evaluation of potential perspectives. Field emphasized that have this study completed and peer countermeasures to reduce any safety technical feasibility alone does not reviewed before July 2012, in time for it concerns associated with lightweight constitute feasibility in the context of to play an integral role in informing the vehicles. NHTSA will include three vehicle mass reduction. Sufficient final rule. light-weighted vehicle designs in this material production capacity and viable B. EPA has awarded a similar contract study: the one from Electricore/EDAG/ manufacturing processes are essential to to FEV, with EDAG and Monroe & GWU mentioned above, one from Lotus economic feasibility. Both Kamiji and Associates, Inc. as subcontractors, to Engineering funded by California Air German noted that both good materials study the maximum feasible amount of Resource Board for the second phase of and good designs will be necessary to mass reduction for a mid-size CUV the study, evaluating mass reduction reduce fatalities. For example, German (cross over vehicle) specifically, a levels around 35 percent of total vehicle cited the examples of hexagonally Toyota Venza. The study tears down a mass, and two funded by EPA and the structured aluminum columns, such as MY 2010 vehicle, studies each International Council on Clean used in the Honda Insight, that can component and sub-system, and then Transportation (ICCT). This study will improve crash absorption at lower mass, and of high-strength steel components redesigns each component and sub- help to inform the agencies about the that can both reduce weight and system trying to maximize the amount possible safety implications for light- improve safety. Kamiji made the point of mass reduction with technologies that weight vehicle designs and the that widespread mass reduction will are considered feasible for high volume appropriate counter-measures,202 if reduce the kinetic energy of all crashes production for a 2017 MY vehicle. FEV applicable, for these designs, as well as which should produce some beneficial in coordination with EDAG is building the feasible amounts of mass reduction. detailed CAD/CAE/powertrain models effect. All of these analyses are expected to be Summers described NHTSA’s plans to validate vehicle safety, stiffness, finished and peer-reviewed before July for a model to estimate fleetwide safety NVH, durability, drivability and 2012, in time to inform the final rule. effects based on an array of vehicle-to- powertrain performance to assess the vehicle computational crash simulations safety of this new design. This study a. NHTSA workshop on vehicle mass, size and safety of current and anticipated vehicle builds upon the low development (20% designs. In particular, three mass reduction) design in the 2010 As stated above, in section C.2, on computational models of lightweight Lotus Engineering study ‘‘An February 25, 2011, NHTSA hosted a vehicles are under development. They Assessment of Mass Reduction workshop on mass reduction, vehicle are based on current vehicles that have Opportunities for a 2017–2020 Model size, and fleet safety at the Headquarters been modified to substantially reduce Year Vehicle Program’’. This study of the US Department of Transportation mass. The most ambitious was the ‘‘high builds upon the low development (20% in Washington, DC. The purpose of the development’’ derivative of a Toyota mass reduction) design in the 2010 workshop was to provide the agencies Venza developed by Lotus Engineering Lotus Engineering study ‘‘An with a broad understanding of current and discussed by Mr. Peterson. Its Assessment of Mass Reduction research in the field and provide structure currently contains about 75% Opportunities for a 2017–2020 Model stakeholders and the public with an aluminum, 12% magnesium, 8% steel, Year Vehicle Program’’. This study will opportunity to weigh in on this issue. and 5% advanced composites. Peterson undergo a peer review. EPA intends to The agencies also created a public expressed confidence that the design have this study completed and peer docket to receive comments from had the potential to meet federal safety reviewed before July 2012, in time for it interested parties that were unable to standards. Nusholtz emphasized that to play an integral role in informing the attend. The presentations were divided computational crash simulations final rule. into two sessions that addressed the two involving more advanced materials were C. California Air Resources Board expansive sets of issues. The first less reliable than those involving (CARB) has awarded a contract to Lotus session explored statistical evidence of traditional metals such as aluminum Engineering, to study the maximum the roles of mass and size on safety, and and steel. feasible amount of mass reduction for a is summarized in section C.2. The Nusholtz presented a revised data- mid-size CUV (cross over vehicle) second session explored the engineering based fleet safety model in which specifically, a Toyota Venza. The study realities of structural crashworthiness, important vehicle parameters were will concentrate on the Body-in-White occupant injury and advanced vehicle modeled based on trends from current and closures in the high development design, and is summarized here. The NCAP crash tests. For example, crash design (40% mass reduction) in the speakers in the second session included pulses and potential intrusion for a Lotus Engineering study cited above. Stephen Summers of NHTSA, Gregg particular size vehicle were based on The study will provide an updated Peterson of Lotus Engineering, Koichi existing distributions. Average occupant design with crash simulation, detailed Kamiji of Honda, John German of the deceleration was used to estimate injury costing and manufacturing feasibility of International Council on Clean risk. Through a range of simulations of these two systems for a MY2020 high Transportation (ICCT), Scott Schmidt of modified vehicle fleets, he was able to volume production vehicle. This study the Alliance of Automobile estimate the net effects of various design will undergo a peer review. EPA intends Manufacturers, Guy Nusholtz of strategies for lighter weight vehicles, to have this study completed and peer such as various scaling approaches for reviewed before July 2012, in time for it 202 Countermeasures could potentially involve vehicle stiffness or intrusion. The to play an integral role in informing the improved front end structure, knee bags, seat approaches were selected based on final rule. ramps, buckle pretensioners, and others. engineering requirements for modified

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vehicles. Transition from the current Thus, for example, the widespread manufacturers and to predict both cost fleet was considered. He concluded that implementation of high-volume and fuel consumption/emissions protocols resulting in safer transitions composite or magnesium structures impacts of improved CAFE/GHG (e.g., removing more mass from heavier might be problematic in the short or standards. We note that the amount of vehicles with appropriate stiffness medium term when compared to mass reduction selected for this scaling according to a 3⁄2 power law) relatively transparent aluminum or high rulemaking is based on our assumptions were not generally consistent with those strength steel implementations. about how much is technologically that provide the greatest reduction in Regulatory changes will affect how feasible without compromising safety. GHG production. these tradeoffs are made and these risks While we are confident that German discussed several important are managed. manufacturers will build safe vehicles, points on the future of mass reduction. Koichi Kamiji presented data showing we cannot predict with certainty that Similar to Kahane’s discussion of the in increased use of high strength steel in they will choose to reduce mass in difficulties of isolating the impact of their Honda product line to reduced exactly the ways that the agencies have weight reduction, German stated that vehicle mass and increase vehicle other important variables, such as safety. He stated that mass reduction is analyzed in response to the standards. vehicle design and compatibility factors, clearly a benefit in 42% of all fatal In the event that manufacturers must be held constant in order for size crashes because absolute energy is ultimately choose to reduce mass and/ or weight impacts to be quantified in reduced. He followed up with slides or footprint in ways not analyzed or statistical analyses. He presented results showing the application of certain anticipated by the agencies, the safety that, compared to driver, driving optimized it designs can improve safety effects of the rulemaking may likely influences, and vehicle design even when controlling for weight and differ from the agencies’ estimates. influences, the safety impacts of size size. NHTSA utilized the 2011 Kahane and weight are small and difficult to A philosophical theme developed that study relationships between weight and quantify. He noted that several explored the ethics of consciously safety, expressed as percent changes in scenarios, such as rollovers, greatly allowing the total societal harm fatalities per 100-pound weight favored the occupants of smaller and associated with mass reduction to lighter cars once a crash occurred. He reduction while holding footprint approach the anticipated benefits of constant. However, as mentioned pointed out that if size and design are enhanced safety technologies. Although maintained, lower weight should previously, there are several identifiable some participants agreed that there may safety trends already occurring, or translate into a lower total crash force. eventually be specific fatalities that expected to occur in the foreseeable He thought that advanced material would not have occurred without future, that are not accounted for in the designs have the potential to downsizing, many also agreed that study. For example, the two important ‘‘decouple’’ the historical correlation safety strategies will have to be adapted between vehicle size and weight, and to the reality created by consumer new safety standards that were felt that effective design and driver choices, and that ‘‘We will be ok if we discussed above for electronic stability attributes may start to dominate size and let data on what works—not wishful control and head curtain airbags, have weight issues in future vehicle models. thinking—guide our strategies.’’ already been issued and began phasing Other presenters noted industry’s in after MY 2008. The recent shifts in perspective of the effect of incentivizing 5. How have the agencies estimated market shares from pickups and SUVs weight reduction. Field highlighted the safety effects for the proposed to cars and CUVs may continue, or complexity of institutional changes that standards? accelerate, if gasoline prices remain may be necessitated by weight a. What was the agencies’ methodology high, or rise further. The growth in reduction, including redesign of for estimating safety effects for the vehicle miles travelled may continue to material and component supply chains proposed standards? stagnate if the economy does not and manufacturing infrastructure. Schmidt described an industry As explained above, the agencies improve, or gasoline prices remain high. perspective on the complicated consider the 2011 statistical analysis of And improvements in driver (and decisions that must be made in the face historical crash data by NHTSA to passenger) behavior, such as higher of regulatory change, such as evaluating represent the best estimates of the safety belt use rates, may continue. All goals, gains, and timing. potential relationship between mass of these will tend to reduce the absolute Field and Schmidt noted that the reduction and fatality increases in the number of fatalities in the future. The introduction of technical innovations is future fleet. This section discusses how agency estimated the overall change in generally an innate development the agencies used NHTSA’s 2011 fatalities by calendar year after adjusting process involving both tactical and analysis to calculate specific estimates for ESC, Side Impact Protection, and strategic considerations that balance of safety effects of the proposed other Federal safety standards and desired vehicle attributes with standards, based on the analysis of how behavioral changes projected through economic and technical risk. In the much mass reduction manufacturers this time period. The smaller percent absence of challenging regulatory might use to meet the proposed changes in risk from mass reduction requirements, a substantial technology standards. (from the 2011 NHTSA analysis), change is often implemented in stages, Neither the proposed CAFE/GHG coupled with the reduced number of starting with lower volume pilot standards nor the agencies’ analysis baseline fatalities, results in smaller production before a commitment is mandates mass reduction, or mandates absolute increases in fatalities than made to the infrastructure and supply that mass reduction occur in any those predicted in the 2010 rulemaking. chain modifications necessary for specific manner. However, mass inclusion on a high-volume production reduction is one of the technology NHTSA examined the impacts of model. Joining, damage applications available to the identifiable safety trends over the characterization, durability, repair, and manufacturers and a degree of mass lifetime of the vehicles produced in significant uncertainty in final reduction is used by both agencies’ each model year. An estimate of these component costs are also concerns. models to determine the capabilities of impacts was contained in a previous

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agency report.203 The impacts were road fleet used for this particular safety modeling runs varying the maximum estimated on a year-by-year basis, but analysis and year 2025. amount of mass reduction applied to could be examined in a combined To estimate the amount of mass each subclass in order to identify a fashion. Using this method, we estimate reduction to apply in the rulemaking combination that achieved a high level a 12.6 percent reduction in fatality analysis, the agencies considered fleet of overall fleet mass reduction while not levels between 2007 and 2020 for the safety effects for mass reduction. As adversely affecting overall fleet safety. combination of safety standards and previously discussed and shown in These maximum levels of mass behavioral changes anticipated (ESC, Table II–15, the Kahane 2011 study reduction for each subclass were then shows that applying mass reduction to head-curtain air bags, and increased belt used in the CAFE model for the CUVs and light duty trucks will use). Since the same safety standards are rulemaking analysis. The agencies generally decrease societal fatalities, taking effect in the same years, the while applying mass reduction to believe that mass reduction of up to 20 estimates derived from applying passenger cars will increase fatalities. percent is feasible on light trucks, CUVs 204 NHTSA fatality percentages to a The CAFE model uses coefficients from and minivans, but that less mass baseline of 2007 fatalities were thus the Kahane study along with the mass reduction should be implemented on multiplied by 0.874 to account for reduction level applied to each vehicle other vehicle types to avoid increases in changes that NHTSA believes will take model to project societal fatality effects societal fatalities. For this proposal, place in passenger car and light truck in each model year. NHTSA used the NHTSA used the mass reduction levels safety between the 2007 baseline on- CAFE model and conducted iterative shown in Table II–15.

For the CAFE model, these II–16 shows the amount of mass percentage mass reduction levels for a percentages apply to a vehicle’s total reduction in pounds for these typical vehicle weight in each subclass. weight, including the powertrain. Table

203 Countermeasures could potentially involve 2007. See Table 4 comparing 2020 to 2007 (37,906/ 204 When applying mass reduction, NHSTA improved front end structure, knee bags, seat 43,363 = 12.6% reduction (1¥.126 = .874). Since capped the maximum amount of mass reduction to ramps, buckle pretensioners, and others. 2008 was a recession year, it does not seem 20 percent for any individual vehicle class. The 20 appropriate to use that as a baseline. We believe Blincoe, L. and Shankar, U., ‘‘The Impact of percent cap is the maximum amount of mass this same ratio should hold for this analysis which reduction the agencies believe to be feasible in MYs Safety Standards and Behavioral Trends on Motor should compare 2025 to 2008. Thus, we are Vehicle Fatality Rates,’’ DOT HS 810 777, January inclined to continue to use the same ratio. 2017–2025 time frame.

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After applying the mass reduction to take more weight out of the heavy MY 2017–2025 of 4 fatalities, broken up levels in the CAFE model, Table II–17 LTVs, CUVs, and minivans than out of into an increase of 61 fatalities in shows the results of NHTSA’s safety other vehicles. As the negative passenger cars and 56 decrease in analysis separately for each model coefficients only appear for LTVs greater fatalities in light trucks. NHTSA also year.205 These are estimated increases or than 4,594 lbs., CUVs, and minivans, a analyzed the results for different decreases in fatalities over the lifetime statistically improvement in safety can regulatory alternatives in Chapter IX of of the model year fleet. A positive only occur if more weight is taken out its PRIA; the difference in the results by number means that fatalities are of these vehicles than passenger cars or alternative depends upon how much projected to increase, a negative number smaller light trucks. Combining weight reduction is used in that (indicated by parentheses) means that passenger car and light truck safety alternative and the types and sizes of fatalities are projected to decrease. The estimates for the proposed standards vehicles that the weight reduction results are significantly affected by the results in an increase in fatalities over applies to. assumptions put into the Volpe model the lifetime of the nine model years of

205 NHTSA has changed the definitions of a 2 wheel drive SUVs have been redefined as different definitions between Tables IX–1 and IX– passenger car and light truck for fuel economy passenger cars instead of light trucks. The Kahane 2 (which use the old definitions) and Table IX–3 purposes between the time of the Kahane 2003 2011 analysis continues with the definitions used (which uses the new definitions). analysis and this proposed rule. About 1.4 million in the Kahane 2003 analysis. Thus, there are

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Using the same coefficients from the model year assumed in the Omega positive number means that fatalities are 2011 Kahane study, EPA used the model, Table II–18 shows the results of projected to increase; a negative number OMEGA model to conduct a similar EPA’s safety analysis separately for each means that fatalities are projected to analysis. After applying these model year. These are estimated decrease. For details, see the EPA RIA percentage increases to the estimated increases or decreases in fatalities over Chapter 3. weight reductions per vehicle size by the lifetime of the model year fleet. A

b. Why might the real-world effects be potentially mitigate the safety effects improved to deal with higher crash less than or greater than what the estimated for this rulemaking: pulses in lighter vehicles; crash agencies have calculated? lightweight vehicles could be designed avoidance technologies could reduce to be both stronger and not more the number of overall crashes; roofs As discussed above the ways in which aggressive; restraint systems could be could be strengthened to improve safety future technological advances could

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in rollovers. As also stated above, passenger cars were below 41 square comments, along with any revisions to however, while we are confident that feet, and due to the overall lower level the report in response to that review, manufacturers will strive to build safe of utility of these vehicles, and the will also be docketed there. Depending vehicles, it will be difficult for both the engineering challenges involved in on the results of the peer review, our agencies and the industry to know with ensuring that these vehicles meet all calculation of safety effects for the final certainty ahead of time how crash applicable federal motor vehicle safety rule will also be revised accordingly. trends will change in the future fleet as standards (FMVSS), we expect a The agencies will also consider any lightweighted vehicles become more significant increase in this segment of comments received on the proposed prevalent. Going forward, we will have the market in the future is unlikely. rule, and determine at that time whether to continue to monitor the crash data as Please see Chapter 2 of the Draft Joint and how our estimates should be well as changes in vehicle weight TSD for additional discussion. changed in response to those comments. relative to what we expect. We seek comment on the Additional studies published by the Additionally, we note that the total appropriateness of the overall analytic agencies or other independent amount of mass reduction used in the assumption that the attribute-based researchers as previously discussed will agencies’ analysis for this rulemaking aspect of the proposed standards will also be considered, along with any other were chosen based on our assumptions have no effect on the overall relevant information. about how much is technologically distribution of vehicle footprints. feasible without compromising safety. Notwithstanding the agencies current III. EPA Proposal for MYs 2017–2025 Again, while we are confident that judgment that such deliberate Greenhouse Gas Vehicle Standards manufacturers are motivated to build reengineering or production shift are A. Overview of EPA Rule safe vehicles, we cannot predict with unlikely as pure compliance strategies, certainty that they will choose to reduce both agencies are considering the 1. Introduction mass in exactly the ways that the potential future application of vehicle Soon after the completion of the agencies have analyzed in response to choice models, and anticipate that doing successful model years (MYs) 2012– the standards. In the event that so could result in estimates that market 2016 rulemaking in May 2010, the manufacturers ultimately choose to shifts induced by changes in vehicle President, with support from the auto reduce mass and/or footprint in ways prices and fuel economy levels could manufacturers, requested that EPA and not analyzed by the agencies, the safety lead to changes in fleet’s footprint NHTSA work to extend the National effects of the rulemaking may likely distribution. However, neither agency is Program to MYs 2017–2025 light duty differ from the agencies’ estimates. currently able to include vehicle choice vehicles. The agencies were requested to The agencies acknowledge the modeling in our analysis. develop ‘‘a coordinated national proposal does not prohibit As discussed in Chapter 2 of the Draft program under the CAA (Clean Air Act) manufacturers from redesigning Joint TSD, the agencies note that the and the EISA (Energy Independence and vehicles to change wheelbase and/or standard is flat for vehicles smaller than Security Act of 2007) to improve fuel track width (footprint). However, as 41 square feet and that downsizing in efficiency and to reduce greenhouse gas NHTSA explained in promulgating this category could help achieve overall emissions of passenger cars and light- MY2008–2011 light truck CAFE compliance, if the vehicles are desirable duty trucks of model years 2017– standards and MY2011 passenger car to consumers. The agencies note that 2025.’’ 207 EPA’s proposal grows directly and light truck CAFE standards, and as less than 10 percent of MY2008 out of our work with NHTSA and CARB the agencies jointly explained in passenger cars were below 41 square in developing such a continuation of the promulgating MY2012–2016 CAFE and feet, and due to the overall lower level National Program. This proposal GHG standards, the agencies believes of utility of these vehicles, and the provides important benefits to society such engineering changes are significant engineering challenges involved in and consumers in the form of reduced enough to be unattractive as a measure ensuring that these vehicles meet all emissions of greenhouse gases (GHGs), to undertake solely to reduce applicable federal motor vehicle safety reduced consumption of oil, and fuel compliance burdens. Similarly, the standards (FMVSS), we expect a savings for consumers, all at reasonable agencies acknowledge that a significant increase in this segment of costs. It provides industry with the manufacturer could, without actually the market in the future is unlikely. important certainty and leadtime reengineering specific vehicles to Please see Chapter 2 of the Draft Joint needed to implement the technology increase footprint, shift production TSD for additional discussion. changes that will achieve these benefits, toward those that perform well as part of a harmonized set of federal compared to their respective footprint- c. Do the agencies plan to make any based targets. However, NHTSA and, changes in these estimates for the final requirements. Acting now to address the more recently NHTSA and EPA have rule? standards for MYs 2017–2025 will allow for the important continuation of the previously explained, because such As discussed above, the agencies have production shifts would run counter to National Program that started with MYs based our estimates of safety effects due 2012–2016. market demands, they would also be to the proposed standards on Kahane’s competitively unattractive. Based on EPA is proposing GHG emissions 2011 report. That report is currently standards for light-duty vehicles, light- this regulatory design, the analysis undergoing peer review and is docketed assumes this proposal will not have duty trucks, and medium-duty for public review;206 the peer review passenger vehicles (hereafter light either of the effects described above. comments and response to peer review As discussed in Chapter 2 of the Draft vehicles) for MYs 2017 through 2025. Joint TSD, the agencies note that the These vehicle categories, which include 206 Kahane, C. J. (2011). ‘‘Relationships Between cars, sport utility vehicles, minivans, standard is flat for vehicles smaller than Fatality Risk, Mass, and Footprint in Model Year 41 square feet and that downsizing in 2000–2007 Passenger Cars and LTVs,’’, July 2011. and pickup trucks used for personal this category could help achieve overall The report is available in the NHTSA docket, NHTSA–2010–0152. You can access the docket at 207 The Presidential Memorandum is found at: compliance, if the vehicles are desirable http://www.regulations.gov/#!home by typing http://www.whitehouse.gov/the-press-office/ to consumers. The agencies note that ‘NHTSA–2010–0152’ where it says ‘‘enter keyword presidential-memorandum-regarding-fuel- less than 10 percent of MY2008 or ID’’ and then clicking on ‘‘Search.’’ efficiency-standards.

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transportation, are responsible for monthly fuel savings more than offsets both naturally occurring and almost 60% of all U.S. transportation the higher monthly payment due to the anthropogenic. The primary GHGs of related GHG emissions. higher incremental vehicle cost. concern that are directly emitted by If finalized, this proposal would be The proposed standards are designed human activities include carbon the second EPA rule to regulate light to allow full consumer choice, in that dioxide, methane, nitrous oxide, vehicle GHG emissions under the Clean they are footprint-based, i.e., larger hydrofluorocarbons, perfluorocarbons, Air Act (CAA), building upon the GHG vehicles have higher absolute GHG and sulfur hexafluoride. emissions standards for MYs 2012–2016 emissions targets and smaller vehicles These gases, once emitted, remain in that were established in 2010,208 and have lower absolute GHG emissions the atmosphere for decades to centuries. the third rule to regulate GHG emissions targets. While the GHG emissions targets They become well mixed globally in the from the transportation sector.209 do become more stringent each year, the atmosphere and their concentrations Combined with the standards already in emissions targets have been selected to accumulate when emissions exceed the effect for MYs 2012–2016, the proposed allow compliance by vehicles of all rate at which natural processes remove standards would result in MY 2025 light sizes and with current levels of vehicle GHGs from the atmosphere. The heating vehicles emitting approximately one- attributes such as utility, size, safety, effect caused by the human-induced half of the GHG emissions of MY 2010 and performance. Accordingly, these buildup of GHGs in the atmosphere is vehicles and would represent the most proposed standards are projected to very likely the cause of most of the significant federal action ever taken to allow consumers to choose from the observed global warming over the last reduce GHG emissions (and improve same mix of vehicles that are currently 50 years. The key effects of climate fuel economy) in the U.S. in the marketplace. change observed to date and projected From a societal standpoint, the Section I above provides a to occur in the future include, but are proposed GHG emissions standards are comprehensive overview of the joint not limited to, more frequent and projected to save approximately 2 EPA/NHTSA proposal, including the intense heat waves, more severe billion metric tons of GHG emissions history and rationale for a National wildfires, degraded air quality, heavier and 4 billion barrels of oil over the Program that allows manufacturers to and more frequent downpours and lifetimes of those vehicles sold in MYs build a single fleet of light vehicles that flooding, increased drought, greater sea 2017–2025. EPA estimates that fuel can satisfy all federal and state level rise, more intense storms, harm to savings will far outweigh higher vehicle requirements for GHG emissions and water resources, continued ocean costs, and that the net benefits to society fuel economy, the level and structure of acidification, harm to agriculture, and will be in the range of $311 billion (at the proposed GHG emissions and harm to wildlife and ecosystems. A 7% discount rate) to $421 billion (3% corporate average fuel economy (CAFE) more in depth explanation of observed discount) over the lifetimes of those standards, the compliance flexibilities and projected changes in GHGs and vehicles sold in MYs 2017–2025. Just in proposed to be available to climate change, and the impact of calendar year 2040 alone, after the on- manufacturers, the mid-term evaluation, climate change on health, society, and road vehicle fleet has largely turned and a summary of the costs and benefits the environment is included in Section over to vehicles sold in MY 2025 and of the GHG and CAFE standards based III.F below. later, EPA projects GHG emissions on a ‘‘model year lifetime analysis.’’ Mobile sources represent a large and savings of 462 million metric tons, oil In this Section III, EPA provides more growing share of U.S. GHG emissions savings of 2.63 million barrels per day, detailed information about EPA’s and include light-duty vehicles, light- duty trucks, medium duty passenger and net benefits of $144 billion using proposed GHG emissions standards. vehicles, heavy duty trucks, airplanes, the $22/ton CO2 social cost of carbon After providing an overview of key railroads, marine vessels and a variety value. information in this section (III.A), EPA of other sources. In 2007, all mobile EPA estimates that these proposed discusses the proposed standards (III.B); sources emitted 30% of all U.S. GHGs, standards will save consumers money. the vehicles covered by the standards, and have been the source of the largest Higher costs for new technology, sales various compliance flexibilities absolute increase in U.S. GHGs since taxes, and insurance will add, on available to manufacturers, and a mid- 1990. Transportation sources, which do average in the first year, about $2100 for term evaluation (III.C); the feasibility of not include certain off highway sources consumers who buy a new vehicle in the proposed standards (III.D); such as farm and construction MY 2025. But those consumers who provisions for certification, compliance, drive their MY 2025 vehicle for its equipment, account for 27% of U.S. and enforcement (III.E); the reductions GHG emissions, and motor vehicles entire lifetime will save, on average, in GHG emissions projected for the $5200 (7% discount rate) to $6600 (3% (CAA section 202(a)), which include proposed standards and the associated light-duty vehicles, light-duty trucks, discount) in fuel savings, for a net effects of these reductions (III.F); the lifetime savings of $3000–$4400. For medium-duty passenger vehicles, impact of the proposal on non-GHG heavy-duty trucks, buses, and those consumers who purchase their emissions and their associated effects new MY 2025 vehicle with cash, the motorcycles account for 23% of total (III.G); the estimated cost, economic, U.S. GHGs. discounted fuel savings will offset the and other impacts of the proposal Light duty vehicles emit carbon higher vehicle cost in less than 4 years, (III.H); and various statutory and dioxide, methane, nitrous oxide and and fuel savings will continue for as executive order issues (III.I). hydrofluorocarbons. Carbon dioxide long as the consumer owns the vehicle. 2. Why is EPA proposing this Rule? (CO2) is the end product of fossil fuel Those consumers that buy a new vehicle combustion. During combustion, the with a 5-year loan will benefit from a a. Light Duty Vehicle Emissions carbon stored in the fuels is oxidized monthly cash flow savings of $12 (or Contribute to Greenhouse Gases and the and emitted as CO2 and smaller about $140 per year), on average, as the Threat of Climate Change amounts of other carbon compounds. Greenhouse gases (GHGs) are gases in Methane (CH4) emissions are a function 208 75 FR 25324 (May 7, 2010). 209 76 FR 57106 (September 15, 2011) established the atmosphere that effectively trap of the methane content of the motor GHG emission standards for heavy-duty vehicles some of the Earth’s heat that would fuel, the amount of hydrocarbons and engines for model years 2014–2018. otherwise escape to space. GHGs are passing uncombusted through the

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engine, and any post-combustion c. EPA’s Endangerment and Cause or projections are based on technical control of hydrocarbon emissions (such Contribute Findings for Greenhouse assumptions by EPA about various as catalytic converters). Nitrous oxide Gases Under Section 202(a) of the Clean matters, including the mix of cars and (N2O) (and nitrogen oxide (NOX)) Air Act trucks, as well as the mix of vehicle emissions from vehicles and their On December 15, 2009, EPA footprint values, in the fleet in varying engines are closely related to air-fuel published its findings that elevated years. It is possible that the actual CO2 ratios, combustion temperatures, and atmospheric concentrations of GHGs are emissions values will be either higher or the use of pollution control equipment. reasonably anticipated to endanger the lower than the EPA projections. In each of these tables, the column For example, some types of catalytic public health and welfare of current and ‘‘Projected CO Compliance Target’’ converters installed to reduce motor future generations, and that emissions of 2 represents our projected fleetwide vehicle NO , carbon monoxide (CO) and GHGs from new motor vehicles X average CO compliance target value hydrocarbon (HC) emissions can contribute to this air pollution. Further 2 information on these findings may be based on the proposed CO2-footprint promote the formation of N2O. curve standards as well as the projected Hydrofluorocarbons (HFC) are found at 74 FR 66496 (December 15, 2009) and 75 FR 49566 (Aug. 13, 2010). mixes of cars and trucks and vehicle progressively replacing footprint levels. This Compliance Target chlorofluorocarbons (CFC) and 3. What is EPA proposing? represents the projected fleetwide hydrochlorofluorocarbons (HCFC) in a. Light-Duty Vehicle, Light-Duty Truck, average of the projected standards for these vehicles’ cooling and refrigeration and Medium-Duty Passenger Vehicle the various manufacturers. systems as CFCs and HCFCs are being Greenhouse Gas Emission Standards The column(s) under ‘‘Incentives’’ phased out under the Montreal Protocol and Projected Emissions Levels represent the emissions impact of the and Title VI of the CAA. There are proposed multiplier incentive for EV/ multiple emissions pathways for HFCs EPA is proposing tailpipe carbon PHEV/FCVs and the proposed pickup with emissions occurring during dioxide (CO2) standards for cars and truck incentives. These incentives allow charging of cooling and refrigeration light trucks based on the CO2 emissions- manufacturers to meet their Compliance systems, during operations, and during footprint curves for cars and light trucks Targets with CO2 emissions levels decommissioning and disposal. that are shown above in Section I.B.3 slightly higher than they would and below in Section III.B. These curves otherwise have to be, but do not reflect b. Basis for Action Under the Clean Air establish different CO2 emissions targets actual real-world CO2 emissions Act for each unique car and truck footprint reductions. As such they reduce the value. Generally, the larger the vehicle emissions reductions that the CO2 Section 202(a)(1) of the Clean Air Act footprint, the higher the corresponding standards would be expected to achieve. (CAA) states that ‘‘the Administrator vehicle CO2 emissions target. Vehicle The column ‘‘Projected Achieved shall by regulation prescribe (and from CO2 emissions will be measured over CO2’’ is the sum of the CO2 Compliance time to time revise) * * * standards the EPA city and highway tests. Under Target and the value(s) in the applicable to the emission of any air this proposal, various incentives and ‘‘Incentive’’ columns. This Achieved pollutant from any class or classes of credits are available for manufacturers CO2 value is a better reflection of the new motor vehicles * * *, which in his to demonstrate compliance with the CO2 emissions benefits of the standards, judgment cause, or contribute to, air standards. See Section I.B for a since it accounts for the incentive pollution which may reasonably be comprehensive overview of both the programs. One incentive that is not anticipated to endanger public health or EPA CO2 emissions-footprint standard reflected in these tables is the 0 gram welfare.’’ The Administrator has found curves and the various compliance per mile compliance value for EV/ that the elevated concentrations of a flexibilities that are proposed to be PHEV/FCVs. The 0 gram per mile value group of six GHGs in the atmosphere available to the manufacturers in accurately reflects the tailpipe CO2 gram may reasonably be anticipated to meeting the EPA tailpipe CO2 standards. per mile achieved by these vehicles; endanger public health and welfare, and EPA projects that the proposed however, the use of this fuel does that emissions of GHGs from new motor tailpipe CO2 emissions-footprint curves impact the overall GHG reductions vehicles and new motor vehicle engines would yield a fleetwide average light associated with the proposed standards contribute to this air pollution. vehicle CO2 emissions compliance due to fuel production and distribution- target level in MY 2025 of 163 grams per related upstream GHG emissions which As a result of these findings, section mile, which would represent an average are projected to be greater than the 202(a) requires EPA to issue standards reduction of 35 percent relative to the upstream GHG emissions associated applicable to emissions of that air projected average light vehicle CO2 level with gasoline from oil. The combined pollutant, and authorizes EPA to revise in MY 2016. On average, car CO2 impact of the 0 gram per mile and them from time to time. This preamble emissions would be reduced by about 5 multiplier incentive for EV/PHEV/FCVs describes the proposed revisions to the percent per year, while light truck CO2 on overall program GHG emissions is current standards to control emissions emissions would be reduced by about discussed in more detail below in of CO2 and HFCs from new light-duty 3.5 percent per year from MY 2017 Section III.C.2. motor vehicles.210 For further through 2021, and by about 5 percent The columns under ‘‘Credits’’ discussion of EPA’s authority under per year from MY 2022 through 2025. quantify the projected CO2 emissions section 202(a), see Section I.D. of the The following three tables, Table III– credits that we project manufacturers preamble. 1 through Table III–3, summarize EPA’s will achieve through improvements in projections of what the proposed air conditioner refrigerants and 210 EPA is not proposing to amend the substantive standards would mean in terms of efficiency. These credits reflect real standards adopted in the 2012–2016 light-duty projected CO2 emissions reductions for world emissions reductions, so they do vehicle rule for N2O and CH4, but is proposing passenger cars, light trucks, and the not raise the levels of the Achieved CO2 revisions to the options that manufacturers have in meeting the N2O and CH4 standards, and to the overall fleet combining passenger cars values, but they do allow manufacturers timeframe for manufacturers to begin measuring and light trucks for MYs 2017–2025. It to comply with their compliance targets N2O emissions. See Section III.B below. is important to emphasize that these with 2-cycle test CO2 emissions values

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higher than otherwise. One other credit technologies. The off-cycle credits, like emissions values that manufacturers program that could similarly affect the A/C credits, reflect real world would have to achieve in order to be 2-cycle CO2 values is the off-cycle credit reductions, so they would not change able to comply with the proposed program, but it is not included in this the CO2 Achieved values. standards. This value is the sum of the table due to the uncertainty inherent in The column ‘‘Projected 2-cycle CO2’’ projected fleetwide credit, incentive, 211 projecting the future use of these is the projected fleetwide 2-cycle CO2 and Compliance Target values.

211 For MY 2016, the Temporary Leadtime estimated the impact of this credit in MY 2016 to have not included this in the following tables for Allowance Alternative Standards are available to be 0.1 gram/mile. Due to the small magnitude, we the MY 2016 base year. manufacturers. In the MYs 2012–2016 rule, we

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BILLING CODE 4910–59–C economy than laboratory test results The real world tailpipe CO2 emissions Table III–4 shows the projected real used to determine compliance with the projections in Table III–4 are calculated world CO2 emissions and fuel economy standards, which are performed under starting with the projected 2-cycle CO2 values associated with the proposed tightly controlled conditions. There are emissions values in Table III–1 through CO2 standards. These real world many assumptions that must be made Table III–3, subtracting the air estimates, similar to values shown on for these projections, and real world conditioner efficiency credits, and then new vehicle labels, reflect the fact that CO2 emissions and fuel economy multiplying by a factor of 1.25. The 1.25 the way cars and trucks are operated in performance can vary based on many factor is an approximation of the ratio the real world generally results in factors. of real world CO2 emissions to 2-cycle higher CO2 emissions and lower fuel test CO2 emissions for the fleet in the

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recent past. It is not possible to know associated with future projections of real world fuel economy. The real world the appropriate factor for future vehicle this factor are discussed in TSD 4. Air fuel economy value is calculated by fleets, as this factor will depend on conditioner efficiency credits were dividing 8887 grams of CO2 per gallon many factors such as technology subtracted from the 2-cycle CO2 of gasoline by the real world tailpipe performance, driver behavior, climate emissions values as air conditioning CO2 emissions value. conditions, fuel composition, etc. Issues efficiency improvements will increase

As discussed both in Section I and provisions are not expected to change reductions from cars than reflected in later in this Section III, EPA either the emissions reductions achieved by Table III–1 (lower CO2 gram/miles already has adopted or is proposing the standards, but should significantly values) and less reductions from trucks provisions for averaging, banking, and reduce the cost of achieving those than reflected in Table III–2 (higher CO2 trading of credits, that allow annual reductions. The tables above do not gram/mile values). Credit transfers credits for a manufacturer’s over- reflect the year to year impact of these between cars and trucks would not be compliance with its unique fleet-wide provisions. For example, EPA expects expected to change the results for the average standard, carry-forward and that many manufacturers may generate combined fleet, reflected in Table III–3. carry-backward of credits, the ability to credits by over complying with the The proposed rule would also exclude transfer credits between a standards for cars, and transfer such from coverage a limited set of vehicles: manufacturer’s car and truck fleets, and credits to its truck fleet. Table III–1 emergency and police vehicles, and credit trading between manufacturers. (cars) and Table III–2 (trucks) do not vehicles manufactured by small EPA is proposing a one-time carry- reflect such transfers. If on an industry businesses. As discussed in Section III.B forward of any credits such that any wide basis more credits are transferred below, these exclusions have very credits generated in MYs 2010–2016 can from cars to trucks than vice versa, you limited impact on the total GHG be used through MY 2021. These would expect to achieve greater emissions reductions from the light-

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duty vehicle fleet. We also do not in fact occur in calendar year 2017, the discounted to the first year of each anticipate significant impacts on total benefits associated with MY 2017 model year, then summed up across all GHG emissions reductions from the vehicles will be split among all the model years. With a 3% discount rate, proposed provisions allowing small calendar years from 2017 through the cumulative incremental vehicle volume manufacturers to petition EPA calendar year during which the last MY technology cost for MYs 2017–2025 for alternative standards. See Section 2017 vehicle would be retired. vehicles is $140 billion, fuel savings is III.B.5 below. Table III–5 provides a summary of the $444 billion, other monetized benefits are $117 billion, and program net b. Environmental and Economic GHG emissions and oil savings benefits are projected to be $421 billion. Benefits and Costs of EPA’s Standards associated with the lifetime operation of all the vehicles sold in each model year. Using a 7% discount rate, the projected i. Model Year Lifetime Analysis Cumulatively, for the nine model years program net benefits are $311 billion. Section I.C provides a comprehensive from 2017 through 2025, the proposed As discussed previously, EPA discussion of the projected benefits and standards are projected to save recognizes that some of these same costs associated with the proposed MYs approximately 2 billion metric tons of benefits and costs are also attributable to 2017–2025 GHG and CAFE standards GHG emissions and 4 billion barrels of the CAFE standard contained in this based on a ‘‘model year lifetime’’ oil. joint proposal, although the GHG analysis, i.e., the benefits and costs Table III–6 provides a summary of the program achieves greater reductions of associated with the lifetime operation of most important projected economic both GHG emissions and petroleum. the new vehicles sold in these nine impacts of the proposed GHG emissions More details associated with this model model years. It is important to note that standards based on this model year year lifetime analysis of the proposed while the incremental vehicle costs lifetime analytical approach. These GHG standards are presented in associated with MY 2017 vehicles will monetized dollar values are all Sections III.F and III.H.

ii. Calendar Year Analysis the projected impacts in this calendar would grow to 547 million metric tons In addition to the model year lifetime year analysis beyond calendar year 2025 of GHG savings and 3.12 million barrels analysis projections summarized above, reflect vehicles sold in model years after of oil per day by calendar year 2050. EPA also performs a ‘‘calendar year’’ 2025 (e.g., most of the benefits in Program net benefits are projected to be analysis that projects the environmental calendar year 2040 would be due to $18 billion in calendar year 2025, and economic impacts associated with vehicles sold after MY 2025). growing to $198 billion in calendar year the proposed tailpipe CO2 standards Table III–7 provides a summary of the 2050. Program net benefits over the 34- during specific calendar years out to most important projected benefits and year period from 2017 through 2050 are 2050. This calendar year approach costs of the proposed EPA GHG projected to have a net present value in reflects the timeframe when the benefits emissions standards based on this 2012 of $600 billion (7% discount rate) would be achieved and the costs calendar year analysis. In calendar year to $1.4 trillion (3% discount rate). incurred. Because the EPA tailpipe CO2 2025, EPA projects GHG savings of 151 More details associated with this emissions standards will remain in million metric tons and oil savings of calendar year analysis of the proposed effect unless and until they are changed, 0.83 million barrels per day. These

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GHG standards are presented in Sections III.F and III.H. BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C economic impacts across the nationwide consumers who own and drive MY 2025 iii. Consumer Analysis light vehicle fleet. EPA has also light vehicles over their lifetimes. projected the average impact of the Table III–8 shows, on average, several The model year lifetime and calendar proposed GHG standards on individual year analytical approaches discussed key consumer impacts associated with above aggregate the environmental and the proposed tailpipe CO2 standard for

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MY 2025 vehicles. Some of these factors $2200. For all of the consumers who beyond this payback period, the vehicle are dependent on the assumed discount drive MY 2025 light-duty vehicles, the will save money for the consumer. For factors, and this table uses the same 3% proposed standards are projected to a consumer that buys a new vehicle and 7% discount factors used yield a net savings of $3000 (7% with a 5-year loan, the monthly cash throughout this preamble. EPA uses discount rate) to $4400 (3% discount) flow savings of $12 (or about $140 per AEO2011 fuel price projections of $3.25 over the lifetime of the vehicle, as the year) shows that the consumer would per gallon in calendar year 2017, rising discounted lifetime fuel savings of benefit immediately as the monthly fuel to $3.54 per gallon in calendar year $5200–$6600 is 2.4 to 3 times greater savings more than offsets the higher 2025 and $3.85 per gallon in calendar than the $2200 incremental lifetime monthly payment due to the higher year 2040. vehicle cost to the consumer. incremental first-year vehicle cost. EPA projects that the new technology Of course, many vehicles are owned necessary to meet the proposed MY by more than one consumer. The The final entries in Table III–8 show 2025 standard would add, on average, payback period and monthly cash flow the CO2 and oil savings that would be an extra $1950 (including markup) to approaches are two ways to evaluate the associated with the MY 2025 vehicles the sticker price of a new MY 2025 economic impact of the MY 2025 on average, both on a lifetime basis and light-duty vehicle. Including higher standard on those new car buyers who in the first full year of operation. On vehicle sales taxes and first-year do not own the vehicle for its entire average, a consumer who owns a MY insurance costs, the projected lifetime. Projected payback periods of 2025 vehicle for its entire lifetime is incremental first-year cost to the 3.7–3.9 years means that, for a consumer projected to emit 20 fewer metric tons consumer is about $2100 on average. that buys a new vehicle with cash, the of CO2 and consume 2200 fewer gallons The projected incremental lifetime discounted fuel savings for that of gasoline due to the proposed vehicle cost to the consumer, reflecting consumer would more than offset the standards. higher insurance premiums over the life incremental lifetime vehicle cost in 4 BILLING CODE 4910–59–P of the vehicle, is, on average, about years. If the consumer owns the vehicle

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BILLING CODE 4910–59–C that these standards are feasible in the achieved. EPA projects, for example, 4. Basis for the GHG Standards Under lead time provided. EPA and NHTSA that the fuel savings over the life of the Section 202(a) have carefully evaluated the vehicles will more than offset the effectiveness of individual technologies increase in cost associated with the EPA has significant discretion under as well as the interactions when technology used to meet the standards. section 202(a) of the Act in how to technologies are combined. EPA As explained in Section III.D.6 below, structure the standards that apply to the projects that manufacturers will be able EPA has also investigated potential emission of the air pollutant at issue to meet the standards by employing a standards both more and less stringent here, the aggregate group of six GHGs, wide variety of technologies that are than those being proposed and has as well as to the content of such already commercially available. EPA’s rejected them. Less stringent standards standards. See generally 74 FR at analysis also takes into account certain would forego emission reductions 49464–65. EPA statutory authority flexibilities that will facilitate which are feasible, cost effective, and under section 202(a)(1) of the Clean Air compliance. These flexibilities include cost feasible, with short consumer Act (CAA) is discussed in more detail in averaging, banking, and trading of payback periods. EPA judges that the Section I.D of the preamble. In this various types of credits. For a few very proposed standards are appropriate and rulemaking, EPA is proposing a CO2 small volume manufacturers, EPA is preferable to more stringent alternatives tailpipe emissions standard that proposing to allow manufacturers to based largely on consideration of cost— provides for credits based on reductions petition for alternative standards. both to manufacturers and to of HFCs, as the appropriate way to issue EPA, as a part of its joint technology consumers—and the potential for overly standards applicable to emissions of the analysis with NHTSA, has performed aggressive penetration rates for single air pollutant, the aggregate group what we believe is the most advanced technologies relative to the of six GHGs. EPA is not proposing to comprehensive federal vehicle penetration rates seen in the proposed change the methane and nitrous oxide technology analysis in history. We standards, especially in the face of standards already in place (although carefully considered the cost to unknown degree of consumer EPA is proposing certain changes to the manufacturers of meeting the standards, acceptance of both the increased costs compliance mechanisms for these estimating piece costs for all candidate and the technologies themselves. standards as explained in Section III.B technologies, direct manufacturing EPA has also evaluated the impacts of below). EPA is not setting any standards costs, cost markups to account for these standards with respect to for perfluorocarbons or sulfur manufacturers’ indirect costs, and reductions in GHGs and reductions in hexafluoride, as they are not emitted by manufacturer cost reductions oil usage. For the lifetime of the model motor vehicles. The following is a attributable to learning. In estimating year 2017–2025 vehicles we estimate summary of the basis for the proposed manufacturer costs, EPA took into GHG reductions of approximately GHG standards under section 202(a), account manufacturers’ own practices 2 billion metric tons and fuel reductions which is discussed in more detail in the such as making major changes to vehicle of about 4 billion barrels of oil. These following portions of Section III. technology packages during a planned are important and significant With respect to CO2 and HFCs, EPA redesign cycle. EPA then projected the reductions. EPA has also analyzed a is proposing attribute-based light-duty average cost across the industry to variety of other impacts of the car and truck standards that achieve employ this technology, as well as standards, ranging from the standards’ large and important emissions manufacturer-by-manufacturer costs. effects on emissions of non-GHG reductions of GHGs. EPA has evaluated EPA considers the per vehicle costs pollutants, impacts on noise, energy, the technological feasibility of the estimated by this analysis to be within safety and congestion. EPA has also standards, and the information and a reasonable range in light of the quantified the cost and benefits of the analysis performed by EPA indicates emissions reductions and benefits standards, to the extent practicable. Our

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analysis to date indicates that the purposes of setting standards under b. EPA’s Plans for Further Standards for overall quantified benefits of the section 202(a) are commercially Light Vehicle Criteria Pollutants and standards far outweigh the projected available and already being utilized to a Gasoline Fuel Quality costs. We estimate the total net social limited extent across the fleet, or will In the May 21, 2010 Presidential benefits (lifetime present value soon be commercialized by one or more Memorandum, in addition to addressing discounted to the first year of the model major manufacturers. The vast majority GHGs and fuel economy, the President year) over the life of MY 2017–2025 of the emission reductions that would also requested that EPA examine its vehicles to be $421 billion with a result from this rule would result from broader motor vehicle air pollution 3% discount rate and $311 billion with the increased use of these technologies. control program. The President a 7% discount rate. EPA also recognizes that this rule would requested that ‘‘[t]he Administrator of Under section 202(a), EPA is called enhance the development and the EPA review for adequacy the current upon to set standards that provide commercialization of more advanced nongreenhouse gas emissions adequate lead-time for the development technologies, such as PHEVs and EVs regulations for new motor vehicles, new and application of technology to meet and strong hybrids as well. In this motor vehicle engines, and motor the standards. EPA’s standards satisfy technological context, there is no clear vehicle fuels, including tailpipe this requirement given the present cut line that indicates that only one emissions standards for nitrogen oxides existence of the technologies on which projection of technology penetration and air toxics, and sulfur standards for the proposed rule is predicated and the gasoline. If the Administrator of the EPA substantial lead times afforded under could potentially be considered feasible for purposes of section 202(a), or only finds that new emissions regulations are the proposal (which by MY2025 allow required, then I request that the for multiple vehicle redesign cycles and one standard that could potentially be considered a reasonable balancing of the Administrator of the EPA promulgate so affords opportunities for adding such regulations as part of a technologies in the most cost efficient factors relevant under section 202(a). EPA therefore evaluated several comprehensive approach toward manner, see 75 FR at 25407). In setting 214 alternative standards, some more regulating motor vehicles.’’ EPA is the standards, EPA is called upon to currently in the process of conducting weigh and balance various factors, and stringent than the promulgated standards and some less stringent. an assessment of the potential need for to exercise judgment in setting additional controls on light-duty vehicle standards that are a reasonable balance See Section III.D.6 for EPA’s analysis non-GHG emissions and gasoline fuel of the relevant factors. In this case, EPA of alternative GHG emissions standards. quality. EPA has been actively engaging has considered many factors, such as in technical conversations with the cost, impacts on emissions (both GHG 5. Other Related EPA Motor Vehicle Regulations automobile industry, the oil industry, and non-GHG), impacts on oil nongovernmental organizations, the conservation, impacts on noise, energy, a. EPA’s Recent Heavy-Duty GHG states, and other stakeholders on the safety, and other factors, and has where Emissions Rulemaking potential need for new regulatory practicable quantified the costs and action, including the areas that are benefits of the proposed rule. In EPA and NHTSA recently conducted specifically mentioned in the summary, given the technical feasibility a joint rulemaking to establish a Presidential Memorandum. EPA will of the standard, the cost per vehicle in comprehensive Heavy-Duty National coordinate all future actions in this area light of the savings in fuel costs over the Program that will reduce greenhouse gas with the State of California. lifetime of the vehicle, the very emissions and fuel consumption for on- Based on this assessment, in the near significant reductions in emissions and road heavy-duty vehicles beginning in future, EPA expects to propose a in oil usage, and the significantly greater MY 2014 (76 FR 57106 (September 15, separate but related program that would, quantified benefits compared to 2011)). EPA’s final carbon dioxide in general, affect the same set of new quantified costs, EPA is confident that (CO2), nitrous oxide (N2O), and methane vehicles on the same timeline as would the standards are an appropriate and (CH4) emissions standards, along with the proposed light-duty GHG emissions reasonable balance of the factors to NHTSA’s final fuel consumption standards. It would be designed to consider under section 202(a). See standards, are tailored to each of three address air quality problems with ozone Husqvarna AB v. EPA, 254 F. 3d 195, regulatory categories of heavy-duty and PM, which continue to be serious 200 (DC Cir. 2001) (great discretion to vehicles: (1) Combination Tractors; problems in many parts of the country, balance statutory factors in considering (2) Heavy-duty Pickup Trucks and Vans; and light-duty vehicles continue to play level of technology-based standard, and and (3) Vocational Vehicles. The rules a significant role. statutory requirement ‘‘to [give include separate standards for the EPA expects that this related program, appropriate] consideration to the cost of engines that power combination tractors called ‘‘Tier 3’’ vehicle and fuel applying * * * technology’’ does not and vocational vehicles. EPA also set standards, would among other things mandate a specific method of cost hydrofluorocarbon standards to control propose tailpipe and evaporative analysis); see also Hercules Inc. v. EPA, leakage from air conditioning systems in standards to reduce non-GHG pollutants 598 F. 2d 91, 106 (DC Cir. 1978) (‘‘In combination tractors and heavy-duty from light-duty vehicles, including reviewing a numerical standard we pickup trucks and vans. volatile organic compounds, nitrogen must ask whether the agency’s numbers oxides, particulate matter, and air are within a zone of reasonableness, not The agencies estimate that the toxics. EPA’s intent, based on extensive whether its numbers are precisely combined standards will reduce CO2 interaction to date with the automobile right’’); Permian Basin Area Rate Cases, emissions by approximately 270 million manufacturers and other stakeholders, is 390 U.S. 747, 797 (1968) (same); Federal metric tons and save 530 million barrels to propose a Tier 3 program that would Power Commission v. Conway Corp., of oil over the life of vehicles sold 426 U.S. 271, 278 (1976) (same); Exxon during the 2014 through 2018 model allow manufacturers to proceed with years, providing $49 billion in net Mobil Gas Marketing Co. v. FERC, 297 214 societal benefits when private fuel The Presidential Memorandum is found at: F. 3d 1071, 1084 (DC Cir. 2002) (same). http://www.whitehouse.gov/the-press-office/ EPA recognizes that most of the savings are considered. See 76 FR at presidential-memorandum-regarding-fuel- technologies that we are considering for 57125–27. efficiency-standards.

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coordinated future product The opportunity to earn credits full size pick-up trucks that meet development plans with a full toward the fleet-wide average CO2 various efficiency performance criteria understanding of the major regulatory standards for improvements to air and/or include hybrid technology at a requirements they will be facing over conditioning systems remains in place minimum level of production volumes. the long term. This coordinated for MY 2017 and later, including These provisions are also discussed in regulatory approach would allow improvements to address both Section III.C. As discussed in those manufacturers to design their future hydrofluorocarbon (HFC) refrigerant sections, while these additional credit vehicles so that any technological losses (i.e., system leakage) and indirect provisions do not change the level of the challenges associated with meeting both CO2 emissions related to the air standards proposed for cars and trucks, the GHG and Tier 3 standards could be conditioning efficiency and load on the unlike the provisions for AC credits, efficiently addressed. engine. The CO2 standards proposed for they all support the reasonableness of It should be noted that under EPA’s cars and trucks take into account EPA’s the standards proposed for MYs 2017– current regulations, GHG emissions and projection of the average amount of 2025. CAFE compliance testing for gasoline credits expected to be generated across 1. What Fleet-wide Emissions Levels vehicles is conducted using a defined the industry. EPA is proposing several Correspond to the CO Standards? fuel that does not include any amount revisions to the air conditioning credits 2 of ethanol.215 If the certification test fuel provisions, as discussed in Section EPA is proposing standards that are is changed to some ethanol-based fuel III.C.1. projected to require, on an average through a future rulemaking, EPA The MY 2012–2016 Final Rule industry fleet wide basis, 163 grams/ would be required under EPCA to established several program elements mile of CO2 in model year 2025. The address the need for a test procedure that remain in place, where EPA is not level of 163 grams/mile CO2 would be adjustment to preserve the level of proposing significant changes. The equivalent on a mpg basis to 54.5 mpg, stringency of the CAFE standards.216 proposed standards described below if this level was achieved solely through EPA is committed to doing so in a would apply to passenger cars, light- improvements in fuel efficiency.218 219 timely manner to ensure that any duty trucks, and medium-duty For passenger cars, the proposed change in certification fuel will not passenger vehicles (MDPVs). As an footprint curves call for reducing CO2 by affect the stringency of future GHG overall group, they are referred to in this 5 percent per year on average from the emission standards. preamble as light-duty vehicles or model year 2016 passenger car standard simply as vehicles. In this preamble through model year 2025. In recognition B. Proposed Model Year 2017–2025 of manufacturers’ unique challenges in GHG Standards for Light-duty Vehicles, section, passenger cars may be referred to simply as ‘‘cars’’, and light-duty improving the GHG emissions of full- Light-duty Trucks, and Medium duty size pickup trucks as we transition from Passenger Vehicles trucks and MDPVs as ‘‘light trucks’’ or ‘‘trucks.’’ 217 the MY 2016 standards to MY 2017 and EPA is proposing new emissions EPA is not proposing changes to the later, while preserving the utility (e.g., standards to control greenhouse gases averaging, banking, and trading program towing and payload capabilities) of (GHGs) from MY 2017 and later light- elements, as discussed in Section III.B.4, those vehicles, EPA is proposing a lower duty vehicles. EPA is proposing new with the exception of our proposal for annual rate of improvement for light- emission standards for carbon dioxide a one-time carry-forward of any credits duty trucks in the early years of the (CO2) on a gram per mile (g/mile) basis generated in MY 2010–2016 to be used program. For light-duty trucks, the that will apply to a manufacturer’s fleet anytime through MY2021. The previous footprint curves call for reducing CO2 by of cars, and a separate standard that will rulemaking also established provisions 3.5 percent per year on average from the apply to a manufacturer’s fleet of trucks. for MY 2016 and later FFVs, where the model year 2016 truck standard through CO2 is the primary greenhouse gas emissions levels of these vehicles are model year 2021. EPA is also proposing resulting from the combustion of based on tailpipe emissions to change the slopes of the CO2-footprint vehicular fuels, and the amount of CO2 performance and the amount of curves for light-duty trucks from those emitted is directly correlated to the alternative fuel used. These provisions in the 2012–2016 rule, in a manner that amount of fuel consumed. EPA is remain in place without change. effectively means that the annual rate of proposing to conduct a mid-term Several provisions are being proposed improvement for smaller light-duty evaluation of the GHG standards and that allow manufacturer’s to generate trucks in model years 2017 through other requirements for MYs 2022–2025, credits for use in complying with the 2021 would be higher than 3.5 percent, as further discussed in Section III.B.3 standards or that provide additional and the annual rate of improvement for below. incentives for use of advanced larger light-duty trucks over the same EPA is not proposing changes to the technology. These include credits for time period would be lower than 3.5 CH and N O emissions standards, but 4 2 technology that reduces CO emissions percent to account for the unique is proposing revisions to the options 2 during off-cycle operation that is not challenges for improving the GHG of that manufacturers have in meeting the reasonably accounted for by the 2-cycle large light trucks while maintaining CH and N O standards, and to the 4 2 tests used for compliance purposes. EPA cargo hauling and towing utility. For timeframe for manufacturers to begin is proposing various changes to this model years 2022 through 2025, EPA is measuring N O emissions. These 2 program to streamline its use compared proposing a reduction of CO2 for light- proposed changes are not intended to to the MYs 2012–2016 program. These change the stringency of the CH and 218 4 provisions are discussed in section III.C. In comparison, the MY 2016 CO2 standard is N2O standards, but are aimed at projected to achieve a national fleet-wide average, addressing implementation concerns In addition, EPA is proposing the use of covering both cars and trucks, of 250 g/mile. 219 regarding the standards. multipliers to provide an incentive for Real-world CO2 is typically 25 percent higher the use of EVs, PHEVs, and FCVs, as and real-world fuel economy is typically 20 percent lower than the CO2 and CAFE values discussed 215 well as a specified gram/mile credit for See 40 CFR 86.113–94(a). here. The reference to CO2 here refers to CO2 216 EPCA requires that CAFE tests be determined equivalent reductions, as this level includes some from the EPA test procedures in place as of 1975, 217 GHG emissions standards would use the same reductions in emissions of greenhouse gases other or procedures that give comparable results. 49 USC vehicle category definitions used for MYs 2012– than CO2, from refrigerant leakage, as one part of 32904(c). 2016 and as are used in the CAFE program. the AC related reductions.

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duty trucks of 5 percent per year on definitions of cars and trucks as consideration of the appropriate lead- average starting from the model year NHTSA, in order to harmonize with time and engineering redesign cycles for 2021 truck standard. CAFE standards. The tables in this each manufacturer to implement the EPA’s proposed standards include section below provide overall fleet requisite emission reductions EPA’s projection of average industry average levels that are projected for both technology across its product line. Note wide CO2-equivalent emission cars and light trucks over the phase-in that MY 2025 is the final model year in reductions from A/C improvements, period which is estimated to correspond which the standards become more where the proposed footprint curve is with the proposed standards. The actual stringent. The MY 2025 CO2 standards made more stringent by an amount fleet-wide average g/mi level that would would remain in place for MY 2025 and equivalent to this projection of A/C be achieved in any year for cars and later model years, until revised by EPA credits. This projection of A/C credits trucks will depend on the actual in a future rulemaking. EPA estimates builds on the projections from MYs production for that year, as well as the that, on a combined fleet-wide national 2012–2016, with the increases in credits use of the various credit and averaging, basis, the 2025 MY proposed standards mainly due to the full penetration of banking, and trading provisions. For would require a level of 163 g/mile CO low GWP alternative refrigerant by MY example, in any year, manufacturers 2. 2021. The proposed car standards would be able to generate credits from The derivation of the 163 g/mile would begin with MY 2017, with a cars and use them for compliance with estimate is described in Section III.B.2. generally linear increase in stringency the truck standard, or vice versa. Such EPA has estimated the overall fleet-wide from MY 2017 through MY 2025 for transfer of credits between cars and CO2-equivalent emission (target) levels cars. The truck standards have a more trucks is not reflected in the table that correspond with the proposed gradual increase for MYs 2017–2020 below. In Section III.F, EPA discusses attribute-based standards, based on the then more rapidly in MY 2021. For MYs the year-by-year estimate of emissions projections of the composition of each 2021–2025, the truck standards increase reductions that are projected to be manufacturer’s fleet in each year of the in stringency generally in a linear achieved by the standards. program. Tables Table III–9 and Table fashion. EPA proposes to continue to In general, the proposed schedule of III–10 provide these target estimates for have separate standards for cars and standards acts as a phase-in to the MY each manufacturer. light trucks, and to have identical 2025 standards, and reflects BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C trucks, and the entire fleet, shown in vary over the MY 2017–2025 timeframe. These estimates were aggregated Table III–11.220 The combined fleet This fleet mix distribution can be found based on projected production volumes estimates are based on the assumption in Chapter 1 of the join TSD. into the fleet-wide averages for cars, of a fleet mix of cars and trucks that

220 Due to rounding during calculations, the estimated fleet-wide CO2-equivalent levels may vary by plus or minus 1 gram.

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As shown in Table III–11, fleet-wide feasible control technology at reasonable emissions, EPA places important weight CO2-equivalent emission levels for cars cost, considering the needed lead time on the fact that the proposed rule under the approach are projected to for this program and with proper provides a long planning horizon to decrease from 213 to 144 grams per mile consideration of manufacturer product achieve the very challenging emissions between MY 2017 and MY 2025. redesign cycles. EPA has analyzed the standards being proposed, and provides Similarly, fleet-wide CO2-equivalent feasibility of achieving the proposed manufacturers with certainty when emission levels for trucks are projected CO2 standards, based on projections of planning future products. The time- to decrease from 295 to 203 grams per the adoption of technology to reduce frame and levels for the standards are mile. These numbers do not include the emissions of CO2, during the normal expected to provide manufacturers the effects of other flexibilities and credits redesign process for cars and trucks, time needed to develop and incorporate in the program.221 The estimated taking into account the effectiveness technology that will achieve GHG achieved values can be found in Chapter and cost of the technology. The results reductions, and to do this as part of the 3 of the Regulatory Impact Analysis of the analysis are discussed in detail in normal vehicle redesign process. (RIA). Section III.D below and in the draft RIA. Further discussing of lead time, As noted above, EPA is proposing EPA also presents the overall estimated redesigns and feasibility can be found in standards that would result in costs and benefits of the car and truck Section III–D and Chapter 3 of the joint increasingly stringent levels of CO2 proposed CO2 standards in Section III.H. TSD. control from MY 2017 though MY 2025. In developing the proposal, EPA has In the MY 2012–2016 Final Rule, EPA Applying the CO2 footprint curves evaluated the kinds of technologies that established several provisions which applicable in each model year to the could be utilized by the automobile will continue to apply for the proposed vehicles (and their footprint industry, as well as the associated costs MY2017–2025 standards. Consistent distributions) expected to be sold in for the industry and fuel savings for the with the requirement of CAA section each model year produces progressively consumer, the magnitude of the GHG 202(a)(1) that standards be applicable to and oil reductions that may be achieved, more stringent estimates of fleet-wide vehicles ‘‘for their useful life,’’ CO2 CO2 emission targets. The standards and other factors relevant under the vehicle standards would apply for the achieve important CO2 emissions CAA. useful life of the vehicle. Under section reductions through the application of With respect to the lead time and cost 202(i) of the Act, which authorized the of incorporating technology Tier 2 standards, EPA established a 221 Nor do they reflect ABT. improvements that reduce GHG useful life period of 10 years or 120,000

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miles, whichever first occurs, for all procedures are the Federal Test described mathematically by a family of light-duty vehicles and light-duty Procedure (FTP or ‘‘city’’ test) and the piecewise linear functions (with respect trucks.222 This useful life was applied to Highway Fuel Economy Test (HFET or to vehicle footprint) that gradually and the MY 2012–2016 GHG standards and ‘‘highway’’ test). continually ramp down from the MY EPA is not proposing any changes to the 2. What Are the Proposed CO Attribute- 2016 curve established in the previous useful life for MYs 2017–2025. Also, as 2 based Standards? rule. As Section II.C describes, EPA has with MYs 2012–2016, EPA proposes modified the curves from 2016, As with the MY 2012–2016 standards, that the in-use emission standard would particularly for trucks. To make this EPA is proposing separate car and truck be 10% higher for a model than the modification, we wanted to ensure that emission levels used for certification standards, that is, vehicles defined as starting from the 2016 curve, there is a and compliance with the fleet average cars have one set of footprint-based gradual transition to the new slopes and that is based on the footprint curves. As curves for MY 2017–2025 and vehicles with the MY2012–2016 standards, this defined as trucks have a different set for cut point (out to 74 sq ft from 66 sq ft). will address issues of production MY 2017–2025. In general, for a given The transition is also designed to variability and test-to-test variability. footprint the CO2 g/mi target for trucks prevent the curve from one year from The in-use standard is discussed in would be less stringent than for a car crossing the previous year’s curve. Section III.E. Finally, EPA is not with the same footprint. EPA’s approach Written in mathematic notation, the proposing any changes to the test for establishing the footprint curves for form of the proposed function is as procedures over which emissions are model years 2017 and later, including follows: 223 measured and weighted to determine changes from the approach used for the compliance with the standards. These MY2012–2016 footprint curves, is 223 See proposed Regulatory text, which are the discussed in Section II.C and Chapter 2 official coefficients and equation. The information 222 See 65 FR 6698 (February 10, 2000). of the joint TSD. The curves are proposed here is a summary version.

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The car curves are largely similar to 2016 rule, the truck curve does not over the first five years occurs between 2016 curve in slope. By contrast, the MY reach the ultimate cutpoint of 74 sq ft MY 2020 and MY 2021. Finally, the 2017 and later truck curves are steeper until 2022. The gap between the 2020 gradual flattening of both the car and relative to the MY 2016 curve, but curve and the 2021 curve is indicative the trucks curves is noticeable. For gradually flatten as a result of the of design of the truck standards further discussion of these topics, please multiplicative increase of the standards. described earlier, where a significant see Section II.C and Chapter 2 of the As a further change from the MYs 2012– proportion of the increased stringency joint TSD.

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3. Mid-Term Evaluation may present themselves. There will be 9. Market penetration across the fleet Given the long time frame at issue in an opportunity for public comment on of fuel efficient technologies. setting standards for MY2022–2025 the draft TAR, and appropriate peer 10. Any other factors that may be light-duty vehicles, and given NHTSA’s review will be performed of underlying deemed relevant to the review. obligation to conduct a separate analyses in the TAR. The assumptions If, based on the evaluation, EPA rulemaking in order to establish final and modeling underlying the TAR will decides that the GHG standards are standards for vehicles for those model be available to the public, to the extent appropriate under section 202(a), then years, EPA and NHTSA will conduct a consistent with law. EPA will announce that final decision comprehensive mid-term evaluation and EPA will also seek public comment and the basis for EPA’s decision. The agency decision-making as described on whether the standards are decision will be final agency action below. Up to date information will be appropriate under section 202(a), e.g. which also will be subject to judicial developed and compiled for the comments to affirm or change the GHG review on its merits. EPA will develop evaluation, through a collaborative, standards (either more or less stringent). an administrative record for that review robust and transparent process, The agencies will carefully consider that will be no less robust than that including public notice and comment. comments and information received and developed for the initial determination The evaluation will be based on (1) A respond to comments in their respective to establish the standards. In the holistic assessment of all of the factors subsequent final actions. midterm evaluation, EPA will develop a EPA and NHTSA will consult and considered by the agencies in setting robust record for judicial review that is coordinate in developing EPA’s standards, including those set forth in the same kind of record that would be determination on whether the MY the rule and other relevant factors, and developed and before a court for judicial 2022–2025 GHG standards are (2) the expected impact of those factors review of the adoption of standards. appropriate under section 202(a) and Where EPA decides that the standards on the manufacturers’ ability to comply, NHTSA’s NPRM. are not appropriate, EPA will initiate a without placing decisive weight on any In making its determination, EPA will rulemaking to adopt standards that are particular factor or projection. The evaluate and determine whether the appropriate under section 202(a), which comprehensive evaluation process will MY2022–2025 GHG standards are could result in standards that are either lead to final agency action by both appropriate under section 202(a) of the less or more stringent. In this agencies. CAA based on a comprehensive, Consistent with the agencies’ rulemaking EPA will evaluate a range of integrated assessment of all of the commitment to maintaining a single alternative standards that are potentially results of the review, as well as any national framework for regulation of effective and reasonably feasible, and public comments received during the vehicle emissions and fuel economy, the the Administrator will propose the evaluation, taken as a whole. The agencies fully expect to conduct the alternative that in her judgment is the decision making required of the mid-term evaluation in close best choice for a standard that is Administrator in making that 224 coordination with the California Air appropriate under section 202(a). If determination is intended to be as Resources Board (CARB). Moreover, the EPA initiates a rulemaking, it will be a robust and comprehensive as that in the agencies fully expect that any joint rulemaking with NHTSA. Any original setting of the MY2017–2025 adjustments to the standards will be final action taken by EPA at the end of standards. made with the participation of CARB that rulemaking is also judicially In making this determination, EPA reviewable. and in a manner that ensures continued will consider information on a range of harmonization of state and Federal The MY 2022–2025 GHG standards relevant factors, including but not will remain in effect unless and until vehicle standards. limited to those listed in the proposed EPA will conduct a mid-term EPA changes them by rulemaking. rule and below: evaluation of the later model year light- NHTSA intends to issue conditional 1. Development of powertrain standards for MYs 2022–2025 in the duty GHG standards (MY2022–2025). improvements to gasoline and diesel The evaluation will determine whether LDV rulemaking being initiated this fall powered vehicles. for MY2017 and later model years. The those standards are appropriate under 2. Impacts on employment, including section 202(a) of the Act. Under the CAFE standards for MYs 2022–2025 the auto sector. will be determined with finality in a regulations proposed today, EPA would 3. Availability and implementation of be legally bound to make a final subsequent, de novo notice and methods to reduce weight, including comment rulemaking conducted in full decision, by April 1, 2018, on whether any impacts on safety. the MY 2022–2025 GHG standards are compliance with section 32902 of title 4. Actual and projected availability of 49 U.S.C. and other applicable law. appropriate under section 202(a), in public and private charging light of the record then before the infrastructure for electric vehicles, and 224 The provisions of CAA section 202(b)(1)(C) are agency. fueling infrastructure for alternative not applicable to any revisions of the greenhouse EPA, NHTSA and CARB will jointly fueled vehicles. standards adopted in a later rulemaking based on prepare a draft Technical Assessment 5. Costs, availability, and consumer the mid-term evaluation. Section 202(b)(1)(C) refers Report (TAR) to inform EPA’s acceptance of technologies to ensure to EPA’s authority to revise ‘‘any standard prescribed or previously revised under this determination on the appropriateness of compliance with the standards, such as subsection,’’ and indicates that ‘‘[a]ny revised the GHG standards and to inform vehicle batteries and power electronics, standard’’ shall require a reduction of emissions NHTSA’s rulemaking for the CAFE mass reduction, and anticipated trends from the standard that was previously applicable. standards for MYs 2022–2025. The TAR in these costs. These provisions apply to standards that are adopted under subsection 202(b) of the Act and are will examine the same issues and 6. Payback periods for any later revised. These provisions are limited by their underlying analyses and projections incremental vehicle costs associated terms to such standards, and do not otherwise limit considered in the original rulemaking, with meeting the standards. EPA’s general authority under section 202(a) to including technical and other analyses 7. Costs for gasoline, diesel fuel, and adopt standards and revise them ‘‘from time to time.’’ Since the greenhouse gas standards are not and projections relevant to each alternative fuels. adopted under subsection 202(b), section agency’s authority to set standards as 8. Total light-duty vehicle sales and 202(b)(1)(C) does not apply to these standards or well as any relevant new issues that projected fleet mix. any subsequent revision of these standards.

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Accordingly, NHTSA’s development of implementing the orderly phase-in of using the credits they have generated. its proposal in that later rulemaking will emissions control technology in their These credits would help manufacturers include the making of economic and production, consistent with their typical resolve lead-time issues they might face technology analyses and estimates that redesign schedules. ABT is important in the model years prior to 2021 as they are appropriate for those model years because it can help to address many transition from the 2016 standards to and based on then-current information. issues of technological feasibility and the progressively more stringent Any rulemaking conducted jointly by lead-time, as well as considerations of standards for 2017 and later. It also the agencies or by NHTSA alone will be cost. ABT is an integral part of the provides an additional incentive to timed to provide sufficient lead time for standard setting itself, and is not just an generate credits earlier, for example in industry to make whatever changes to add-on to help reduce costs. In many MYs 2014 and 2015, because those their products that the rulemaking cases, ABT resolves issues of cost or credits may be used through 2021, analysis deems feasible based on the technical feasibility, allowing EPA to set thereby encouraging the earlier use of new information available. At the very a standard that is numerically more additional CO2 reducing technology. latest, the three agencies will complete stringent. The ABT provisions are While this provision provides greater the mid-term evaluation process and integral to the fleet averaging approach flexibility in how manufacturers use subsequent rulemaking on the standards established in the MY 2012–2016 rule. credits they have generated, it would that may occur in sufficient time to EPA is proposing to change the credit not change the overall CO2 benefits of promulgate final standards for MYs carry-forward provisions as described the National Program, as EPA does not 2022–2025 with at least 18 months lead below, but the program otherwise would expect that any of the credits would time, but additional lead time may be remain in place unchanged for model have expired as they likely would be provided. years 2017 and later. used or traded to other manufacturers. EPA understands that California As noted above, the ABT provisions EPA believes the proposed approach intends to propose a mid-term consist primarily of credit carry-back, provides important additional flexibility evaluation in its program that is credit carry-forward, credit transfers, in the early years of the new MY2017 coordinated with EPA and NHTSA and and credit trading. A manufacturer may and later standards. EPA requests is based on a similar set of factors as have a deficit at the end of a model year comments on the proposed approach for outlined in this Appendix A. The rules after averaging across its fleet using carrying over MY 2010–2015 credits submitted to EPA for a waiver under the credit transfers between cars and through MY 2021. CAA will include such a mid-term trucks—that is, a manufacturer’s fleet EPA is not proposing to allow MY evaluation. EPA understands that average level may fail to meet the 2009 early credits to be carried forward California intends to continue required fleet average standard. Credit beyond the normal 5 years due to promoting harmonized state and federal carry-back refers to using credits to concerns expressed during the 2012– vehicle standards. EPA further offset any deficit in meeting the fleet 2016 rulemaking that there may be the understands that California’s 2017–2025 average standards that had accrued in a potential for large numbers of credits standards to be submitted to EPA for a prior model year. A deficit must be that could be generated in MY 2009 for waiver under the Clean Air Act will offset within 3 model years using credit companies that are over-achieving on deem compliance with EPA greenhouse carry-back provisions. After satisfying CAFE and that some of these credits gas emission standards, even if any needs to offset pre-existing debits could represent windfall credits.226 In amended after 2012, as compliant with within a vehicle category, remaining response to these concerns, EPA placed California’s. Therefore, if EPA revises it credits may be banked, or saved for use restrictions the use of MY 2009 credits standards in response to the mid-term in future years. This is referred to as (for example, MY 2009 credits may not evaluation, California may need to credit carry-forward. The EPCA/EISA be traded) and does not believe amend one or more of its 2022–2025 MY statutory framework for the CAFE expanding the use of MY 2009 credits standards and would submit such program includes a 5-year credit carry- would be appropriate. Under the MY amendments to EPA with a request for forward provision and a 3-year credit 2012–2016 early credits program, a waiver, or for confirmation that said carry-back provision. In the MYs 2012– manufacturers have until the end of MY amendments fall within the scope of an 2016 program, EPA chose to adopt 5- 2011 (reports must be submitted by existing waiver, as appropriate. year credit carry-forward and 3-year April 2012), when the early credits credit carry-back provisions as a 4. Averaging, Banking, and Trading program ends, to submit early credit reasonable approach that maintained Provisions for CO Standards reports. Therefore, EPA does not yet 2 consistency between the agencies’ have information on the amount of early In the MY 2012–2016 rule, EPA provisions. EPA is proposing to MY2009 credits actually generated by adopted credit provisions for credit continue with this approach in this manufacturers to assess whether or not carry-back, credit carry-forward, credit rulemaking. (A further discussion of the they could be viewed as windfall. transfers, and credit trading. For EPA’s ABT provisions can be found at 75 FR Nevertheless, because these concerns purposes, these kinds of provisions are 25412–14 May 7, 2010). continue, EPA is proposing not to collectively termed Averaging, Banking, Although the credit carry-forward and extend the MY 2009 credit transfers past and Trading (ABT), and have been an carry-back provisions would generally the existing 5-years limit. important part of many mobile source remain in place for MY 2017 and later, Transferring credits refers to programs under CAA Title II, both for EPA is proposing to allow all unused exchanging credits between the two fuels programs as well as for engine and credits generated in MY 2010–2016 to averaging sets, passenger cars and vehicle programs.225 As in the MY2012– be carried forward through MY 2021. trucks, within a manufacturer. For 2016 program, EPA is proposing This amounts to the normal 5 year basically the same comprehensive carry-forward for MY 2016 and later 226 75 FR at 25442. Moreover, as pointed out in program for averaging, banking, and credits but provides additional carry- the earlier rulemaking, there can be no legitimate trading of credits which together will forward years for credits earned in MYs expectation that these 2009 MY credits could be used as part of a compliance strategy in model years help manufacturers in planning and 2010–2015. Extending the life for MY after 2014, and thus no reason to carry forward the 2010–2015 credits would provide credits past 5 years due to action in reliance by 225 See 75 FR at 25412–413. greater flexibility for manufacturers in manufacturers.

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example, credits accrued by over- produce one or two vehicle types but manufacturers but are able to establish compliance with a manufacturer’s car must compete directly with brands that that they are operationally independent. fleet average standard could be used to are part of larger manufacturer groups EPA considered a variety of offset debits accrued due to that that have more resources available to approaches and believes a case-by-case manufacturer not meeting the truck fleet them. There is often a time lag in the approach for establishing SVM average standard in a given year. availability of technologies from standards would be appropriate. EPA is Finally, accumulated credits may be suppliers between when the technology proposing to allow eligible SVMs the traded to another manufacturer. In is supplied to large manufacturers and option to petition EPA for alternative EPA’s CO2 program, there are no limits when it is available to small volume standards. An SVM utilizing this option on the amount of credits that may be manufacturers. Also, incorporating new would be required to submit data and transferred or traded. technologies into vehicle designs costs information that the agency would use The averaging, banking, and trading the same or more for small volume in addition to other available provisions are generally consistent with manufacturers, yet the costs are spread information to establish CO2 standards those included in the CAFE program, over significantly smaller volumes. for that specific manufacturer. EPA with a few notable exceptions. As with Therefore, SVMs typically have longer requests comments on all aspects of the EPA’s approach (except for the proposal model life cycles in order to recover proposed approach described in detail discussed above for a one-time extended their investments. SVMs further noted below. carry-forward of MY2010–2016 credits), that despite constraints facing them, a. Overview of Existing Case-by-Case CAFE allows five year carry-forward of SVMs need to innovate in order to Approaches credits and three year carry-back, per differentiate themselves in the market EISA. CAFE transfers of credits across a and often lead in incorporating A case-by-case approach for manufacturer’s car and truck averaging technological innovations, particularly establishing standards for SVMs has sets are also allowed, but with limits lightweight materials. been adopted by NHTSA for CAFE, established by EISA on the use of In the MY 2012–2016 Final Rule, EPA CARB in their 2009–2016 GHG program, transferred credits. The amount of noted that it intended to conduct a and the European Union (EU) for transferred credits that can be used in a follow-on rulemaking to establish European CO2 standards. For the CAFE year is limited under CAFE, and appropriate standards for these program, EPCA allows manufacturers transferred credits may not be used to manufacturers. In developing this making less than 10,000 vehicles per meet the CAFE minimum domestic proposal, the agencies held detailed year worldwide to petition the agency to passenger car standard, also per statute. technical discussions with the have an alternative standard set for CAFE allows credit trading, but again, manufacturers eligible for the them.227 NHTSA has adopted traded credits cannot be used to meet exemption under the MY 2012–2016 alternative standards for some small the minimum domestic passenger car program and reviewed detailed product volume manufacturers under these standard. plans of each manufacturer. EPA CAFE provisions and continually continues to believe that SVMs would reviews applications as they are 5. Small Volume Manufacturer face great difficulty meeting the primary submitted.228 Under the CAFE program, Standards CO2 standards and that establishing petitioners must include projections of In adopting the CO2 standards for MY challenging but less stringent SVM the most fuel efficient production mix of 2012–2016, EPA recognized that for standards is appropriate given the vehicle configurations for a model year very small volume manufacturers, the limited products offering of SVMs. EPA and a discussion demonstrating that the CO2 standards adopted for MY 2012– believes it is important to establish projections are reasonable. Petitioners 2016 would be extremely challenging standards that will require SVMs to must include, among other items, and potentially infeasible absent credits continue to innovate to reduce annual production data, efforts to from other manufacturers. EPA therefore emissions and do their ‘‘fair share’’ comply with applicable fuel economy deferred small volume manufacturers under the GHG program. However, standards, and detailed information on (SVMs) with annual U.S. sales less than selecting a single set of standards that vehicle technologies and specifications. 5,000 vehicles from having to meet CO2 would apply to all SVMs is difficult The petitioner must explain why they standards until EPA is able to establish because each manufacturer’s product have not pursued additional means that appropriate SVM standards. As part of lines vary significantly. EPA is would allow them to achieve higher establishing eligibility for the concerned that a standard that would be average fuel economy. NHTSA exemption, manufacturers must make a appropriate for one manufacturer may publishes a proposed decision in the good faith effort to secure credits from not be feasible for another, potentially Federal Register and accepts public other manufacturers, if they are driving them from the domestic market. comments. Petitions may be granted for reasonably available, to cover the Alternatively, a less stringent standard up to three years. emissions reductions they would have may only cap emissions for some For the California GHG standards for otherwise had to achieve under manufacturers, providing little incentive MYs 2009–2016, CARB established a applicable standards. to reduce emissions. process that would start at the beginning These small volume manufacturers Based on this, rather than conducting of MY2013, where small volume face a greater challenge in meeting CO2 a separate rulemaking, as part of this manufacturers would identify all MY standards compared to large MY 2017–2025 rulemaking EPA is manufacturers because they only proposing to allow SVMs to petition 227 See 49 U.S.C. 32902(d) and 49 CFR Part 525. produce a few vehicle models, mostly EPA for an alternative CO standard for Under the CAFE program, manufacturers who 2 manufacture less than 10,000 passenger cars focusing on high performance sports these model years. The proposed worldwide annually may petition for an exemption cars and luxury vehicles. These approach for SVM standards and from generally-applicable CAFE standards, in manufacturers have limited product eligibility requirements are described which case NHTSA will determine what level of lines across which to average emissions, below. EPA is also requesting comments CAFE would be maximum feasible for that particular manufacturer if the agency determines and the few models they produce often on extending eligibility for the proposed that doing so is appropriate. have very high CO2 levels. As SVMs SVM standards to very small 228 Alternative CAFE standards are provided in 49 noted in discussions, SVMs only manufacturers that are owned by large CFR 531.5 (e).

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2012 vehicle models certified by large the Commission will grant a derogation manufacturer at least 12 months prior to volume manufacturers that are to the manufacturer. the start of the model year in cases comparable to the SVM’s planned MY where the manufacturer provided all b. EPA’s Proposed Framework for Case- 2016 vehicle models.229 The required information by the established by-Case SVM Standards comparison vehicles were to be selected deadline, the manufacturer may request on the basis of horsepower and power EPA proposes that SVMs will become an extension of the alternative standards to weight ratio. The SVM was required subject to the GHG program beginning currently in place, on a model year by to demonstrate the appropriateness of with MY 2017. Starting in MY 2017, an model year basis. This would provide the comparison models selected. CARB SVM would be required to meet the assurance to manufacturers that they would then provide a target CO2 value primary program standards unless EPA would have at least 12 months lead time based on the emissions performance of establishes alternative standards for the to prepare for the upcoming model year. the comparison vehicles to the SVM for manufacturer. EPA proposes that EPA requests comments on allowing each of their vehicle models to be used eligible manufacturers seeking SVMs to comply early with the MY to calculate a fleet average standard for alternative standards must petition EPA 2017 SVM standards established for each test group for MY2016 and later. for alternative standards by July 30, them. Manufacturers may want to Since CARB provides that compliance 2013, providing the information certify to the MY 2017 standards in with the National Program for MYs described below. If EPA finds that the earlier model years (e.g., MY 2015 or 2012–2016 will be deemed compliance application is incomplete, EPA would MY 2016). Under the MY 2012–2016 with the CARB program, it has not taken notify the manufacturer and provide an program, SVMs are eligible for an action to set unique SVM standards, but additional 30 days for the manufacturer exemption from the standards as long as its program nevertheless was a useful to provide all necessary information. they have made a good faith effort to model to consider. EPA would then publish a notice in the purchase credits. By certifying to the Federal Register of the manufacturer’s The EU process allows small SVM alternative standard early in lieu petition and recommendations for an manufacturers to apply for a derogation of this exemption, manufacturers could alternative standard, as well as EPA’s from the primary CO emissions avoid having to seek out credits to 2 proposed alternative standard. Non reduction targets.230 Applications for purchase in order to maintain this confidential business information 2012 were required to be submitted by exemption. EPA would not allow portions of the petition would be manufacturers no later than March 31, certification for vehicles already available to the public for review in the produced by the manufacturer, so the 2011, and the Commission will assess docket. After a period for public applicability of this provision would be the application within 9 months of the comment, EPA would make a limited due to the timing of establishing receipt of a complete application. determination on an alternative the SVM standards. Manufacturers Applications for derogations for 2012 standard for the manufacturer and interested in the possibility of early have been submitted by several publish final notice of the determination compliance would be able to apply for manufacturers and non confidential in the Federal Register for the general SVM standards earlier than the required versions are currently available to the public as well as the applicant. EPA July 30, 2013 deadline proposed above. public.231 In the EU process, the SVM expects the process to establish the An early compliance option also may be proposes an alternative emissions target alternative standard to take about 12 beneficial for new manufacturers supported by detailed information on months once a complete application is entering the market that qualify as the applicant’s economic activities and submitted by the manufacturer. SVMs. technological potential to reduce CO2 EPA proposes that manufacturers emissions. The application also requires would petition for alternative standards c. Petition Data and Information information on individual vehicle for up to 5 model years (i.e., MYs Requirements models such as mass and specific CO2 2017—2021) as long as sufficient As described in detail in section I.D.2, emissions of the vehicles, and information is available on which to EPA establishes motor vehicle standards information on the characteristics of the base the alternative standards (see under section 202(a) that are based on market for the types of vehicles application discussion below). This technological feasibility, and manufactured. The proposed alternative initial round of establishing case-by- considering lead time, safety, costs and emissions standards may be the same case standards would be followed by other impacts on consumers, and other numeric standard for multiple years or one or more additional rounds until factors such as energy impacts a declining standard, and the alternative standards are established for the SVM associated with use of the technology. standards may be established for a for all model years up to and including EPA proposes to require that SVMs maximum period of five years. Where MY 2025. For the later round(s) of submit the data and information listed the European Commission is satisfied standard setting, EPA proposes that the below which EPA would use, in that the specific emissions target SVM must submit their petition 36 addition to other relevant information, proposed by the manufacturer is months prior to the start of the first in determining an appropriate consistent with its reduction potential, model year for which the standards alternative standard for the SVM. EPA including the economic and would apply in order to provide would also consider data and technological potential to reduce its sufficient time for EPA to evaluate and information provided by commenters specific emissions of CO2, and taking set alternative standards (e.g., January 1, during the comment process in into account the characteristics of the 2018 for MY 2022). The 36 month determining the final level of the SVM’s market for the type of car manufactured, requirement would not apply to new standards. As noted above, other case- market entrants, discussed in section by-case standard setting approaches 229 13 CCR 1961.1(D). III.C.5.e below. The subsequent case-by- have been adopted by NHTSA, the 230 Article 11 of Regulation (EC) No 443/2009 and case standard setting would follow the European Union, and CARB and EPA EU No 63/2011. See also ‘‘Frequently asked same notice and comment process as has considered the data requirements of questions on application for derogation pursuant to Aticle 11 of Regulation (EC) 443/2009.’’ outlined above. those programs in developing the 231 http://ec.europa.eu/clima/documentation/ EPA also proposes that if EPA does proposed data and information transport/vehicles/cars_en.htm. not establish SVM standards for a requirements detailed below. EPA

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requests comments on the following appropriate by model and MY and the the primary program. Although EPA proposed data requirements. technological and other basis for the does not expect significant credits to be EPA proposes that SVMs would estimate generated by SVMs due to the provide the following information as • For each MY, projection of the manufacturer-specific standard setting part of their petition for SVM standards: lowest fleet average CO2 production mix approach being proposed, SVMs would of vehicle models and discussion Vehicle Model and Fleet Information be able to generate and use credits demonstrating that these projections are internally, under the credit carry- • MYs that the application covers— reasonable forward and carry-back provisions. up to 5 MYs. Sufficient information • A copy of any applications Under a case-by-case approach, EPA must be provided to establish submitted to NHTSA for MY 2012 and would not view such credits as windfall alternative standards for each year later alternative standards credits and not allowing internal • Vehicle models and sales Eligibility banking could stifle potential innovative projections by model for each MY approaches for SVMs. SVMs would also • • Description of models (vehicle type, U.S. sales for previous three model be able to transfer credits between the mass, power, footprint, expected years and projections for production car and light trucks categories. pricing) volumes over the time period covered • Description of powertrain by the application e. SVM Standards Eligibility • • Production cycle for each model Complete information on i. Current SVMs including new vehicle model ownership structure in cases where introductions SVM has ties to other manufacturers The MY 2012–2016 rulemaking • limited eligibility for the SVM Vehicle footprint based targets and with U.S. vehicle sales projected fleet average standard under EPA proposes to weigh several factors deferment to manufacturers in the U.S. market in MY 2008 or MY 2009 with primary program by model year in determining what CO2 standards are appropriate for a given SVMs fleet. U.S. sales of less than 5,000 vehicles per Technology Evaluation year. After initial eligibility has been • These factors would include the level of CO2 reduction technologies technology applied to date by the established, the SVM remains eligible employed or expected to be on the manufacturer, the manufacturer’s for the exemption if the rolling average vehicle model(s) for the applicable projections for the application of of three consecutive model years of sales remains below 5,000 vehicles. model years, including effectiveness additional technology, CO reducing 2 Manufacturers going over the 5,000 and cost information technologies being employed by other vehicle rolling average limit would have —Including A/C and potential off-cycle manufacturers including on vehicles two additional model years to transition technologies with which the SVM competes directly to having to meet applicable CO • Evaluation of similar vehicles to and the CO levels of those vehicles, 2 2 standards. Based on these eligibility those produced by the petitioning SVM and the technological feasibility and criteria, there are three companies that and certified in MYs 2012–2013 (or reasonableness of employing additional qualify currently as SVMs under the latest 2 MYs for later applications) for technology not projected by the MY2012–2016 standards: , each vehicle model including CO2 manufacturer in the time-frame for Lotus, and McLaren.233 These results and any A/C credits generated by which standards are being established. manufacturers make up much less than the models EPA would also consider opportunities one percent of total U.S. vehicles sales, —Similar vehicles must be selected to generate A/C and off-cycle credits so the environmental impact of these based on vehicle type, horsepower, that are available to the manufacturer. alternative standards would be very mass, power-to-weight, vehicle Lead time would be a key consideration small. EPA continues to believe that the footprint, vehicle price range and both for the initial years of the SVM 5,000 vehicle cut-point and rolling three other relevant factors as explained by standard, where lead time would be year average approach is appropriate the SVM shorter due to the timing of the notice • and proposes to retain it as a primary Discussion of CO2 reducing and comment process to establish the criterion for SVMs to remain eligible for technologies employed on vehicles standards, and for the later years where SVM standards. The 5,000 vehicle offered by the manufacturer outside of manufacturers would have more time to threshold allows for some sales growth the U.S. market but not in the U.S., achieve additional CO2 reductions. including why those vehicles/ by SVMs, as the SVMs in the market technologies are not being introduced in d. SVM Credits Provisions today typically have annual sales of the U.S. market as a way of reducing As discussed in Section III.B.4, EPA’s below 2,000 vehicles. However, EPA wants to ensure that standards for as overall fleet CO2 levels program includes a variety of credit • Evaluation of technologies averaging, banking, and trading few vehicles as possible are included in projected by EPA as technologies likely provisions. EPA proposes that these the SVM standards to minimize the to be used to meet the MYs 2012–2016 provisions would generally apply to environmental impact, and therefore and MYs 2017–2025 standards that are SVM standards as well, with the believes it is appropriate that not projected to be fully utilized by the exception that SVMs would not be manufacturers with U.S. sales growing petitioning SVM and explanation of allowed to trade credits to other to above 5,000 vehicles per year be reasons for not using the technologies, manufacturers. Because SVMs would be required to comply with the primary including relevant cost information 232 meeting alternative, less stringent standards. Manufacturers with standards compared to manufacturers in unusually strong sales in a given year SVM Projected Standards would still likely remain eligible, based • the primary program, EPA proposes that The most stringent CO2 level SVM would not be allowed to trade (i.e., on the three year rolling average. estimated by the SVM to be feasible and However, if a manufacturer expands in sell or otherwise provide) CO2 credits that the SVM generates against the SVM 232 See 75 FR 25444 (Section III.D) for MY 2012– 233 Under the MY 2012–2016 program, 2016 technologies and Section III.D below for standards to other manufacturers. SVMs manufacturers must also make a good faith effort to discussion of projected MY 2017–2025 would be able to use credits purchased purchase CO2 credits in order to maintain eligibility technologies. from other manufacturers generated in for SVM status.

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the U.S. market on a permanent basis plans, and evidence the company is iii. Aggregation Requirements and an such that they consistently sell more working to meet other federal vehicle Operational Independence Concept than 5,000 vehicles per year, they would requirements such as other EPA In determining eligibility for the MY likely increase their rolling average to emissions standards and NHTSA 2012–2016 exemption, sales volumes above 5,000 and no longer be eligible. vehicle safety standards. EPA is must be aggregated across EPA believes a manufacturer will be concerned about the administrative manufacturers according to the able to consider these provisions, along burden that could be created for the provisions of 40 CFR 86.1838–01(b)(3), with other factors, in its planning to agency by companies with no firm plans which requires the sales of different significantly expand in the U.S. market. to enter the U.S. market submitting firms to be aggregated in various As discussed below, EPA is not applications in order to see what situations, including where one firm has proposing to continue to tie eligibility to standard might be established for them. a 10% or more equity ownership of having been in the market in MY 2008 This information, in addition to a another firm, or where a third party has or MY 2009, or any other year and is complete application with the a 10% or more equity ownership of two instead proposing eligibility criteria for information and data outlined above, or more firms. These are the same new SVMs newly entering the U.S. would provide evidence of the aggregation requirements used in other market. seriousness of the applicant. As part of EPA small volume manufacturer ii. New SVMs (New Entrants to the U.S. this review, EPA reserves the right to provisions, such as those for other light- Market) not undertake its SVM standards duty emissions standards.234 EPA development process for companies that proposes to retain these aggregation As noted above, the SVM deferment do not exhibit a serious and provisions as part of the eligibility under the MY 2012–2016 program documented effort to enter the U.S. criteria for the SVM standards for MYs included a requirement that a market. 2017–2025. Manufacturers also retain, manufacturer had to have been in the EPA remains concerned about the no matter their size, the option to meet U.S. vehicle market in MY 2008 or MY potential for gaming by a manufacturer the full set of GHG requirements on 2009. This provision ensured that a that sells less than 5,000 vehicles in the their own, and do not necessarily need known universe of manufacturers would first year, but with plans for to demonstrate compliance as part of a be eligible for the exemption in the significantly larger sales volumes in the corporate parent company fleet. short term and manufacturers would not following years. EPA believes that it However, as discussed below, EPA is be driven from the market as EPA seeking comments on allowing proceeded to develop appropriate SVM would not be appropriate to establish manufacturers that otherwise would not standards. EPA is not proposing to SVM standards for a new market entrant be eligible for the SVM standards due to include such a provision for the SVM that plans a steep ramp-up in U.S. these aggregation provisions, to standards eligibility criteria for MY vehicle sales. Therefore, EPA proposes demonstrate to the Administrator that 2017–2025. EPA believes that with SVM that for new entrants, U.S. vehicle sales they are ‘‘operationally independent’’ standards in place, tying eligibility to must remain below 5,000 vehicles for based on the criteria described below. being in the market in a prior year is no the first three years in the market. After Under such a concept, if the longer necessary because SVMs will be the initial three years, the manufacturer Administrator were to determine that a required to achieve appropriate levels of must maintain a three year rolling manufacturer was operationally emissions control. Also, it could serve average below 5,000 vehicles (e.g., the independent, that manufacturer would as a potential market barrier to rolling average of years 2, 3 and 4, must be eligible for SVM standards. competition by hindering new SVMs be below 5,000 vehicles). If a new market entrant does not comply with During the 2012–2016 rule comment from entering the U.S. market. period, EPA received comments from For new market entrants, EPA these provisions for the first five years Ferrari requesting that EPA allow a proposes that a manufacturer seeking an in the market, vehicles sold above the manufacturer to apply to EPA to alternative standard for MY2017–2025 5,000 vehicle threshold would be found establish SVM status based on the must apply and that standards would be not to be covered by the alternative independence of its research, established through the process standards, and EPA expects the fleet development, testing, design, and described above. The new SVM would average is therefore not in compliance manufacturing from another firm that not be able to certify their vehicles until with the standards and would be subject has ownership interest in that the standards are established and to enforcement action and also, the manufacturer. Ferrari is majority owned therefore EPA would expect the manufacturer would lose eligibility for by Fiat and would be aggregated with manufacturer to submit an application the SVM standards until it has other Fiat brands, including Chrysler, as early as possible but at least 30 reestablished three consecutive years of Maserati, and Alfa Romeo, for purposes months prior to when they expect to sales below 5,000 vehicles. of determining eligibility for SVM begin producing vehicles in order to By not tying the 5,000 vehicle standards; therefore Ferrari does not provide enough time for EPA to evaluate eligibility criteria to a particular model meet the eligibility criteria for SVM standards and to follow the notice and year, it would be possible for a status. However, Ferrari believes that it comment process to establish the manufacturer already in the market to would qualify for such an ‘‘operational standards and for certification. In drop below the 5,000 vehicle threshold independence’’ concept, if such an addition to the information and data in a future year and attempt to establish option were provided. In the MY 2012– described below, EPA proposes to eligibility. EPA proposes to treat such 2016 Final Rule, EPA noted that it require new market entrants to provide manufacturers as new entrants to the would further consider the issue of evidence that the company intends to market for purposes of determining operational independence and seek enter the U.S. market within the time eligibility for SVM standards. However, public comments on this concept (see frame of the MY2017–2025 SVM the requirements to demonstrate that the 75 FR 25420). In this proposal, EPA is standards. Such evidence would manufacturer intends to enter the U.S. include documentation of work market obviously would not be relevant 234 For other programs, the eligibility cut point for underway to establish a dealer network, in this case, and therefore would not SVM flexibility is 15,000 vehicles rather than 5,000 appropriate financing and marketing apply. vehicles.

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requesting comment on the concept of companies because of operational market process and to the extent that operational independence. Specifically, independence. manufacturer sells parts/components to we are seeking comment on expanding EPA is considering and requesting non-related auto manufacturers, it does eligibility for the SVM standards to comments on the operational so through the open market at manufacturers who would have U.S. independence criteria listed below. competitive pricing. annual sales of less than 5,000 vehicles These criteria are meant to establish that In addition to the criteria listed above, and based on a demonstration that they a company, though owned by another EPA also requests comments on the are ‘‘operationally independent’’ of manufacturer, does not benefit following programmatic elements and other companies. Under such an operationally or financially from this framework. EPA requests comments on approach, EPA would be amending the relationship, and should therefore be requiring the manufacturer applying for limitation for SVM corporate considered independent for purposes of operational independence to provide an aggregation provisions such that a calculating the sales volume for the attest engagement from an independent manufacturer that is more than 10 SVM program. Manufacturers would auditor verifying the accuracy of the percent owned by a large manufacturer need to demonstrate compliance with information provided in the would be allowed to qualify for SVM all of these criteria in order to be found application.235 EPA foresees possible standards on the basis of its own sales, to be operationally independent. By difficulty verifying the information in because it operates its research, design, ‘‘related manufacturers’’ below, EPA the application, especially if the production, and manufacturing means all manufacturers that would be company is located overseas. The independently from the parent aggregated together under the 10 percent principal purpose of the attest company. ownership provisions contained in engagement would be to provide an independent review and verification of In seeking public comment on this EPA’s current small volume the information provided. EPA also concept of operational independence, manufacturer definition (i.e., the parent would require that the application be EPA particularly is interested in company and all subsidiaries where signed by the company president or comments regarding the degree to which there is 10 percent or greater CEO. After EPA approval, the this concept could unnecessarily open ownership). manufacturer would be required to up the SVM standards to several smaller EPA would need to determine, based report within 60 days any material manufacturers that are integrated into on the information provided by the changes to the information provided in large companies—smaller companies manufacturer in its application, that the manufacturer currently meets the the application. A manufacturer would that may be capable of and planning to lose eligibility automatically after the meet the CO standards as part of the following criteria and has met them for 2 at least 24 months preceding the material change occurs. However, EPA larger manufacturer’s fleet. EPA also would confirm that the manufacturer no seeks comment on the concern that application submittal: 1. No financial or other support of longer meets one or more of the criteria manufacturers could change their economic value was provided by related and thus is no longer considered corporate structure to take advantage of manufacturers for purposes of design, operationally independent, and would such provisions (that is, gaming). EPA is parts procurement, R&D and production notify the manufacturer. EPA would therefore requesting comment on facilities and operation. Any other provide two model years lead time for approaches, described below, to transactions with related manufacturers the manufacturer to transition to the narrowly define the operational must be conducted under normal primary program. For example, if the independence criteria to ensure that commercial arrangements like those manufacturer lost eligibility sometime qualifying companies are truly conducted with other parties. Any such in calendar year 2018 (based on when independent and to avoid gaming to transactions shall be at competitive the material change occurs), the meet the criteria. EPA also requests pricing rates to the manufacturer. manufacturer would need to meet comments on the possible implications 2. Maintains separate and primary program standards in MY 2021. of this approach on market competition, independent research and development, In addition, EPA requests comments which we believe should be fully testing, and production facilities. on whether or not a manufacturer losing explored through the public comment 3. Does not use any vehicle eligibility should be able to re-establish process. EPA acknowledges that powertrains or platforms developed or itself as operationally independent in a regardless of the criteria for operational produced by related manufacturers. future year and over what period of time independence, a small manufacturer 4. Patents are not held jointly with they would need to meet the criteria to under the umbrella of a large related manufacturers. again be eligible. EPA requests manufacturer is fundamentally different 5. Maintains separate business comments on, for example, whether or from other SVMs because the large administration, legal, purchasing, sales, not a manufacturer meeting the criteria manufacturer has several options under and marketing departments; maintains for three to five consecutive years the GHG program to bring the smaller autonomous decision making on should be allowed to again be subsidiary into compliance, including commercial matters. considered operationally independent. the use of averaging or credit transfer 6. Overlap of Board of Directors is provisions, purchasing credits from limited to 25 percent with no sharing of 6. Nitrous Oxide, Methane, and CO2- another manufacturer, or providing top operational management, including equivalent Approaches technical and financial assistance to the president, chief executive officer (CEO), a. Standards and Flexibility smaller subsidiary. Truly independent chief financial officer (CFO), and chief For light-duty vehicles, as part of the SVMs do not have the potential access operating officer (COO), and provided MY 2012–2016 rulemaking, EPA to these options, with the exception of that no individual overlapping director finalized standards for nitrous oxide buying credits from another or combination of overlapping directors (N2O) of 0.010 g/mile and methane manufacturer. EPA requests comments exercises exclusive management control (CH4) of 0.030 g/mile for MY 2012 and on the need for and appropriateness of over either or both companies. 7. Parts or components supply allowing companies to apply for less 235 EPA has required attest engagements as part of stringent SVM standards based on sales agreements between related companies its Reformulated Fuels program. See 40 CFR that are not aggregated with other must be established through open § 80.1164 and § 80.1464.

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later vehicles. 75 FR at 25421–24. The In response to these concerns, as part equivalent (taking into account the GWP light-duty vehicle standards for N2O and of the heavy-duty GHG rulemaking, EPA of N2O and CH4), manufacturers would CH4 were established to cap emissions, requested comment on and finalized determine their CO2 fleet emissions where current levels are generally provisions allowing manufacturers to standard and add the 1 to 2 g/mile significantly below the cap. The cap use CO2 credits, on a CO2-equivalent adjustment factor to it to determine their would prevent future emissions basis, to meet the light-duty N2O and CO2-equivalent standard. The 237 increases, and were generally not CH4 standards. Manufacturers have adjustment factor would slightly expected to result in the application of the option of using CO2 credits to meet increase the amount of allowed fleet new technologies or significant costs for N2O and CH4 standards on a test group average CO2-equivalent emissions for the manufacturers for current vehicle basis as needed for MYs 2012–2016. In the manufacturer’s fleet. The purpose of designs. EPA also finalized an their public comments to the proposal this adjustment would be so alternative CO2 equivalent standard in the heavy-duty package, manufacturers do not have to offset the option, which manufacturers may manufacturers urged EPA to extend this typical N2O and CH4 vehicle emissions, choose to use in lieu of complying with flexibility indefinitely, as they believed while holding manufacturers the N2O and CH4 cap standards. The this option was more advantageous than responsible for higher than average N2O the CO2-equivalent fleet wide option and CH4 emissions levels. CO2-equivalent standard option allows manufacturers to fold all 2-cycle (discussed previously) already provided At this time, EPA is not proposing an in the light-duty program, because it adjustment value due to a current lack weighted N2O and CH4 emissions, on a allowed manufacturers to address N2O of N2O test data on which to base the CO2-equivalent basis, along with CO2 and CH4 separately and on a test group adjustment for N2O. As discussed into their CO2 emissions fleet average 236 basis, rather than across their whole below, EPA and manufacturers are compliance level. The applicable CO2 fleet average standard is not adjusted to fleet. Further, manufacturers believed currently evaluating N2O measurement equipment and insufficient data is account for the addition of N O and that since this option is allowed under 2 the heavy-duty standards, allowing it available at this time on which to base CH4. For flexible fueled vehicles, the indefinitely in the light-duty program an appropriate adjustment. For CH4, N2O and CH4 standards must be met on both fuels (e.g., both gasoline and E–85). would make the light- and heavy-duty manufacturers currently provide data programs more consistent. In the Final during certification, and based on After the light-duty standards were Rule for Heavy-Duty Vehicles, EPA current vehicle data a fleet-wide finalized, manufacturers raised concerns noted that it would consider this issue adjustment for CH4 in the range of 0.14 that for a few of the vehicle models in further in the context of new standards g/mile appears to be appropriate.238 their existing fleet they were having for MYs 2017–2025 in the planned EPA requests comments on this concept difficulty meeting the N2O and/or CH4 future light-duty vehicle rulemaking. 76 and requests city and highway cycle standards, in the near-term. In such FR at 57194. N2O data on current Tier 2 vehicles cases, manufacturers would still have EPA has further considered this issue which could help serve as the basis for the option of complying using the CO2 and is proposing to allow the additional the adjustment. equivalent alternative. On a CO2 option of using CO2 credits to meet the EPA continues to believe that it equivalent basis, folding in all N2O and light-duty vehicle N2O and CH4 would not be appropriate to base the CH4 emissions could add up to 3–4 standards to extend for all model years adjustment on the cap standards g/mile to a manufacturer’s overall fleet- beyond MY 2016. EPA understands because such an approach could have average CO2 emissions level because the manufacturer concerns that if they use the effect of undermining the stringency alternative standard must be used for the CO2-equivalent option for meeting of the CO2 standards, as many vehicles the entire fleet, not just for the problem the GHG standards, they would be would likely have CH4 and N2O levels vehicles. The 3–4 g/mile assumes all penalized by having to incorporate all much lower than the cap standards. emissions are actually at the level of the N2O and CH4 emissions across their EPA believes that if an appropriate cap. See 75 FR at 74211. This could be entire fleet into their CO2-equivalent adjustment could be developed and especially challenging in the early years fleet emissions level determination. EPA applied, it would help alleviate of the program for manufacturers with continues to believe that allowing CO2 manufacturers’ concerns discussed little compliance margin because there credits to meet CH4 and N2O standards above and make the CO2-equivalent is very limited lead time to develop on a CO2-equivalent basis is a approach a more viable option. strategies to address these additional reasonable approach to provide emissions. Some manufacturers believe additional flexibility without b. N2O Measurement that the current CO2-equivalent fleet- diminishing overall GHG emissions For the N2O standard, EPA finalized wide option ‘‘penalizes’’ them by reductions. provisions in the MY 2012–2016 rule requiring them to fold in both CH4 and EPA is also requesting comments on allowing manufacturers to support an N2O emissions for their entire fleet, establishing an adjustment to the CO2- application for a certificate by supplying even if they have difficulty meeting the equivalent standard for manufacturers a compliance statement based on good cap on only one vehicle model. selecting the CO2-equivalent option engineering judgment, in lieu of N2O established in the MY 2012–2016 test data, through MY 2014. EPA 236 The global warming potentials (GWP) used in rulemaking. Manufacturers would required N2O testing starting with MY this rule are consistent with the 100-year time frame continue to be required to fold in all of 2015. See 75 FR at 25423. This values in the 2007 Intergovernmental Panel on their CH4 and N2O emissions, along flexibility provided manufacturers with Climate Change (IPCC) Fourth Assessment Report with CO2, into their CO2-equivalent (AR4). At this time, the 100-year GWP values from lead time needed to make necessary the 1996 IPCC Second Assessment Report (SAR) are levels. They would then apply the 238 used in the official U.S. greenhouse gas inventory agency-established adjustment factor to Average city/highway cycle CH4 emissions submission to the United Nations Framework the CO2-equivalent standard. For based on MY2010–2012 gasoline vehicles Convention on Climate Change (per the reporting certification data is about 0.0056 g/mile; multiplied example, if the adjustment for CH4 and requirements under that international convention, by the methane GWP of 25, this level would result N2O combined was 1 to 2 g/mile CO2- which were last updated in 2006) . N2O has a 100- in a 0.14 g/mile adjustment. See memo to the year GWP of 298 and CH4 has a 100-year GWP of docket, ‘‘Analysis of Methane (CH4) Certification 25 according to the 2007 IPCC AR4. 237 See 76 FR at 57193–94. Data for Model Year 2010–2012 Vehicles.’’

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facilities changes and install N2O vehicle small manufacturers that have small entities, as the credits would be measurement equipment. recently entered the market, eight ICIs, available to large manufacturers Since the final rule, manufacturers and nine alternative fuel vehicle producing similar vehicles, and the have raised concerns that the lead-time converters in the light-duty vehicle credits further encourage manufacturers provided to begin N2O measurement is market. EPA estimates that these small of advanced technology vehicles such as not sufficient, as their research and entities comprise less than 0.1 percent EVs. In addition to benefiting these evaluation of N2O measurement of the total light-duty vehicle sales in small businesses, this option also has instrumentation has involved a greater the U.S., and therefore the exemption the potential to expand the pool of level of effort than previously expected. will have a negligible impact on the credits available to be purchased by There are several analyzers available GHG emissions reductions from the other manufacturers. EPA proposes that today for the measurement of N2O. Over standards. Further detail regarding manufacturers waiving their small the last year since the MY 2012–2016 EPA’s assessment of small businesses is entity exemption would be required to standards were finalized, EPA has provided in Regulatory Flexibility Act meet all aspects of the GHG standards continued to evaluate instruments for Section III.J.3. and program requirements across their N2O measurement and now believes At least one small business entire product line. EPA requests instruments not evaluated during the manufacturer, Fisker Automotive, in comments on the small business 2012–2016 rulemaking have the discussions with EPA, has suggested provisions described above. potential to provide more precise that small businesses should have the 8. Additional Leadtime Issues emissions measurement and believe it option of voluntarily opting-in to the would be prudent to provide The 2012–2016 GHG vehicle GHG standards. This manufacturer sells manufacturers with additional time to standards include Temporary Leadtime electric vehicles, and sees a potential evaluate, procure, and install equipment Allowance Alternative Standards market for selling credits to other in their test cells.239 Therefore, EPA (TLAAS) which provide alternative manufacturers. EPA believes that there believes that the manufacturer’s standards to certain intermediate sized could be several benefits to this concerns about the need for additional manufacturers (those with U.S. sales approach, as it would allow small lead-time have merit, and is proposing between 5,000 and 400,000 during businesses an opportunity to generate to extend the ability for manufacturers model year 2009) to accommodate two revenue to offset their technology to use compliance statements based on situations: manufacturers which investments and encourage good engineering judgment in lieu of traditionally paid fines instead of test data through MY 2016. Beginning in commercialization of the innovative complying with CAFE standards, and MY 2017, manufacturers would be technology, and it would benefit any limited line manufacturers facing manufacturer seeking those credits to required to measure N2O emissions to special compliance challenges due to verify compliance with the standard. meet their compliance obligations. EPA less flexibility afforded by averaging, This approach, if finalized, will provide is proposing to allow small businesses banking and trading. See 75 FR at the manufacturers with two additional to waive their small entity exemption 25414–416. EPA is not proposing to years of lead-time to evaluate, procure, and opt-in to the GHG standards. Upon continue this program for MYs 2017– opting in, the manufacturer would be and install N2O measurement systems 2025. First, the allowance was premised throughout their certification subject to all of the requirements that on the need to provide adequate lead laboratories. would otherwise be applicable. This time, given the (at the time the rule was would allow small entity manufacturers finalized) rapidly approaching MY 2012 7. Small Entity Exemption to earn CO2 credits under the program, deadline, and given that manufacturers In the MY 2012–2016 rule, EPA which may be an especially attractive were transitioning from a CAFE regime exempted entities from the GHG option for the new electric vehicle that allows fine-paying, to a Clean Air emissions standard, if the entity met the manufacturers entering the market. EPA Act regime that does not. That concern Small Business Administration (SBA) proposes to make the opt-in available is no longer applicable, given that there size criteria of a small business as starting in MY 2014, as the MY 2012, is ample lead time before the MY 2017 described in 13 CFR 121.201.240 This and potentially the MY 2013, standards. More important, the includes both U.S.-based and foreign certification process will have already Temporary Lead Time Allowance was small entities in three distinct categories occurred by the time this rulemaking is just that—temporary—and EPA of businesses for light-duty vehicles: finalized. EPA is not proposing to provided it to allow manufacturers to small manufacturers, independent retroactively certify vehicles that have transition to full compliance in later commercial importers (ICIs), and already been produced. However, EPA model years. See 75 FR at 25416. EPA alternative fuel vehicle converters. EPA proposes that manufacturers certifying is thus not proposing to continue this is proposing to continue this exemption to the GHG standards for MY 2014 provision. for the MY 2017–2025 standards. EPA would be eligible to generate credits for In the context of the increasing will instead consider appropriate GHG vehicles sold in MY 2012 and MY 2013 stringency of standards in the latter standards for these entities as part of a based on the number of vehicles sold phase of the program (e.g., MY 2022– future regulatory action. and the manufacturer’s footprint-based 2025), one manufacturer suggested that EPA has identified about 21 entities standard under the primary program EPA should consider providing limited that fit the Small Business that would have otherwise applied to line, intermediate volume Administration (SBA) size criterion of a the manufacturer if it were a large manufacturers additional time to phase small business. EPA estimates there manufacturer. This approach would be into the standards. The concern raised currently are approximately four small similar to that used by EPA for early is that such limited line manufacturers manufacturers including three electric credits generated in MYs 2009–2011, face unique challenges securing where manufacturers did not certify competitive supplier contracts for new 239 ‘‘Data from the evaluation of instruments that vehicles to CO2 standards in those years technologies, and have fewer vehicle measure Nitrous Oxide (N2O),’’ Memorandum from Chris Laroo to Docket EPA–HQ–OAR–2010–0799, but were able to generate credits. See 75 lines to allocate the necessary upfront October 31, 2011. FR at 25441. EPA believes it is investment and risk inherent with new 240 See final regulations at 40 CFR 86.1801–12(j). appropriate to provide these credits to technology introduction. This

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manufacturer believes that as the committed to further consider the issue emergency vehicles. Technical standards become increasingly stringent in a future rulemaking.241 After further feasibility issues go beyond those of in future years requiring the investment consideration of this issue, EPA other high-performance vehicles and in new or advanced technologies, proposes to exempt police and other there is a clear public need for law intermediate volume limited line emergency vehicles from the CO2 enforcement and emergency vehicles manufacturers may have to pay a standards starting in MY 2012.242 EPA that meet these performance premium to gain access to these believes it is appropriate to provide an characteristics as these vehicles must technologies which would put them at exemption for these vehicles because of continue to be made available in the a competitive disadvantage. EPA seeks the unique features of vehicles designed market. MY 2012–2016 standards, as comment on this issue, and whether specifically for law enforcement and well as MY 2017 and later standards there is a need to provide some type of emergency response purposes, which would be fully harmonized with CAFE additional leadtime for intermediate have the effect of raising their GHG regarding the treatment of these volume limited line manufacturers to emissions, as well as for purposes of vehicles. EPA requests comments on its meet the latter year standards. harmonization with the CAFE program. proposal to exempt emergency vehicles In the context of the increasing EPA proposes to exempt vehicles that from the GHG standards. stringency of standards starting in MY are excluded under EPCA and NHTSA 10. Test Procedures 2017, as discussed, EPA is not regulations which define emergency proposing a continuation of the TLAAS. vehicle as ‘‘a motor vehicle EPA is considering revising the TLAAS was available to firms with a manufactured primarily for use as an procedures for measuring fuel economy wide range of U.S. sales volumes or combination ambulance- and calculating average fuel economy (between 5,000 and 400,000 in MY hearse or for use by the United States for the CAFE program, effective 2009). One company with U.S. sales on Government or a State or local beginning in MY 2017, to account for the order of 25,000 vehicles per year has government for law enforcement, or for three impacts on fuel economy not indicated that it believes that the CO2 other emergency uses as prescribed by currently included in these standards in today’s proposal for MY regulation by the Secretary of procedures—increases in fuel economy 2017–2025 would present significant Transportation.’’ 243 because of increases in efficiency of the technical challenges for their company, The unique features of these vehicles air conditioner; increases in fuel due to the relatively small volume of result in significant added weight economy because of technology products it sells in the U.S., limited including: heavy-duty suspensions, improvements that achieve ‘‘off-cycle’’ ability to average across their limited stabilizer bars, heavy-duty/dual benefits; and incentives for use of line fleet, and the performance-oriented batteries, heavy-duty engine cooling certain hybrid technologies in full size nature of its vehicles. This firm systems, heavier glass, bullet-proof side pickup trucks, and for the use of other indicated that absent access several panels, and high strength sub-frame. technologies that help those vehicles years in advance to CO2 credits that it Police pursuit vehicles are often exceed their targets, in the form of could purchase from other firms, this equipped with specialty steel rims and increased values assigned for fuel firm would need to significantly change increased rolling resistance tires economy. As discussed in section IV of the types of products they currently designed for high speeds, and unique this proposal, NHTSA would take these market in the U.S. beginning in model engine and transmission calibrations to changes into account in determining the year 2017, even if it adds substantial allow high-power, high-speed chases. maximum feasible fuel economy CO2 reducing technology to its vehicles. Police and emergency vehicles also have standard, to the extent practicable. In EPA requests comment on the potential features that tend to reduce this section, EPA discusses the legal need to include additional flexibilities aerodynamics, such as emergency lights, framework for considering these for companies with U.S. vehicle sales on increased ground clearance, and heavy- changes, and the mechanisms by which the order of 25,000 units per year, and duty front suspensions. these changes could be implemented. what types of additional flexibilities EPA is concerned that manufacturers EPA invites comment on all aspects of would be appropriate. Potential may not be able to sufficiently reduce this concept, and plans to adopt this flexibilities could include an extension the emissions from these vehicles, and approach in the final rule if it of the TLAAS program for lower volume would be faced with a difficult choice determines the changes are appropriate companies, or a one-to-three year delay of compromising necessary vehicle after consideration of all comments on in the applicable model year standard features or dropping vehicles from their these issues. (e.g., the proposed MY 2017 standards fleets, as they may not have credits These changes would be the same as could be delayed to begin in MY 2018, under the fleet averaging provisions program elements that are part of EPA’s MY 2019, or MY 2020). Commenters necessary to cover the excess emissions greenhouse gas performance standards, suggesting that additional flexibilities from these vehicles as standards become discussed in section III.B.1 and 2, above. may be needed are encouraged to more stringent. Without the exemption, EPA is considering adopting these provide EPA with data supporting their there could be situations where a changes for A/C efficiency and off-cycle suggested flexibilities. manufacturer is more challenged in technology because they are based on meeting the GHG standards simply due technology improvements that affect 9. Police and Emergency Vehicle to the inclusion of these higher emitting real world fuel economy, and the Exemption From CO2 Standards incentives for light-duty trucks will Under EPCA, manufacturers are 241 75 FR 25409. promote greater use of hybrid allowed to exclude police and other 242 Manufacturers would exclude police and technology to improve fuel economy in emergency vehicles from their CAFE emergency vehicles from fleet average calculations these vehicles. In addition, adoption of (both for determining fleet compliance levels and fleet and all manufacturers that produce fleet standards) starting in MY 2012. Because this these changes would lead to greater emergency vehicles have historically would have the effect of making the fleet standards coordination between the greenhouse done so. EPA received comments in the easier to meet for manufacturers, EPA does not gas program under the CAA and the fuel believe there would be lead time issues associated MY 2012–2016 rulemaking that these with the exemption, even though it would take economy program under EPCA. As vehicles should be exempt from the effect well into MY 2012. discussed below, these three elements GHG emissions standards and EPA 243 49 U.S.C. 32902(e). would be implemented in the same

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manner as in the EPA’s greenhouse gas EPA measures fuel economy for the result of design improvements or program—a vehicle manufacturer would CAFE program using two different test marketing shifts, and which would not have the option to generate these fuel procedures—the Federal Test Procedure result in any improvement in real world economy values for vehicle models that (FTP) and the Highway Fuel Economy fuel economy. EPA likewise concluded meet the criteria for these ‘‘credits,’’ and Test (HFET). These procedures that test procedure changes that to use these values in calculating their originated in the early 1970’s, and were provided manufacturers with an fleet average fuel economy. intended to generally represent city and improved ability to achieve increases in highway driving, respectively. These measured fuel economy based on real a. Legal Framework two tests are commonly referred to as world fuel economy improvements also EPCA provides that: the ‘‘2-cycle’’ test procedures for CAFE. would not warrant a CAFE adjustment. (c) Testing and calculation procedures. The The FTP is also used for measuring Id. at 27172, 27174, 27183. EPA adopted Administrator [of EPA] shall measure fuel compliance with CAA emissions retroactive adjustments that had the economy for each model and calculate standards for vehicle exhaust. EPA has effect of increasing measured fuel average fuel economy for a manufacturer made various changes to the city and economy (to offset test procedure under testing and calculation procedures highway fuel economy tests over the changes that reduced the measured fuel prescribed by the Administrator. However years. These have ranged from changes economy level) but declined to apply * * *, the Administrator shall use the same to dynamometers and other mechanical retroactive adjustments that reduced procedures for passenger automobiles the elements of testing, changes in test fuel fuel economy. Administrator used for model year 1975 properties, changes in testing * * *, or procedures that give comparable The DC Circuit reviewed two of EPA’s results. 49 U.S.C. 32904(c) conditions, to changes made in the decisions on CAFE test procedure 1990s when EPA adopted additional test Thus, EPA is charged with developing adjustments. Center for Auto Safety et procedures for exhaust emissions al. v. Thomas, 806 F.2d 1071 (1986). and adopting the procedures used to testing, called the Supplemental Federal measure fuel economy for vehicle First, the Court rejected EPA’s decision Test Procedures (SFTP). to apply only positive retroactive models and for calculating average fuel When EPA has made changes to the adjustments, as the appropriateness of economy across a manufacturer’s fleet. FTP or HFET, we have evaluated an adjustment did not depend on While this provision provides broad whether it is appropriate to provide for whether it increased or decreased discretion to EPA, it contains an an adjustment to the measured fuel measured fuel economy results. Second, important limitation for the economy results, to comply with the measurement and calculation EPCA requirement for passenger cars the Court upheld EPA’s decision to not procedures applicable to passenger that the test procedures produce results apply any adjustment for the change in automobiles. For passenger automobiles, comparable to the 1975 test procedures. the test setting for road load power. The EPA has to use the same procedures These adjustments are typically referred 1975 test procedure provided a default used for model year 1975 automobiles, to as a CAFE or fuel economy test setting for road load power, as well as or procedures that give comparable procedure adjustment or adjustment an optional, alternative method that results.244 This limitation does not factor. In 1985 EPA evaluated various allowed a manufacturer to develop an apply to vehicles that are not passenger test procedure changes made since alternative road load power setting. The automobiles. The legislative history 1975, and applied fuel economy road load power setting affected the explains that: adjustment factors to account for several amount of work that the engine had to of the test procedure changes that perform during the test, hence it Compliance by a manufacturer with affected the amount of fuel consumed applicable average fuel economy standards is reduced the measured fuel economy, to be determined in accordance with test producing a significant CAFE impact for during the test and the measured fuel procedures established by the EPA vehicle manufacturers. 50 FR 27172 economy. EPA changed the test Administrator. Test procedures so (July 1, 1985). EPA defined this procedure by replacing the alternative established would be the procedures utilized significant CAFE impact as any change method in the 1975 procedure with a by the EPA Administrator for model year or group of changes that has at least a new alternative coast down procedure. 1975, or procedures which yield comparable one tenth of a mile per gallon impact on Both the original and the replacement results. The words ‘‘or procedures which CAFE results. Id. at 27173. EPA also alternative procedures were designed to yield comparable results’’ are intended to concluded in this proceeding that no allow manufacturers to obtain the give EPA wide latitude in modifying the 1975 benefit of vehicle changes, such as test procedures to achieve procedures that adjustments would be provided for are more accurate or easier to administer, so changes that removed the changes in aerodynamic design, that long as the modified procedure does not have manufacturer’s ability to take advantage improved real world fuel economy by the effect of substantially changing the of flexibilities in the test procedure and reducing the amount of work that the average fuel economy standards. H.R. Rep. derive increases in measured fuel engine needed to perform to move the No. 94–340, at 91–92 (1975).245 economy values which were not the vehicle. The Center for Auto Safety (CAS) argued that EPA was required to 244 For purposes of this discussion, EPA need not The fuel economy improvement goals set in provide a test procedure adjustment for determine whether the changes relating to A/C section 504 are based upon the representative the new alternative coast down efficiency, off-cycle, and light-duty trucks involve driving cycles used by the Environmental procedure as it increased measured fuel changes to procedures that measure fuel economy Protection Agency to determine automobile fuel or procedures for calculating a manufacturer’s economies for model year 1975. In the event that economy compared to the values average fuel economy. The same provisions apply these driving cycles are changed in the future, it is measured for the 1975 fleet. In 1975, irrespective of which procedure is at issue. This the intent of this legislation that the numerical almost no manufacturers made use of discussion generally refers to procedures for miles per gallon values of the fuel economy measuring fuel economy for purposes of standards be revised to reflect a stringency (in terms the then available alternative method, convenience, but the same analysis applies whether of percentage-improvement from the baseline) that while in later years many manufacturers a measurement or calculation procedure is is the same as the bill requires in terms of the made use of the option once it was involved. present test procedures. S. Rep. No. 94–179, at 19 changed to the coast down procedure. 245 Unlike the House Bill, the Senate bill did not (1975). CAS argued this amounted to a change restrict EPA’s discretion to adopt or revise test In Conference, the House version of the bill was procedures. Senate Bill 1883, section 503(6). adopted, which contained the restriction on EPA’s in test procedure that did not achieve However, the Senate Report noted that: authority. comparable results, and therefore

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required a test procedure adjustment. whether the change in measured fuel change in the average fuel economy CAS did not contest that the coast down economy reflects real word fuel standard. As explained above, EPA has method and the prior alternative economy impacts from changes in considered a change of one-tenth of a method achieved comparable results. technology or design, or whether it is an mile per gallon as having a substantial The DC Circuit rejected CAS’ artifact of the test procedure or test impact, based in part on the one tenth arguments, stating that: procedure flexibilities such that the of a mile per gallon rounding The critical fact is that a procedure that change in measured fuel economy does convention in the statute for CAFE credited reductions in a vehicle’s road load not reflect a real world fuel economy calculations. 48 FR 56526, 56528 fn.14 power requirements achieved through impact. (December 21, 1983). A change in the improved aerodynamic design was available In this case, allowing credits for procedure that changes fuel economy for MY1975 testing, and those manufacturers, improvements in air conditioner results to this or a larger degree has the however few in number, that found it efficiency and off-cycle efficiency for effect of changing the stringency of the advantageous to do so, employed that passenger cars would lead to an increase CAFE standard, either making it more or procedure. The manifold intake procedure (i.e., improvement) in the fuel economy subsequently became obsolete for other less stringent. A change in stringency of reasons, but its basic function, to measure results for the vehicle model. The the standard changes the burden on the real improvements in fuel economy through impact on fuel economy and CAFE manufacturers, as well as the fuel more aerodynamically efficient designs, lived results clearly could be greater than one savings and other benefits to society on in the form of the coast down technique tenth of a mile per gallon (the level that expected from the standard. A CAFE for measuring those aerodynamic EPA has previously indicated as having adjustment factor is designed to account improvements. We credit the EPA’s finding a substantial impact). The increase in for these impacts. that increases in measured fuel economy fuel economy results would reflect real Here, however, there is a companion because of the lower road load settings world improvements in fuel economy EPA standard for greenhouse gas obtainable under the coast down method, and not changes that are just artifacts of emissions. In this case, the changes were increases ‘‘likely to be observed on the road,’’ and were not ‘‘unrepresentative the test procedure or changes that come would have an impact on the fuel artifact[s] of the dynamometer test from closing a loophole or removing a economy results and therefore the procedure.’’ Such real improvements are flexibility in the current test procedure. stringency of the CAFE standard, but exactly what Congress meant to measure However, these changes in procedure would not appear to have a real world when it afforded the EPA flexibility to would not have the ‘‘critical fact’’ that impact on the burden placed on the change testing and calculating procedures. the CAS Court relied upon—the manufacturers, as the provisions would We agree with the EPA that no retroactive existence of a 1975 test provision that be the same as provisions in EPA’s adjustment need be made on account of the was designed to account for the same greenhouse gas standards. Similarly it coast down technique. Center for Auto Safety kind of fuel economy improvements would not appear to have a real world et al v. EPA, 806 F.2d 1071, 1077 (DC Cir. 1986) from changes in A/C or off-cycle impact on the fuel savings and other efficiency. Under EPA’s traditional benefits of the National Program which Some years later, in 1996, EPA approach, these changes would appear would remain identical. If that is the adopted a variety of test procedure to have a significant impact on CAFE case, then it would appear reasonable to changes as part of updating the results, would reflect real world changes interpret section 32904(c) in these emissions test procedures to better in fuel economy, but would not have a circumstances as not restricting these reflect real world operation and comparable precedent in the 1975 test changes in procedure for passenger conditions. 61 FR 54852 (October 22, procedure addressing the impact of automobiles. The fuel economy results 1996). EPA adopted new test procedures these technology changes on fuel would be considered ‘‘comparable to supplement the FTP, as well as economy. EPA’s traditional approach results’’ to the 1975 procedure as there modifications to the FTP itself. For would be expected to lead to a CAFE would not be a substantial impact on example, EPA adopted a new adjustment factor for passenger cars to real world CAFE stringency and supplemental test procedure specifically account for the impact of these changes. benefits, given the changes in procedure to address the impact of air conditioner However, EPA is considering whether are the same as provisions in EPA’s use on exhaust emissions. Since this a change in approach is appropriate companion greenhouse gas procedures new test directly addressed the impact based on the existence of similar EPA and standards. EPA invites comment on of A/C use on emissions, EPA removed provisions for the greenhouse gas this approach to interpreting section the specified A/C horsepower emissions procedures and standards. In 32904(c), as well as the view that this adjustment that had been in the FTP the past, EPA has determined whether would not have a substantial impact on since 1975. Id. at 54864, 54873. Later a CAFE adjustment factor for passenger either the burden on manufacturers or EPA determined that there was no need cars would be appropriate in a context the benefits of the National Program. for CAFE adjustments for the overall set where manufacturers are subject to a EPA is also considering an alternative of test procedures changes to the FTP, CAFE standard under EPCA and there is interpretation. Under this interpretation, as the net effect of the changes was no no parallel greenhouse gas standard the reference to the 1975 procedures in significant change in CAFE results. under the CAA. That is not the case section 32904(c) would be viewed as a As evidenced by this regulatory here, as MY2017–2025 passenger cars historic reference point, and not a history, EPA’s traditional approach is to will be subject to both CAFE and codification of any specific procedures consider the impact of potential test greenhouse gas standards. As such, EPA or fuel economy improvement procedure changes on CAFE results for is considering whether it is appropriate technologies. The change in procedure passenger automobiles and determine if to consider the impact of a CAFE would be considered within EPA’s a CAFE adjustment factor is warranted procedure change in this broader broad discretion to prescribe reasonable to meet the requirement that the test context standard. testing and calculation procedures, as procedure produce results comparable The term ‘‘comparable results’’ is not these changes reflect real world to the 1975 test procedure. This defined in section 32904(c), and the improvements in design and involves evaluating the magnitude of legislative history indicates that it is accompanying real world improvements the impact on measured fuel economy intended to address changes in in fuel economy. The changes in results. It also involves evaluating procedure that result in a substantial procedure would reflect real world fuel

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economy improvements and increase in light-trucks, if certain criteria are met, overall cost analysis for the program. As harmonization with EPA’s greenhouse as these provisions apply to light-trucks discussed in section II.F, and III.B.10, gas program. Since the changes in and not passenger automobiles. EPA, in coordination with NHTSA, is procedure have an impact on fuel also proposing that manufacturers be b. Implementation of This Approach economy results and could have an able to include fuel consumption impact on the stringency of the CAFE As discussed in section IV, NHTSA reductions resulting from the use of A/ standard, EPA could consider two would take these changes in procedure C efficiency improvements in their different approaches to offsetting the into account in setting the applicable CAFE compliance calculations. change in stringency. CAFE standards for passenger cars and Manufacturers would generate ‘‘fuel In one approach EPA could maintain light-trucks, to the extent practicable. As consumption improvement values’’ the stringency of the 2-cycle (FTP and in EPA’s greenhouse gas program, the essentially equivalent to EPA CO2 HFET) CAFE standard by adopting a allowance of AC credits for cars and credits, for use in the CAFE program. corresponding adjustment factor to the trucks results in a more stringent CAFE The proposed changes to the CAFE test results, ensuring that the stringency standard than otherwise would apply program to incorporate A/C efficiency of the CAFE standard was not (although in the CAFE program the AC improvements are discussed below in substantially changed by the change in credits would only be for AC efficiency section III.C.1.b. procedure. This would be the traditional improvements, since refrigerant As in the 2012–2016 final rule, EPA approach EPA has followed. Another improvements do not impact fuel is structuring the A/C provisions as approach would be for NHTSA to economy). The allowance of off-cycle optional credits for achieving maintain the stringency of the 2-cycle credits has been considered in setting compliance, not as separate standards. CAFE standard by increasing that the CAFE standards for passenger car That is, unlike standards for N2O and standard’s stringency to offset any and light-trucks and credits for hybrid CH4, there are no separate GHG reduction in stringency associated with use in light pick-up trucks has not been standards related to AC related changes that increase fuel economy expressly considered in setting the emissions. Instead, EPA provides values. The effect of this adjustment to CAFE standards for light-trucks, because manufacturers the option to generate A/ the standard would be to maintain at the agencies did not believe that it was C GHG emission reductions that could comparable levels the amount of CAFE possible to quantify accurately the be used as part of their CO2 fleet average to be achieved using technology whose extent to which manufacturers would compliance demonstrations. As in the effects on fuel economy are accounted rely on those credits, but if more 2012–2016 final rule, EPA also included for as measured under the 1975 test accurate quantification were possible, projections of A/C credit generation in procedures. The effect of the adjustment NHTSA would consider incorporating determining the appropriate level of the to the standard would also typically be those incentives into its stringency proposed standards.246 an additional amount of CAFE that determination. In the time since the analyses would have to be achieved, for example EPA further discusses the criteria and supporting the 2012–2016 FRM were by technology whose effects on fuel test procedures for determining AC completed, EPA has re-assessed its economy are not accounted for under credits, off-cycle technology credits, and estimates of overall A/C emissions and the 1975 test procedures. Under this hybrid/performance-based credits for the fraction of those emissions that interpretation, this would maintain the full size pickup trucks in Section III.C might be controlled by technologies that level of stringency of the 2-cycle CAFE below. are or will be available to standard that would be adopted for manufacturers.247 As discussed in more passenger cars absent the changes in C. Additional Manufacturer Compliance detail in Chapter 5 of the Joint TSD (see procedure. As with the interpretation Flexibilities Section 5.1.3.2), the revised estimates discussed above, this alternative 1. Air Conditioning Related Credits remain very similar to those of the interpretation would be a major change earlier rule. This includes the leakage of from EPA’s past interpretation and A/C is virtually standard equipment refrigerant during the vehicle’s useful practice. In this joint rulemaking the in new cars and trucks today. Over 95% life, as well as the subsequent leakage alternative interpretation would apply of the new cars and light trucks in the associated with maintenance and to changes in procedure that are the United States are equipped with A/C servicing, and with disposal at the end same as the companion EPA greenhouse systems. Given the large number of of the vehicle’s life (also called ‘‘direct gas program. However, that would not vehicles with A/C in use in today’s light emissions’’). The refrigerant universally be an important element in this duty vehicle fleet, their impact on the used today is HFC–134a with a global alternative interpretation, which would amount of energy consumed and on the warming potential (GWP) of 1,430.248 apply irrespective of the similarity with amount of refrigerant leakage that Together these leakage emissions are EPA’s greenhouse gas procedures and occurs due to their use is significant. equivalent to CO2 emissions of 13.8 g/ standards. EPA invites comment on this EPA proposes that manufacturers be alternative interpretation. able to comply with their fleetwide 246 See Section II.F above and Section IV below The discussion above focuses on the average CO2 standards described above for more information on the use of such credits in procedures for passenger cars, as section by generating and using credits for the CAFE program. 247 The A/C-related emission inventories 32904(c) only limits changes to the improved (A/C) systems. Because such presented in this paragraph are discussed in CAFE test and calculation procedures improved A/C technologies tend to be Chapter 4 of the Draft RIA. for these automobiles. There is no such relatively inexpensive compared to 248 The global warming potentials (GWP) used in limitation on the procedures for light- other GHG-reducing technologies, EPA this rule are consistent with the 100-year time frame values in the 2007 Intergovernmental Panel on trucks. The credit provisions for expects that most manufacturers would Climate Change (IPCC) Fourth Assessment Report improvements in air conditioner choose to generate and use such A/C (AR4). At this time, the 1996 IPCC Second efficiency and off-cycle performance compliance credits as a part of their Assessment Report (SAR) 100-year GWP values are would apply to light-trucks as well. In compliance demonstrations. For this used in the official U.S. greenhouse gas inventory submission to the United Nations Framework addition, the limitation in section reason, EPA has incorporated the Convention on Climate Change (per the reporting 32904(c) does not apply to the projected costs of compliance with A/C requirements under that international convention, provisions for credits for use of hybrids related emission reductions into the which were last updated in 2006).

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mi for cars and 17.2 g/mi for trucks. reduce leakage and increase efficiency. approaches to address leakage (Due to the high GWP of HFC–134a, a Manufacturers can reduce A/C leakage reductions and efficiency improvements small amount of leakage of the emissions by using components that independently. A leakage reduction refrigerant has a much greater global tend to limit or eliminate refrigerant credit would take into account the warming impact than a similar amount leakage. Also, manufacturers can various technologies that could be used of emissions of CO2 or other mobile significantly reduce the global warming to reduce the GHG impact of refrigerant source GHGs.) EPA also estimates that impact of leakage emissions by adopting leakage, including the use of an A/C efficiency-related emissions (also systems that use an alternative, low- alternative refrigerant with a lower called ‘‘indirect’’ A/C emissions), GWP refrigerant, acceptable under GWP. An efficiency improvement credit account for CO –equivalent emissions of 2 EPA’s SNAP program, as discussed would account for the various types of 11.9 g/mi for cars and 17.1 g/mi for below, especially if systems are also hardware and control of that hardware trucks.249 Chapter 5 of the Joint TSD 251 designed to minimize leakage. available to increase the A/C system (see Section 5.1.3.2) discusses the Manufacturers can also increase the efficiency. To generate credits toward derivation of these estimates. overall efficiency of the A/C system and compliance with the fleet average CO2 Achieving GHG reductions in the thus reduce A/C-related CO2 emissions. most cost-effective ways is a primary This is because the A/C system standard, manufacturers would be required to attest to the durability of the goal of the program, and EPA believes contributes to increased CO2 emissions that allowing manufacturers to comply through the additional work required to leakage reduction and the efficiency with the proposed standards by using operate the compressor, fans, and improvement technologies over the full credits generated from incorporating A/ blowers. This additional work typically useful life of the vehicle. C GHG-reducing technologies is a key is provided through the engine’s EPA believes that both reducing A/C 250 factor in meeting that goal. EPA crankshaft, and delivered via belt drive system leakage and increasing A/C accounts for projected reductions from to the alternator (which provides efficiency would be highly cost-effective A/C related credits in developing the electric energy for powering the fans and technologically feasible for light- standards (curve targets), and includes and blowers) and the A/C compressor duty vehicles in the 2017–2025 these emission reductions in estimating (which pressurizes the refrigerant timeframe. EPA proposes to maintain the achieved benefits of the program. during A/C operation). The additional See Section II.D above. much of the existing framework for fuel used to supply the power through quantifying, generating, and using A/C Manufacturers can make very feasible the crankshaft necessary to operate the improvements to their A/C systems to Leakage Credits and Efficiency Credits. A/C system is converted into CO2 by the EPA expects that most manufacturers engine during combustion. This 247 The A/C-related emission inventories would choose to use these A/C credit incremental CO produced from A/C presented in this paragraph are discussed in 2 provisions, although some may choose Chapter 4 of the Draft RIA. operation can thus be reduced by not to do so. Consistent with the 2012– 248 The global warming potentials (GWP) used in increasing the overall efficiency of the this rule are consistent with the 100-year time frame vehicle’s A/C system, which in turn will 2016 final rule, the proposed standard values in the 2007 Intergovernmental Panel on reduce the additional load on the engine reflects this projected widespread Climate Change (IPCC) Fourth Assessment Report penetration of A/C control technology. (AR4). At this time, the 1996 IPCC Second from A/C operation. Assessment Report (SAR) 100-year GWP values are As with the earlier GHG rule, EPA is The following table summarizes the used in the official U.S. greenhouse gas inventory submission to the United Nations Framework proposing two separate credit maximum credits the EPA proposes to Convention on Climate Change (per the reporting make available in the overall A/C 249 requirements under that international convention, Indirect emissions are additional CO2 emitted program. which were last updated in 2006). due to the load of the A/C system on the engine.

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The next table shows the credits on a (starting with the ending values from average truck credits accounted for the model year basis that EPA projects that the 2012–2016 final rule). In the 2012– difference between the GHG and CAFE manufacturers will generate on average 2016 rule, the total average car and total standards.

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The year-on-year progression of number of credits for using low GWP for all the other technologies. However credits was determined as follows. The refrigerants, as well as the variety of because the maximum efficiency credits credits are assumed to increase starting alternative refrigerants that appear to be for cars and trucks have changed since from their MY 2016 value at a rate available, EPA believes that a total the 2012–2016 rule, proportioning to the approximately commensurate with the phase-in of alternative refrigerants is credits provides a more realistic and increasing stringency of the 2017–2025 likely to begin in the near future and be smoother year-on-year sequencing of GHG standards, but not exceeding a completed by no later than 2021 (as costs.252 shown in Table III–13 above). EPA 20% penetration rate increase in any EPA seeks comment on all aspects of requests comment on our assumptions given year, until the maximum credits the A/C credit program, including are achieved by 2021. EPA expects that for the phase-in rate for alternative refrigerants. changes from the current A/C credit manufacturers would be changing over program and the details in the Joint to alternative refrigerants at the time of The progression of the average credits TSD. complete vehicle redesign, which (relative to the maximum) also defines occurs about every 5 years, though in the relative year-on-year costs as confidential meetings, some described in Chapter 3 of the Joint TSD. manufacturers/suppliers have informed The costs are proportioned by the ratio 252 In contrast, the technology penetration rates EPA that a modification of the hardware could have anomalous (and unrealistic) of the average credit in any given year discontinuities that would be reflected in the cost for some alternative refrigerant systems to the maximum credit. This is nearly progressions. This issue is only specific to A/C may be able to be done between equivalent to proportioning costs to credits and costs and not to any other technology redesign periods. Given the significant technology penetration rates as is done analysis in this proposal.

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a. Air Conditioning Leakage (‘‘Direct’’) HFO–1234yf, HFC–152a, and carbon alternative-refrigerant systems a Emissions and Credits dioxide (R–744). Work on additional provision that would provide a i. Quantifying A/C Leakage Credits for low GWP alternatives continues. disincentive for manufacturers if Today’s Refrigerant HFO1234yf, has a GWP of 4, HFC–152a systems designed to operate with HFO– has a GWP of 124 and CO2 has a GWP 1234yf, HFC–152a, R744, or some other As previously discussed, EPA 254 of 1. Both HFC–152a and CO2 are low GWP refrigerant incorporated fewer proposes to continue the existing produced commercially in large leakage-reduction technologies. A leakage credit program, with minor amounts and thus, supply of refrigerant system with higher annual leakage modifications. Although in general EPA is not a significant factor preventing could then be recharged with HFC–134a continues to prefer performance-based adoption.255 HFC–152a has been shown or another refrigerant with a GWP standards whenever possible, A/C to be comparable to HFC–134a with higher than that with which the vehicle leakage is very difficult to accurately respect to cooling performance and fuel was originally equipped (e.g., HFO– measure in a laboratory test, due to the 256 use in A/C systems. 1234yf, CO2, or HFC–152a). Some typical slowness of such leaks and the In the MYs 2012–2016 GHG rule, a stakeholders have suggested that EPA tendency of leakage to develop manufacturer using an alternative take precautions to address the potential unexpectedly as vehicles age. At this refrigerant would receive no credit for for HFC–134a to replace HFO–1234yf, time, no appropriate performance test leakage-reduction technologies. At that for example, in vehicles designed for for refrigerant leakage is available. Thus, time, EPA believed that from the use with the new refrigerant (see as in the existing MYs 2012–2016 perspective of primary climate effect, comment and response section of EPA’s program, EPA would associate each leakage of a very low GWP refrigerant is SNAP rule on HFO–1234yf, 76 FR available leakage-reduction technology largely irrelevant. However, there is 17509; March 29, 2011).258 In EPA’s with associated leakage credit value, now reason to believe that the need for proposed disincentive provision, which would be added together to repeated recharging (top-off) of A/C manufacturers would avoid some or all quantify the overall system credit, up to systems with another, potentially costly of a deduction in their Leakage Credit of the maximum available credit. EPA’s refrigerant could lead some consumers about 2 g/mi by maintaining the use of Leakage Credit method is drawn from and/or repair facilities to recharge a low-leak components after a transition the SAE J2727 method (HFC–134a system designed for use with an to an alternative refrigerant. Mobile Air Conditioning System alternative, low GWP refrigerant with Refrigerant Emission Chart, August 2008 ii. Issues Raised by a Potential Broad either HFC–134a or another high GWP version), which in turn was based on Transition to Alternative Refrigerants results from the cooperative ‘‘IMAC’’ refrigerant. Depending on the As described previously, use of study.253 EPA is proposing to refrigerant, it may still be feasible, alternative, lower-GWP refrigerants for incorporate several minor modifications although not ideal, for systems designed mobile use reduces the climate effects of that SAE is making to the J2727 method, for a low GWP refrigerant to operate on leakage or release of refrigerant through but these do not affect the proposed HFC–134a; in particular, the A/C system the entire life-cycle of the A/C system. credit values for the technologies. operating pressures for HFO–1234yf and Because the impact of direct emissions Chapter 5 of the joint TSD includes a HFC–152a might allow their use. Thus, of such refrigerants on climate is full discussion of why EPA is proposing the need for repeated recharging in use significantly less than that for the to continue the design-based ‘‘menu’’ could slow the transition away from the approach to quantifying Leakage high-GWP refrigerant even though current refrigerant HFC–134a, release of Credits, including definitions of each of recharging with a refrigerant different these refrigerants into the atmosphere the technologies associated with the from that already in the A/C system is through direct leakage, as well as release values in the menu. not authorized under current due to maintenance or vehicle In addition to the above ‘‘menu’’ for regulations.257 scrappage, is predictably less of a vehicles using the current high-GWP For alternative refrigerant systems, concern than with the current refrigerant (HFC–134a), EPA also EPA is proposing to add to the existing refrigerant. As discussed above, there proposes to continue to provide the credit calculation approach for remains a concern, even with a low- leakage credit calculation for vehicles GWP refrigerant, that some repairs may using an alternative, lower-GWP 254 IPCC 4th Assessment Report. repeatedly result in the replacement of 255 refrigerant. This provision was also a The U.S. has one of the largest industrial the lower-GWP refrigerant from a leaky quality CO2 production facilities in the world (Gale A/C system with a readily-available, part of the MYs 2012–2016 rule. As with Group, 2011). HFC–152a is used widely as an the earlier rule, the agency is including aerosol propellant in many commercial products inexpensive, high-GWP refrigerant. this provision because shifting to lower- and thus potentially available for refrigerant use in For a number of years, the automotive GWP alternative refrigerants would motor vehicle A/C. Production volume for non- industry has explored lower-GWP confidential chemicals reported under the 2006 refrigerants and the systems required for significantly reduce the climate-change Inventory Update Rule. Chemical: Ethane, 1,1- concern about HFC–134a refrigerant difluoro-. Aggregated National Production Volume: them to operate effectively and leakage by reducing the direct climate 50 to <100 million pounds. [US EPA; Non- efficiently, taking into account impacts. Thus, the credit a manufacturer Confidential 2006 Inventory Update Reporting. refrigerant costs, toxicity, flammability, National Chemical Information. Ethane, 1,1- environmental impacts, and A/C system could generate is a function of the difluoro- (75–37–6). Available from, as of degree to which the GWP of an September 21, 2009: http://cfpub.epa.gov/ costs, weight, complexity, and alternative refrigerant is less than that of iursearch/index.cfm?s=chem&err=t. efficiency. European Union regulations the current refrigerant (HFC–134a). 256 United Nations Environment Program, require a transition to alternative In recent years, the global industry Technology and Economic Assessment Panel, refrigerants with a GWP of 150 or less ‘‘Assessment of HCFCs and Environmentally Sound has given serious attention primarily to Alternatives,’’ TEAP 2010 Progress Report, Volume for motor vehicle air conditioning. The three of the alternative refrigerants: 1, May 2010. http://www.unep.ch/ozone/ European Union’s Directive on mobile Assessment_Panels/TEAP/Reports/TEAP_Reports/ 253 Society of Automotive Engineers, ‘‘IMAC teap-2010-progress-report-volume1-May2010.pdf. 258 Regulations in Appendix D to Subpart G of 40 Team 1—Refrigerant Leakage Reduction, Final This document is available in Docket EPA–HQ– CFR part 82 prohibit topping off the refrigerant in Report to Sponsors,’’ 2006. This document is OAR–2010–0799. a motor vehicle A/C system with a different available in Docket EPA–HQ–OAR–2010–0799. 257 See appendix D to 40 CFR part 82, subpart G. refrigerant.

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air-conditioning systems (MAC cost of HFO–1234yf is largely because of producers of these blends have not to Directive 259) aims at reducing emissions limited global production capability at date applied for SNAP approval. of specific fluorinated greenhouse gases this time. However, because it is more However, we expect that there may well in the air-conditioning systems fitted to complicated to produce the molecule for be additional alternative refrigerants passenger cars (vehicles under EU HFO–1234yf, it is unlikely that it will available to vehicle manufacturers in category M1) and light commercial ever be as inexpensive as HFC–134a is the next few years. vehicles (EU category N1, class 1). currently. In Chapter 5 of the TSD (see The main objectives of the EU MAC Section 5.1.4), the EPA has accounted (1) Related EPA Actions to Date and Directive are: to control leakage of for this additional cost of both the Potential Actions Concerning fluorinated greenhouse gases with a refrigerant as well as the hardware Alternative Refrigerants global warming potential (GWP) higher upgrades. EPA is addressing potential than 150 used in this sector; and to Manufacturers have seriously environmental and human health prohibit by a specified date the use of considered other alternative refrigerants concerns of low-GWP alternative higher GWP refrigerants in MACs. The in recent years. One of these, HFC–152a, refrigerants through a number of MAC Directive is part of the European has a GWP of 124.262 HFC–152a is actions. The SNAP program has issued Union’s overall objectives to meet produced commercially in large final rules regulating the use of HFC– commitments made under the amounts.263 HFC–152a has been shown 152a and HFO–1234yf in order to UNFCCC’s Kyoto Protocol. This to be comparable to HFC–134a with reduce their potential risks (June 12, transition starts with new car models in respect to cooling performance and fuel 2008, 73 FR 33304; March 29, 2010, 76 264 2011 and continues with a complete use in A/C systems. HFC–152a is FR 17488). The SNAP rule for HFC– 265 transition to manufacturing all new cars flammable, listed as A2 by ASHRAE. 152a allows its use in new motor with low GWP refrigerant by January 1, Air conditioning systems using this vehicle A/C systems where proper 2017. refrigerant would require engineering engineering strategies and/or safety One alternative refrigerant has strategies or devices in order to reduce devices are incorporated into the generated significant interest in the flammability risks to acceptable levels system. The SNAP rules for both HFC– automobile manufacturing industry and (e.g., use of release valves or secondary- 152a and HFO–1234yf require meeting it appears likely to be used broadly in loop systems). In addition, CO2 can be safety requirements of the industry the near future for this application. This used as a refrigerant. It has a GWP of 1, standard SAE J639. With both refrigerant, called HFO–1234yf, has a and is widely available refrigerants, EPA expects that GWP of 4. The physical and 266 commercially. Air conditioning manufacturers conduct and keep on file thermodynamic properties of this systems using CO2 would require failure mode and effect analysis for the refrigerant are similar enough to HFC– different designs than other refrigerants, motor vehicle A/C system, as stated in 134a that auto manufacturers would primarily due to the higher operating SAE J1739. EPA has also proposed a need to make relatively minor pressures that are required. Reesearch rule that would allow use of carbon technological changes to their vehicle continues exploring the potential for dioxide as a refrigerant subject to use A/C systems in order to manufacture these alternative refrigerants for conditions for motor vehicle A/C and market vehicles capable of using automotive applications. Finally, EPA is systems (September 21, 2006; 71 FR HFO–1234yf. Although HFO–1234yf is aware that the chemical and automobile 55140). EPA expects to finalize a rule flammable, it requires a high amount of manufacturing industries continue to for use of carbon dioxide in motor energy to ignite, and is expected to have consider additional refrigerants with vehicle A/C systems in 2012. flammability risks that are not GWPs less than 150. For example, SAE significantly different from those of International is currently running a Under Section 612(d) of the Clean Air HFC–134a or other refrigerants found cooperative research program looking at Act, any person may petition EPA to acceptable subject to use conditions (76 two low GWP refrigerant blends, with add alternatives to or remove them from FR 17494–17496, 17507; March 29, the program to complete in 2012.267 The the list of acceptable substitutes for 2011). ozone depleting substances. The There are some drawbacks to the use 262 IPCC 4th Assessment Report. National Resource Defense Council of HFO–1234yf. Some technological 263 HFC–152a is used widely as an aerosol (NRDC) submitted a petition on behalf changes, such as the addition of an propellant in many commercial products and may of NRDC, the Institute for Governance & potentially be available for refrigerant use in motor Sustainable Development (IGSD), and internal heat exchanger in the A/C vehicle A/C systems. Aggregated national system, may be necessary to use HFO– production volume is estimated to be between 50 the Environmental Investigation 1234yf. In addition, the anticipated cost and 100 million pounds. [US EPA; Non- Agency-US (EIA–US) to EPA under of HFO–1234yf is several times that of Confidential 2006 Inventory Update Reporting. Clean Air Act Section 612(d), requesting National Chemical Information.] that the Agency remove HFC–134a from HFC–134a. At the time that EPA’s 264 May 2010 TEAP XXI/9 Task Force Report, Significant New Alternatives Policy http://www.unep.ch/ozone/Assessment_Panels/ the list of acceptable substitutes and add (SNAP) program issued its TEAP/Reports/TEAP_Reports/teap-2010-progress- it to the list of unacceptable (prohibited) determination allowing the use of HFO– report-volume1–May2010.pdf. substitutes for motor vehicle A/C, 265 A wide range of concentrations has been among other uses.268 EPA has found this 1234yf in motor vehicle A/C systems, reported for HFC–152a flammability where the gas the agency cited estimated costs of $40 poses a risk of ignition and fire (3.7%–20% by to $60 per pound, and stated that this volume in air) (Wilson, 2002). EPA finalized a rule Assessment’ Technical Update. Enrique Peral- range was confirmed by an automobile in 2008 listing HFC–152a as acceptable subject to Antunez, Renault. Presentation at SAE Alternative use conditions in motor vehicle air-conditioning, Refrigerant and System Efficiency Symposium. manufacturer (76 FR 17491; March 29, one of these restricting refrigerant concentrations in September, 2011. Available online at http:// 2011) and a component supplier.260 By the passenger compartment resulting from leaks www.sae.org/events/aars/presentations/2011/ comparison, HFC–134a currently costs above the lower flammability limit of 3.7% (see 71 Enrique%20Peral%20Renault%20Recent about $2 to $4 per pound.261 The higher FR 33304; June 12, 2008). %20Experiences%20in% 266 The U.S. has one of the largest industrial 20MAC%20System%20Dev.pdf . quality CO2 production facilities in the world (Gale 268 NRDC et al. Re: Petition to Remove HFC–134a 259 2006/40/EC. Group, 2011). from the List of Acceptable Substitutes under the 260 Automotive News, April 18, 2011.21. 267 ‘‘Recent Experiences in MAC System Significant New Alternatives Policy Program 261 Ibid. Development: ‘New Alternative Refrigerant (November 16, 2010).

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petition complete specifically for use of sunlight to create significant amounts of and the resulting estimated average HFC–134a in new motor vehicle A/C smog. EPA has already determined that credits over time shown in Table III–13. systems for use in passenger cars and a number of compounds, including the Switching to alternative refrigerants light duty vehicles. EPA intends to current automotive refrigerant, HFC– in the U.S. market continues to be an initiate a separate notice and comment 134a as well as HFC–152a, are low attractive option for automobile rulemaking in response to this petition enough in photochemical reactivity that manufacturers because vehicles with in the future. they do not need to be regulated under low GWP refrigerant could qualify for a EPA expects to address potential SIPs. CO is not considered a volatile 2 significantly larger leakage credit. toxicity issues with the use of CO2 as a organic compound (VOC) for purposes Manufacturers have expressed to EPA refrigerant in automotive A/C systems in of preparing SIPs. the upcoming final SNAP rule that they would plan to place a mentioned above. CO2 has a workplace (2) Vehicle Technology Requirements significant reliance on, or in some cases exposure limit of 5000 pm on a 8-hour for Alternative Refrigerants believe that they would need, time-weighted average.269 EPA has also alternative refrigerant credits for As discussed above, significant addressed potential toxicity issues with compliance with GHG fleet emission hardware changes could be needed to HFO–1234yf through a significant new standards starting in MY 2017. allow use of HFC–152a or CO , because use rule (SNUR) under the Toxic 2 of the flammability of HFC–152a and (3) Alternative Refrigerant Supply Substances Control Act (TSCA) (October because of the high operating pressure 27, 2010; 75 FR 65987). The SNUR for required for CO . In the case of HFO– EPA is aware that another practical HFO–1234yf allows its use as an A/C 2 1234yf, manufacturers have said that factor affecting the rate of transition to refrigerant for light-duty vehicles and A/C systems for use with HFO–1234yf alternative refrigerants is their supply. light-duty trucks, and found no As mentioned above, both HFC–152a significant toxicity issues with that use. would need a limited amount of additional hardware to maintain cooling and CO2 are being produced As mentioned in the NPRM for a VOC commercially in large quantities and exemption for HFO–1234yf, ‘‘The EPA efficiency compared to HFC–134a. In thus, although their supply chain does considered the results of developmental particular, A/C systems may require an not at this time include auto testing available at the time of the final internal heat exchanger to use HFO– manufacturers, it may be easier to SNUR action to be of some concern, but 1234yf, because HFO–1234yf would be not a sufficient basis to find HFO– less effective in A/C systems not increase production to meet additional 1234yf unacceptable under the SNUR designed for its use. Because EPA’s demand that would occur if determination. As a result, the EPA SNAP ruling allows only for its use in manufacturers adopt either as a requested additional toxicity testing and new vehicles, we expect that refrigerant. However, for the newest issued the SNUR for HFO–1234yf. The manufacturers would introduce cars refrigerant listed under the SNAP EPA has received and is presently using HFO–1234yf only during program, HFO–1234yf, supply is complete vehicle redesigns or when currently limited. There are currently reviewing the results of the additional 270 toxicity testing. The EPA continues to introducing new models. EPA two major producers of HFO–1234yf, believe that HFO–1234yf, when used in expects that the same would be true for DuPont and Honeywell, that are new automobile air conditioning other alternative refrigerants that are licensed to produce this chemical for systems in accordance with the use potential candidates (e.g., HFC–152a the U.S. market. Both companies will conditions under the SNAP rule, does and CO2). This need for complete likely provide most of their production not result in significantly greater risks to vehicle redesign limits the potential for the next few years from a single pace of a transition from HFC–134a to human health than the use of other overseas facility, as well as some alternative refrigerants. In meetings with available substitutes.’’ (76 FR 64063, production from small pilot plants. The EPA, manufacturers have informed EPA October 17, 2011). HFC–152a is initial emphasis for these companies is that, in the case of HFO–1234yf, for considered relatively low in toxicity and to provide HFO–1234yf to the European comparable to HFC–134a, both of which example, they would need to upgrade their refrigerant storage facilities and market, where regulatory requirements have a workplace environmental for low GWP refrigerants are already in exposure limit from the American charging stations on their assembly lines. During the transition period effect. These same companies have Industrial Hygiene Association of 1000 indicated that they plan to construct a ppm on an 8-hour time-weighted between the refrigerants, some of these assembly lines might need to have the new facility in the 2014 timeframe and average (73 FR 33304; June 12, 2008). intend to issue a formal announcement EPA has issued a proposed rule, infrastructure for both refrigerants simultaneously since many lines about that facility close to the end of proposing to exempt HFO–1234yf from this calendar year. This facility should the definition of ‘‘volatile organic produce multiple vehicle models. be designed to provide sufficient compound’’ (VOC) for purposes of Moreover, many of these plants might production volume for a worldwide preparing State implementation Plans not immediately have the facilities or market in coming years. EPA expects (SIPs) to attain the national ambient air space for two refrigerant infrastructures, quality standards for ozone under Title thus likely further increasing necessary that the speed of the transition to I of the Clean Air Act (October 17, 2011; lead time. EPA took these kinds of alternative refrigerants in the U.S. may 76 FR 64059). VOCs are a class of factors into account in estimating the depend on how rapidly chemical compounds that can contribute to penetration of alternative refrigerants, manufacturers are able to provide ground level ozone, or smog, in the supply to automobile manufacturers presence of sunlight. Some organic 270 Some suppliers and manufacturers have sufficient to allow most or all vehicles informed us that some vehicles may be able to sold in the U.S. to be built using the compounds do not react enough with upgrade A/C systems during a refresh of an existing model (between redesign years). However, this is alternative refrigerant. 269 The 8-hour time-weighted average worker highly dependent on the vehicle, space constraints One manufacturer (GM) has exposure limit for CO2 is consistent with OSHA’s behind the dashboard, and the manufacturing plant, announced its intention to begin PEL–TWA, and ACGIH’S TLV–TWA of 5,000 ppm so an upgrade may be feasible for only a select few (0.5%). models. introducing vehicle models using HFO–

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1234yf as early as MY 2013.271 EPA is For purposes of this proposed GHG HFC–134a for newly manufactured not aware of other companies that have rule, EPA is assuming the current status, vehicles. EPA requests comment on made a public commitment to early where there are no U.S. regulatory factors that may affect the industry adoption of HFO–1234yf or other requirements for manufacturers to demand for refrigerant and its U.S. and alternative refrigerants. As described eliminate the use of HFC–134a for international supply. above, we expect that in most cases a newly manufactured vehicles. Thus, the change-over to systems designed for agency would expect that the market b. Air Conditioning Efficiency alternative refrigerants would be limited penetration of alternatives will proceed (‘‘Indirect’’) Emissions and Credits to vehicle product redesign cycles, based on supply and demand and the In addition to the A/C leakage credits typically about every 5 years. Because of strong incentives in this proposal. Given discussed above, EPA is proposing this, the pace of introduction is likely to the combination of clear interest from credits for improving the efficiency of— be limited to about 20% of a automobile manufacturers in switching and thus reducing the CO2 emissions manufacturer’s fleet per year. In to an alternative refrigerant, the interest from—A/C systems. Manufacturers have addition, the current uncertainty about from HFO–1234yf alternative refrigerant available a number of very cost-effective the availability of supply of the new manufacturers to expand their capacity technology options that can reduce refrigerant in the early years of to produce and market the refrigerant, these A/C-related CO2 emissions, which introduction into vehicles in the U.S. and current commercial availability of EPA estimates are currently on average vehicles, also discussed above, means HFC–152a and CO2, EPA believes it is 11.9 g/mi for cars and 17.1 for trucks that the change-over may not occur at reasonable to project that supply would nationally.272 When manufacturers every vehicle redesign point. Thus, even be adequate to support the orderly rate incorporate these technologies into with the announced intention of this of transition to an alternative refrigerant vehicles that clearly result in reduced one manufacturer to begin early described above. As mentioned earlier, CO2 emissions, EPA believes that A/C introduction of an alternative at least one U.S. manufacturer already Efficiency Credits are warranted. Based refrigerant, EPA’s analysis of the overall has plans to introduce models using the on extensive industry testing and EPA industry trend will assume minimal alternative refrigerant HFO–1234yf analysis, the agency proposes that penetration of the U.S. vehicle market beginning in MY 2013. However, it is eligible efficiency-improving before MY 2017. not certain how widespread the technologies be limited to up to a Table III–13 shows that, starting from transition to a alternative refrigerants maximum 42% improvement,273 which MY 2017, virtually all of the expected will be in the U.S., nor how quickly that translates into a maximum credit value increase in generated credits would be transition will occur in the absence of of 5.0 g/mi for cars and 7.2 g/mi for due to a gradual increase in penetration requirements or strong incentives. trucks. of alternative refrigerants. In earlier There are other situations that could As discussed further in Section model years, EPA attributes the lead to an overall fleet changeover from III.C.1.b.iii below, under its EPCA expected increase in Leakage Credits to HFC–134a to alternative refrigerants. authority, EPA is proposing, in improvements in low-leak technologies. For example, the governments of the coordination with NHTSA, to allow U.S., Canada, and Mexico have (4) Projected Potential Scenarios for manufacturers to generate fuel proposed to the Parties to the Montreal consumption improvement values for Auto Industry Changeover to Protocol on Substances that Deplete the Alternative Refrigerants purposes of CAFE compliance based on Ozone Layer that production of HFCs be the use of A/C efficiency technologies. As discussed above, EPA is planning reduced over time. The North American EPA is proposing that both the A/C on issuing a proposed SNAP rulemaking Proposal to amend the Montreal efficiency credits under EPA’s GHG in the future requesting comment on Protocol allows the global community to program and the A/C efficiency fuel whether to move HFC–134a from the list make near-term progress on climate consumption improvement values of acceptable substitutes to the list of change by addressing this group of under the CAFE program would be unacceptable (prohibited) substitutes. potent greenhouse gases. The proposal based on the same methodologies and However, the agency has not would result in lower emissions in test procedures, as further described determined the specific content of that developed and developing countries below. proposal, and the results of any final through the phase-down of the action are unknowable at this time. EPA production and consumption of HFCs. If i. Quantifying A/C Efficiency Credits recognizes that a major element of that an amendment were adopted by the In the 2012–2016 rule, EPA proposed proposal will be the evaluation of the Parties, then switching from HFC–134a that A/C Efficiency Credits be calculated time needed for a transition for to alternative refrigerants would likely based on the efficiency-improving automobile manufacturers away from become an attractive option for HFC–134a. Thus, there could be decreasing the overall use and 272 EPA derived these estimates using a multiple scenarios for the timing of a emissions of high-GWP HFCs, and the sophisticated new vehicle simulation tool that EPA transition considered in that future Parties would likely initiate or expand has developed since the completion of the MYs policies to incentivize suppliers to ramp 2012–2016 final rule. Although results are very proposed rulemaking. Should EPA similar to those in the earlier rule, EPA believes finalize a rule under the SNAP program up the supply of alternative refrigerants. they represent more accurate estimates. Chapter 5 that prohibits the use of HFC–134a in Options for reductions would include of the Joint TSD presents a detailed discussion of new vehicles, the agency plans to transition from HFCs, moving from high the development of the simulation tool and the to lower GWP HFCs, and reducing resulting emissions estimates. evaluate the impacts of such a SNAP 273 The cooperative IMAC study mentioned above rule to determine whether it would be charge sizes. EPA requests comment on the concluded that these emissions can be reduced by necessary to consider revisions to the as much as 40% through the use of these availability and use of the compliance implications for the program of the technologies. In addition, EPA has concluded that credit for MY 2017–2025. refrigerant transition scenario assumed improvements in the control software for the A/C for the analyses supporting this NPRM; system, including more precise control of such components as the radiator fan and compressor, can 271 General Motors Press Release, July 23, 2010. that is, where there are no U.S. add another 2% to the emission reductions. In total, ‘‘GM First to Market Greenhouse Gas-Friendly Air regulatory requirements for EPA believes that a total maximum improvement of Conditioning Refrigerant in U.S’’. manufacturers to eliminate the use of 42% is available for A/C systems.

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technologies included in the vehicle. Although EPA believes some of auto manufacturers (USCAR) have The design-based approach, associating adjustments in the Idle Test are developed a new transient test each technology with a specific credit warranted and is proposing such procedure that can measure the effect of value, was a surrogate for a using a adjustments, the agency also believes the operation of the overall A/C system performance test to determine credit that a reasonable degree of verification on CO2 emissions and fuel economy. values. Although EPA generally prefers is still needed, to demonstrate that that The new test, known as ‘‘AC17’’ (for Air measuring actual emissions A/C efficiency-improving technologies Conditioning, 2017), and described in performance to a design-based for which manufacturers are basing detail in Chapter 5 of the Joint TSD, is approach, measuring small differences credits are indeed implemented essentially a combination of the existing in A/C CO2 emissions is very difficult, properly and are reducing A/C-related SC03 and HWFET test procedures, and an accurate test procedure capable fuel consumption. EPA continues to which, with the proposed of determining such differences was not believe that the Idle Test is a reasonable modifications, would exercise the A/C available. measure of some A/C-related CO2 system (and new technologies) under In conjunction with the (menu or) emissions as there is significant real- conditions representing typical U.S. design-based calculation, EPA continues world driving activity at idle, and it driving and climate. to believe it is important to verify that significantly exercises a number of the Some aspects of the AC17 test are still the technologies installed to generate A/C technologies from the menu. being developed and improved, but the credits are improving the efficiency of Therefore, EPA proposes to maintain the basic procedure is sufficiently complete the A/C system. In the 2012–2016 rule, use of Idle Test as a prerequisite for for EPA to propose it as a reporting EPA required that manufacturers submit generating Efficiency Credits for MYs option alternative to the Idle Test data from an A/C CO2 Idle Test as a 2014–2016. However, in order to threshold in 2014, and a replacement for prerequisite to accessing the design- provide reasonable verification while the Idle Test in 2017, as a prerequisite based credit calculation method. encouraging the development and use of for generating Efficiency Credits. In Beginning in MY 2014, manufacturers efficiency-improving technologies, EPA model years 2014 to 2016, the AC17 test wishing to generate the A/C Efficiency proposes to revise the CO2 threshold. would be used to demonstrate that a vehicle’s A/C system is delivering the Credits need to meet a CO2 emissions Specifically, the agency proposes to threshold on the Idle Test. scale the magnitude of the threshold to efficiency benefits of the new As manufacturers have begun to the displacement of the vehicle’s technologies, and the menu will still be evaluate the Idle Test requirements, engine, with smaller-displacement utilized. Manufacturers would run the they have made EPA aware of an issue engines having a higher ‘‘grams per AC17 test procedure on each vehicle with the test’s original design. In the minute’’ threshold than larger- platform that incorporates the new MYs 2012–2016 rule, EPA received displacement engines. Thus, for technologies, with the A/C system off comments that the Idle Test did not vehicles with smaller-displacement and then on, and then report these test properly capture the efficiency impact engines, the threshold would be less results to the EPA. This reporting option of some of the technologies on the stringent. The revised threshold would would replace the need for the Idle Test. Efficiency Credit menu list. EPA also apply for MYs 2014–2016, and can be In addition to reporting the test results, received comments that idle operation used (optionally) instead of the flat gram EPA will require that manufactures is not typical of real-world driving. EPA per minute threshold that applies for provide detailed vehicle and A/C acknowledges that both of these MYs 2014, through 2016.276 In addition system information for each vehicle tested (e.g. vehicle class, model type, comments have merit. At the time of the to revising the threshold, EPA proposes curb weight, engine size, transmission MY 2012–2016 rule, we expected that to relax the average ambient type, interior volume, climate control many manufacturers would be able to temperature and humidity type, refrigerant type, compressor type, demonstrate improved efficiency with requirements, due to the difficulty in and evaporator/condenser technologies like forced cabin air controlling the year-round humidity in test cells designed for FTP testing. EPA characteristics). recirculation or electronically- For model years 2017 and beyond, the requests comment on the proposed controlled, and variable-displacement A/C Idle Test menu and threshold continued use of the Idle Test as a tool compressors., But under idle conditions, requirement would be eliminated and to validate the function of a vehicle’s A/ testing by manufacturers has shown that be replaced with the AC17 test, as a the benefits from these technologies can C efficiency-improving technologies, prerequisite for access to the credit be difficult to quantify. Also, recent data and on the revised CO2 threshold and menu. For vehicle models which provided by the industry shows that ambient requirements. manufacturers are applying for A/C As stated above, EPA still considers some vehicles that incorporate higher- efficiency credits, the AC17 test would the Idle Test to be a reasonable measure efficiency A/C technologies are not able be run to validate that the performance of some A/C-related CO emissions. to consistently reach the CO2 threshold 2 and efficiency of a vehicle’s A/C However, there are A/C efficiency- on the current Idle Test. The available technology is commensurate to the level data also indicates that meeting the improving technologies that cannot be of credit for which the manufacturer is threshold tends to be more difficult for fully evaluated with the Idle Test. In applying. To determine whether the vehicles with smaller-displacement addition to proposing the revised Idle efficiency improvements of these engines.274 EPA continues to believe Test, EPA proposes that manufacturers technologies are being realized on the that there are some technologies that do have the option of reporting results from vehicle, the results of an AC17 test have their effectiveness demonstrated a new transient A/C test in place of the performed on a new vehicle model during idle and that idle is a significant Idle Test, for MYs 2014–2016. In the would be compared to a ‘‘baseline’’ fraction of real-world operation.275 year since the previous GHG rule was vehicle which does not incorporate the finalized, EPA, CARB, and a consortium efficiency-improving technologies. If the 274 Chapter 5 of the Joint TDS provides details difference between the new vehicle’s about the manufacturers’ testing of these vehicles. 276 Chapter 5 of the Joint TSD describes the 275 More discussion of real world idle operation available data relevant to testing on the Idle Test AC17 test result and the baseline can be found below and in chapter 5 of the joint and to the design of the displacement-weighted vehicle test result is greater than or TSD in the description of stop-start off cycle credits. revised threshold in more detail. equal to the amount of menu credit for

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which the manufacturer is applying, vs. when it is turned off. This difference and dynamometer testing to quantify then the menu credit amount would be in the ‘‘off-on’’ CO2 emissions, along Efficiency Credits. Specifically, the generated. However, if the difference in with details about the vehicle and its A/ agencies request comment on how to test results did not demonstrate the full C system design, will help inform EPA define the baseline configuration for menu-based potential of the technology, as to how these efficiency-improving bench testing. The agencies also request a partial credit could still be generated. technologies perform on a wide variety comment on the use of the Lifecycle This partial credit would be of vehicle types. Climate Performance Model (LCCP), or proportional to how far the difference in However, the test is limited in its alternatively, the use of an EPA results was from the expected menu- ability to accurately quantify the simulation tool to convert the test bench based credit (i.e., the sum of the amount of credit that would be results to a change in fuel consumption individual technology credits). The warranted by an improved A/C system and CO2 emissions. baseline vehicle is defined as one with on a particular vehicle. This is because iii. A/C Efficiency Fuel Consumption characteristics which are similar to the to determine an absolute—rather than a Improvement Values in the CAFE new vehicle, except that it is not relative—difference in CO2 effect for an Program equipped with the efficiency-improving individual vehicle design would require technologies (or they are de-activated). knowledge of the A/C system CO2 As described in section II.F and EPA is seeking comment on this performance for that exact vehicle, but above, EPA is proposing to use the approach to qualifying for A/C without those specific A/C efficiency AC17 test as a prerequisite to generating efficiency credits. improvements installed. This would be A/C Efficiency Credits starting in MY The AC17 test requires a significant difficult and costly, since two test 2017. EPA is proposing, in coordination amount of time for each test (nearly 4 vehicles (or a single vehicle with the with NHTSA, for the first time under its hours) and must be run in expensive components removed and replaced) EPCA authority to allow manufacturers SC03-capable facilities. EPA believes would be necessary to quantify this to use this same test procedure to that the purpose of the test—to validate precisely. Even then, the inherent generate fuel consumption improvement that A/C CO2 reductions are indeed variability between such tests on such a values for purposes of CAFE compliance occurring and hence that the small sample in such an approach might based on the use of A/C efficiency manufacturer is eligible for efficiency not be statistically robust enough to technologies. As described above, the credits—would be met if the confidently determine a small absolute CO2 credits would be determined from manufacturer performs the new test on CO2 emissions impact between the two a comparison of the new vehicle a limited subset of test vehicles. EPA vehicles. compared to an older ‘‘baseline proposes that manufacturers wishing to As an alternative to comparing new vehicle.’’ For CAFE, EPA proposes to use the AC17 test to validate a vehicle’s vehicle AC17 test with a ‘‘baseline’’ convert the total CO2 credits due to A/C technology be required to test one (described above), in Chapter 5 of the A/C efficiency improvements from vehicle from each platform. For this Joint TSD, EPA discusses a potential metric tons of CO2 to a fleetwide CAFE purpose, ‘‘platform’’ would be defined method of more accurately quantifying improvement value. The fuel as a group of vehicles with common the credit. This involves comparing the consumption improvement values are body floorplan, chassis, engine, and efficiencies of individual components presented to give the reader some transmission.277 EPA requests comment outside the vehicles, through ‘‘bench’’ context and explain the relationship on the new test and its proposed use. testing of components supplemented by between CO2 and fuel consumption EPA also requests comment on using the vehicle simulation modeling to relate improvements. The fuel consumption AC17 test to quantify efficiency credits, that component’s performance to the improvement values would be the instead of the menu. EPA is also seeking complete vehicle. EPA believes that amount of fuel consumption reduction comment on an option starting in MY such approaches may eventually allow achieved by that vehicle, up to a 2017, to have the AC17 test be used in the AC17 test to be used as part of a maximum of 0.000563 gallons/mi fuel a similar fashion as the Idle Test, such more complicated series of test consumption improvement value for that if the CO2 measurements are below procedures and simulations, to cars and a 0.000586 gallons/mi fuel a certain threshold value, then credit accurately quantify the A/C CO2 effect consumption improvement value for would be quantified based on the menu. of an individual vehicle’s A/C trucks.278 If the difference between the EPA also seeks comment on eliminating technology package. However, EPA new vehicle and baseline results does the idle test in favor of reporting only believes that this issue is beyond the not demonstrate the full menu-based the AC17 test for A/C efficiency credits scope of this proposed rule since there potential of the technology, a partial starting as early as MY 2014. are many challenges associated with credit could still be generated. This measuring small incremental decreases partial credit would be proportional to ii. Potential Future Use of the New in fuel consumption and CO2 emissions how far the difference in results was A/C Test for Credit Quantification compared to the relatively large overall from the expected menu-based credit As described above, EPA is proposing fuel consumption rate and CO2 (i.e., the sum of the individual to use the AC17 test as a prerequisite to emissions. The agency does encourage technology credits). The table below generating A/C Efficiency Credits. The comment, including test data, on how presents the proposed CAFE fuel test is well-suited for this purpose since the AC17 test could be enhanced in consumption improvement values for it can accurately measure the difference order to measure the individual and 278 Note that EPA’s proposed calculation in the increased CO2 emissions that collective impact of different A/C efficiency-improving technologies on methodology in 40 CFR 600.510–12 does not use occur when the A/C system is turned on vehicle-specific fuel consumption adjustments to individual vehicle designs and thus to determine the CAFE increase due to the various 277 A single platform may encompass a larger quantify Efficiency Credits. EPA incentives allowed under the proposed program. group of fuel economy label classes or car lines (40 especially seeks comment on a more Instead, EPA would convert the total CO2 credits CFR § 600.002–93), such as passenger cars, compact complex procedure, also discussed in due to each incentive program from metric tons of utility vehicles, and station wagons The specific CO2 to a fleetwide CAFE improvement value. The vehicle selection requirements for manufacturers Chapter 5 of the Joint TSD, that uses a fuel consumption values are presented to give the using this testing are laid out in the regulations combination of bench testing of reader some context and explain the relationship associated with this NPRM. components, vehicle simulation models, between CO2 and fuel consumption improvements.

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each of the efficiency-reducing air in chapter 5 of the joint TSD. EPA is conditioner technology used by conditioning technologies considered in proposing definitions of each of the manufacturers seeking these values this proposal. More detail is provided technologies in the table below which corresponds with the technology used to on the calculation of indirect A/C CAFE are discussed in Chapter 5 of the draft derive the fuel consumption fuel consumption improvement values joint TSD to ensure that the air improvement values.

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2. Incentive for Electric Vehicles, Plug- respect to control of transportation GHG upstream sources of those emissions. At in Hybrid Electric Vehicles, and Fuel emissions as they can combine an this time, however, there is no such Cell Vehicles efficient vehicle propulsion system with comprehensive program addressing a. Rationale for Temporary Regulatory the potential to use motor fuels upstream emissions of GHGs, and the Incentives for Electric Vehicles, Plug-in produced from low-GHG emissions upstream GHG emissions associated Hybrid Electric Vehicles, and Fuel Cell feedstocks or from fossil feedstocks with with production and distribution of Vehicles carbon capture and sequestration. EPA electricity are higher, on a national recognizes that the use of EVs, PHEVs, average basis, than the corresponding EPA has identified two vehicle and FCVs in the 2017–2025 timeframe, upstream GHG emissions of gasoline or powertrain-fuel combinations that have in conjunction with the incentives, will other petroleum based fuels.280 In the the future potential to transform the decrease the overall GHG emissions future, if there were a program to light-duty vehicle sector by achieving reductions associated with the program comprehensively control upstream GHG near-zero greenhouse gas (GHG) as the upstream emissions associated emissions, then the zero tailpipe levels emissions and oil consumption in the with the generation and distribution of from these vehicles have the potential to longer term, but which face major near- electricity are higher than the upstream contribute to very large GHG reductions, term market barriers such as vehicle emissions associated with production and to transform the transportation cost, fuel cost (in the case of fuel cell and distribution of gasoline. EPA sector’s contribution to nationwide GHG vehicles), the development of low-GHG accounts for this difference in emissions (as well as oil consumption). fuel production and distribution projections of the overall program’s For a discussion of this issue in the infrastructure, and/or consumer impacts and benefits (see Section 2012–2016 rule, see 75 FR at 25434– acceptance. III.F).279 438. • Electric vehicles (EVs) and plug-in The tailpipe GHG emissions from EVs and FCVs also represent some of hybrid electric vehicles (PHEVs) which EVs, PHEVs operated on grid electricity, the most significant changes in would operate exclusively or frequently and hydrogen-fueled FCVs are zero, and automotive technology in the industry’s on grid electricity that could be traditionally the emissions of the history.281 For example, EVs face major produced from very low GHG emission vehicle itself are all that EPA takes into consumer barriers such as significantly feedstocks or processes. account for purposes of compliance • Fuel cell vehicles (FCVs) which with standards set under Clean Air Act 280 There is significant regional variation with would operate on hydrogen that could section 202(a). Focusing on vehicle upstream GHG emissions associated with electricity be produced from very low GHG tailpipe emissions has not raised any production and distribution. Based on EPA’s eGRID2010 database, comprised of 26 regions, the emissions feedstocks or processes. issues for criteria pollutants, as average powerplant GHG emissions rates per As in the 2012–2016 rule, EPA is upstream emissions associated with kilowatt-hour for those regions with the highest proposing temporary regulatory production and distribution of the fuel GHG emissions rates are about 3 times higher than incentives for the commercialization of are addressed by comprehensive those with the lowest GHG emissions rates. See http://www.epa.gov/cleanenergy/energy-resources/ EVs, PHEVs, and FCVs. EPA believes regulatory programs focused on the egrid/index.html. that these advanced technologies 281 A PHEV is not such a big change since, if the represent potential game-changers with 279 Also see the Regulatory Impact Analysis. owner so chooses, it can operate on gasoline.

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higher vehicle cost and lower range. and have reduced their incremental cost Analysis, today’s Nissan Leaf EV would However, EVs also have attributes that to a few thousand dollars. The cost and have an upstream GHG emissions value could be attractive to some consumers: consumer tradeoffs associated with EVs, of 161 grams per mile based on national Lower and more predictable fuel price, PHEVs, and FCVs are more significant average electricity, and a value of 89 no need for oil changes or spark plugs, than those associated with conventional grams per mile based on the average and reducing one’s personal hybrids. Given the long leadtimes electricity in California, one of the contribution to local air pollution, associated with major transportation initial markets for the Leaf. climate change, and oil dependence.282 technology shifts, there is value in Because these upstream GHG Original equipment manufacturers promoting these potential game- emissions values are generally higher currently offer two EVs and one PHEV changing technologies today if we want than the upstream GHG emissions in the U.S. market.283 Deliveries of the to retain the possibility of achieving values associated with gasoline Nissan Leaf EV, which has a list price major environmental and energy vehicles, and because there is currently of about $33,000 (before tax credits) and benefits in the future. no national program in place to reduce an EPA label range of 73 miles, began In terms of the relative relationship GHG emissions from electric in December 2010 in selected areas, and between tailpipe and upstream fuel powerplants, EPA believes it is total sales through October 2011 are production and distribution GHG appropriate to consider the incremental about 8000. The luxury Tesla emissions, EVs, PHEVs, and FCVs are upstream GHG emissions associated EV, with a list price of $109,000, has very different than conventional with electricity production and been on sale since March 2008 with gasoline vehicles. Combining vehicle distribution. But, we also think it is cumulative sales of approximately 1500. tailpipe and fuel production/ appropriate to encourage the initial The PHEV, with a list distribution sources, gasoline vehicles commercialization of EV/PHEV/FCVs as price of about $41,000 and an EPA label emit about 80 percent of these GHG well, in order to retain the potential for all-electric range of 35 miles, has sold emissions at the vehicle tailpipe with game-changing GHG emissions and oil over 5000 vehicles since it entered the the remaining 20 percent associated savings in the long term. market in December 2010 in selected with ‘‘upstream’’ fuel production and Accordingly, EPA proposes to provide markets. At this time, no original distribution GHG emissions.286 On the temporary regulatory incentives for EVs, equipment manufacturer offers FCVs to other hand, vehicles using electricity PHEVs (when operated on electricity) the general public except for some and hydrogen emit no GHG (or other and FCVs that will be discussed in 284 limited demonstration programs. emissions) at the vehicle tailpipe, and detail below. EPA recognizes that the Currently, combined EV, PHEV, and therefore all GHG emissions associated use of EVs, PHEVs, and FCVs in the FCV sales represent about 0.1% of with powering the vehicle are due to 2017–2025 timeframe, in conjunction with the incentives, will decrease the overall light-duty vehicle sales. fuel production and distribution.287 overall GHG emissions reductions Additional models, such as the Ford Depending on how the electricity and associated with the program as the Focus EV, the Mitsubishi i EV, and the hydrogen fuels are produced, these fuels upstream emissions associated with the Toyota Prius PHEV, are expected to can have very high fuel production/ generation and distribution of electricity enter the U.S. market in the next few distribution GHG emissions (for are higher than the upstream emissions months. example, if coal is used with no GHG The agency remains optimistic about associated with production and emissions control) or very low GHG consumer acceptance of EVs, PHEVs, distribution of gasoline. EPA accounts emissions (for example, if renewable and FCVs in the long run, but we for this difference in projections of the processes with minimal fossil energy believe that near-term market overall program’s impacts and benefits inputs are used, or if carbon capture and acceptance is less certain. One of the (see Section III.F). EPA believes that the sequestration is used). For example, as most successful new automotive relatively minor impact on GHG shown in the Regulatory Impact powertrain technologies—conventional emissions reductions in the near term is hybrid electric vehicles like the Toyota justified by promoting technologies that 286 Fuel production and distribution GHG Prius—illustrates the challenges emissions have received much attention because have significant transportation GHG involved with consumer acceptance of there is the potential for more widespread emissions and oil consumption game- new technologies, even those that do commercialization of transportation fuels that have changing potential in the longer run, not involve vehicle attribute tradeoffs. very different GHG emissions characteristics in and that also face major market barriers terms of the relative contribution of GHG emissions Even though conventional hybrids have from the vehicle tailpipe and those associated with in entering a market that has been now been on the U.S. market for over a fuel production and distribution. Other GHG dominated by gasoline vehicle decade, their market share hovers emissions source categories include vehicle technology and infrastructure for over around 2 to 3 percent or so 285 even production, including the raw materials used to 100 years. manufacture vehicle components, and vehicle though they offer higher vehicle range disposal. These categories have not been included EPA will review all of the issues than their traditional gasoline vehicle in EPA motor vehicle emissions regulations for associated with upstream GHG counterparts, involve no significant several reasons: These categories are less important emissions, including the status of EV/ consumer tradeoffs (other than cost), from an emissions inventory perspective, they raise PHEV/FCV commercialization, the complex accounting questions that go well beyond vehicle testing and fuel-cycle analysis, and in status of upstream GHG emissions 282 PHEVs and FCVs share many of these same general there are fewer differences across control programs, and other relevant challenges and opportunities. technologies. factors. 283 Smart has also leased approximately 100 287 The Agency notes that many other fuels Smart ED vehicles in the U.S. currently used in light-duty vehicles, such as diesel b. MYs 2012–2016 Light-Duty Vehicle 284 For example, Honda has leased up to 200 from conventional oil, ethanol from corn, and Greenhouse Gas Emissions Standards Clarity fuel cell vehicles in southern California (see compressed natural gas from conventional natural Honda.com) and Toyota has announced plans for a gas, have tailpipe GHG and fuel production/ The light-duty vehicle greenhouse gas limited fuel cell vehicle introduction in 2015 (see distribution GHG emissions characteristics fairly emissions standards for model years Toyota.com). similar to that of gasoline from conventional oil. 2012–2016 provide a regulatory 285 Light-Duty Automotive Technology, Carbon See 75 FR at 25437. The Agency recognizes that Dioxide Emissions, and Fuel Economy Trends: 1975 future transportation fuels may be produced from incentive for electric vehicles (EVs), fuel Through 2010, EPA–420–R–10–023, November renewable feedstocks with lower fuel production/ cell vehicles (FCVs), and for the electric 2010, www.epa.gov/otaq/fetrends.htm. distribution GHG emissions than gasoline from oil. portion of operation of plug-in hybrid

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electric vehicles (PHEVs). See generally decrease in GHG emissions reductions d. Proposal for MYs 2017–2025 75 FR at 25434–438. This is designed to that would be associated with a scenario promote advanced technologies that of 500,000 EVs certified with a EPA is proposing the following have the potential to provide ‘‘game compliance value of 0 grams per mile. temporary regulatory incentives for EVs, changing’’ GHG emissions reductions in This scenario would result in a PHEVs, and FCVs consistent with the the future. This incentive is a 0 grams projected decrease of 25 million metric discussion in the August 2011 per mile compliance value (i.e., a tons of GHG emissions reductions, or Supplemental Notice of Intent. compliance value based on measured less than 3 percent of the total projected For MYs 2017 through 2021, EPA is vehicle tailpipe GHG emissions) up to a GHG benefits of the program of 962 proposing two incentives. The first cumulative EV/PHEV/FCV production million metric tons. This GHG proposed incentive is to allow all EVs, cap threshold for individual emissions impact could be smaller or PHEVs (electric operation), and FCVs to manufacturers. There is a two-tier larger, of course, based on the actual use a GHG emissions compliance value cumulative EV/PHEV/FCV production number of EVs that would certify at 0 of 0 grams per mile. There would be no cap for MYs 2012–2016: The cap is grams per mile. cap on the number of vehicles eligible 300,000 vehicles for those In the preamble to the final rule, EPA for the 0 grams per mile compliance manufacturers that sell at least 25,000 stated that it would reassess this issue value for MYs 2017 through 2021. EVs/PHEVs/FCVs in MY 2012, and the for rulemakings beginning in MY 2017 The second proposed incentive for cap is 200,000 vehicles for all other based on the status of advanced vehicle MYs 2017 through 2021 is a multiplier manufacturers. For manufacturers that technology commercialization, the for all EVs, PHEVs, and FCVs, which exceed the cumulative production cap status of upstream GHG control would allow each of these vehicles to over MYs 2012–2016, compliance programs, and other relevant factors. ‘‘count’’ as more than one vehicle in the values for those vehicles in excess of the manufacturer’s compliance cap will be based on a full accounting c. Supplemental Notice of Intent calculation.290 While the Agency of the net fuel production and In our most recent Supplemental rejected a multiplier incentive in the distribution GHG emissions associated Notice of Intent,289 EPA stated that: MYs 2012–2016 final rule, we are with those vehicles relative to the fuel ‘‘EPA intends to propose an incentive proposing a multiplier for MYs 2017– production and distribution GHG multiplier for all electric vehicles (EVs), 2021 because, while advanced emissions associated with comparable plug-in hybrid electric vehicles technologies were not necessary for gasoline vehicles. For an electric (PHEVs), and fuel cell vehicles (FCVs) compliance in MYs 2012–2016, they are vehicle, this accounting is based on the sold in MYs 2017 through 2021. This necessary, for some manufacturers, to vehicle electricity consumption over the multiplier approach means that each comply with the GHG standards in the EPA compliance tests, eGRID2007 EV/PHEV/FCV would count as more MYs 2022–2025 timeframe. A multiplier national average powerplant GHG than one vehicle in the manufacturer’s for MYs 2017–2021 can also promote emissions factors, and multiplicative compliance calculation. EPA intends to the initial commercialization of these factors to account for electricity grid propose that EVs and FCVs start with a advanced technologies. In order for a transmission losses and pre-powerplant multiplier value of 2.0 in MY 2017, PHEV to be eligible for the multiplier feedstock GHG related emissions.288 phasing down to a value of 1.5 in MY incentive, EPA proposes that PHEVs be The accounting for a hydrogen fuel cell 2021. PHEVs would start at a multiplier required to be able to complete a full vehicle would be done in a comparable value of 1.6 in MY 2017 and phase EPA highway test (10.2 miles), without manner. using any conventional fuel, or Although EPA also proposed a vehicle down to a value of 1.3 in MY 2021. These multipliers would be proposed alternatively, have a minimum incentive multiplier for MYs 2012– equivalent all-electric range of 10.2 2016, the agency did not finalize a for incorporation in EPA’s GHG program * * *. As an additional incentive for miles as measured on the EPA highway multiplier. At that time, the Agency cycle. EPA seeks comment on whether believed that combining the 0 gram per EVs, PHEVs and FCVs, EPA intends to propose allowing a value of 0 g/mile for this minimum range (all-electric or mile and multiplier incentives would be equivalent all-electric) should be lower excessive. the tailpipe compliance value for EVs, or higher, or whether the multiplier The 0 grams per mile compliance PHEVs (electricity usage) and FCVs for should vary based on range or on value decreases the GHG emissions MYs 2017–2021, with no limit on the reductions associated with the 2012– quantity of vehicles eligible for 0 g/mi another PHEV metric such as battery 2016 standards compared to the same tailpipe emissions accounting. For MYs capacity or ratio of electric motor power standards and no 0 grams per mile 2022–2025, 0 g/mi will only be allowed to engine or total vehicle power. The compliance value. It is impossible to up to a per-company cumulative sales specific proposed multipliers are shown know the precise number of vehicles cap based on significant penetration of in Table III–15. that will take advantage of this incentive these advanced vehicles in the in MYs 2012–2016. In the preamble to marketplace. EPA intends to propose an 290 In the unlikely case where a PHEV with a low appropriate cap in the NPRM.’’ electric range might have an overall GHG emissions the final rule, EPA projected the compliance value that is higher than its compliance target, EPA proposes that the automaker can choose 288 See 40 CFR 600.113–12(m). 289 76 Federal Register 48758 (August 9, 2011). not to use the multiplier.

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EPA also requests comments on the EPA recognizes that a central tension EV/PHEV/FCVs eligible for the 0 grams merits of providing similar multiplier in the design of a proposed cap relates per mile incentive in MYs 2022–2025. incentives to dedicated and/or dual fuel to certainty and uncertainty with EPA has chosen 2 million vehicles compressed natural gas vehicles. respect to both individual automaker because, as shown below, we project For MYs 2022 through 2025, EPA is caps and the overall number of vehicles that this limits the maximum decrease proposing one incentive—the 0 grams that may fall under the cap, which in GHG emissions reductions to about 5 per mile GHG emissions compliance determines the overall decrease in GHG percent of total program GHG savings. incentive for EVs, PHEVs (electric emissions reductions. A per-company EPA would allocate this 2 million operation), and FCVs up to a per- cap as described above would provide vehicle cap to individual automakers in company cumulative production cap clear certainty for individual calendar year 2022 based on cumulative threshold for those model years. EPA is manufacturers at the time of the final EV/PHEV/FCV sales in MYs 2019–2021, proposing a two-tier, per-company cap rule, but would yield uncertainty about i.e., if an automaker sold X percent of based on cumulative production in prior how many vehicles industry-wide industry-wide EV/PHEV/FCV sales in years, consistent with the general would take advantage of the 0 grams per MYs 2019–2021, that automaker would approach that was adopted in the mile incentive and therefore the overall get X percent of the 2 million industry- rulemaking for MYs 2012–2016. For impact on GHG emissions. An wide cumulative production cap in MYs manufacturers that sell 300,000 or more alternative approach would be an 2022–2025 (or possibly somewhat less EV/PHEV/FCVs combined in MYs industry-wide cap where EPA would than X percent, if EPA were to reserve 2019–2021, the proposed cumulative establish a finite limit on the total some small volumes for those production cap would be 600,000 EV/ number of vehicles eligible for the 0 automakers that sold zero EV/PHEV/ PHEV/FCVs for MYs 2022–2025. Other grams per mile incentive, with a method FCVs in MYs 2019–2021). automakers would have a proposed for allocating this industry-wide cap to For both the proposed per-company cumulative production cap of 200,000 individual automakers. An industry- cap and the alternative industry-wide EV/PHEV/FCVs in MYs 2022–2025. wide cap would provide certainty with cap, EPA proposes that, for production This proposed cap design is respect to the maximum number of beyond the cumulative vehicle appropriate as a way to encourage vehicles and GHG emissions impact and production cap for a given manufacturer automaker investment in potential GHG would reward those automakers who in MY 2022 and later, compliance emissions game-changing technologies show early leadership. If EPA were to values would be calculated according to that face very significant cost and make a specific numerical allocation at a methodology that accounts for the full consumer barriers. In addition, as with the time of the final rule, automakers net increase in upstream GHG emissions the rulemaking for MYs 2012–2016, would have certainty, but EPA is relative to that of a comparable gasoline EPA believes it is important to both concerned that we may not have vehicle. EPA also asks for comment on recognize the benefit of early leadership sufficient information to make an various approaches for phasing in from in commercialization of these equitable allocation for a timeframe that a 0 gram per mile value to a full net technologies, and encourage additional is over a decade away. If EPA were to increase value, e.g., an interim period manufacturers to invest over time. adopt an allocation formula in the final when the compliance value might be Manufacturers are unlikely to do so if rule that was dependent on future sales one-half of the net increase. vehicles with these technologies are (as we are proposing above for the per- EPA also seeks comments on whether treated for compliance purposes to be company cap), automakers would have any changes should be made for MYs no more advantageous than the best much less certainty in compliance 2012–2016, i.e., whether the compliance conventional hybrid vehicles. Finally, planning as they would not know their value for production beyond the cap we believe that the proposed cap design individual caps until some point in the should be one-half of the net increase in provides a reasonable limit to the future. upstream GHG emissions, or whether overall decrease in program GHG To further assess the merits of an the current cap for MYs 2012–2016 emissions reductions associated with industry-wide cap approach, EPA also should be removed. the incentives, and EPA is being seeks comment on the following EPA is not proposing any multiplier transparent about these GHG emissions alternative for an industry-wide cap. incentives for MYs 2022 through 2025. impacts (see later in this section and EPA would place an industry-wide EPA believes that the 0 gram per mile also Section III.F). cumulative production cap of 2 million compliance value, with cumulative

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vehicle production cap, is a sufficient have a 2-cycle test electricity be produced, if and when it were used incentive for MYs 2022–2025. consumption of 230 watt-hours/mile) as a transportation fuel, EPA seeks • One key issue here is the appropriate Adjusting this watt-hours/mile comment on projections for the fuel electricity upstream GHG emissions value upward to account for electricity production and distribution GHG losses during electricity transmission factor or rate to use in future projections emissions associated with hydrogen (dividing 230 watt-hours/mile by 0.93 to of EV/PHEV emissions based on the net production for various feedstocks and account for grid/transmission losses upstream approach. In the following processes. yields a value of 247 watt-hours/mile) example, we use a 2025 nationwide EPA is fully accounting for the • Multiplying the adjusted watt- upstream GHG emissions associated average electricity upstream GHG hours/mile value by a 2025 nationwide emissions rate (powerplant plus with all electricity used by EVs and average electricity upstream GHG PHEVs (and any hydrogen used by feedstock extraction, transportation, and emissions rate of 0.574 grams/watt-hour processing) of 0.574 grams GHG/watt- FCVs), both in our regulatory at the powerplant (247 watt-hours/mile projections of the impacts and benefits hour, based on simulations with the multiplied by 0.574 grams GHG/watt- EPA Office of Atmospheric Program’s of the program, and in all GHG hour yields 142 grams/mile) emissions inventory accounting. Integrated Planning Model (IPM).291 For • Subtracting the upstream GHG the example below, EPA is using a EPA seeks public comment on the emissions of a comparable midsize proposed incentives for EVs, PHEVs, projected national average value from 292 gasoline vehicle of 39 grams/mile to and FCVs described above. the IPM model, but EPA recognizes that reflect a full net increase in upstream values appropriate for future vehicle use GHG emissions (142 grams/mile for the e. Projection of Impact on GHG may be higher or lower than this value. EV minus 39 grams/mile for the gasoline Emissions Reductions Due to Incentives EPA is considering running the IPM vehicle yields a net increase and EV EPA believes it is important to project model with a more robust set of vehicle 293 compliance value of 103 grams/mile). the impact on GHG emissions that will and vehicle charging-specific The full accounting methodology for be associated with the proposed assumptions to generate a better FCVs and the portion of PHEV operation incentives (both 0 grams per mile and electricity upstream GHG emissions on grid electricity would use this same the multiplier) for EV/PHEV/FCVs over factor for EVs and PHEVs for our final approach. The proposed regulations the MYs 2017–2025 timeframe. Since it rulemaking, and, at minimum, intends contain EPA’s proposed method to is impossible to know precisely how to account for the likely regional sales determine the compliance value for many EV/PHEV/FCVs will be sold in variation for initial EV/PHEV/FCVs, and PHEVs, and EPA proposes to develop a the MYs 2017–2025 timeframe that will different scenarios for the relative similar methodology for FCVs if and utilize the proposed incentives, EPA frequency of daytime and nighttime when the need arises.294 Given the presents projections for two scenarios: charging. EPA seeks comment on uncertainty about how hydrogen would (1) The number of EV/PHEV/FCVs that whether there are additional factors that EPA’s OMEGA technology and cost we should try to include in the IPM 292 A midsize gasoline vehicle with a footprint of model predicts based exclusively on its modeling for the final rulemaking. 46 square feet would have a MY 2025 GHG target of about 140 grams/mile; dividing 8887 grams CO2/ projections for the most cost-effective EPA proposes a 4-step methodology gallon of gasoline by 140 grams/mile yields an way for the industry to meet the for calculating the GHG emissions equivalent fuel economy level of 63.5 mpg; and dividing 2478 grams upstream GHG/gallon of proposed standards, and (2) a scenario compliance value for vehicle production gasoline by 63.5 mpg yields a midsize gasoline with a greater number of EV/PHEV/ in excess of the cumulative production vehicle upstream GHG value of 39 grams/mile. The FCVs, based not only on compliance cap for an individual automaker. For 2478 grams upstream GHG/gallon of gasoline is with the proposed GHG and CAFE example, for an EV in MY 2025, this calculated from 21,546 grams upstream GHG/ million Btu (EPA value for future gasoline based on standards, but other factors such as the methodology would include the DOE’s GREET model modified by EPA standards proposed cumulative production caps following steps and calculations: and data; see docket memo to MY 2012–2016 and manufacturer investments. For this • rulemaking titled ‘‘Calculation of Upstream Measuring the vehicle electricity Emissions for the GHG Vehicle Rule’’) and analysis, EPA assumes that EVs and consumption in watt-hours/mile over multiplying by 0.115 million Btu/gallon of gasoline. PHEVs each account for 50 percent of the EPA city and highway tests (for 293 Manufacturers can utilize alternate calculation all EV/PHEV/FCVs. EPA seeks comment example, a midsize EV in 2025 might methodologies if shown to yield equivalent or on whether there are other scenarios superior results and if approved in advance by the Administrator. which should be evaluated for this 291 Technical Support Document, Chapter 4. 294 40 CFR 600.113–12(m). purpose in the final rule.

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not allowing a 0 gram per mile which could also help in this regard EPA projects that the cumulative GHG compliance value would change the include technology innovation and emissions savings of the proposed MYs technology mix and cost projected for lower prices for some powerplant fuels 2017–2025 standards, on a model year the proposed standard. such as natural gas. lifetime basis, is approximately 2 billion It is also important to note that the metric tons. Table III–16 projects that projected impact on GHG emissions On the other hand, EPA also the likely decrease in cumulative GHG reductions in the above table are based recognizes factors which could increase emissions reductions due to the EV/ on the 2025 nationwide average the appropriate electricity upstream PHEV/FCV incentives for MYs 2017– electricity upstream GHG emissions rate GHG emissions factor in the future, such 2025 vehicles is in the range of 80 to (powerplant plus feedstock) of 0.574 as a consideration of marginal electricity 110 million metric tons, or about 4 to 5 grams GHG/watt-hour discussed above demand rather than average demand percent. (based on simulations with the EPA’s and use of high-power charging. The It is important to note that the above Integrated Planning Model (IPM) for possibility that EVs won’t displace projection of the impact of the EV/ powerplants in 2025, and a 1.06 factor gasoline vehicle use on a 1:1 basis (i.e., PHEV/FCV incentives on the overall to account for feedstock-related GHG multi-vehicle households may use EVs program GHG emissions reductions emissions). for more shorter trips and fewer longer assumes that there would be no change EPA recognizes two factors which trips, which could lead to lower overall to the standard even if the EV 0 gram could significantly reduce the electricity travel for typical EVs and higher overall per mile incentive were not in effect, upstream GHG emissions factor by travel for gasoline vehicles) could also i.e., that EPA would propose exactly the calendar year 2025. First, there is a reduce the overall GHG emissions same standard if the 0 gram per mile likelihood that early EV/PHEV/FCV benefits of EVs. compliance value were not allowed for sales will be much more concentrated in any EV/PHEV/FCVs. While EPA has not parts of the country with lower EPA seeks comment on information analyzed such a scenario, it is clear that electricity GHG emissions rates and relevant to these and other factors much less concentrated in regions with which could both decrease or increase 295 The number of metric tons represents the higher electricity GHG emissions rates. the proper electricity upstream GHG number of additional tons that would be reduced This has been the case with sales of emissions factor for calendar year 2025 if the standards stayed the same and there was no 0 gram per mile compliance value. hybrid vehicles, and is likely to be more modeling. 296 The percentage change represents the ratio of so with EVs in particular. Second, there the cumulative decrease in GHG emissions is the possibility of a future reductions from the prior column to the total comprehensive program addressing cumulative GHG emissions reductions associated with the proposed standards and the proposed 0 upstream emissions of GHGs from the gram per mile compliance value. generation of electricity. Other factors

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3. Incentives for ‘‘Game-Changing’’ and fuel consumption improvement measured at the cargo floor surface Technologies Including Use of values provide the incentive to begin along vehicle centerline).299 Hybridization and Other Advanced transforming this challenged category of 3. Minimum Towing Capability—the Technologies for Full-Size Pickup vehicles toward use of the most vehicle must have a GCWR (gross Trucks advanced technologies. combined weight rating) minus GVWR As explained in section II. C above, Access to this credit is conditioned on (gross vehicle weight rating) value of at 300 the agencies recognize that the a minimum penetration of the least 5,000 pounds. standards under consideration for MY technologies in a manufacturer’s full 4. Minimum Payload Capability—the 2017–2025 will be challenging for large size pickup truck fleet. The proposed vehicle must have a GVWR (gross trucks, including full size pickup trucks penetration rates can be found in Table vehicle weight rating) minus curb that are often used for commercial 5–26 in the TSD. EPA is seeking weight value of at least 1,700 pounds. purposes and have generally higher comment on these penetration rates and As discussed above, this proposed payload and towing capabilities, and how they should be applied to a definition is intend to cover the larger cargo volumes than other light-duty manufacturer’s truck fleet. pickup trucks sold in the U.S. today To ensure its use for only full sized vehicles. In Section II.C and Chapter 2 (and for 2017 and later) which have the pickup trucks, EPA is proposing a of the joint TSD, EPA and NHTSA unique attributes of an open bed, and specific definition for a full sized describe how the slope of the truck larger towing and/or payload capacity. pickup truck based on minimum bed curve has been adjusted compared to This proposed incentive will encourage size and minimum towing capability. the 2012–2016 rule to reflect these the penetration of advanced, low CO2 The specifics of this proposed definition disproportionate challenges. In Section technologies into this market segment. can be found in Chapter 5 of the draft III.B, EPA describes the progression of The proposed definition would exclude joint TSD (see Section 5.3.1) and in the the truck standards. In this section, EPA a number of smaller-size pickup trucks draft regulations at 86.1866–12(e). This describes a proposed incentive for full sold in the U.S. today (examples are the proposed definition is meant to ensure size pickup trucks, proposed by EPA Dakota, Nissan Frontier, that the larger pickup trucks which under both section 202 (a) of the CAA Chevrolet Colorado, Toyota Tacoma and provide significant utility with respect and section 32904 (c) of EPCA, to Ford Ranger). These vehicles generally to payload and towing capacity as well incentivize advanced technologies on have smaller boxes (and thus smaller as open beds with large cargo capacity this class of vehicles. This incentive cargo capacity), and lower payload and are captured by the definition, while would be in the form of credits under towing ratings. EPA is aware that some smaller pickup trucks which have more the EPA GHG program, and fuel configurations of these smaller pickups limited hauling, payload and/or towing consumption improvement values trucks can offer towing capacity similar are not covered by the proposed (equivalent to EPA’s credits) under the to the larger pickups. As discussed in definition. For this proposal, a full sized CAFE program. the draft Joint TSD Section 5.3.1, EPA The agencies’ goal is to incentivize pickup truck would be defined as is seeking comment on expanding the the penetration into the marketplace of meeting requirements 1 and 2, below, as scope of this credit to somewhat smaller ‘‘game changing’’ technologies for these well as either requirement 3 or 4, below: pickups (with a minimum distance 1. The vehicle must have an open pickups, including their hybridization. between the wheel wells of 42 inches, cargo box with a minimum width For that reason, EPA is proposing but still with a minimum box length of between the wheelhouses of 48 inches credits for manufacturers that hybridize 60 inches), provided they have the measured as the minimum lateral a significant quantity of their full size towing capabilities of the larger full-size distance between the limiting pickup trucks, or use other technologies trucks (for example a minimum towing interferences (pass-through) of the that significantly reduce CO emissions capacity of 6,000 pounds). EPA believes 2 wheelhouses. The measurement would and fuel consumption. This proposed this could incentivize advanced exclude the transitional arc, local credit would be available on a per- technologies (such as HEVs) on pickups protrusions, and depressions or pockets, vehicle basis for mild and strong HEVs, which offer some of the utility of the if present.298 An open cargo box means as well as for use of other technologies larger vehicles, but overall have lower a vehicle where the cargo bed does not that significantly improve the efficiency CO2 emissions due to the much lighter have a permanent roof or cover. of the full sized pickup class. As mass of the vehicle. Providing an Vehicles sold with detachable covers are described in section II.F. and III.B.10, advanced technology incentive credit considered ‘‘open’’ for the purposes of EPA, in coordination with NHTSA, is for a vehicle which offers consumers these criteria. much of the utility of a larger pickup also proposing that manufacturers be 2. Minimum open cargo box length of truck but with overall lower CO2 able to include ‘‘fuel consumption 60 inches defined by the lesser of the improvement values’’ equivalent to EPA performance would promote the overall pickup bed length at the top of the body objective of the proposed standards. CO2 credits in the CAFE program. The (defined as the longitudinal distance gallon per mile values equivalent to from the inside front of the pickup bed 299 The pickup body length at the top of the body EPA proposed CO2 credits are also to the inside of the closed endgate; this provided below, in addition to the is also known as dimension L506 in Society of Automotive Engineers Procedure J1100. The pickup 297 would be measured at the height of the proposed CO2 credits. These credits top of the open pickup bed along body length at the floor is also known as dimension vehicle centerline and the pickup bed L505 in Society of Automotive Engineers Procedure 297 Note that EPA’s proposed calculation J1100. methodology in 40 CFR 600.510–12 does not use length at the floor) and the pickup bed 300 Gross combined weight rating means the value vehicle-specific fuel consumption adjustments to length at the floor (defined as the specified by the vehicle manufacturer as the determine the CAFE increase due to the various longitudinal distance from the inside maximum weight of a loaded vehicle and trailer, incentives allowed under the proposed program. front of the pickup bed to the inside of consistent with good engineering judgment. Gross Instead, EPA would convert the total CO2 credits vehicle weight rating means the value specified by due to each incentive program from metric tons of the closed endgate; this would be the vehicle manufacturer as the maximum design CO2 to a fleetwide CAFE improvement value. The loaded weight of a single vehicle, consistent with fuel consumption values are presented to give the 298 This dimension is also known as dimension good engineering judgment. Curb weight is defined reader some context and explain the relationship W202 as defined in Society of Automotive in 40 CFR 86.1803, consistent with the provisions between CO2 and fuel consumption improvements. Engineers Procedure J1100. of 40 CFR 1037.140.

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EPA proposes that mild HEV pickup 0.0011 gal/mi) performance-based credit 4. Treatment of Plug-in Hybrid Electric trucks would be eligible for a per-truck would be available for MYs 2017 to Vehicles, Dual Fuel Compressed Natural 10 g/mi CO2 credit (equal to 0.0011 gal/ 2021 and a vehicle meeting the Gas Vehicles, and Ethanol Flexible Fuel mi for a 25 mpg truck) during MYs requirements would receive the credit Vehicles for GHG Emissions 2017–2021 if the mild HEV technology until MY 2021 unless its CO2 level or Compliance is used on a minimum percentage of a fuel consumption increases. The 10 g/ a. Greenhouse Gas Emissions company’s full sized pickups. That mi credit is not available after 2021 i. Introduction minimum percentage would be 30 because the post-2021 standards quickly percent of a company’s full sized pickup overtake a 15% overcompliance. Earlier This section addresses proposed production in MY 2017 with a ramp up in the program, an overcompliance lasts approaches for determining the to at least 80 percent of production in for more years, making the credit/value compliance values for greenhouse gas MY 2021. appropriate for a longer period. The 20 (GHG) emissions for those vehicles that EPA is also proposing that strong HEV can use two different fuels, typically g/mi CO (equivalent to 0.0023 gal/mi) pickup trucks would be eligible for a 2 referred to as dual fuel vehicles under performance-based credit would be per-truck 20 g/mi CO2 credit (equal to the CAFE program. Three specific 0.0023 gal/mi for a 25 mpg truck) during available for a maximum of 5 technologies are addressed: Plug-in MYs 2017–2025 if the strong HEV consecutive years within the model hybrid electric vehicles (PHEVs), dual technology is used on a minimum years of 2017 to 2025 after it is first fuel compressed natural gas (CNG) percentage of a company’s full sized eligible, provided its CO2 level and fuel vehicles, and ethanol flexible fuel pickups. That minimum percentage consumption does not increase. vehicles (FFVs).302 EPA’s underlying would be 10 percent of a company’s full Subsequent redesigns can qualify for the principle is to base compliance values sized pickup production in each year credit again. The credits would begin in on demonstrated vehicle tailpipe CO2 over the model years 2017–2025. the model year of introduction, and (as emissions performance. The key issue To ensure that the hybridization noted) could not extend past MY 2021 with vehicles that can use more than technology used by manufacturers for the 10 g/mi credit (equivalent to one fuel is how to weight the operation seeking one of these credits meets the 0.0011 gal/mi) and MY 2025 for the 20 (and therefore GHG emissions intent behind the incentives, EPA is g/mi credit (equivalent to 0.0023 gal/ performance) on the two different fuels. proposing very specific definitions of mi). EPA proposes to do this on a what qualifies as a mild and a strong technology-by-technology basis, and the As with the HEV-based credit, the HEV for these purposes. These sections below will explain the rationale performance-based credit/value requires definitions are described in detail in for choosing a particular approach for that the technology be used on a Chapter 5 of the draft joint TSD (see each vehicle technology. section 5.3.3). minimum percentage of a EPA is proposing no changes to the Because there are other technologies manufacturer’s full-size pickup trucks. tailpipe GHG emissions compliance besides mild and strong hybrids which That minimum percentage for the 10 g/ approach for dedicated vehicles, i.e., can significantly reduce GHG emissions mi GHG credit (equivalent to 0.0011 gal/ those vehicles that can use only one and fuel consumption in pickup trucks, mi fuel consumption improvement fuel. As finalized for MY 2016 and later EPA is also proposing performance- value) would be 15 percent of a vehicles in the 2012–2016 rule, tailpipe based incentive credits, and equivalent company’s full sized pickup production CO2 emissions compliance levels are fuel consumption improvement values in MY 2017 with a ramp up to at least those values measured over the EPA 2- for CAFE, for full size pickup trucks that 40 percent of production in MY 2021. cycle city/highway tests.303 EPA is achieve an emission level significantly The minimum percentage for the 20 g/ proposing provisions for how and when 301 below the applicable CO2 target. EPA mi credit (equivalent to 0.0011 gal/mi to also account for the upstream fuel proposes that this credit be either 10 g/ fuel consumption improvement value) production and distribution related mi CO2 (equivalent to 0.0011 gal/mi for would be 10 percent of a company’s full GHG emissions associated with electric the CAFE program) or 20 g/mi CO2 sized pickup production in each year vehicles, fuel cell vehicles, and the (equivalent to 0.0023 gal/mi for the over the model years 2017–2025. These electric portion of plug-in hybrid CAFE program) for pickups achieving minimum percentages are set to electric vehicles, and these provisions 15 percent or 20 percent, respectively, encourage significant penetration of are discussed in Section III.C.2 above. better CO2 than their footprint based these technologies, leading to long-term ii. Plug-In Hybrid Electric Vehicles target in a given model year. Because market acceptance. the footprint target curve has been PHEVs can operate both on an on- adjusted to account for A/C related Importantly, the same vehicle could board battery that can be charged by wall electricity from the grid, and on a credits, the CO2 level to be compared not receive credits (or equivalent fuel with the target would also include any consumption improvement values) conventional liquid fuel such as A/C related credits generated by the under both the HEV and the gasoline. Depending on how these vehicles. EPA provides further details performance-based approaches. EPA vehicles are fueled and operated, PHEVs on this performance-based incentive in requests comment on all aspects of this Chapter 5 of the draft joint TSD (see proposed pickup truck incentive credit, 302 EPA recognizes that other vehicle technologies may be introduced in the future that can use two Section 5.3). The 10 g/mi (equivalent to including the proposed definitions for (or more) fuels. For example, the original FFVs were full sized pickup truck and mild and designed for up to 85% methanol/15% gasoline, 301 The 15 and 20 percent thresholds would be strong HEV. rather than the 85% ethanol/15% gasoline for based on CO2 performance compared to the which current FFVs are designed. EPA has applicable CO2 vehicle footprint target for both CO2 regulations that address methanol vehicles (both credits and corresponding CAFE fuel consumption FFVs and dedicated vehicles), and, for GHG improvement values. As with A/C and off-cycle emissions compliance in MYs 2017–2025, EPA is credits, EPA would convert the total CO2 credits proposing to treat methanol vehicles in the same due to the pick-up incentive program from metric way as ethanol vehicles. 303 tons of CO2 to a fleetwide equivalent CAFE For dedicated alternative fuel vehicles. See 75 improvement value. at FR 25434.

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could operate exclusively on grid manufacturer (OEM) PHEV in the U.S. price for the dual fuel capability, and electricity, exclusively on the market today, which has an all-electric because CNG fuel is considerably conventional fuel, or any combination range of 35 miles on EPA’s fuel cheaper than gasoline on a per mile of both fuels. EPA can determine the economy label, has city and highway basis. EPA notes that there are some CO2 emissions performance when cycle utility factors of about 0.65, relevant differences between dual fuel operated on the battery and on the meaning that the average Volt driver is CNG vehicles and PHEVs, and some of conventional fuel. But, in order to projected to drive about 65 percent of these differences might weaken the case generate a single CO2 emissions the miles on grid electricity and about for using utility factors for dual fuel compliance value, EPA must adopt an 35 percent of the miles on gasoline. CNG vehicles. For example, a dual fuel approach for determining the Each PHEV will have its own utility CNG vehicle might be able to run on appropriate weighting of the CO2 factor. gasoline when both fuels are available emissions performance on grid Based on this utility factor approach, on board (depending on how the vehicle electricity and the CO2 emissions EPA calculates the GHG emissions is designed), it may be much more performance on gasoline. compliance value for an individual inconvenient for some private dual fuel EPA is proposing no changes to the PHEV as the sum of (1) the GHG CNG vehicle owners to fuel every day Society of Automotive Engineers (SAE) emissions value for electric operation relative to PHEVs, and there are many cycle-specific utility factor approach for (either 0 grams per mile or a non-zero fewer CNG refueling stations than PHEV compliance and label emissions value reflecting the net upstream GHG electrical charging facilities.307 On the calculations first adopted by EPA in the emissions accounting depending on other hand, there are differences that joint EPA/DOT final rulemaking whether automaker EV/PHEV/FCV could strengthen the case as well, e.g., establishing new fuel economy and production is below or above its many dual fuel CNG vehicles will likely environment label requirements for MY cumulative production cap as discussed have smaller gasoline tanks given the 2013 and later vehicles.304 This utility in Section III.C.2 above) multiplied by expectation that gasoline will be used factor approach is based on several key the utility factor, and (2) the tailpipe only as an ‘‘emergency’’ fuel, and it may assumptions. One, PHEVs are designed CO2 emissions value on gasoline be easier for a dual fuel CNG vehicle to such that the first mode of operation is multiplied by (1 minus the utility be refueled during the day than a PHEV all-electric drive or electric assist. Every factor). (which is most conveniently refueled at PHEV design with which EPA is iii. Dual Fuel Compressed Natural Gas night with a home charging unit). familiar is consistent with this Taking all these considerations into Vehicles assumption. Two, PHEVs will be account, EPA believes that the merit of charged once per day. While this critical Dual fuel CNG vehicles operate on using a utility factor-based approach for assumption is unlikely to be met by either compressed natural gas or dual fuel CNG vehicles is similar to that every PHEV driver every day, EPA gasoline, but not both at the same time, of doing so for PHEVs, and we propose believes that a large majority of PHEV and have separate tanks for the two to develop a similar methodology for owners will be highly motivated to re- fuels.306 There are no OEM dual fuel dual fuel CNG vehicles. For example, charge as frequently as possible, both CNG vehicles in the U.S. market today, applying the current SAE fleet utility because the owner has paid a but some manufacturers have expressed factor approach developed for PHEVs to considerably higher initial vehicle cost interest in bringing them to market a dual fuel CNG vehicle with a 150-mile to be able to operate on grid electricity, during the rulemaking time frame. CNG range would result in a compliance and because electricity is considerably Under current EPA regulations through assumption of about 95 percent cheaper, on a per mile basis, than MY 2015, GHG emissions compliance operation on CNG and about 5 percent gasoline. Three, it is reasonable to values for dual fuel CNG vehicles are operation on gasoline.308 EPA is assume that future PHEV drivers will based on a methodology that provides proposing to directly extend the PHEV retain driving profiles similar to those of significant GHG emissions incentives utility factor methodology to dual fuel past drivers on which the utility factors equivalent to the ‘‘CAFE credit’’ CNG vehicles, using the same were based. More detailed information approach for dual and flexible fuel assumptions about daily refueling. EPA on the development of this utility factor vehicles. For MY 2016, current EPA invites comment on this proposal, approach can be obtained from the regulations utilize a methodology based including the appropriateness of the Society of Automotive Engineers.305 on demonstrated vehicle emissions assumptions described above for dual EPA will continue to reevaluate the performance and real world fuels usage, fuel CNG vehicles. appropriateness of these assumptions similar to that for ethanol flexible fuel Further, for MYs 2012–2015, EPA is over time. vehicles discussed below. also proposing to allow the option, at Based on this approach, and PHEV- EPA proposes to develop a new the manufacturer’s discretion, to use the specific specifications such as all- approach for dual fuel CNG vehicle proposed utility factor-based electric drive or equivalent all-electric GHG emissions compliance that is very methodology for MYs 2016–2025 range, the cycle-specific utility factor similar to the utility factor approach discussed above. The rationale for methodology yields PHEV-specific developed and described above for providing this option is that some values for projected average percent of PHEVs, and for this new approach to manufacturers are likely to reach the operation on grid electricity and average take effect with MY 2016. As with maximum allowable GHG emissions percent of operation on gasoline over PHEVs, EPA believes that owners of credits (based on the statutory CAFE dual fuel CNG vehicles will both the city and highway test cycles. credits) through their production of For example, the Chevrolet Volt PHEV, preferentially seek to refuel and operate on CNG fuel as much as possible, both the only original equipment 307 EPA assumes that most PHEV owners will because the owner paid a much higher charge at home with electrical charging equipment 304 76 FR 39504–39505 (July 6, 2011) and 40 CFR that they purchase and install for their own use. 600.116–12(b). 306 EPA considers ‘‘bi-fuel’’ CNG vehicles to be 308 See SAE J2841 ‘‘Utility Factor Definitions for 305 http://www.SAE.org, specifically SAE J2841 those vehicles that can operate on a mixture of CNG Plug-In Hybrid Electric Vehicles Using Travel ‘‘Utility Factor Definitions for Plug-In Hybrid and gasoline. Bi-fuel vehicles would not be eligible Survey Data,’’ September 2010, available at http:// Electric Vehicles Using Travel Survey Data,’’ for this treatment, since they are not designed to www.SAE.org, which we are proposing to use for September 2010. allow the use of CNG only. dual fuel CNG vehicles as well.

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ethanol FFVs, and therefore would not owners of ethanol FFVs do not pay any definition of a dual fueled vehicle in be able to gain any GHG emissions more for the E85 fueling capability. EPCA. Instead, EPA’s focus is on compliance benefit even if they Unlike with PHEVs and dual fuel CNG establishing appropriate procedures for produced dual fuel CNG vehicles that vehicles, operation on E85 is not the broad range of vehicles that can use demonstrated superior GHG emissions cheaper than gasoline on a per mile both alternative and conventional fuels. performance. basis, it is typically the same or For convenience, this discussion uses In determining eligibility for the somewhat more expensive to operate on the term dual fuel to refer to vehicles utility factor approach, EPA may E85. Accordingly, there is no direct that can operate on an alternative fuel consider placing additional constraints economic motivation for the owner of and on a conventional fuel. on the designs of dual fuel CNG vehicles ethanol FFVs to seek E85 refueling, and EPA sees two potential approaches for to maximize the likelihood that in some cases there is an economic dual fuel vehicle CAFE calculations for consumers will routinely seek to use disincentive. Because E85 has a lower model years 2020 and later. EPA CNG fuel. Options include, but are not energy content per gallon than gasoline, requests comment on the two options limited to, placing a minimum value on an ethanol FFV will have a lower range discussed here, and we welcome CNG tank size or CNG range, a on E85 than on gasoline, which comments on other potential options as maximum value on gasoline tank size or provides an additional disincentive. The well. gasoline range, a minimum ratio of data confirm that, on a national average Determining the fuel economy of the CNG-to-gasoline range, and requiring an basis in 2008, less than one percent of vehicle for purposes of CAFE requires a onboard control system so that a dual ethanol FFVs used E85 fuel.311 determination on how to weight the fuel fuel CNG vehicle is only able to access If, in the future, this situation were to economy performance on the alternative the gasoline fuel tank if the CNG tank change (e.g., if E85 were less expensive, fuel and the fuel economy performance is empty. EPA seeks comments on the on a per mile basis), then EPA could on the conventional fuel. For PHEVs, merits of these additional eligibility reconsider its approach to this issue. dual-fuel CNG vehicles, and FFVs, EPA constraints for dual fuel CNG vehicles. proposes to apply the same weighting b. Procedures for CAFE Calculations for for CAFE purposes as for purposes of iv. Ethanol Flexible Fuel Vehicles MY 2020 and Later GHG emissions compliance values. EPA Ethanol FFVs can operate on E85 (a 49 U.S.C. 32905 specifies how the fuel proposes that, for PHEVs and dual-fuel blend of 15 percent gasoline and 85 economy of dual fuel vehicles is to be CNG vehicles, the fuel economy percent ethanol, by volume), gasoline, calculated for the purposes of CAFE weightings will be determined using the or any blend of the two. There are many through the 2019 model year. The basic SAE utility factor methodology, while ethanol FFVs in the market today. calculation is a 50/50 harmonic average for ethanol FFVs, manufacturers can In the final rulemaking for MY 2012– of the fuel economy for the alternative choose to use a default based on 100% 2016, EPA promulgated regulations for fuel and the conventional fuel, gasoline operation, or can choose to MYs 2012–2015 ethanol FFVs that irrespective of the actual usage of each base the fuel economy weightings on provided significant GHG emissions fuel. In addition, the fuel economy national average E85 and gasoline use, incentives equivalent to the long- value for the alternative fuel is or on manufacturer-specific data standing ‘‘CAFE credits’’ for ethanol significantly increased by dividing by showing the percentage of miles that are FFVs under EPCA, since many 0.15 in the case of CNG and ethanol and driven on E85 vis-a`-vis gasoline for that manufacturers had relied on the by using a petroleum equivalency factor manufacturer’s ethanol FFVs. Where the availability of these credits in methodology that yields a similar two options differ is whether the 0.15 developing their compliance overall increase in the CAFE mpg value divisor or similar adjustment factor is strategies.309 Beginning in MY 2016, for electricity.312 In a related provision, retained or not. EPA believes that there EPA ended the GHG emissions 49 U.S.C. 32906, the amount by which are legitimate arguments both for and compliance incentives and adopted a a manufacturer’s CAFE value (for against retaining the adjustment factors. methodology based on demonstrated domestic passenger cars, import EPA proposes to continue to use the vehicle emissions performance. This passenger cars, or light-duty trucks) can 0.15 divisor for CNG and ethanol, and methodology established a default value be improved by the statutory incentive the petroleum equivalency factor for assumption where ethanol FFVs are for dual fuel vehicles is limited by electricity, both of which the statute operated 100 percent of the time on EPCA to 1.2 mpg through 2014, and requires to be used through 2019, for gasoline, but allows manufacturers to then gradually reduced until it is model years 2020 and later. EPA use a relative E85 and gasoline vehicle phased out entirely starting in model believes there are two primary emissions performance weighting based year 2020.313 With the expiration of the arguments for retaining the 0.15 divisor either on national average E85 and special calculation procedures in 49 and petroleum equivalency factor. One, gasoline sales data, or manufacturer- U.S.C. 32905 for dual fueled vehicles, this approach is directionally consistent specific data showing the percentage of the CAFE calculation procedures for with the overall petroleum reduction miles that are driven on E85 vis-a`-vis model years 2020 and later vehicles goals of EPCA and the CAFE program, gasoline for that manufacturer’s ethanol need to be set under the general because it continues to encourage FFVs.310 EPA is not proposing any provisions authorizing EPA to establish manufacturers to build vehicles capable changes to this methodology for MYs testing and calculation procedures.314 of operating on fuels other than 2017–2025. With the expiration of the specific petroleum. Two, the 0.15 divisor and EPA believes there is a compelling procedures for dual fueled vehicles, petroleum equivalency factor are used rationale for not adopting a utility there is less need to base the procedures under EPCA to calculate CAFE factor-based approach, as discussed on whether a vehicle meets the specific compliance values for dedicated above for PHEVs and dual fuel CNG alternative fuel vehicles, and retaining vehicles, for ethanol FFVs. Unlike with 311 75 FR 14762 (March 26, 2010). this approach for dual fuel vehicles 312 PHEVs and dual fuel CNG vehicles, 49 U.S.C. 32905. would maintain consistency, for MY 313 49 U.S.C. 32906. NHTSA interprets section 32906(a) as not limiting the impact of duel fueled 2020 and later, between the approaches 309 75 FR at 25432–433. vehicles on CAFE calculations after MY2019. for dedicated alternative fuel vehicles 310 75 FR at 25433–434. 314 49 U.S.C. 32904(a), (c). and for the alternative fuel portion of

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dual fuel vehicle operation. Opting not The fuel economy for the CNG portion Section III.C.5.a–b below, and for the to provide the 0.15 divisor or PEF for of a dual fuel CNG vehicle, E85 portion CAFE program are described in Section the alternative fuel portion of these of FFVs, and the electric portion of a III.C.5.c below. vehicles’ operation may discourage PHEV would be determined strictly on a. Off-Cycle Credit Program Adopted in manufacturers from building vehicles an energy-equivalent basis, without any MY 2012–2016 Rule capable of operating on both gasoline/ adjustment based on the 0.15 divisor or diesel and alternative fuels, and thus petroleum equivalency factor. For E85 In the MY 2012–2016 Final Rule, EPA potentially discourage important FFVs, the manufacturer would almost adopted an optional credit opportunity ‘‘bridge’’ technologies that may help certainly use the gasoline fuel economy for new and innovative technologies consumers overcome current concerns value only because gasoline has higher that reduce vehicle CO2 emissions, but about advanced technology vehicles. energy content and fuel economy than for which the CO2 reduction benefits are EPA recognizes that this proposed E85.315 This approach would place less not significantly captured over the 2- calculation procedure would continue emphasis on conservation of petroleum cycle test procedure used to determine to provide, directionally, an increase in and more on conservation of energy for compliance with the fleet average fuel economy values for the vehicles dual fuel vehicles. It would also place standards (i.e., ‘‘off-cycle’’).317 EPA previously covered by the special more emphasis on Congress’ decision to indicated that eligible innovative calculation procedures in 49 U.S.C. reduce over time the impact on CAFE technologies are those that may be 32905, and that Congress chose both to from the increased fuel economy values relatively newly introduced in one or end the specific calculation procedures derived from the specified calculation more vehicle models, but that are not in that section and over time to reduce procedures in 49 U.S.C. 32905, and less yet implemented in widespread use in the benefit for CAFE purposes of the emphasis on aligning the incentives for the light-duty fleet, and which provide increase in fuel economy mandated by dual fuel alternative fuel vehicles with novel approaches to reducing those special calculation procedures. the incentives for dedicated alternative greenhouse gas emissions. The However, the proposed provisions differ fuel vehicles.316 EPA invites comment technologies must have verifiable and significantly in important ways from the on both approaches. demonstrable real-world GHG special calculation provisions mandated reductions.318 EPA adopted the off-cycle by EPCA. Most importantly, they are 5. Off-Cycle Technology Credits credit option to provide an incentive to changed to reflect actual usage rates of For MYs 2012–2016, EPA provided an encourage the introduction of these the alternative fuel and do not use the option for manufacturers to generate types of technologies, believing that artificial 50/50 weighting previously credits for employing new and bona fide reductions from these mandated by 49 U.S.C. 32905. In innovative technologies that achieve technologies should be considered in practice this means the primary vehicles CO2 reductions which are not reflected determining a manufacturer’s fleet to benefit from the proposed provision on current 2-cycle test procedures. For average, and that a credit mechanism is will be PHEVs and dual-fuel CNG this proposal, EPA, in coordination with an effective way to do this. This vehicles, and not FFVs, while the NHTSA, is proposing to apply the off- optional credit opportunity is currently primary source of benefit to cycle credits and equivalent fuel available through the 2016 model year. manufacturers under the statutory consumption improvement values to EPA finalized a two-tiered process for provisions came from FFVs. Changing both the GHG and CAFE programs. This OEMs to demonstrate that CO2 the weighting to better reflect real world proposed expansion is a change from reductions of an innovative and novel usage is a major change from that the 2012–16 final rule where EPA only technology are verifiable and mandated by 49 U.S.C. 32905, and it provided the off-cycle credits for the measureable but are not captured by the orients the calculation procedure more GHG program. For MY 2017 and later, 2-cycle test procedures. First, a to the real world impact on petroleum EPA is proposing that manufacturers manufacturer must determine whether usage, consistent with the statute’s may continue to use off-cycle credits for the benefit of the technology could be overarching purpose of energy GHG compliance and begin to use fuel captured using the 5-cycle methodology conservation. In addition, as noted consumption improvement values currently used to determine fuel above, Congress clearly continued the (essentially equivalent to EPA credits) economy label values. EPA established calculation procedures for dedicated for CAFE compliance. In addition, EPA the 5-cycle test methods to better alternative fuel vehicles that result in is proposing a set of defined (e.g. represent real-world factors impacting increased fuel economy values. This default) values for identified off-cycle fuel economy, including higher speeds proposed approach is consistent with technologies that would apply unless and more aggressive driving, colder this, as it uses the same approach for the manufacturer demonstrates to EPA temperature operation, and the use of calculating fuel economy on the that a different value for its technologies air conditioning. If this determination is alternative fuel when there is real world is appropriate. The proposed changes to affirmative, the manufacture must usage of the alternative fuel. Since the incorporate off-cycle technologies for follow the 5-cycle procedures. proposed provisions are quite different the GHG program are described in If the manufacturer finds that the in effect from the specified provisions in technology is such that the benefit is not 49 U.S.C. 32905, and are consistent with 315 Manufacturers can also choose to base the fuel adequately captured using the 5-cycle economy weightings on national average E85 and the calculation procures for dedicated gasoline use, or on manufacturer-specific data approach, then the manufacturer would vehicles that use the same alternative showing the percentage of miles that are driven on have to develop a robust methodology, fuel, EPA believes this proposal would E85 vis-a`-vis gasoline for that manufacturer’s subject to EPA approval, to demonstrate be an appropriate exercise of discretion ethanol FFVs, but since E85 fuel economy ratings the benefit and determine the are based on miles per gallon of E85, not adjusted under the general authority provided in for energy equivalency with gasoline, E85 mpg appropriate CO2 gram per mile credit. 49 U.S.C. 32904. values are lower than gasoline mpg values, which This case-by-case, non-5-cycle credits An alternative option to the above makes this a non-option. approach includes an opportunity for proposal, and about which EPA seeks 316 Incentives for dedicated alternative fuel public comment as part of the approval comment, is to not adopt the 0.15 vehicles would not be affected by changes to incentives for dual fueled vehicles. Dedicated divisor and petroleum equivalency alternative fuel vehicles would continue to use the 317 75 FR 25438–440, factor for model years 2020 and later. 0.15 divisor or petroleum equivalency factor. 318 See 40 CFR 1866.12 (d); 75 FR at 25438.

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process. The demonstration program In implementing the program, some credit applications for both the must be robust, verifiable, and capable manufacturers have expressed concern remaining years of the MY 2012–2016 of demonstrating the real-world that a drawback to using the program is program as well as for MY 2017 and emissions benefit of the technology with uncertainty over which technologies later credits that are not based on the strong statistical significance. Whether may be eligible for off-cycle credits plus pre-defined list. the approach involves on-road testing, uncertainties resulting from a case-by- As discussed in section II.F and modeling, or some other analytical case approval process. Current EPA III.B.10, EPA, in coordination with approach, the manufacturer is required eligibility criteria require technologies NHTSA, is also proposing that to present a proposed methodology to to be new, innovative, and not in manufacturers be able to include fuel EPA. EPA will approve the methodology widespread use in order to qualify for consumption reductions resulting from and credits only if certain criteria are credits. Also, the MY 2012–2016 Final the use of off-cycle technologies in their met. Baseline emissions and control Rule specified that technologies must CAFE compliance calculations. emissions must be clearly demonstrated not be significantly measurable on the 2- Manufacturers would generate ‘‘fuel over a wide range of real world driving cycle test procedures. As discussed consumption improvement values’’ conditions and over a sufficient number below, EPA proposes to significantly essentially equivalent to EPA credits, for of vehicles to address issues of modify the eligibility criteria, as the use in the CAFE program. The proposed uncertainty with the data. Data must be current criteria are not well defined and changes to the CAFE program to on a vehicle model-specific basis unless have been a source of uncertainty for incorporate off-cycle technologies are a manufacturer demonstrated model manufacturers, thereby interfering with discussed below in section III.5.c. specific data was not necessary. See the goal of providing an incentive for i. Pre-Defined Credit List for MY 2017 generally 75 FR at 25438–40. the development and use of additional and Later technologies to achieve real world b. Proposed Changes to the Off-cycle reductions in CO emissions. The focus As noted above, EPA proposes to Credits Program 2 will be on whether or not add-on establish a list of off-cycle technologies EPA has been encouraged by technologies can be demonstrated to from which manufacturers could select automakers’ interest in off-cycle credits provide off-cycle CO2 emissions to earn a pre-defined level of CO2 since the program was finalized. reductions that are not sufficiently credits in MY 2017 and later. Both Though it is early in the program, reflected on the 2-cycle tests. technologies and credit values based on several manufacturers have shown In addition, as described below in the list would be pre-approved. The interest in introducing off-cycle section III.C.5.b.i, EPA is proposing that manufacturer would demonstrate in the technologies which are in various stages manufacturers would be able to generate certification process that their of development and testing. EPA credits by applying technologies listed technology meets the definition of the believes that continuing the option for on an EPA pre-defined and pre- technology in the list. Table III–17 off-cycle credits would further approved technology list starting with provides an initial proposed list of the encourage innovative strategies for MY 2017. These credits would be technologies and per vehicle credit reducing CO2 emissions beyond those verified and approved as part of levels for cars and light trucks. EPA has measured by the 2-cycle test procedures. certification with no prior approval used a combination of available activity Continuing the program provides process needed. We believe this new data from the MOVES model, vehicle manufacturers with additional option would significantly streamline and test data, and EPA’s vehicle flexibility in reducing CO2 to meet and simplify the program for simulation tool to estimate a proposed increasingly stringent CO2 standards manufacturers choosing to use it and credit value EPA believes to be and to encourage early penetration of would provide manufacturers with appropriate. In particular, this vehicle off-cycle technologies into the light duty certainty that credits may be generated simulation tool was used to determine fleet. Furthermore, extending the through the use of pre-approved the credit amount for electrical load program may encourage automakers to technologies. For credits not based on reduction technologies (e.g. high invest in off-cycle technologies that the pre-defined list, EPA is proposing to efficiency exterior lighting, engine heat could have the benefit of realizing streamline and better define a step-by- reconvery, and solar roof panels) and additional reductions in the light-duty step process for demonstrating active aerodynamic improvements. fleet over the longer-term. Therefore, emissions reductions and applying for Chapter 5 of the joint TSD provides a EPA is proposing to extend the off-cycle credits. EPA is proposing that these detailed description of how these credits program to 2017 and later model procedural changes to the case-by-case technologies are defined and how the years. approach would be effective for new proposed credits levels were derived.

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Two technologies on the list—active active grill shutters is just one of various III.D has a more detailed discussion on aerodynamic improvements and stop technologies that can be used as part of the feasibility of the standards within start—are in a different category than aerodynamic design improvements (as the context of the flexibilities (such as the other technologies on the list. Both part of the ‘‘aero2’’ technology). The off-cycle credits) proposed in this rule. of these technologies are included in the modeling and other analysis developed As discussed in section III.D, EPA plans agencies’ modeling analysis of for determining the appropriate to incorporate the off-cycle credits for technologies projected to be available emissions standard includes these these two technologies in the cost for use in achieving the reductions technologies, using the effectiveness analysis for the final rule (which EPA needed for the standards. We have values on the 2-cycle test. This is anticipates would slightly reduce costs information on their effectiveness, cost, consistent with our consideration of all with no change to benefits). EPA and availability for purposes of of the other technologies included in requests comments on this approach for considering them along with the various these analyses. Including them on the stop start and active aerodynamic other technologies we consider in list for off-cycle credit generation, for improvements. determining the appropriate CO2 purposes of compliance with the Although EPA believes that there is emissions standard. These technologies standard, would recognize that these sufficient information to estimate are among those listed in Chapter 3 of technologies have a higher degree of performance of other listed technologies the joint TSD and have measureable effectiveness in reducing real-world CO2 for purposes of a credit program, EPA benefit on the 2-cycle test. However in emissions than is reflected in their 2- does not believe it appropriate to reflect the context of off-cycle credits, stop start cycle effectiveness. EPA has taken into these technologies in setting the level of is any technology which enables a account the generation of off-cycle standards at this point. There remains vehicle to automatically turn off the credits by these two technologies in significant uncertainty as to the extent engine when the vehicle comes to a rest determining the appropriateness of the listed technologies other than stop start and restart the engine when the driver proposed GHG standards, considering and active aerodynamic improvements applies pressure to the accelerator or the amount of credit, the projected may be used across the light duty fleet releases the brake. This includes HEVs degree of penetration of these and (in some instances) costs of the and PHEVs (but not EVs). In addition, technologies, and other factors. Section technologies. Including them in the

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standard setting, as is done with A/C of CO2 benefits. EPA proposes that believes 10 percent is an appropriate control technology, calls for a manufacturers wanting to generate threshold as it would encourage reasonable projection of the penetration credits in excess of the 10 g/mile limit manufacturers to develop technologies of these technologies across the fleet for these listed technologies could do so for use on larger volume models and and over time, along with reasonable by generating necessary data and going bring the technologies into the estimates of their cost. EPA does not through the credit approval process mainstream. On the other hand, EPA is have adequate data at this point in time described below in Section III.C.5.b.iii not proposing a larger value because to make such fleet wide projections for and iv. EPA does not want to discourage the use other technologies on the list, or for As noted above, EPA proposes to of technologies. For solar roof panels other technologies addressed by the make the list available for credit (solar control) and electric heater case-by-case approach. As in the 2012– generation starting in MY 2017. Prior to circulation pumps, which are HEV/ 2016 rule, the use of these technologies MY 2017, manufacturers would need to PHEV/EV-specific, EPA is not proposing continues to be not nearly so well demonstrate off-cycle emissions a minimum penetration rate threshold developed and understood for purposes reductions in order to generate credits for credit generation. Hybrids and EVs of consideration in setting the for off-cycle technologies, including may be a small subset of a standards. See 75 FR at 25438. those on the list. Requirements for manufacturer’s fleet, less than 10 Technologies that are considered by demonstrating off-cycle credits not percent in some cases, and EPA does EPA in setting the standard, as based on the list are described below. not believe establishing a threshold for discussed in section III.D and in Chapter Manufacturers may also opt to generate hybrid-based technologies would be 3 of the TSD, may not generate off-cycle data for listed technologies in MY 2017 useful and could unnecessarily impede credits under this approach, except for and later where they are able to the introduction of these technologies. active aerodynamic improvements and demonstrate a credit value greater than EPA is also not proposing to apply a stop start.319 This would amount to the that provided on the list. minimum penetration threshold to double counting discussed at 75 FR Prior to MY 2017, EPA would exhaust heat recovery because the 25438, as EPA has already considered continue to evaluate off-cycle threshold could impede rather than these technologies and assigned them an technologies. Based on data provided by encourage the development of the emission reduction effectiveness for manufacturers for non-listed technology due to its relatively early purposes of standard setting, and has technologies, and other available data, stage of development and potentially enough information on effectiveness, EPA would consider adding high cost. EPA requests comments on cost, and applicability to project their technologies to the list through applying this type of threshold, the use for purposes of standard setting. rulemaking. EPA could also issue appropriateness of 10 percent as the EPA will reassess the list above for the guidance in the future for additional off- threshold for several of the listed Final Rule, based on additional cycle technologies, indicating the level technologies, and the proposed information that becomes available of credits that EPA expects could be treatment of HEV/PHEV/EV specific during the comment period. It may also approved for any manufacturer through technologies and exhaust heat recovery. be appropriate to reconsider this the case-by-case approach, helping to ii. Proposed Technology Eligibility approach as part of the mid-term streamline the case-by-case approach Criteria evaluation as information on these until a rulemaking was conducted to technologies’ applicability, costs, and update the list. If the CO2 reduction EPA proposes to remove the criteria performance becomes more robust. benefits of a technology have been in the 2012–2016 rule that off-cycle EPA proposes to cap the amount of established through manufacturer data technologies must be ‘new, innovative, credits a manufacturer could generate and testing, EPA believes that it would and not widespread’ because these using the above list to 10 g/mile per year be appropriate to list the technology and terms are imprecise and have created on a combined car and truck fleet-wide a conservative associated credit value. implementation issues and uncertainty average basis. The cap would not apply Since one purpose of the off-cycle in the program. For example, it is on a vehicle model basis, allowing credits is to encourage market unclear if technologies developed in the manufacturers the flexibility to focus penetration of the technologies (see 75 past but not used extensively would be off-cycle technologies on certain vehicle FR at 25438), EPA also proposes to considered new, if only the first one or models and generate credits for that require minimum penetration rates for two manufacturers using the technology vehicle model in excess of 10 g/mile. several of the listed technologies as a would be eligible or if all manufacturers EPA is proposing a fleet-wide cap condition for generating credit from the could use a technology to generate because the proposed credits are based list as a way to further encourage their credits, or if credits for a technology on limited data, and also EPA widespread adoption by MY 2017 and would sunset after a period of time. It recognizes that some uncertainty is later. The proposed minimum has also been unclear if a technology introduced when credits are provided penetration rates for the various such as active aerodynamics would be based on a general assessment of off- technologies are provided in Table III– eligible since it provides a small cycle performance as opposed to testing 17. At the end of the model year for measurable reduction on the 2-cycle test on the individual vehicle models. Also, which the off-cycle credit is claimed, but provides additional reductions off- as discussed in Chapter 5 of the draft manufacturers would need to cycle, especially during high speed TSD, EPA believes the credits proposed demonstrate that production of vehicles driving. These criteria have interfered are based on conservative estimates, equipped with the technologies for that with the goal of providing an incentive providing additional assurance that the model year exceeded the percentage for the development and use of off-cycle list would not result in an overall loss thresholds in order to receive the listed technology that reduces CO2 emissions. credit. EPA proposes to set the EPA proposes this approach for new MY 319 Section III.D provides EPA projected threshold at 10 percent of a 2012–2016 credits as well as for MY technology penetration rates. Technologies manufacturer’s overall combined car 2017–2025. projected to be used to meet the standards would and light truck production except for EPA believes it is appropriate to not be eligible for off-cycle credits, with the exception of stop start and active aerodynamic technologies specific to HEVs/PHEVs/ provide credit opportunities for improvements. EVs and exhaust heat recovery. EPA technologies that achieve real world

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reductions beyond those measured provides additional off-cycle benefits some benefit on the 2-cycle test but under the two-cycle test without further above and beyond a system meeting much greater benefits off-cycle. Under making (somewhat subjective) minimum Federal requirements, those today’s proposal, technologies would judgments regarding the newness and incremental improvements could be need to be demonstrated to provide innovativeness of the technology. eligible for off-cycle credits, assuming significant incremental off-cycle Instead, EPA proposes to provide off- an appropriate quantification of credits benefits above and beyond those cycle credits for any technologies that is demonstrated. provided over the 2-cycle test (examples are added to a vehicle model that are By proposing to remove the ‘‘new, are shown below). EPA proposes this demonstrated to provide significant innovative, not widespread use’’ criteria approach for new MY 2012–2016 credits incremental off-cycle CO2 reductions, in the present rule, EPA is also making as well as for MY 2017–2025. like those on the list. The proposed clear that once approved, EPA does not The 5-cycle test procedures would technology demonstration and step-by- intend to sunset a technology’s credit remain the starting point for step application process is described in eligibility or deny credits to other demonstrating off-cycle emissions detail below in section III.C.5.b.ii. EPA vehicle applications using the reductions. The MY 2012–2016 is proposing to clarify that technologies technology, as may have been implied rulemaking established general 5-cycle providing small reductions on the 2- by those criteria under the MY 2012– testing requirements and EPA is cycle tests but additional significant 2016 program. EPA believes, at this proposing several provisions to reductions off-cycle could be eligible to time, that it should encourage the wider delineate what EPA would expect as generate off-cycle credits. EPA thus use of technologies with legitimate off- part of a 5-cycle based demonstration. proposes to remove the ‘‘not cycle emissions benefits. Manufacturers Manufacturers requested clarification on significantly measurable over the 2- demonstrating through the EPA the amount of 5-cycle testing that would cycle test’’ criteria. EPA proposes that, approval process that the technology is be needed to demonstrate off-cycle instead, manufacturers must be able to effective on additional vehicle models credits, and EPA is proposing the make a demonstration through testing would be eligible for credits. Limiting following as part of the step-by-step with and without the off-cycle the application of a technology or methodology manufacturers would technology. sunsetting the availability of credits follow to generate credits. In addition to the general 5-cycle demonstration As noted above, EPA proposes that during the 2017–2025 time frame would be counterproductive because it would requirements of the MY 2012–2016 technologies included in EPA’s program, EPA proposes to specifically assessment in this rulemaking of remove part of the incentive for manufacturers to invest in developing require model-based verification of 5- technology for purposes of developing cycle results where off-cycle reductions the standard would not be allowed to and deploying off-cycle technologies, some of which may be promising but are small and could be a product of generate off-cycle credits, as their cost testing variability. EPA is also proposing and effectiveness and expected use are have considerable development costs associated with them. Also, approving a to specifically require that all already included in the assessment of applications include an engineering the standard. (As explained above, the technology only to later disallow it could lead to a manufacturer analysis for why the technology agencies have done so with respect to provides off-cycle emissions reductions. stop start and active aerodynamic discontinuing the use of the technology even if it remained a cost effective way EPA proposes to specify that improvements by including the manufacturers would run an initial set projected level of credits in determining to reduce emissions. EPA also believes that this approach provides an incentive of three 5-cycle tests with and without the appropriateness of the proposed the technology providing the off-cycle standards.) EPA proposes that for manufacturers to continue to CO2 reduction. Testing must be technologies integral or inherent to the improve technologies without concern that they will become ineligible for conducted on a representative vehicle, basic vehicle design including engine, selected using good engineering transmission, mass reduction, passive credits at some future time. EPA requests comments on all aspects of the judgment, for each vehicle model. EPA aerodynamic design, and base tires proposes that manufacturers could above approach for the off-cycle credits would not be eligible for credits. For bundle off-cycle technologies together program criteria. example, manufacturers would not be for testing in order to reduce testing able to generate off-cycle credits by iii. Demonstrating Off-Cycle Emissions costs and improve their ability to moving to an eight-speed transmission. Reductions demonstrate consistently measurable EPA believes that it would be difficult 5-Cycle Testing reductions over the tests. If these A/B 5- to clearly establish an appropriate A/B cycle tests demonstrate an off-cycle test (with and without technologies) for EPA is retaining a two-tiered process benefit of 3 percent or greater, technologies so integral to the basic for demonstrating the CO2 reductions of comparing average test results with and vehicle design. EPA proposes to limit off-cycle technologies (in those without the off-cycle technology, the the off-cycle program to technologies instances when a manufacturer is not manufacturer would be able to use the that can be clearly identified as add-on using the default value provided by the data as the basis for credits. EPA has technologies conducive to A/B testing. rule), but is clarifying several of the long used 3 percent as a threshold in Further, EPA would not provide credits requirements. The process described fuel economy confirmatory testing for for a technology required to be used by below would be used for all credits not determining if a manufacturer’s fuel Federal law, such as tire pressure based on the pre-defined list described economy test results are comparable to monitoring systems, as EPA would in Section III.C.5.i, above. As noted those run by EPA.320 consider such credits to be windfall above, the proposed approach would If the initial three sets of 5-cycle credits (i.e. not generated as a result of replace the requirement in the 2012– results demonstrate a reduction of less the rule). The base versions of such 2016 rule that technology must not be than a 3 percent difference in the 5- technologies would be considered part ‘‘significantly measurable’’ over the 2- cycle results with and without the off- of the base vehicle. However, if a cycle test. See section 86. 1866–12 (d) cycle technology, the manufacturer manufacturer demonstrates that an (ii). This criterion has been problematic improvement to such technologies because several technologies provide 320 40 CFR 600.008 (b)(3).

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would have to run two additional 5- need to develop their own new MY 2012–2016 credits as well as cycle tests with and without the off- demonstration methodology. The first is for MY 2017–2025. cycle technologies and verify the a situation where the technology is EPA Light-Duty Vehicle Simulation emission reduction using the EPA Light- active only during certain operating Tool duty Simulation Tool described below. conditions that are not represented by If the simulation tool supports credits any of the 5-cycle tests. To determine As explained above and, EPA has that are less than 3 percent of the the overall emissions reductions, developed full vehicle simulation baseline 2-cycle emissions, then EPA manufacturers must determine not only capabilities in order to support would approve the credits based on the the emissions impacts during operation regulations and vehicle compliance by test results. As outlined below, credits but also real-world activity data to quantifying the effectiveness of different technologies over a wide range of engine based on this methodology would be determine how often the technology is and vehicle operating conditions. This subject to a 60 day EPA review period utilized during actual, in-use driving on in-house simulation tool has been starting when EPA receives a complete average across the fleet. EPA has application, which would not include a developed for modeling a wide variety identified some of these types of of light, medium, and heavy duty public review. technologies and has calculated a EPA believes that small off-cycle vehicle applications over various default credit for them, including items credit claims (i.e., less than 3 percent of driving cycles. In order to ensure such as high efficiency (e.g., LED) lights the vehicle model 2-cycle CO2 level) transparency of the models and free should be supported with modeling and and solar panels on hybrids. See Table public access, EPA has developed the engineering analysis. EPA is proposing III–17 above. In their demonstrations, tool in MATLAB/Simulink environment the approach above for a number of manufacturers may be able to apply the with a completely open source code. reasons. Emissions reductions of only a same type of methodologies used by EPA’s first application of the vehicle few grams may not be statistically EPA as a basis for these default values simulation tool was for purposes of significant and could be the product of (see TSD Chapter 5). heavy-duty vehicle compliance and gaming. Also, manufacturers have raised The second type of situation where certification. For the model years 2014 test-to-test variability as an issue for manufacturers would need to develop to 2017 final rule for medium and heavy demonstrating technologies through 5- their own demonstration data would be duty trucks, EPA created the cycle testing. Modeling and engineering for technologies that involve action by ‘‘Greenhouse gas Emissions Model’’ analyses can help resolve these the driver to make the technology (GEM), which is used both to assess Class 2b–8 vocational vehicle and Class questions. EPA also requests comments effective in reducing CO2 emissions. 7 on allowing manufacturers to use the EPA believes that driver interactive ⁄8 combination tractor GHG emissions EPA simulation tool and engineering technologies face the highest and fuel efficiency and to demonstrate analysis in lieu of additional 5-cycle demonstration hurdle because compliance with the vocational vehicle testing. For some technologies providing manufacturers would need to provide and combination tractor standards. See 76 FR at 57146–147.322 EPA will submit very small incremental benefits, it may actual real-world usage data on driver the simulation tool for peer review for not be possible to accurately measure response rates. Such technologies would the final rule. Chapter 2 of the Draft RIA their benefit with vehicle testing. include ‘‘eco buttons’’ where the driver has more details of this simulation tool. Demonstrations Not Based on 5-Cycle has the option of selecting more fuel As mentioned previously, the tool is Testing efficient operating modes, traffic based on MATLAB/Simulink and is a In cases where the benefit of a avoidance systems, and more advanced forward-looking full vehicle model that technological approach to reducing CO2 tire pressure monitor systems (i.e., uses the same physical principles as emissions cannot be adequately technologies that go beyond the other commercially available vehicle represented using 5-cycle testing, minimum Federal requirements) simulation tools (e.g. Autonomie, AVL– manufacturers will need to develop test notifying the driver to fill their tires CRUISE, GT–Drive, etc.) to derive the procedures and analytical approaches to more often.321 EPA proposes that data governing equations. These governing estimate the effectiveness of the would need to be from instrumented equations describe steady-state and technology for the purpose of generating vehicle studies and not through driver transient behaviors of each of electrical, credits. See 75 FR at 25440. EPA is not surveys where results may be engine, transmission, driveline, and proposing to make significant changes influenced by drivers failure to vehicle systems, and they are integrated to this aspect of the program. If the 5- accurately recall their response together to provide overall system cycle process is inadequate for the behavior. Systems such as On- could behavior during transient conditions as specific technology being considered by be one promising way to collect driver well as steady-state operations. In the the manufacturer (i.e., the 5-cycle test response data if they are designed to do light-duty vehicle simulation tool, there does not demonstrate any emissions so. Manufacturers might have to design are four key system elements that reductions), then an alternative extensive on-road test programs. Any describe the overall vehicle dynamics approach may be developed by the such on-road testing programs would behavior and the corresponding fuel manufacturer and submitted to EPA for need to be statistically robust and based efficiency: Electrical, engine, approval. The demonstration program on average U.S. driving conditions, transmission, and vehicle. The electrical must be robust, verifiable, and capable factoring in differences in geography, system model consists of parasitic of demonstrating the real-world climate, and driving behavior across the electrical load and A/C blower fan, both emissions benefit of the technology with U.S. EPA proposes this approach for of which were assumed to be constant. strong statistical significance. The The engine system model is comprised methodology developed and submitted 321 A tire pressure monitor system that also to EPA would be subject to public automatically fills the tire without driver 322 See also US EPA, ‘‘Final Rule Making to review as explained at 75 FR 25440 and interaction would obviously not involve driver Establish Greenhouse Gas Emissions Standards and response data for the automatic system, but the Fuel Efficiency Standards for Medium- and Heavy- in 86.1866(d)(2)(ii). demonstration may involve the driver response Duty Engines and Vehicles,’’ Heavy-Duty EPA has identified two general rates for the baseline system to determine an Regulatory Impact Analysis.give cite to where GEM situations where manufacturers would incremental credit. is written up in the heavy duty RIA.

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of engine torque and fueling maps. For example, if actual data of electrical load (d)(1)(iii). The technologies upon which the vehicle system, four vehicles were reduction and/or on-board electricity the credits are based are subject to full modeled: Small, mid, large size generation by one or more of these useful life compliance provisions, as passenger vehicles, and a light-duty technologies is available through data with other emissions controls. Unless pick-up truck. The engine maps, submission from manufacturers. the manufacturer can demonstrate that transmission gear ratios and shifting Similarly, there are technologies that the technology would not be subject to schedules were appropriately sized and would provide additional GHG in-use deterioration over the useful life adjusted according to the vehicle type reduction benefits in the 5-cycle test by of the vehicle, the manufacturer must represented by the simulation. This tool actively reducing the vehicle’s account for deterioration in the is capable of simulating a wide range of aerodynamic drag forces. These are estimation of the credits in order to conventional and advanced engines, referred to as active aerodynamic ensure that the credits are based on real transmissions, and vehicle technologies technologies, which include but are not in-use emissions reductions over the life over various driving cycles. It evaluates limited to Active Grill Shutters and of the vehicle. In-use requirements technology package effectiveness while Active Suspension Lowering. Like the would apply to technologies generating taking into account synergy (and dis- electrical load reduction technologies, credits based on the pre-defined list as synergy) effects among vehicle the vehicle simulation tool can be used well as to those based on a components and estimates GHG to more accurately estimate the manufacturer’s demonstration. emissions for various combinations of additional GHG reductions (therefore Manufacturers have requested technologies. Chapter 2 of the Draft the credits) provided by these active clarification of these provisions and Regulatory Impact Analysis provides aerodynamic technologies over the 5- guidance on how to demonstrate in-use more details on this light-duty vehicle cycle drive test. EPA seeks comment on performance. EPA is proposing to clarify simulation tool. using the simulation tool in order to that off-cycle technologies are As discussed in section III.C.1, EPA quantify these credits. In order to do considered emissions related has used the light-duty vehicle this properly, manufacturers would be components and all in-use requirements simulation tool to estimate indirect A/ expected to submit two sets of coast- apply including defect reporting, C CO2 emissions from conventional down coefficients (with and without the warranty, and recall. OBD requirements (non-hybrid) vehicles, helping to active aerodynamic technologies). do not apply under the MY 2012–2016 quantify the indirect A/C credit. In There are other technologies that program and EPA is not proposing any addition to A/C related CO2 reductions, would result in additional GHG OBD requirements at this time for off- EPA believes this same simulation tool reduction benefits that cannot be fully cycle technologies. Manufacturers may may be useful in estimating CO2 captured on the combined FTP/ establish maintenance intervals for reductions from off-cycle technologies. Highway cycle test. These technologies these components in the same way they Currently, the model provides A/B typically reduce engine loads by would for other emissions related relative comparisons with and without utilizing advanced engine controls, and components. The performance of these technologies that can help inform they range from enabling the vehicle to components would be considered in credits estimates. EPA has used it to turn off the engine at idle, to reducing determining compliance with the estimate credits for some of the cabin temperature and thus A/C applicable in-use CO2 standards. technologies in the proposed pre- compressor loading when the vehicle is Manufacturers may demonstrate in-use defined list, including active restarted. Examples include Engine emissions durability at time of aerodynamic improvements. As Start-Stop, Electric Heater Circulation certification by submitting an discussed above, EPA is proposing to Pump, Active Engine/Transmission engineering analysis describing why the require this simulation tool be used as Warm-Up, and Solar Control. For these technology is durable and expected to an additional way to estimate emissions types of technologies, the overall GHG last for the full useful life of the vehicle. reductions in cases where the 5-cycle reduction largely depends on the This demonstration may also include test results indicate the potential control and calibration strategies of component durability testing or through reductions to be small, and EPA is also individual manufacturers and vehicle whole vehicle aging if the manufacturer requesting comments on using the types. Also, the current vehicle has such data. The demonstration simulation tool as a basis for estimating simulation tool does not yet have the would be subject to EPA approval prior off-cycle credits in lieu of 5-cycle capability to properly simulate the to credits being awarded.323 EPA testing. vehicle behaviors that depend on believes these provisions are important There are a number of technologies thermal conditions of the vehicle and its to ensure that promised emissions that could bring additional GHG surroundings, such as Active Engine/ reductions and fuel economy benefit to reductions over the 5-cycle drive test (or Transmission Warm-Up and Solar the consumer are delivered in-use. EPA in the real world) compared to the Control. Therefore, the vehicle requests comments on the above combined FTP/Highway (or two) cycle simulation may not provide full benefits approach for in-use emissions test. These are called off-cycle of the technologies on the GHG durability. technologies and are described in reductions. For this reason, the agency chapter 5 of the Joint TSD in detail. is not proposing to use the simulation v. Step-by-Step EPA Review Process Among them are technologies related to tool to generate the GHG credits for EPA proposes to provide a step-by- reducing vehicle’s electrical loads, such these technologies at this time, though step process and timeline for reviewing as High Efficiency Exterior Lights, future versions of the model may be credit applications and providing a Engine Heat Recovery, and Solar Roof more capable of quantifying the efficacy decision to manufacturers. EPA requests Panels. In an effort to streamline the of these off-cycle technologies as well. comments on the process described process for approving off-cycle credits, iv. In-Use Emissions Requirements below including comments on how to we have set a relatively conservative further improve or streamline it while estimate of the credit based on our EPA requires off-cycle components to maintaining its effectiveness. EPA efficacy analysis. EPA seeks comment be durable in-use and continues to on utilizing the model in order to believe that this is an important aspect 323 Listed technologies are pre-approved quantify the credits more accurately, for of the program. See 86.1866–12 assuming the manufacturer demonstrates durability.

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proposes these clarifications and further testing or analysis 60 days of receiving a complete detailed step-by-step instructions for • An estimate of off-cycle credits by application. new MY 2012–2016 credits as well as vehicle model, and fleetwide based • For applications where the rule for MY 2017–2025. EPA believes these on projected vehicle sales does specify public participation and additional details are consistent with • Engineering analysis and/or review, EPA will notify the the general off-cycle requirements component durability testing or manufacturer of its decision on the adopted in the MY 2012–2016 rule. whole vehicle test data (as application after reviewing public Starting in MY 2017, EPA is proposing necessary) demonstrating in-use comments. that manufacturers may generate credits durability of components • EPA will notify manufacturers in using technologies on a pre-defined list, Step 3: EPA Review writing of its decision to approve or and these technologies would not be deny the credits application, and required to go through the approval Once EPA receives an application, provide a written explanation for its process described below. EPA would do the following: action (supported by the administrative • Step 1: Manufacturer Conducts Testing EPA will review the application for record for the application proceeding). completeness and within 30 days and Prepares Application c. Off-Cycle Technology Fuel will notify the manufacturer if Consumption Improvement Values in • 5-cycle—Manufacturers would additional information is needed the CAFE Program conduct the testing and/or • EPA will review the data and simulation described above information provided to determine EPA proposes, in coordination with • Non 5-cycle—Manufacturers would if the application supports the level NHTSA, that manufacturers would be develop a methodology for non 5- of credits estimated by able to generate fuel consumption cycle based demonstration and manufacturers improvement values equivalent to CO2 carry-out necessary testing and • EPA will consult with NHTSA on the off-cycle credits for use in the CAFE analysis application and the data received in program. EPA is proposing that a CAFE Æ Manufacturers may opt to meet cases where the manufacturer improvement value for off-cycle with EPA to discuss their plans for intends to generate fuel improvements be determined at the fleet demonstrating technologies and consumption improvement values level by converting the CO2 credits seek EPA input prior to conducting for CAFE in MY 2017 and later determined under the EPA program (in testing or analysis • For applications where the rule metric tons of CO2) for each fleet (car • Manufacturers conduct engineering specifies public participation in the and truck) to a fleet fuel consumption analysis and/or testing to review process, EPA will make the improvement value. This improvement demonstrate in-use durability applications available to the public value would then be used to adjust the Step 2: Manufacturer Submits within 60 days of receiving a fleet’s CAFE level upward. See the Application complete application proposed regulations at 40 CFR Æ The public review period will be 30 600.510–12. Note that while the The manufacturer application must day review of the methodology used following table presents fuel contain the following: by the manufacturer to estimate consumption values equivalent to a • Description of the off-cycle credits, during which time the given CO2 credit value, these technologies and how they function public may submit comments. consumption values are presented for to reduce off-cycle emissions Æ Manufacturers may submit a informational purposes and are not • The vehicle models on which the written rebuttal of comments for meant to imply that these values will be technology will be applied EPA consideration or may revise used to determine the fuel economy for • Test vehicles selection and supporting their application in response to individual vehicles. For off-cycle CO2 engineering analysis for their comments following the end of the credits not based on the list, selection public review period. manufacturers would go though the • 5-cycle test data, and/or including steps described above in Section Step 4: EPA Decision simulation results using EPA Light- III.C.5.b. Again, all off-cycle CO2 credits duty Simulation Tool, as applicable • For applications where the rule would be converted to a gallons per • For credits not based on 5-cycle does not specify public participation mile fuel consumption improvement testing, a complete description of and review, EPA, after consultation with value at a fleet level for purposes of the methodology used to estimate NHTSA in cases where the CAFE program. EPA would approve credits and supporting data (vehicle manufacturer intends to generate fuel credit generation, and corresponding test data and activity data) consumption improvement values for equivalent fuel consumption Æ Manufacturer may seek EPA input CAFE in MY 2017 and later, will notify improvement values, in consultation on methodology prior to conducting the manufacturer of its decision within with NHTSA.

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D. Technical Assessment of the MYs 2012–2016 rulemaking. EPA is have major impacts on the amount of Proposed CO2 Standards evaluating emissions control fuel that is combusted while operating This proposed rule is based on the technologies which reduce CO2 and the vehicle. The braking system, the need to obtain significant GHG other greenhouse gases. CO2 emissions aerodynamics of the vehicle, and the emissions reductions from the from automobiles are largely the efficiency of accessories, such as the air transportation sector, and the product of fuel combustion. Vehicles conditioner, all affect how much fuel is recognition that there are cost-effective combust fuel to perform two basic combusted as well. functions: (1) to transport the vehicle, technologies available in this timeframe In evaluating vehicle efficiency, we to achieve such reductions for MY its passengers and its contents (and any towed loads), and (2) to operate various have excluded fundamental changes in 2017–2025 light duty vehicles. As in 324 accessories during the operation of the vehicles’ utility. For example, we did many prior mobile source rulemakings, not evaluate converting minivans and the decision on what standard to set is vehicle such as the air conditioner. Technology can reduce CO2 emissions SUVs to station wagons, converting largely based on the effectiveness of the vehicles with four wheel drive to two emissions control technology, the cost by either making more efficient use of wheel drive, or reducing headroom in and other impacts of implementing the the energy that is produced through order to lower the roofline and reduce technology, and the lead time needed combustion of the fuel or reducing the aerodynamic drag. We have limited our for manufacturers to employ the control energy needed to perform either of these technology. The standards derived from functions. assessment of technical feasibility and assessing these factors are also This focus on efficiency calls for resultant vehicle cost to technologies evaluated in terms of the need for looking at the vehicle as an entire which maintain vehicle utility as much reductions of greenhouse gases, the system, and as in the MYs 2012–2016 as possible (and, in our assessment of degree of reductions achieved by the rule, the proposed standards reflect this the costs of the rule, included the costs standards, and the impacts of the basic paradigm. In addition to fuel to manufacturers of preserving vehicle standards in terms of costs, quantified delivery, combustion, and utility). Manufacturers may decide to benefits, and other impacts of the aftertreatment technology, any aspect of alter the utility of the vehicles which standards. The availability of the vehicle that affects the need to they sell, but this would not be a technology to achieve reductions and produce energy must also be the cost and other aspects of this considered. For example, the efficiency 324 EPA recognizes that electric vehicles, a technology are therefore a central focus of the transmission system, which takes technology considered in this analysis, have unique attributes and discusses these considerations in of this rulemaking. the energy produced by the engine and Section III.H.1.b. There is also a fuller discussion EPA is taking the same basic approach transmits it to the wheels, and the of the utility of Atkinson engine hybrid vehicles in in this rulemaking as that taken in the resistance of the tires to rolling both EPA DRIA Chapter 1.

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necessary consequence of the rule but plans for the next several years, costs for both the industry and the costs rather a matter of automaker choice. including plans to comply with to the consumer are reasonable and that This need to focus on the efficient use emissions, fuel economy, and safety consumer savings due to improved fuel of energy by the vehicle as a system regulations.327 This redesign often economy will more than pay for the leads to a broad focus on a wide variety involves significant engineering, increased vehicle cost over the life of of technologies that affect vehicle development, manufacturing, and the vehicles. EPA also estimated costs design. As discussed below, there are marketing resources to create a new for the intermediate model years 2017 many technologies that are currently product with multiple new features. In through 2020 based on the OMEGA available which can reduce vehicle order to leverage this significant upfront analyses in MYs 2016 and 2021 as well energy consumption. Several of these investment, manufacturers plan vehicle as the intermediate model years 2022– are ‘‘game-changing’’ technologies and redesigns with several model years’ of 2024 based on the OMEGA analyses in are already being commercially utilized production in mind. Vehicle models are MYs 2021 and 2025. to a limited degree in the current light- not completely static between redesigns EPA’s technical assessment of the duty fleet. Examples include hybrid as limited changes are often proposed MY2017–2025 standards is technologies that use high efficiency incorporated for each model year. This described below. EPA has also batteries and electric motors as the interim process is called a refresh of the evaluated a set of alternative standards power source in combination with or vehicle and generally does not allow for for these model years, two of which are instead of internal combustion engines, major technology changes although more stringent and two of which are less plug-in hybrid electric vehicles, and more minor ones can be done (e.g., stringent than the standards proposed. battery-electric vehicles. While already small aerodynamic improvements, valve The technical assessment of these commercialized, these technologies timing improvements, etc). More major alternative standards in relation to the continue to be developed and offer the technology upgrades that affect multiple ones proposed is discussed at the end of potential for even more significant systems of the vehicle thus occur at the this section. efficiency improvements. There are also vehicle redesign stage and not in the Evaluating the appropriateness of other advanced technologies under time period between redesigns. these standards includes a core focus on development and not yet on production This proposal affects nine years of identifying available technologies and vehicles, such as high BMEP engines vehicle production, model years 2017– assessing their effectiveness, cost, and with cooled EGR, which offer the 2025. Given the now-typical five year impact on relevant aspects of vehicle potential of improved energy generation redesign cycle, many vehicles will be performance and utility. The wide taking the gasoline combustion process redesigned three times between MY number of technologies which are nearly to its thermodynamic limit. In 2012 and MY 2025 and are expected to available and likely to be used in addition, the available technologies are be redesigned twice during the 2017– combination requires a sophisticated not limited to powertrain improvements 2025 timeframe. Due to the relatively assessment of their combined cost and but also include a number of long lead time before 2017, there are effectiveness. An important factor is technologies that are expected to fewer lead time concerns with regard to also the degree that these technologies continually improve incrementally, product redesign in this proposal than are already being used in the current such as engine friction reduction, with the MYs 2012–2016 rule (or the vehicle fleet and thus, unavailable for rolling resistance reduction, mass MY 2014–2018 rule for heavy duty use to improve energy efficiency beyond reduction, electrical system efficiencies, vehicles and engines). However, there current levels. Finally, the challenge for and aerodynamic improvements. are still some technologies that require manufacturers to design the technology The large number of possible significant lead time, and are not into their products within the technologies to consider and the breadth projected to be heavily utilized in the constraints of the redesign cycles, and of vehicle systems that are affected first years of this proposal. An example the appropriate lead time needed to mean that consideration of the is the advanced high BMEP, cooled EGR employ the technology over the product manufacturer’s design, product engines. As these engines are not yet in line of the industry must be considered. development and manufacturing vehicles today, a research and Applying these technologies process plays a major role in developing development period is required, even if efficiently to the wide range of vehicles the proposed standards. Vehicle there are a number of demonstration produced by various manufacturers is a manufacturers typically develop many projects complete (as discussed in challenging task involving dozens of different models by basing them on a Chapter 3 of the joint TSD). technologies and hundreds of vehicle platforms. In order to assist in this task, limited number of vehicle platforms. In developing the proposed MY 2021 EPA is again using a computerized The platform typically consists of a and 2025 car and truck curves program called the Optimization Model common set of vehicle architecture and (discussed in Section III.B), EPA used for reducing Emissions of Greenhouse structural components.325 This allows the OMEGA model to evaluate gases from Automobiles (OMEGA). for efficient use of design and technologies that manufacturers could Broadly, OMEGA starts with a manufacturing resources. Given the very use to comply with the targets which description of the future vehicle fleet large investment put into designing and those curves would establish. These (i.e. the ‘reference fleet’; see section II.B producing each vehicle model, curves correspond to sales-weighted above), including manufacturer, sales, manufacturers typically plan on a major fleetwide CO2 average targets of 200 g/ base CO emissions, footprint and the redesign for the models approximately mile in MY 2021 and 163 g/mile in MY 2 extent to which emission control every 5 years.326 2025. As discussed later in this section, At the redesign stage, technologies are already employed. For the manufacturer will upgrade or add all we believe that this level of technology application to the light-duty vehicle the purpose of this analysis, EPA uses of the technology and make most other OMEGA to analyze over 200 vehicle changes supporting the manufacturer’s fleet can be achieved in this time frame, the standards will produce significant platforms comprising approximately 1300 vehicle models in order o capture 325 Examples of shared vehicle platforms include reductions in GHG emissions, and the the Ford Taurus and Ford Explorer or the Chrysler the important differences in vehicle and Sebring and Dodge Journey. 327 TSD 3 discusses redesign schedules in greater engine design and utility of future 326 See TSD Chapter 3. detail. vehicle sales of roughly 16–18 million

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units annually in the 2017–2025 1. How did EPA develop a reference and approach available for this proposal.331 timeframe. The model is then provided control fleet for evaluating standards? First, as discussed in Section II.B above, with a list of technologies which are In order to calculate the impacts of the designs of these MYs 2017–2025 applicable to various types of vehicles, this proposal, it is necessary to project vehicles at the level of detail required along with the technologies’ cost and the GHG emissions characteristics of the for emission and cost modeling are not effectiveness and the percentage of future vehicle fleet absent the proposed publically available, and in many cases, vehicle sales which can receive each regulation. EPA and NHTSA develop do not yet exist. Even manufacturers’ technology during the redesign cycle of this projection using a three step confidential descriptions of these interest. The model combines this process. (1) Develop a set of detailed vehicle designs are usually not of information with economic parameters, vehicle characteristics and sales for a sufficient detail to facilitate the level of such as fuel prices and a discount rate, specific model year (in this case, technology and emission modeling to project how various manufacturers 2008).328 This is called the baseline performed by both agencies. Second, would apply the available technology in fleet. (2) Adjust the sales of this baseline steps two and three of the process used order to meet increasing levels of fleet using projections made by the to create the reference case fleet adjust emission control. The result is a Energy Information Administration both the sales and technology of the description of which technologies are (EIA) and CSM to account for projected 2008 vehicles. Thus, our reference fleet reflects the extent that completely new added to each vehicle platform, along sales volumes in future MYs absent vehicles are expected to shift the light with the resulting cost. While OMEGA future regulation.329 (3) Apply fuel vehicle market in terms of both segment can apply technologies which reduce saving and emission control technology and manufacturer. Also, by adding to these vehicles to the extent necessary CO2 efficiency related emissions and technology to facilitate compliance with for manufacturers to comply with the refrigerant leakage emissions associated the MY 2016 standards, we account for existing 2016 standards and the with air conditioner use, this task is the vast majority of ways in which these currently handled outside of the proposed standards. Thus, the analyzed fleet differs from new vehicles will differ from their older OMEGA model. A/C improvements are counterparts. relatively cost-effective, and would the MY 2008 baseline fleet in both the always be added to vehicles by the level of technology utilized and in terms a. Reference Fleet Scenario Modeled model, thus they are simply added into of the sales of any particular vehicle. A EPA projects that in the absence of the the results at the projected penetration similar method is used to analyze both proposed GHG and CAFE standards, the levels. The model can also be set to reference and control cases, with the reference case fleet in MY 2017–2025 account for the various proposed major distinction being the stringency of would have fleetwide GHG emissions compliance flexibilities (and to the standards. performance no better than that accommodate compliance flexibilities in EPA and NHTSA perform steps one projected to be necessary to meet the general. and two above in an identical manner. MY 2016 standards. While it is not The development of the characteristics possible to know with certainty the The remainder of this section of the baseline 2008 fleet and the sales describes the technical feasibility future fleetwide GHG emissions adjustment to match AEO and CSM performance in the absence of more analysis in greater detail. Section III.D.1 forecasts is described in Section II.B describes the development of our stringent standards, EPA believes that above and in greater detail in Chapter 1 this approach is the most reasonable reference and control case projections of of the joint TSD. The two agencies projection for developing the reference the MY 2017–2025 fleet. Section III.D.2 perform step three in a conceptually case fleet for MYs 2017–2025. One describes our estimates of the identical manner, but each agency important element supporting the effectiveness and cost of the control utilizes its own vehicle technology and proposed approach is that AEO2011 technologies available for application in emission model to project the projects relatively stable gasoline prices the 2017–2025 timeframe. Section technology needed to comply with the over the next 15 years. The average III.D.3 describes how these technologies reference and proposed standards. actual price in the U.S. for the first nine are combined into packages likely to be Further, each agency evaluates its own months of 2011 for gasoline was $3.57 applied at the same time by a proposed and MY 2016 standards; per gallon ($3.38 in 2009 dollars).332 manufacturer. In this section, the overall neither NHTSA nor EPA evaluated the However, the AEO2011 reference case effectiveness of the technology packages other agency’s standard in this projects a price of $2.80 per gallon (in vis-a`-vis their effectiveness when proposal.330 2009 dollars) AEO2011 projects prices adopted individually is described. The use of MY 2008 vehicles in our to be $3.25 in 2017, rising slightly to Section III.D.4 describes EPA’s OMEGA fleet projections includes vehicle $3.54 per gallon in 2025 (which is less model and its approach to estimating models which already have or will be than a 4 cent per year increase on how manufacturers will add technology discontinued by the time this rule takes average). Based on these fuel price to their vehicles in order to comply with effect and will be replaced by more projections, the reference fleet for MYs potential CO2 emission standards. advanced vehicle models. However, we 2017–2025 should correspond to a time Section III.D.5 presents the results of the believe that the use of MY 2008 vehicle period where there is a stable, OMEGA modeling, namely the level of designs is still the most appropriate unchanging GHG standard, and technology added to manufacturers’ essentially stable gasoline prices. vehicles and the cost of adding that 328 As discussed in TSD Chapter 1, and in Section EPA reviewed the historical record for technology. Section III.D.6 discusses the II.B.2, the agencies will consider using Model Year similar periods when we had stable fuel 2010 for the final rule, based on availability and an appropriateness (or lack of analysis of the data representativeness. economy standards and stable gasoline appropriateness) of the alternative 329 See generally Chapter 1 of the Joint TSD for standards in relation to those proposed. details on development of the baseline fleet, and 331 See section II.B.2 concerning the selection of Further technical detail on all of these Section III.H.1 for a discussion of the potential sales MY 2008 as the appropriate baseline. 332 issues can be found in the Draft Joint impacts of this proposal. The Energy Information Administration 330 While the MY 2012–2016 standards are largely estimated the average regular unleaded gasoline Technical Support Document as well as similar, some important differences remain. See 75 price in the U.S. for the first nine months of 2011 EPA’s Regulatory Impact Analysis. FR at 25342. was $3.57.

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prices. EPA maintains, and publishes companies may over-comply, any slightly.340 On the other hand, it is also every year, the seminal reference on voluntary over-compliance by one possible that future GHG emissions and new light-duty vehicle CO2 emissions company would generate credits that fuel economy performance could be and fuel economy.333 This report could be sold to other companies to better than MY2016 levels if there are contains very detailed data from MYs substitute for their more expensive shifts from trucks to cars, or to lower 1975–2010. There was an extended 18- compliance technologies; this ability to footprint levels. While EPA has not year period from 1986 through 2003 buy and sell credits could eliminate any performed a quantified sensitivity during which CAFE standards were over-compliance for the overall fleet.337 assessment for this proposal, EPA essentially unchanged,334 and gasoline NHTSA also evaluated EIA assumptions believes that a reasonable range for a prices were relatively stable and and inputs employed in the version of sensitivity analysis would evaluate over remained below $1.50 per gallon for NEMS used to support AEO 2011 and or under compliance on the order of a almost the entire period. The 1975–1985 found, based on this analysis, that when few percent which EPA projects would and 2004–2010 timeframes are not fuel economy standards were held have, at most, a small impact on relevant in this regard due to either constant after MY 2016, EIA appears to projected program costs and benefits. rising gasoline prices, rising CAFE forecast market-driven levels of over- Based on this assessment, the EPA standards, or both. Thus, the 1986–2003 and under-compliance generally reference case fleet is estimated through time frame is an excellent analogue to consistent with a CAFE model analysis the target curves defined in the MY the period out to MY 2025 during which using a flat, 2016-based reference case 2016 rulemaking applied to the AEO projects relatively stable gasoline fleet. From a consumer market driven projected MYs 2017–2025 fleet.341 As in prices. EPA staff have analyzed the fuel perspective, while there is considerable the previous rulemaking, EPA assumes economy trends data from the 1986– evidence that many consumers now care that manufacturers make use of 10.2 2003 timeframe (during which CAFE more about fuel economy than in past grams of air conditioning credits on cars standards did not vary by footprint) and decades, the 2016 compliance level is and 11.5 on light trucks, or an average have drawn three conclusions: (1) there projected to be several mpg higher than of approximately 11 grams on the U.S. was a small, industry-wide, average that being demanded in the market fleet and the technology for doing so is over-compliance with CAFE on the today.338 On the other hand, some included in the reference case (Section order of 1–2 mpg or 3–4%, (2) almost all manufacturers have already announced III.C). plans to introduce technology well of this industry-wide over-compliance b. Control Scenarios Modeled was from 3 companies (Toyota, Honda, beyond that required by the 2016 MY and Nissan) that routinely over- GHG standards.339 However, it is For the control scenario, EPA complied with the universal CAFE difficult, if not impossible, to separate modeled the proposed standard curves standards simply because they future fuel economy improvements discussed in Section III.B, as well as the produced smaller and lighter vehicles made for marketing purposes from those alternative scenarios discussed in relative to the industry average, and (3) designed to efficiently plan for III.D.6. Other flexibilities are accounted full line car and truck manufacturers, compliance with anticipated future for in the analysis. The air conditioning such as General Motors, Ford, and CAFE or CO2 emission standards, i.e., credits modeled are discussed in III.D.2. Chrysler, which produced larger and some manufacturers may have made Air conditioning credits (both leakage heavier vehicles relative to the industry public statements about higher mpg and efficiency) are included in the cost average and which were constrained by levels in the future in part because of and technology analysis described the universal CAFE standards, rarely the expectation of higher future below. The compliance value of 0 g/mi over-complied during the entire 18-year standards. for PHEVs and EVs are also included. period.335 All estimates of actual GHG emissions However, off-cycle credits, PH/EV Since the MY 2012–2016 standards and fuel economy performance in 2016 multipliers through MY 2021, pickup are footprint-based, every major or other future years are projections, and truck credits, flexible fuel, and carry manufacturer is expected to be it is plausible that actual GHG emissions forward/back credits are not included constrained by the new standards in and fuel economy performance in 2016 explicitly in the cost analysis. These 2016 and manufacturers of small and later years, absent more stringent flexibilities will offer the manufacturers vehicles will not routinely over-comply standards, could be worse than more compliance options. Moreover, the as they had with the past universal projected if there are shifts from car overall cost analysis includes small standards.336 Thus, the historical market share to truck market share, or volume manufacturers in the fleet, evidence and the footprint-based design to higher footprint levels. For example, which would have company specific of the 2016 GHG emissions and CAFE average fuel economy performance standards assuming this part of the standards strongly support the use of a levels decreased over the period from proposal is finalized (see section III.C). reference case fleet where there are no 1986–2003 even as car CAFE standards As we expect all of these flexibilities further fuel economy improvements were stable and truck CAFE levels rose together to only have a small impact on beyond those required by the MY 2016 the fleet compliance costs on average, 337 Oates, Wallace E., Paul R. Portney, and Albert we will re-evaluate including them in standards. There are additional factors M. McGartland. ‘‘The Net Benefits of Incentive- that reinforce the historical evidence. Based Regulation: A Case Study of Environmental the final rule analysis. While it is possible that one or two Standard Setting.’’ American Economic Review 79(5) (December 1989): 1233–1242. c. Vehicle Groupings Used 338 The average, fleetwide ‘‘laboratory’’ or 333 Light-Duty Automotive Technology, Carbon In order to create future technology ‘‘unadjusted’’ fuel economy value for MY 2010 is Dioxide Emissions, and Fuel Economy Trends: 1975 projections and enable compliance with 28.3 mpg (see Light-Duty Automotive Technology, through 2010, November 2010, available at http:// Carbon Dioxide Emissions, and Fuel Economy the modeled standards, EPA aggregates www.epa.gov/otaq/fetrends.htm. Trends: 1975 Through 2010, November 2010, vehicle sales by a combination of 334 There are no EPA LD GHG emissions available at http://www.epa.gov/otaq/fetrends.htm), manufacturer, vehicle platform, and regulations prior to MY 2012. 6–7 mpg less than the 34–35 mpg levels necessary engine design for the OMEGA model. As 335 See Regulatory Impact Analysis, Chapter 3. to meet the EPA GHG and NHTSA CAFE levels in 336 With the notable exception of manufacturers MY 2016. who only market electric vehicles or other limited 339 For example, Hyundai has made a public 340 See Regulatory Impact Analysis, Chapter 3. product lines. commitment to achieve 50 mpg by 2025. 341 75 FR at 25686.

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discussed above, manufacturers automobile, etc) at a given and in some cases head design, the implement major design changes at manufacturing plant. Because the cost of vehicle sales are broken down beyond vehicle redesign and tend to implement modifying the engine depends on the the platform level to reflect relevant these changes across a vehicle platform valve train design (such as SOHC, engine differences. The vehicle (such as large SUV, mid-size SUV, large DOHC, etc.), the number of cylinders groupings are shown in Table III–19.

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2. What are the Effectiveness and Costs technologies can be added to the fleet mile) as more vehicles in the fleet of CO2-Reducing Technologies? (see Chapter 3.5 of the draft joint TSD convert to use of the new alternative EPA and NHTSA worked together to for more detail). This preamble section, refrigerant.342 By 2021, we project that develop information on the rather than repeating those details, 100% of the MY 2021 fleet will be using focuses upon EPA-only technology effectiveness and cost of most CO2- alternative refrigerants, and that credits reducing and fuel economy-improving assumptions, specifically, those relating will remain constant on a car and truck technologies. This joint work is to air conditioning refrigerant. basis until 2025. Note from the table reflected in Chapter 3 of the draft Joint EPA expects all manufacturers will below that costs then decrease from TSD and in Section II.D of this choose to use AC improvement credit 2021 to 2025 due to manufacturer preamble. The work on technology cost opportunities as a strategy for learning as discussed in Section II of and effectiveness also includes complying with the CO2 standards, and this preamble and in Chapter 3 of the maximum penetration rates, or ‘‘caps’’ has set the stringency of the proposed draft joint TSD. A more in-depth for the OMEGA model. These caps are standards accordingly (see section II.F discussion of feasibility and availability an important input to OMEGA that above). EPA estimates that the level of of low GWP alternative refrigerants, can capture the agencies’ analysis the credits earned will increase from be found in Section III.C of the concerning the rate at which 2017 (13 grams/mile) to 2021 (21 grams/ Preamble.

342 See table in III.B.

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Additionally, by MY 2019, EPA available resources, including costs and effectiveness values, each of estimates that 100% of the A/C engineering, development, these 19 vehicle types is mapped into efficiency improvements will by fully manufacturing and marketing activities one of seven classes of vehicles: phased-in. However 85% of these costs to create a product with multiple new Subcompact, Small car, Large car, are already in the reference fleet, as this features. Therefore, the approach taken Minivan, Minivan with towing, Small is the level of penetration assumed in here is to group technologies into truck, and Large truck.343 We believe the 2012–2016 final rule. The packages of increasing cost and that these seven vehicle classes, along penetration of A/C costs for this effectiveness. with engine cylinder count, provide EPA built unique technology packages proposal can be found in Chapter 5 of adequate representation for the cost for each of 19 ‘‘vehicle types,’’ which, the draft joint TSD. basis associated with most technology as in the MYs 2012–2016 rule and the 3. How were technologies combined Interim Joint TAR, provides sufficient application. Note also that these 19 into ‘‘Packages’’ and what is the cost resolution to represent the technology of vehicle types span the range of vehicle and effectiveness of packages? the entire fleet. This was the result of footprints—smaller footprints for Individual technologies can be used analyzing the existing light duty fleet smaller vehicles and larger footprints for by manufacturers to achieve with respect to vehicle size and larger vehicles—which served as the incremental CO2 reductions. However, powertrain configurations. All vehicles, basis for the 2012–2016 GHG standards as discussed extensively in the MYs including cars and trucks, were first and the standards in this proposal. A 2012–2016 Rule, EPA believes that distributed based on their relative size, detailed table showing the 19 vehicle manufacturers are more likely to bundle starting from compact cars and working types, their baseline engines and their technologies into ‘‘packages’’ to capture upward to large trucks. Next, each synergistic aspects and reflect vehicle was evaluated for powertrain, 343 Note that, for the current assessment and progressively larger CO2 reductions with specifically the engine size (I4, V6, and representing an update since the 2010 TAR, EPA additions or changes to any given V8) then by valvetrain configuration has created a new vehicle class called ‘‘minivan with towing’’ which allows for greater package. In this manner, and consistent (DOHC, SOHC, OHV), and finally by the differentiation of costs for this popular class of with the concept of a redesign cycle, number of valves per cylinder. For vehicles (such as the Ford Edge, Honda Odyssey, manufacturers can optimize their purposes of calculating some technology Jeep Grand Cherokee).

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descriptions is contained in Table III–19 subject to constraints.344 This a wider ratio span into the and in Chapter 1 of EPA’s draft RIA. ‘‘preliminary-set’’ of packages consists transmissions. Some of the engine Within each of the 19 vehicle types, of roughly 2,000 possible packages of technologies have the same goal, such as multiple technology packages were technologies for each of 19 vehicle cylinder deactivation, advanced created in increasing technology content types, or nearly 40,000 packages in all. valvetrains, and turbocharging. In order resulting in increasing effectiveness. As The cost of each package is determined to account for this overlap and avoid stated earlier, with few exceptions, each by adding the cost of each individual over-estimating emissions reduction package is meant to provide equivalent technology contained in the package for effectiveness, EPA uses an engineering driver-perceived performance to the the given year of interest. The approach known as the lumped- baseline package. Note that we refer effectiveness of each package is parameter technique. The results from throughout this discussion of package determined in a more deliberate this approach were then applied building to a ‘‘baseline’’ vehicle or a manner; one cannot simply add the directly to the vehicle packages. The ‘‘baseline’’ package. This should not be effectiveness of individual technologies lumped-parameter technique is well confused with the baseline fleet, which to arrive at a package-level effectiveness documented in the literature, and the is the fleet of roughly 16 million because of the synergistic effects of specific approach developed by EPA is 2008MY individual vehicles comprised technologies when grouped with other detailed in Chapter 3 (Section 3.3.2) of of over 1,100 vehicle models. In this technologies that seek to improve the the draft joint TSD as well as Chapter 1 discussion, when we refer to ‘‘baseline’’ same or similar efficiency loss of EPA’s draft RIA. vehicle we refer to the ‘‘baseline’’ mechanism. As an example, the benefits Table III–21 presents technology costs configuration of the given vehicle type. of the engine and transmission for a subset of the more prominent So, we have 19 baseline vehicles in the technologies can usually be combined technologies in our analysis (note that context of building packages. Each of multiplicatively,345 but in some cases, those 19 baseline vehicles is equipped all technology costs are presented in the benefit of the transmission-related Chapter 3 of the draft Joint TSD and in with a port fuel injected engine and a 4 technologies overlaps with the engine speed automatic transmission. The Chapter 1.2 of EPA’s draft RIA). Table technologies. This occurs because the III–21 includes technology costs for a V6 valvetrain configuration and the number transmission technologies shift dual overhead cam midsize or large car of cylinders changes for each vehicle operation of the engine to more efficient and a V8 overhead valve large pickup type in an effort to encompass the locations on the engine map by truck. This table is meant to illustrate diversity in the 2008 baseline fleet as incorporating more ratio selections and discussed above. In short, while the how technology costs are similar and/or different for these two large selling baseline vehicle that defines the vehicle 344 Example constraints include the requirement type is relevant when discussing the for stoichiometric gasoline direct injection on every vehicle classes and how the technology package building process, the baseline turbocharged and downsized engine and/or any 27 costs change over time due to learning and reference case fleets of real vehicles bar BMEP turbocharged and downsized engine and indirect cost changes as described must also include cooled EGR. Some constraints are in section II.D of this preamble and at are not relevant to the discussion here. the result of engineering judgment while others are We describe this in more detail in the result of effectiveness value estimates which are length in Chapter 3.2 of the draft Joint Chapter 1 of EPA’s draft RIA. tied to specific combinations of technologies. TSD. Note that these costs are not To develop a set of packages as 345 For example, if an engine technology reduces package costs but, rather, individual OMEGA inputs, EPA builds packages CO2 emissions by five percent and a transmission technology costs. We present package technology reduces CO2 emissions by four percent, costs for the V6 midsize or large car in consisting of every legitimate the benefit of applying both technologies is 8.8 permutation of technology available, percent (100% ¥ (100% ¥ 4%) * (100% ¥ 5%)). Table III–22, below.

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Table III–22 presents the cost and result of this TARF ranking process is a injection, turbocharging and effectiveness values from a 2025MY ‘‘ranked-set’’ of roughly 500 packages downsizing, and more advanced master-set of packages used in the for use as OMEGA inputs, or roughly 25 transmission technologies such as six OMEGA model for EPA’s vehicle type 5, per vehicle type. EPA prepares a ranked and eight speed dual-clutch a midsize or large car class equipped set of packages for any MY in which transmissions and 6 and 8 speed with a V6 engine. Similar packages were OMEGA is run,347 the initial packages automatic transmissions. The most generated for each of the 19 vehicle represent what we believe a technologically advanced packages types and the costs and effectiveness manufacturer will most likely within a vehicle type include the estimates for each of those packages are implement on all vehicles, including hybrids, plug-in hybrids and electric discussed in detail in Chapter 1 of lower rolling resistance tires, low vehicles. Note that plug-in hybrid and EPA’s draft RIA. friction lubricants, engine friction electric vehicle packages are only As detailed in Chapter 1 of EPA’s reduction, aggressive shift logic, early modeled for the non-towing vehicle draft RIA, this preliminary-set of torque converter lock-up, improved types, in order to better maintain utility. packages is then ranked according to electrical accessories, and low drag We request comment on this decision technology application ranking factors brakes (to the extent not reflected in the and whether or not we should perhaps (TARFs) to eliminate packages that are baseline vehicle).348 Subsequent consider plug-in hybrids for towing not as cost-effective as others.346 The packages include gasoline direct vehicle types.

346 The Technology Application Ranking Factor EPA’s draft RIA chapter 3 contains more details on 348 When making reference to low friction (TARF) is discussed further in III.D.5. the OMEGA modeling and draft Joint TSD Chapter lubricants, the technology being referred to is the 347 Note that a ranked-set of package is generated 3 has more detail on both costs changes over time engine changes and possible durability testing that for any year for which OMEGA is run due to the and the maximum penetration limits of certain would be done to accommodate the low friction changes in costs and maximum penetration rates. technologies. lubricants, not the lubricants themselves.

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4. How does EPA project how a by the model user prior to running the individual technology was given a manufacturer would decide between model. The third type of input data ranking which generally followed the options to improve CO2 performance to describes vehicle operational data, such degree of complexity, cost and meet a fleet average standard? as annual vehicle scrappage rates and effectiveness of the technologies within As discussed, there are many ways for mileage accumulation rates, and each group. More specifically, the economic data, such as fuel prices and ranking is based on the premise that a a manufacturer to reduce CO2-emissions from its vehicles. A manufacturer can discount rates. These estimates are technology on a 2008 baseline vehicle described in Section II.E above, Section with a lower ranking would be replaced choose from a myriad of CO2 reducing technologies and can apply one or more III.H below and Chapter 4 of the Joint by one with a higher ranking which was of these technologies to some or all of TSD. contained in one of the technology its vehicles. Thus, for a variety of levels The fourth type of data describes the packages which we included in our CO2 emission standards being modeled. OMEGA modeling. The corollary of this of CO2 emission control, there are an almost infinite number of technology These include the MY 2016 standards, premise is that a technology on a 2008 combinations which produce a desired proposed MY 2021 and proposed MY baseline vehicle with a higher ranking 2025 standards. As described in more would be not be replaced by one with CO2 reduction. As noted earlier, EPA used the same model used in the MYs detail below, the application of A/C an equal or lower ranking which was 2012–2016 Rule, the OMEGA model, in technology is evaluated in a separate contained in one of the technology order to make a reasonable estimate of analysis from those technologies which packages which we chose to include in how manufacturers will add impact CO2 emissions over the 2-cycle our OMEGA modeling. This ranking technologies to vehicles in order to meet test procedure. Thus, for the percent of scheme can be seen in an OMEGA pre- vehicles that are projected to achieve A/ processor (the TEB/CEB calculation a fleet-wide CO2 emissions level. EPA has described OMEGA’s specific C related reductions, the CO2 credit macro), available in the docket. methodologies and algorithms associated with the projected use of In the second step of the process, previously in the model improved A/C systems is used to adjust these rankings were used to estimate the documentation,349 makes the model the final CO2 standard which will be complete list of technologies which publically available on its Web site,350 applicable to each manufacturer to would be present on each baseline and has recently peer reviewed the develop a target for CO2 emissions over vehicle after the application of a model.351 the 2-cycle test which is assessed in our technology package. In other words, this The OMEGA model utilizes four basic OMEGA modeling. As an example, on step indicates the specific technology on sets of input data. The first is a an industry wide basis, EPA projects each baseline vehicle after a package has description of the vehicle fleet. The key that manufacturers will generate 11 g/mi been applied to it. EPA then used the pieces of data required for each vehicle of A/C credit in 2016. Thus, the 2016 lumped parameter model to estimate the CO2 target in OMEGA was total percentage CO2 emission reduction are its manufacturer, CO2 emission level, fuel type, projected sales and approximately eleven grams less associated with the technology present footprint. The model also requires that stringent for each manufacturer than on the baseline vehicle (termed package each vehicle be assigned to one of the predicted by the curves. Similar 0), as well as the total percentage 19 vehicle types, which tells the model adjustments were made for the control reduction after application of each which set of technologies can be applied cases (i.e., the A/C credits allowed by package. A similar approach was used to that vehicle. (For a description of the rule are accounted for in the to determine the total cost of all of the how the 19 vehicle types were created, standards), but for a larger amount of A/ technology present on the baseline see Section III.D.3 above.) In addition, C credit (approximately 25 grams). vehicle and after the application of each As mentioned above for the market the degree to which each baseline applicable technology package. data input file utilized by OMEGA, The third step in this process is to vehicle already reflects the effectiveness which characterizes the vehicle fleet, account for the degree of each and cost of each available technology our modeling accounts for the fact that technology package’s incremental must also be input. This avoids the many 2008 MY vehicles are already effectiveness and incremental cost is situation, for example, where the model equipped with one or more of the affected by the technology already might try to add a basic engine technologies discussed in Section III.D.2 present on the baseline vehicle. In this improvement to a current hybrid above. Because of the choice to apply step, we calculate the degree to which vehicle. Except for this type of technologies in packages, and because a technology package’s effectiveness is information, the development of the 2008 vehicles are equipped with already present on the baseline vehicle, required data regarding the reference individual technologies in a wide and produce a value for each package fleet was described in Section III.D.1 variety of combinations, accounting for termed the technology effectiveness above and in Chapter 1 of the Joint TSD. the presence of specific technologies in basis, or TEB. The degree to which a The second type of input data used by terms of their proportion of package cost technology package’s incremental cost is the model is a description of the and CO effectiveness requires careful, reduced by technology already present technologies available to manufacturers, 2 detailed analysis. on the baseline vehicle is termed the primarily their cost and effectiveness. Thus, EPA developed a method to cost effectiveness basis, or CEB, in the This information was described above account for the presence of the OMEGA model. The equations for as well as in Chapter 3 of the draft Joint combinations of applied technologies in calculating these values can be seen in TSD and Chapter 1 of EPA’s draft RIA. terms of their proportion of the RIA chapter 3. In all cases, the order of the technology packages. This analysis can As described in Section III.D.3 above, technologies or technology packages for be broken down into four steps technology packages are applied to a particular vehicle type is determined The first step in the updated process groups of vehicles which generally is to break down the available GHG represent a single vehicle platform and 349 Previous OMEGA documentation for versions used in MYs 2012–2016 Final Rule (EPA–420–B– control technologies into five groups: (1) which are equipped with a single engine 09–035), Interim Joint TAR (EPA–420–B–10–042). Engine-related, (2) transmission-related, size (e.g., compact cars with four 350 http://www.epa.gov/oms/climate/models.htm. (3) hybridization, (4) weight reduction cylinder engine produced by Ford). 351 EPA–420–R–09–016, September 2009. and (5) other. Within each group, each These groupings are described in Table

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III–19. Thus, the fourth step is to considers the difference in lifetime VMT accrued over the period of time which combine the fractions of the CEB and of cars and trucks, as indicated in the they will own the vehicle, which is TEB of each technology package already proposed regulations which govern estimated to be roughly five years. It is present on the individual MY 2008 credit trading between these two vehicle also assumed that consumers discount vehicle models for each vehicle classes (which reflect the final 2012– these savings at the same rate as that grouping. For cost, percentages of each 2016 rules on this point).352 used in the rest of the analysis (3 or 7 package already present are combined As noted above, EPA estimated percent).353 Any residual value of the using a simple sales-weighting separately the cost of the improved A/ additional technology which might C systems required to generate the procedure, since the cost of each remain when the vehicle is sold is not package is the same for each vehicle in credit. In the reference case fleet that considered. The CO emission reduction a grouping. For effectiveness, the complies with the MY 2016 standards, 2 is the change in CO emissions individual percentages are combined by 85% of vehicles are modeled with 2 weighting them by both sales and base improved A/C efficiency and leakage multiplied by the percentage of vehicles surviving after each year of use CO2 emission level. This appropriately prevention technology. weights vehicle models with either The model then works with one multiplied by the annual miles travelled by age. higher sales or CO2 emissions within a manufacturer at a time to add grouping. Once again, this process technologies until that manufacturer Given this definition, the higher prevents the model from adding meets its applicable proposed standard. priority technologies are those with the technology which is already present on The OMEGA model can utilize several lowest manufacturer-based net cost- vehicles, and thus ensures that the approaches to determining the order in effectiveness value (relatively low model does not double count which vehicles receive technologies. For technology cost or high fuel savings technology effectiveness and cost this analysis, EPA used a leads to lower values). Because the ‘‘manufacturer-based net cost- associated with complying with the order of technology application is set for effectiveness factor’’ to rank the modeled standards. each vehicle, the model uses the Conceptually, the OMEGA model technology packages in the order in manufacturer-based net cost- begins by determining the specific CO which a manufacturer is likely to apply 2 effectiveness primarily to decide which emission standard applicable for each them. Conceptually, this approach manufacturer and its vehicle class (i.e., estimates the cost of adding the vehicle receives the next technology car or truck). Since the proposal allows technology from the manufacturer’s addition. Initially, technology package for averaging across a manufacturer’s perspective and divides it by the mass #1 is the only one available to any cars and trucks, the model determines of CO2 the technology will reduce. One particular vehicle. However, as soon as the CO2 emission standard applicable to component of the cost of adding a a vehicle receives technology package each manufacturer’s car and truck sales technology is its production cost, as #1, the model considers the from the two sets of coefficients discussed above. However, it is manufacturer-based net cost- describing the piecewise linear standard expected that new vehicle purchasers effectiveness of technology package #2 functions for cars and trucks (i.e., the value improved fuel economy since it for that vehicle and so on. In general respective car and truck curves) in the reduces the cost of operating the terms, the equation describing the inputs, and creates a combined car-truck vehicle. Typical vehicle purchasers are calculation of manufacturer-based cost standard. This combined standard assumed to value the fuel savings effectiveness is as follows:

Where: VMTregulatory = the statutorily defined VMT of the social cost of this proposed rule, CostEffManuft = Manufacturer-Based Cost but a measure of the private cost, (i.e., Effectiveness (in dollars per kilogram EPA describes the technology ranking methodology and manufacturer-based a measure of the vehicle purchaser’s CO2), cost effectiveness metric in greater willingness to pay more for a vehicle TechCost = Marked up cost of the technology with higher fuel efficiency). Since (dollars), detail in the OMEGA documentation.354 vehicle operators pay the full price of FS = Difference in fuel consumption due to When calculating the fuel savings in the addition of technology times fuel the TARF equation, the full retail price fuel, including taxes, they value fuel price and discounted over the payback of fuel, including taxes is used. While costs or savings at this level, and the period, or the number of years of vehicle manufacturers will consider this when use over which consumers value fuel taxes are not generally included when calculating the cost or benefits of a choosing among the technology savings when evaluating the value of a options.355 new vehicle at time of purchase regulation, the net cost component of dCO2 = Difference in CO2 emissions (g/mile) the manufacturer-based net cost- The values of manufacturer-based net due to the addition of technology effectiveness equation is not a measure cost-effectiveness for specific

352 The analysis for the control cases in this this has little impact on the technology projections year of vehicle purchase at 7% per annum. It is proposal was run with slightly different lifetime shown here. reasonable to estimate that the added technology to VMT estimates than those proposed in the 354 OMEGA model documentation. EPA–420–B– improve CO2 level and fuel economy will retain this regulation. The impact on the cost estimates is 10–042. same percentage of value when the vehicle is five small and varies by manufacturer. 355 This definition of manufacturer-based net years old. However, it is less clear whether first cost-effectiveness ignores any change in the purchasers, and thus, manufacturers consider this 353 While our costs and benefits are discounted at residual value of the vehicle due to the additional residual value when ranking technologies and 3% or 7%, the decision algorithm (TARF) used in technology when the vehicle is five years old. Based making vehicle purchases, respectively. For this OMEGA was run at a discount rate of 3%. Given on historic used car pricing, applicable sales taxes, proposal, this factor was not included in our that manufacturers must comply with the standard and insurance, vehicles are worth roughly 23% of determination of manufacturer-based net cost- regardless of the discount rate used in the TARF, their original cost after five years, discounted to effectiveness in the analyses.

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technologies will vary from vehicle to effectiveness for the various technology percent of the MY 2025 fleet are vehicle, often substantially. This occurs packages. projected to be electric vehicles while for three reasons. First, both the cost less than 1 percent are projected to be 5. Projected Compliance Costs and and fuel-saving component cost, electric vehicles in the reference case. Technology Penetrations ownership fuel-savings, and lifetime EPA notes that we have projected one CO2 effectiveness of a specific The following tables present the potential compliance path for each technology all vary by the type of projected incremental costs and company and the industry as a whole— vehicle or engine to which it is being technology penetrations for the this does not mean other potential applied (e.g., small car versus large proposed program. Overall projected technology penetrations are not truck, or 4-cylinder versus 8-cylinder cost increases are $734 in MY 2021 and possible, in fact, it is likely that each engine). Second, the effectiveness of a $1946 in MY 2025. Relative to the firm will of course plot their own future specific technology often depends on reference fleet complying with of MY course on how to comply. For example, the presence of other technologies 2016 standards, we see significant while we show relatively low levels of already being used on the vehicle (i.e., increases in advanced transmission EV and PHEV technologies may be used the dis-synergies). Third, the absolute technologies such as the high efficiency to meet the proposed standards, several fuel savings and CO2 reduction of a gear box and 8 speed transmissions, as firms have announced plans to percentage an incremental reduction in well as more moderate increase in turbo aggressively pursue EV and PHEV fuel consumption depends on the CO2 downsized, cooled EGR 24 bar BMEP technologies and thus the actual level of the vehicle prior to adding the engines. In the control case, 15 percent penetration of those technologies may technology. Chapter 1 of EPA’s draft of the MY 2025 fleet is projected to be turn out to be much higher than the RIA contains further detail on the values a strong P2 hybrid as compared to 5% prediction we present here. of manufacturer-based net cost- in the 2016 reference case. Similarly, 3 BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C addressed by this proposal. For the standards.357 The alternatives, like the 6. How does the technical assessment purposes of considering alternatives, proposed standards, account for support the proposed CO2 standards as EPA assessed these two specific years as projected use of A/C related credits. compared to the alternatives has EPA being reasonably separated in time in They represent the average targets for considered? order to evaluate a range of cars and trucks projected for the meaningfully different standards, rather proposed standards and four alternative a. What are the targets and achieved than analyzing alternatives for each standards. They do not represent the levels for the fleet in this proposal? individual model year. After discussing manner in which manufacturers are In this section EPA analyzes the the reasons for selecting the proposed projected to achieve compliance with proposed standards alongside several standards rather than any of the these targets, which includes the ability potential alternative GHG standards. alternatives, EPA will describe the to transfer credits to and from the car Table III–28 includes a summary of specific standard phase-in schedule for and truck fleets. That is discussed later. the proposed standards and the four the proposal. Table III–28 presents the alternatives considered by EPA for this projected reference case targets for the 357 The reference case targets for 2021 and 2025 notice. In this table and for the majority fleet in 2021 and 2025, that is the may be different even though the footprint based estimated industry wide targets that standards are identical (the 2016 curves). This is of the data presented in this section, because the fleet distribution of cars and trucks may EPA focuses on two specific model would be required for the projected fleet change in the intervening years thus changing the years in the 2017–2025 time frame in those years by the MY 2016 targets in 2021 and 2025.

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Alternative 1 and 2 are focused on all improvements were made with fuel the fleet targets shown in Table III–28) changes in the level of stringency for economy technologies) and a range of as this is how manufacturers would just light-duty trucks: Alternative 1 is 20 150–177 g/mi CO2 in 2025 in 2025 view the future standards given the grams/mile CO2 less stringent (higher) (equivalent to a range of 50–59 mpg if opportunity to transfer credits between in 2021 and 2025, and Alternative 2 is all improvements were made with fuel cars and trucks under the GHG 358 20 grams/mile CO2 more stringent economy technologies). program. A manufacturer’s ability to (lower) in 2021 and 2025. Alternative 3 Using the OMEGA model, EPA transfer GHG credits between its car and and 4 are focused on changes in the evaluated the proposed standards and truck fleets without limit does have the level of stringency for just passenger each of the alternatives in 2021 and in effect of muting the ‘‘truck’’ focused and cars: Alternative 3 is 20 grams/mile CO2 2025. It is worth noting that although ‘‘car’’ focused nature of the alternatives less stringent (higher) in 2021 and 2025, Alternatives 1 and 2 consider different EPA is evaluating. For example, while and Alternative 4 is 20 grams/mile CO2 truck footprint curves compared to the Alternative 1 has truck standards more stringent (lower) in 2021 and proposal and Alternatives 3 and 4 2025. When combined with the sales evaluate different car footprint curves 358 The curves for the alternatives were developed projections for 2021 and 2025, these compared to the proposal, in all cases using the same methods as the proposed curves, alternatives span fleet wide targets with however with different targets. Thus, just as in the EPA evaluated the alternatives by proposed curves, the car and truck curves described a range of 187–213 g/mi CO2 in 2021 modeling both the car and truck in TSD 2 were ‘‘fanned’’ up or down to determine (equivalent to a range of 42–48 mpge if footprint curves together (which achieve the curves of the alternatives.

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projected in 2021 and 2025 to be 20 Alternative 1 in a cost effective manner Table III–29 shows the projected grams/mile less stringent than the from each company’s perspective. EPA’s target and projected achieved levels in proposed truck standards and the same modeling of single manufacturer fleets 2025 for the proposed standards. This car standards as the proposed car reflects this flexibility, and accounts for a manufacturer’s ability to standards, individual firms may over appropriately so given that it reflects transfer credits to and from cars and comply on trucks and under-comply on manufacturers’ expected response. trucks to meet a manufacturer’s car and cars (or vice versa) in order to meet truck targets.

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Similar tables for each of the alternatives and the proposal for 2021 draft RIA. With the proposed standards alternatives for 2025 and for the are contained in Chapter 3 of EPA’s and for Alternatives 1 and 2, all

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companies are projected to be able to trucks is increasing at a slower rate than with the car standard in light of the comply both in 2021 and 2025, with the for cars. As described in Section I.B.2 of truck standard, or vice versa. A with the exception of Ferrari, which in the preamble, the proposed car consistent pattern across the industry of each case falls 9 g/mi short of its standards are decreasing (in CO2) at a manufacturers choosing to under or over projected fleet wide obligation in rate of 5% per year from MYs 2017– comply with a car or trucks standard 2025.359 In Alternatives 3 and 4, where 2025, while the proposed truck could indicate that the car or truck the car stringency varies, all companies standards are decreasing at a rate of standard should be evaluated further to are again projected to comply with the 3.5% per year on average from MYs determine if one was more or less exception of Ferrari, which complies 2017–2021, then 5% per year thereafter stringent than might be appropriate in under Alternative 3, but has a 30 gram till 2025. Given this difference in light of the technology choices available shortfall under Alternative 4. This level percentage rates, the close similarity in to manufacturers and their costs. As of compliance was not the case for the average cost stems from the fact that it shown above, that is not the case for the 2016 standards from the previous rule. is more costly to add the technologies to proposed car and truck standards. The primary reason for this result is the trucks (in general) than to cars as However, EPA did evaluate a set of penetration of more efficient described in Chapter 1 of the draft RIA. alternative standards that reflect technologies beyond 2016. As described Moreover, some technologies are not separately increasing or decreasing the earlier, many technologies projected as even available for towing trucks. These stringency of the car and truck not to be available by MY 2016 or whose include EVs, PHEVs, Atkinson Cycle standards, as discussed below. penetration was limited due to lead time engines (matched with HEVs), and c. What are the costs and advanced issues are projected to be available or DCTs—the latter two are relatively cost technology penetration rates for the available at greater penetration rates in effective. Together these result in a alternative standards in relation to the the 2017–2025 timeframe, especially decrease in effectiveness potential for proposed standards? given two more redesign cycles for the the heavier towing trucks compared to industry on average. non-towing trucks and cars. In Below we discuss results for the addition,, there is more mass reduction proposed car and truck standards b. Why is the Relative Rate of Car Truck compared to the truck alternatives Stringency Appropriate? projected for these vehicles, but this comes at higher cost as well, as the cost evaluated (Alternatives 1 and 2), and Table III–29 illustrates the importance per pound for mass reduction goes up then discuss the proposed car and truck of car-truck credit transfer for individual with higher levels of mass reduction standards compared to the car firms. For example, the OMEGA model (that is, the cost increase curves upward alternatives (Alternatives 3 and 4). projects for the proposed standards that Table III–30 presents our projected rather than being linear). As described in 2025, Daimler would under comply per-vehicle cost for the average car, in greater detail in Chapter 2 of the joint for trucks by 22 g/mile but over comply truck and for the fleet in model year TSD, these factors help explain the in their car fleet by 8 g/mi in order to 2021 and 2025 for the proposal and for reason EPA and NHTSA are proposing meet their overall compliance Alternatives 1 and 2. All costs are to make the truck curve steeper relative obligation, while for Kia the OMEGA relative to the reference case (i.e. the to the 2016 curve, thus resulting in a model projects that under the proposed fleet with technology added to meet the truck curve that is ‘‘more parallel’’ to standards Kia’s truck fleet would over 2016 MY standards). As can be seen, cars than the 2016 truck curve. comply by 10 g/mi and under comply in even though only the truck standards their car fleet by 3 g/mi in order to meet Taken together, our analysis shows vary among these three scenarios, in their compliance obligations. However, that under the proposed standards, there each case the projected average car and for the fleet as a whole, we project only is relatively little net trading between truck costs vary as a result of car-truck a relatively small degree of net credit car and trucks; average costs for credit transfer by individual companies. transfers from the truck fleet to the car compliance with cars is similar to that Table III–30 shows that compared to the fleet. of trucks in MY 2021 as well as MY proposal, Alternative 1 (with a 2021 and Table III–23 shows that the average 2025; and it is more costly to add 2025 truck target 20 g/mile less costs for cars and trucks are also nearly technologies to trucks than to cars. stringent, or 20 g/mile greater, than the equivalent for 2021 and 2025. For MY These facts corroborate the proposal) is $281 per vehicle less than 2021, the average cost to comply with reasonableness for increasing the slope the proposal in 2021 and $430 per the car standards is $718, while it is of the truck curve. These observations vehicle less than the proposal in 2025. $764 for trucks. For MY 2025, the also lead us to the conclusion that (at a Alternative 2 (with a 2021 and 2025 average cost to comply with the car fleet level) starting from MYs 2017– truck target 20g/mile more stringent, or standards is $1,942, while it is $1,954 2021, the slower rate of increase for 20 g/mile less, than the proposal) is for trucks. These results are highly trucks compared to cars (3.5% $343 per vehicle more than the proposal consistent with the small degree of net compared to 5% per year), and the same in 2021 and $516 per vehicle more than projected credit transfer between cars rate of increase (5% per year) for both the proposal in 2025. and trucks. cars and trucks for MY 2022–2025 Note that while the car and truck The average cost for complying with results in car and truck standards that costs are nearly equivalent for the truck and car standards are similar, reflect increases in stringency over time Alternative 2 in 2021 and 2025, cars are even though the level of stringency for that are comparable and consistent. over complying on average by 7 g/mi, There are no indications that either the while trucks are under complying by 11 359 Note that Ferrari is shown as a separate entity truck or car standards are leading in the table above but could be combined with other g/mi, thus indicating significant flow of manufacturers to choose technology 360 Fiat-owned companies for purposes of GHG credits from cars to trucks. The compliance at the manufacturer’s discretion. Also, paths that lead to significant over or situation is reversed in Alternative 1, in Section III.B., EPA is requesting comment on the under compliance for cars or trucks, on where cars are under complying on concept of allowing companies that are able to an industry wide level. E.g., there is no demonstrate ‘‘operational independence’’ to be average by 9 g/mi and trucks are over eligible for SVM alternative standards. However, indication that on average the proposed the costs shown above are based on Ferrari meeting car standards would lead manufacturers 360 These detailed tables are in Chapter 3 of EPA’s the primary program standards. to consistently under or over comply draft RIA.

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complying by 16 g/mi, implying significant flow of credits from truck to significant flow of credits from truck to cars. cars.

Table III–31 presents the per-vehicle Alternative 2. In general, for most of the the same trends as for the industry as a cost estimates in MY 2021 by company companies our projected results show whole. for the proposal, Alternative 1 and

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Table III–32 presents the per-vehicle expensive then the proposal, and for an equally less stringent alternative cost estimates in MY 2025 by company Alternative 2 on the order of $200 to standard. This is not a surprise as more for the proposal, Alternative 1 and $800 per vehicle more expensive. For technologies must be added to vehicles Alternative 2. In general, for most of the the fleet as a whole, the average cost for to meet tighter standards, and these companies our projected results show Alternative 1 is $430 less costly, while technologies increase in cost in a non- the same trends as for the industry as a Alternative 2 is $516 more costly. Thus linear fashion. whole, with Alternative 1 on the order the incremental average cost is higher of $200 to $600 per vehicle less for the more stringent alternative than

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The previous tables present the costs EPA’s draft RIA Chapter 3 includes the these tables are those for which there is for the proposal and alternatives 1 and details on this much longer list for the a large difference in penetration rates 2 at both the industry and company passenger car fleet, light-duty truck between the proposal and the level. In addition to costs, another key fleet, and the overall fleet at both the alternatives. We have not included here, is the technology required to meet industry and individual company level. for example, the penetration rates for potential future standards. The EPA Table III–33 and Table III–34 present improved high efficiency gear boxes assessment of the proposal, as well as only a sub-set of the technologies EPA because in 2021 our modeling estimates Alternatives 1 and 2 predict the estimates could be used to meet the a 58% penetration of this technology penetration into the fleet of a large proposed standards as well as across the total fleet for the proposal as number of technologies at various rates alternative 1 and 2 in MY 2021. Table well as for alternatives 1 and 2, or 8 of penetration. A subset of these III–35 and Table III–36 show the same speed automatic transmissions which in technologies are discussed below, while for 2025. The technologies listed in 2021 we estimate at a 28% penetration

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rate for the proposed standards as well engines, a 10% decrease in the engines, 8% decrease in penetration of as for alternatives 1 and 2. There are penetration of cooled EGR, and a 12% 8 speed dual clutch transmissions, and several other technologies (shown in the decrease in the penetration of gasoline a 19% decrease in penetration of Chapter 3 of the DRIA) where there is direct injection fuel systems. We also gasoline direct injection fuel systems in little differentiation between the see that due to credit transfer between the car fleet. For the more stringent proposal and alternatives 1 and 2. cars and trucks, the lower level of alternative 2, we see increases in the Table III–33 shows that in 2021, for stringency considered for trucks in penetration of many of these several technologies the proposal alternative 1 also impacts the technologies projected for 2021, for the requires higher levels of penetration for penetration of technology to the car truck fleet as well as for the car fleet. trucks than alternative 1. For example, fleet—with alternative 1 leading to a Table III–34 shows these same overall for trucks, compared to the proposal, 14% decrease in penetration of 18 bar trends but at the sales weighted fleet alternative 1 leads to an 8% decrease in turbo-downsized engines, 5% decrease level in 2021. the 24 bar turbo-charged/downsized in penetration of 24 bar turbo-downsize

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Table III–35 shows that in 2025, there projected to be met with a 4% decrease in penetration of 24 bar turbo- is only a small change in many of these in penetration of HEVs compared to the downsized engines, 12% decrease in technology penetration rates when proposal. As in 2021, we see that due to penetration of cooled EGR, 6% decrease comparing the proposal to alternative 1 credit transfer between cars and trucks, in penetration of HEVs, and a 2% for trucks, and most of the change the lower level of stringency considered decrease in penetration of electric shows up in the car fleet. One important for trucks in alternative 1 also impacts vehicles. For the more stringent exception is hybrid electric vehicles, the car fleet penetration—with alternative 2, we see only small where the less stringent alternative 1 is alternative 1 leading to a 8% decrease increases in the penetration of many of

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these technologies projected for 2025, penetration of HEVs for trucks compared to the proposal, and a 3% with a major exception being a compared to the proposal, a 6% increase increase in the penetration of EVs for significant 14% increase in the in the penetration of HEVs for cars cars compared to the proposal.

The results are similar for the car stringency varies, +20 g/mi and for the average car, truck and for the Alternatives 3 and 4, where the truck -20 g/mi respectively. Table III–37 fleet in model year 2021 and 2025 for standard stays at the proposal level and presents our projected per-vehicle cost the proposal and for Alternatives 3 and

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4. Compared to the proposal, the proposal in 2025. These differences complying by 5 g/mi, while trucks are Alternative 3 (with a 2021 and 2025 car are even more pronounced than under complying by 7 g/mi, thus target 20 g/mile less stringent then the Alternatives 1 and 2. As in the analysis indicating significant flow of credits proposal) is $442 per vehicle less on above, the costs increases are greater for from cars to trucks. The situation is average than the proposal in 2021 and more stringent alternatives than the reversed in Alternative 4, where cars are $708 per vehicle less than the proposal reduced costs from the less stringent under complying by 6 g/mi and trucks in 2025. Alternative 4 (with a 2021 and alternatives. are over complying by 12 g/mi implying 2025 car target 20g/mile more stringent Note that although the car and truck significant flow of credits from truck to then the proposal) is $635 per vehicle costs are not too dissimilar for cars and cars. more on average than the proposal in trucks for Alternative 3 in 2025, what is 2021 and $923 per vehicle more than not shown is that cars are over

Table III–38 presents the per-vehicle whole, with Alternative 3 being a stringent than less stringent cost estimates in MY 2021 by company several hundred dollars per vehicle less alternatives). In some case the for the proposal, Alternative 3 and expensive then the proposal, and differences exceed $1,000 (e.g. BMW, Alternative 4. In general, for most of the Alternative 4 being several hundred Daimler, Geely/Volvo, Mazda, Spyker/ companies our projected results show dollars per vehicle more expensive Saab, and Tata). the same trends as for the industry as a (with larger increment for more

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Table III–39 presents the per-vehicle the same trends as for the industry as a $1,600 per vehicle more expensive. cost estimates in MY 2025 by company whole, with Alternative 3 on the order Again these differences are more for the proposal, Alternative 3 and of $500 to $1,400 per vehicle less pronounced for the car alternatives than Alternative 4. In general, for most of the expensive then the proposal, and the truck alternatives. companies our projected results show Alternative 4 on the order of $700 to

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Table III–40 shows that in 2021, for We also see that due to credit transfer direct injection fuel systems in the car several technologies Alternative 3 leads between cars and trucks, the lower level fleet. For the more stringent alternative to lower levels of penetration for cars as of stringency considered for cars in 4, we see increases in the penetration of well as trucks compared to the proposal. alternative 3 also impacts the many of these technologies projected for For example (on cars) there is an 13% penetration of technology to the truck 2021, for the truck fleet as well as for decrease in the 18 bar turbo-charged/ fleet—with alternative 3 leading to 12% the car fleet. Table III–41 shows these downsized engines, a 5% decrease in decrease in penetration of 24 bar turbo- same overall trends but at the sales the penetration of cooled EGR, and a downsized engines, 13% decrease in weighted fleet level in 2021. 22% decrease in the penetration of penetration of cooled EGR, and a 17% gasoline direct injection fuel systems. decrease in penetration of gasoline

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Table III–42 shows that in 2025, there technology penetration rates when for cars, and most of the change shows is only a small change in many of these comparing the proposal to alternative 3 up in the car fleet. There are a few

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exceptions: There is a 15% decrease in at the lower level of stringency 2025, with a major exception being a the penetrate rate of 24 bar bmep considered for cars in alternative 3 also significant 9% increase in the engines (made up somewhat by a 4% impacts the truck fleet penetration— penetration of HEVs for cars compared increase in 18 bar engines); there is 20% with alternative 3 leading to 7% to the proposal (along with a drop in less EGR boost and GDI, and 9% less decrease in penetration of HEVs. For the advanced engines), and a 20% increase hybrid electric vehicles compared to the more stringent alternative 4, we see only in the penetration of HEVs for trucks proposal. As in 2021, we see that due to small increases in the penetration of compared to the proposal. credit transfer between cars and trucks many of these technologies projected for

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The trend for Alternatives 3 and 4 $1,946 in 2025. We have also shown less stringent, the response of the have thus far been that the impacts have that the relative rate of increase in the manufacturers is to make changes across been more extreme than Alternatives 1 stringencies of cars and trucks are at an their fleet, in light of their ability to and 2 compared to the proposal. Thus appropriate level such that there is transfer credits between cars and trucks. we will focus the discussion of greater balance amongst the For example, Alternatives 1 and 3 make feasibility on Alternatives 1 and 2 (as manufacturers where the distribution of either the car or trucks standard less the same will also then apply to 3 and the burden is relatively evenly spread. stringent, and keep the other standard as 4 respectively). In Section I.C of the Preamble, we also is. For both alternatives, manufacturers As stated above, EPA’s OMEGA showed that the benefits of the program increase their projected CO2 g/mile level analysis indicates that there is a are significant, and that this cost can be achieved by their car fleet, and to a technology pathway for all recovered within the first four years of lesser extent their truck fleet. For manufacturers to build vehicles that vehicle ownership. alternatives 2 and 4, where either the would meet the proposed standards as EPA’s analysis of the four alternatives truck or car fleet is made more stringent, well as the alternative standards.361 The indicates that under all of the and the other standard is kept as is, differences lie in the per-vehicle costs alternatives the projected response of manufacturers reduce the projected CO2 and the associated technology the manufacturers is to change both g/mile level achieved by both their car penetrations. With the proposed their car and truck fleets. Whether the and trucks fleets, in a generally standards, we estimate that the average car or truck standard is being changed, comparable fashion. This is summarized per-vehicle cost is $734 in 2021 and and whether it is being made more or in Table III–44 for MY 2025.

This demonstrates that the four little if any net transfer of credits manufacturers to focus more on alternatives are indicative of what between cars and trucks. In that context, increasing the CO2 gm/mile of cars than would happen if EPA increased the the results from alternatives 1 and 3 can trucks (alternatives 1 and 3). Increasing stringency of both the car and truck fleet be considered as indicative of what the stringency of the car and truck at the same time, or decreased the would be expected if EPA decreased the standards would generally lead to stringency of the car and truck fleet at stringency of both the car and truck comparable increases in gm/mi for both the same time. E.g., Alternative 4 would standards, and alternatives 2 and 4 as cars and trucks. be comparable to an alternative where indicative of what would happen if EPA Alternatives 1 and 3 would achieve EPA made the car standard more increased the stringency of both the car significantly lower reductions, and stringent by 14 gm/mi and the truck and truck standards. In general, it would therefore forego important standard by 10 gm/mile. Under such an appears that decreasing the stringency benefits that the proposed standards alternative, there would logically be of the standards would lead the would achieve at reasonable costs and

361 Except Ferrari.

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penetrations of technology. EPA judges technologies, such as HEVs and EVs. model generally adds them as one of the that there is not a good reason to forego The following tables and charts show last technology choices for compliance. such benefits, and is not proposing less the technology penetrations by They are therefore an indicator of the stringent standards such as alternatives manufacturer in greater detail. extent to which the stringency of the 1 and 3. Table III–45 and later tables describe standard is pushing the manufacturers Alternatives 2 and 4 increase the per the projected penetration rates for the to the most costly technology. Cost (as vehicle estimates to $1,077 and $1,369 OEMs of some key technologies in MY shown above) is a similar indicator. respectively in 2021 and $2,462 and 2021 and MY2025 under the proposed $2,869 respectively in 2025. This standards. TDS27, HEV, and PHEV+EV Table III–45 describes technology increase in cost from the proposal technologies represent the most costly penetration for MY2021 under the originates from the dramatic increases technologies added in the package proposal. in the costlier electrification generation process, and the OMEGA

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It can be seen from this table that the of advanced technologies that are below table). On the other hand, smaller larger volume manufacturers have levels the phase in caps (described in the next ‘‘luxury’’ volume manufacturers tend to

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require higher levels of these that rates below that cap are practical or manufacturers’ product redesign technologies. BMW, Daimler, Volvo, reasonable, and is intended to be more schedules. In contrast, an advanced Porsche, Saab, Jaguar/LandRover, and of a physical limit of technical technology still under development VW all reach the maximum penetration capability in light of conditions such as based on an improved engine design, cap for HEVs (30%) in 2021. is supplier capacity, up-front investment TDS27, has a cap on penetration phase the only other company with greater capital requirements, manufacturability, in rate in MYs 2015, 2021, and 2025 of than 20% penetration of HEVs and only and other factors. For example, in MY 0%, 15%, and 50% indicative of a two manufacturers have greater than 2010, there are presently 3% HEVs in longer lead time to develop the 10% penetration of PH/EVs: Porsche the new vehicle fleet. In MYs 2015, technology, but a relatively faster phase and Saab. Together these seven 2021 and 2025 we project that this cap in rate once the technology is ‘‘ready’’ ‘‘luxury’’ vehicle manufacturers on technology penetration rate increases (consistent with other ‘‘conventional’’ represent 12% of vehicle sales and their to 15%, 30% and 50% respectively. For estimated cost of compliance with 2021 PH/EVs in MY 2010, there is practically evolutionary improvements). Table III– proposed standards is $2,178 compared none of these technologies. In MYs 46 summarizes the caps on the phase in to $744 for the others. 2015, 2021 and 2025 we project that this rates of some of the key technologies. A It is important to review some of the cap on technology penetration rate penetration rate result from the analysis caps or limits on the technology phase increases to approximately 5%, 10% that approaches the caps for these in rates described in Chapter 3.5.2.3 of and 15% respectively for EVs and technologies for a given manufacturer is the joint TSD as it relates to the PHEVs separately. These highly an indication of how much that remainder of this discussion. These are complex technologies also have the manufacturer is being ‘‘pushed’’ to upper limits on the penetration rates slowest penetration phase-in rates to technical limits by the standards. This allowed under our modeling, and reflect reflect the relatively long lead time will be in direct correlation to the cost an estimate of the physical limits for required to implement into substantial of compliance for that same such penetration. It is not a judgment fractions of the fleet subject to the manufacturer.

Table III–47 shows the technology There are other significant increases The larger volume manufacturers penetrations for Alternative 2. in the larger manufacturers and even have an estimated per vehicle cost of Immediately striking is the penetration more dramatic increases in the HEV compliance with 2021 alternative rates of truck HEVs in the fleet: Even in penetration in smaller manufacturers’ standards of $1,044, which is $555 2021, it nearly doubles in comparison to fleets. For example, Suzuki cars now higher than the proposed standards. The the proposal. The Ford truck fleet (to reach the maximum technology seven ‘‘luxury’’ vehicle manufacturers take one of the largest volume penetration cap of 30% for HEVs and now have estimated costs of $2,733, manufacturers as an example) increases Mitsubishi now has 20% HEVs. Also, which is $300 higher than the proposed from 2% HEVs in the proposal trucks to there are now four manufacturers with standards (See Table III–12 above). 16% in Alternative 2, an eightfold total fleet PH/EV penetration rates equal increase. to 10% or greater.

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BILLING CODE 4910–59–P Table III–48 shows the technology 2021. The large volume manufacturer, penetrations for Alternative 4 for MY Ford now has a 25% penetration rate of

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truck HEVs (a 23% increase compared trucks now have greater than 20% seven ‘‘luxury’’ vehicle manufacturers to the proposed standards) and the fleet HEVs. Also, there are now six now have estimated costs of $3,499, penetration has gone up 11 fold for this manufacturers with PH/EV penetration which is $1,320 higher than the company in comparison to the proposed rates greater than 10%. proposed standard (See Table III–32 standards. The larger volume manufacturers now above). For the seven luxury Mitsubishi, and Suzuki cars now have an estimated per vehicle cost of manufacturers, this per vehicle cost reach the maximum technology compliance with 2021 alternative exceeds the costs under the proposal for penetration cap of 30% for HEVs, and standards of $1,428, which is $683 complying with the considerably more Mazda, Subaru cars as well as Ford higher than the proposed standards. The stringent 2025 standards.

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Table III–49 shows the technology in 2025. The larger volume technologies that are below the phase in penetrations for the proposed standards manufacturers have levels of advanced caps (described in the next table),

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though there are some notably high general, we note a 3% penetration rate approximately 10 years for HEV penetration rates for truck HEVs for of PHEV+EVs—it is interesting to note penetration to get to the levels that we Ford and Nissan.362 For the fleet in that this is the penetration rate of HEVs see today, and that was without an today. EPA believes that there is increase in the stringency of passenger 362 EPA has not conducted an analysis of pickup sufficient lead time to have this level of car CAFE standards. truck HEV penetration rates compared to the remainder of the truck fleet. This may be conducted penetration of these vehicles by 2025. for the final rule. Case in point, it has taken

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Six of the seven luxury vehicle penetration cap on their truck portion of reaches 50% for their combined fleet. manufacturers reach the maximum their fleet; however, no company The seven do have over 30%

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penetration rate of HEVs, while Suzuki Table III–50 shows the technology Subaru, Suzuki, and Toyota. Suzuki (in is the only company to have between 20 penetrations for Alternative 2 in 2025. addition to the seven) now also has 10% and 30% HEVs. Six of the 7 luxury In this alternative Chrysler trucks nearly or greater penetration of PH/EVs. Ford, vehicle manufacturers also have greater double their penetration rate of HEVs GM, Chrysler, and Nissan now have than 10% penetration of PH/EVs (which along with dramatic increases in car and more than 20% penetration of HEVs in has a total cap of 29%). The only truck PH/EVs. GM has a very large trucks. company to have large penetration rates increase in truck HEVs as well: From (>15%) of TDS27 is Jaguar/LandRover at The estimated per vehicle cost of 3% in the proposed to 39% in the compliance with 2025 alternative 2 29%. alternative standards along with a The estimated per vehicle cost of standards is $2,354, which is $410 doubling of PH/EVs. Toyota also has compliance with 2025 proposed higher than the proposed standards. The standards is $1,943 for the larger double the number of HEVs. In this seven luxury vehicle manufacturers volume manufacturers and $3,133 for alternative there are many more now have costs of $3,616, which is $483 the seven ‘‘luxury’’ vehicle companies with 20–30% HEVs: higher than the proposed standards. See manufacturers. Chrysler, Ford, GM, Mitsubishi, Nissan, Table III–32 above.

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Table III–51 shows the technology In this alternative every company except 20% HEVs. Many of the large volume penetrations for Alternative 4 in 2025. Honda, Hyundai, Kia have greater than manufacturers have even more dramatic

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increases in the volumes of P/H/EVs while Daimler, Volvo, Porsche, Saab, now have costs of $4,481, which is than in Alternative 2. Ford, GM, Nissan, and VW have over 20%. $1,348 higher than the proposed and Toyota have greater than 20 or 30% The estimated per vehicle cost of standards. Much of this non-linear penetration rates of HEVs on trucks. compliance with 2025 alternative increase in cost is due to increased Mazda, Mitsubishi, Subaru, Suzuki (in standards is $2,853, which is $910 penetration of PHEVs and EVs (more so addition to the seven) now also have higher than the proposed standards. The than HEVs). 10% or greater penetration of PH/EVs, seven luxury vehicle manufacturers

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d. Summary of the Technology believes that these penetration rates are, alternative 2. From another perspective, Penetration Rates and Costs From the in the narrow sense, technically the average cost of compliance to the Alternative Scenarios in Relation to the achievable, it is more a question of industry on average is $23 and $44 Proposed Standards judgment whether we are confident at billion for the 2021 and 2025 proposed this time that these increased rates of As described above, alternatives 2 and standards respectively. Alternative 2 advanced technology usage can be 4 would lead to significant increases in will cost the industry on average $7 and practically and smoothly implemented the penetration of advanced $9 billion in excess, while Alternative 4 into the fleet—a reason the agencies are technologies into the fleet during the will cost the industry on average $10 attempting to encourage more time frame of these standards. In and $16 billion in excess of the costs for utilization of this technology with the general, both alternatives would lead to the proposed standards. These are large proposed HEV pickup truck credits but an increase in the average penetration increases in percentage terms, ranging being reasonably prudent in proposing from approximately 25% to 45% in rate for advanced technologies in 2021, standards that could de facto force high in effect accelerating some of the 2021, and from approximately 20% to degrees of penetration of this technology 35% in 2025. technology penetration that would on towing trucks.363 otherwise occur in the 2022–2025 EPA notes that the same concerns Per vehicle costs will also increase timeframe. For the fleet as a whole, in support the proposed decision to dramatically including for some of the 2021 alternative 2 would lead to a steepen the slope of the truck curve in largest, full-line manufacturers. Under significant increase in cooled EGR use acknowledgement of the special Alternative 2, per vehicle costs for and a limited increase in HEV use, challenges these larger footprint trucks Chrysler, Ford, GM, Honda and Nissan while alternative 4 would lead to an (which in many instances are towing increase by an estimated one-third to even larger increase in cooled EGR as vehicles) would face. Without the nearly double (200%) to meet 2021 well as a significant increase in HEV steepening, the penetration rates of standards and from roughly 25% to 45% use. In 2025 these alternatives would these challenging technologies would to meet 2025 standards (see Table III–31 dramatically affect penetration rates of have been even greater. and Table III–32 above). The per-vehicle HEVs, EVs, and PHEVs, in each case From a cost point of view, the impacts costs to meet Alternative 4 for these leading to very significant increases on on cost track fairly closely with the manufacturers is significantly greater average for the fleet. Again, Alternative technology penetration rates discussed and in the same proportions, see Table 4 would lead to greater penetration rates above. The average cost increases under III–38 and Table III–39. than Alternative 2. When one considers Alternatives 2 and 4 are significant for the technology penetration rates for As noted, these cost increases are 2021 (approximately $300 and $600), associated especially with increased individual manufacturers, in 2021 the and for some manufacturers they result utilization of advanced technologies. As alternatives lead to much higher in very large cost increases. For 2025 the shown in Figure below, HEV+PHEV+EV increases than average for some cost increases are even higher penetration are projected to increase in individual large volume manufacturers. (approximately $500 and $900). 2025 from 17% in the proposed Smaller volume manufacturers start out Alternative 4, as expected, is standards to 28% and to nearly 35% with higher penetration rates and are significantly more costly than pushed to even higher levels. This result under Alternatives 2 and 4 respectively for manufacturers with annual sales is even more pronounced in 2025. 363 See 76 FR at 57220 discussing a similar issue This increase in technology in the context of the standards for heavy duty above 500,000 vehicles (including penetration rates raises serious concerns pickups and vans: ‘‘Hybrid electric technology Chrysler, Ford, GM, Honda, Hyundai, likewise could be applied to heavy-duty vehicles, Nissan, Toyota and VW). The about the ability and likelihood and in fact has already been so applied on a limited manufacturers can smoothly implement basis. However, the development, design, and differences are less pronounced for the increased technology penetration in tooling effort needed to apply this technology to a 2021, but still (in alternative 4) over a fleet that has so far seen limited usage vehicle model is quite large, and seems less likely double the penetration level of the to prove cost-effective in this time frame, due to the proposal. EPA regards these differences of these technologies, especially for small sales volumes relative to the light-duty sector. trucks—and for towing trucks in Here again, potential customer acceptance would as significant, given the factors of particular. While this is more need to be better understood because the smaller expense, consumer cost, consumer pronounced for 2025, there are still engines that facilitate much of a hybrid’s benefit are acceptance, and potentially (for 2021) typically at odds with the importance pickup truck lead time. concerns for the 2021 technology buyers place on engine horsepower and torque, penetration rates. Although EPA whatever the vehicle’s real performance’’. BILLING CODE 491–59–P

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The Figure below shows the Porsche, Subaru, Suzuki, and Jaguar/ distribution within these are shifting to HEV+PHEV+EV penetration for LandRover while excluding Aston the higher cost EVs and PHEVs as noted manufacturers with sales below 500,000 Martin, Ferrari, Lotus, Saab, and Tesla). above. but exceeding 30,000 (including BMW, While the penetration rates of these Daimler, Volvo, Kia, Mazda, Mitsubishi, advanced technologies also increase, the

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EPA did not model a number of is not expected to be of enough degree of consumer acceptance of both flexibilities when conducting the significance to warrant a change to the the increased costs and the technologies analysis for the NPRM. For example, standards proposed. Instead they are themselves. At the same time, the PHEV, EV and fuel cell vehicle expected to support the reasonableness proposal helps to address these issues incentive multipliers for 2017–2021, full of the proposed standards. by providing incentives to promote size pickup truck HEV incentive credits, Overall, EPA believes that the early and broader deployment of full size pickup truck performance characteristics and impacts of these and advanced technologies, and so provides based incentive credits, and off-cycle other alternative standards generally a means of encouraging their further credits, were not explicitly captured. reflect a continuum in terms of penetration while leaving manufacturers We plan on modeling these flexibilities technical feasibility, cost, lead time, alternative technology choices. EPA for the final rule. For this proposal, consumer impacts, emissions reductions thus judges that the increase in while we have not been able to and oil savings, and other factors technology penetration rates and the explicitly model the impacts on the evaluated under section 202 (a). In increase in costs under the increased program costs, the impact will only be determining the appropriate standard to stringency for the car and truck fleets to reduce the estimated costs of the propose in this context, EPA judges that reflected in alternatives 2 and 4 are such program for most manufacturers. From the proposed standards are appropriate that it would not be appropriate to an industry wide perspective, EPA and preferable to more stringent propose standards that would increase expects that their overall impact on alternatives based largely on the stringency of the car and truck fleets costs, technology penetration, and consideration of cost—both to in this manner. emissions reductions and other benefits manufacturers and to consumers—and The two tables below shows the year will be limited. They will provide some the potential for overly aggressive on year costs as described in greater additional, important flexibility in penetration rates for advanced detail in Chapter 5 of the RIA. These achieving the proposed levels and technologies relative to the penetration projections show a steady increase in promoting more advanced technology, rates seen in the proposed standards, costs from 2017 thru 2025 (as on a case by case basis, but their impact especially in the face of unknown interpolated).

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Figure 7 below shows graphically the trucks seems to result in a slower rate is also reasonable. Though there are year on year average costs presented in of increase in costs for both cars and undoubtedly a range of minor Table III–53 with the per vehicle costs trucks. This initial slower rate of modifications that could be made to the on the left axis and the projected CO2 stringency for trucks is appropriate due progression of standards, EPA believes target standards on the right axis. It is primarily concerns over technology that the progression proposed is quite evident and intuitive that as the penetration rates and disproportionately reasonable and appropriate. Also, EPA stringency of the standard gets tighter, higher costs for adding technologies to believes that any progression of the average per vehicle costs increase. It trucks than cars, as described in Section standards that significantly deviates is also clear that the costs for cars III.D.6.b above. The figure below from the proposed standards (such as exceed that of trucks for the early years corroborates these conclusions and those in Alternatives 1 through 4) are of the program, but then progress further demonstrates that based on the much less appropriate for the reasons upwards together starting in MY 2021. smooth progression of average costs provided in the discussion above. It is interesting to note that the slower (from 2017–2025), the year on year rate of progression of the standards for increase in stringency of the standards

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7. To what extent do any of today’s a specific CO2 target. In this analysis, targets through MY 2022). As the CO2 vehicles meet or surpass the proposed EPA assumed usage of air conditioner targets become more stringent each MY 2017–2025 CO2 footprint-based credits because air conditioner model year, fewer MY 2011 and MY targets with current powertrain designs? improvements are considered to be 2012 vehicles achieve or surpass the In addition to the analysis discussed among the cheapest and easiest proposed CO2 targets, in particular for above regarding what technologies technologies to reduce greenhouse gas gasoline powertrains. While could be added to vehicles in order to emissions, manufacturers are already approximately 15 unique gasoline investing in air conditioner vehicle models achieve or surpass the achieve the projected CO2 obligation for each automotive company under the improvements, and air conditioner MY 2017 targets, this number falls to proposed MY 2017 to 2025 standards, changes do not impact engine, approximately 11 for the MY 2018 EPA performed an assessment of the transmission, or aerodynamic designs so targets, 9 for the model year 2019 light-duty vehicles available in the assuming such credits does not affect targets, and only 2 unique gasoline market today to see how such vehicles consideration of cost and leadtime for vehicle models can achieve the MY 2020 proposed CO targets with A/C compare to the proposed MY 2017–2025 use of these other technologies. In this 2 improvements. footprint-based standard curves. This analysis, EPA assumed increasing air conditioner credits over time with a EPA also assessed the subset of these analysis supports EPA’s overall vehicles that have emissions within 5%, assessment that there are a broad range phase-in of alternative refrigerant for the generation of HFC leakage reduction of the proposed CO2 targets. As detailed of effective and available technologies in Chapter 3 of the EPA Draft RIA, the that could be used to achieve the credits consistent with the assumed phase-in schedule discussed in Section analysis shows that there are more than proposed standards, as well as twenty additional vehicle models illustrating the need for the lead-time III.C.I. of this preamble. No adjustments were made to vehicle CO2 performance (primarily with gasoline and diesel between today and MY 2017 to MY powertrains) that are within 5% of the 2025 in order for continued refinement other then this assumption of air conditioning credit generation. Under proposed MY 2017 CO2 targets, of today’s technologies and their including compact cars, midsize cars, broader penetration across the fleet for this analysis, a wide range of existing vehicles would meet the MY 2017 large cars, SUVs, station wagons, the industry as a whole as well as minivans, small and standard pickup proposed CO2 targets, and a few meet individual companies. In addition, this trucks. EPA also receives projected sales even the proposed MY 2025 CO2 targets. assessment supports EPA’s view that the data prior to each model year from each proposed standards would not interfere The details regarding this assessment are in Chapter 3 of the EPA Draft RIA. manufacturer. Based on this data, with consumer utility—footprint- approximately 7% of MY 2011 sales attribute standards provide This assessment shows that a will be vehicles that would meet or be manufacturers with the ability to offer significant number of vehicles models better than the proposed MY 2017 consumers a full range of vehicles with sold today (nearly 40 models) would targets for those vehicles, requiring only the utility customers want, and does not meet or be lower than the proposed MY improvements in air conditioning require or encourage companies to just 2017 footprint-based CO2 targets with systems. In addition, nearly 15% of produce small passenger cars with very current powertrain designs, assuming projected MY 2011 sales would be low CO2 emissions. air conditioning credit generation within 5% of the proposed MY 2017 Using publicly available data, EPA consistent with our proposal. The list of footprint CO2 target with only simple compiled a list of available vehicles and vehicles includes a full suite of vehicle improvements to air conditioning their 2-cycle CO2 emissions sizes and classes, including midsize systems, a full six model years before performance (that is, the performance cars, minivans, sport utility vehicles, the proposed standard takes effect. With over the city and highway test cycles compact cars, small pickup trucks and improvements to air conditioning required by this proposal). Data is full size pickup trucks—all of which systems, the most efficient gasoline currently available for all MY 2011 meet the proposed MY 2017 target internal combustion engines would vehicles and some MY 2012 vehicles. values with no technology meet the MY 2020 proposed footprint EPA gathered vehicle footprint data improvements other than air targets. After MY 2020, the only current from EPA reports, manufacturer conditioning system upgrades. These vehicles that continue to meet the submitted CAFE reports, and vehicles utilize a wide variety of proposed footprint-based CO2 targets manufacturer Web sites. powertrain technologies and operate on (assuming improvements in air EPA evaluated these vehicles against a variety of different fuels including conditioning) are hybrid-electric, plug- the proposed CO2 footprint-based gasoline, diesel, electricity, and in hybrid-electric, and fully electric standard curves to determine which compressed natural gas. Nearly every vehicles. However, the proposed MY vehicles would meet or exceed the major manufacturer currently produces 2021 standards, if finalized, would not proposed MY 2017–MY 2025 footprint- vehicles that would meet or exceed the need to be met for another 9 years. based CO2 targets assuming air proposed MY 2017 footprint CO2 target Today’s Toyota Prius, Ford Fusion conditioning credit generation with only improvements in air Hybrid, Chevrolet Volt, Nissan Leaf, consistent with today’s proposal. Under conditioning systems. For all of these Honda Civic Hybrid, and Hyundai the proposed 2017–2025 greenhouse gas vehicle classes the MY 2017 targets are Sonata Hybrid all meet or surpass the emissions standards, each vehicle will achieved with conventional gasoline proposed footprint-based CO2 targets have a unique CO2 target based on the powertrains, with the exception of the through MY 2025. In fact, the current vehicle’s footprint. However, it is full size (or ‘‘standard’’) pickup trucks. Prius, Volt, and Leaf meet the proposed important to note that the proposed CO2 In the case of full size pickups trucks, 2025 CO2 targets without air standard is a company-specific sales only HEV versions of the Chevrolet conditioning credits. weighted fleet-wide standard for each Silverado and the GMC Sierra fall into This assessment of MY 2011 and MY company’s passenger cars and truck this category (though the HEV Silverado 2012 vehicles makes it clear that HEV fleets calculated using the proposed and Sierra meet not just the MY 2017 technology (and of course EVs and footprint-based standard curves. No footprint-based CO2 targets with A/C PHEVs) is capable of achieving the MY individual vehicle is required to achieve improvements, but their respective 2025 standards. However, as discussed

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earlier in this section, EPA’s modeling at relatively low levels (e.g., a maximum environmental and public health projects that the MY 2017–2025 level of 30% or less) by MY 2016, and benefits promised by these mobile standards can primarily be achieved by even by MY 2021. These include source GHG standards. EPA’s GHG advanced gasoline vehicles—for important powertrain technologies such compliance program is designed around example, in MY 2025, we project more as 8-speed transmissions and second or two overarching priorities: (1) to address than 80 percent of the new vehicles third generation downsized engines Clean Air Act (CAA) requirements and could be advanced gasoline with turbocharging, policy objectives; and (2) to streamline powertrains. The assessment of MY The majority of these technologies the compliance process for both 2011 and MY 2012 vehicles available in must be integrated into vehicles during manufacturers and EPA by building on the market today indicates advanced the product redesign schedule, which is existing practice wherever possible, and gasoline vehicles (as well as diesels) can typically on a 5-year cycle. EPA by structuring the program such that achieve the targets for the early model discussed in the MY 2012–2016 rule the manufacturers can use a single data set years of the proposed standards (i.e., significant costs and potential risks to satisfy both GHG and Corporate model years 2017–2020) with only associated with requiring major Average Fuel Economy (CAFE) testing improvements in air conditioning technologies to be added in-between the and reporting requirements. The EPA systems. However, significant typical 5-year vehicle redesign schedule and NHTSA programs replicate the improvements in technologies are (see 75 FR at 25467–68, May 7, 2010). compliance protocols established in the needed and penetrations of those In addition, engines and transmissions MY 2012–2016 rule.364 The technologies must increase substantially generally have longer lifetimes then 5 certification, testing, reporting, and in order for individual manufacturers years, typically on the order of 10 years. associated compliance activities track (and the fleet overall) to achieve the Thus major powertrain technologies current practices and are thus familiar proposed standards for the early years of generally take longer to penetrate the to manufacturers. As is the case under the program, and certainly for the later new vehicle fleet then can be done in a the 2012–2016 program, EPA and years (i.e., model years 2021–2025). 5-year redesign cycle. As detailed in NHTSA have designed a coordinated These technology improvements are the Chapter 3.5 of the draft Joint TSD, EPA compliance approach for 2017–2025 very technologies EPA and NHTSA projects that 8-speed transmissions such that the compliance mechanisms describe in detail in Chapter 3 of the could increase their maximum for both GHG and CAFE standards are draft Joint Technical Support Document penetration in the fleet from 30% in MY consistent and non-duplicative. Readers and which we forecasted penetration 2016 to 80% in 2021 and to 100% in are encouraged to review the MY 2012– rates earlier in this section III.D, and MY 2025. Similarly, we project that 2016 final rule for background and a they include for example: gasoline second generation downsized and detailed description of these direct injection fuel systems; downsized turbocharged engines (represented in certification, compliance, and and turbocharged gasoline engines our assessment as engines with a brake- enforcement requirements. (including in some cases with the mean effective pressure of 24 bars) Vehicle emission standards application of cooled exhaust gas could penetrate the new vehicle fleet at established under the CAA apply recirculation); continued improvements a maximum level of 15% in MY 2016, throughout a vehicle’s full useful life. in engine friction reduction and low 30% in MY 2021, and 75% in MY 2025. Today’s rule establishes fleet average friction lubricants; transmissions with When coupled with the typical 5-year greenhouse gas standards where an increased number of forward gears vehicle redesign schedule, EPA projects compliance with the fleet average is (e.g., 8 speeds); improvements in that it is not possible for all of the determined based on the testing transmission shifting logic; advanced gasoline vehicle technologies performed at time of production, as with improvements in transmission gear box we have assessed to penetrate the fleet the current CAFE fleet average. EPA is efficiency; vehicle mass reduction; in a single 5-year vehicle redesign also establishing in-use standards that lower rolling resistance tires, and schedule. apply throughout a vehicle’s useful life, improved vehicle aerodynamics. In Given the status of the technologies with the in-use standard determined by many (though not all) cases these we project to be used to achieve the adding an adjustment factor to the technologies are beginning to penetrate proposed MY2017–2025 standards and emission results used to calculate the the U.S. light-duty vehicle market. the product development and fleet average. EPA’s program will thus In general, these technologies must go introduction process which is fairly not only assess compliance with the through the automotive product standard in the automotive industry fleet average standards described in development cycle in order to be today, our assessment of the MY2011 Section III.B, but will also assess introduced into a vehicle. In some cases and MY2012 vehicles in comparison to compliance with the in-use standards. additional research is needed before the the proposed standards supports our As it does now, EPA will use a variety overall feasibility assessment, and technologies’ CO2 benefits can be fully of compliance mechanisms to conduct realized and large-scale manufacturing reinforces our assessment of the lead these assessments, including pre- can be achieved. The subject of time needed for the industry to achieve production certification and post- technology penetration phase-in rates is the proposed standards. production, in-use monitoring once discussed in more detail in Chapter 3.5 E. Certification, Compliance, and vehicles enter customer service. Under of the draft Joint Technical Support Enforcement this compliance program manufacturers Document. In that Chapter, we explain will also be afforded numerous 1. Compliance Program Overview that why many CO2 reducing flexibilities to help achieve compliance, technologies should be able to penetrate This section summarizes EPA’s both stemming from the program design the new vehicle market at high levels comprehensive program to ensure itself in the form of a manufacturer- between now and MY 2016. There are compliance with emission standards for specific CO2 fleet average standard, as also many of the key technologies we carbon dioxide (CO2), nitrous oxide well as in various credit banking and project as being needed to achieve the (N2O), and methane (CH4), as described trading opportunities, as described in proposed 2017–2025 standards which in Section III.B. An effective compliance will only be able to penetrate the market program is essential to achieving the 364 75 FR 25468.

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Section III.C. The compliance program requirements for EPA issuance of a Prohibited Acts in the CAA is summarized in further detail below. certificate of conformity, based on a Section 203 of the Clean Air Act demonstration of compliance with the 2. Compliance With Fleet-Average CO2 describes acts that are prohibited by emission standards established by EPA Standards law. This section and associated under section 202 of the Act. The regulations apply equally to the Fleet average emission levels can only certification demonstration requires be determined when a complete fleet greenhouse gas standards as to any other emission testing, and must be done for regulated emission. Acts that are profile becomes available at the close of each model year.365 the model year. Therefore, EPA will prohibited by section 203 of the Clean determine compliance with the fleet Since compliance with a fleet average Air Act include the introduction into standard depends on actual production commerce or the sale of a vehicle average CO2 standards when the model year closes out, based on actual volumes, it is not possible to determine without a certificate of conformity, production figures for each model and compliance with the fleet average at the removing or otherwise defeating on model-level emissions data collected time the manufacturer applies for and emission control equipment, the sale or through testing over the course of the receives a certificate of conformity for a installation of devices designed to model year. Manufacturers will submit test group. Instead, EPA will continue to defeat emission controls, and other this information to EPA in an end-of- condition each certificate of conformity actions. This proposal includes a year report which is discussed in detail for the GHG program upon a section that details these prohibited in Section III.E.5.h of the MY 2012–2016 manufacturer’s demonstration of acts, as did the 2012 greenhouse gas final rule preamble (see 75 FR 25481). compliance with the manufacturer’s regulations. fleet-wide average CO2 standard. Please 7. Other Certification Issues a. Compliance Determinations see Section III.E.3 of the MY 2012–2016 As described in Section III.B above, final rule preamble (75 FR 25470) for a a. Carryover/Carry Across Certification the fleet average standards will be discussion of how EPA will certify Test Data determined on a manufacturer by vehicles under the GHG standards. EPA’s certification program for manufacturer basis, separately for cars 4. Useful Life Compliance vehicles allows manufacturers to carry and trucks, using the footprint attribute certification test data over and across curves. EPA will calculate the fleet Section 202(a)(1) of the CAA requires certification testing from one model year average emission level using actual emission standards to apply to vehicles to the next, when no significant changes production figures and, for each model throughout their statutory useful life, as to models are made. EPA would type, CO2 emission test values generated further described in Section III.A. The continue to apply this policy to CO2, at the time of a manufacturer’s CAFE in-use CO standard under the N2O and CH4 certification test data and testing. EPA will then compare the 2 greenhouse gas program would apply to would allow manufacturers to use actual fleet average to the individual vehicles and is separate from carryover and carry across data to manufacturer’s footprint standard to demonstrate CO2 fleet average determine compliance, taking into the fleet-average standard. The in-use CO2 standard for each model would be compliance if they have done so for consideration use of averaging and CAFE purposes. credits. the model specific CO2 level used in Final determination of compliance calculating the fleet average, adjusted to b. Compliance Fees with fleet average CO2 standards may be 10% higher to account for test-to-test and production variability that might The CAA allows EPA to collect fees not occur until several years after the to cover the costs of issuing certificates close of the model year due to the affect in-use test results. Please see Section III.E.4 of the MY 2012–2016 of conformity for the classes of vehicles flexibilities of carry-forward and carry- covered by this rule. back credits and the remediation of final rule preamble (75 FR 25473 for a At this time the extent of any added deficits (see Section III.B). A failure to detailed discussion of the in-use costs to EPA as a result of this rule is meet the fleet average standard after standard, in-use testing requirements, not known. EPA will assess its credit opportunities have been and deterioration factors for CO2, N2O, compliance testing and other activities exhausted could ultimately result in and CH4. associated with the rule and may amend penalties and injunctive orders under 5. Credit Program Implementation its fees regulations in the future to the CAA as described in Section III.E.6 include any warranted new costs. below. As described in Section III.C, several c. Small Entity Exemption b. Required Minimum Testing For Fleet credit programs are available under this rulemaking. Please see Section III.E.5 of Average CO2 EPA would exempt small entities, and the MY 2012–2016 final rule preamble these entities (necessarily) would not be EPA will require and use the same (75 FR 25477) for a detailed explanation test data to determine a manufacturer’s subject to the certification requirements of credit program implementation, of this rule. compliance with both the CAFE sample credit and deficit calculations, As discussed in Section III.B.7, standard and the fleet average CO2 and end-of-year reporting requirements. emissions standard. Please see Section businesses meeting the Small Business III.E.2.b of the MY 2012–2016 final rule 6. Enforcement Administration (SBA) criterion of a preamble (75 FR 25469) for details. small business as described in 13 CFR The enforcement structure EPA 121.201 would not be subject to the 3. Vehicle Certification promulgated under the MY 2012–2016 GHG requirements, pending future CAA section 203(a)(1) prohibits rulemaking remains in place. Please see regulatory action. Small entities are manufacturers from introducing a new Section III.E.6 of the MY 2012–2016 currently covered by a number of EPA motor vehicle into commerce unless the final rule preamble (75 FR 25482) for a motor vehicle emission regulations, and vehicle is covered by an EPA-issued discussion of these provisions. they routinely submit information and certificate of conformity. Section data on an annual basis as part of their 206(a)(1) of the CAA describes the 365 CAA section 206(a)(1). compliance responsibilities.

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As discussed in detail in Section N2O and/or CH4 that can be subtracted measurement and rounding. The III.B.5, small volume manufacturers from the CH4 and N2O measured values previous definition stated that track with annual sales volumes of less than to demonstrate compliance with CH4 width is ‘‘measured in inches,’’ which 5,000 vehicles would be required to and/or N2O standards. may inadvertently imply measuring and meet primary GHG standards or to recording to the nearest inch. The g. Geographical Location of Greenhouse petition the Agency for alternative Gas Fleet Vehicles revised definition clarifies that standards. measurements should be to the nearest EPA emission certification regulations one tenth of an inch, and average track d. Onboard Diagnostics (OBD) and CO2 require emission compliance 366 in the Regulations width should be rounded to the nearest 50 states, the District of Columbia, the tenth of an inch. As under the current program, EPA Puerto Rico, the Virgin Islands, Guam, We are also proposing a solution to a would not require CO2, N2O, and CH4 American Samoa and the situation in which a manufacturer of a emissions as one of the applicable Commonwealth of the Northern Mariana clean alternative fuel conversion is standards required for the OBD Islands. attempting to comply with the fuel monitoring threshold. 8. Warranty, Defect Reporting, and conversion regulations (see 40 CFR part e. Applicability of Current High Other Emission-Related Components 85 subpart F) at a point in time before Altitude Provisions to Greenhouse Provisions which certain data is available from the Gases This rulemaking would retain original manufacturer of the vehicle. As under the current program, warranty, defect reporting, and other Clean alternative fuel conversions are vehicles covered by this rule would be emission-related component provisions subject to greenhouse gas standards if the vehicle as originally manufactured required to meet the CO2, N2O and CH4 promulgated in the MY 2012–2016 standard at altitude but would not rulemaking. Please see Section III.E.10 was subject to greenhouse gas standards, normally be required to submit vehicle of the MY 2012–2016 final rule unless the conversion manufacturer qualifies for exemption as a small CO2 test data for high altitude. Instead, preamble (75 FR 25486) for a discussion they would submit an engineering of these provisions. business. Compliance with light-duty evaluation indicating that common vehicle greenhouse gas emission 9. Miscellaneous Technical calibration approaches will be utilized standards is demonstrated by complying Amendments and Corrections at high altitude. with the N2O and CH4 standards and the EPA is proposing a number of in-use CO2 exhaust emission standard f. Applicability of Standards to noncontroversial amendments and set forth in 40 CFR 86.1818–12(d) as Aftermarket Conversions corrections to the existing regulations. determined by the original manufacturer With the exception of the small entity Because the regulatory provisions for for the subconfiguration that is identical and small business exemptions, EPA’s the EPA greenhouse gas program, to the fuel conversion emission data emission standards, including NHTSA’s CAFE program, and the joint vehicle (EDV). However, the greenhouse gas standards, will continue fuel economy and environment labeling subconfiguration data may not be to apply as stated in the applicability program are all intertwined in 40 CFR available to the fuel conversion sections of the relevant regulations. EPA Part 600, this proposed rule presents an manufacturer at the time they are expects that some aftermarket opportunity to make corrections and seeking EPA certification. Several conversion companies will qualify for clarifications to all or any of these compliance options are currently and seek the small entity and/or small programs. Consequently, a number of provided to fuel conversion business exemption, but those that do minor and non-substantive corrections manufacturers that are consistent with not qualify will be required to meet the are being proposed to the regulations the compliance options for the original applicable emission standards, that implement these programs. equipment manufacturers. EPA is including the greenhouse gas standards Amendments include the following: proposing to add another option that • to qualify for a tampering exemption In section 86.135–12, we have would be applicable starting with the under 40 CFR subpart F. Fleet average removed references to the model year 2012 model year. The new option would standards are not generally appropriate applicability of N2O measurement. This allow clean alternative fuel conversion for fuel conversion manufacturers applicability is covered elsewhere in the manufacturers to satisfy the greenhouse because the ‘‘fleet’’ of vehicles to which regulations, and we believe that—where gas standards if the sum of CH4 plus possible—testing regulations should be a conversion system may be applied has N2O plus CREE emissions from the already been accounted for under the limited to the specifics of testing and vehicle pre-conversion is less than the measurement. OEM’s fleet average standard. Therefore, • sum post-conversion, adjusting for the EPA is proposing to retain the process The definition of ‘‘Footprint’’ in global warming potential of the 86.1803–01 is revised to clarify promulgated in 40 CFR subpart F anti- constituents. tampering regulations whereby 366 Section 216 of the Clean Air Act defines the 10. Base Tire Definition conversion manufacturers demonstrate term commerce to mean ‘‘(A) commerce between compliance at the vehicle rather than any place in any State and any place outside One of the factors in a manufacturer’s the fleet level. Fuel converters will thereof; and (B) commerce wholly within the calculation of vehicle footprint is the continue to show compliance with District of Columbia.’’ base tire. Footprint is based on a Section 302(d) of the Clean Air Act reads ‘‘The greenhouse gas standards by submitting term ‘‘State’’ means a State, the District of vehicle’s wheel base and track width, data to demonstrate that the conversion Columbia, the Commonwealth of Puerto Rico, the and track width in turn is ‘‘the lateral Virgin Islands, Guam, and American Samoa and EDV N2O, CH4 and CREE results are less distance between the centerlines of the includes the Commonwealth of the Northern base tires at ground, including the than or equal to the OEM’s in-use Mariana Islands.’’ In addition, 40 CFR 85.1502 (14) 367 standard for that subconfiguration.. EPA regarding the importation of motor vehicles and camber angle.’’ EPA’s current is also proposing to continue to allow motor vehicle engines defines the United States to definition of base tire is the ‘‘tire conversion manufacturers, on a test include ‘‘the States, the District of Columbia, the specified as standard equipment by the Commonwealth of Puerto Rico, the Commonwealth group basis, to convert CO2 of the Northern Mariana Islands, Guam, American overcompliance into CO2 equivalents of Samoa, and the U.S. Virgin Islands.’’ 367 See 40 CFR 86.1803–01.

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manufacturer.’’ 368 EPA understands case for emissions controlled by the typically averaged with equal weighting. that some manufacturers may be catalyst because of the spike in There are also detailed provisions that applying this base tire definition in emissions associated with each start). explain how a manufacturer may different ways, which could lead to Similarly, a plug-in hybrid electric conduct surveys to support a statement differences across manufacturers in how vehicle is tested in charge-sustaining that a given mode is predominant. they are ultimately calculating (i.e., gasoline-only) operation. Current However, CISD–09–19 only addresses footprints. EPA invites public comment regulations require the reporting of CO2 transmissions, and states the following on whether the base tire definition emissions from certification tests regarding other technologies: should be clarified to ensure a more conducted under Part 86, but EPA uniform application across regulations also recognize that these ‘‘Please contact EPA in advance to request manufacturers. For example, NHTSA is values, from emission data vehicles that guidance for vehicles equipped with future proposing a specific change to the base represent a test group, are ultimately not technologies not covered by this document, tire definition for the CAFE program the values that are used to establish in- unusual default strategies or driver selectable features, e.g., hybrid electric vehicles where (see Section IV.I.5.g, and proposed 49 use CO2 standards (which are CFR 523.2). Because the calculation of established on much more detailed sub- the multimode button or switch disables or footprint is a fundamental aspect of both configuration-specific level) or the modifies any fuel saving features of the vehicle (such as the stop-start feature, air the greenhouse gas standards and the model type CO and fuel economy 2 conditioning compressor operation, electric- CAFE standards, EPA welcomes values used for fleet averaging under only operation, etc.).’’ comments on whether the existing base Part 600. tire definition should be clarified, and When EPA tests vehicles for fuel The unique operating characteristics specific changes to the definition that economy and CO2 emissions of these technologies essentially often would address this issue. performance, user-selectable modes are requires that EPA determine fuel treated somewhat differently, where the 11. Treatment of Driver-Selectable economy and CO2 testing and Modes and Conditions goals are different and where worst-case calculations on a case-by-case basis. operation may not be the appropriate Because the CAFE and CO programs EPA is requesting comments on 2 method. For example, EPA does not require a single value to represent a whether there is a need to clarify in the believe that the fuel economy and CO2 model type, EPA must make a decision regulations how EPA treats driver- emissions value for a PHEV should regarding how to account for multiple selectable modes (such as multi-mode ignore the use of grid electricity, or that modes of operation. When a transmissions and other user-selectable other dual fuel vehicles should ignore buttons or switches) that may impact the real-world use of alternative fuels manufacturer brings such a technology fuel economy and GHG emissions. New that reduce GHG emissions. The to us for consideration, we will evaluate technologies continue to arrive on the regulations address the use of utility the technology (including possibly requiring that the manufacturer give us market, with increasing complexity and factors to properly weight the CO2 an increasing array of ways a driver can performance on the conventional fuel a vehicle to test) and provide the make choices that affect the fuel and the alternative fuel. Similarly, non- manufacturer with instructions on how economy and greenhouse gas emissions. CO2 emission certification testing may to determine fuel economy and CO2 For example, some start-stop systems be done in a transmission mode that is emissions. In general we will evaluate may offer the driver the option of not likely to be the predominant mode these technologies in the same way and choosing whether or not the system is used by consumers. Testing under Part following the same principles we use to enabled. Similarly, vehicles with ride 600 must determine a single fuel evaluate transmissions under CISD–09– height adjustment or grill shutters may economy value for each model type for 19, making a determination as to allow drivers to override those features. the CAFE program and a single CO2 whether a given operating mode is Under the current regulations, EPA value for each model type for EPA’s predominant or not (using the criteria draws a distinction between vehicles program. With respect to transmissions, for predominance described in CISD– tested for purposes of CO2 emissions Part 600 refers to 86.128, which states 09–19). These instructions are provided performance and fuel economy and the following: to the manufacturer under the authority vehicles tested for non-CO emissions 2 All test conditions, except as noted, shall for special test procedures described in performance. When testing emission be run according to the manufacturer’s 40 CFR 600.111–08. EPA would apply data vehicles for certification under Part recommendations to the ultimate purchaser, the same approach to testing for 86 for non-CO2 emissions standards, a Provided, That: Such recommendations are compliance with the in-use CO2 vehicle that has multiple operating representative of what may reasonably be standard, so testing for the CO fleet modes must meet the applicable expected to be followed by the ultimate 2 emission standards in all modes, and on purchaser under in-use conditions. average and testing for compliance with all fuels. Sometimes testing may occur the in-use CO2 standard would be For multi-mode transmissions EPA consistent. EPA requests comment on in all modes, but more frequently the relies on guidance letter CISD–09–19 worst-case mode is selected for testing whether the current approach and (December 3, 2009) to guide the regulatory provisions are sufficient, or to represent the emission test group. For determination of what is ‘‘representative whether additional regulations or example, a vehicle that allows the user of what may reasonably be expected to guidance should be developed to to disengage the start-stop capability be followed by the ultimate purchaser must meet the standards with and under in-use conditions.’’ If EPA can describe EPA’s process. EPA recognizes without the start-stop system operating make a determination that one mode is that ultimately no regulation can (in some cases EPA has determined that the ‘‘predominant’’ mode (meaning anticipate all options, devices, and the operation of start-stop is the worst nearly total usage), then testing may be operator controls that may arrive in the done in that mode. However, if EPA future, and adequate flexibility to 368 See 40 CFR 86.1803–01, and 40 CFR 600.002. cannot be convinced that a single mode address future situations is an important Standard equipment means those features or equipment which are marketed on a vehicle over is predominant, then fuel economy and attribute for fuel economy and CO2 which the purchaser can exercise no choice. GHG results from each mode are emissions testing.

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F. How would this proposal reduce GHG shows emissions of CO2, methane (CH4), from cars and light-trucks to this U.S. emissions and their associated effects? nitrous oxide (N2O) and air conditioning share reaches an estimated 17 percent of refrigerant (HFC–134a) on a CO2- U.S. emissions by 2030 in the absence This action is an important step equivalent basis for calendar years 2010, of control. As discussed later in this towards curbing growth of GHG 2020, 2030, 2040 and 2050. As shown section, this steady rise in GHG emissions from cars and light trucks. In below, U.S. GHGs are estimated to make emissions is associated with numerous the absence of control, GHG emissions up roughly 15 percent of total adverse impacts on human health, food worldwide and in the U.S. are projected worldwide emissions in 2010. Further, and agriculture, air quality, and water to continue steady growth. Table III–54 the contribution of direct emissions and forestry resources.

standards continue indefinitely beyond standards. An additional 65 MMTCO2eq This rule will result in significant 2016. of reduced emissions are attributable to reductions as newer, cleaner vehicles EPA estimated greenhouse impacts reductions in gasoline production, from several sources including: (a) The come into the fleet. As discussed in distribution and transport. 15 impact of the standards on tailpipe CO Section I, this GHG rule is part of a joint 2 MMTCO2eq of additional emissions will emissions, (b) projected improvements be attributable to increased electricity National Program such that a large part in the efficiency of vehicle air production. In total, EPA estimates that of the projected benefits, but by no conditioning systems, 372 (c) reductions compared to a baseline of indefinite means all, would be achieved jointly in direct emissions of the refrigerant and 2016 model year standards, net GHG with NHTSA’s CAFE standards, which potent greenhouse gas HFC–134a from emission reductions from the program are described in detail in Section IV. air conditioning systems, (d) would be approximately 300 million EPA estimates the reductions ‘‘upstream’’ emission reductions from metric tons CO2-equivalent attributable to the GHG program over gasoline extraction, production and (MMTCO2eq) annually by 2030, which time assuming the model year 2025 distribution processes as a result of represents a reduction of 4% of total standards continue indefinitely post- reduced gasoline demand associated U.S. GHG emissions and 0.5% of total 2025, compared to a reference scenario with this rule, and (e) ‘‘upstream’’ worldwide GHG emissions projected in in which the 2016 model year GHG emission increases from power plants as that year. These GHG savings would electric powertrain vehicles increase in result in savings of approximately 26 369 ADAGE and GCAM model projections of prevalence as a result of this rule. EPA billion gallons of petroleum-based worldwide and U.S. GHG emissions are provided additionally accounted for the gasoline.373 for context only. The baseline data in these models differ in certain assumptions from the baseline used greenhouse gas impacts of additional EPA projects the total reduction of the in this proposal. For example, the ADAGE baseline vehicle miles travelled (VMT) due to the program over the full life of model year is calibrated to AEO 2010, which includes the EISA ‘‘rebound’’ effect discussed in Section 2017–2025 vehicles to be about 1,970 35 MPG by 2020 provision, but does not explicitly III.H. MMTCO2eq, with fuel savings of 170 include the MYs 2012–2016 rule. All emissions Using this approach EPA estimates data were rounded to two significant digits. billion gallons (3.9 billion barrels) of aGCAM model. the proposed standards would cut gasoline over the life of these vehicles. 370 Based on the Representative Concentration annual fleetwide car and light truck The impacts on atmospheric CO2 Pathway scenario in GCAM available at http:// tailpipe CO2 emissions by concentrations, global mean surface www.globalchange.umd.edu/gcamrcp. See section approximately 230 MMT or 18 percent temperature, sea level rise, and ocean III.F.3 and DRIA Chapter 6.4 for additional by 2030, when 85 percent of car and pH resulting from these emission information on GCAM. b ADAGE model. light truck miles will be travelled by reductions are discussed in Section 371 Based on the ADAGE reference case used in vehicles meeting the MY 2017 or later III.F.3. U.S. EPA (2010). ‘‘EPA Analysis of the American Power Act of 2010’’ U.S. Environmental Protection 372 While EPA anticipates that the majority of 373 All estimates of fuel savings presented here Agency, Washington, DC, USA (http:www.epagov/ mobile air conditioning systems will be improved assume that manufacturers use air conditioning climatechange/economics/economicanalyses.html). in response to the MY 2012–2016 rulemaking, the leakage credits as part of their compliance strategy. c OMEGA model, Tailpipe CO2 and HFC134a only agency expects that the remainder will be improved If these credits were not used, the fuel savings (includes impacts of MYs 2012–2016 rule). as a result of this action. would be larger.

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1. Impact on GHG Emissions emissions. Since these improvements policies on the electric power sector in are relatively low cost, EPA again the 48 contiguous states and the District The modeling of fuel savings and projects that manufacturers will take of Columbia. IPM is a multi-regional, greenhouse gas emissions is advantage of this flexibility, leading to dynamic, deterministic linear substantially similar to that which was reductions from emissions associated programming model of the U.S. electric conducted in the 2012–2016 Final with vehicle air conditioning systems. power sector. It provides forecasts of Rulemaking and the MY 2017–2025 As explained above, these reductions least-cost capacity expansion, electricity Interim Joint Technical Assessment will come from both direct emissions of dispatch, and emission control Report (TAR). As detailed in Draft RIA air conditioning refrigerant over the life strategies for meeting energy demand chapter 4, EPA estimated calendar year of the vehicle and tailpipe CO2 and environmental, transmission, tailpipe CO reductions based on pre- 2 emissions produced by the increased dispatch, and reliability constraints. and post-control CO gram per mile 2 load of the A/C system on the engine. EPA derived average national CO levels from EPA’s OMEGA model, 2 In particular, EPA estimates that direct emission factors from the IPM version coupled with VMT projections derived emissions of HFC–134a, one of the most 4.10 base case run for the ‘‘Proposed from AEO 2011 Final Release. These potent greenhouse gases, would be fully Transport Rule.’’ 374 As discussed in estimates reflect the real-world CO 2 removed from light-duty vehicles Draft TSD Chapter 4, for the Final emissions reductions projected for the through the phase-in of alternative Rulemaking, EPA may consider entire U.S. vehicle fleet in a specified refrigerants. More efficient air emission factors other than national calendar year. EPA also estimated full conditioning systems would also lead to power generation, such as marginal lifetime reductions for model years fuel savings and additional reductions power emission factors, or regional 2017–2025 using pre- and post-control in upstream emissions from fuel emission factors. CO2 levels projected by the OMEGA production and distribution. Our model, coupled with projected vehicle estimated reductions from the A/C a. Calendar Year Reductions for Future sales and lifetime mileage estimates. credit program assume that Years These estimates reflect the real-world manufacturers will fully utilize the Table III–55 shows reductions CO2 emissions reductions projected for program by MY 2021. model years 2017 through 2025 vehicles estimated from these GHG standards Upstream greenhouse gas emission assuming a pre-control case of 2016 MY over their entire life. Upstream impacts reductions associated with the from power plant emissions came from standards continuing indefinitely production and distribution of fuel were beyond 2016, and a post-control case in OMEGA estimates of EV/penetration estimated using emission factors from into the fleet (approximately 3%). For which 2025 MY GHG standards DOE’s GREET1.8 model, with continue indefinitely beyond 2025. both calendar year and model year modifications as detailed in Chapter 5 of assessments, EPA estimated the These reductions are broken down by the DRIA. These estimates include both upstream and downstream components, environmental impact of the advanced international and domestic emission technology multiplier, pickup truck including air conditioning reductions, since reductions in foreign improvements, and also account for the hybrid electric vehicle (HEV) and exports of finished gasoline and/or performance based incentives and air offset from a 10 percent VMT ‘‘rebound’’ crude would make up a significant share effect as discussed in Section III.H. conditioning credits. The impact of the of the fuel savings resulting from the off-cycle credits were not explicitly Including the reductions from upstream GHG standards. Thus, significant emissions, total reductions are estimated, as these credits are assumed portions of the upstream GHG emission to be inherently environmentally estimated to reach 297 MMTCO2eq reductions will occur outside of the annually by 2030, and grow to over 540 neutral (Section III.B). EPA also did not U.S.; a breakdown of projected assess the impact of the credit banking MMTCO2eq in 2050 as cleaner vehicles international versus domestic continue to come into the fleet. carry-forward programs. reductions is included in the DRIA. As in the MY 2012–2016 rulemaking, Electricity emission factors were 374 EPA. IPM. http://www.epa.gov/airmarkt/ this proposal allows manufacturers to derived from EPA’s Integrated Planning progsregs/epa-ipm/BaseCasev410.html. ‘‘Proposed earn credits for improvements to Model (IPM). EPA uses IPM to analyze Transport Rule/NODA version’’ of IPM. controls for both direct and indirect AC the projected impact of environmental TR_SB_Limited Trading v.4.10.

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The total program emission decreases relative to worldwide and reductions yield significant emission national total emissions.

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2025 model year cars and light trucks contributions, are presented in Table b. Lifetime Reductions for 2017–2025 that would be affected by this III–57, showing lifetime reductions of Model Years 375 program. These results, including about 2,065 MMTCO2eq. EPA also analyzed the emission both upstream and downstream GHG reductions over the full life of the 2017–

c. Impacts of VMT Rebound Effect VMT for affected model years is III–55 and Table III–56). The table below As noted above and discussed more modeled as increasing by 10 percent as compares the reductions under two fully in Section III.H., the effect of a much as the decrease in fuel cost per different scenarios; one in which the decrease in fuel cost per mile on vehicle mile; i.e., a 10 percent decrease in fuel VMT estimate is entirely insensitive to use (VMT ‘‘rebound’’) was accounted for cost per mile from our proposed the cost of travel, and one in which both in our assessment of economic and standards would result in a 1 percent control and reference scenario VMT are environmental impacts of this proposed increase in VMT. Results are shown in affected by the rebound effect. This rule. A 10 percent rebound case was Table III–58. This increase is accounted topic is further discussed in DRIA used for this analysis, meaning that for in the reductions presented in Table chapter 4.

375 As detailed in DRIA Chapter 4 and TSD Chapter 4, for this analysis the full life of the 2017] and 249,000 miles [MY 2025]). These int eh cost of driving s owners of conventional estimates are a function of how far vehicles are vehicle is represented by average lifetime mileages gasoline vehicles. We seek comment on this driven per year and scrappage rates. for cars (197,000 miles [MY 2017] and 211,000 approach in Section III.H.4c. 376 This assessment assumes that owners of grid- miles [MY 2025]) and trucks (235,000 miles [MY electric powered vehicles react similarly to changes

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d. Analysis of Alternatives identical penetrations as in the primary 2025. As in the primary scenario, EPA EPA analyzed four alternative scenario. EPA re-estimated the impact of assumed that the fleet complied with scenarios for this proposal (Table III– the electric vehicle multiplier under the standards. For full details on 59). EPA assumed that manufacturers each alternative. Under these modeling assumptions, please refer to would use air conditioning assumptions, EPA expects achieved DRIA Chapter 4. EPA’s assessment of improvements and the HEV and fleetwide average emission levels of 150 these alternative standards is discussed performance based pickup incentives in g/mile CO2 to 177 g/mile CO2eq (6%) in in Section III.D.6

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2. Climate Change Impacts From GHG (‘‘NRC’’) 378 as the primary scientific and sulfur hexafluoride) taken in Emissions and technical basis for the combination endanger both the public Endangerment and Cause or Contribute health and the public welfare of current The impact of GHG emissions on the Findings for Greenhouse Gases Under and future generations, and further climate has been reviewed in the 2012– Section 202(a) of the Clean Air Act (74 found that the combined emissions of 2016 light-duty rulemaking and recent FR 66496, December 15, 2009). These these greenhouse gases from new motor heavy-duty GHG rulemaking. See 75 FR assessments comprehensively address vehicles and engines contribute to the at 25491; 76 FR at 57294. This section the scientific issues the Administrator greenhouse gas air pollution that briefly discusses again some of the had to examine, providing her both data endangers public health and welfare. climate impact context for and information on a wide range of More recent assessments have transportation emissions. These issues pertinent to the Endangerment produced similar conclusions to those previous discussions noted that once Finding. These assessments have been of the assessments upon which the emitted, GHGs that are the subject of rigorously reviewed by the expert Administrator relied. In May 2010, the this regulation can remain in the community, and also by United States NRC published its comprehensive atmosphere for decades to millennia, government agencies and scientists, assessment, ‘‘Advancing the Science of meaning that 1) their concentrations including by EPA itself. Climate Change.’’ 379 It concluded that become well-mixed throughout the Based on these assessments, the ‘‘climate change is occurring, is caused global atmosphere regardless of Administrator determined, in essence, largely by human activities, and poses emission origin, and 2) their effects on that greenhouse gases cause warming; significant risks for—and in many cases climate are long lasting. GHG emissions that levels of greenhouse gases are is already affecting—a broad range of come mainly from the combustion of increasing in the atmosphere due to human and natural systems.’’ fossil fuels (coal, oil, and gas), with human activity; the climate is warming; Furthermore, the NRC stated that this additional contributions from the recent warming has been attributed to conclusion is based on findings that are clearing of forests, agricultural the increase in greenhouse gases; and ‘‘consistent with the conclusions of activities, cement production, and some that warming of the climate threatens recent assessments by the U.S. Global industrial activities. Transportation human health and welfare. The Change Research Program, the activities, in aggregate, were the second Administrator further found that Intergovernmental Panel on Climate largest contributor to total U.S. GHG emissions of well-mixed greenhouse Change’s Fourth Assessment Report, emissions in 2009 (27 percent of total gases from new motor vehicles and and other assessments of the state of emissions).377 engines contribute to the air pollution scientific knowledge on climate change.’’ These are the same The Administrator relied on thorough for which the endangerment finding was made. Specifically, the Administrator assessments that served as the primary and peer-reviewed assessments of scientific references underlying the climate change science prepared by the found under section 202(a) of the Act that six greenhouse gases (carbon Administrator’s Endangerment Finding. Intergovernmental Panel on Climate Another NRC assessment, ‘‘Climate Change (‘‘IPCC’’), the United States dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, Stabilization Targets: Emissions, Global Change Research Program Concentrations, and Impacts over (‘‘USGCRP’’), and the National Research Decades to Millennia,’’ was published Council of the National Academies 378 For a complete list of core references from IPCC, USGCRP/CCSP, NRC and others relied upon for development of the TSD for EPA’s 379 National Research Council (NRC) (2010). 377 U.S. EPA (2011) Inventory of U.S. Greenhouse Endangerment and Cause or Contribute Findings Advancing the Science of Climate Change. National Gas Emissions and Sinks: 1990–2009. EPA 430–R– see section 1(b), specifically, Table 1.1 of the TSD. Academy Press. Washington, DC. (Docket EPA–HQ– 11–005. (Docket EPA–HQ–OAR–2010–0799). (Docket EPA–HQ–OAR–2010–0799). OAR–2010–0799).

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in 2011. This report found that climate dramatic consequences for polar food per million by volume (ppmv), global change due to carbon dioxide emissions webs including salmon, the report said. mean temperature is estimated to be will persist for many centuries. The Importantly, these recent NRC reduced by 0.0076 to 0.0184 °C, and sea- report also estimates a number of assessments represent another level rise is projected to be reduced by specific climate change impacts, finding independent and critical inquiry of the approximately 0.074–0.166 cm, based that every degree Celsius (C) of warming state of climate change science, separate on a range of climate sensitivities. The could lead to increases in the heaviest and apart from the previous IPCC and analysis also demonstrates that ocean 15% of daily rainfalls of 3 to 10%, USGCRP assessments. pH will increase by 0.0018 pH units by decreases of 5 to 15% in yields for a 3. Changes in Global Climate Indicators 2100 relative to the reference case. number of crops (absent adaptation Associated With the Proposal’s GHG a. Estimated Reductions in Atmospheric measures that do not presently exist), Emissions Reductions CO Concentration, Global Mean decreases of Arctic sea ice extent of 25% 2 EPA examined 380 the reductions in Surface Temperatures, Sea Level Rise, in September and 15% annually and Ocean pH averaged, along with changes in CO2 and other GHGs associated with precipitation and streamflow of 5 to this rulemaking and analyzed the EPA estimated changes in the 10% in many regions and river basins projected effects on atmospheric CO2 atmospheric CO2 concentration, global (increases in some regions, decreases in concentrations, global mean surface mean temperature, and sea level rise out others). The assessment also found that temperature, sea level rise, and ocean to 2100 resulting from the emissions pH which are common variables used as reductions in this rulemaking using the for an increase of 4 degrees C nearly all 381 land areas would experience summers indicators of climate change. The Global Change Assessment Model warmer than all but 5% of summers in analysis projects that the proposed rule, (GCAM, formerly MiniCAM), integrated 382 the 20th century, that for an increase of if adopted, will reduce atmospheric assessment model coupled with the concentrations of CO , global climate 1 to 2 degrees C the area burnt by 2 Model for the Assessment of warming, ocean acidification, and sea wildfires in western North America will Greenhouse Gas Induced Climate level rise relative to the reference case. 383 likely more than double, that coral Change (MAGICC, version 5.3v2). Although the projected reductions and bleaching and erosion will increase due GCAM was used to create the globally improvements are small in comparison both to warming and ocean and temporally consistent set of climate to the total projected climate change, acidification, and that sea level will rise relevant variables required for running they are quantifiable, directionally 1.6 to 3.3 feet by 2100 in a 3 degree C MAGICC. MAGICC was then used to consistent, and will contribute to scenario. The assessment notes that estimate the projected change in these reducing the risks associated with many important aspects of climate variables over time. Given the climate change. Climate change is a change are difficult to quantify but that magnitude of the estimated emissions global phenomenon and EPA recognizes reductions associated with this action, a the risk of adverse impacts is likely to that this one national action alone will increase with increasing temperature, simple climate model such as MAGICC not prevent it: EPA notes this would be is reasonable for estimating the and that the risk of abrupt climate true for any given GHG mitigation changes can be expected to increase atmospheric and climate response. This action when taken alone or when widely used, peer reviewed modeling with the duration and magnitude of the considered in isolation. EPA also notes warming. tool was also used to project that a substantial portion of CO2 emitted temperature and sea level rise under In the 2010 report cited above, the into the atmosphere is not removed by different emissions scenarios in the NRC stated that some of the largest natural processes for millennia, and Third and Fourth Assessments of the potential risks associated with future therefore each unit of CO2 not emitted IPCC. climate change may come not from into the atmosphere due to this rule The integrated impact of the following relatively smooth changes that are avoids essentially permanent climate pollutant and greenhouse gas emissions reasonably well understood, but from change on centennial time scales. changes are considered: CO , CH , N O, extreme events, abrupt changes, and 2 4 2 EPA determines that the projected HFC–134a, NO , CO, SO , and volatile surprises that might occur when climate X 2 reductions in atmospheric CO2, global organic compounds (VOC). For these or environmental system thresholds are mean temperature and sea level rise are pollutants an annual time-series of crossed. Examples cited as warranting meaningful in the context of this (upstream + downstream) emissions more research include the release of proposed action. In addition, EPA has large quantities of GHGs stored in conducted an analysis to evaluate the 382 GCAM is a long-term, global integrated permafrost (frozen soils) across the projected changes in ocean pH in the assessment model of energy, economy, agriculture Arctic, rapid disintegration of the major context of the changes in emissions and land use, that considers the sources of ice sheets, irreversible drying and emissions of a suite of GHGs, emitted in 14 globally from this rulemaking. The results of the disaggregated regions, the fate of emissions to the desertification in the subtropics, analysis demonstrate that relative to the atmosphere, and the consequences of changing changes in ocean circulation, and the reference case, projected atmospheric concentrations of greenhouse related gases for climate change. GCAM begins with a representation rapid release of destabilized methane CO2 concentrations are estimated by hydrates in the oceans. of demographic and economic developments in 2100 to be reduced by 3.29 to 3.68 part each region and combines these with assumptions On ocean acidification, the same about technology development to describe an report noted the potential for broad, 380 Using the Model for the Assessment of internally consistent representation of energy, ‘‘catastrophic’’ impacts on marine Greenhouse Gas Induced Climate Change (MAGICC) agriculture, land-use, and economic developments ecosystems. Ocean acidity has increased 5.3v2, http://www.cgd.ucar.edu/cas/wigley/ that in turn shape global emissions. Brenkert A, S. magicc/), EPA estimated the effects of this Smith, S. Kim, and H. Pitcher, 2003: Model 25 percent since pre-industrial times, rulemaking’s greenhouse gas emissions reductions Documentation for the MiniCAM. PNNL–14337, and is projected to continue increasing. on global mean temperature and sea level. Please Pacific Northwest National Laboratory, Richland, By the time atmospheric CO2 content refer to Chapter 6.4 of the DRIA for additional Washington. (Docket EPA–HQ–OAR–2010–0799). doubles over its preindustrial value, information. 383 Wigley, T.M.L. 2008. MAGICC 5.3.v2 User 381 Due to timing constraints, this analysis was Manual. UCAR—Climate and Global Dynamics there would be virtually no place left in conducted with preliminary estimates of the Division, Boulder, Colorado. http:// the ocean that can sustain coral reef emissions reductions projected from this proposal, www.cgd.ucar.edu/cas/wigley/magicc/ (Docket growth. Ocean acidification could have which were similar to the final estimates. EPA–HQ–OAR–2010–0799).

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reductions estimated from the climate forcers such as aerosols and the uncertainty for equilibrium climate rulemaking were applied as net ozone can have effects that vary with sensitivity for how much global mean reductions to a global reference case (or location and timing of emissions. Black temperature would rise if the baseline) emissions scenario in GCAM carbon in particular is known to cause concentration of carbon dioxide in the to generate an emissions scenario a positive forcing or warming effect by atmosphere were to double. The specific to this proposed rule.384 The absorbing incoming solar radiation, but information for this range come from emissions reductions past 2050 for all there are uncertainties about the constraints from past climate change on gases were scaled with total U.S. road magnitude of that warming effect and various time scales, and the spread of transportation fuel consumption from the interaction of black carbon (and results for climate sensitivity from the GCAM reference scenario. Road other co-emitted aerosol species) with ensembles of models.386 Details about transport fuel consumption past 2050 clouds. While black carbon is likely to this modeling analysis can be found in does not change significantly and thus be an important contributor to climate the DRIA Chapter 6.4. emissions reductions remain relatively change, it would be premature to The results of this modeling, constant from 2050 through 2100. include quantification of black carbon summarized in Table III–62, show Specific details about the GCAM climate impacts in an analysis of these small, but quantifiable, reductions in reference case scenario can be found in proposed standards. See generally, EPA, atmospheric CO2 concentrations, Chapter 6.4 of the DRIA that Response to Comments to the projected global mean temperature and accompanies this proposal. Endangerment Finding Vol. 9 section sea level resulting from this action, MAGICC calculates the forcing 9.1.6.1 and the discussion of black across all climate sensitivities. As a response at the global scale from carbon in the endangerment finding at result of the emission reductions from changes in atmospheric concentrations 74 FR at 66520. Additionally, the the proposed standards, relative to the of CO2, CH4, N2O, HFCs, and magnitude of PM2.5 emissions changes reference case the atmospheric CO2 tropospheric ozone (O3). It also includes (and therefore, black carbon emission concentration is projected to be reduced the effects of temperature changes on changes) related to these proposed by 3.29–3.68 ppmv by 2100, the global stratospheric ozone and the effects of standards are small in comparison to the mean temperature is projected to be CH4 emissions on stratospheric water changes in the pollutants which have reduced by approximately 0.0076– vapor. Changes in CH4, NOX, VOC, and been included in the MAGICC model 0.0184 °C by 2100, and global mean sea CO emissions affect both O3 simulations. level rise is projected to be reduced by concentrations and CH concentrations. 4 Changes in atmospheric CO2 approximately 0.074–0.166 cm by 2100. MAGICC includes the relative climate concentration, global mean temperature, The range of reductions in global mean forcing effects of changes in sulfate and sea level rise for both the reference temperature and sea level rise is larger concentrations due to changing SO2 case and the emissions scenarios than that for CO concentrations emissions, including both the direct 2 associated with this action were because CO2 concentrations are only effect of sulfate particles and the computed using MAGICC. To calculate weakly coupled to climate sensitivity indirect effects related to cloud the reductions in the atmospheric CO2 through the dependence on temperature interactions. However, MAGICC does concentrations as well as in temperature of the rate of ocean absorption of CO2, not calculate the effect of changes in and sea level resulting from this whereas the magnitude of temperature concentrations of other aerosols such as proposal, the output from the policy change response to CO2 changes (and nitrates, black carbon, or organic carbon, scenario associated with EPA’s therefore sea level rise) is more tightly making the assumption that the sulfate proposed standards was subtracted from coupled to climate sensitivity in the cooling effect is a proxy for the sum of an existing Global Change Assessment MAGICC model. all the aerosol effects. Therefore, the Model (GCAM, formerly MiniCAM) climate effects of changes in PM 2.5 reference emission scenario. To capture 4.5 °C, ‘‘very unlikely’’ to be less than 1.5 °C, and emissions and precursors (besides SO2) some key uncertainties in the climate ‘‘values substantially higher than 4.5 °C cannot be which are presented in the DRIA excluded.’’ IPCC WGI, 2007, Climate Change system with the MAGICC model, 2007—The Physical Science Basis, Contribution of Chapter 6 were not included in the changes in atmospheric CO , global calculations in this chapter. MAGICC 2 Working Group I to the Fourth Assessment Report mean temperature and sea level rise of the IPCC, http://www.ipcc.ch/ (Docket EPA–HQ– also calculates all climate effects at the were projected across the most current OAR–2010–0799). global scale. This global scale captures IPCC range of climate sensitivities, from 386 Meehl, G.A. et al. (2007) Global Climate the climate effects of the long-lived, Projections. In: Climate Change 2007: The Physical 1.5 °C to 6.0 °C.385 This range reflects well-mixed greenhouse gases, but does Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the not address the fact that short-lived 385 In IPCC reports, equilibrium climate Intergovernmental Panel on Climate Change sensitivity refers to the equilibrium change in the [Solomon, S., D. Qin, M. Manning, Z. Chen, M. 384 Due to timing constraints, this analysis was annual mean global surface temperature following Marquis, K.B. Averyt, M. Tignor and H.L. Miller conducted with preliminary estimates of the a doubling of the atmospheric equivalent carbon (eds.)]. Cambridge University Press, Cambridge, emissions reductions projected from this proposal, dioxide concentration. The IPCC states that climate United Kingdom and New York, NY, USA. (Docket which were similar to the final estimates. sensitivity is ‘‘likely’’ to be in the range of 2 °C to EPA–HQ–OAR–2010–0799).

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The projected reductions are small atmospheric CO2 concentrations, among time scales. Reductions in emissions in relative to the change in temperature other specified input conditions. Based the near-term are important in (1.8–4.8 °C), sea level rise (23–55 cm), on the projected atmospheric CO2 determining long-term climate and ocean acidity (¥0.30 pH units) concentration reductions resulting from stabilization and associated impacts from 1990 to 2100 from the MAGICC this proposal, the program calculates an experienced not just over the next simulations for the GCAM reference increase in ocean pH of 0.0018 pH units decades but in the coming centuries and case. However, this is to be expected in 2100 relative to the reference case millennia.389 Though the magnitude of given the magnitude of emissions (compared to a decrease of 0.3 pH units the avoided climate change projected reductions expected from the program from 1990 to 2100 in the reference case). here is small in comparison to the total in the context of global emissions. This Thus, this analysis indicates the projected changes, these reductions uncertainty range does not include the projected decrease in atmospheric CO2 represent a reduction in the adverse effects of uncertainty in future concentrations from the program will risks associated with climate change emissions. It should also be noted that result in an increase in ocean pH. For (though these risks were not formally the calculations in MAGICC do not additional validation, results were estimated for this action) across a range include the possible effects of generated using different known of equilibrium climate sensitivities. accelerated ice flow in Greenland and/ constants from the literature. A EPA’s analysis of the program’s or Antarctica: the recent NRC report comprehensive discussion of the impact on global climate conditions is estimated a likely sea level increase for modeling analysis associated with ocean intended to quantify these potential a business-as-usual scenario of 0.5 to 1.0 pH is provided in the DRIA, Chapter 6. reductions using the best available meters.387 Further discussion of EPA’s As discussed in III.F.2, the 2011 NRC science. EPA’s modeling results show modeling analysis is found in the DRIA, assessment on ‘‘Climate Stabilization repeatable, consistent reductions Chapter 6. Targets: Emissions, Concentrations, and relative to the reference case in changes EPA used the computer program Impacts over Decades to Millennia’’ of CO2 concentration, temperature, sea- CO2SYS,388 version 1.05, to estimate determined how a number of climate level rise, and ocean pH over the next projected changes in ocean pH for impacts—such as heaviest daily century. tropical waters based on the rainfalls, crop yields, and Arctic sea ice G. How would the proposal impact non- atmospheric CO 2 concentration change extent—would change with a GHG emissions and their associated (reduction) resulting from this proposal. temperature change of 1 degree Celsius effects? The program performs calculations (C) of warming. These relationships of relating parameters of the CO2 system in impacts with temperature change could Although this rule focuses on GHGs, seawater. EPA used the program to be combined with the calculated it will also have an impact on non-GHG calculate ocean pH as a function of reductions in warming in Table III–56 to pollutants. Sections G.1 of this preamble estimate changes in these impacts details the criteria pollutant and air 387 National Research Council (NRC), 2011. associated with this rulemaking. toxic inventory changes of this proposed Climate Stabilization Targets: Emissions, rule. The following sections, G.2 and Concentrations, and Impacts over Decades to b. Program’s Effect on Climate G.3, discuss the health and Millennia. Washington, DC: National Academies environmental effects associated with Press. (Docket EPA–HQ–OAR–2010–0799). As a substantial portion of CO2 388 Lewis, E., and D. W. R. Wallace. 1998. emitted into the atmosphere is not 389 Program Developed for CO2 System Calculations. removed by natural processes for National Research Council (NRC) (2011). ORNL/CDIAC–105. Carbon Dioxide Information Climate Stabilization Targets: Emissions, Analysis Center, Oak Ridge National Laboratory, millennia, each unit of CO2 not emitted Concentrations, and Impacts over Decades to U.S. Department of Energy, Oak Ridge, Tennessee. into the atmosphere avoids essentially Millennia. National Academy Press. Washington, (Docket EPA–HQ–OAR–2010–0799). permanent climate change on centennial DC. (Docket EPA–HQ–OAR–2010–0799).

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the criteria and toxic air pollutants that rebound (discussed in Sections III.F and thus the projected emission increases are being impacted by this proposed III.H) and decreased consumption of due to VMT rebound and electricity rule. In Section G.4 we discuss the fuel; b) ‘‘upstream’’ emission reductions production are greater than the potential impact of this proposal on due to decreased extraction, production projected emission decreases due to concentrations of criteria and air toxic and distribution of motor vehicle reduced fuel production. For SOX, pollutants in the ambient air. The tools gasoline; c) ‘‘upstream’’ emission downstream emissions are roughly and methodologies used in this analysis increases from power plants as electric proportional to fuel consumption, are substantially similar to those used in powertrain vehicles increase in therefore a decrease is seen in both the MYs 2012–2016 light duty prevalence as a result of this rule. downstream and fuel refining sources. rulemaking. Program impacts on criteria and toxics For all criteria pollutants the overall emissions are discussed below, followed 1. Inventory impact of the proposed program would by individual discussions of the be small compared to total U.S. a. Impacts methodology used to calculate each of these three sources of impacts. inventories across all sectors. In 2030, In addition to reducing the emissions EPA estimates that the program would of greenhouse gases, this rule would As shown in Table III–63, EPA reduce total NOX, PM and SOX influence ‘‘non-GHG’’ pollutants, i.e., estimates that the proposed light duty vehicle program would result in inventories by 0.1 to 0.8 percent and ‘‘criteria’’ air pollutants and their reduce the VOC inventory by 1.1 reductions of NOX, VOC, PM2.5 and precursors, and air toxics. The proposal percent, while increasing the total would affect emissions of carbon SOX, but would increase CO 390 national CO inventory by 0.5 percent. monoxide (CO), fine particulate matter emissions. For NOX, VOC, and PM2.5, we estimate net reductions because the (PM2.5), sulfur dioxide (SOX), volatile As shown in Table III–64, EPA organic compounds (VOC), nitrogen net emissions reductions from reduced estimates that the proposed program fuel refining, distribution and transport oxides (NOX), benzene, 1,3-butadiene, would result in similarly small changes formaldehyde, acetaldehyde, and is larger than the emission increases due for air toxic emissions compared to total acrolein. Our estimates of these non- to increased VMT and increased U.S. inventories across all sectors. In GHG emission impacts from the GHG electricity production. In the case of CO, 2030, EPA estimates the proposed program are shown by pollutant in we estimate slight emission increases, program would increase total 1,3 Table III.G–1 and Table III.G–2 both in because there are relatively small butadiene and acetaldehyde emissions total and broken down by the three reductions in upstream emissions, and by 0.1 to 0.4 percent. Total acrolein, drivers of these changes: a) benzene and formaldehyde emissions 390 While estimates for CY 2020 and 2030 are would decrease by similarly small ‘‘downstream’’ emission changes, shown here, estimates through 2050 are shown in reflecting the estimated effects of VMT RIA Ch. 4. amounts.

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b. Methodology rebound effect were then calculated Tier 3 emission standards, because these using the OMEGA model post- standards have not yet been proposed As in the MYs 2012–2016 rulemaking, for the downstream analysis, the current processor. A more complete discussion (see Section III.A). We intend for the version of the EPA motor vehicle of the inputs, methodology, and results analysis assessing the impacts of both emission simulator (MOVES2010a) was is contained in RIA Chapter 4. the final Tier 3 emission standards and the final 2017–2025 LD GHG to be used to estimate base VOC, CO, NOX, This proposal assumes that MY 2017 PM and air toxics emission rates. and later vehicles are compliant with included in the final Tier 3 rule. For the Additional emissions from light duty the agency’s Tier 2 emission standards. proposals, we are taking care to cars and trucks attributable to the This proposal does not model any future coordinate the modeling of each rule to

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properly assess the air quality impact of resulting from the GHG standards; and strategies for meeting energy demand each action independently without increased hot soak evaporative and environmental, transmission, double counting. emissions due to the likely increase in dispatch, and reliability constraints. As in the MYs 2012–2016 GHG number of trips associated with VMT EPA derived average national CO2 rulemaking, for this analysis we rebound modeled in this proposal. In emission factors from the IPM version attribute decreased fuel consumption all, these additional analyses would 4.10 run for the ‘‘Proposed Transport from this program to petroleum-based likely result in small changes relative to Rule.’’ 394 As discussed in Draft TSD fuels only, while assuming no effect on the national inventory. Chapter 4, for the Final Rulemaking, volumes of ethanol and other renewable To determine the upstream fuel EPA may consider emission factors fuels because they are mandated under production impacts, EPA estimated the other than national power generation, the Renewable Fuel Standard (RFS2). impact of reduced petroleum volumes such as marginal power emission For the purposes of this emission on the extraction and transportation of factors, or regional emission factors. analysis, we assume that all gasoline in crude oil as well as the production and the timeframe of the analysis is blended distribution of finished gasoline. For the 2. Health Effects of Non-GHG Pollutants with 10 percent ethanol (E10). However, purpose of assessing domestic-only In this section we discuss health as a consequence of the fixed volume of emission reductions it was necessary to effects associated with exposure to some renewable fuels mandated in the RFS2 estimate the fraction of fuel savings of the criteria and air toxic pollutants rulemaking and the decreasing attributable to domestic finished impacted by the proposed vehicle petroleum consumption predicted here, gasoline, and of this gasoline what standards. we anticipate that this proposal would fraction is produced from domestic a. Particulate Matter in fact increase the fraction of the U.S. crude. For this analysis EPA estimated fuel supply that is made up by that 50 percent of fuel savings is i. Background renewable fuels. Although we are not attributable to domestic finished Particulate matter is a generic term for modeling this effect in our analysis of gasoline and that 90 percent of this a broad class of chemically and this proposal, the Tier 3 rulemaking will gasoline originated from imported physically diverse substances. It can be make more refined assumptions about crude. Emission factors for most principally characterized as discrete future fuel properties, including (in a upstream emission sources are based on particles that exist in the condensed final Tier 3 rule) accounting for the the GREET1.8 model, developed by (liquid or solid) phase spanning several impacts of the LD GHG rule. In this DOE’s Argonne National Laboratory,392 orders of magnitude in size. Since 1987, rulemaking EPA modeled the three but in some cases the GREET values EPA has delineated that subset of impacts on criteria pollutant emissions were modified or updated by EPA to be inhalable particles small enough to (rebound driving, changes in fuel consistent with the National Emission penetrate to the thoracic region production, and changes in electricity Inventory (NEI).393 The primary updates (including the tracheobronchial and production) discussed above. for this analysis were to incorporate alveolar regions) of the respiratory tract While electric vehicles have zero newer information on gasoline (referred to as thoracic particles).395 tailpipe emissions, EPA assumes that distribution emissions for VOC from the Current National Ambient Air Quality manufacturers will plan for these NEI, which were significantly higher Standards (NAAQS) use PM2.5 as the vehicles in their regulatory compliance than GREET estimates; and the indicator for fine particles (with PM2.5 strategy for non-GHG emissions incorporation of upstream emission generally referring to particles with a standards, and will not over-comply factors for the air toxics estimated in nominal mean aerodynamic diameter with those standards. Since the Tier 2 this analysis: benzene, 1,3-butadiene, less than or equal to 2.5 micrometers emissions standards are fleet-average acetaldehyde, acrolein, and (mm), and use PM10 as the indicator for standards, we assume that if a formaldehyde. The development of purposes of regulating the coarse manufacturer introduces EVs into its these emission factors is detailed in a fraction of PM10 (referred to as thoracic fleet, that it would correspondingly memo to the docket. These emission coarse particles or coarse-fraction compensate through changes to vehicles factors were incorporated into the particles; generally including particles elsewhere in its fleet, rather than meet OMEGA post-processor. with a nominal mean aerodynamic an overall lower fleet-average emissions As with the GHG emission analysis diameter greater than 2.5 mm and less 391 level. Consequently, EPA assumes discussed in section III.F, electricity than or equal to 10 mm, or PM10–2.5). neither tailpipe pollutant benefit (other emission factors were derived from Ultrafine particles are a subset of fine than CO2) nor an evaporative emission EPA’s Integrated Planning Model (IPM). particles, generally less than 100 benefit from the introduction of electric EPA uses IPM to analyze the projected nanometers (0.1 mm) in diameter. vehicles into the fleet. Other factors impact of environmental policies on the Fine particles are produced primarily which may impact downstream non- electric power sector in the 48 by combustion processes and by GHG emissions, but are not estimated in contiguous states and the District of transformations of gaseous emissions this analysis, include: The potential for Columbia. IPM is a multi-regional, (e.g., sulfur oxides (SOX), nitrogen decreased criteria pollutant emissions dynamic, deterministic linear oxides (NOX), and volatile organic due to increased air conditioner programming model of the U.S. electric compounds (VOC)) in the atmosphere. efficiency; reduced refueling emissions power sector. It provides forecasts of The chemical and physical properties of due to less frequent refueling events and least-cost capacity expansion, electricity PM2.5 may vary greatly with time, reduced annual refueling volumes dispatch, and emission control region, meteorology, and source

391 Historically, manufacturers have reduced 392 Greenhouse Gas, Regulated Emissions, and 394 EPA. IPM. http://www.epa.gov/airmarkt/ precious metal loading in catalysts in order to Energy Use in Transportation model (GREET), U.S. progsregs/epa-ipm/BaseCasev410.html. ‘‘Proposed reduce costs. See http:// Department of Energy, Argonne National Transport Rule/NODA version’’ of IPM. www.platinum.matthey.com/media-room/our-view- Laboratory, http://www.transportation.anl.gov/ TR_SB_Limited Trading v.4.10. on-.-.-./thrifting-of-precious-metals-in- modeling_simulation/GREET/. 395 Regulatory definitions of PM size fractions, autocatalysts/ Accessed 11/08/2011. Alternatively, 393 U.S. EPA. 2002 National Emissions Inventory and information on reference and equivalent manufacturers could also modify vehicle (NEI) Data and Documentation, http://www.epa.gov/ methods for measuring PM in ambient air, are calibration. ttn/chief/net/2002inventory.html. provided in 40 CFR parts 50, 53, and 58.

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category. Thus, PM2.5 may include a mutagenicity, and genotoxicity and assessed in EPA’s 2006 Air Quality 399 complex mixture of different long-term exposure to PM2.5. Criteria Document and 2007 Staff components including sulfates, nitrates, For PM10–2.5, the ISA concludes that Paper.402 403 People who are more organic compounds, elemental carbon the current evidence is suggestive of a susceptible to effects associated with and metal compounds. These particles causal relationship between short-term exposure to ozone can include children, can remain in the atmosphere for days exposures and cardiovascular effects. the elderly, and individuals with to weeks and travel hundreds to There is also suggestive evidence of a respiratory disease such as asthma. thousands of kilometers. causal relationship between short-term Those with greater exposures to ozone, PM10–2.5 exposure and mortality and for instance due to time spent outdoors ii. Health Effects of Particulate Matter respiratory effects. Data are inadequate (e.g., children and outdoor workers), are Scientific studies show ambient PM is to draw conclusions regarding the of particular concern. Ozone can irritate associated with a series of adverse health effects associated with long-term the respiratory system, causing 400 health effects. These health effects are exposure to PM10–2.5. coughing, throat irritation, and For ultrafine particles, the ISA discussed in detail in EPA’s Integrated breathing discomfort. Ozone can reduce concludes that there is suggestive Science Assessment (ISA) for Particulate lung function and cause pulmonary evidence of a causal relationship Matter.396 Further discussion of health inflammation in healthy individuals. between short-term exposures and effects associated with PM can also be Ozone can also aggravate asthma, cardiovascular effects, such as changes found in the draft RIA. The ISA leading to more asthma attacks that in heart rhythm and blood vessel summarizes health effects evidence require medical attention and/or the use function. It also concludes that there is associated with both short-term and of additional medication. Thus, ambient suggestive evidence of association long-term exposures to PM ozone may cause both healthy and 2.5, PM10–2.5, between short-term exposure to and ultrafine particles. asthmatic individuals to limit their ultrafine particles and respiratory outdoor activities. In addition, there is The ISA concludes that health effects effects. Data are inadequate to draw suggestive evidence of a contribution of associated with short-term exposures conclusions regarding the health effects ozone to cardiovascular-related (hours to days) to ambient PM2.5 include associated with long-term exposure to morbidity and highly suggestive mortality, cardiovascular effects, such as ultrafine particles.401 evidence that short-term ozone exposure altered vasomotor function and hospital b. Ozone directly or indirectly contributes to non- admissions and emergency department accidental and cardiopulmonary-related visits for ischemic heart disease and i. Background mortality, but additional research is congestive heart failure, and respiratory Ground-level ozone pollution is needed to clarify the underlying effects, such as exacerbation of asthma typically formed by the reaction of VOC mechanisms causing these effects. In a symptoms in children and hospital and NOX in the lower atmosphere in the report on the estimation of ozone- admissions and emergency department presence of sunlight. These pollutants, related premature mortality published visits for chronic obstructive pulmonary often referred to as ozone precursors, are by NRC, a panel of experts and 397 disease and respiratory infections. emitted by many types of pollution reviewers concluded that short-term The ISA notes that long-term exposure sources, such as highway and nonroad exposure to ambient ozone is likely to (months to years) to PM2.5 is associated motor vehicles and engines, power contribute to premature deaths and that with the development/progression of plants, chemical plants, refineries, ozone-related mortality should be cardiovascular disease, premature makers of consumer and commercial included in estimates of the health mortality, and respiratory effects, products, industrial facilities, and benefits of reducing ozone exposure.404 including reduced lung function smaller area sources. Animal toxicological evidence indicates growth, increased respiratory The science of ozone formation, that with repeated exposure, ozone can 398 symptoms, and asthma development. transport, and accumulation is complex. inflame and damage the lining of the The ISA concludes that the currently Ground-level ozone is produced and lungs, which may lead to permanent available scientific evidence from destroyed in a cyclical set of chemical changes in lung tissue and irreversible epidemiologic, controlled human reactions, many of which are sensitive reductions in lung function. The exposure, and toxicological studies to temperature and sunlight. When respiratory effects observed in supports a causal association between ambient temperatures and sunlight controlled human exposure studies and short- and long-term exposures to PM2.5 levels remain high for several days and animal studies are coherent with the and cardiovascular effects and the air is relatively stagnant, ozone and evidence from epidemiologic studies mortality. Furthermore, the ISA its precursors can build up and result in supporting a causal relationship concludes that the collective evidence more ozone than typically occurs on a between acute ambient ozone exposures supports likely causal associations single high-temperature day. Ozone can and increased respiratory-related between short- and long-term PM2.5 be transported hundreds of miles emergency room visits and exposures and respiratory effects. The downwind from precursor emissions, ISA also concludes that the scientific resulting in elevated ozone levels even 402 U.S. EPA. (2006). Air Quality Criteria for evidence is suggestive of a causal in areas with low local VOC or NOX Ozone and Related Photochemical Oxidants (Final). association for reproductive and emissions. EPA/600/R–05/004aF–cF. Washington, DC: U.S. developmental effects and cancer, EPA. Docket EPA–HQ–OAR–2010–0799. ii. Health Effects of Ozone 403 U.S. EPA. (2007). Review of the National The health and welfare effects of Ambient Air Quality Standards for Ozone: Policy 396 U.S. EPA (2009) Integrated Science Assessment of Scientific and Technical Assessment for Particulate Matter (Final Report). ozone are well documented and are Information, OAQPS Staff Paper. EPA–452/R–07– U.S. Environmental Protection Agency, 003. Washington, DC, U.S. EPA. Docket EPA–HQ– Washington, DC, EPA/600/R–08/139F, Docket EPA– 399 See U.S. EPA 2009 Final PM ISA, Note 396, OAR–2010–0799. HQ–OAR–2010–0799. at Section 2.3.2. 404 National Research Council (NRC), 2008. 397 See U.S. EPA, 2009 Final PM ISA, Note 396, 400 See U.S. EPA 2009 Final PM ISA, Note 396, Estimating Mortality Risk Reduction and Economic at Section 2.3.1.1. at Section 2.3.4, Table 2–6. Benefits from Controlling Ozone Air Pollution. The 398 See U.S. EPA 2009 Final PM ISA, Note 396, 401 See U.S. EPA 2009 Final PM ISA, Note 396, National Academies Press: Washington, DC Docket at page 2–12, Sections 7.3.1.1 and 7.3.2.1. at Section 2.3.5, Table 2–6. EPA–HQ–OAR–2010–0799.

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hospitalizations in the warm season. In increases in non-specific airway ambient concentrations of CO are addition, there is suggestive evidence of hyperresponsiveness were reported associated with a number of adverse a contribution of ozone to following 1-hour exposures of health effects.408 This section provides cardiovascular-related morbidity and asthmatics to 0.1 ppm NO2. Enhanced a summary of the health effects non-accidental and cardiopulmonary airway responsiveness could have associated with exposure to ambient mortality. important clinical implications for concentrations of CO.409 Human clinical studies of subjects c. Nitrogen Oxides and Sulfur Oxides asthmatics since transient increases in airway responsiveness following NO2 with coronary artery disease show a i. Background exposure have the potential to increase decrease in the time to onset of exercise- induced angina (chest pain) and Nitrogen dioxide (NO2) is a member of symptoms and worsen asthma control. electrocardiogram changes following CO the NOX family of gases. Most NO2 is Together, the epidemiologic and formed in the air through the oxidation experimental data sets form a plausible, exposure. In addition, epidemiologic of nitric oxide (NO) emitted when fuel consistent, and coherent description of studies show associations between is burned at a high temperature. Sulfur a relationship between NO2 exposures short-term CO exposure and cardiovascular morbidity, particularly Dioxide (SO2) a member of the sulfur and an array of adverse health effects increased emergency room visits and oxide (SOX) family of gases, is formed that range from the onset of respiratory from burning fuels containing sulfur symptoms to hospital admission. hospital admissions for coronary heart (e.g., coal or oil derived), extracting Although the weight of evidence disease (including ischemic heart gasoline from oil, or extracting metals supporting a causal relationship is disease, myocardial infarction, and from ore. somewhat less certain than that angina). Some epidemiologic evidence SO2 and NO2 can dissolve in water associated with respiratory morbidity, is also available for increased hospital droplets and further oxidize to form NO2 has also been linked to other health admissions and emergency room visits sulfuric and nitric acid which react with endpoints. These include all-cause for congestive heart failure and ammonia to form sulfates and nitrates, (nonaccidental) mortality, hospital cardiovascular disease as a whole. The both of which are important admissions or emergency department ISA concludes that a causal relationship components of ambient PM. The health visits for cardiovascular disease, and is likely to exist between short-term effects of ambient PM are discussed in decrements in lung function growth exposures to CO and cardiovascular Section III.G.3.a.ii of this preamble. NOX associated with chronic exposure. morbidity. It also concludes that and NMHC are the two major precursors available data are inadequate to iii. Health Effects of SO2 of ozone. The health effects of ozone are conclude that a causal relationship covered in Section III.G.3.b.ii. Information on the health effects of exists between long-term exposures to SO2 can be found in the EPA Integrated CO and cardiovascular morbidity. ii. Health Effects of NO2 Science Assessment for Sulfur Animal studies show various 406 Information on the health effects of Oxides. SO2 has long been known to neurological effects with in-utero CO NO2 can be found in the EPA Integrated cause adverse respiratory health effects, exposure. Controlled human exposure Science Assessment (ISA) for Nitrogen particularly among individuals with studies report inconsistent neural and Oxides.405 The EPA has concluded that asthma. Other potentially sensitive behavioral effects following low-level the findings of epidemiologic, groups include children and the elderly. CO exposures. The ISA concludes the controlled human exposure, and animal During periods of elevated ventilation, evidence is suggestive of a causal toxicological studies provide evidence asthmatics may experience symptomatic relationship with both short- and long- that is sufficient to infer a likely causal bronchoconstriction within minutes of term exposure to CO and central relationship between respiratory effects exposure. Following an extensive nervous system effects. and short-term NO2 exposure. The ISA evaluation of health evidence from A number of epidemiologic and concludes that the strongest evidence epidemiologic and laboratory studies, animal toxicological studies cited in the for such a relationship comes from the EPA has concluded that there is a ISA have evaluated associations epidemiologic studies of respiratory causal relationship between respiratory between CO exposure and birth effects including symptoms, emergency health effects and short-term exposure outcomes such as preterm birth or department visits, and hospital to SO2. Separately, based on an cardiac birth defects. The epidemiologic admissions. The ISA also draws two evaluation of the epidemiologic studies provide limited evidence of a broad conclusions regarding airway evidence of associations between short- CO-induced effect on preterm births and responsiveness following NO2 exposure. term exposure to SO2 and mortality, the birth defects, with weak evidence for a First, the ISA concludes that NO2 EPA has concluded that the overall decrease in birth weight. Animal exposure may enhance the sensitivity to evidence is suggestive of a causal allergen-induced decrements in lung relationship between short-term Washington, DC, EPA/600/R–09/019F, 2010. exposure to SO and mortality. Available at http://cfpub.epa.gov/ncea/cfm/ function and increase the allergen- 2 recordisplay.cfm?deid=218686. Docket EPA–HQ– induced airway inflammatory response d. Carbon Monoxide OAR–2010–0799. following 30-minute exposures of 408 The ISA evaluates the health evidence asthmatics to NO2 concentrations as low Information on the health effects of associated with different health effects, assigning as 0.26 ppm. Second, exposure to NO CO can be found in the EPA Integrated one of five ‘‘weight of evidence’’ determinations: 2 causal relationship, likely to be a causal has been found to enhance the inherent Science Assessment (ISA) for Carbon 407 relationship, suggestive of a causal relationship, responsiveness of the airway to Monoxide. The ISA concludes that inadequate to infer a causal relationship, and not subsequent nonspecific challenges in likely to be a causal relationship. For definitions of controlled human exposure studies of 406 U.S. EPA. (2008). Integrated Science these levels of evidence, please refer to Section 1.6 Assessment (ISA) for Sulfur Oxides—Health of the ISA. asthmatic subjects. Small but significant Criteria (Final Report). EPA/600/R–08/047F. 409 Personal exposure includes contributions from Washington, DC: U.S. Environmental Protection many sources, and in many different environments. 405 U.S. EPA (2008). Integrated Science Agency. Docket EPA–HQ–OAR–2010–0799. Total personal exposure to CO includes both Assessment for Oxides of Nitrogen—Health Criteria 407 U.S. EPA, 2010. Integrated Science ambient and nonambient components; and both (Final Report). EPA/600/R–08/071. Washington, Assessment for Carbon Monoxide (Final Report). components may contribute to adverse health DC: U.S. EPA. Docket EPA–HQ–OAR–2010–0799. U.S. Environmental Protection Agency, effects.

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toxicological studies have found known collectively as ‘‘air toxics.’’ 410 The most sensitive noncancer effect associations between perinatal CO These compounds include, but are not observed in humans, based on current exposure and decrements in birth limited to, benzene, 1,3-butadiene, data, is the depression of the absolute weight, as well as other developmental formaldehyde, acetaldehyde, acrolein, lymphocyte count in blood.419 420 In outcomes. The ISA concludes these polycyclic organic matter, and addition, published work, including studies are suggestive of a causal naphthalene. These compounds were studies sponsored by the Health Effects relationship between long-term identified as national or regional risk Institute (HEI), provides evidence that exposures to CO and developmental drivers or contributors in the 2005 biochemical responses are occurring at effects and birth outcomes. National-Scale Air Toxics Assessment lower levels of benzene exposure than and have significant inventory previously known.421 422 423 424 EPA’s Epidemiologic studies provide contributions from mobile sources.411 IRIS program has not yet evaluated evidence of effects on respiratory these new data. morbidity such as changes in i. Benzene pulmonary function, respiratory The EPA’s Integrated Risk Information ii. 1,3-Butadiene symptoms, and hospital admissions System (IRIS) database lists benzene as EPA has characterized 1,3-butadiene associated with ambient CO a known human carcinogen (causing as carcinogenic to humans by concentrations. A limited number of leukemia) by all routes of exposure, and inhalation.425 426 The IARC has epidemiologic studies considered concludes that exposure is associated determined that 1,3-butadiene is a copollutants such as ozone, SO2, and with additional health effects, including human carcinogen and the U.S. DHHS PM in two-pollutant models and found genetic changes in both humans and has characterized 1,3-butadiene as a that CO risk estimates were generally animals and increased proliferation of known human carcinogen.427 428 There robust, although this limited evidence bone marrow cells in mice.412 413 414 EPA makes it difficult to disentangle effects states in its IRIS database that data Perspect. 82: 193–197. Docket EPA–HQ–OAR– attributed to CO itself from those of the indicate a causal relationship between 2010–0799. larger complex air pollution mixture. benzene exposure and acute 418 Goldstein, B.D. (1988). Benzene toxicity. Controlled human exposure studies Occupational medicine. State of the Art Reviews. 3: lymphocytic leukemia and suggest a 541–554. Docket EPA–HQ–OAR–2010–0799. have not extensively evaluated the effect relationship between benzene exposure 419 Rothman, N., G.L. Li, M. Dosemeci, W.E. of CO on respiratory morbidity. Animal and chronic non-lymphocytic leukemia Bechtold, G.E. Marti, Y.Z. Wang, M. Linet, L.Q. Xi, studies at levels of 50–100 ppm CO and chronic lymphocytic leukemia. The W. Lu, M.T. Smith, N. Titenko-Holland, L.P. Zhang, show preliminary evidence of altered W. Blot, S.N. Yin, and R.B. Hayes (1996) International Agency for Research on Hematotoxicity among Chinese workers heavily pulmonary vascular remodeling and Carcinogens (IARC) has determined that exposed to benzene. Am. J. Ind. Med. 29: 236–246. oxidative injury. The ISA concludes that benzene is a human carcinogen and the Docket EPA–HQ–OAR–2010–0799. the evidence is suggestive of a causal U.S. Department of Health and Human 420 U.S. EPA (2002) Toxicological Review of relationship between short-term CO Benzene (Noncancer Effects). Environmental Services (DHHS) has characterized Protection Agency, Integrated Risk Information exposure and respiratory morbidity, and benzene as a known human System, Research and Development, National inadequate to conclude that a causal carcinogen.415 416 Center for Environmental Assessment, Washington relationship exists between long-term A number of adverse noncancer DC. This material is available electronically at http://www.epa.gov/iris/subst/0276.htm. Docket exposure and respiratory morbidity. health effects including blood disorders, EPA–HQ–OAR–2010–0799. Finally, the ISA concludes that the such as preleukemia and aplastic 421 Qu, O.; Shore, R.; Li, G.; Jin, X.; Chen, C.L.; epidemiologic evidence is suggestive of anemia, have also been associated with Cohen, B.; Melikian, A.; Eastmond, D.; Rappaport, long-term exposure to benzene.417 418 S.; Li, H.; Rupa, D.; Suramaya, R.; Songnian, W.; a causal relationship between short-term Huifant, Y.; Meng, M.; Winnik, M.; Kwok, E.; Li, Y.; exposures to CO and mortality. Mu, R.; Xu, B.; Zhang, X.; Li, K. (2003) HEI Report 410 Epidemiologic studies provide evidence U.S. EPA. (2011) Summary of Results for the 115, Validation & Evaluation of Biomarkers in 2005 National-Scale Assessment. http:// Workers Exposed to Benzene in China. Docket of an association between short-term www.epa.gov/ttn/atw/nata2005/05pdf/ EPA–HQ–OAR–2010–0799. _ exposure to CO and mortality, but sum results.pdf. Docket EPA–HQ–OAR–2010– 422 Qu, Q., R. Shore, G. Li, X. Jin, L.C. Chen, B. limited evidence is available to evaluate 0799. Cohen, et al. (2002) Hematological changes among 411 cause-specific mortality outcomes U.S. EPA (2011) 2005 National-Scale Air Chinese workers with a broad range of benzene Toxics Assessment. http://www.epa.gov/ttn/atw/ exposures. Am. J. Industr. Med. 42: 275–285. associated with CO exposure. In nata2005. Docket EPA–HQ–OAR–2010–0799. Docket EPA–HQ–OAR–2010–0799. addition, the attenuation of CO risk 412 U.S. EPA. 2000. Integrated Risk Information 423 Lan, Qing, Zhang, L., Li, G., Vermeulen, R., et estimates which was often observed in System File for Benzene. This material is available al. (2004) Hematotoxically in Workers Exposed to copollutant models contributes to the electronically at http://www.epa.gov/iris/subst/ Low Levels of Benzene. Science 306: 1774–1776. 0276.htm. Docket EPA–HQ–OAR–2010–0799. Docket EPA–HQ–OAR–2010–0799. uncertainty as to whether CO is acting 413 International Agency for Research on Cancer. 424 Turtletaub, K.W. and Mani, C. (2003) Benzene alone or as an indicator for other 1982. Monographs on the evaluation of metabolism in rodents at doses relevant to human combustion-related pollutants. The ISA carcinogenic risk of chemicals to humans, Volume exposure from Urban Air. Research Reports Health also concludes that there is not likely to 29. Some industrial chemicals and dyestuffs, World Effect Inst. Report No. 113. Docket EPA–HQ–OAR– Health Organization, Lyon, France, p. 345–389. be a causal relationship between 2010–0799. Docket EPA–HQ–OAR–2010–0799. 425 U.S. EPA (2002) Health Assessment of 1,3- relevant long-term exposures to CO and 414 Irons, R.D.; Stillman, W.S.; Colagiovanni, D.B.; Butadiene. Office of Research and Development, mortality. Henry, V.A. 1992. Synergistic action of the benzene National Center for Environmental Assessment, metabolite hydroquinone on myelopoietic Washington Office, Washington, DC. Report No. e. Air Toxics stimulating activity of granulocyte/macrophage EPA600–P–98–001F. This document is available colony-stimulating factor in vitro, Proc. Natl. Acad. electronically at http://www.epa.gov/iris/supdocs/ Light-duty vehicle emissions Sci. 89:3691–3695. Docket EPA–HQ–OAR–2010– buta-sup.pdf. Docket EPA–HQ–OAR–2010–0799. contribute to ambient levels of air toxics 0799. 426 U.S. EPA (2002) Full IRIS Summary for 1,3- 415 See IARC, Note 413, above. butadiene (CASRN 106–99–0). Environmental known or suspected as human or animal 416 U.S. Department of Health and Human Protection Agency, Integrated Risk Information carcinogens, or that have noncancer Services National Toxicology Program 11th Report System (IRIS), Research and Development, National health effects. The population on Carcinogens available at: http:// Center for Environmental Assessment, Washington, experiences an elevated risk of cancer ntp.niehs.nih.gov/go/16183. Docket EPA–HQ– DC http://www.epa.gov/iris/subst/0139.htm. Docket and other noncancer health effects from OAR–2010–0799. EPA–HQ–OAR–2010–0799. 417 Aksoy, M. (1989). Hematotoxicity and 427 International Agency for Research on Cancer exposure to the class of pollutants carcinogenicity of benzene. Environ. Health (1999) Monographs on the evaluation of

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are numerous studies consistently lymphohematopoietic cancer risk and inhalation, oral, and intravenous demonstrating that 1,3-butadiene is peak exposures.433 A National Institute routes.439 Acetaldehyde is reasonably metabolized into genotoxic metabolites of Occupational Safety and Health study anticipated to be a human carcinogen by by experimental animals and humans. of garment workers also found increased the U.S. DHHS in the 11th Report on The specific mechanisms of 1,3- risk of death due to leukemia among Carcinogens and is classified as possibly butadiene-induced carcinogenesis are workers exposed to formaldehyde.434 carcinogenic to humans (Group 2B) by unknown; however, the scientific Extended follow-up of a cohort of the IARC.440 441 EPA is currently evidence strongly suggests that the British chemical workers did not find conducting a reassessment of cancer risk carcinogenic effects are mediated by evidence of an increase in from inhalation exposure to genotoxic metabolites. Animal data nasopharyngeal or acetaldehyde. suggest that females may be more lymphohematopoietic cancers, but a The primary noncancer effects of sensitive than males for cancer effects continuing statistically significant exposure to acetaldehyde vapors associated with 1,3-butadiene exposure; excess in lung cancers was reported.435 include irritation of the eyes, skin, and there are insufficient data in humans In 2006, the IARC re-classified respiratory tract.442 In short-term (4 from which to draw conclusions about formaldehyde as a human carcinogen week) rat studies, degeneration of sensitive subpopulations. 1,3-butadiene (Group 1).436 olfactory epithelium was observed at also causes a variety of reproductive and Formaldehyde exposure also causes a various concentration levels of developmental effects in mice; no range of noncancer health effects, acetaldehyde exposure.443 444 Data from human data on these effects are including irritation of the eyes (burning these studies were used by EPA to available. The most sensitive effect was and watering of the eyes), nose and develop an inhalation reference ovarian atrophy observed in a lifetime throat. Effects from repeated exposure in concentration. Some asthmatics have bioassay of female mice.429 humans include respiratory tract been shown to be a sensitive subpopulation to decrements in iii. Formaldehyde irritation, chronic bronchitis and nasal epithelial lesions such as metaplasia functional expiratory volume (FEV1 Since 1987, EPA has classified and loss of cilia. Animal studies suggest test) and bronchoconstriction upon formaldehyde as a probable human that formaldehyde may also cause acetaldehyde inhalation.445 The agency carcinogen based on evidence in airway inflammation—including is currently conducting a reassessment humans and in rats, mice, hamsters, and eosinophil infiltration into the airways. of the health hazards from inhalation 430 monkeys. EPA is currently reviewing There are several studies that suggest exposure to acetaldehyde. epidemiological data published since that formaldehyde may increase the risk v. Acrolein that time. For instance, research of asthma—particularly in the Acrolein is extremely acrid and conducted by the National Cancer young.437 438 Institute found an increased risk of irritating to humans when inhaled, with nasopharyngeal cancer and iv. Acetaldehyde acute exposure resulting in upper lymphohematopoietic malignancies Acetaldehyde is classified in EPA’s respiratory tract irritation, mucus such as leukemia among workers IRIS database as a probable human hypersecretion and congestion. The exposed to formaldehyde.431, 432 In an carcinogen, based on nasal tumors in intense irritancy of this carbonyl has analysis of the lymphohematopoietic rats, and is considered toxic by the been demonstrated during controlled cancer mortality from an extended tests in human subjects, who suffer follow-up of these workers, the National 433 Beane Freeman, L. E.; Blair, A.; Lubin, J. H.; intolerable eye and nasal mucosal Cancer Institute confirmed an Stewart, P. A.; Hayes, R. B.; Hoover, R. N.; association between Hauptmann, M. 2009. Mortality from 439 U.S. EPA. 1991. Integrated Risk Information lymphohematopoietic malignancies among workers System File of Acetaldehyde. Research and in formaldehyde industries: The National Cancer Development, National Center for Environmental carcinogenic risk of chemicals to humans, Volume Institute cohort. J. National Cancer Inst. 101: 751– Assessment, Washington, DC. Available at http:// 71, Re-evaluation of some organic chemicals, 761. Docket EPA–HQ–OAR–2010–0799. www.epa.gov/iris/subst/0290.htm. Docket EPA– hydrazine and hydrogen peroxide and Volume 97 434 Pinkerton, L. E. 2004. Mortality among a HQ–OAR–2010–0799. (in preparation), World Health Organization, Lyon, 440 France. Docket EPA–HQ–OAR–2010–0799. cohort of garment workers exposed to U.S. Department of Health and Human formaldehyde: an update. Occup. Environ. Med. 61: Services National Toxicology Program 11th Report 428 U.S. Department of Health and Human on Carcinogens available at: http:// Services (2005) National Toxicology Program 11th 193–200. Docket EPA–HQ–OAR–2010–0799. 435 ntp.niehs.nih.gov/index.cfm?objectid=32BA9724– Report on Carcinogens available at: Coggon, D, EC Harris, J Poole, KT Palmer. F1F6–975E–7FCE50709CB4C932. Docket EPA–HQ– ntp.niehs.nih.gov/index.cfm?objectid=32BA9724– 2003. Extended follow-up of a cohort of British OAR–2010–0799. F1F6–975E–7FCE50709CB4C932. Docket EPA–HQ– chemical workers exposed to formaldehyde. J 441 OAR–2010–0799. National Cancer Inst. 95:1608–1615. Docket EPA– International Agency for Research on Cancer. 1999. Re-evaluation of some organic chemicals, 429 Bevan, C.; Stadler, J.C.; Elliot, G.S.; et al. HQ–OAR–2010–0799. (1996) Subchronic toxicity of 4-vinylcyclohexene in 436 International Agency for Research on Cancer. hydrazine, and hydrogen peroxide. IARC rats and mice by inhalation. Fundam. Appl. 2006. Formaldehyde, 2–Butoxyethanol and 1-tert- Monographs on the Evaluation of Carcinogenic Risk Toxicol. 32:1–10. Docket EPA–HQ–OAR–2010– Butoxypropan-2-ol. Volume 88. (in preparation), of Chemical to Humans, Vol 71. Lyon, France. 0799. World Health Organization, Lyon, France. Docket Docket EPA–HQ–OAR–2010–0799. 442 430 U.S. EPA (1987) Assessment of Health Risks EPA–HQ–OAR–2010–0799; See Integrated Risk Information System File of to Garment Workers and Certain Home Residents 437 Agency for Toxic Substances and Disease Acetaldehyde, Note 439, above. from Exposure to Formaldehyde, Office of Registry (ATSDR). 1999. Toxicological profile for 443 Appleman, L. M., R. A. Woutersen, V. J. Feron, Pesticides and Toxic Substances, April 1987. Formaldehyde. Atlanta, GA: U.S. Department of R. N. Hooftman, and W. R. F. Notten. 1986. Effects Docket EPA–HQ–OAR–2010–0799. Health and Human Services, Public Health Service. of the variable versus fixed exposure levels on the 431 Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; http://www.atsdr.cdc.gov/toxprofiles/tp111.html toxicity of acetaldehyde in rats. J. Appl. Toxicol. 6: Hayes, R. B.; Blair, A. 2003. Mortality from Docket EPA–HQ–OAR–2010–0799. 331–336. Docket EPA–HQ–OAR–2010–0799. lymphohematopoetic malignancies among workers 438 WHO (2002) Concise International Chemical 444 Appleman, L.M., R.A. Woutersen, and V.J. in formaldehyde industries. Journal of the National Assessment Document 40: Formaldehyde. Feron. 1982. Inhalation toxicity of acetaldehyde in Cancer Institute 95: 1615–1623. Docket EPA–HQ– Published under the joint sponsorship of the United rats. I. Acute and subacute studies. Toxicology. 23: OAR–2010–0799. Nations Environment Programme, the International 293–297. Docket EPA–HQ–OAR–2010–0799. 432 Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Labour Organization, and the World Health 445 Myou, S.; Fujimura, M.; Nishi K.; Ohka, T.; Hayes, R. B.; Blair, A. 2004. Mortality from solid Organization, and produced within the framework and Matsuda, T. 1993. Aerosolized acetaldehyde cancers among workers in formaldehyde industries. of the Inter-Organization Programme for the Sound induces histamine-mediated bronchoconstriction in American Journal of Epidemiology 159: 1117–1130. Management of Chemicals. Geneva. Docket EPA– asthmatics. Am. Rev. Respir.Dis.148(4 Pt 1): 940–3. Docket EPA–HQ–OAR–2010–0799. HQ–OAR–2010–0799. Docket EPA–HQ–OAR–2010–0799.

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sensory reactions within minutes of determined in 1995 that acrolein was vii. Naphthalene 446 exposure. These data and additional not classifiable as to its carcinogenicity Naphthalene is found in small 453 studies regarding acute effects of human in humans. quantities in gasoline and diesel fuels. exposure to acrolein are summarized in vi. Polycyclic Organic Matter Naphthalene emissions have been EPA’s 2003 IRIS Human Health measured in larger quantities in both 447 The term polycyclic organic matter Assessment for acrolein. Evidence gasoline and diesel exhaust compared (POM) defines a broad class of available from studies in humans with evaporative emissions from mobile compounds that includes the polycyclic indicate that levels as low as 0.09 ppm sources, indicating it is primarily a 3 aromatic hydrocarbon compounds (0.21 mg/m ) for five minutes may elicit product of combustion. EPA released an (PAHs). One of these compounds, subjective complaints of eye irritation external review draft of a reassessment naphthalene, is discussed separately with increasing concentrations leading of the inhalation carcinogenicity of below. POM compounds are formed to more extensive eye, nose and naphthalene based on a number of 448 primarily from combustion and are respiratory symptoms. Lesions to the recent animal carcinogenicity present in the atmosphere in gas and lungs and upper respiratory tract of rats, studies.459 The draft reassessment particulate form. Cancer is the major rabbits, and hamsters have been completed external peer review.460 concern from exposure to POM. observed after subchronic exposure to Based on external peer review 449 Epidemiologic studies have reported an acrolein. Acute exposure effects in comments received, additional analyses increase in lung cancer in humans animal studies report bronchial hyper- are being undertaken. This external 450 exposed to diesel exhaust, coke oven responsiveness. In one study, the review draft does not represent official emissions, roofing tar emissions, and acute respiratory irritant effects of agency opinion and was released solely cigarette smoke; all of these mixtures exposure to 1.1 ppm acrolein were more for the purposes of external peer review contain POM compounds.454 455 Animal pronounced in mice with allergic and public comment. The National studies have reported respiratory tract airway disease by comparison to non- Toxicology Program listed naphthalene tumors from inhalation exposure to diseased mice which also showed as ‘‘reasonably anticipated to be a 451 benzo[a]pyrene and alimentary tract and decreases in respiratory rate. Based human carcinogen’’ in 2004 on the basis liver tumors from oral exposure to on these animal data and demonstration of bioassays reporting clear evidence of benzo[a]pyrene. In 1997 EPA classified of similar effects in humans (e.g., carcinogenicity in rats and some seven PAHs (benzo[a]pyrene, reduction in respiratory rate), evidence of carcinogenicity in mice.461 benz[a]anthracene, chrysene, individuals with compromised California EPA has released a new risk respiratory function (e.g., emphysema, benzo[b]fluoranthene, assessment for naphthalene, and the asthma) are expected to be at increased benzo[k]fluoranthene, IARC has reevaluated naphthalene and risk of developing adverse responses to dibenz[a,h]anthracene, and re-classified it as Group 2B: possibly strong respiratory irritants such as indeno[1,2,3-cd]pyrene) as Group B2, 462 456 carcinogenic to humans. Naphthalene acrolein. probable human carcinogens. Since also causes a number of chronic non- EPA determined in 2003 that the that time, studies have found that cancer effects in animals, including human carcinogenic potential of maternal exposures to PAHs in a abnormal cell changes and growth in acrolein could not be determined population of pregnant women were respiratory and nasal tissues.463 because the available data were associated with several adverse birth inadequate. No information was outcomes, including low birth weight pollutants on birth outcomes in a multiethnic available on the carcinogenic effects of and reduced length at birth, as well as population. Environ Health Perspect. 111: 201–205. acrolein in humans and the animal data impaired cognitive development in 458 Perera, F.P.; Rauh, V.; Whyatt, R.M.; Tsai, provided inadequate evidence of preschool children (3 years of age).457 458 W.Y.; Tang, D.; Diaz, D.; Hoepner, L.; Barr, D.; Tu, carcinogenicity.452 The IARC Y.H.; Camann, D.; Kinney, P. (2006) Effect of EPA has not yet evaluated these studies. prenatal exposure to airborne polycyclic aromatic hydrocarbons on neurodevelopment in the first 3 446 U.S. EPA (U.S. Environmental Protection available at http://www.epa.gov/iris/subst/0364.htm years of life among inner-city children. Environ Agency). (2003) Toxicological review of acrolein in Docket EPA–HQ–OAR–2010–0799. Health Perspect 114: 1287–1292. support of summary information on Integrated Risk 453 International Agency for Research on Cancer. 459 U.S. EPA. 2004. Toxicological Review of Information System (IRIS) National Center for 1995. Monographs on the evaluation of Naphthalene (Reassessment of the Inhalation Environmental Assessment, Washington, DC. EPA/ carcinogenic risk of chemicals to humans, Volume Cancer Risk), Environmental Protection Agency, 635/R–03/003. p. 10. Available online at: http:// 63. Dry cleaning, some chlorinated solvents and Integrated Risk Information System, Research and www.epa.gov/ncea/iris/toxreviews/0364tr.pdf. other industrial chemicals, World Health Development, National Center for Environmental Docket EPA–HQ–OAR–2010–0799. Organization, Lyon, France. Docket EPA–HQ–OAR– Assessment, Washington, DC. This material is 447 See U.S. EPA 2003 Toxicological review of 2010–0799. available electronically at http://www.epa.gov/iris/ acrolein, Note 446, above. 454 Agency for Toxic Substances and Disease subst/0436.htm. Docket EPA–HQ–OAR–2010–0799. 448 See U.S. EPA 2003 Toxicological review of Registry (ATSDR). 1995. Toxicological profile for 460 Oak Ridge Institute for Science and Education. acrolein, Note 446, at p. 11. Polycyclic Aromatic Hydrocarbons (PAHs). Atlanta, (2004). External Peer Review for the IRIS 449 Integrated Risk Information System File of GA: U.S. Department of Health and Human Reassessment of the Inhalation Carcinogenicity of Acrolein. Office of Research and Development, Services, Public Health Service. Available Naphthalene. August 2004. http://cfpub.epa.gov/ National Center for Environmental Assessment, electronically at http://www.atsdr.cdc.gov/ ncea/cfm/recordisplay.cfm?deid=84403 Docket Washington, DC. This material is available at http:// ToxProfiles/TP.asp?id=122&tid=25. EPA–HQ–OAR–2010–0799. www.epa.gov/iris/subst/0364.htm Docket EPA–HQ– 455 U.S. EPA (2002). Health Assessment Document 461 National Toxicology Program (NTP). (2004). OAR–2010–0799. for Exhaust. EPA/600/8–90/057F 11th Report on Carcinogens. Public Health Service, 450 See U.S. 2003 Toxicological review of Office of Research and Development, Washington, U.S. Department of Health and Human Services, acrolein, Note 446, at p. 15. DC. http://cfpub.epa.gov/ncea/cfm/ Research Triangle Park, NC. Available from: http:// 451 Morris JB, Symanowicz PT, Olsen JE, et al. recordisplay.cfm?deid=29060. Docket EPA–HQ– ntp-server.niehs.nih.gov. Docket EPA–HQ–OAR– 2003. Immediate sensory nerve-mediated OAR–2010–0799 2010–0799. respiratory responses to irritants in healthy and 456 U.S. EPA (1997). Integrated Risk Information 462 International Agency for Research on Cancer. allergic airway-diseased mice. J Appl Physiol System File of indeno(1,2,3-cd)pyrene. Research (2002). Monographs on the Evaluation of the 94(4):1563–1571. Docket EPA–HQ–OAR–2010– and Development, National Center for Carcinogenic Risk of Chemicals for Humans. Vol. 0799. Environmental Assessment, Washington, DC. This 82. Lyon, France. Docket EPA–HQ–OAR–2010– 452 U.S. EPA. 2003. Integrated Risk Information material is available electronically at http:// 0799. System File of Acrolein. Research and www.epa.gov/ncea/iris/subst/0457.htm. 463 U. S. EPA. 1998. Toxicological Review of Development, National Center for Environmental 457 Perera, F.P.; Rauh, V.; Tsai, W–Y.; et al. (2002) Naphthalene, Environmental Protection Agency, Assessment, Washington, DC. This material is Effect of transplacental exposure to environmental Integrated Risk Information System, Research and

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viii. Other Air Toxics is ‘‘sufficient to infer the presence of a and traffic-related air pollutants is weak, In addition to the compounds causal association’’ between traffic but noted the inability to draw firm described above, other compounds in exposure and exacerbation of childhood conclusions based on limited 470 gaseous hydrocarbon and PM emissions asthma symptoms. The HEI report also evidence. from light-duty vehicles will be affected concludes that the evidence is either There is a large population in the by this proposal. Mobile source air toxic ‘‘sufficient’’ or ‘‘suggestive but not United States living in close proximity compounds that would potentially be sufficient’’ for a causal association of major roads. According to the Census impacted include ethylbenzene, between traffic exposure and new Bureau’s American Housing Survey for propionaldehyde, toluene, and xylene. childhood asthma cases. A review of 2007, approximately 20 million Information regarding the health effects asthma studies by Salam et al. (2008) residences in the United States, 15.6% 467 of these compounds can be found in reaches similar conclusions. The HEI of all homes, are located within 300 feet EPA’s IRIS database.464 report also concludes that there is (91 m) of a highway with 4+ lanes, a ‘‘suggestive’’ evidence for pulmonary railroad, or an airport.471 Therefore, at f. Exposure and Health Effects function deficits associated with traffic current population of approximately Associated With Traffic-Related Air exposure, but concluded that there is 309 million, assuming that population Pollution ‘‘inadequate and insufficient’’ evidence and housing are similarly distributed, Populations who live, work, or attend for causal associations with respiratory there are over 48 million people in the school near major roads experience health care utilization, adult-onset United States living near such sources. elevated exposure to a wide range of air asthma, chronic obstructive pulmonary The HEI report also notes that in two pollutants, as well as higher risks for a disease symptoms, and allergy. A North American cities, Los Angeles and number of adverse health effects. While review by Holguin (2008) notes that the Toronto, over 40% of each city’s the previous sections of this preamble effects of traffic on asthma may be population live within 500 meters of a have focused on the health effects modified by nutrition status, medication highway or 100 meters of a major road. associated with individual criteria use, and genetic factors.468 It also notes that about 33% of each pollutants or air toxics, this section The HEI report also concludes that city’s population resides within 50 discusses the mixture of different evidence is ‘‘suggestive’’ of a causal meters of major roads. Together, the exposures near major roadways, rather association between traffic exposure and evidence suggests that a large U.S. than the effects of any single pollutant. all-cause and cardiovascular mortality. population lives in areas with elevated As such, this section emphasizes traffic- There is also evidence of an association traffic-related air pollution. related air pollution, in general, as the between traffic-related air pollutants People living near roads are often relevant indicator of exposure rather and cardiovascular effects such as socioeconomically disadvantaged. than any particular pollutant. changes in heart rhythm, heart attack, According to the 2007 American Concentrations of many traffic- and cardiovascular disease. The HEI Housing Survey, a renter-occupied generated air pollutants are elevated for report characterizes this evidence as property is over twice as likely as an up to 300–500 meters downwind of ‘‘suggestive’’ of a causal association, and owner-occupied property to be located roads with high traffic volumes.465 an independent epidemiological near a highway with 4+ lanes, railroad Numerous sources on roads contribute literature review by Adar and Kaufman or airport. In the same survey, the to elevated roadside concentrations, (2007) concludes that there is median household income of rental including exhaust and evaporative ‘‘consistent evidence’’ linking traffic- housing occupants was less than half emissions, and resuspension of road related pollution and adverse that of owner-occupants ($28,921/ dust and tire and brake wear. cardiovascular health outcomes.469 $59,886). Numerous studies in Concentrations of several criteria and Some studies have reported individual urban areas report higher hazardous air pollutants are elevated associations between traffic exposure levels of traffic-related air pollutants in near major roads. Furthermore, different and other health effects, such as birth areas with high minority or poor semi-volatile organic compounds and outcomes (e.g., low birth weight) and populations.472 473 474 chemical components of particulate childhood cancer. The HEI report Students may also be exposed in matter, including elemental carbon, concludes that there is currently situations where schools are located organic material, and trace metals, have ‘‘inadequate and insufficient’’ evidence 470 been reported at higher concentrations for a causal association between these Raaschou-Nielsen, O.; Reynolds, P. (2006) Air effects and traffic exposure. A review by pollution and childhood cancer: a review of the near major roads. epidemiological literature. Int J Cancer 118: 2920– Populations near major roads Raaschou-Nielsen and Reynolds (2006) 2929. Docket EPA–HQ–OAR–2010–0799. experience greater risk of certain concluded that evidence of an 471 U.S. Census Bureau (2008) American Housing adverse health effects. The Health association between childhood cancer Survey for the United States in 2007. Series H–150 (National Data), Table 1A–7. [Accessed at http:// Effects Institute published a report on www.census.gov/hhes/www/housing/ahs/ahs07/ the health effects of traffic-related air critical review of the literature on emissions, ahs07.html on January 22, 2009] Docket EPA–HQ– 466 exposure, and health effects. [Online at http:// OAR–2010–0799. pollution. It concluded that evidence www.healtheffects.org] Docket EPA–HQ–OAR– 472 Lena, T.S.; Ochieng, V.; Carter, M.; Holguı´n- 2010–0799. Veras, J.; Kinney, Public Law (2002) Elemental 467 Development, National Center for Environmental Salam, M.T.; Islam, T.; Gilliland, F.D. (2008) carbon and PM2.5 levels in an urban community Assessment, Washington, DC. This material is Recent evidence for adverse effects of residential heavily impacted by truck traffic. Environ Health available electronically at http://www.epa.gov/iris/ proximity to traffic sources on asthma. Current Perspect 110: 1009–1015. Docket EPA–HQ–OAR– subst/0436.htm Docket EPA–HQ–OAR–2010–0799. Opin Pulm Med 14: 3–8. Docket EPA–HQ–OAR– 2010–0799. 464 U.S. EPA Integrated Risk Information System 2010–0799. 473 Wier, M.; Sciammas, C.; Seto, E.; Bhatia, R.; (IRIS) database is available at: http://www.epa.gov/ 468 Holguin, F. (2008) Traffic, outdoor air Rivard, T. (2009) Health, traffic, and environmental iris. pollution, and asthma. Immunol Allergy Clinics justice: collaborative research and community 465 Zhou, Y.; Levy, J.I. (2007) Factors influencing North Am 28: 577–588. Docket EPA–HQ–OAR– action in San Francisco, California. Am J Public the spatial extent of mobile source air pollution 2010–0799. Health 99: S499–S504. Docket EPA–HQ–OAR– impacts: a meta-analysis. BMC Public Health 7: 89. 469 Adar, S.D.; Kaufman, J.D. (2007) 2010–0799. doi:10.1186/1471–2458–7–89 Docket EPA–HQ– Cardiovascular disease and air pollutants: 474 Forkenbrock, D.J. and L.A. Schweitzer, OAR–2010–0799. evaluating and improving epidemiological data Environmental Justice and Transportation 466 HEI Panel on the Health Effects of Air implicating traffic exposure. Inhal Toxicol 19: 135– Investment Policy. Iowa City: University of Iowa, Pollution. (2010) Traffic-related air pollution: a 149. Docket EPA–HQ–OAR–2010–0799. 1997. Docket EPA–HQ–OAR–2010–0799.

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near major roads. In a study of nine has direct significance to people’s photosynthesis, the process by which metropolitan areas across the United enjoyment of daily activities in all parts the plant makes carbohydrates (its States, Appatova et al. (2008) found that of the country. Individuals value good source of energy and food), can lead to on average greater than 33% of schools visibility for the well-being it provides a subsequent reduction in root growth were located within 400 m of an them directly, where they live and and carbohydrate storage below ground, Interstate, U.S., or state highway, while work, and in places where they enjoy resulting in other, more subtle plant and 12% were located within 100 m.475 The recreational opportunities. Visibility is ecosystems impacts. study also found that among the also highly valued in significant natural These latter impacts include metropolitan areas studied, schools in areas, such as national parks and increased susceptibility of plants to the Eastern United States were more wilderness areas, and special emphasis insect attack, disease, harsh weather, often sited near major roadways than is given to protecting visibility in these interspecies competition and overall schools in the Western United States. areas. For more information on visibility decreased plant vigor. The adverse Demographic studies of students in see the final 2009 p.m. ISA.480 effects of ozone on forest and other schools near major roadways suggest EPA is pursuing a two-part strategy to natural vegetation can potentially lead that this population is more likely than address visibility impairment. First, to species shifts and loss from the the general student population to be of EPA developed the regional haze affected ecosystems, resulting in a loss non-white race or Hispanic ethnicity, program (64 FR 35714) which was put or reduction in associated ecosystem and more often live in low in place in July 1999 to protect the goods and services. Lastly, visible ozone socioeconomic status visibility in Mandatory Class I Federal injury to leaves can result in a loss of locations.476, 477, 478 There is some areas. There are 156 national parks, aesthetic value in areas of special scenic inconsistency in the evidence, which forests and wilderness areas categorized significance like national parks and may be due to different local as Mandatory Class I Federal areas (62 wilderness areas. The final 2006 Ozone development patterns and measures of FR 38680–38681, July 18, 1997). These Air Quality Criteria Document presents traffic and geographic scale used in the areas are defined in CAA section 162 as more detailed information on ozone studies. those national parks exceeding 6,000 effects on vegetation and ecosystems. acres, wilderness areas and memorial 3. Environmental Effects of Non-GHG parks exceeding 5,000 acres, and all c. Atmospheric Deposition Pollutants international parks which were in Wet and dry deposition of ambient In this section we discuss some of the existence on August 7, 1977. Second, particulate matter delivers a complex environmental effects of PM and its EPA has concluded that PM2.5 causes mixture of metals (e.g., , zinc, precursors such as visibility adverse effects on visibility in other lead, nickel, aluminum, cadmium), impairment, atmospheric deposition, areas that are not protected by the organic compounds (e.g., polycyclic and materials damage and soiling, as Regional Haze Rule, depending on PM2.5 organic matter, dioxins, furans) and well as environmental effects associated concentrations and other factors that inorganic compounds (e.g., nitrate, with the presence of ozone in the control their visibility impact sulfate) to terrestrial and aquatic ambient air, such as impacts on plants, effectiveness such as dry chemical ecosystems. The chemical form of the including trees, agronomic crops and composition and relative humidity (i.e., compounds deposited depends on a urban ornamentals, and environmental an indicator of the water composition of variety of factors including ambient effects associated with air toxics. the particles), and has set secondary conditions (e.g., temperature, humidity, a. Visibility PM2.5 standards to address these areas. oxidant levels) and the sources of the The existing annual primary and Visibility can be defined as the degree material. Chemical and physical secondary PM2.5 standards have been transformations of the compounds occur to which the atmosphere is transparent remanded and are being addressed in to visible light.479 Visibility impairment in the atmosphere as well as the media the currently ongoing PM NAAQS onto which they deposit. These is caused by light scattering and review. absorption by suspended particles and transformations in turn influence the gases. Visibility is important because it b. Plant and Ecosystem Effects of Ozone fate, bioavailability and potential Elevated ozone levels contribute to toxicity of these compounds. 475 Appatova, A.S.; Ryan, P.H.; LeMasters, G.K.; environmental effects, with impacts to Atmospheric deposition has been Grinshpun, S.A. (2008) Proximal exposure of public plants and ecosystems being of most identified as a key component of the schools and students to major roadways: a environmental and human health nationwide U.S. survey. J Environ Plan Mgmt concern. Ozone can produce both acute Docket EPA–HQ–OAR–2010–0799. and chronic injury in sensitive species hazard posed by several pollutants 481 476 Green, R.S.; Smorodinsky, S.; Kim, J.J.; depending on the concentration level including mercury, dioxin and PCBs. McLaughlin, R.; Ostro, B. (2004) Proximity of and the duration of the exposure. Ozone Adverse impacts on water quality can California public schools to busy roads. Environ occur when atmospheric contaminants Health Perspect 112: 61–66. Docket EPA–HQ–OAR– effects also tend to accumulate over the 2010–0799. growing season of the plant, so that even deposit to the water surface or when 477 Houston, D.; Ong, P.; Wu, J.; Winer, A. (2006) low concentrations experienced for a material deposited on the land enters a Proximity of licensed child care facilities to near- longer duration have the potential to waterbody through runoff. Potential roadway vehicle pollution. Am J Public Health 96: create chronic stress on vegetation. impacts of atmospheric deposition to 1611–1617. Docket EPA–HQ–OAR–2010–0799. waterbodies include those related to 478 Wu, Y.; Batterman, S. (2006) Proximity of Ozone damage to plants includes visible schools in Detroit, Michigan to automobile and injury to leaves and impaired both nutrient and toxic inputs. Adverse truck traffic. J Exposure Sci Environ Epidemiol 16: photosynthesis, both of which can lead effects to human health and welfare can 457–470. Docket EPA–HQ–OAR–2010–0799. to reduced plant growth and occur from the addition of excess 479 National Research Council, 1993. Protecting nitrogen via atmospheric deposition. Visibility in National Parks and Wilderness Areas. reproduction, resulting in reduced crop National Academy of Sciences Committee on Haze yields, forestry production, and use of The nitrogen-nutrient enrichment in National Parks and Wilderness Areas. National sensitive ornamentals in landscaping. In Academy Press, Washington, DC. Docket EPA–HQ– 481 U.S. EPA (2000) Deposition of Air Pollutants OAR–2010–0799. This book can be viewed on the addition, the impairment of to the Great Waters: Third Report to Congress. National Academy Press Web site at http:// Office of Air Quality Planning and Standards. EPA– www.nap.edu/books/0309048443/html/. 480 See U.S. EPA 2009 Final PM ISA, Note 396. 453/R–00–0005. Docket EPA–HQ–OAR–2010–0799.

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contributes to toxic algae blooms and systems increased nitrogen can alter on seed germination, flowering and fruit zones of depleted oxygen, which can species assemblages and cause ripening. Effects of individual VOCs or lead to fish kills, frequently in coastal eutrophication. In terrestrial systems their role in conjunction with other waters. Deposition of heavy metals or nitrogen loading can lead to loss of stressors (e.g., acidification, drought, other toxics may lead to the human nitrogen sensitive lichen species, temperature extremes) have not been ingestion of contaminated fish, decreased biodiversity of grasslands, well studied. In a recent study of a impairment of drinking water, damage meadows and other sensitive habitats, mixture of VOCs including ethanol and to freshwater and marine ecosystem and increased potential for invasive toluene on herbaceous plants, components, and limits to recreational species. For a broader explanation of the significant effects on seed production, uses. Several studies have been topics treated here, refer to the leaf water content and photosynthetic conducted in U.S. coastal waters and in description in Section 6.1.2.2 of the efficiency were reported for some plant the Great Lakes Region in which the role RIA. species.489 of ambient PM deposition and runoff is Adverse impacts on soil chemistry Research suggests an adverse impact investigated.482, 483, 484, 485, 486 and plant life have been observed for of vehicle exhaust on plants, which has Atmospheric deposition of nitrogen areas heavily influenced by atmospheric in some cases been attributed to and sulfur contributes to acidification, deposition of nutrients, metals and acid aromatic compounds and in other cases altering biogeochemistry and affecting species, resulting in species shifts, loss to nitrogen oxides.490 491 492 The impacts animal and plant life in terrestrial and of biodiversity, forest decline, damage to of VOCs on plant reproduction may aquatic ecosystems across the United forest productivity and reductions in have long-term implications for States. The sensitivity of terrestrial and ecosystem services. Potential impacts biodiversity and survival of native aquatic ecosystems to acidification from also include adverse effects to human species near major roadways. Most of nitrogen and sulfur deposition is health through ingestion of the studies of the impacts of VOCs on predominantly governed by geology. contaminated vegetation or livestock (as vegetation have focused on short-term Prolonged exposure to excess nitrogen in the case for dioxin deposition), exposure and few studies have focused and sulfur deposition in sensitive areas reduction in crop yield, and limited use on long-term effects of VOCs on acidifies lakes, rivers and soils. of land due to contamination. vegetation and the potential for Increased acidity in surface waters Atmospheric deposition of pollutants metabolites of these compounds to creates inhospitable conditions for biota can reduce the aesthetic appeal of affect herbivores or insects. and affects the abundance and buildings and culturally important 4. Air Quality Impacts of Non-GHG nutritional value of preferred prey articles through soiling, and can Pollutants species, threatening biodiversity and contribute directly (or in conjunction ecosystem function. Over time, with other pollutants) to structural a. Current Levels of Non-GHG Pollutants acidifying deposition also removes damage by means of corrosion or This proposal may have impacts on essential nutrients from forest soils, erosion. Atmospheric deposition may ambient concentrations of criteria and depleting the capacity of soils to affect materials principally by air toxic pollutants. Nationally, levels of neutralize future acid loadings and promoting and accelerating the PM2.5, ozone, NOX, SOX, CO and air negatively affecting forest sustainability. corrosion of metals, by degrading paints, toxics are declining.493 However, Major effects include a decline in and by deteriorating building materials approximately 127 million people lived sensitive forest tree species, such as red such as concrete and limestone. in counties that exceeded any NAAQS spruce (Picea rubens) and sugar maple Particles contribute to these effects in 2008.494 These numbers do not (Acer saccharum), and a loss of because of their electrolytic, include the people living in areas where biodiversity of fishes, zooplankton, and hygroscopic, and acidic properties, and there is a future risk of failing to macro invertebrates. their ability to adsorb corrosive gases maintain or attain the NAAQS. It is In addition to the role nitrogen (principally sulfur dioxide). important to note that these numbers do deposition plays in acidification, not account for potential ozone, PM2.5, nitrogen deposition also leads to d. Environmental Effects of Air Toxics CO, SO2, NO2 or lead nonattainment nutrient enrichment and altered Emissions from producing, biogeochemical cycling. In aquatic transporting and combusting fuel 489 Cape JN, ID Leith, J Binnie, J Content, M contribute to ambient levels of Donkin, M Skewes, DN Price AR Brown, AD 482 U.S. EPA (2004) National Coastal Condition pollutants that contribute to adverse Sharpe. 2003. Effects of VOCs on herbaceous plants Report II. Office of Research and Development/ in an open-top chamber experiment. Environ. Office of Water. EPA–620/R–03/002. Docket EPA– effects on vegetation. Volatile organic Pollut. 124:341–343. Docket EPA–HQ–OAR–2010– HQ–OAR–2010–0799. compounds, some of which are 0799. 483 Gao, Y., E.D. Nelson, M.P. Field, et al. 2002. considered air toxics, have long been 490 Viskari E–L. 2000. Epicuticular wax of Norway Characterization of atmospheric trace elements on suspected to play a role in vegetation spruce needles as indicator of traffic pollutant deposition. Water, Air, and Soil Pollut. 121:327– PM2.5 particulate matter over the New York-New 487 Jersey harbor estuary. Atmos. Environ. 36: 1077– damage. In laboratory experiments, a 337. Docket EPA–HQ–OAR–2010–0799. 1086. Docket EPA–HQ–OAR–2010–0799. wide range of tolerance to VOCs has 491 Ugrekhelidze D, F Korte, G Kvesitadze. 1997. 484 Kim, G., N. Hussain, J.R. Scudlark, and T.M. been observed.488 Decreases in Uptake and transformation of benzene and toluene Church. 2000. Factors influencing the atmospheric harvested seed pod weight have been by plant leaves. Ecotox. Environ. Safety 37:24–29. depositional fluxes of stable Pb, 210Pb, and 7Be reported for the more sensitive plants, Docket EPA–HQ–OAR–2010–0799. into Chesapeake Bay. J. Atmos. Chem. 36: 65–79. 492 Kammerbauer H, H Selinger, R Rommelt, A Docket EPA–HQ–OAR–2010–0799. and some studies have reported effects Ziegler-Jons, D Knoppik, B Hock. 1987. Toxic 485 Lu, R., R.P. Turco, K. Stolzenbach, et al. 2003. components of motor vehicle emissions for the Dry deposition of airborne trace metals on the Los 487 U.S. EPA. 1991. Effects of organic chemicals spruce Picea abies. Environ. Pollut. 48:235–243. Angeles Basin and adjacent coastal waters. J. in the atmosphere on terrestrial plants. EPA/600/3– Docket EPA–HQ–OAR–2010–0799. Geophys. Res. 108(D2, 4074): AAC 11–1 to 11–24. 91/001. Docket EPA–HQ–OAR–2010–0799. 493 U.S. EPA (2010) Our Nation’s Air: Status and Docket EPA–HQ–OAR–2010–0799. 488 Cape JN, ID Leith, J Binnie, J Content, M Trends through 2008. Office of Air Quality Planning 486 Marvin, C.H., M.N. Charlton, E.J. Reiner, et al. Donkin, M Skewes, DN Price AR Brown, AD and Standards, Research Triangle Park, NC. 2002. Surficial sediment contamination in Lakes Sharpe. 2003. Effects of VOCs on herbaceous plants Publication No. EPA 454/R–09–002. http:// Erie and Ontario: A comparative analysis. J. Great in an open-top chamber experiment. Environ. www.epa.gov/airtrends/2010/. Docket EPA–HQ– Lakes Res. 28(3): 437–450. Docket EPA–HQ–OAR– Pollut. 124:341–343. Docket EPA–HQ–OAR–2010– OAR–2010–0799. 2010–0799. 0799. 494 See U.S. EPA Trends, Note 493.

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areas which have not yet been The CMAQ model is a well-known and comment on any studies or research in designated. Further, the majority of well-established tool and is commonly this area that should be considered in Americans continue to be exposed to used by EPA for regulatory analyses and the future to assess a fuller range of ambient concentrations of air toxics at by States in developing attainment health and environmental impacts from levels which have the potential to cause demonstrations for their State the light-duty vehicle fleet moving to adverse health effects.495 The levels of Implementation Plans. The CMAQ advanced GHG-reducing technologies. air toxics to which people are exposed model version 4.7 was most recently EPA is aware of some studies vary depending on where people live peer-reviewed in February of 2009 for examining the lifecycle GHG emissions, and work and the kinds of activities in the U.S. EPA.501 including vehicle production-related which they engage, as discussed in CMAQ includes many science emissions, for advanced technology detail in U.S. EPA’s recent mobile modules that simulate the emission, vehicles.502 The American Iron and source air toxics rule.496 production, decay, deposition and Steel Institute (AISI) has recommended transport of organic and inorganic gas- b. Impacts of Proposed Standards on that EPA consider basing future phase and particle-phase pollutants in Future Ambient Concentrations of standards on lifecycle assessments that the atmosphere. EPA intends to use the PM , Ozone and Air Toxics include vehicle production, use, and 2.5 most recent version of CMAQ, which end-of-life impacts; AISI is working on Full-scale photochemical air quality reflects updates to version 4.7 to related research with the University of modeling is necessary to accurately improve the underlying science. These California, Davis.503 At this point, EPA project levels of criteria pollutants and include aqueous chemistry mass believes there is insufficient information air toxics. For the final rulemaking, a conservation improvements, improved about the lifecycle impacts of future national-scale air quality modeling vertical convective mixing and lowered advanced technologies to conduct the analysis will be performed to analyze CB05 mechanism unit yields for type of detailed assessments that would the impacts of the standards on PM2.5, acrolein from 1,3-butadiene tracer be needed in a regulatory context, but ozone, and selected air toxics (i.e., reactions which were updated to be EPA seeks comment on any current or benzene, formaldehyde, acetaldehyde, consistent with laboratory future studies and research underway acrolein and 1,3-butadiene). The length measurements. on this topic. of time needed to prepare the necessary emissions inventories, in addition to the 5. Other Unquantified Health and H. What are the estimated cost, processing time associated with the Environmental Effects economic, and other impacts of the modeling itself, has precluded us from In addition, EPA seeks comment on proposal? performing air quality modeling for this whether there are any other health and In this section, EPA presents the costs proposal. environmental impacts associated with and impacts of the proposed GHG Sections III.G.1 and III.G.2 of the advancements in vehicle GHG reduction standards. It is important to note that preamble present projections of the technologies that should be considered. NHTSA’s CAFE standards and EPA’s changes in criteria pollutant and air For example, the use of technologies GHG standards will both be in effect, toxics emissions due to the proposed and other strategies to reduce GHG and each will lead to average fuel vehicle standards; the basis for those emissions could have effects on a economy increases and CO2 emissions estimates is set out in Chapter 4 of the vehicle’s life-cycle impacts (e.g., reductions. The two agencies’ standards draft RIA. The atmospheric chemistry materials usage, manufacturing, end of comprise the National Program, and this related to ambient concentrations of life disposal), beyond the issues discussion of costs and benefits of EPA’s PM2.5, ozone and air toxics is very regarding fuel production and GHG standard does not change the fact complex, and making predictions based distribution (upstream) GHG emissions that both the CAFE and GHG standards, solely on emissions changes is discussed in Section III.C.2. EPA seeks jointly, will be the source of the benefits extremely difficult. However, based on and costs of the National Program. the magnitude of the emissions changes algorithms of EPA Models-3 Community Multiscale These costs and benefits are predicted to result from the proposed Air Quality (CMAQ modeling system, EPA/600/R– appropriately analyzed separately by standards, EPA expects that there will 99/030, Office of Research and Development). each agency and should not be added be an improvement in ambient air Docket EPA–HQ–OAR–2010–0799. 498 together. quality, pending a more comprehensive Byun, D.W., and Schere, K.L., 2006. Review of the Governing Equations, Computational This section outlines the basis for analysis for the final rulemaking. Algorithms, and Other Components of the Models- For the final rulemaking, EPA intends assessing the benefits and costs of the 3 Community Multiscale Air Quality (CMAQ) GHG standards and provides estimates to use a Community Multi-scale Air Modeling System, J. Applied Mechanics Reviews, Quality (CMAQ) modeling platform as 59 (2), 51–77. Docket EPA–HQ–OAR–2010–0799. of these costs and benefits. Some of the tool for the air quality modeling. 499 Dennis, R.L., Byun, D.W., Novak, J.H., these effects are private, meaning that Galluppi, K.J., Coats, C.J., and Vouk, M.A., 1996. The CMAQ modeling system is a they affect consumers and producers The next generation of integrated air quality directly in their sales, purchases, and comprehensive three-dimensional grid- modeling: EPA’s Models-3, Atmospheric based Eulerian air quality model Environment, 30, 1925–1938. Docket EPA–HQ– use of vehicles. These private effects designed to estimate the formation and OAR–2010–0799. include the increase in vehicle prices 500 fate of oxidant precursors, primary and Carlton, A., Bhave, P., Napelnok, S., Edney, E., due to costs of the technology, fuel Sarwar, G., Pinder, R., Pouliot, G., and Houyoux, M. savings, and the benefits of additional secondary PM concentrations and Model Representation of Secondary Organic deposition, and air toxics, over regional Aerosol in CMAQv4.7. Ahead of Print in driving and reduced refueling. Other and urban spatial scales (e.g., over the Environmental Science and Technology. Accessed 502 497 498 499 500 at: http://pubs.acs.org/doi/abs/10.1021/ For examples, see Chapter 6 of NHTSA’s Draft contiguous United States). es100636q?prevSearch=CMAQ&searchHistoryKey Environmental Impact Statement for this proposed Docket EPA–HQ–OAR–2010–0799. rulemaking, ‘‘Literature Synthesis of Life-cycle 495 U.S. Environmental Protection Agency (2007). 501 Allen, D. et al (2009). Report on the Peer Environmental Impacts of Certain Vehicle Materials Control of Hazardous Air Pollutants from Mobile Review of the Atmospheric Modeling and Analysis and Technologies,’’ Docket NHTSA–2011–0056. Sources; Final Rule. 72 FR 8434, February 26, 2007. Division, National Exposure Research Laboratory, 503 See AISI comments on the 2012–2016 496 See U.S. EPA 2007, Note 495. Office of Research and Development, U.S. EPA. rulemaking and NOI/Interim Joint TAR: Document 497 U.S. Environmental Protection Agency, Byun, http://www.epa.gov/asmdnerl/peer/ ID # EPA–HQ–OAR–2009–0472–7088 and EPA– D.W., and Ching, J.K.S., Eds, 1999. Science reviewdocs.html Docket EPA–HQ–OAR–2010–0799. HQ–OAR–2010–0799–0313, respectively.

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costs and benefits affect people outside standards are estimated to be between employment. These impacts are not the markets for vehicles and their use; $243 to $551 billion for new vehicle included in the analysis of overall costs these effects are termed external, technology (assuming a 7 and 3 percent and benefits of the proposed standards. because they affect people in ways other discount rate, respectively), less $579 to Further information on these and other than the effect on the market for and use $1,510 billion in savings realized by aspects of the economic impacts of of new vehicles and are generally not consumers through fewer fuel EPA’s proposed rule are summarized in taken into account by the purchaser of expenditures (calculated using pre-tax the following sections and are presented the vehicle. The external effects include fuel prices and using a 7 and 3 percent in more detail in the DRIA for this the climate impacts, the effects on non- discount rate, respectively). These costs rulemaking. GHG pollutants, energy security are summarized below in Table III–78 EPA requests comment on all aspects impacts, and the effects on traffic, and the fuel savings are summarized in of the cost, savings, and benefits accidents, and noise due to additional Table III–79. The total net present value analysis presented here and in the driving. The sum of the private and of net benefits under the proposed DRIA. EPA also requests comment on external benefits and costs is the net standards are projected to be between the inputs used in these analyses as social benefits of the standards. $1.2 and $1.7 trillion, using a 3 percent described in the Draft Joint TSD. There is some debate about the discount rate and depending on the behavior of private markets in the value used for the social cost of carbon. 1. Conceptual Framework for Evaluating context of these standards: If consumers With a 7 percent discount rate, the total Consumer Impacts optimize their purchases of fuel net present value of net benefits under For this proposed rule, EPA projects economy, with full information and the proposed standards are projected to significant private gains to consumers in perfect foresight, in perfectly efficient be between $460 billion to $950 billion, three major areas: (1) Reductions in markets, they should have already depending on the value used for the spending on fuel, (2) for gasoline-fueled considered these benefits in their social cost of carbon. The estimates vehicles, time saved due to less vehicle purchase decisions. If so, then developed here use as a baseline for refueling, and (3) additional driving that no net private benefits would result comparison the greenhouse gas results from the rebound effect. In from the program, because consumers performance and fuel economy combination, these private benefits, would already buy vehicles with the associated with MY 2016 standards. To mostly from fuel savings, appear to amount of fuel economy that is optimal the extent that greater fuel economy outweigh the costs of the standards, for them; requiring additional fuel improvements than those assumed to even without accounting for economy would alter both the purchase occur under the baseline may have externalities. prices of new cars and their lifetime occurred due to market forces alone Admittedly, these findings pose an streams of operating costs in ways that (absent these proposed standards), the economic conundrum. On the one hand, will inevitably reduce consumers’ well- analysis overestimates private and consumers are expected to gain being. Section III.H.1 discusses this social net benefits. significantly from the rules, as the issue more fully. While NHTSA and EPA each modeled increased cost of fuel efficient cars is The net benefits of EPA’s proposal their respective regulatory programs, the smaller than the fuel savings. Yet many consist of the effects of the proposed analyses were generally consistent and of these technologies are readily standards on: • featured similar parameters. For this available; financially savvy consumers The vehicle costs; proposal, EPA has not conducted an could have sought vehicles with • Fuel savings associated with overall uncertainty analysis of the improved fuel efficiency, and auto reduced fuel usage resulting from the impacts associated with its regulatory makers seeking those customers could proposed program program, though it did conduct have offered them. Assuming full • Greenhouse gas emissions; • Other air pollutants; sensitivity analyses of individual information, perfect foresight, perfect • Other impacts, including noise, components of the analysis (e.g., competition, and financially rational congestion, accidents; alternative SCC estimates, rebound consumers and producers, standard • Energy security impacts; effect, battery costs, mass reduction economic theory suggests that normal • Changes in refueling events; costs, the indirect cost markup factor, market operations would have provided • Increased driving due to the and cost learning curves); these analyses the private net gains to consumers, and ‘‘rebound’’ effect. are found in Chapters 3, 4, and 7 of the the only benefits of the rule would be EPA also presents the cost per ton of EPA DRIA. NHTSA, however, due to external benefits. If our analysis GHG reductions associated with the conducted a Monte Carlo simulation of projects net private benefits that proposed GHG standards on a CO2eq the uncertainty associated with its consumers have not realized in this basis, in Section III.H.3 below. regulatory program. The focus of the perfectly functioning market, then, with The total present value of monetized simulation model was variation around the above assumptions, there must be benefits (excluding fuel savings) under the chosen uncertainty parameters and additional costs of these private net the proposed standards are projected to their resulting impact on the key output benefits that are not accounted for. This be between $275 to $764 billion, using parameters, fuel savings, and net calculation assumes that consumers a 3 percent discount rate and depending benefits. Because of the similarities accurately predict and act on all the on the value used for the social cost of between the two analyses, EPA fuel-saving benefits they will get from a carbon. With a 7 percent discount rate, references NHTSA RIA Chapters X and new vehicle, and that producers market the total present value of monetized XII as indicative of the relative products providing those benefits. The benefits (excluding fuel savings) under magnitude, uncertainty and sensitivities estimate of large private net benefits the proposed standards are projected to of parameters of the cost/benefit from this rule, then, suggests either that be between $124 to $614 billion, analysis. For the final rule, EPA plans the assumptions noted above do not depending on the value used for the to perform sensitivity analyses for a hold, or that EPA’s analysis has missed social cost of carbon. These benefits are wider variety of parameters. EPA has some factor(s) tied to improved fuel summarized below in Table III–80. The also analyzed the potential impact of economy that reduce(s) consumer present value of costs of the proposed this proposed rule on vehicle sales and welfare.

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This subsection discusses the • Consumers might be ‘‘myopic’’ and consumers are making purchasing economic principles underlying the hence undervalue future fuel savings in decisions. assessment of impacts on consumer their purchasing decisions. EPA discussed this issue at length in well-being due to the proposed changes • Consumers might lack the the 2012–2016 light duty rulemaking in the vehicles. Because conventional information necessary to estimate the and in the medium- and heavy-duty gasoline- and diesel-fueled vehicles value of future fuel savings, or not have greenhouse gas rulemaking. See 75 FR at have quite different characteristics from a full understanding of this information 25510–13; 76 FR 57315–19. advanced technology vehicles even when it is presented. Considerable research indicates that the (especially electric vehicles), the • Consumer may be accounting for Energy Paradox may be a real and principles for these different kinds uncertainty in future fuel savings when significant phenomenon, although the vehicles are discussed separately below. comparing upfront cost to future literature has not reached a consensus returns. about the reasons for its existence. a. Conventional Vehicles • Consumers may consider fuel Several researchers have found evidence For conventional vehicles, the economy after other vehicle attributes suggesting that consumers do not give estimates of technology costs developed and, as such, not optimize the level of full or appropriate weight to fuel for this proposed rule take into account this attribute (instead ‘‘satisficing’’ or economy in purchasing decisions. For the cost needed to ensure that vehicle selecting vehicles that have some example, Sanstad and Howarth 509 argue utility (including performance, sufficient amount of fuel economy). that consumers make decisions without reliability, and size) stay constant, • Consumers might be especially the benefit of full information by except for fuel economy and vehicle averse to the short-term losses resorting to imprecise but convenient price, with some minor exceptions (e.g., associated with the higher prices of rules of thumb. Some studies find that see the discussion of the ‘‘Atkinson- energy efficient products relative to the a substantial portion of this cycle’’ engine and towing capacity in future fuel savings (the behavioral undervaluation can be explained by III.D.3). For example, using a 4-cylinder phenomenon of ‘‘loss aversion’’). inaccurate assessments of energy engine instead of a 6-cylinder engine • Consumers might associate higher savings, or by uncertainty and reduces fuel economy, but also reduces fuel economy with inexpensive, less irreversibility of energy investments due performance; turbocharging the 4- well designed vehicles. to fluctuations in energy prices.510 For cylinder engine, though, produces fuel • Even if consumers have relevant a number of reasons, consumers may savings while maintaining performance. knowledge, selecting a vehicle is a undervalue future energy savings due to The cost estimates assume highly complex undertaking, involving routine mistakes in how they evaluate turbocharging accompanies engine many vehicle characteristics. In the face these trade-offs. For instance, the downsizing. As a result, if the market of such a complicated choice, calculation of fuel savings is complex, for fuel economy is efficient and these consumers may use simplified decision and consumers may not make it cost estimates are correct, then the rules. correctly.511 The attribute of fuel existence of large private net benefits • In the case of vehicle fuel economy may be insufficiently salient, implies that there would need to be efficiency, and perhaps as a result of leading to a situation in which some other changed qualities, missed in one or more of the foregoing factors, the cost estimates, that would reduce consumers may have relatively few 509 Sanstad, A., and R. Howarth (1994). ‘‘ ‘Normal’ the benefits consumers receive from Markets, Market Imperfections, and Energy choices to purchase vehicles with Efficiency.’’ Energy Policy 22(10): 811–818 (Docket 504 their vehicles. We seek comments greater fuel economy once other EPA–HQ–OAR–2010–0799). that identify any such changed qualities characteristics, such as vehicle class, are 510 Greene, D., J. German, and M. Delucchi (2009). omitted from the analysis. Such chosen.507 ‘‘Fuel Economy: The Case for Market Failure’’ in comments should describe how changed A great deal of work in behavioral Reducing Climate Impacts in the Transportation Sector, Sperling, D., and J. Cannon, eds. Springer qualities affect consumer benefits from economics identifies and elaborates Science (Docket EPA–HQ–OAR–2010–0799); vehicles, and provide cost estimates for factors of this sort, which help account Dasgupta, S., S. Siddarth, and J. Silva-Risso (2007). eliminating the effects of the changes. for the Energy Paradox.508 This point ‘‘To Lease or to Buy? A Structural Model of a The central conundrum observed in holds in the context of fuel savings (the Consumer’s Vehicle and Contract Choice Decisions.’’ Journal of Marketing Research 44: 490– this market, that consumers appear not main focus here), but it applies equally 502 (Docket EPA–HQ–OAR–2010–0799); Metcalf, to purchase products featuring levels of to the other private benefits, including G., and D. Rosenthal (1995). ‘‘The ‘New’ View of energy efficiency that are in their reductions in refueling frequency and Investment Decisions and Public Policy Analysis: economic self-interest, has been referred additional driving. For example, it An Application to Green Lights and Cold Refrigerators,’’ Journal of Policy Analysis and to as the Energy Paradox in this setting might well be questioned whether Management 14: 517–531 (Docket EPA–HQ–OAR– 505 (and in several others). There are significant reductions in refueling 2010–0799); Hassett, K., and G. Metcalf (1995), many possible reasons discussed in frequency, and corresponding private ‘‘Energy Tax Credits and Residential Conservation academic research why this might savings, are fully internalized when Investment: Evidence from Panel Data,’’ Journal of 506 Public Economics 57: 201–217 (Docket EPA–HQ– occur: OAR–2010–0799); Metcalf, G., and K. Hassett Resource Economics 5 (2011): 103–146. Docket (1999), ‘‘Measuring the Energy Savings from Home 504 It should be noted that adding fuel-saving EPA–HQ–OAR–2010–0799. Improvement Investments: Evidence from Monthly technology does not preclude future improvements 507 For instance, in MY 2010, the range of fuel Billing Data,’’ The Review of Economics and in performance, safety, or other attributes, though economy (combined city and highway) available Statistics 81(3): 516–528 (Docket EPA–HQ–OAR– it is possible that the costs of these additions may among all listed 6-cylinder minivans was 18 to 20 2010–0799); van Soest D., and E. Bulte (2001), be affected by the presence of fuel-saving miles per gallon. With a manual-transmission 4- ‘‘Does the Energy-Efficiency Paradox Exist? technology. cylinder minivan, it is possible to get 24 mpg. See Technological Progress and Uncertainty.’’ 505 Jaffe, A. B., and Stavins, R. N. (1994). ‘‘The http://www.fueleconomy.gov, which is jointly Environmental and Resource Economics 18: 101–12 Energy Paradox and the Diffusion of Conservation maintained by the U.S. Department of Energy and (Docket EPA–HQ–OAR–2010–0799). Technology.’’ Resource and Energy Economics the EPA. 511 Turrentine, T. and K. Kurani (2007). ‘‘Car 16(2), 91–122. Docket EPA–HQ–OAR–2010–0799. 508 Jaffe, A. B., and Stavins, R. N. (1994). ‘‘The Buyers and Fuel Economy?’’ Energy Policy 35: 506 For an overview, see Helfand, Gloria and Ann Energy Paradox and the Diffusion of Conservation 1213–1223 (Docket EPA–HQ–OAR–2009–0472); Wolverton, ‘‘Evaluating the Consumer Response to Technology.’’ Resource and Energy Economics Larrick, R. P., and J.B. Soll (2008). ‘‘The MPG Fuel Economy: A Review of the Literature.’’ 16(2), 91–122. Docket EPA–HQ–OAR–2010–0799. illusion.’’ Science 320: 1593–1594 (Docket EPA– International Review of Environmental and See also Allcott and Wozny, supra note. HQ–OAR–2010–0799).

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consumers are not willing to pay $1 for purchase decisions.517 Of 27 studies, fuel economy, including risk or loss an expected $1 present value of reduced significant numbers of them find that aversion, and poor ability to calculate gasoline costs.512 Larrick and Soll consumers undervalue, overvalue, or savings. Also as noted, fuel economy (2008) find that consumers do not value approximately correctly the fuel may not be as salient as other vehicle understand how to translate changes in savings that they will receive from characteristics when a consumer is miles-per-gallon into fuel savings.513 In improved fuel economy. The variation considering vehicles. If these arguments addition, future fuel price (a major in the value of fuel economy in these are valid, then there will be significant component of fuel savings) is highly studies is so high that it appears to be gains to consumers of the government uncertain. Consumer fuel savings also inappropriate to identify one central mandating additional fuel economy. vary across individuals, who travel estimate of value from the literature. While acknowledging the conundrum, different amounts and have different Thus, estimating consumer response to EPA continues to value fuel savings driving styles. Cost calculations based higher vehicle fuel economy is still from the proposed standards using the unsettled science. on the average do not distinguish projected market value over the EPA and NHTSA recently revised the vehicles’ entire lifetimes, and to report between those that may gain or lose as fuel economy label on new vehicles in 514 that value among private benefits of the a result of the policy. In addition, it ways intended to improve information is possible that factors that might help proposed rule. Improved fuel economy for consumers.518 For instance, it will significantly reduce consumer explain why consumers don’t purchase presents fuel consumption data in expenditures on fuel, thus benefiting more fuel efficiency, such as transaction addition to miles per gallon, in response consumers. Real money is being saved costs and differences in quality, may not to the concern over the difficulties of and accrued by the initial buyer and be adequately measured.515 Studies translating mpg into fuel savings; it also subsequent owners. In addition, using a regularly show that fuel economy plays reports expected fuel savings or measure based on consumer a role in consumers’ vehicle purchases, additional costs relative to an average consideration at the time of vehicle but modeling that role is still in vehicle. Whether the new label will purchase would involve a very wide development, and there is no consensus help consumers to overcome the range of uncertainty, due to the lack of that most consumers make fully ‘‘energy paradox’’ is not known at this consensus on the value of additional 516 informed tradeoffs. A review point. A literature review that fuel economy in vehicle choice models. commissioned by EPA finds great contributed to the fuel economy labeling Due partly to this factor, it is true that variability in estimates of the role of fuel rule points out that consumers limitations in modeling affect our ability economy in consumers’ vehicle increasingly do a great deal of research to estimate how much of these savings on the internet before going to an auto would have occurred in the absence of 512 Allcott, Hunt, and Nathan Wozny, ‘‘Gasoline dealer.519 To the extent that the label the rule. For example, some of the Prices, Fuel Economy, and the Energy Paradox’’ improves consumers’ understanding of technologies predicted to be adopted in (2010), available at http://web.mit.edu/allcott/www/ the value of fuel economy, purchase Allcott%20and%20Wozny%202010%20- response to the rule may already be in %20Gasoline%20Prices,%20Fuel%20Economy,% decisions could change. Until the newly the deployment process due to shifts in (Docket EPA–HQ–OAR–2010–0799). U.S. revised labels enter the marketplace consumer demand for fuel economy, or Department of Energy, 2011. ‘‘Transportation and with MY 2013 vehicles (or optionally due to expectations by auto makers of the Economy,’’ Chapter 10 in ‘‘Transportation sooner), the agencies may not be able to Energy Data Book,’’ http://cta.ornl.gov/data/tedb30/ future GHG/fuel economy standards. It Edition30_Chapter10.pdf, Table 10.13, estimates determine how vehicle purchase is not impossible that some of these that gas and oil costs were 15.4% of vehicle costs decisions are likely to change as a result savings would have occurred in the per mile in 2010. of the new labels. absence of the proposed standards.520 513 Sanstad, A., and R. Howarth (1994). ‘‘ ‘Normal’ If there is a difference between To the extent that greater fuel economy Markets, Market Imperfections, and Energy expected fuel savings and consumers’ Efficiency.’’Energy Policy 22(10): 811–818 (Docket improvements than those assumed to EPA–HQ–OAR–2010–0799); Larrick, R. P., and J.B. willingness to pay for those fuel savings, occur under the baseline may have Soll (2008). ‘‘The MPG illusion.’’ Science 320: the next question is, which is the occurred due to market forces alone 1593–1594 (Docket EPA–HQ–OAR–2010–0799). appropriate measure of consumer (absent the proposed standards), the 514 Hausman J., Joskow P. (1982). ‘‘Evaluating the benefit? Fuel savings measure the actual Costs and Benefits of Appliance Efficiency analysis overestimates private and Standards.’’ American Economic Review 72: 220–25 monetary value that consumers will social benefits and costs. As discussed (Docket EPA–HQ–OAR–2010–0799). receive after purchasing a vehicle; the below, limitations in modeling also 515 Jaccard, Mark. ‘‘Paradigms of Energy willingness to pay for fuel economy affect our ability to estimate the effects Efficiency’s Cost and their Policy Implications: De´ja` measures the value that, before a of the rule on net benefits in the market Vu All Over Again.’’ Modeling the Economics of purchase, consumers place on Greenhouse Gas Mitigation: Summary of a for vehicles. Workshop, K. John Holmes, Rapporteur. National additional fuel economy. As noted, Consumer vehicle choice models Academies Press, 2010. http://www.nap.edu/ there are a number of reasons that estimate what vehicles consumers buy openbook.php?record_id=13023&page=42 (Docket consumers may incorrectly estimate the based on vehicle and consumer EPA–HQ–OAR–2010–0799). benefits that they get from improved 516 E.g., Goldberg, Pinelopi Koujianou, ‘‘Product characteristics. In principle, such Differentiation and Oligopoly in International models could provide a means of 517 Markets: The Case of the U.S. Automobile Greene, David L. ‘‘How Consumers Value Fuel understanding both the role of fuel Industry,’’ Econometrica 63(4) (July 1995): 891–951 Economy: A Literature Review.’’ EPA Report EPA– (Docket EPA–HQ–OAR–2010–0799); Goldberg, 420–R–10–008, March 2010 (Docket EPA–HQ– economy in consumers’ purchase Pinelopi Koujianou, ‘‘The Effects of the Corporate OAR–2010–0799). decisions and the effects of this rule on Average Fuel Efficiency Standards in the U.S.,’’ 518 Environmental Protection Agency and the benefits that consumers will get Journal of Industrial Economics 46(1) (March 1998): Department of Transportation, ‘‘Revisions and from vehicles. Helfand and Wolverton 1–33 (Docket EPA–HQ–OAR–2010–0799); Busse, Additions to Motor Vehicle Fuel Economy Label,’’ Meghan R., Christopher R. Knittel, and Florian Federal Register 76(129) (July 6, 2011): 39478– discuss the wide variation in the Zettelmeyer (2009). ‘‘Pain at the Pump: How 39587. Gasoline Prices Affect Automobile Purchasing in 519 PRR, Inc., ‘‘Environmental Protection Agency 520 However, as discussed at section III.D above, New and Used Markets,’’ Working paper (accessed Fuel Economy Label: Literature Review.’’ EPA–420– the assumption of a flat baseline absent this rule 11/1/11), available at http://web.mit.edu/knittel/ R–10–906, August 2010, available at http:// rests on strong historic evidence of lack of increase www/papers/gaspaper_latest.pdf (Docket EPA–HQ– www.epa.gov/fueleconomy/label/420r10906.pdf in fuel economy absent either regulatory control or OAR–2010–0799). 2010 (Docket EPA–HQ–OAR–2010–0799). sharply rising fuel prices.

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structure and results of these models.521 review of values found in the literature price, the technology cost thus measures Models or model results have not on vehicle choice modeling. Additional the welfare loss to the consumer. frequently been systematically discussion of this model can be found Increasing fuel economy would have to compared to each other. When they in Chapter 8.1.2.8 of the DRIA. The lead to other changes in the vehicles have, the results show large variation model is still undergoing development; that consumers find undesirable for over, for instance, the value that the agency will seek peer review on it there to be additional losses not consumers place on additional fuel before it is utilized. In addition, bounded by the technology costs. concerns remain over the ability of any economy. b. Electric Vehicles and Other Advanced vehicle choice model to make In order to develop greater Technology Vehicles understanding of these models, EPA is reasonable predictions of the response in the process of developing a vehicle of the total number and composition of This proposal finds that electric choice model. It uses a ‘‘nested logit’’ new vehicle sales to changes in the vehicles (EVs) may form a part (albeit structure common in the vehicle choice prices and characteristics of specific limited) of some manufacturers’ modeling literature. ‘‘Nesting’’ refers to vehicle models. EPA seeks comments on compliance strategy. The following the decision-tree structure of buyers’ the use of vehicle choice modeling for discussion will focus on EVs, because choices among vehicles the model predicting changes in sales mix due to they are expected to play more of a role employs, and ‘‘logit’’ refers to the policies, and on methods to test the in compliance than vehicles with other specific pattern by which buyers’ ability of a vehicle choice model to alternative fuels, but related issues may choices respond to differences in the produce reasonable estimates of changes arise for other alternatively fueled overall utility that individual vehicle in fleet mix. vehicles. It should be noted that EPA’s models and their attributes provide.522 The next issue is the potential for loss projection of the penetration of EVs in The nesting structure in EPA’s model in consumer welfare due to the rule. As the MY 2025 fleet is very small (under involves a hierarchy of choices. In its mentioned above (and discussed more 3%). Electric vehicles (EVs), at the time of current form, at the initial decision thoroughly in Section III.D.3 of this this rulemaking, have very different node, consumers choose between preamble), the technology cost estimates refueling infrastructures than buying a new vehicle or not. developed here for conventional conventional gasoline- or diesel-fueled Conditional on choosing a new vehicle, vehicles take into account the costs to vehicles: Refueling EVs requires either consumers then choose among hold other vehicle attributes, such as 523 access to electric charging facilities or passenger vehicles, cargo vehicles, and size and performance, constant. In battery replacement. In addition, ultra-luxury vehicles. The next set of addition, the analysis assumes that the because of the expense of increased choices subdivides each of these full technology costs are passed along to battery capacity, EVs commonly have a categories into vehicle type (e.g., consumers. With these assumptions, because welfare losses are monetary smaller driving range than conventional standard car, minivan, SUV, etc.). Next, vehicles. Because of these differences, the vehicle types are divided into estimates of how much consumers would have to be compensated to be the vehicles cannot be considered classes (small, medium, and large SUVs, conventional vehicles unmodified for instance), and then, at the bottom, made as well off as in the absence of the 524 except for cost and fuel economy. As a are the individual models. At this change, the price increase measures the loss to the buyer.525 Assuming that result, the consumer welfare arguments bottom level, vehicles that are similar to presented above need to be modified to each other (such as standard the full technology cost gets passed along to the buyer as an increase in account for these differences. subcompacts, or prestige large vehicles) A first important point to observe is end up in the same ‘‘nest.’’ Substitution 523 If the reference-case vehicles include different that, although auto makers are required within a nest is considered much more vehicle characteristics, such as improved to comply with the proposed standards, likely than substitution across nests, acceleration or towing capacity, then the costs for producing EVs as a compliance strategy because the vehicles within a nest are the proposed standards would be, as here, the costs is not specifically required. Auto makers more similar to each other than vehicles of adding compliance technologies to those reference-case vehicles. These costs may differ from will choose to provide EVs either if they in different nests. For instance, a person those estimated here, due to our lack of information have few alternative ways to comply, or is more likely to substitute between a on how those vehicle characteristics might change if EVs are, for some range of production, Chevrolet Aveo and a Toyota Yaris (both between now and 2025. likely to be more profitable (or less 524 subcompacts) than between an Aveo This approach describes the economic concept unprofitable) than other ways of and a pickup truck. In addition, of compensating variation, a payment of money after a change that would make a consumer as well complying. substitution is greater at low decision off after the change as before it. A related concept, From the consumer perspective, it is nodes (such as individual vehicles) than equivalent variation, estimates the income change important to observe that there is no at higher decision nodes (such as the that would be an alternative to the change taking mandate for any consumer to choose buy/no buy decision), because there are place. The difference between them is whether the consumer’s point of reference is her welfare before any particular kind of vehicle. An more choices at lower levels than at the change (compensating variation) or after the individual consumer will buy an EV higher levels. Parameters for the model change (equivalent variation). In practice, these two only if the price and characteristics of (including demand elasticities and the measures are typically very close together for the vehicle make it more attractive to value of fuel economy in purchase marketed goods. 525 Indeed, it is likely to be an overestimate of the her than other vehicles. If the range of decisions) are being selected based on a loss to the consumer, because the consumer has vehicles in the conventional fleet does choices other than buying the same vehicle with a not shrink, the availability of EVs 521 Helfand, Gloria and Ann Wolverton, higher price; she could choose a different vehicle, should not reduce consumer welfare ‘‘Evaluating the Consumer Response to Fuel or decide not to buy a new vehicle. The consumer Economy: A Review of the Literature.’’ would choose one of those options only if the compared to a fleet with no EVs: International Review of Environmental and alternative involves less loss than paying the higher Increasing options should not reduce Resource Economics 5 (2011): 103–146 (Docket price. Thus, the increase in price that the consumer consumer well-being, because other EPA–HQ–OAR–2010–0799). faces would be the upper bound of loss of consumer existing options still are available. On 522 Logit refers to a statistical analysis method welfare, unless there are other changes to the used for analyzing the factors that affect discrete vehicle due to the fuel economy improvements, the other hand, if the variety of vehicles choices (i.e., yes/no decisions or the choice among unaccounted for in the costs, that make the vehicle in the conventional market does change, a countable number of options). less desirable to consumers. there may be consumers who are forced

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to substitute to alternative vehicles. The people who park on the street. If an MINI Cooper) for a year.529 They found use of the footprint-based standard is infrastructure develops for recharging that drivers adapted their driving intended in part to help maintain the vehicles with the convenience patterns in response to EV ownership: diversity of vehicle sizes. Because the approaching that of buying gasoline, For instance, they modified where they agencies do not expect any vehicle range or home recharging may become shopped and increased their use of classes to become unavailable, less of a barrier to purchase. Of course, regenerative braking in order to reduce consumers who buy EVs therefore are other attributes of the marketed EVs, range as a constraint. These finding expected to choose them voluntarily, in such as their performance and their suggest that, for some consumers, range preference to the other vehicles passenger and storage capacity, will also may be a limiting factor only available to them. affect the share of consumers who will occasionally. If those consumers are From a practical perspective, the key consider them. As infrastructure, EV willing to consider alternative ways of issue is whether the consumer demand technology, and costs evolve over time, driving long distances, such as renting for EVs is large enough to absorb all the consumer interest in EVs will adjust as a gasoline vehicle or exchanging EVs that automakers will produce in well. Thus, modeling consumer vehicles within the household, then order to comply with these standards, or response to advanced technology limited range may not be a barrier to whether automakers will need to vehicles in the 2017–2025 time frame adoption for them. These studies also increase consumer purchases by poses even more challenges than those raise the question whether analysis of providing subsidies to consumers. If associated with modeling consumer EV use should be based on the driving enough consumers find EVs more response for conventional vehicles. patterns from conventional vehicles, attractive than other vehicles, and because consumers may use EVs automakers therefore do not need to Because range is a major factor in EV differently than conventional vehicles. subsidize their purchase, then both acceptability, it is starting to draw EVs themselves are expected to consumers and producers will benefit attention in the research community. change over time, as battery from the introduction of EVs. On the For instance, several studies have technologies and costs develop. In other hand, it is possible that examined consumers’ willingness to pay addition, consumer interest in EVs is automakers will find EVs to be part of for increased vehicle range. Results likely to change over time, as early a cost-effective compliance technology vary, depending on when the survey adopters share their experiences. The but nevertheless need to price them was conducted (studies from the early initial research in the area suggests that below cost them to sell sufficient 1990s have much higher values than consumers put a high value on numbers. If so, then there is a welfare more recent studies) and on household increased range, though this value loss associated with the sale of EVs income and other demographic factors; appears to be changing over time. The beyond those that would be sold in the some find range to be statistically research also suggests that some free market. The deadweight loss can be indistinguishable from zero, while segments of the driving public may approximated as one-half of the size of others find the value of increasing range experience little, if any, restriction on the subsidy needed for the marginal from 150 to 300 miles to be as much as their driving due to range limitations if purchaser, times the number of sales $59,000 (2009$) (see RIA Chapter 8 for they were to purchase EVs. At this time that would need the subsidy. Estimating more discussion). it is not possible to estimate whether the this value would require knowing the Other research has examined how the number of people who will choose to number of sales necessary beyond the range limitation may affect driving purchase EVs at private-market prices will be more or less than the number expected sales level in an unregulated patterns. Pearre et al. observed daily that auto makers are expected to market, and the amount of the subsidy driving patterns for 484 vehicles in the produce to comply with the standards. that would be necessary to induce the Atlanta area over a year.527 In their We note that our projections of desired number of sales. Given the sample, 9 percent of vehicles never technology penetrations indicate that a fledgling state of the market for EVs, exceeded 100 miles in one day, and 21 very small portion (fewer than 3 neither of these values is easily percent never exceeded 150 miles in percent) of new vehicles produced in knowable for the 2017 to 2025 time one day. Lin and Greene compared the 2025 will need to be EVs. For the frame. cost of reduced range to the cost of purposes of the analysis presented here A number of factors will affect the additional battery capacity for EVs.528 likelihood of consumer acceptance of for this proposal, we assume that the They find that an ‘‘optimized’’ range of consumer market will be sufficient to EVs. People with short commutes may about 75 miles would be sufficient for find little obstacle in the relatively short absorb the number of EVs expected to be 98% of days for ‘‘modest’’ drivers (those used for compliance under this rule. We driving range, but others who regularly who average about 25 miles per day); drive long distances may find EVs’ seek comment and further research that the optimized EV range for ‘‘average’’ might provide evidence on the ranges limiting. The reduced tailpipe drivers (who average about 43 miles per emissions and reduced noise may be consumer market for EVs in the 2017– day), close to 120 miles, would meet 2025 period. attractive features to some their needs on 97 percent of days. consumers.526 Recharging at home Turrentine et al. studied drivers who c. Summary could be a convenient, desirable feature leased MINI E EVs (a conversion of the The Energy Paradox, also known as for people who have garages with the efficiency gap, raises the question, electric charging capability, but not for 527 Pearre, Nathaniel S., Willett Kempton, Randall why do private markets not provide L. Guensler, and Vetri V. Elango. ‘‘Electric vehicles: energy savings that engineering, 526 For instance, Hidrue et al. (Hidrue, Michael How much range is required for a day’s driving?’’ K., George R. Parsons, Willett Kempton, and Meryl Transportation Research Part C 19(6) (2011): 1171– technology cost analyses find are cost- P. Gardner. ‘‘Willingness to Pay for Electric 1184 (Docket EPA–HQ–OAR–2010–0799). Vehicles and their Attributes.’’ Resource and Energy 528 Lin, Zhenhong, and David Greene. 529 Turrentine, Tom, Dahlia Garas, Andy Lentz, Economics 33(3) (2011): 686–705 (Docket EPA–HQ– ‘‘Rethinking FCV/BEV Vehicle Range: A Consumer and Justin Woodjack. ‘‘The UC Davis MINI E OAR–2010–0799)) find that some consumers are Value Trade-off Perspective.’’ The 25th World Consumer Study.’’ UC Davis Institute of willing to pay $5100 for vehicles with 95% lower Battery, Hybrid and Fuel Cell Electric Vehicle Transportation Research Report UCD–ITS–RR–11– emissions than the vehicles they otherwise aim to Symposium and Exhibition, Shenzhen, China, Nov. 05, May 4, 2011 (Docket EPA–HQ–OAR–2010– purchase. 5–9, 2010 (Docket EPA–HQ–OAR–2010–0799). 0799).

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effective? Though a number of range a cost of an EV), current research direct manufacturing costs have been hypotheses have been raised to explain also suggests that consumers may find estimated in a variety of ways—vehicle the paradox, studies have not been able ways to adapt to the shorter range so and technology tear down, models at this time to identify the relative that it is less constraining. The developed by outside organizations, and importance of different explanations. As technologies, prices, infrastructure, and literature review—and indirect costs a result, it is not possible at this point consumer experiences associated with have been estimated using the updated to state with any degree of certainty EVs are all expected to evolve between and revised indirect cost multiplier whether the market for fuel efficiency is the present and the period when this (ICM) approach that was first developed operating efficiently, or whether the rule becomes effective. The analysis in for the 2012–2016 final rule. All of these market has failings. this proposal assumes that the consumer individual technology costs are For conventional vehicles, the key market is sufficient to absorb the described in detail in Chapter 3 of the implication is that the there may be two expected number of EVs without draft joint TSD. Also described there are different estimates of the value of fuel subsidies. the ICMs used in this proposal and the We seek comment and further savings. One value comes from the ways the ICMs have been updated and engineering estimates, based on research on the efficiency of the market revised since the 2012–2016 final rule consumers’ expected driving patterns for fuel economy for conventional which results in considerably higher over the vehicle’s lifetime; the other vehicles and on the likely size of the indirect costs in this proposal than value is what the consumer factors into consumer market for EVs in 2017–2025. the purchase decision when buying a estimated in the 2012–2016 final rule. 2. Costs Associated With the Vehicle vehicle. Although economic theory Further, we describe in detail the Standards suggests that these two values should be adjustments to technology costs to the same in a well functioning market, In this section, EPA presents our account for manufacturing learning and if engineering estimates accurately estimate of the costs associated with the the cost reductions that result from that measure fuel savings that consumers proposed vehicle program. The learning. We note here that learning will experience, the available evidence presentation here summarizes the impacts are applied only to direct does not provide support for that theory. vehicle level costs associated with the manufacturing costs which differs from The fuel savings estimates presented new technologies expected to be added the 2012–2016 final rule which applied here are based on expected consumers’ to meet the proposed GHG standards, learning to both direct and indirect in-use fuel consumption rather than the including hardware costs to comply costs. Lastly, we have included costs value they estimate at the time that they with the proposed A/C credit program. associated with stranded capital (i.e., consider purchasing a vehicle. Though The analysis summarized here provides capital investments that are not fully the cost estimates may not have taken our estimate of incremental costs on a recaptured by auto makers because they into account some changes that per vehicle basis and on an annual total would be forced to update vehicles on consumers may not find desirable, those basis. a more rapid schedule than they may omitted costs would have to be of very The presentation here summarizes the have intended absent this proposal). considerable magnitude to have a outputs of the OMEGA model that was Again, this is detailed in Chapter 3 of significant effect on the net benefits of discussed in some detail in Section III.D the draft joint TSD. this rule. The costs imposed on the of this preamble. For details behind the EPA then used the technology costs to consumer are measured by the costs of analysis such as the OMEGA model build GHG and fuel consumption the technologies needed to comply with inputs and the estimates of costs reducing packages of technologies for the standards. Because the cost associated with individual technologies, each of 19 different vehicle types meant estimates have built into them the costs the reader is directed to Chapter 1 of the to fully represent the range of baseline EPA’s draft RIA and Chapter 3 of the required to hold other vehicle attributes vehicle technologies in the marketplace draft Joint TSD. For more detail on the constant, then, in principle, (i.e., number of cylinders, valve train compensating consumers for the outputs of the OMEGA model and the configuration, vehicle class). This increased costs would hold them overall vehicle program costs package building process as well as the harmless, even if they paid no attention summarized here, the reader is directed process we use to determine the most to the fuel efficiency of vehicles when to Chapters 3 and 5 of EPA’s draft RIA. cost effective packages for each of the 19 making their purchase decisions. With respect to the aggregate cost For electric vehicles, and perhaps for estimations presented here, EPA notes vehicle types is detailed in Chapter 1 of other advanced-technology vehicles, that there are a number of areas where EPA’s draft RIA. These packages are other vehicle attributes are not expected the results of our analysis may be then used as inputs to the OMEGA to be held constant. In particular, their conservative and, in general, EPA model to estimate the most cost effective ranges and modes of refueling will be believes we have directionally means of compliance with the proposed different from those of conventional overestimated the costs of compliance standards giving due consideration to vehicles. From a social welfare with these new standards, especially in the timing required for manufacturers to perspective, the key question is whether not accounting for the full range of implement the needed technologies. the number of consumers who will want credit opportunities available to That is, we assume that manufacturers to buy EVs at their private-market prices manufacturers. For example, some cost cannot add the full suite of needed will exceed the number that auto saving programs are considered in our technologies in the first year of makers are expected to produce to analysis, such as full car/truck trading, implementation. Instead, we expect comply with the standards. If too few while others are not, such as advanced them to add technologies to vehicles consumers are willing to buy them at vehicle technology credits. during the typical 4 to 5 year redesign their private-market prices, then auto cycle. As such, we expect that every makers will have to subsidize their a. Costs per Vehicle vehicle can be redesigned to add prices. Though current research finds To develop costs per vehicle, EPA has significant levels of new technology that consumers typically have a high used the same methodology as that used every 4 to 5 years. Further, we do not value for increasing the range of EVs in the recent 2012–2016 final rule and expect manufacturers to redesign or (and thus would consider a shorter the 2010 TAR. Individual technology refresh vehicles at a pace more rapid

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than the industry standard four to five The results, including costs associated described in Chapter 3 of the draft joint year cycle. with the air conditioning program and TSD, are shown in Table III–65. estimates of stranded capital as

b. Annual Costs of the Proposed above result in the total annual costs proposed MY 2025 standards would National Program presented in Table III–66 below. Note continue in perpetuity. Any changes to that the costs presented in Table III–66 the proposed standards would be The costs presented here represent the do not include the fuel savings that considered as part of a future incremental costs for newly added consumers would experience as a result rulemaking. In other words, the technology to comply with the proposed of driving a vehicle with improved fuel proposed standards would not apply program. Together with the projected economy. Those impacts are presented only to 2017–2025 model year increases in car and truck sales, the in Section III.H.4. Note also that the vehicles—they would, in fact, apply to increases in per-car and per-truck costs presented here represent costs all 2025 and later model year vehicles. average costs shown in Table III–65, estimated to occur presuming that the

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3. Cost per Ton of Emissions Reduced emissions reductions has been reduced fuel consumption (presented calculated in the years 2020, 2030, 2040, below in Section III.H.4). This latter EPA has calculated the cost per ton of and 2050 using the annual vehicle calculation does not include the other GHG reductions associated with the compliance costs and emission benefits associated with this program proposed GHG standards on a CO2eq reductions for each of those years. The such as those associated with energy basis using the costs and the emissions value in 2050 represents the long-term security benefits as discussed later in reductions described in Section III.F. cost per ton of the emissions reduced. Section III. By including the fuel These values are presented in Table III– EPA has also calculated the cost per savings, the cost per ton is generally less 67 for cars, trucks and the combined metric ton of GHG emission reductions than $0 since the estimated value of fuel fleet. The cost per metric ton of GHG including the savings associated with savings outweighs the program costs.

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4. Reduction in Fuel Consumption and decrease under the proposed GHG consumers who drive more than our Its Impacts standards, electricity consumption average estimates for vehicle miles a. What are the projected changes in fuel would increase slightly due to the small traveled (VMT) will experience more consumption? penetration of EVs and PHEVs (1–3% fuel savings; consumers who drive less for the 2021 and 2025 MYs). The fuel than our average VMT estimates will The proposed CO2 standards will savings includes both the gasoline experience less fuel savings. result in significant improvements in consumption reductions and the The expected impacts on fuel the fuel efficiency of affected vehicles. electricity consumption increases. Note consumption are shown in Table III–68. Drivers of those vehicles will see that the total number of miles that The gallons reduced and kilowatt hours corresponding savings associated with vehicles are driven each year is different increased (kWh) as shown in the tables reduced fuel expenditures. EPA has under the control case than in the reflect impacts from the proposed CO2 estimated the impacts on fuel reference case due to the ‘‘rebound standards, including the A/C credit consumption for both the tailpipe CO2 effect,’’ which is discussed in Section program, and include increased standards and the A/C credit program. III.H.4.c and in Chapter 4 of the draft consumption resulting from the rebound While gasoline consumption would joint TSD. EPA also notes that effect.

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b. What are the fuel savings to the To do this, we multiply reduced fuel Release.530 These estimates do not consumer? consumption in each year by the Using the fuel consumption estimates corresponding estimated average fuel 530 In the Preface to AEO 2011, the Energy presented in Section III.H.4.a, EPA can price in that year, using the reference Information Administration describes the reference calculate the monetized fuel savings case taken from the AEO 2011 Final case. They state that, ‘‘Projections by EIA are not associated with the proposed standards. Continued

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account for the significant uncertainty used by NHTSA and EPA and many gasoline tax rates, the difference in future fuel prices; the monetized fuel other government agencies to estimate between these two columns represents savings would be understated if actual the projected price of fuel. This has the reduction in fuel tax revenues that future fuel prices are higher (or been done using both the pre-tax and will be received by state and federal overstated if fuel prices are lower) than post-tax gasoline prices. Since the post- governments—about $82 million in estimated. AEO is a standard reference tax gasoline prices are the prices paid at 2017 and $17 billion by 2050. These fuel pumps, the fuel savings calculated results are shown in Table III–69. Note statements of what will happen but of what might happen, given the assumptions and methodologies using these prices represent the savings that in Section III.H.9, the overall used for any particular scenario. The Reference case consumers would see. The pre-tax fuel benefits and costs of the proposal are projection is a business-as-usual trend estimate, savings are those savings that society presented and, for that reason, only the given known technology and technological and demographic trends. would see. Assuming no change in pre-tax fuel savings are presented there.

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As shown in Table III–69, the a result of the proposed standards. As conundrum from an economic agencies are projecting that consumers discussed further in the introductory perspective that these large fuel savings would realize very large fuel savings as paragraphs of Section III.H.1, it is a have not been provided by automakers

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and purchased by consumers. A number using an estimate of the future rebound rebound effect will be the same whether of behavioral and market phenomena effect, analysis by Small and Greene a consumer is driving a conventional may lead to this disparity between the show that the rebound effect could be in gasoline vehicle or a vehicle powered by fuel economy that makes financial sense the range of 5% or lower.535 grid electricity. We are not aware of any to consumers and the fuel economy they Most studies that estimate the research that has examined consumer purchase. Regardless how consumers rebound effect use the fuel cost per mile responses to changes in the cost per make their decisions on how much fuel of driving or gasoline prices as a mile of driving that result from driving economy to purchase, EPA expects that, surrogate for fuel efficiency. Recent an electric-powered vehicle instead of a in the aggregate, they will gain these work conducted by Kenneth conventional gasoline vehicle. EPA fuel savings, which will provide actual Gillingham, however, provides requests comment and data on this money in consumers’ pockets. suggestive evidence that consumers may topic. be less responsive to changes in fuel Chapter 4.2.5 of the Joint TSD reviews c. VMT Rebound Effect efficiency than to changes in fuel the relevant literature and discusses in The rebound effect refers to the prices.536 While this research pertains more depth the reasoning for the increase in vehicle use that results if an specifically to California, this finding rebound value used here. The rebound increase in fuel efficiency lowers the suggests that the common assumption effect is also discussed in Section II.E of cost per mile of driving. For this that consumers respond similarly to the preamble. While EPA has used a proposal, EPA is using an estimate of 10 changes in gasoline prices and changes weight of evidence approach for percent for the rebound effect (i.e., we in fuel efficiency may overstate the determining that 10 percent is a assume a 10 percent decrease in fuel potential rebound effect. Additional reasonable value to use for the rebound cost per mile from our proposed research is needed in this area, and EPA effect, EPA requests comments on this standards would result in a 1 percent requests comments and data on this and alternative methodologies for increase in VMT). topic. estimating the rebound effect over the As we discussed in the 2012–2016 Another factor discussed by period that our proposed standards rulemaking and in Chapter 4 of the Joint Gillingham is whether consumers would go into effect. EPA also invites TSD, this value was not derived from a actually respond the same way to an the submission of new data regarding single point estimate from a particular increase in the cost of driving compared estimates of the rebound effect. We also study, but instead represents a to a decrease in the cost of driving. discuss two approaches for modeling reasonable compromise between the There is some evidence in the literature the rebound effect in Chapter 4 of the historical estimates and the projected that consumers are more responsive to DRIA; we request comment on these future estimates. This value is an increase in prices than to a decrease modeling approaches. consistent with the rebound estimate for in prices.537 538 539 Furthermore, it is the most recent time period analyzed in also possible that consumers respond 5. CO2 Emission Reduction Benefits the Small and Van Dender 2007 more to a large shock than a small, EPA has assigned a dollar value to paper,531 and falls within the range of gradual change in prices. Since these reductions in CO2 emissions using the larger body of historical work on the proposed standards would decrease the global estimates of the social cost of rebound effect.532 Recent work by David cost of driving gradually over time, it is carbon (SCC). The SCC is an estimate of Greene on the rebound effect for light- possible that the rebound effect would the monetized damages associated with duty vehicles in the U.S. supports the be much smaller than some of the an incremental increase in carbon hypothesis that the rebound effect is estimates included in the historical emissions in a given year. It is intended decreasing over time,533 which could literature. More research in this area is to include (but is not limited to) changes mean that rebound estimates based on also important, and EPA invites in net agricultural productivity, human recent time period data may be more comment and data on this aspect of the health, property damages from reliable than historical estimates that are rebound effect. increased flood risk, and the value of based on older time period data. New Finally, for purposes of analyzing the ecosystem services due to climate proposed standards, EPA assumes the work by Hymel, Small, and Van Dender change. The SCC estimates used in this also supports the theory that the analysis were developed through an 2010, Pages 1220–1241, ISSN 0191–2615, DOI: rebound effect is declining over time, 10.1016/j.trb.2010.02.007. (Docket EPA–HQ–OAR– interagency process that included EPA, although the Hymel et al. estimates are 2010–0799). DOT/NHTSA, and other executive higher than the 2007 Small and Van 535 Report by Kenneth A. Small of University of branch entities, and concluded in Dender estimates.534 Furthermore, by California at Irvine to EPA, ‘‘The Rebound Effect February 2010. We first used these SCC from Fuel Efficiency Standards: Measurement and Projection to 2030’’, June 12, 2009 (Docket EPA– estimates in the benefits analysis for the 531 Small, K. and K. Van Dender, 2007. ‘‘Fuel HQ–OAR–2010–0799). See also Greene, 2010. 2012–2016 light-duty GHG rulemaking; Efficiency and Motor Vehicle Travel: The Declining 536 Gillingham, Kenneth. ‘‘The Consumer see 75 FR at 25520. We have continued Rebound Effect’’, The Energy Journal, vol. 28, no. Response to Gasoline Price Changes: Empirical to use these estimates in other 1, pp. 25–51 (Docket EPA–HQ–OAR–2010–0799). Evidence and Policy Implications.’’ Ph.D. diss., 532 Sorrell, S. and J. Dimitropoulos, 2007. Stanford University, 2011. (Docket EPA–HQ–OAR– rulemaking analyses, including the ‘‘UKERC Review of Evidence for the Rebound 2010–0799). heavy-duty GHG rulemaking; see 76 FR Effect, Technical Report 2: Econometric Studies’’, 537 Dargay, J.M., Gately, D., 1997. ‘‘The demand at 57332. The SCC Technical Support UKERC/WP/TPA/2007/010, UK Energy Research for transportation fuels: imperfect price- Document (SCC TSD) provides a Centre, London, October (Docket EPA–HQ–OAR– reversibility?’’ Transportation Research Part B 31(1). 2010–0799). (Docket EPA–HQ–OAR–2010–0799). complete discussion of the methods 540 533 Greene, David, ‘‘Rebound 2007: Analysis of 538 Dermot Gately, 1993. ‘‘The Imperfect Price- used to develop these SCC estimates. National Light-Duty Vehicle Travel Statistics,’’ Reversibility of World Oil Demand,’’ The Energy February 9, 2010 (Docket EPA–HQ–OAR–2010– Journal, International Association for Energy 540 Docket ID EPA–HQ–OAR–2010–0799, 0799). This paper has been accepted for an Economics, vol. 14(4), pages 163–182. (Docket Technical Support Document: Social Cost of upcoming special issue of Energy Policy, although EPA–HQ–OAR–2010–0799). Carbon for Regulatory Impact Analysis Under the publication date has not yet been determined. 539 Sentenac-Chemin, E. (2010) Is the price effect Executive Order 12866, Interagency Working Group 534 Hymel, Kent M., Kenneth A. Small, and Kurt on fuel consumption symmetric? Some evidence on Social Cost of Carbon, with participation by Van Dender, ‘‘Induced demand and rebound effects from an empirical study, Energy Policy (2010), Council of Economic Advisers, Council on in road transport,’’ Transportation Research Part B: doi:10.1016/j.enpol.2010.07.016 (Docket EPA–HQ– Environmental Quality, Department of Agriculture, Methodological, Volume 44, Issue 10, December OAR–2010–0799). Department of Commerce, Department of Energy,

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The interagency group selected four Science points out that any assessment Standards (NSPS) for oil and gas SCC values for use in regulatory will suffer from uncertainty, exploration (76 FR at 52792). Referred to analyses, which we have applied in this speculation, and lack of information as the ‘‘global warming potential (GWP) analysis: $5, $22, $36, and $67 per about (1) Future emissions of approach,’’ the calculation uses the metric ton of CO2 emissions in 2010, in greenhouse gases, (2) the effects of past GWP of the non-CO2 gas to estimate CO2 2009 dollars.541 542 The first three values and future emissions on the climate equivalents and then multiplies these are based on the average SCC from three system, (3) the impact of changes in CO2 equivalent emission reductions by integrated assessment models, at climate on the physical and biological the social cost of CO2. discount rates of 5, 3, and 2.5 percent, environment, and (4) the translation of EPA presented and requested respectively. SCCs at several discount these environmental impacts into comment on the GWP approach in the 543 rates are included because the literature economic damages. As a result, any NSPS proposal as an interim method to shows that the SCC is quite sensitive to effort to quantify and monetize the produce estimates of the social cost of assumptions about the discount rate, harms associated with climate change methane until the Administration and because no consensus exists on the will raise serious questions of science, develops such values. Similarly, we appropriate rate to use in an economics, and ethics and should be request comments in this proposed intergenerational context. The fourth viewed as provisional. rulemaking on using the GWPs as an value is the 95th percentile of the SCC The interagency group noted a interim approach and more broadly number of limitations to the SCC from all three models at a 3 percent about appropriate methods to monetize analysis, including the incomplete way discount rate. It is included to represent the climate benefits of non-CO GHG in which the integrated assessment 2 higher-than-expected impacts from reductions. temperature change further out in the models capture catastrophic and non- tails of the SCC distribution. Low catastrophic impacts, their incomplete In addition, the U.S. government probability, high impact events are treatment of adaptation and intends to revise the SCC estimates, incorporated into all of the SCC values technological change, uncertainty in the taking into account new research through explicit consideration of their extrapolation of damages to high findings that were not included in the effects in two of the three models as temperatures, and assumptions first round, and has set a preliminary well as the use of a probability density regarding risk aversion. The limited goal of revisiting the SCC values in the function for equilibrium climate amount of research linking climate next few years or at such time as sensitivity. Treating climate sensitivity impacts to economic damages makes the substantially updated models become probabilistically results in more high interagency modeling exercise even available, and to continue to support temperature outcomes, which in turn more difficult. The interagency group research in this area. In particular, DOE lead to higher projections of damages. hopes that over time researchers and and EPA hosted a series of workshops The SCC increases over time because modelers will work to fill these gaps to help motivate and inform this 544 future emissions are expected to and that the SCC estimates used for process. The first workshop focused produce larger incremental damages as regulatory analysis by the Federal on conceptual and methodological physical and economic systems become government will continue to evolve issues related to integrated assessment more stressed in response to greater with improvements in modeling. modeling and valuing climate change climatic change. Note that the Another limitation of the GHG impacts, along with methods of interagency group estimated the growth benefits analysis in this proposed rule is incorporating these estimates into rate of the SCC directly using the three that it does not monetize the impacts policy analysis. integrated assessment models rather associated with the non-CO2 GHG Applying the global SCC estimates, than assuming a constant annual growth reductions expected under the proposed shown in Table III–70, to the estimated rate. This helps to ensure that the standards (in this case, nitrous oxides, reductions in CO2 emissions under the estimates are internally consistent with methane, and hydorfluorocarbons). The proposed standards, we estimate the other modeling assumptions. Table III– interagency group did not estimate the dollar value of the GHG related benefits 70 presents the SCC estimates used in social costs of non-CO2 GHG emissions for each analysis year. For internal this analysis. when it developed the current social consistency, the annual benefits are When attempting to assess the cost of CO2 values. EPA recently discounted back to net present value incremental economic impacts of carbon requested comment on a methodology to terms using the same discount rate as dioxide emissions, the analyst faces a estimate the benefits associated with each SCC estimate (i.e., 5%, 3%, and 545 number of serious challenges. A recent non-CO2 GHG reductions under the 2.5%) rather than 3% and 7%. These report from the National Academies of proposed New Source Performance estimates are provided in Table III–71.

Department of Transportation, Environmental would not result in accurate estimates of the social 544 Improving the Assessment and Valuation of Protection Agency, National Economic Council, costs of non-CO2 gases’’ (SCC TSD, pg 13). Climate Change Impacts for Policy and Regulatory Office of Energy and Climate Change, Office of 542 The SCC estimates were converted from 2007 Analysis, held November 18–19, 2010 and January Management and Budget, Office of Science and dollars to 2008 dollars using a GDP price deflator 27–28, 2011. Materials available at: http:// Technology Policy, and Department of Treasury (1.021) and again to 2009 dollars using a GDP price yosemite.epa.gov/ee/epa/eerm.nsf/ (February 2010). Also available at http://epa.gov/ deflator (1.009) obtained from the Bureau of vwRepNumLookup/EE–0564?OpenDocument and otaq/climate/regulations.htm. Economic Analysis, National Income and Product http://yosemite.epa.gov/ee/epa/eerm.nsf/ 541 The interagency group decided that these Accounts Table 1.1.4, Prices Indexes for Gross vwRepNumLookup/EE–0566?OpenDocument. See estimates apply only to CO2 emissions. Given that warming profiles and impacts other than Domestic Product. also Docket ID EPA–HQ–OAR–2010–0799. temperature change (e.g., ocean acidification) vary 543 National Research Council (2009). Hidden 545 It is possible that other benefits or costs of across GHGs, the group concluded ‘‘transforming Costs of Energy: Unpriced Consequences of Energy final regulations unrelated to CO2 emissions will be gases into CO2-equivalents using GWP, and then Production and Use. National Academies Press. See discounted at rates that differ from those used to multiplying the carbon-equivalents by the SCC, docket ID EPA–HQ–OAR–2010–0799. develop the SCC estimates.

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6. Non-Greenhouse Gas Health and GHG standards. CO2 emissions are pollution such as direct PM, NOX, VOCs Environmental Impacts predominantly the byproduct of fossil and air toxics. The proposed standards fuel combustion processes that also would affect exhaust emissions of these This section presents EPA’s analysis produce criteria and hazardous air pollutants from vehicles. They would of the non-GHG health and pollutants. The vehicles that are subject also affect emissions from upstream environmental impacts that can be to the proposed standards are also sources related to changes in fuel expected to occur as a result of the significant sources of mobile source air consumption. Changes in ambient proposed 2017–2025 light-duty vehicle

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ozone, PM2.5, and air toxics that would monetize the PM-related co-benefits the air toxics emissions impacts result from the proposed standards are associated with the proposal; the second associated with the proposed standards. expected to affect human health in the explains what PM- and ozone-related form of premature deaths and other health and environmental impacts EPA a. Economic Value of Reductions in serious human health effects, as well as will quantify and monetize in the Criteria Pollutants other important public health and analysis for the final rule. EPA bases its As described in Section III.G, the welfare effects. analyses on peer-reviewed studies of air proposed standards would reduce It is important to quantify the health quality and health and welfare effects emissions of several criteria and toxic and environmental impacts associated and peer-reviewed studies of the pollutants and precursors. In this with the proposed standard because a monetary values of public health and analysis, EPA estimates the economic failure to adequately consider these welfare improvements, and is generally value of the human health benefits ancillary co-pollutant impacts could consistent with benefits analyses lead to an incorrect assessment of their associated with reducing PM2.5 performed for the analysis of the final exposure. Due to analytical limitations, net costs and benefits. Moreover, co- Cross-State Air Pollution Rule,546 the pollutant impacts tend to accrue in the this analysis does not estimate benefits final 2014–2018 MY Heavy-Duty related to other criteria pollutants (such near term, while any effects from 547 Vehicle Greenhouse Gas Rule, and as ozone, NO or SO ) or toxic reduced climate change mostly accrue the final Portland Cement National 2 2 over a time frame of several decades or pollutants, nor does it monetize all of Emissions Standards for Hazardous Air the potential health and welfare effects longer. Pollutants (NESHAP) RIA.548 associated with PM . EPA typically quantifies and Though EPA is characterizing the 2.5 monetizes the health and environmental changes in emissions associated with This analysis uses a ‘‘benefit-per-ton’’ impacts related to both PM and ozone toxic pollutants, we will not be able to method to estimate a selected suite of in its regulatory impact analyses (RIAs) quantify or monetize the human health PM2.5-related health benefits described when possible. However, EPA was effects associated with air toxic below. These PM2.5 benefit-per-ton unable to do so in time for this proposal. pollutants for either the proposal or the estimates provide the total monetized EPA attempts to make emissions and air final rule analyses. Please refer to human health benefits (the sum of quality modeling decisions early in the Section III.G for more information about premature mortality and premature analytical process so that we can morbidity) of reducing one ton of complete the photochemical air quality 546 Final Cross-State Air Pollution Rule. (76 FR directly emitted PM2.5, or its precursors modeling and use that data to inform 48208, August 8, 2011). (such as NOX, SOX, and VOCs), from a the health and environmental impacts 547 U.S. Environmental Protection Agency. (2011). specified source. Ideally, the human analysis. Resource and time constraints Final Rulemaking to Establish Heavy-Duty Vehicle health benefits would be estimated precluded the Agency from completing Greenhouse Gas Emission Standards and Corporate based on changes in ambient PM2.5 as this work in time for the proposal. Average Fuel Economy Standards: Regulatory Impact Analysis, Assessment and Standards determined by full-scale air quality Instead, EPA is using PM-related Division, Office of Transportation and Air Quality, modeling. However, this modeling was benefits-per-ton values as an interim EPA–420–R–10–009, July 2011. Available on the not possible in the timeframe for this internet: http://www.epa.gov/otaq/climate/ approach to estimating the PM-related proposal. benefits of the proposal. EPA also regulations/420r10009.pdf. 548 U.S. Environmental Protection Agency (U.S. The dollar-per-ton estimates used in provides a characterization of the health EPA). 2010. Regulatory Impact Analysis: National and environmental impacts that will be Emission Standards for Hazardous Air Pollutants this analysis are provided in Table III– quantified and monetized for the final from the Portland Cement Manufacturing Industry. 72. In the summary of costs and rulemaking. Office of Air Quality Planning and Standards, benefits, Section III.H.9 of this Research Triangle Park, NC. Augues. Available on preamble, EPA presents the monetized This section is split into two sub- the Internet at < http://www.epa.gov/ttn/ecas/ sections: The first presents the PM- regdata/RIAs/portlandcementfinalria.pdf >. EPA– value of PM-related improvements related benefits-per-ton values used to HQ–OAR–2009–0472–0241. associated with the proposal.

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the Six-Cities study (Laden et al., 2006), the values mortality to account for a twenty-year segmented would be approximately two-and-a-half times cessation lag. a The benefit-per-ton estimates presented in this larger. See below for a description of these studies. c Benefit-per-ton values were estimated for the table are based on an estimate of premature b The benefit-per-ton estimates presented in this years 2015, 2020, and 2030. For intermediate years, mortality derived from the ACS study (Pope et al., table assume either a 3 percent or 7 percent such as 2017 (the year the standards begin), we 2002). If the benefit-per-ton estimates were based on discount rate in the valuation of premature Continued

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The benefit per-ton technique has the Portland Cement National Emissions related co-benefits captured in those been used in previous analyses, Standards for Hazardous Air Pollutants benefit-per-ton estimates. including EPA’s 2012–2016 Light-Duty (NESHAP) RIA.551 Table III–73 shows 549 550 Vehicle Greenhouse Gas Rule, and the quantified and unquantified PM2.5-

Consistent with the cost-benefit applies a value of a statistical life (VSL) from current cost-of-illness and/or wage analysis that accompanied the NO2 derived from the mortality valuation estimates. NAAQS,552 553 the benefits estimates literature. For certain health impacts, A more detailed description of the utilize the concentration-response such as chronic bronchitis and a benefit-per-ton estimates is provided in functions as reported in the number of respiratory-related ailments, Chapter 4 of the Draft Joint TSD that epidemiology literature. To calculate the EPA applies willingness-to-pay accompanies this rulemaking. Readers total monetized impacts associated with estimates derived from the valuation interested in reviewing the complete quantified health impacts, EPA applies literature. For the remaining health methodology for creating the benefit- values derived from a number of impacts, EPA applies values derived per-ton estimates used in this analysis sources. For premature mortality, EPA can consult the Technical Support

550 interpolated exponentially. For years beyond 2030 U.S. Environmental Protection Agency (U.S. NO2 NAAQS for a more detailed description of (including 2040), EPA and NHTSA extrapolated EPA). 2008. Regulatory Impact Analysis, 2008 recent changes to the PM benefits presentation and exponentially based on the growth between 2020 National Ambient Air Quality Standards for preference for the no-threshold model. Note that the and 2030. Ground-level Ozone, Chapter 6. Office of Air cost-benefit analysis was prepared solely for d Quality Planning and Standards, Research Triangle Note that the benefit-per-ton value for SOx is purposes of fulfilling analysis requirements under based on the value for Stationary (Non-EGU) Park, NC. March. Available at http://www.epa.gov/ Executive Order 12866 and was not considered, or sources; no SOx value was estimated for mobile ttn/ecas/regdata/RIAs/6-ozoneriachapter6.pdf. sources. The benefit-per-ton value for VOCs was 551 U.S. Environmental Protection Agency (U.S. otherwise played any part, in the decision to revise estimated across all sources. EPA). 2010. Regulatory Impact Analysis: National the NO2 NAAQS. e Non-EGU denotes stationary sources of Emission Standards for Hazardous Air Pollutants 553 U.S. Environmental Protection Agency (U.S. emissions other than electric generating units. from the Portland Cement Manufacturing Industry. EPA). 2010. Final NO2 NAAQS Regulatory Impact 549 U.S. Environmental Protection Agency (U.S. Office of Air Quality Planning and Standards, Analysis (RIA). Office of Air Quality Planning and EPA), 2010. Regulatory Impact Analysis, Final Research Triangle Park, NC. Augues. Available on Standards, Research Triangle Park, NC. April. the Internet at < http://www.epa.gov/ttn/ecas/ Rulemaking to Establish Light-Duty Vehicle Available on the Internet at http://www.epa.gov/ttn/ regdata/RIAs/portlandcementfinalria.pdf. EPA-HQ- Greenhouse Gas Emission Standards and Corporate ecas/regdata/RIAs/FinalNO2RIAfulldocument.pdf. Average Fuel Economy Standards. Office of OAR-2009-0472-0241 Accessed March 15, 2010. EPA–HQ–OAR–2009– Transportation and Air Quality. April. Available at 552 Although we summarize the main issues in http://www.epa.gov/otaq/climate/regulations/ this chapter, we encourage interested readers to see 0472–0237 U.S. Environmental Protection Agency 420r10009.pdf. EPA-420-R-10-009. benefits chapter of the RIA that accompanied the (U.S. EPA). 2009.

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Document (TSD) 554 accompanying the air pollution.559 They also reflect future per-ton estimates do not exist due to recent final ozone NAAQS RIA (U.S. population growth and increased life issues associated with the complexity of EPA, 2008).555 Readers can also refer to expectancy, which expands the size of the atmospheric air chemistry and Fann et al. (2009) 556 for a detailed the population exposed to air pollution nonlinearities associated with ozone description of the benefit-per-ton in both urban and rural areas, especially formation. The PM-related benefits-per- methodology.557 in older age groups with the highest ton estimates also do not include any As described in the documentation for mortality risk.560 human welfare or ecological benefits. the benefit per-ton estimates cited The benefit-per-ton estimates are Please refer to Chapter 6.3 of the DRIA above, national per-ton estimates were subject to a number of assumptions and that accompanies this proposal for a developed for selected pollutant/source uncertainties: description of the agecy’s plan to • category combinations. The per-ton They do not reflect local variability quantify and monetize the PM- and values calculated therefore apply only in population density, meteorology, ozone-related health impacts for the to tons reduced from those specific exposure, baseline health incidence FRM and a description of the pollutant/source combinations (e.g., rates, or other local factors that might unquantified co-pollutant benefits NO emitted from mobile sources; direct lead to an overestimate or underestimate associated with this rulemaking. 2 • PM emitted from stationary sources). of the actual benefits of controlling fine There are many uncertainties Our estimate of PM2.5 benefits is particulates. EPA will conduct full-scale associated with the health impact functions used in this modeling effort. therefore based on the total direct PM2.5 air quality modeling for the final and PM-related precursor emissions rulemaking in an effort to capture this These include: Within-study variability variability. (the precision with which a given study controlled by sector and multiplied by • each per-ton value. This analysis assumes that all fine estimates the relationship between air As Table III–72 indicates, EPA particles, regardless of their chemical quality changes and health effects); projects that the per-ton values for composition, are equally potent in across-study variation (different reducing emissions of non-GHG causing premature mortality. This is an published studies of the same pollutant/ pollutants from both vehicle use and important assumption, because PM2.5 health effect relationship typically do stationary sources such as fuel refineries produced via transported precursors not report identical findings and in and storage facilities will increase over emitted from stationary sources may some instances the differences are time.558 These projected increases differ significantly from direct PM2.5 substantial); the application of concentration-response functions reflect rising income levels, which are released from diesel engines and other nationwide (does not account for any assumed to increase affected industrial sources, but no clear relationship between region and health individuals’ willingness to pay for scientific grounds exist for supporting effect, to the extent that such a reduced exposure to health threats from differential effects estimates by particle type. relationship exists); extrapolation of • This analysis assumes that the impact functions across population (we 554 U.S. Environmental Protection Agency (U.S. assumed that certain health impact EPA). 2008. Technical Support Document: health impact function for fine particles Calculating Benefit Per-Ton Estimates, Ozone is linear within the range of ambient functions applied to age ranges broader NAAQS Docket #EPA–HQ–OAR–2007–0225–0284. concentrations under consideration. than that considered in the original Office of Air Quality Planning and Standards, Thus, the estimates include health epidemiological study); and various Research Triangle Park, NC. March. Available on uncertainties in the concentration- the Internet at . benefits from reducing fine particles in 555 U.S. Environmental Protection Agency (U.S. areas with varied concentrations of response function, including causality EPA). 2008. Regulatory Impact Analysis, 2008 PM2.5, including both regions that are in and thresholds. These uncertainties may National Ambient Air Quality Standards for attainment with fine particle standard under- or over-estimate benefits. Ground-level Ozone, Chapter 6. Office of Air and those that do not meet the standard • EPA has investigated methods to Quality Planning and Standards, Research Triangle characterize uncertainty in the Park, NC. March. Available at . concentrations. relationship between PM2.5 exposure Note that the cost-benefit analysis was prepared • There are several health benefits and premature mortality. EPA’s final solely for purposes of fulfilling analysis categories that EPA was unable to PM2.5 NAAQS analysis provides a more requirements under Executive Order 12866 and was complete picture about the overall not considered, or otherwise played any part, in the quantify due to limitations associated decision to revise the Ozone NAAQS. with using benefits-per-ton estimates, uncertainty in PM2.5 benefits estimates. 556 Fann, N. et al. (2009). The influence of several of which could be substantial. For more information, please consult 561 location, source, and emission type in estimates of Because the NO and VOC emission the PM2.5 NAAQS RIA (Table 5.5). X • the human health benefits of reducing a ton of air reductions associated with this proposal The benefit-per-ton estimates used pollution. Air Qual Atmos Health. Published are also precursors to ozone, reductions in this analysis incorporate projections online: 09 June, 2009. of key variables, including atmospheric 557 The values included in this report are different in NOX and VOC would also reduce from those presented in the article cited above. ozone formation and the health effects conditions, source level emissions, Benefits methods change to reflect new information associated with ozone exposure. population, health baselines and and evaluation of the science. Since publication of Unfortunately, ozone-related benefits- incomes, technology. These projections the June 2009 article, EPA has made two significant introduce some uncertainties to the changes to its benefits methods: (1) We no longer assume that a threshold exists in PM-related models 559 The issue is discussed in more detail in the benefit per ton estimates. of health impacts; and (2) We have revised the PM NAAQS RIA from 2006. See U.S. • As described above, using the Value of a Statistical Life to equal $6.3 million (year Environmental Protection Agency. 2006. Final benefit-per-ton value derived from the 2000$), up from an estimate of $5.5 million (year Regulatory Impact Analysis (RIA) for the Proposed ACS study (Pope et al., 2002) alone 2000$) used in the June 2009 report. Please refer to National Ambient Air Quality Standards for the following Web site for updates to the dollar-per- Particulate Matter. Prepared by: Office of Air and provides an incomplete characterization ton estimates: http://www.epa.gov/air/benmap/ Radiation. October 2006. Available at http:// of PM2.5 benefits. When placed in the bpt.html. www.epa.gov/ttn/ecas/ria.html. 558 As we discuss in the emissions chapter of 560 For more information about EPA’s population 561 U.S. Environmental Protection Agency. EPA’s DRIA (Chapter 4), the rule would yield projections, please refer to the following: http:// October 2006. Final Regulatory Impact Analysis emission reductions from upstream refining and www.epa.gov/air/benmap/models/ (RIA) for the Final National Ambient Air Quality fuel distribution due to decreased petroleum BenMAPManualAppendicesAugust2010.pdf (See Standards for Particulate Matter. Prepared by: consumption. Appendix K). Office of Air and Radiation.

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context of the Expert Elicitation results, pollutant health effect concentration- Toxics Assessment (NATA). The EPA this estimate falls toward the lower end response functions EPA will use to Science Advisory Board specifically of the distribution. By contrast, the quantify the non-GHG incidence commented in their review of the 1996 estimated PM2.5 benefits using the impacts associated with the final light- NATA that these tools were not yet coefficient reported by Laden in that duty vehicles standard. These include ready for use in a national-scale benefits author’s reanalysis of the Harvard Six PM- and ozone-related premature analysis, because they did not consider Cities cohort fall toward the upper end mortality, chronic bronchitis, nonfatal the full distribution of exposure and of the Expert Elicitation distribution heart attacks, hospital admissions risk, or address sub-chronic health results. (respiratory and cardiovascular), effects.563 While EPA has since As mentioned above, emissions emergency room visits, acute bronchitis, improved the tools, there remain critical changes and benefits-per-ton estimates minor restricted activity days, and days limitations for estimating incidence and alone are not a good indication of local of work and school lost. assessing benefits of reducing mobile or regional air quality and health source air toxics. EPA continues to work ii. Monetized Impacts impacts, as there may be localized to address these limitations; however, impacts associated with the proposed To calculate the total monetized EPA does not anticipate having methods rulemaking. Additionally, the impacts associated with quantified and tools available for national-scale atmospheric chemistry related to health impacts, EPA applies values application in time for the analysis of ambient concentrations of PM2.5, ozone derived from a number of sources. For the final rules.564 and air toxics is very complex. Full- premature mortality, EPA applies a scale photochemical modeling is value of a statistical life (VSL) derived 7. Energy Security Impacts therefore necessary to provide the from the mortality valuation literature. The proposed GHG standards require needed spatial and temporal detail to For certain health impacts, such as improvements in light-duty vehicle fuel more completely and accurately chronic bronchitis and a number of efficiency which, in turn, will reduce estimate the changes in ambient levels respiratory-related ailments, EPA overall fuel consumption and help to of these pollutants and their associated applies willingness-to-pay estimates reduce U.S. petroleum imports. health and welfare impacts. As derived from the valuation literature. Reducing U.S. petroleum imports discussed above, timing and resource For the remaining health impacts, EPA lowers both the financial and strategic constraints precluded EPA from applies values derived from current risks caused by potential sudden conducting a full-scale photochemical cost-of-illness and/or wage estimates. disruptions in the supply of imported air quality modeling analysis in time for Chapter 6.3 in the DRIA that petroleum to the U.S. The economic the NPRM. For the final rule, however, accompanies this proposal presents the value of reductions in these risks a national-scale air quality modeling monetary values EPA will apply to provides a measure of improved U.S. analysis will be performed to analyze changes in the incidence of health and energy security. This section the impacts of the standards on PM2.5, welfare effects associated with summarizes EPA’s estimates of U.S. oil ozone, and selected air toxics. The reductions in non-GHG pollutants that import reductions and energy security benefits analysis plan for the final will occur when these GHG control benefits from this proposal. Additional rulemaking is discussed in the next strategies are finalized. discussion of this issue can be found in section. iii. Other Unquantified Health and Chapter 4.2.8 of the Joint TSD. b. Human Health and Environmental Environmental Impacts a. Implications of Reduced Petroleum Benefits for the Final Rule In addition to the co-pollutant health Use on U.S. Imports i. Human Health and Environmental and environmental impacts EPA will In 2010, U.S. petroleum import Impacts quantify for the analysis of the final expenditures represented 14 percent of standard, there are a number of other To model the ozone and PM air total U.S. imports of all goods and health and human welfare endpoints 565 quality benefits of the final rule, EPA services. These expenditures rose to that EPA will not be able to quantify or 566 will use the Community Multiscale Air 18 percent by April of 2011. In 2010, monetize because of current limitations Quality (CMAQ) model (see Section the United States imported 49 percent of in the methods or available data. These 567 III.G.5. for a description of the CMAQ the petroleum it consumed, and the impacts are associated with emissions of model). The modeled ambient air air toxics (including benzene, 1,3- 563 quality data will serve as an input to the Science Advisory Board. 2001. NATA— butadiene, formaldehyde, acetaldehyde, Evaluating the National-Scale Air Toxics Environmental Benefits Mapping and acrolein, and ethanol), ambient ozone, Assessment for 1996—an SAB Advisory. http:// Analysis Program (BenMAP).562 and ambient PM exposures. Chapter www.epa.gov/ttn/atw/sab/sabrev.html. BenMAP is a computer program 2.5 564 In April, 2009, EPA hosted a workshop on developed by EPA that integrates a 6.3 of the DRIA lists these unquantified estimating the benefits of reducing hazardous air number of the modeling elements used health and environmental impacts. pollutants. This workshop built upon the work While there will be impacts accomplished in the June 2000 Science Advisory in previous RIAs (e.g., interpolation associated with air toxic pollutant Board/EPA Workshop on the Benefits of Reductions functions, population projections, in Exposure to Hazardous Air Pollutants, which emission changes that result from the health impact functions, valuation generated thoughtful discussion on approaches to final standard, EPA will not attempt to functions, analysis and pooling estimating human health benefits from reductions monetize those impacts. This is in air toxics exposure, but no consensus was methods) to translate modeled air primarily because currently available reached on methods that could be implemented in concentration estimates into health the near term for a broad selection of air toxics. tools and methods to assess air toxics effects incidence estimates and Please visit http://epa.gov/air/toxicair/ risk from mobile sources at the national monetized benefits estimates. 2009workshop.html for more information about the scale are not adequate for extrapolation workshop and its associated materials. Chapter 6.3 in the DRIA that 565 http://www.eia.gov/dnav/pet/hist/ accompanies this proposal lists the co- to incidence estimations or benefits assessment. The best suite of tools and LeafHandler.ashx?n=PET&s=WTTIMUS2&f=W. 566 http://www.eia.gov/dnav/pet/pet_move_ 562 Information on BenMAP, including methods currently available for impcus_a2_nus_ep00_im0_mbblpd_a.htm. downloads of the software, can be found at assessment at the national scale are 567 http://www.eia.gov/dnav/pet/pet_pri_rac2_ http://www.epa.gov/ttn/ecas/benmodels.html. those used in the National-Scale Air dcu_nus_m.htm.

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transportation sector accounted for 71 The agencies conducted a detailed reduced domestic fuel refining. Of this percent of total U.S. petroleum analysis of future changes in U.S. latter figure, 90 percent is anticipated to consumption. This compares to transportation fuel consumption, reduce U.S. imports of crude petroleum approximately 37 percent of total U.S. petroleum imports, and domestic fuel for use as a refinery feedstock, while the petroleum supplied by imports and 55 refining projected to occur under remaining 10 percent is expected to percent of U.S. petroleum consumption alternative economic growth and oil reduce U.S. domestic production of in the transportation sector in 1975.568 price scenarios reported by the EIA in crude petroleum. Thus, on balance, each its Annual Energy Outlook 2011.570 On gallon of fuel saved as a consequence of Requiring vehicle technology that the basis of this analysis, we estimate the GHG and fuel efficiency standards is reduces GHGs and fuel consumption in that approximately 50 percent of the anticipated to reduce total U.S. imports light-duty vehicles is expected to lower reduction in fuel consumption resulting of petroleum by 0.95 gallon.571 Table U.S. oil imports. EPA’s estimates of from adopting improved GHG emission III–74 below compares EPA’s estimates reductions in fuel consumption and fuel efficiency standards is likely to of the reduction in imports of U.S. crude resulting from the proposed standards be reflected in reduced U.S. imports of oil and petroleum-based products from are discussed in Section III.H.3 above, refined fuel, while the remaining 50 this program to projected total U.S. and in EPA’s draft RIA.569 percent is expected to be reflected in imports for selected years.

b. Energy Security Implications which has developed approaches for entitled, The Energy Security Benefits of evaluating the economic costs and Reduced Oil Use, 2006–2015, completed In order to understand the energy energy security implications of oil use. in March 2008. This study is included security implications of reducing U.S. The energy security estimates provided as part of the docket for this petroleum imports, EPA worked with below are based upon a methodology proposal.572 573 Oak Ridge National Laboratory (ORNL), developed in a peer-reviewed study

568 Source: U.S. Department of Energy, Annual quantities of gasoline consumption avoided. 571 This figure is calculated as 0.50 + 0.50*0.9 = Energy Review 2008, Report No. DOE/EIA– Relative to the preliminary gasoline consumption 0.50 + 0.45 = 0.95. 0384(2008), Tables 5.1 and 5.13c, June 26, 2009. reductions, the reductions presented in this 572 Leiby, Paul N., Estimating the Energy Security 569 Due to timing constraints, the energy security proposal are roughly 3% lower in total from 2017 Benefits of Reduced U.S. Oil Imports, Oak Ridge premiums ($/gallon) were derived using through 2050. National Laboratory, ORNL/TM–2007/028, Final preliminary estimates of the gasoline consumption 570 Energy Information Administration, Annual Report, 2008. (Docket EPA–HQ–OAR–2010–0162) reductions projected from this proposal. The energy Energy Outlook 2011, Reference Case and other 573 The ORNL study The Energy Security Benefits security benefits totals shown here were calculated scenarios, available at http://www.eia.gov/oiaf/aeo/ of Reduced Oil Use, 2006–2015, completed in with those $/gallon values along with the final tablebrowser/ (last accessed October 12, 2011). March 2008, is an updated version of the approach Continued

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When conducting its analysis, ORNL agencies included only the latter the TSD for a more detailed discussion considered the full economic cost of component (discussed below). of the national security implications of importing petroleum into the United ORNL’s analysis of energy security this proposed rule. States. The economic cost of importing benefits from reducing U.S. oil imports For this action, ORNL estimated petroleum into the U.S. is defined to did not include an estimate of potential energy security premiums by include two components in addition to reductions in costs for maintaining a incorporating the most recently the purchase price of petroleum itself. U.S. military presence to help secure available AEO 2011 Reference Case oil These are: (1) the higher costs for oil stable oil supply from potentially price forecasts and market trends. imports resulting from the effect of vulnerable regions of the world because Energy security premiums for the years increasing U.S. import demand on the attributing military spending to 2020, 2030, 2035, 2040 and 2050 are particular missions or activities is world oil price and on the market power presented in Table III–75 as well as a difficult. Attempts to attribute some of the Organization of the Petroleum breakdown of the components of the share of U.S. military costs to oil energy security premiums for each of Exporting Countries (i.e., the ‘‘demand’’ imports are further complicated by the or ‘‘monopsony’’ costs); and (2) the risk these years.574 The components of the need to estimate how those costs vary energy security premium and their of reductions in U.S. economic output with incremental variations in U.S. oil values are discussed in detail in the and disruption of the U.S. economy imports. Several commenters for the Joint TSD Chapter 4.2.8. The oil security caused by sudden disruptions in the 2012–2016 light-duty vehicle proposal premium rises over the future as a result supply of imported petroleum to the recommended that the agencies attempt of changing factors such as the world oil U.S. (i.e., ‘‘macroeconomic disruption/ to estimate the avoided U.S. military price, global supply/demand balances, adjustment costs’’). In its analysis of costs associated with reductions in U.S. U.S. oil imports and consumption, and energy security benefits from reducing oil imports. The agencies request U.S. GDP (the size of economy at risk to U.S. petroleum imports, however, the comment on this issue, including oil shocks). The principal factor is whether there are new studies that steadily rising oil prices. used for estimating the energy security benefits of credibly estimate the military cost of U.S. oil import reductions developed in an ORNL securing stable oil supplies and, if so, 1997 Report by Leiby, Paul N., Donald W. Jones, T. 574 AEO 2011 forecasts energy market trends and Randall Curlee, and Russell Lee, entitled Oil how should these new estimates be values only to 2035. The energy security premium Imports: An Assessment of Benefits and Costs. factored into this proposal’s energy estimates post-2035 were assumed to be the 2035 (Docket EPA–HQ–OAR–2010–0162). security analysis. See Section 4.2.8 of estimate.

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The literature on energy security for U.S. also represents a loss to other with ORNL’s energy security premium the last two decades has routinely countries. Given the redistributive estimates,575 576 the agencies developed combined the monopsony and the nature of this monopsony effect from a estimates of the total energy security macroeconomic disruption components global perspective, it is excluded in the benefits for the years 2017 through 2050 when calculating the total value of the energy security benefits calculations for as shown in Table III–76.577 energy security premium. However, in this proposal. In contrast, the other the context of using a global social cost portion of the energy security premium, 575 AEO 2011 forecasts energy market trends and of carbon (SCC) value, the question the U.S. macroeconomic disruption and values only to 2035. The energy security premium estimates post-2035 were assumed to be the 2035 arises: How should the energy security adjustment cost that arises from U.S. estimate. premium be determined when a global petroleum imports, does not have 576 Due to timing constraints, the energy security perspective is taken? Monopsony offsetting impacts outside of the U.S., premiums ($/gallon) were derived using benefits represent avoided payments by and, thus, is included in the energy preliminary estimates of the gasoline consumption reductions projected from this proposal. The energy the United States to oil producers in security benefits estimated for this security benefits totals shown here were calculated foreign countries that result from a proposal. To summarize, EPA has with those $/gallon values along with the final decrease in the world oil price as the included only the macroeconomic quantities of gasoline consumption avoided. U.S. decreases its consumption of disruption portion of the energy security Relative to the preliminary gasoline consumption reductions, the reductions presented in this imported oil. benefits to estimate the monetary value proposal are roughly 3% lower in total from 2017 Although there is clearly a benefit to of the total energy security benefits of through 2050. the U.S. when considered from a this program. 577 Estimated reductions in U.S. imports of finished petroleum products and crude oil are 95% domestic perspective, the decrease in For this proposal, using EPA’s fuel of 54.2 million barrels (MMB) in 2020, 609 MMB price due to decreased demand in the consumption analysis in conjunction Continued

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The energy security analysis price causes an increase in oil use in their refining and use. However, lower conducted for this proposal estimates China, India, or another country’s usage of, for example, displaced coal that the world price of oil will fall industrial sector, this increase in oil would result in a decrease in modestly in response to lower U.S. consumption may displace natural gas greenhouse gas emissions. Therefore, demand for refined fuel. One potential usage. Alternatively, the increased oil any assessment of the impacts on GHG result of this decline in the world price use could result in a decrease in coal emissions from a potential increase in of oil would be an increase in the used to produce electricity. An increase world oil demand would need to take consumption of petroleum products, in the consumption of petroleum into account the impacts on all portions particularly outside the U.S. In addition, products, particularly outside the U.S., of the global energy sector. The other fuels could be displaced from the could lead to a modest increase in agencies’ analyses have not attempted to increasing use of oil worldwide. For emissions of greenhouse gases, criteria estimate these effects. example, if a decline in the world oil air pollutants, and airborne toxics from

in 2030, 962 MMB in 2040, and 1,140 MMB in 2050.

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Since EPA anticipates that more Key questions that arise with associated reduced fuel consumption electric vehicles (EVs) and plug-in increased use of electricity in vehicles that vary with miles driven. Lower fuel hybrid electric vehicles (PHEVs) will in the U.S. include whether there is the consumption would, presumably, result penetrate the U.S. automobile market potential for disruptions in electricity in fewer trips to the filling station to over time as a result of this proposal, the supply in general, or more specifically, refuel and, thus, time saved. The Agency is considering analyzing the from increased electrification of the U.S. rebound effect, discussed in detail in energy security implications of these vehicle fleet. Also, if there is the Section III.H.4.c, produces additional vehicles and the fuels that they potential for supply disruptions in benefits to vehicle owners in the form consume. These vehicles run on electricity markets, how likely would of consumer surplus from the increase electricity either in whole (EVs), or in the disruptions be associated with in vehicle-miles driven, but may also part (PHEVs), which displaces disruptions in the supply of oil? In increase the societal costs associated conventional transportation fuel such as addition, what is the overall expected with traffic congestion, motor vehicle gasoline and diesel. EPA does not have impact, if any, of additional EV/PHEV crashes, and noise. These effects are sufficient information for this proposal use on the stability and flexibility of likely to be relatively small in to conduct an analysis of the energy fuel and electricity markets? Finally, security implications of increased use of such analysis may also need to consider comparison to the value of fuel saved as EVs/PHEVs, but is considering how to the source of electricity used to power a result of the standards, but they are conduct this type of analysis in the EVs/PHEVs. EPA solicits comments on nevertheless important to include. Table future. The Agency recognizes that the how to best conduct this type of III–77 summarizes the other economic fleet penetration of EV/PHEV’s will be analysis, including any studies or impacts. Please refer to Preamble relatively small in the time period of research that have been published on Section II.E and the Joint TSD that these standards (fewer than 3% of new these issues. accompanies this rule for more vehicles in 2025), but views establishing information about these impacts and a framework for examining the energy 8. Additional Impacts how EPA and NHTSA use them in their security implications of these vehicles There are other impacts associated analyses. as important for longer-term analysis. with the CO2 emissions standards and

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9. Summary of Costs and Benefits calendar years 2012–2050 using both 3 calculated using pre-tax fuel prices percent and 7 percent discount rates.578 since savings in fuel taxes do not In this section, the agencies present a Table III–79 shows the undiscounted represent a reduction in the value of summary of costs, benefits, and net annual monetized fuel savings of the economic resources utilized in benefits of the proposed program. Table proposed program. The table also shows producing and consuming fuel. Note III–78 shows the estimated annual the net present values of those fuel that the fuel savings shown here result monetized costs of the proposed savings for the same calendar years from reductions in fleet-wide fuel use. program for the indicated calendar using both 3 percent and 7 percent Thus, fuel savings grow over time as an years. The table also shows the net discount rates. In this table, the increasing fraction of the fleet meets the present values of those costs for the aggregate value of fuel savings is proposed standards.

578 For the estimation of the stream of costs and the proposed MY 2017–2025 standards, the 2025 benefits, we assume that after implementation of standards apply to each year thereafter.

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Table III–80 presents estimated working group. As discussed in the RIA In addition, these monetized GHG annual monetized benefits for the Chapter 7.2, there are some limitations benefits exclude the value of net indicated calendar years. The table also to the SCC analysis, including the reductions in non-CO2 GHG emissions shows the net present values of those incomplete way in which the integrated (CH4, N2O, HFC) expected under this benefits for the calendar years 2012– assessment models capture catastrophic action. Although EPA has not 2050 using both 3 percent and 7 percent and non-catastrophic impacts, their monetized the benefits of reductions in discount rates. The table shows the incomplete treatment of adaptation and non-CO2 GHGs, the value of these benefits of reduced CO2 emissions—and technological change, uncertainty in the reductions should not be interpreted as consequently the annual quantified extrapolation of damages to high zero. Rather, the net reductions in non- benefits (i.e., total benefits)—for each of temperatures, and assumptions CO2 GHGs will contribute to this the four social cost of carbon (SCC) regarding risk aversion. program’s climate benefits, as explained values estimated by the interagency in Section III.H.5.

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Table III–81 presents estimated calendar years. The table also shows the for the calendar years 2012–2050 using annual net benefits for the indicated net present values of those net benefits both 3 percent and 7 percent discount

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rates. The table includes the benefits of for each of the four SCC values reduced CO2 emissions (and considered by EPA. consequently the annual net benefits)

EPA also conducted a separate below shows the impacts of the nine model years from 2017 through analysis of the total benefits over the proposed program on vehicles produced 2025 are shown in Table III–82 and model year lifetimes of the 2017 through during each of the model years 2017 Table III–83 at both 3 percent and 7 2025 model year vehicles. In contrast to through 2025 over the course of their percent discount rates, respectively. the calendar year analysis presented expected lifetimes. The net societal BILLING CODE 4910–59–P above in Table III–78 through Table III– benefits over the full lifetimes of 81, the model year lifetime analysis vehicles produced during each of the

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BILLING CODE 4910–59–C

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10. U.S. Vehicle Sales Impacts and effects and should therefore reinforce extra sales would accrue to that Payback Period that learning. company’s competitors. a. Vehicle Sales Impacts and Payback Today’s proposed rule, combined In other words, consumer learning Period with the new and easier-to-understand about the benefits of fuel efficient fuel economy label required to be on all vehicles involves positive externalities Predicting the effects of this rule on new vehicles beginning in 2012, may (spillovers) from one company to the vehicles entails comparing two effects. increase sales above baseline levels by others.579 These positive externalities On the one hand, the vehicles designed hastening this very type of consumer may lead to benefits for manufacturers to meet the proposed standards will learning. As more consumers as a whole. We emphasize that this become more expensive, which would, experience, as a result of the rule, the discussion has been tentative and by itself, be expected to discourage savings in time and expense from qualified. To be sure, social learning of sales. On the other hand, the vehicles owning more fuel efficient vehicles, related kinds has been identified in a will have improved fuel economy and demand may shift yet further in the number of contexts.580 Comments are thus lower operating costs, producing direction of the vehicles mandated invited on the discussion offered here, lower total costs over the life of under the rule. This social learning can with particular reference to any relevant vehicles, which makes them more take place both within and across empirical findings. attractive to consumers. Which of these households, as consumers learn from In previous rulemakings, EPA and effects dominates for potential vehicle one another. NHTSA conducted vehicle sales buyers when they are considering a First and most directly, the time and analyses by comparing the up-front purchase will determine the effect on fuel savings associated with operating costs of the vehicles with the present sales. However, assessing the net effect more fuel efficient vehicles may be more value of five years’ worth of fuel of these two competing effects is salient to individuals who own them, savings. We assumed that the costs for complex and uncertain, as it rests on which might cause their subsequent the fuel-saving technologies would be how consumers value fuel savings at the purchase decisions to shift closer to passed along fully to vehicle buyers in time of purchase and the extent to minimizing the total cost of ownership the vehicle prices. The up-front vehicle which manufacturers and dealers reflect over the lifetime of the vehicle. costs were adjusted to take into account them in the purchase price. The Second, this appreciation may spread several factors that would affect empirical literature does not provide across households through word of consumer costs: The increased sales tax clear evidence on whether consumers mouth and other forms of that consumers would pay, the increase fully consider the value of fuel savings communications. in insurance premiums, the increase in at the time of purchase. It also generally Third, as more motorists experience loan payments that buyers would face, does not speak to the efficiency of the time and fuel savings associated and a higher resale value, with all of manufacturing and dealer pricing with greater fuel efficiency, the price of these factors due to the higher up-front decisions. Thus, for the proposal we do used cars will better reflect such cost of the vehicle. Those calculations not provide quantified estimates of efficiency, further reducing the cost of resulted in an adjusted increase in costs potential sales impacts. Rather, we owning more efficient vehicles for the to consumers. We then assumed that solicit comment on the issues raised buyers of new vehicles (since the resale consumers considered the present value here and on methods for estimating the price will increase). of five years of fuel savings in their effect of this rule on vehicle sales. If these induced learning effects are vehicle purchase, which is consistent For years, consumers have been strong, the rule could potentially with the length of a typical new light- gaining experience with the benefits increase total vehicle sales over time. It duty vehicle loan, and is similar to the that accrue to them from owning and is not possible to quantify these learning average time that a new vehicle operating vehicles with greater fuel effects years in advance and that effect purchaser holds onto the vehicle.581 The efficiency. Many households already may be speeded or slowed by other present value of fuel savings was own vehicles with a fairly wide range of factors that enter into a consumer’s subtracted from technology costs to get fuel economy, and thus already have an valuation of fuel efficiency in selecting a net effect on vehicle cost of opportunity to learn about the value of vehicles. ownership. We then used a short-run fuel economy on their own. Among two- The possibility that the rule will (after demand elasticity of ¥1 to convert a vehicle households, for example, the a lag for consumer learning) increase change in price into a change in least fuel-efficient vehicle averages just sales need not rest on the assumption over 22 mpg (EPA test rating), and the that automobile manufacturers are 579 Industrywide positive spillovers of this type range between this and the fuel failing to pursue profitable are hardly unique to this situation. In many opportunities to supply the vehicles that industries, companies form trade associations to economy of their other vehicle averages promote industry-wide public goods. For example, nearly 7 mpg. Among households that consumers demand. In the absence of merchants in a given locale may band together to own 3 or more vehicles, the typical the rule, no individual automobile promote tourism in that locale. Antitrust law range of the fuel economy they offer is manufacturer would find it profitable to recognizes that this type of coordination can much wider. Consumer demand may move toward the more efficient vehicles increase output. 580 See Hunt Allcott, Social Norms and Energy have shifted towards such vehicles, not mandated under the rule. In particular, Conservation, Journal of Public Economics only because of higher fuel prices but no individual company can fully (forthcoming 2011), available at http://web.mit.edu/ also if many consumers are learning internalize the future boost to demand allcott/www/Allcott%202011%20JPubEc%20-%20 about the value of purchases based not resulting from the rule. If one company Social%20Norms%20and%20Energy%20 Conservation.pdf; Christophe Chamley, Rational only on initial costs but also on the total were to make more efficient vehicles, Herds: Economic Models of Social Learning cost of owning and operating a vehicle counting on consumer learning to (Cambridge, 2003). over its lifetime. This type of learning enhance demand in the future, that 581 In this proposal, the 5-year payback should continue before and during the company would capture only a fraction assumption corresponds to an assumption that of the extra sales so generated, because vehicle buyers take into account between 30 and 50 model years affected by this rule, percent of the present value of lifetime vehicle fuel particularly given the new fuel economy the learning at issue is not specific to savings (with the variation depending on discount labels that clarify potential economic any one company’s fleet. Many of the rate, model year, and car vs. truck).

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quantity demanded of vehicles.582 An cost of a new vehicle. For example, a as the potential rebound miles driven or elasticity of ¥1 means that a 1% new 2025 MY vehicle is estimated to the value of driving those rebound increase in price leads to a 1% cost $1,946 more (on average, and miles, or noise, congestion and reduction in quantity sold. In the relative to the reference case vehicle) accidents, since the focus is meant to be vehicle sales analyses, if five years of due to the addition of new GHG on those factors consumers think about fuel savings outweighed the adjusted reducing/fuel economy improving most while in the showroom technology costs, then vehicle sales technology (see Section III.D.6 for considering a new car purchase. Car/ were predicted to increase; if the fuel details on this cost estimate). This new truck fleet weighting is handled as savings were smaller than the adjusted technology will result in lower fuel described in Chapter 1 of the Joint TSD. technology costs, sales would decrease, consumption and, therefore, savings in The costs take into account the effects compared to a world without the fuel expenditures (see Section III.H.10 of the increased costs on sales tax, standards. for details on fuel savings). But how We do not here present a vehicle sales many months or years would pass insurance, resale value, and finance analysis using this approach. This rule before the fuel savings exceed the costs. More detail on this analysis can takes effect for MY 2017–2025. In the upfront costs? be found in Chapter 5 of EPA’s draft intervening years, it is possible that the The payback analysis uses annual RIA. assumptions underlying this analysis, as miles driven (vehicle miles traveled, or Table III–84 presents results for MY well as market conditions, might VMT) and survival rates consistent with 2021 because it is the last year before change. Instead, we present a payback the emission and benefits analyses the mid-term review impacts, if any, period analysis to estimate the number presented in Chapter 4 of the Joint TSD. will take place, and MY 2025 because it of years of fuel savings needed to The control case includes fuel savings is the last year of the program. The recover the up-front costs of the new associated with A/C controls. Not payback period in 2021 is shorter than technologies. In other words, the included here are the likely A/C-related that in 2025, because the technologies maintenance savings as discussed in payback period identifies the break-even required to meet the proposed MY 2021 point for new vehicle buyers. Chapter 2 of EPA’s RIA. Further, this standards are more cost-effective than A payback period analysis examines analysis does not include other private how long it would take for the expected impacts, such as reduced refueling those for MY 2025. In all cases, the fuel savings to outweigh the increased events, or other societal impacts, such payback periods are less than 4 years.

Most people purchase a new vehicle year, 60 month loan. As of July, 2011, If the increased vehicle cost is spread using credit rather than paying cash up the national average interest rate for a 5 out over 5 years at 5.52 percent, the front. A common car loan today is a five year new car loan was 5.52 percent.583 analysis for a MY 2025 vehicle would

582 For a durable good such as an auto, the comment on whether or when a long-run elasticity 583 ‘‘National Auto Loan Rates for July 21, 2011,’’ elasticity may be smaller in the long run: Though should be used for a rule that phases in over time, http://www.bankrate.com/finance/auto/national- people may be able to change the timing of their as well as how to find good estimates for the long- auto-loan-rates-for-july-21–2011.aspx, accessed 7/ purchase when price changes in the short run, they run elasticity. 26/11 (Docket EPA–HQ–OAR–2010–0799). must eventually make the investment. We request

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look like that shown in Table III–85. As somewhat due to reduced VMT as the payments. This amounts to a savings on can be seen in this table, the fuel average vehicle ages. Results are similar the order of $12 per month throughout savings immediately outweigh the using a 7% discount rate. This means the duration of the 5 year loan. Note that increased payments on the car loan, that for every month that the average in year six when the car loan is paid off, amounting to $145 in discounted net owner is making a payment for the the net savings equal the fuel savings savings (3% discount rate) in the first financing of the average new vehicle less the increased insurance premiums year and similar savings for the next their monthly fuel savings would be (as would be the case for the remaining four years although savings decline greater than the increase in the loan years of ownership).

The lifetime fuel savings and net the vehicle owner who retains the the present value of the lifetime net savings can also be calculated for those vehicle for its entire life and drives the savings is greater than $4,200 at a 3% who purchase the vehicle using cash vehicle each year at the rate equal to the discount rate, or $2,900 at a 7% and for those who purchase the vehicle national projected average. The results discount rate. with credit. This calculation applies to are shown in Table III–86. In either case,

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Note that throughout this consumer consumers place on additional fuel the anticipated effects of this rule on payback discussion, the analysis reflects economy. As discussed in Section fuel use and emissions. the average number of vehicle miles III.H.1 and in Chapter 8.1.2.8 of the Because of the uncertainty regarding traveled per year. Drivers who drive DRIA, EPA is exploring development of how the value of projected fuel savings more miles than the average would a consumer vehicle choice model, but from this rule to potential buyers will incur fuel-related savings more quickly the model is not sufficiently developed compare to their estimates of increases and, therefore, the payback would come for use in this NPRM. in new vehicle prices, we have not sooner. Drivers who drive fewer miles attempted to estimate explicitly the The effect of this rule on the use and than the average would incur fuel effects of the rule on scrappage of older scrappage of older vehicles will be related savings more slowly and, vehicles and the turnover of the vehicle therefore, the payback would come related to its effects on new vehicle fleet. later. prices, the fuel efficiency of new vehicle Chapter 5 of EPA’s DRIA provides models, the fuel efficiency of used more information on the payback period Another method to estimate effects on vehicles, and the total sales of new vehicle sales is to model the market for analysis, and Chapter 8 of EPA’s DRIA vehicles. If the value of fuel savings vehicles. Consumer vehicle choice has further discussion of methods for resulting from improved fuel efficiency models estimate what vehicles examining the effects of this rule on to the typical potential buyer of a new consumers buy based on vehicle and vehicle sales. We welcome comments consumer characteristics. In principle, vehicle outweighs the average increase on all aspects of this discussion, such models could provide a means of in new models’ prices, sales of new including the full range of understanding both the role of fuel vehicles could rise, while scrappage considerations and assumptions which economy in consumers’ purchase rates of used vehicles will increase influence market behavior and decisions and the effects of this rule on slightly. This will cause the turnover of outcomes and associated uncertainties. the benefits that consumers will get the vehicle fleet (i.e., the retirement of We also welcome comments on all the from vehicles. Helfand and Wolverton used vehicles and their replacement by parameters described here, as well as discuss the wide variation in the new models) to accelerate slightly, thus other quantitative estimates of the structure and results of these models.584 accentuating the anticipated effect of the effects of this proposal on sales, Models or model results have not rule on fleet-wide fuel consumption and accompanied by detailed descriptions of frequently been systematically CO2 emissions. However, if potential the methodologies used. compared to each other. When they buyers value future fuel savings 11. Employment Impacts have, the results show large variation resulting from the increased fuel over, for instance, the value that efficiency of new models at less than the a. Introduction increase in their average selling price, Although analysis of employment 584 Helfand, Gloria, and Ann Wolverton. sales of new vehicles will decline, as impacts is not part of a cost-benefit ‘‘Evaluating the Consumer Response to Fuel will the rate at which used vehicles are analysis (except to the extent that labor Economy: A Review of the Literature.’’ retired from service. This effect will International Review of Environmental and costs contribute to costs), employment Resource Economics 5 (2011): 103–146 (Docket slow the replacement of used vehicles impacts of federal rules are of particular EPA–HQ–OAR–2010–0799). by new models, and thus partly reduce concern in the current economic climate

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of sizeable unemployment. When petroleum refinery and supply not placed in the broader economic President Obama requested that the industries. Finally, since the net context.’’ agencies develop this program, he reduction in cost associated with this It is assumed that the official sought a program that would proposal is expected to lead to lower unemployment rate will have declined ‘‘strengthen the [auto] industry and household expenditures on fuel net of to 5.3 percent by the time this rule takes enhance job creation in the United vehicle costs, consumers then will have effect and so the effect of the regulation States.’’ 585 The recently issued additional discretionary income that can on labor will be to shift workers from Executive Order 13563, ‘‘Improving be spent on other goods and services. one sector to another.589 Those shifts in Regulation and Regulatory Review’’ When the economy is at full employment impose an opportunity cost (January 18, 2011), states, ‘‘Our employment, an environmental on society, approximated by the wages regulatory system must protect public regulation is unlikely to have much of the employees, as regulation diverts health, welfare, safety, and our impact on net overall U.S. employment; workers from other activities in the environment while promoting economic instead, labor would primarily be economy. In this situation, any effects growth, innovation, competitiveness, on net employment are likely to be and job creation’’ (emphasis added). shifted from one sector to another. These shifts in employment impose an transitory as workers change jobs (e.g., EPA is accordingly providing partial some workers may need to be retrained opportunity cost on society, estimates of the effects of this proposal or require time to search for new jobs, approximated by the wages of the on domestic employment in the auto while shortages in some sectors or employees, as regulation diverts manufacturing and parts sectors, while regions could bid up wages to attract workers from other activities in the qualitatively discussing how it may workers). It is also possible that the state economy. In this situation, any effects affect employment in other sectors more of the economy will be such that on net employment are likely to be generally. positive or negative employment effects transitory as workers change jobs (e.g., This proposal is expected to affect will occur. some workers may need to be retrained employment in the United States A number of different approaches or require time to search for new jobs, through the regulated sector—the auto have been used in published literature while shortages in some sectors or manufacturing industry—and through to conduct employment analysis. All several related sectors, specifically, regions could bid up wages to attract potential methods of estimating industries that supply the auto workers). employment impacts of a rule have manufacturing industry (e.g., vehicle On the other hand, if a regulation advantages and limitations. We seek parts), auto dealers, the fuel refining and comes into effect during a period of high comment on the analytical approach supply sectors, and the general retail unemployment, a change in labor presented here, other appropriate sector. According to the U.S. Bureau of demand due to regulation may affect net methods for analyzing employment Labor Statistics, in 2010, about 677,000 overall U.S. employment because the impacts for this rulemaking, and the people in the U.S. were employed in the labor market is not in equilibrium. In inputs used here for employment Motor Vehicle and Parts Manufacturing such a period, both positive and analysis. Sector (NAICS 3361, 3362, and 3363). negative employment effects are b. Approaches to Quantitative About 129,000 people in the U.S. were possible.587 Schmalansee and Stavins Employment Analysis employed specifically in the point out that net positive employment Automobile and Light Truck effects are possible in the near term Measuring the employment impacts of Manufacturing Sector (NAICS 33611), when the economy is at less than full a policy depend on a number of inputs the directly regulated sector, since it employment due to the potential hiring and assumptions. For instance, as encompasses the auto manufacturers of idle labor resources by the regulated discussed, assumptions about the that are responsible for complying with sector to meet new requirements (e.g., to overall state of unemployment in the the proposed standards.586 The install new equipment) and new economy play a major role in measured employment effects of this rule are economic activity in sectors related to job impacts. The inputs to the models expected to expand beyond the the regulated sector.588 In the longer commonly are the changes in quantities regulated sector. Though some of the run, the net effect on employment is or expenditures in the affected sectors; parts used to achieve the proposed more difficult to predict and will model results may vary in different standards are likely to be built by auto depend on the way in which the related studies depending on the assumptions manufacturers themselves, the auto industries respond to the regulatory about the levels of those inputs, and parts manufacturing sector also plays a requirements. As Schmalansee and which sectors receive those changes. significant role in providing those parts, Stavins note, it is possible that the Which sectors are included in the study and will also be affected by changes in magnitude of the effect on employment can also affect the results. For instance, vehicle sales. Changes in light duty could vary over time, region, and sector, a study of this program that looks only vehicle sales, discussed in Section and positive effects on employment in at employment impacts in the refinery III.H.10, could affect employment for some regions or sectors could be offset sector may find negative effects, because auto dealers. As discussed in Chapter by negative effects in other regions or consumers will purchase less gasoline; 5.4 of the DRIA, this proposal is sectors. For this reason, they urge a study that looks only at the auto parts expected to reduce the amount of fuel caution in reporting partial employment sector, on the other hand, may find these vehicles use, and thus affect the effects since it can ‘‘paint an inaccurate positive impacts, because the program picture of net employment impacts if will require redesigned or additional 585 President Barack Obama. ‘‘Presidential parts for vehicles. In both instances, Memorandum Regarding Fuel Efficiency Standards. The White House, Office of the Press Secretary, May 587 Masur and Posner, http://papers.ssrn.com/ these would only be partial perspectives 21, 2010. http://www.whitehouse.gov/the-press- sol3/papers.cfm?abstract_id=1920441. office/presidential-memorandum-regarding-fuel- 588 Schmalensee, Richard, and Robert N. Stavins. 589 Office of Management and Budget, ‘‘Fiscal efficiency-standards. ‘‘A Guide to Economic and Policy Analysis of EPA’s Year 2012 Mid-Session Review: Budget of the U.S. 586 U.S. Bureau of Labor Statistics, Quarterly Transport Rule.’’ White paper commissioned by Government.’’ http://www.whitehouse.gov/sites/ Census of Employment and Wages, as accessed on Excelon Corporation, March 2011 (Docket EPA– default/files/omb/budget/fy2012/assets/12msr.pdf, August 9, 2011. HQ–OAR–2010–0799). p. 10.

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on the overall change in national effect’’ to have a positive effect on models are very useful for looking at employment due to Federal regulation. employment, and the ‘‘factor-shift interaction effects of markets: ‘‘They effect’’ to have an ambiguous effect on allow for substitution among inputs in i. Conceptual Framework for employment. Without more information production and goods in consumption.’’ Employment Impacts in the Regulated with respect to the magnitude of these Thus, if one market experiences a Sector competing effects, it is not possible to change, such as a new regulation, then One study by Morgenstern, Pizer, and predict the total effect environmental the effects can be observed in all other Shih 590 provides a retrospective look at regulation will have on employment markets. As a result, they can measure the impacts of regulation in levels in a regulated sector. the employment changes in the employment in the regulated sectors by The authors conclude that increased economy due to a regulation. Because estimating the effects on employment of abatement expenditures generally have they usually assume equilibrium in all spending on pollution abatement for not caused a significant change in markets, though, they typically lack four highly polluting/regulated U.S. employment in those sectors. More involuntary unemployment. If the total industries (pulp and paper, plastics, specifically, their results show that, on amount of labor changes, it is due to steel, and petroleum refining) using data average across the industries studied, people voluntarily entering or leaving for six years between 1979 and 1991. each additional $1 million spent on the workforce. As a result, these models The paper provides a theoretical pollution abatement results in a may not be appropriate for measuring framework that can be useful for (statistically insignificant) net increase effects of a policy on unemployment, examining the impacts of a regulatory of 1.5 jobs. because of the assumption that there is change on the regulated sector in the This approach to employment no involuntary unemployment. In medium to longer term. In particular, it analysis has the advantage of carefully addition, because of the assumptions of identifies three separate ways that controlling for many possibly equilibrium in all markets and forward- employment levels may change in the confounding effects in order to separate looking consumers and firms, they are regulated industry in response to a new the effect of changes in regulatory costs designed for examining the long-run (or more stringent) regulation. on employment. It was, however, effects of a policy but may offer little • Demand effect: higher production conducted for only four sectors. It could insight into its short-run effects. costs due to the regulation will lead to also be very difficult to update the study higher market prices; higher prices in for other sectors, because one of the iii. Input-Output (IO) Models turn reduce demand for the good, databases on which it relies, the Input-output models represent the reducing the demand for labor to make Pollution Abatement Cost and economy through a matrix of that good. In the authors’ words, the Expenditure survey, has been conducted coefficients that describe the ‘‘extent of this effect depends on the infrequently since 1994, with the last connections between supplying and cost increase passed on to consumers as survey conducted in 2005. The consuming sectors. In that sense, like well as the demand elasticity of empirical estimates provided by CGE models, they describe the industry output.’’ Morgenstern et al. are not relevant to the interconnections of the economy. These • Cost effect: as costs go up, plants case of fuel economy standards, which interconnections look at how changes in add more capital and labor (holding are very different from the pollution one sector ripple through the rest of the other factors constant), with potentially control standards on industrial facilities economy. For instance, a requirement positive effects on employment. In the that were considered in that study. In for additional technology for vehicles authors’ words, as ‘‘production costs addition, it does not examine the effects requires additional steel, which requires rise, more inputs, including labor, are of regulation on employment in sectors more workers in both the auto and steel used to produce the same amount of related to but outside of the regulated sectors; the additional workers in those output.’’ sector. Nevertheless, the theory that sectors then have more money to spend, • Factor-shift effect: post-regulation Morgenstern et al. developed continues which leads to more employment in production technologies may be more or to be useful in this context. retail sectors. These are known as less labor-intensive (i.e., more/less labor The following discussion of ‘‘multiplier’’ effects, because an initial is required per dollar of output). In the additional methodologies draws from impact in one sector gets multiplied authors’ words, ‘‘environmental Berck and Hoffmann’s review of through the economy. Unlike CGE activities may be more labor intensive employment models.592 models, input-output models have than conventional production,’’ fixed, linear relationships among the ii. Computable General Equilibrium meaning that ‘‘the amount of labor per sectors (e.g., substitution among inputs (CGE) Models dollar of output will rise,’’ though it is or goods is not allowed), and quantity also possible that ‘‘cleaner operations Computable general equilibrium supplied need not equal quantity could involve automation and less (CGE) models are often used to assess demanded. In particular, these models employment, for example.’’ the impacts of policy. These models do not allow for price changes—an According to the authors, the ‘‘demand include a stylized representation of increase in the demand for labor or effect’’ is expected to have a negative supply and demand curves for all major capital does not result in a change in its effect on employment,591 the ‘‘cost markets in the economy. The labor price to help reallocate it to its best use. market is commonly included. CGE As a result, these models cannot capture 590 Morgenstern, Richard D., William A. Pizer, opportunity costs from using resources and Jhih-Shyang Shih. ‘‘Jobs Versus the III.H.1, this possibility that vehicles may become in one area of the economy over Environment: An Industry-Level Perspective.’’ more attractive to consumers after the program another. The multipliers take an initial Journal of Environmental Economics and poses a conundrum: Why have interactions between Management 43 (2002): 412–436 (Docket EPA–HQ– vehicle buyers and producers not provided these impact and can increase it substantially. OAR–2010–0799). benefits without government intervention? IO models are commonly used for 591 As will be discussed below, the demand effect 592 Berck, Peter, and Sandra Hoffmann. regional analysis of projects. In a in this proposal is potentially an exception to this ‘‘Assessing the Employment Impacts of regional analysis, the markets are rule. While the vehicles become more expensive, Environmental and Natural Resource Policy.’’ they also produce reduced fuel expenditures; the Environmental and Resource Economics 22 (2002): commonly considered small enough reduced fuel costs provide a countervailing impact 133–156 (Docket EPA–HQ–OAR–2010–0799) that wages and prices are determined on vehicle sales. As discussed in Preamble Section (Docket EPA–HQ–OAR–2010–0799). outside the region, and any excess

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supply or demand is due to exports and labor demand is proportional to output being reviewed. We seek comment on imports (or, in the case of labor, or expenditures. As Berck and the analytical approaches presented emigration or immigration). For Hoffmann note, though, ‘‘Compliance here, the inputs used below for national-level employment analysis, the with regulations may create additional employment analysis, and other use of input-output models requires the jobs that are not accounted for.’’ While appropriate methods for analyzing assumption that workers flow into or such an analysis can approximate the employment impacts for this out of the labor market perfectly freely. effects in that one sector in a simple rulemaking. Wages do not adjust; instead, people way, it also may miss important join into or depart from the labor pool connections to related sectors. c. Employment analysis of this proposal as production requires them. For other vi. Ex-Post Econometric Studies As mentioned above, this program is markets as well, there is no substitution expected to affect employment in the of less expensive inputs for more A number of ex-post econometric regulated sector (auto manufacturing) expensive ones. As a result, IO models analyses examine the net effect of and other sectors directly affected by the provide an upper bound on employment regulation on employment in regulated proposal: auto parts suppliers, auto impacts. As Berck and Hoffmann note, sectors. Morgenstern, Pizer, and Shih dealers, the fuel supply market (which ‘‘For the same reason, they can be (2002), discussed above, and Berman will face reduced petroleum production thought of as simulating very short-run and Bui (2001) are two notable due to reduced fuel demand but which adjustment,’’ in contrast to the CGE’s examples that rely on highly may see additional demand for implicit assumption of long-run disaggregated establishment-level time electricity or other fuels), and adjustment. Changes in production series data to estimate longer-run 593 consumers (who will face higher vehicle processes, introducing new employment effects. While often a costs and lower fuel expenditures). In technologies, or learning over time due sophisticated treatment of the issues addition, as the discussion above to new regulatory requirements are also analyzed, these studies commonly suggests, each of these sectors could generally not captured by IO models, as analyze specific scenarios or sectors in potentially have ripple effects in the rest the past; care needs to be taken in they are calibrated to already of the economy. These ripple effects extrapolating their results to other established relationships between depend much more heavily on the state scenarios and to the future. For inputs and outputs. of the macroeconomy than do the direct instance, neither of these two studies effects. At the national level, iv. Hybrid Models examines the auto industry and are employment may increase in one As Berck and Hoffmann note, input- therefore of limited applicability in this industry or region and decrease in output models and CGE models context. another, with the net effect being ‘‘represent a continuum of closely vii. Summary smaller than either individual-sector related models.’’ Though not separately effect. EPA does not attempt to quantify discussed by Berck and Hoffmann, some All methods of estimating hybrid models combine some of the employment impacts of a regulation the net effects of the regulation on features of CGE models (e.g., prices that have advantages and limitations. CGE overall national employment. can change) with input-output models may be most appropriate for The discussion that follows provides relationships. For instance, a hybrid long-term impacts, but the usual a partial, bottom-up quantitative model may include the ability to assumption of equilibrium in the estimate of the effects of this proposal examine disequilibrium phenomena, employment market means that it is not on the regulated sector (the auto such as labor being at less than full useful for looking at changes in overall industry; for reasons discussed below, employment. Hybrid models depend on employment: overall levels are likely to we include some quantitative assumptions about how adjustments in be premised on full employment. IO assessment of effects on suppliers to the the economy occur. CGE models models, on the other hand, may be most industry, although they are not characterize equilibria but say little appropriate for small-scale, short-term regulated directly). It also includes about the pathway between them, while effects, because they assume fixed qualitative discussion of the effects of IO models assume that adjustments are relationships across sectors and do not the proposal on other sectors. Focusing largely constrained by previously require market equilibria. Hybrid quantification of employment impacts defined relationships; the effectiveness models, which combine some features on the regulated sector has some of hybrid models depends on their of CGEs with IO models, depend upon advantages over quantifying all impacts. success in overcoming the limitations of key assumptions and economic First, the analysis relies on data each of these approaches. Hybrid relationships that are built into them. generated as part of the rulemaking models could potentially be used to Single-sector models are simple and process, which focuses on the regulated model labor market impacts of various straightforward, but they are often based sector; as a result, what is presented vehicle policy options, although a on the assumptions that labor demand here is based on internally consistent number of judgments need to be made is proportional to output, and that other assumptions and estimates made in this about the appropriate assumptions sectors are not affected. Finally, proposal. Secondly, as discussed above, underlying the model as well as the econometric models have been net effects on employment in the empirical basis for the modeling results. developed to evaluate the longer-run net economy as a whole depend heavily on effects of regulation on sector the overall state of the economy when v. Single Sectors employment, though these are ex-post this rule has its effects. Focusing on the It is possible to conduct a bottom-up analyses commonly of specific sectors regulated sector provides insight into analysis of the partial effect of or situations, and the results may not employment effects in that sector regulation on employment in a single have direct bearing for the regulation without having to make assumptions sector by estimating the change in about the state of the economy when output or expenditures in a sector and 593 Berman, Eli, and Linda T. Bui, (2001) this rule has its impacts. We include a ‘‘Environmental Regulation and Labor Demand: multiplying it by an estimate of the Evidence from the South Coast Air Basin,’’ Journal qualitative discussion of employment number of workers per unit of output or of Public Economics, 79, 265—295 (Docket EPA– effects other sectors to provide a broader expenditures, under the assumption that HQ–OAR–2010–0799). perspective on the impacts of this rule.

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As noted above, in a full-employment effect will depend on which of these expenditures: The U.S. Bureau of Labor economy, any changes in employment effects dominates. Because, as described Statistics’ (BLS) Employment will result from people changing jobs or in Chapter 8.1, we have not quantified Requirements Matrix (ERM); 594 the voluntarily entering or exiting the the impact on sales for this proposal, we Census Bureau’s Annual Survey of workforce. In a full-employment do not quantify the demand effect. Manufactures 595 (ASM); and the Census economy, employment impacts of this (2) The Cost Effect Bureau’s Economic Census. DRIA proposal will change employment in Chapter 8.2.3.1.2 provides details on all specific sectors, but it will have small, The demand effect, discussed above, these sources. The ASM and the if any, effect on aggregate employment. measures employment changes due to Economic Census have more sectoral This rule would take effect in 2017 new vehicle sales only. The cost effect detail than the ERM; we provide measures employment impacts due to through 2025; by then, the current high estimates for both Motor Vehicle the new or additional technologies unemployment may be moderated or Manufacturing and Light Duty Vehicle needed for vehicles to comply with the ended. For that reason, this analysis Manufacturing sectors for comparison proposed standards. As DRIA Chapter does not include multiplier effects, but purposes. For all of these, we adjust for 8.2.3.1.3 explains, we estimate the cost instead focuses on employment impacts the ratio of domestic production to in the most directly affected industries. effect by multiplying the costs of rule compliance by ratios of workers to each domestic sales. The maximum value for Those sectors are likely to face the most employment impacts per $1 million concentrated employment impacts. The $1 million of expenditures in that sector. The magnitude and relative size expenditures (after accounting for the agencies seek comment on other sectors share of domestic production) in 2009 that are likely to be significantly of these ratios depends on the sectors’ labor intensity of the production was estimated to be 2.049 if all the affected and thus warrant further additional costs are in the parts sector; analysis in the final rulemaking process. The use of these ratios has both the minimum value is 0.407, if all the analysis. advantages and limitations. It is often additional costs are in the light-duty i. Employment Impacts in the Auto possible to estimate these ratios for vehicle manufacturing sector: That is, Industry quite specific sectors of the economy; as the range of employment impacts is a result, it is not necessary to between 0.4 and 2 additional jobs per $1 Following the Morgenstern et al. extrapolate employment ratios from million expenditures in the sector. The conceptual framework for the impacts of possibly unrelated sectors. On the other different data sources provide similar regulation on employment in the hand, these estimates are averages for magnitudes for the estimates for the regulated sector, we consider three the sectors, covering all the activities in sectors. Parts manufacturing appears to effects for the auto sector: the demand those sectors; they may not be be more labor-intensive than vehicle effect, the cost effect, and the factor shift representative of the labor required manufacturing; light-duty vehicle effect. However, we are only able to when expenditures are required on manufacturing appears to be slightly offer quantitative estimates for the cost specific activities, as the factor shift less labor-intensive than motor vehicle effect. We note that these estimates, effect (discussed below) indicates. In manufacturing as a whole. As discussed based on extrapolations from current addition, these estimates do not include in the DRIA, trends in the BLS ERM are data, become more uncertain as time changes in sectors that supply these used to estimate productivity goes on. sectors, such as steel or electronics improvements over time that are used to (1) The Demand Effect producers. They thus may best be adjust these ratios over time. Table III– viewed as the effects on employment in 87 shows the cost estimates developed The demand effect depends on the the auto sector due to the changes in for this rule, discussed in Section effects of this proposal on vehicle sales. expenditures in that sector, rather than III.H.2. Multiplying those cost estimates If vehicle sales increase, then more as an assessment of all employment by the maximum and minimum values people will be required to assemble changes due to these changes in for the cost effect (maximum using the vehicles and their components. If expenditures. ASM ratio if all additional costs are in vehicle sales decrease, employment Some of the costs of this proposal will the parts sector, and minimum using the associated with these activities will be spent directly in the auto Economic Census ratio for the light-duty unambiguously decrease. Unlike in manufacturing sector, but some of the Morgenstern et al.’s study, where the sector if all additional costs are borne by costs will be spent in the auto parts auto manufacturers) provides the cost demand effect unambiguously manufacturing sector. Because we do decreased employment, there are effect employment estimates. This is a not have information on the proportion simple way to examine the relationship countervailing effects in the vehicle of expenditures in each sector, we market due to the fuel savings resulting between labor required and separately present the ratios for both the expenditure, and we seek comment on from this program. On one hand, this auto manufacturing sector and the auto refining this method. proposal will increase vehicle costs; by parts manufacturing sector. These are itself, this effect would reduce vehicle not additive, but should instead be While we estimate employment sales. On the other hand, this proposal considered as a range of estimates for impacts beginning with the first year of will reduce the fuel costs of operating the cost effect, depending on which the standard (2017), some of these job the vehicle; by itself, this effect would sector adds technologies to the vehicles gains may occur earlier as auto increase vehicle sales, especially if to comply with the regulation. manufacturers and parts suppliers hire potential buyers have an expectation of We use several public sources for staff in anticipation of compliance with higher fuel prices. The sign of demand estimates of employment per $1 million the standard.

594 http://www.bls.gov/emp/ 595 http://www.census.gov/manufacturing/asm/ ep_data_emp_requirements.htm. index.html.

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(3) The Factor Shift Effect discussed in DRIA Chapter 8.2.3.1.3, technologies likely to be used to meet though, for a subset of the technologies, the standards in this proposal, then, the The factor shift effect looks at the EPA-sponsored research (discussed in factor shift effect increases labor effects on employment due to changes Chapter 3.2.1.1 of the Joint TSD), which demand, at least in the short run; in the in labor intensity associated with a compared new technologies to existing long run, as with all technologies, the regulation. As noted above, the ones at the level of individual cost structure is likely to change due to estimates of the cost effect assume components, found that labor use for the learning, economies of scale, etc. The constant labor per $1 million in new technologies increased: The new technologies examined in this research expenditures, though the new fuel-saving technologies use more labor are, however, only a subset of the technologies may be either more or less than the baseline technologies. For technologies that auto makers may use labor-intensive than the existing ones. instance, switching from a conventional to comply with the standards proposed An estimate of the factor shift effect mid-size vehicle to a hybrid version of here. As a result, these results cannot be would either increase or decrease the that vehicle involves an additional considered definitive evidence that the estimate used for the cost effect. $395.85 in labor costs, which we factor-shift effect increases employment We are not quantifying the factor shift estimate to require an additional 8.6 for this rule. We therefore do not effect here, for lack of data on the labor hours per vehicle.596 For a subset of the quantify the factor shift effect. intensity of all the possible technologies that manufacturers could use to comply 596 FEV, Inc. ‘‘Light Duty Technology Cost EPA Report EPA–420–R–11_015, November 2011 with the proposed standards. As Analysis, Power-Split and P2 HEV Case Studies.’’ (Docket EPA–HQ–OAR–2010–0799).

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(4) Summary of Employment Effects in parts sector also depend on the effects consumer receives). As a result, the Auto Sector of the proposed standards on vehicle consumers will have additional money While we are not able to quantify the sales and on the labor intensity of the to spend on other goods and services, demand or factor shift effects, the cost new technologies, qualitatively in the though, for those who do not finance effect results show that the employment same ways as for the auto their vehicles, it will occur after the manufacturing sector. initial payback period. These increased effects of the increased spending in the expenditures will support employment regulated sector (and, possibly, the parts iv. Effects on Employment for Fuel in those sectors where consumers spend sector) are expected to be positive and Suppliers their savings. on the order of a few thousand in the In addition to the effects on the auto These increased expenditures will initial years of the program. As noted manufacturing and parts sectors, these occur in 2017 and beyond. If the above, the motor vehicle and parts rules will result in changes in fuel use economy returns to full employment by manufacturing sectors employed about that lower GHG emissions. Fuel saving, that time, any change in consumer 677,000 people in 2010, with principally reductions in liquid fuels expenditures would primarily represent automobile and light truck such as gasoline and diesel, will affect a shift in employment among sectors. If, manufacturing accounting for about employment in the fuel suppliers on the other hand, the economy still has 129,000 of that total. industry sectors throughout the supply substantial unemployment, these ii. Effects on Employment for Auto chain, from refineries to gasoline expenditures would contribute to Dealers stations. To the extent that the proposed employment through increased standards result in increased use of consumer demand. The effects of the proposed standards electricity, natural gas, or other fuels, on employment for auto dealers depend employment effects will result from d. Summary principally on the effects of the providing these fuels and developing The primary employment effects of standards on light duty vehicle sales. In the infrastructure to supply them to this proposal are expected to be found addition, auto dealers may be affected consumers. throughout several key sectors: auto by changes in maintenance and service Expected petroleum fuel consumption manufacturers, auto dealers, auto parts costs. Increases in those costs are likely reductions can be found in Section manufacturing, fuel production and to increase labor demand in dealerships. III.H.3. While those figures represent supply, and consumers. This rule Although this proposal predicts very fuel savings for purchasers of fuel, it initially takes effect in model year 2017, small penetration of advanced represents a loss in value of output for a time period sufficiently far in the technology vehicles, the uncertainty on the petroleum refinery industry, fuel future that the current sustained high consumer acceptance of such distribution, and gasoline stations. The unemployment at the national level may technology vehicles is even greater. As loss of expenditures to petroleum fuel be moderated or ended. In an economy discussed in Section III.H.1.b, suppliers throughout the petroleum fuel with full employment, the primary consumers may find some supply chain, from the petroleum employment effect of a rulemaking is characteristics of electric vehicles and refiners to the gasoline stations, is likely likely to be to move employment from plug-in hybrid electric vehicles, such as to result in reduced employment in one sector to another, rather than to the ability to fuel with electricity rather these sectors. increase or decrease employment. For than gasoline, attractive; they may find This rule is also expected to lead to that reason, we focus our partial other characteristics, such as the limited increases in electricity consumption by quantitative analysis on employment in range for electric vehicles, undesirable. vehicles, as discussed in Section III.H.4. the regulated sector, to examine the As a result, some consumers will find This new fuel may require additional impacts on that sector directly. We that EVs will meet their needs, but other infrastructure, such as electricity discuss the likely direction of other buyers will choose more conventional charging locations. Providing this impacts in the regulated sector as well vehicles. Auto dealers may play a major infrastructure will require some as in other directly related sectors, but role in explaining the merits and increased employment. In addition, the we do not quantify those impacts, disadvantages of these new technologies generation of electricity will also require because they are more difficult to to vehicle buyers. There may be a some additional labor. We have quantify with reasonable accuracy, temporary need for increased insufficient information at this time to particularly so far into the future. employment to train sales staff in the predict whether the increases in labor For the regulated sector, we have not new technologies as the new associated with increased infrastructure quantified the demand effect. The cost technologies become available. provision and fuel generation for these effect is expected to increase newer fuels will be greater or less than employment by 600–3,600 workers in iii. Effects on Employment in the Auto 2017 depending on the share of that Parts Sector the employment reductions associated with reduced demand for petroleum employment that is in the auto As discussed in the context of fuels. manufacturing sector compared to the employment in the auto industry, some auto parts manufacturing sector. As vehicle parts are made in-house by auto v. Effects on Employment Due to mentioned above, some of these job manufacturers; others are made by Impacts on Consumer Expenditures gains may occur earlier as auto independent suppliers who are not As a result of these proposed manufacturers and parts suppliers hire directly regulated, but who will be standards, consumers will pay a higher staff to prepare to comply with the affected by the proposed standards as up-front cost for the vehicles, but they standard. The demand effect is well. The additional expenditures on will recover those costs in a fairly short ambiguous and depends on changes in technologies are expected to have a payback period (see Section III.H.10.b); vehicle sales, which are not quantified positive effect on employment in the indeed, people who finance their for this proposal. Though we do not parts sector as well as the vehicles are expected to find that their have estimates of the factor shift effect manufacturing sector; the breakdown in fuel savings per month exceed the for all potential compliance employment between the two sectors is increase in the loan cost (though this technologies, the evidence which we do difficult to predict. The effects on the depends on the particular loan rate a have for some technologies suggests that

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many of the technologies will have is likely to have an annual effect on the manufacturers provide information the increased labor needs. economy of $100 million or more. Administrator may reasonably require to Effects in other sectors that are Accordingly, EPA submitted this action determine compliance with the predicated on vehicle sales are also to the Office of Management and Budget regulations; submission of the ambiguous. Changes in vehicle sales are (OMB) for review under Executive information is therefore mandatory. We expected to affect labor needs in auto Orders 12866 and 13563 (76 FR 3821, will consider confidential all dealerships and in parts manufacturing. January 21, 2011) and any changes made information meeting the requirements of Increased expenditures for auto parts in response to OMB recommendations section 208(c) of the Clean Air Act. have been documented in the docket for are expected to require increased labor As shown in Table III–88, the total this action as required by CAA section to build parts, though this effect also annual reporting burden associated with 307(d)(4)(B)(ii). depends on any changes in the labor this proposal is about 5,100 hours and intensity of production; as noted, the In addition, EPA prepared an analysis of the potential costs and benefits $1.36 million, based on a projection of subset of potential compliance 33 respondents. The estimated burden technologies for which data are associated with this action. This analysis is contained in the Draft for vehicle manufacturers is a total available show increased labor estimate for new reporting requirements. Reduced fuel production Regulatory Impact Analysis, which is available in the docket for this requirements. Burden means the total implies less employment in the time, effort, or financial resources petroleum sectors. Finally, consumer rulemaking and at the docket internet address listed under ADDRESSES above. expended by persons to generate, spending is expected to affect maintain, retain, or disclose or provide employment through changes in b. Paperwork Reduction Act information to or for a Federal agency. expenditures in general retail sectors; The information collection This includes the time needed to review net fuel savings by consumers are requirements in this proposed rule have instructions; develop, acquire, install, expected to increase demand (and been submitted for approval to the and utilize technology and systems for therefore employment) in other sectors. Office of Management and Budget the purposes of collecting, validating, I. Statutory and Executive Order (OMB) under the Paperwork Reduction and verifying information, processing Reviews Act, 44 U.S.C. 3501 et seq. The and maintaining information, and Information Collection Request (ICR) disclosing and providing information; a. Executive Order 12866: ‘‘Regulatory document prepared by EPA has been adjust the existing ways to comply with Planning and Review and Executive assigned EPA ICR number 0783.61. any previously applicable instructions Order 13563: Improving Regulation and The Agency proposes to collect and requirements; train personnel to be Regulatory Review’’ information to ensure compliance with able to respond to a collection of Under section 3(f)(1) of Executive the provisions in this rule. This information; search data sources; Order 12866 (58 FR 51735, October 4, includes a variety of requirements for complete and review the collection of 1993), this action is an ‘‘economically vehicle manufacturers. Section 208(a) of information; and transmit or otherwise significant regulatory action’’ because it the Clean Air Act requires that vehicle disclose the information.

An agency may not conduct or related to the ICR for this proposed rule information collection requirements sponsor, and a person is not required to to EPA and OMB. See ‘Addresses’ contained in this proposal. respond to a collection of information section at the beginning of this notice c. Regulatory Flexibility Act unless it displays a currently valid OMB for where to submit comments to EPA. control number. The OMB control Send comments to OMB at the Office of The Regulatory Flexibility Act (RFA) numbers for EPA’s regulations in 40 Information and Regulatory Affairs, generally requires an agency to prepare CFR are listed in 40 CFR part 9. Office of Management and Budget, 725 a regulatory flexibility analysis of any To comment on the Agency’s need for 17th Street NW., Washington, DC 20503, rule subject to notice and comment this information, the accuracy of the Attention: Desk Office for EPA. Since rulemaking requirements under the provided burden estimates, and any OMB is required to make a decision Administrative Procedure Act or any suggested methods for minimizing concerning the ICR between 30 and 60 other statute unless the agency certifies respondent burden, including the use of days after December 1, 2011, a comment that the rule will not have a significant automated collection techniques, EPA to OMB is best assured of having its full economic impact on a substantial has established a public docket for this effect if OMB receives it by January 3, number of small entities. Small entities rule, which includes this ICR, under 2012. The final rule will respond to any include small businesses, small Docket ID number EPA–HQ–OAR– OMB or public comments on the organizations, and small governmental 2010–0799. Submit any comments jurisdictions.

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For purposes of assessing the impacts small governmental jurisdiction that is a independently owned and operated and of this rule on small entities, small government of a city, county, town, is not dominant in its field. entity is defined as: (1) A small business school district or special district with a Table III–89 provides an overview of as defined by the Small Business population of less than 50,000; and the primary SBA small business Administration’s (SBA) regulations at 13 (3) a small organization that is any not- categories included in the light-duty CFR 121.201 (see table below); (2) a for-profit enterprise which is vehicle sector:

After considering the economic consider appropriate GHG standards for are small businesses (no major vehicle impacts of today’s proposal on small these entities as part of a future manufacturers meet the small-entity entities, EPA certifies that this action regulatory action. criteria as defined by SBA). EPA will not have a significant economic Potentially affected small entities fall estimates that these small entities impact on a substantial number of small into three distinct categories of comprise less than 0.1 percent of the entities. As with the MY 2012–2016 businesses for light-duty vehicles: Small total light-duty vehicle sales in the U.S., GHG standards, EPA is proposing to volume manufacturers (SVMs), and therefore the proposed exemption exempt manufacturers meeting SBA’s independent commercial importers will have a negligible impact on the definition of small business as described (ICIs), and alternative fuel vehicle GHG emissions reductions from the in 13 CFR 121.201 due to unique issues converters. Based on our preliminary proposed standards. involved with establishing appropriate assessment, EPA has identified a total of As discussed in Section III.B.7, EPA is GHG standards for these small about 21 entities that fit the Small proposing to allow small businesses to businesses and the potential need to Business Administration (SBA) criterion waive their small entity exemption and develop a program that would be of a small business. There are about 4 optionally certify to the GHG standards. structured differently for them (which small manufacturers, including three This would allow small entity would require more time), and the electric vehicle manufacturers, 8 ICIs, manufacturers to earn CO2 credits under extremely small emissions contribution and 9 alternative fuel vehicle converters the GHG program, if their actual of these entities. EPA would instead in the light-duty vehicle market which fleetwide CO2 performance was better

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than their fleetwide CO2 target standard. manufacturers are exempted from the action, EPA did consult with EPA proposes to make the GHG program standards, EPA is properly certifying representatives of state and local opt-in available starting in MY 2014, as that the 2017–2025 standards would not governments in developing this action. the MY 2012, and potentially the MY have a significant economic impact on In the spirit of Executive Order 13132, 2013, certification process will have a substantial number of small entities and consistent with EPA policy to already occurred by the time this directly subject to the rule or otherwise promote communications between EPA rulemaking is finalized. EPA is also would have a positive economic effect and State and local governments, EPA proposing that manufacturers certifying on all of the small entities opting in to specifically solicits comment on this to the GHG standards for MY 2014 the rule. proposed action from State and local would be eligible to generate early We continue to be interested in the officials. potential impacts of the proposed rule credits for vehicles sold in MY 2012 and f. Executive Order 13175: ‘‘Consultation on small entities and welcome MY 2013. Manufacturers waiving their and Coordination with Indian Tribal comments on issues related to such small entity exemption would be Governments’’ required to meet all aspects of the GHG impacts. This proposed rule does not have standards and program requirements d. Unfunded Mandates Reform Act across their entire product line. tribal implications, as specified in However, the exemption waiver would Title II of the Unfunded Mandates Executive Order 13175 (65 FR 67249, be optional for small entities and Reform Act of 1995 (UMRA), Public November 9, 2000). This rule will be presumably manufacturers would only Law 104–4, establishes requirements for implemented at the Federal level and opt into the GHG program if it is Federal agencies to assess the effects of impose compliance costs only on economically advantageous for them to their regulatory actions on State, local, vehicle manufacturers. Tribal do so, for example through the and tribal governments and the private governments would be affected only to generation and sale of CO2 credits. sector. the extent they purchase and use Therefore, EPA believes adding this This proposal contains no Federal regulated vehicles; tribal governments voluntary option does not affect EPA’s mandates (under the regulatory that purchase new model year 2017 and determination that the proposed provisions of Title II of the UMRA) for later vehicles will enjoy substantial fuel standards would impose no significant State, local, or tribal governments. The savings from these more fuel efficient adverse impact on small entities. rule imposes no enforceable duty on any vehicles. Thus, Executive Order 13175 Some commenters to the 2012–2016 State, local or tribal governments. This does not apply to this rule. EPA light duty vehicle GHG rulemaking action is also not subject to the specifically solicits additional comment argued that EPA is obligated under the requirements of section 203 of UMRA on this proposed rule from tribal RFA to consider indirect impacts of the because EPA has determined that this officials. rule contains no regulatory rules in assessing impacts on small g. Executive Order 13045: ‘‘Protection of requirements that might significantly or businesses, in particular potential Children from Environmental Health uniquely affect small governments. EPA impacts on stationary sources that Risks and Safety Risks’’ would not be directly regulated by the has determined that this proposal rule. EPA disagrees. When considering contains a Federal mandate that may This action is subject to EO 13045 (62 whether a rule should be certified, the result in expenditures of $100 million or FR 19885, April 23, 1997) because it is RFA requires an agency to look only at more for the private sector in any one an economically significant regulatory the small entities to which the proposed year. EPA believes that the proposal action as defined by EO 12866, and EPA rule will apply and which will be represents the least costly, most cost- believes that the environmental health subject to the requirement of the effective approach to revise the light or safety risk addressed by this action specific rule in question. 5 U.S.C. 603, duty vehicle standards as authorized by may have a disproportionate effect on 605 (b); Mid-Tex Elec. Coop. v. FERC, section 202(a)(1). See Section III.A.2.a children. Climate change impacts, and 773 F.3d 327, 342 (DC Cir. 1985). above. The costs and benefits associated in particular the determinations of the Reading section 605 in light of section with the proposal are discussed above Administrator in the Endangerment and 603, we conclude that an agency may and in the Draft Regulatory Impact Cause or Contribute Findings for properly certify that no regulatory Analysis, as required by the UMRA. Greenhouse Gases Under Section 202(a) of the Clean Air Act (74 FR 66496, flexibility analysis is necessary when it e. Executive Order 13132: ‘‘Federalism’’ determines that the rule will not have a December 15, 2009), are summarized in significant economic impact on a This proposed action would not have Section III.F.2. In making those substantial number of small entities that federalism implications. It will not have Findings, the Administrator placed are subject to the requirements of the substantial direct effects on the States, weight on the fact that certain groups, rule; see also Cement Kiln Recycling on the relationship between the national including children, are particularly Coalition, v. EPA, 255 F.3d 855, 869 (DC government and the States, or on the vulnerable to climate-related health Cir. 2001). DC Circuit has consistently distribution of power and effects. In those Findings, the rejected the contention that the RFA responsibilities among the various Administrator determined that the applies to small businesses indirectly levels of government, as specified in health effects of climate change linked affected by the regulation of other Executive Order 13132. This rulemaking to observed and projected elevated entities.597 would apply to manufacturers of motor concentrations of GHGs include the Since the proposal would regulate vehicles and not to state or local increased likelihood of more frequent exclusively large motor vehicle governments; state and local and intense heat waves, increases in manufacturers and small vehicle governments that purchase new model ozone concentrations over broad areas year 2017 and later vehicles will enjoy of the country, an increase of the 597 In any case, any impacts on stationary sources substantial fuel savings from these more severity of extreme weather events such arise because of express statutory requirements in fuel efficient vehicles. Thus, Executive as hurricanes and floods, and increasing the CAA, not as a result of vehicle GHG regulation. Moreover, GHGs have become subject to regulation Order 13132 does not apply to this severity of coastal storms due to rising under the CAA by virtue of other regulatory actions action. Although section 6 of Executive sea levels. These effects can all increase taken by EPA before this proposal. Order 13132 does not apply to this mortality and morbidity, especially in

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vulnerable populations such as i. National Technology Transfer and the proposed standards will affect children, the elderly, and the poor. In Advancement Act climate change projections, and EPA has addition, the occurrence of wildfires in Section 12(d) of the National estimated reductions in projected global North America have increased and are Technology Transfer and Advancement mean surface temperatures and sea-level likely to intensify in a warmer future. Act of 1995 (‘‘NTTAA’’), Public Law rise (Section III.F.3). Within settlements PM emissions from these wildfires can 104–113, 12(d) (15 U.S.C. 272 note) experiencing climate change, certain contribute to acute and chronic illnesses directs EPA to use voluntary consensus parts of the population may be of the respiratory system, including standards in its regulatory activities especially vulnerable; these include the pneumonia, upper respiratory diseases, unless to do so would be inconsistent poor, the elderly, those already in poor asthma, and chronic obstructive with applicable law or otherwise health, the disabled, those living alone, pulmonary disease, especially in impractical. Voluntary consensus and/or indigenous populations 599 children. standards are technical standards (e.g., dependent on one or a few resources. materials, specifications, test methods, Therefore, these populations may EPA has estimated reductions in receive disproportionate benefits from projected global mean surface sampling procedures, and business practices) that are developed or adopted reductions in GHGs. temperature and sea level rise as a result For non-GHG co-pollutants such as by voluntary consensus standards of reductions in GHG emissions ozone, PM , and toxics, EPA has bodies. NTTAA directs EPA to provide 2.5 associated with the standards proposed concluded that it is not practicable to Congress, through OMB, explanations in this action (Section III.F.3). Due to determine whether there would be when the Agency decides not to use their vulnerability, children may receive disproportionately high and adverse available and applicable voluntary disproportionate benefits from these human health or environmental effects consensus standards. reductions in temperature and the on minority and/or low income For CO emissions, EPA is proposing subsequent reduction of increased 2 populations from this proposed rule. ozone and severity of weather events. to collect data over the same tests that are used for the MY 2012–2016 CO2 J. Statutory Provisions and Legal The public is invited to submit standards and for the CAFE program. Authority comments or identify peer-reviewed This will minimize the amount of studies and data that assess effects of Statutory authority for the vehicle testing done by manufacturers, since controls proposed today is found in early life exposure to the pollutants manufacturers are already required to addressed by this proposed rule. section 202(a) (which authorizes run these tests. For A/C credits, EPA is standards for emissions of pollutants h. Executive Order 13211: ‘‘Energy proposing to use a consensus from new motor vehicles which Effects’’ methodology developed by the Society emissions cause or contribute to air of Automotive Engineers (SAE) and also pollution which may reasonably be Executive Order 13211; 598 applies to a new A/C test. EPA knows of no anticipated to endanger public health or any rule that: (1) Is determined to be consensus standard available for the A/ welfare), 202(d), 203–209, 216, and 301 economically significant as defined C test. of the Clean Air Act, 42 U.S.C. 7521(a), under E.O. 12866, and is likely to have j. Executive Order 12898: ‘‘Federal 7521(d), 7522, 7523, 7524, 7525, 7541, a significant adverse effect on the Actions To Address Environmental 7542, 7543, 7550, and 7601. Statutory supply, distribution, or use of energy; or Justice in Minority Populations and authority for EPA to establish CAFE test (2) that is designated by the Low-Income Populations’’ procedures is found in section 32904(c) Administrator of the Office of of the Energy Policy and Conservation Executive Order (E.O.) 12898 (59 FR Information and Regulatory Affairs as a Act, 49 U.S.C. section 32904(c). significant energy action. If the 7629 (Feb. 16, 1994)) establishes federal regulatory action meets either criterion, executive policy on environmental IV. NHTSA Proposed Rule for we must evaluate the adverse energy justice. Its main provision directs Passenger Car and Light Truck CAFE effects of the proposed rule and explain federal agencies, to the greatest extent Standards for Model Years 2017–2025 why the proposed regulation is practicable and permitted by law, to A. Executive Overview of NHTSA preferable to other potentially effective make environmental justice part of their Proposed Rule and reasonably feasible alternatives mission by identifying and addressing, 1. Introduction considered by us. as appropriate, disproportionately high and adverse human health or The National Highway Traffic Safety The proposed rule seeks to establish environmental effects of their programs, Administration (NHTSA) is proposing passenger car and light truck fuel policies, and activities on minority Corporate Average Fuel Economy economy standards that would populations and low-income (CAFE) standards for passenger significantly reduce the consumption of populations in the United States. automobiles (passenger cars) and petroleum, would achieve energy With respect to GHG emissions, EPA nonpassenger automobiles (light trucks) security benefits, and would not have has determined that this proposed rule for model years (MY) 2017–2025. any adverse energy effects (Section will not have disproportionately high NHTSA’s proposed CAFE standards III.H.7). In fact, this rule has a positive and adverse human health or would require passenger cars and light effect on energy supply and use. environmental effects on minority or trucks to meet an estimated combined Because the GHG emission standards low-income populations because it average of 49.6 mpg in MY 2025. This finalized today result in significant fuel increases the level of environmental represents an average annual increase of savings, this rule encourages more protection for all affected populations efficient use of fuels. Accordingly, this without having any disproportionately 599 U.S. EPA. (2009). Technical Support proposed rulemaking action is not high and adverse human health or Document for Endangerment or Cause or Contribute designated as a significant energy action environmental effects on any Findings for Greenhouse Gases under Section as defined by E.O. 13211. 202(a) of the Clean Air Act. Washington, DC: U.S. population, including any minority or EPA. Retrieved on April 21, 2009 from http:// low-income population. The reductions epa.gov/climatechange/endangerment/downloads/ 598 66 FR 28355 (May 18, 2001). in CO2 and other GHGs associated with TSD_Endangerment.pdf.

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603 4 percent from the estimated 34.4 mpg independence, energy security, and a CO2. The two other measures for combined fuel economy level expected low carbon economy.601 The reducing the tailpipe emissions of CO2 in MY 2016. Due to these proposed significance accorded to improving fuel are switching to vehicle fuels with standards, we project total fuel savings economy reflects several factors. lower carbon content and changing of approximately 173 billion gallons Conserving energy, especially reducing driver behavior, i.e., inducing people to over the lifetimes of the vehicles sold in the nation’s dependence on petroleum, drive less. model years 2017–2025, with benefits the U.S. in several ways. Reducing Petroleum Consumption To corresponding net societal benefits of Improving energy efficiency has benefits Improve Energy Security and Save the over $358 billion using a 3 percent for economic growth and the U.S. Money discount rate,600 or $262 billion using a environment, as well as other benefits, In 1975, Congress enacted the Energy 7 percent discount rate. such as reducing pollution and While NHTSA has been setting fuel Policy and Conservation Act (EPCA), improving security of energy supply. mandating that NHTSA establish and economy standards since the 1970s, as More specifically, reducing total discussed in Section I, NHTSA’s implement a regulatory program for petroleum use decreases our economy’s motor vehicle fuel economy to meet the proposed MYs 2017–2025 CAFE vulnerability to oil price shocks. standards are part of a National Program various facets of the need to conserve Reducing dependence on oil imports made up of complementary regulations energy, including ones having energy from regions with uncertain conditions by NHTSA and the Environmental independence and security, enhances our energy security. Protection Agency. Today’s proposed environmental, and foreign policy standards build upon the success of the Additionally, the emission of CO2 from implications. The need to reduce energy first phase of the National Program, the tailpipes of cars and light trucks due consumption is even more crucial today finalized on May 7, 2010, in which to the combustion of petroleum is one than it was when EPCA was enacted. NHTSA and EPA set coordinated CAFE of the largest sources of U.S. CO2 U.S. energy consumption has been 602 and greenhouse gas (GHG) standards for emissions. Using vehicle technology outstripping U.S. energy production at MYs 2012–2016 passenger cars and light to improve fuel economy, and thereby an increasing rate. Improving our energy trucks. Because of the very close reducing tailpipe emissions of CO2, is and national security by reducing our relationship between improving fuel one of the three main measures for dependence on foreign oil has been a economy and reducing carbon dioxide reducing those tailpipe emissions of national objective since the first oil (CO2) tailpipe emissions, a large price shocks in the 1970s. Net majority of the projected benefits are 601 Among the reports and studies noting this petroleum imports accounted for achieved jointly with EPA’s GHG rule, point are the following: approximately 51 percent of U.S. described in detail above in Section III John Podesta, Todd Stern and Kim Batten, petroleum consumption in 2009.604 ‘‘Capturing the Energy Opportunity; Creating a World crude oil production is highly of this preamble. These proposed CAFE Low-Carbon Economy,’’ Center for American standards are consistent with the Progress (November 2007), pp. 2, 6, 8, and 24–29, concentrated, exacerbating the risks of President’s National Fuel Efficiency available at: http://www.americanprogress.org/ supply disruptions and price shocks as _ Policy announcement of May 19, 2009, issues/2007/11/pdf/energy chapter.pdf (last the recent unrest in North Africa and accessed Sept. 24, 2011). the Persian Gulf highlights. The export which called for harmonized rules for Sarah Ladislaw, Kathryn Zyla, Jonathan Pershing, all automakers, instead of three Frank Verrastro, Jenna Goodward, David Pumphrey, of U.S. assets for oil imports continues overlapping and potentially inconsistent and Britt Staley, ‘‘A Roadmap for a Secure, Low- to be an important component of U.S. requirements from DOT, EPA, and the Carbon Energy Economy; Balancing Energy Security trade deficits. Transportation accounted and Climate Change,’’ World Resources Institute California Air Resources Board. And for about 71 percent of U.S. petroleum and Center for Strategic and International Studies 605 finally, the proposed CAFE standards (January 2009), pp. 21–22; available at: http://pdf. consumption in 2009. Light-duty and the analysis supporting them also wri.org/secure_low_carbon_energy_economy_ vehicles account for about 60 percent of respond to President’s Obama’s May roadmap.pdf (last accessed Sept. 24, 2011). transportation oil use, which means that 2010 memorandum requesting the Alliance to Save Energy et al., ‘‘Reducing the Cost they alone account for about 40 percent of Addressing Climate Change Through Energy of all U.S. oil consumption. agencies to develop, through notice and Efficiency’’ (2009), available at: http://www.aceee. comment rulemaking, a coordinated org/files/pdf/white-paper/ReducingtheCostof Gasoline consumption in the U.S. has National Program for passenger cars and AddressingClimateChange_synopsis.pdf (last historically been relatively insensitive light trucks for MYs 2017 to 2025. accessed Sept. 24, 2011). to fluctuations in both price and John DeCicco and Freda Fung, ‘‘Global Warming consumer income, and people in most 2. Why does NHTSA set CAFE on the Road; The Climate Impact of America’s parts of the country tend to view Automobiles,’’ Environmental Defense (2006) pp. standards for passenger cars and light iv–vii; available at: http://www.edf.org/sites/ gasoline consumption as a non- trucks? default/files/5301_Globalwarmingontheroad_0.pdf discretionary expense. Thus, when Improving vehicle fuel economy has (last accessed Sept. 24, 2011). gasoline’s share in consumer ‘‘Why is Fuel Economy Important?,’’ a Web page expenditures rises, the public been long and widely recognized as one maintained by the Department of Energy and of the key ways of achieving energy Environmental Protection Agency, available at experiences fiscal distress. Recent tight http://www.fueleconomy.gov/feg/why.shtml (last 600 This value is based on what NHTSA refers to accessed Sept. 24, 2011); 603 Podesta et al., p. 25; Ladislaw et al. p. 21; as ‘‘Reference Case’’ inputs, which are based on the Robert Socolow, Roberta Hotinski, B. DeCicco et al. p. vii; ‘‘Reduce Climate Change, a assumptions that NHTSA has employed for its main Greenblatt, and Stephen Pacala, ‘‘Solving The Web page maintained by the Department of Energy analysis (as opposed to sensitivity analyses to Climate Problem: Technologies Available to Curb and Environmental Protection Agency at http:// examine the effect of variations in the assumptions CO2 Emissions,’’ Environment, volume 46, no. 10, www.fueleconomy.gov/feg/climate.shtml (last on costs and benefits). The Reference Case inputs 2004, pages 8–19, available at: http://www. accessed Sept. 24, 2011). include fuel prices based on the AEO 2011 princeton.edu/mae/people/faculty/socolow/ 604 Energy Information Administration, ‘‘How Reference Case, a 3 percent and a 7 percent ENVIRONMENTDec2004issue.pdf (last accessed dependent are we on foreign oil?’’ Available at discount rate, a 10 percent rebound effect, a value Sept. 24, 2011). http://www.eia.gov/energy_in_brief/foreign_oil_ for the social cost of carbon (SCC) of $22/metric ton 602 EPA Inventory of U.S. Greenhouse Gas dependence.cfm (last accessed August 28, 2011). 605 CO2 (in 2010, rising to $45/metric ton in 2050, at Emissions and Sinks: 1990–2008 (April 2010), pp. Energy Information Administration, Annual a 3 percent discount rate), etc. For a full listing of ES–5, ES–8, and 2–17. Available at http://www.epa. Energy Outlook 2011, ‘‘Oil/Liquids.’’ Available at the Reference Case input assumptions, see Section gov/climatechange/emissions/usgginv_archive.html http://www.eia.gov/forecasts/aeo/MT_liquid IV.C.3 below. (last accessed Sept. 25, 2011). fuels.cfm (last accessed August 28, 2011).

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global oil markets led to prices over global climate change. These risks are clean cars and trucks through $100 per barrel, with gasoline reaching well documented in Section III of this innovative technologies and as high as $4 per gallon in many parts notice, and in NHTSA’s draft manufacturing that will spur economic of the U.S., causing financial hardship Environmental Impact Statement (DEIS) growth and create high-quality domestic for many families and businesses. This accompanying these proposed jobs, enhance our energy security, and fiscal distress can, in some cases, have standards. improve our environment.’’ macroeconomic consequences for the Fuel economy gains since 1975, due The Presidential Memorandum stated economy at large. both to the standards and to market ‘‘The program should also seek to Additionally, since U.S. oil factors, have resulted in saving billions achieve substantial annual progress in production is only affected by of barrels of oil and avoiding billions of reducing transportation sector fluctuations in prices over a period of metric tons of CO2 emissions. In greenhouse gas emissions and fossil fuel years, any changes in petroleum December 2007, Congress enacted the consumption, consistent with my consumption (as through increased fuel Energy Independence and Security Act Administration’s overall energy and economy levels for the on-road fleet) (EISA), amending EPCA to require climate security goals, through the largely flow into changes in the quantity substantial, continuing increases in fuel increased domestic production and use of imports. Since petroleum imports economy. NHTSA thus sets CAFE of existing, advanced, and emerging account for about 2 percent of GDP, standards today under EPCA, as technologies, and should strengthen the increases in oil imports can create a amended by EISA, in order to help the industry and enhance job creation in the discernible fiscal drag. As a U.S. passenger car and light truck fleet United States.’’ Among other things, the consequence, measures that reduce save fuel to promote energy agencies were tasked with researching petroleum consumption, like fuel independence, energy security, and a and then developing standards for MYs economy standards, will directly benefit low carbon economy. 2017 through 2025 that would be the balance-of-payments account, and appropriate and consistent with EPA’s 3. Why is NHTSA proposing CAFE and NHTSA’s respective statutory strengthen the U.S. economy to some standards for MYs 2017–2025 now? degree. And finally, U.S. foreign policy authorities, in order to continue to guide has been affected by decades by rising a. President’s Memorandum the automotive sector along the road to U.S. and world dependency on crude oil During the public comment period for reducing its fuel consumption and GHG as the basis for modern transportation the MY 2012–2016 proposed emissions, thereby ensuring systems, although fuel economy rulemaking, many stakeholders corresponding energy security and standards have at best an indirect encouraged NHTSA and EPA to begin environmental benefits. Several major impact on U.S. foreign policy. working toward standards for MY 2017 automobile manufacturers and CARB and beyond in order to maintain a single sent letters to EPA and NHTSA in Reducing Petroleum Consumption To support of a MYs 2017 to 2025 Reduce Climate Change Impacts nationwide program. After the publication of the final rule establishing rulemaking initiative as outlined in the CO2 is the natural by-product of the MYs 2012–2016 CAFE and GHG President’s May 21, 2010 combustion of fuel to power motor standards, President Obama issued a announcement.609 The agencies began vehicles. The more fuel-efficient a Memorandum on May 21, 2010 working immediately on the next phase vehicle is, the less fuel it needs to burn requesting that NHTSA, on behalf of the of the National Program, work which to travel a given distance. The less fuel Department of Transportation, and EPA has culminated in the standards it burns, the less CO2 it emits in work together to develop a national proposed in this notice for MYs 2017– traveling that distance.606 Since the program for model years 2017–2025.608 2025. amount of CO2 emissions is essentially Specifically, he requested that the constant per gallon combusted of a b. Benefits of Continuing the National agencies develop ‘‘* * * a coordinated Program given type of fuel, the amount of fuel national program under the CAA [Clean consumption per mile is closely related Air Act] and the EISA [Energy The National Program is both needed to the amount of CO2 emissions per Independence and Security Act of 2007] and possible because the relationship mile. Motor vehicles are the second to improve fuel efficiency and to reduce between improving fuel economy and largest GHG-emitting sector in the U.S. greenhouse gas emissions of passenger reducing CO2 tailpipe emissions is a after electricity generation, and cars and light-duty trucks of model very close one. In the real world, there accounted for 27 percent of total U.S. years 2017–2025.’’ The President is a single pool of technologies for GHG emissions in 2008.607 recognized that our country could take reducing fuel consumption and CO2 Concentrations of greenhouse gases are a leadership role in addressing the emissions. Using these technologies in at unprecedented levels compared to the global challenges of improving energy the way that minimizes fuel recent and distant past, which means security and reducing greenhouse gas consumption also minimizes CO2 that fuel economy improvements to pollution, stating that ‘‘America has the emissions. While there are emission reduce those emissions are a crucial opportunity to lead the world in the control technologies that can capture or step toward addressing the risks of development of a new generation of destroy the pollutants that are produced by imperfect combustion of fuel (e.g., 606 Panel on Policy Implications of Greenhouse 608 The Presidential Memorandum is found at: carbon monoxide), there are at present Warming, National Academy of Sciences, National http://www.whitehouse.gov/the-press-office/ no such technologies for CO2. In fact, Academy of Engineering, Institute of Medicine, presidential-memorandum-regarding-fuel- the only way at present to reduce ‘‘Policy Implications of Greenhouse Warming: efficiency-standards. For the reader’s reference, the Mitigation, Adaptation, and the Science Base,’’ President also requested the Administrators of EPA tailpipe emissions of CO2 is by reducing National Academies Press, 1992, at 287. Available and NHTSA to issue joint rules under the CAA and at http://www.nap.edu/catalog.php?record_id=1605 EISA to establish fuel efficiency and greenhouse gas 609 These commitment letters in response to the (last accessed Sept. 25, 2011). emissions standards for commercial medium-and May 21, 2010 Presidential Memorandum are 607 EPA Inventory of U.S. Greenhouse Gas heavy-duty on-highway vehicles and work trucks available at http://www.epa.gov/otaq/climate/ Emissions and Sinks: 1990–2008 (April 2010), p. 2– beginning with the 2014 model year. The agencies proposedregs.htm#cl; and http://www.nhtsa.gov/ 17. Available at http://www.epa.gov/climatechange/ recently promulgated final GHG and fuel efficiency Laws+&+Regulations/CAFE+-+Fuel+Economy/ emissions/usgginv_archive.html (last accessed Sept. standards for heavy duty vehicles and engines for Stakeholder+Commitment+Letters (last accessed 25, 2011). MYs 2014–2018. 76 FR 57106 (September 15, 2011). August 28, 2011).

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fuel consumption. The National applicable law—beyond simply B. Background Program thus has dual benefits: it reviewing the analysis and findings in 1. Chronology of Events Since the MY conserves energy by improving fuel the present rulemaking to see whether 2012–2016 Final Rule Was Issued economy, as required of NHTSA by they are still accurate and applicable, EPCA and EISA; in the process, it and taking a fresh look at all relevant Section I above covers the chronology necessarily reduces tailpipe CO2 factors based on the best and most of events in considerable detail, and we emissions consonant with EPA’s current information available at that refer the reader there. purposes and responsibilities under the future time. 2. How has NHTSA developed the Clean Air Act. To facilitate that future effort, NHTSA proposed CAFE standards since the Additionally, by setting harmonized President’s announcement? Federal standards to regulate both fuel and EPA will conduct a comprehensive economy and greenhouse gas emissions, mid-term evaluation. Up to date The CAFE standards proposed in this the agencies are able to provide a information will be developed and NPRM are based on much more analysis predictable regulatory framework for the compiled for the evaluation, through a conducted by the agencies since July 29, automotive industry while preserving collaborative, robust, and transparent including in-depth modeling analysis by the legal authorities of NHTSA, EPA, process, including notice and comment. DOT/NHTSA to support the proposed and the State of California. Consistent, The agencies fully expect to conduct the CAFE standards, and further refinement harmonized, and streamlined mid-term evaluation in close of a number of our baseline, technology, requirements under the National coordination with the California Air and economic assumptions used to Program, both for MYs 2012–2016 and Resources Board (CARB), consistent evaluate the proposed standards and for MYs 2017–2025, hold out the with the agencies’ commitment to their impacts. This NPRM, the draft promise of continuing to deliver energy maintaining a single national framework joint TSD, and NHTSA’s PRIA and and environmental benefits, cost for regulation of fuel economy and GHG EPA’s DRIA contain much more savings, and administrative efficiencies emissions.611 Prior to beginning information about the analysis on a nationwide basis that might not be NHTSA’s rulemaking process and EPA’s underlying these proposed standards. available under a less coordinated mid-term evaluation, the agencies will The following sections provide the basis approach. The National Program makes jointly prepare a draft Technical for NHTSA’s proposed passenger car it possible for the standards of two Assessment Report (TAR) to examine and light truck CAFE standards for MYs different Federal agencies and the afresh the issues and, in doing so, 2017–2025, the standards themselves, standards of California and other conduct similar analyses and the estimated impacts of the proposed ‘‘Section 177’’ states to act in a unified projections as those considered in the standards, and much more information about the CAFE program relevant to the fashion in providing these benefits. A current rulemaking, including technical 2017–2025 timeframe. harmonized approach to regulating and other analyses and projections passenger car and light truck fuel relevant to each agency’s authority to set C. Development and Feasibility of the economy and GHG emissions is standards as well as any relevant new Proposed Standards critically important given the issues that may present themselves. The 1. How was the baseline vehicle fleet interdependent goals of addressing agencies will provide an opportunity for climate change and ensuring energy developed? public comment on the draft TAR, and independence and security. appropriate peer review will be a. Why do the agencies establish a Additionally, a harmonized approach performed of underlying analyses in the baseline and reference vehicle fleet? would help to mitigate the cost to manufacturers of having to comply with TAR. The assumptions and modeling As also discussed in Section II.B multiple sets of Federal and State underlying the TAR will be available to above, in order to determine what levels standards. the public, to the extent consistent with of stringency are feasible in future One aspect of this phase of the law. The draft TAR is expected to be model years, the agencies must project National Program that is unique for issued no later than November 15, 2017. what vehicles will exist in those model NHTSA, however, is that the passenger After the draft TAR and public years, and then evaluate what car and light truck CAFE standards for comment, the agencies will consult and technologies can feasibly be applied to MYs 2022–2025 must be conditional, coordinate as NHTSA develops its those vehicles in order to raise their fuel while EPA’s standards for those model NPRM. NHTSA will ensure that the economy and lower their CO2 years will be legally binding when subsequent final rule will be timed to emissions. The agencies therefore adopted in this round. EISA requires provide sufficient lead time for industry established a ‘‘baseline’’ vehicle fleet NHTSA to issue CAFE standards for ‘‘at to make whatever changes to their representing those vehicles, based on least 1, but not more than 5, model products that the rulemaking analysis the best available transparent years.’’ 610 To maintain the deems maximum feasible based on the information. The agencies then harmonization benefits of the National new information available. At the very developed a ‘‘reference’’ fleet, projecting Program, NHTSA will therefore propose latest, NHTSA will complete its the baseline fleet sales into MYs 2017– and adopt standards for all 9 model subsequent rulemaking on the standards 2025 and accounting for the effect that years from 2017–2025, but the last 4 with at least 18 months lead time as the MY 2012–2016 CAFE standards years of standards will not be legally required by EPCA,612 but additional have on the baseline fleet.613 This binding as part of this rulemaking. The lead time may be provided. passenger car and light truck CAFE 613 In order to calculate the impacts of the proposed future GHG and CAFE standards, it is standards for MYs 2022–2025 will be 611 The agencies also fully expect that any necessary to estimate the composition of the future determined with finality in a adjustments to the standards as a result of the mid- vehicle fleet absent those proposed standards in subsequent, de novo notice and term evaluation process from the levels enumerated order to conduct comparisons. The first step in this comment rulemaking conducted in full in the current rulemaking will be made with the process was to develop a fleet based on model year participation of CARB and in a manner that 2008 data. This 2008-based fleet includes vehicle compliance with EPCA/EISA and other continues the harmonization of state and Federal sales volumes, GHG/fuel economy performance, vehicle standards. and contains a listing of the base technologies on 610 49 U.S.C. 32902(b)(3)(B). 612 49 U.S.C. 32902(a). every 2008 vehicle sold. The second step was to

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reference fleet is then used for latest, most representative transparent only at the car and truck level, not at the comparisons of technologies’ data set that we had available. However, manufacturer and model-specific level, incremental cost and effectiveness, as the agencies plan to use the MY 2010 which are needed in order to estimate well as for other relevant comparisons data, if available, to develop an updated the effects new standards will have on in the rule. market forecast for use in the final rule. individual manufacturers. Therefore, If and when the MY 2010 data becomes EPA purchased data from CSM– b. What data did the agencies use to available, NHTSA will place a copy of Worldwide and used their projections of construct the baseline, and how did this data into its rulemaking docket. the number of vehicles of each type they do so? Some information important for predicted to be sold by manufacturers in As explained in the draft joint TSD, analyzing new CAFE standards is not 2017–2025.615 This provided the year- both agencies used a baseline vehicle contained in the EPA fuel economy by-year percentages of cars and trucks fleet constructed beginning with EPA certification data. EPA staff estimated sold by each manufacturer as well as the fuel economy certification data for the vehicle wheelbase and track widths percentages of each vehicle segment. 2008 model year, the most recent model using data from Motortrend.com and Using these percentages normalized to year for which final data is currently Edmunds.com. This information is the AEO projected volumes then available from manufacturers. These necessary for estimating vehicle provided the manufacturer-specific data were used as the source for MY footprint, which is required for the market share and model-specific sales 2008 production volumes and some analysis of footprint-based standards. for model years 2011–2016. vehicle engineering characteristics, such Considerable additional information The processes for constructing the MY as fuel economy compliance ratings, regarding vehicle engineering 2008 baseline vehicle fleet and engine sizes, numbers of cylinders, and characteristics is also important for subsequently adjusting sales volumes to transmission types. estimating the potential to add new construct the MY 2017–2025 baseline For this NPRM, NHTSA and EPA technologies in response to new CAFE vehicle fleet are presented in detail in chose again to use MY 2008 vehicle data standards. In general, such information Chapter 1 of the Joint Technical Support as the basis of the baseline fleet. MY helps to avoid ‘‘adding’’ technologies to Document accompanying today’s 2008 is now the most recent model year vehicles that already have the same or proposed rule. for which the industry had what the a more advanced technology. Examples The agencies assume that without agencies would consider to be ‘‘normal’’ include valvetrain configuration (e.g., adoption of the proposed rule, that sales. Complete MY 2009 data is now OHV, SOHC, DOHC), presence of during the 2017–2025 period, available for the industry, but the cylinder deactivation, and fuel delivery manufacturers will not improve fuel agencies believe that the model year was (e.g., MPFI, SIDI). To the extent that economy levels beyond the levels disrupted by the economic downturn such engineering characteristics were required in the MY 2016 standards. and the bankruptcies of both General not available in certification data, EPA However, it is possible that Motors and Chrysler. CAFE compliance staff relied on data published by Ward’s manufacturers may be driven by market data shows that there was a significant Automotive, supplementing this with forces to raise the fuel economy of their reduction in the number of vehicles sold information from Internet sites such as fleets. The recently-adopted fuel by both companies and by the industry Motortrend.com and Edmunds.com. economy and environment labels as a whole. These abnormalities led the NHTSA staff also added some more (‘‘window stickers’’), for example, may agencies to conclude that MY 2009 data detailed engineering characteristics make consumers more aware of the was likely not representative for (e.g., type of variable valve timing) using benefits of higher fuel economy, and projecting the future fleet for purposes data available from ALLDATA® Online. may cause them to demand more fuel- of this analysis. While MY 2010 data is Combined with the certification data, all efficient vehicles during that timeframe. likely more representative for projecting of this information yielded the MY 2008 Moreover, the agencies’ analysis the future fleet, it was not complete and baseline vehicle fleet. NHTSA also indicates that some fuel-saving available in time for it to be used for the reviewed information from technologies may save money for NPRM analysis. Therefore, for purposes manufacturers’ confidential product manufacturers. In Chapter X of the of the NPRM analysis, NHTSA and EPA plans submitted to the agency, but did PRIA, NHTSA examines the impact of chose to use MY 2008 CAFE compliance not rely on that information for an alternative ‘‘market-driven’’ baseline, data for the baseline since it was the developing the baseline or reference which allows for some increases in fuel fleets. economy due to ‘‘voluntary project that 2008-based fleet volume into MYs After the baseline was created the overcompliance’’ beyond the MY 2016 2017–2025. This is called the reference fleet, and next step was to project the sales levels. NHTSA seeks comment on what it represents the fleet volumes (but, until later steps, volumes for 2017–2025 model years. not levels of technology) that the NHTSA and EPA assumptions about fuel economy expect would exist in MYs 2017–2025 absent any EPA used projected car and truck increases are most likely to accurately change due to regulation in 2017–2025. volumes for this period from Energy predict what would happen in the After determining the reference fleet, a third step Information Administration’s (EIA’s) absence of the proposed rule. is needed to account for technologies (and 2011 Interim Annual Energy Outlook NHTSA invites comment on the corresponding increases in cost and reductions in (AEO).614 However, AEO projects sales fuel consumption and CO2 emissions) that could be process used to develop the market added to MY 2008-technology vehicles in the forecast, and on whether the agencies future, taking into previously-promulgated 614 Department of Energy, Energy Information should consider alternative approaches standards, and assuming MY 2016 standards are Administration, Annual Energy Outlook (AEO) extended through MY2025. NHTSA accomplished 2011, Early Release. Available at http:// to producing a forecast at the level of this by using the CAFE model to add technologies www.eia.gov/forecasts/aeo/. Both agencies regard detail we need for modeling. If to that MY 2008-based market forecast such that AEO a credible source not only of such forecasts, commenters wish to offer alternatives, each manufacturer’s car and truck CAFE and but also of many underlying forecasts, including we ask that they address how average CO2 levels reflect baseline standards. The forecasts of the size of the future light vehicle model’s output, the reference case (or adjusted market. The agencies used the early release version manufacturers’ future fleets would be baseline, or no-action alternative), is the light-duty of AEO 2011 and confirmed later that changes fleet estimated to exist in MYs 2017–2025 without reflected in the final version were insignificant with 615 The agencies explain in Chapter I of the draft new GHG/CAFE standards covering MYs 2017– respect to the relative volumes of passenger cars Joint TSD why data from CSM was chosen for 2025. and light trucks. creating the baseline for this rulemaking.

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defined in terms of specific products, assuming post-MY 2016 increases in the reflects updates to the underlying and the sales volumes and technical stringency of CAFE standards.617 commercially-available forecast of characteristics (e.g., fuel economy, Another change in the baseline fleet manufacturer and market segment technology content, vehicle weight, and from the last rulemaking involved our shares of the future passenger car and other engineering characteristics) of redefinition of the list of manufacturers light truck market. Again, the those products. The agency also invites to account for realignment and differences are in input assumptions comment regarding what sensitivity ownership changes taking place within rather than the basic approach and analyses—if any—we should do related the industry. The reported results methodology. It also includes changes to the market forecast. For example, supporting this rulemaking recognize in various macroeconomic assumptions should the agency evaluate the extent to that Volvo vehicles are no longer a part underlying the AEO forecasts and the which its analysis is sensitive to of Ford, but are reported as a separate use of the AEO Unforced Reference projections of the size of the market, company, Geely; that Saab vehicles are Case. Another change in the market manufacturers’ respective market no longer part of GM, but are reported input data from the last rulemaking shares, the relative growth of different as part of Spyker which purchased Saab involved our redefinition of the list of market segments, and or the relative from GM in 2010; and that Chrysler, manufacturers to account for growth of the passenger car and light along with Ferrari and Maserati, are realignment taking place within the truck markets? If so, how would reported as Fiat. industry. In addition, low volume specialty commenters suggest that we do that? Estimated vehicle sales: manufacturers omitted from the analysis The sales forecasts, based on the c. How is the development of the supporting the MY 2012–2016 Energy Information Administration’s baseline fleet for this rule different from rulemaking have been included in the (EIA’s) Early Annual Energy Outlook for the baseline fleet that NHTSA used for analysis supporting this rulemaking. 2011 (Interim AEO 2011), used in the the MY 2012–2016 (May 2010) final These include Aston Martin, Lotus, and current baseline indicate that the total rule? Tesla. number of light vehicles expected to be sold during MYs 2012–2016 is 79 d. How is this baseline different The development of the baseline fleet million, or about 15.8 million vehicles quantitatively from the baseline that for this rulemaking utilizes the same annually. NHTSA’s MY 2012–2016 final NHTSA used for the MY 2012–2016 procedures used in the development of rule forecast, based on AEO 2010, of the (May 2010) final rule? the baseline fleet for the MY 2012–2016 total number of light vehicles likely to rulemaking. Compared to that As discussed above, the current be sold during MY 2012 through MY rulemaking, the change in the baseline baseline was developed from adjusted 2016 was 80 million, or about 16 is much less dramatic—the MY 2012– MY 2008 compliance data and covers million vehicles annually. Light trucks 2016 rulemaking was the first MY 2017–2025. This section describes, are expected to make up 37 percent of rulemaking in which NHTSA did not for the reader’s comparison, some of the the MY 2016 baseline market forecast in use manufacturer product plan data to differences between the current baseline the current baseline, compared to 34 develop the baseline fleet,616 so and the MY 2012–2016 CAFE rule percent of the baseline market forecast evaluating the difference between the baseline. This comparison provides a in the MY 2012–2016 final rule. These baseline fleet used in the MY 2011 final basis for understanding general changes in both the overall size of the rule and in the MY 2012–2016 characteristics and measures of the light vehicle market and the relative rulemaking was informative at that time difference between the two baselines. market shares of passenger cars and regarding some of the major impacts of The current baseline, while developed light trucks reflect changes in the that switch. In this proposal, we are using the same methods as the baseline economic forecast underlying AEO, using basically the same MY 2008 based used for MY 2012–2016 rulemaking, changes in AEO’s forecast of future fuel file as the starting point in the MY prices, and use of the Unforced 2012–2016 analysis, and simply using 617 Similar to the analyses supporting the MYs Reference Case. 2012–2016 rulemaking, the agencies have used the Estimated manufacturer market an updated AEO forecast and an Energy Information Administration’s (EIA’s) updated CSM forecast. Of those, most National Energy Modeling System (NEMS) to shares: differences are in input assumptions estimate the future relative market shares of These changes are reflected below in rather than the basic approach and passenger cars and light trucks. However, NEMS Table IV–1, which shows the agency’s methodology includes shifting vehicle sales sales forecasts for passenger cars and methodology. These include changes in volume, starting after 2007, away from fleets with various macroeconomic assumptions lower fuel economy (the light-truck fleet) towards light trucks under the current baseline underlying the AEO and CSM forecasts vehicles with higher fuel economies (the passenger and the MY 2012–2016 final rule. There and the use of results obtained by using car fleet) in order to facilitate compliance with has been a general decrease in MY 2016 CAFE and GHG MYs 2012–2016 standards. Because forecast overall sales (from AEO) and for DOE’s National Energy Modeling we use our market projection as a baseline relative System (NEMS) to repeat the AEO 2011 to which we measure the effects of new standards, all manufacturers (reflecting CSM’s analysis without forcing increased and we attempt to estimate the industry’s ability to forecast of manufacturers’ market passenger car volumes, and without comply with new standards without changing shares), with the exception of Chrysler, product mix, the Interim AEO 2011-projected shift when the current baseline is compared in passenger car market share as a result of required 616 The agencies’ reasons for not relying on fuel economy improvements creates a circularity. to that used in the MY 2012–2016 product plan data for the development of the Therefore, for the current analysis, the agencies rulemaking. There were no significant baseline fleet were discussed in the Regulatory developed a new projection of passenger car and shifts in manufacturers’ market shares Impact Analysis for the MYs 2012–2016 rulemaking light truck sales shares by running scenarios from between the two baselines. The effect of and at 74 FR 49487–89. While a baseline developed the Interim AEO 2011 reference case that first using publicly and commercially available sources deactivate the above-mentioned sales-volume including the low volume specialty has both advantages and disadvantages relative to shifting methodology and then hold post-2017 manufacturers and accounting for a baseline developed using manufacturers’ product CAFE standards constant at MY 2016 levels. known corporate realignments in the plans, NHTSA currently concludes, as it did in the Incorporating these changes reduced the projected current baseline appear to be negligible. course of that prior rulemaking, that the advantages passenger car share of the light vehicle market by outweigh the disadvantages. Commenters generally an average of about 5 percent during 2017–2025. For individual manufacturers, there supported the more transparent approach employed NHTSA and EPA refer to this as the ‘‘Unforced have been shifts in the shares of in the MYs 2012–2016 rulemaking. Reference Case.’’ passenger car and light trucks, as would

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be expected given that the agency is assumptions as discussed above and in relying on different underlying Chapter 1 of the joint TSD. vehicles were reported under Ford and Saab vehicles were reported under GM; and Chrysler was 618 Again, Aston Martin, Alfa Romeo, Ferrari, reported as a separate company whereas now it is Maserati, Lotus and Tesla were not included in the reported as part of Fiat and includes Alfa Romeo, baseline of the MY 2012–2016 rulemaking; Volvo Ferrari, and Maserati.

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Estimated achieved fuel economy 2016 than shown in the baseline market baseline in the MY 2012–2016 levels: forecast for the MY 2012–2016 rulemaking. The 0.3 mpg change The current baseline market forecast rulemaking. Under the current baseline, relative to the MY 2012–2016 shows industry-wide average fuel average fuel economy for MY 2016 is rulemaking’s baseline is the result of economy levels somewhat lower in MY 27.0 mpg, versus 27.3 mpg under the changes in the shares of passenger car

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and light trucks in the MY 2016 market 2012–2016 rulemaking baseline for combined CAFE levels are considered. as noted above—more light trucks passenger cars and light trucks. Table Here we see a general decline in CAFE generally equals lower average fuel IV–3 shows the combined averages of at the manufacturer level due to the economy—and not the result of changes these planned CAFE levels in the increased share of light trucks. Because in the capabilities of the car and truck respective baseline fleets. These tables the agencies have, as for the MY 2012– fleets. demonstrate that there are no significant 2016 rulemaking, based this market These differences are shown in greater differences in CAFE for either passenger forecast on vehicles in the MY 2008 detail below in Table IV–2, which cars or light trucks at the manufacturer fleet, these changes in CAFE levels shows manufacturer-specific CAFE level between the current baseline and reflect changes in vehicle mix, not levels (not counting FFV credits that the MY 2012–2016 rulemaking baseline. changes in the fuel economy achieved some manufacturers expect to earn) The differences become more significant by individual vehicle models. from the current baseline versus the MY at the manufacturer level when BILLING CODE 4910–59–P

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619 Again, Aston Martin, Alfa Romeo, Ferrari, vehicles were reported under Ford and Saab reported as part of Fiat and includes Alfa Romeo, Maserati, Lotus and Tesla were not included in the vehicles were reported under GM; and Chrysler was Ferrari, and Maserati. baseline of the MY 2012–2016 rulemaking; Volvo reported as a separate company whereas now it is

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as information regarding the context for issued in preparation for today’s joint BILLING CODE 4910–59–C those plans (e.g., estimates of future fuel NPRM. e. How does manufacturer product plan prices), and estimates of the future NHTSA indicated that it requested data factor into the baseline used in this availability, cost, and efficacy of fuel- information for MYs 2010–2025 rule? saving technologies.621 The purpose of primarily as a basis for subsequent this request was to acquire updated discussions with individual In December 2010, NHTSA requested information regarding vehicle that manufacturers provide information manufacturers regarding their manufacturers’ future product plans to regarding future product plans, as well capabilities for the MYs 2017–2025 time assist the agency in assessing what frame as it worked to develop today’s 620 Again, Aston Martin, Alfa Romeo, Ferrari, corporate CAFE standards should be NPRM. NHTSA indicated that the Maserati, Lotus and Tesla were not included in the established for passenger cars and light information received would supplement baseline of the MY 2012–2016 rulemaking; manufactured in model years other information to be used by NHTSA vehicles were reported under Ford and Saab 2017 and beyond. The request was being to develop a realistic forecast of the vehicles were reported under GM; and Chrysler was reported as a separate company whereas now it is vehicle market in MY 2017 and beyond, reported as part of Fiat and includes Alfa Romeo, and to evaluate what technologies may Ferrari, and Maserati. 621 75 FR 80430. feasibly be applied by manufacturers to

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achieve compliance with potential agency’s CAFE modeling system, but modeling system and using the future standards. NHTSA further also by releasing all model inputs and integrated system for future analysis of indicated that information regarding outputs for the agency’s analysis, all of potential CAFE standards. If the agency later model years could help the agency which are available on NHTSA’s Web does so, we expect that the vehicle gain a better understanding of how site at http://www.nhtsa.gov/fuel- choice model would impact estimated manufacturers’ plans through MY 2025 economy. Therefore, NHTSA worked fleet composition not just under new relate to their longer-term expectations with EPA, as it did in preparing for CAFE standards, but also under baseline regarding foreseeable regulatory analysis supporting today’s proposal, to CAFE standards. requirements, market trends, and build a market forecast based on 2. How were the technology inputs prospects for more advanced publicly- and commercially-available developed? technologies. sources. NHTSA continues to believe NHTSA also indicated that it would that the potential technical benefits of As discussed above in Section II.E, for consider information regarding the relying on manufacturers’ plans for developing the technology inputs for model years requested when future products are outweighed by the these proposed MYs 2017–2025 CAFE considering manufacturers’ planned transparency gained in building a and GHG standards, the agencies schedules for redesigning and market forecast that does not rely on primarily began with the technology freshening their products, in order to confidential business information, but inputs used in the MYs 2012–2016 examine how manufacturers anticipate also continues to find product plan CAFE final rule and in the 2010 TAR. tying technology introduction to information to be an important point of The agencies have also updated product design schedules. In addition, reference for meetings with individual information based on newly completed the agency requested information manufacturers. We seek comment on FEV tear down studies and new vehicle regarding manufacturers’ estimates of what value manufacturer product plan simulation work conducted by Ricardo the future vehicle population, and fuel might have in the future, and whether Engineering, both of which were economy improvements and it continues to be useful to request contracted by EPA. Additionally, the incremental costs attributed to manufacturer product plans to inform agencies relied on a model developed by technologies reflected in those plans. rulemaking analyses, specifically the Argonne National Laboratory to estimate Given the importance that responses baseline forecast used in rulemaking hybrid, plug-in hybrid and electric to this request for comment may have in analyses. vehicle battery costs. More detail is informing NHTSA’s proposed CAFE available regarding how the agencies rulemaking, whether as part of the basis f. What sensitivity analyses is NHTSA developed the technology inputs for this for the standards or as an independent conducting on the baseline? proposal above in Section II.E, in check on them, NHTSA requested that As discussed below in Section IV.G, Chapter 3 of the Joint TSD, and in commenters fully respond to each when evaluating the potential impacts Section V of NHTSA’s PRIA. question, particularly by providing of new CAFE standards, NHTSA a. What technologies does NHTSA information regarding the basis for considered the potential that, depending consider? technology costs and effectiveness on how the cost and effectiveness of estimates. available technologies compare to the Section II.E.1 above describes the We have already noted that in past price of fuel, manufacturers would add fuel-saving technologies considered by CAFE rulemakings, NHTSA used more fuel-saving technology than might the agencies that manufacturers could manufacturers’ product plans—and be required solely for purposes of use to improve the fuel economy of their other information—to build market complying with CAFE standards. This vehicles during MYs 2017–2025. Many forecasts providing the foundation for reflects that agency’s consideration that of the technologies described in this the agency’s rulemaking analysis. This there could, in the future, be at least section are readily available, well issue has been the subject of much some market for fuel economy known, and could be incorporated into debate over the past several rulemakings improvements beyond the required MY vehicles once production decisions are since NHTSA began actively working on 2016 CAFE levels. In this sensitivity made. Other technologies, added for this CAFE again following the lifting of the analysis, this causes some additional rulemaking analysis, are considered that appropriations riders in 2001. The technology to be applied, more so under are not currently in production, but are agency continues to believe that these baseline standards than under the more beyond the initial research phase, under market forecasts reflected the most stringent standards proposed today by development and are expected to be in technically sound forecasts the agency the agency. Results of this sensitivity production in the next 5–10 years. As could have then developed for this analysis are summarized in Section IV.G discussed, the technologies considered purpose. Because the agency could not and in NHTSA’s PRIA accompanying fall into five broad categories: engine disclose confidential business today’s notice. technologies, transmission technologies, information in manufacturers’ product vehicle technologies, electrification/ plans, NHTSA provided summarized g. How else is NHTSA considering accessory technologies, and hybrid information, such as planned CAFE looking at the baseline for the final rule? technologies. Table IV–4 below lists all levels and technology application rates, Beyond the sensitivity analysis the technologies considered and rather than the fuel economy levels and discussed above, NHTSA is also provides the abbreviations used for technology content of specific vehicle considering developing and using a them in the CAFE model,622 as well as model types. vehicle choice model to estimate the their year of availability, which for In preparing the MY 2012–2016 rule extent to which sales volumes would purposes of NHTSA’s analysis means jointly with EPA, however, NHTSA shift in response to changes in vehicle the first model year in the rulemaking revisited this practice, and concluded prices and fuel economy levels. As that for that rulemaking, it was discussed IV.C.4, the agency is currently 622 The abbreviations are used in this section both important that all reviewers have equal sponsoring research directed toward for brevity and for the reader’s reference if they wish to refer to the expanded decision trees and the access to all details of NHTSA’s developing such a model. If that effort model input and output sheets, which are available analysis. NHTSA provided this level of is successful, the agency will consider in Docket No. NHTSA–2010–0131 and on NHTSA’s transparency by releasing not only the integrating the model into the CAFE Web site.

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period that the CAFE model is allowed availability’’ recognizes that technology use until such time as it is to apply a technology to a technologies must achieve a level of considered to be technologically manufacturer’s fleet.623 ‘‘Year of technical viability before they can be feasible. For a more detailed description implemented in the CAFE model, and of each technology and their costs and effectiveness, we refer the reader to 622 The abbreviations are used in this section both are thus a means of constraining for brevity and for the reader’s reference if they Chapter 3 of the Joint TSD and Section wish to refer to the expanded decision trees and the in Docket No. NHTSA–2010–0131 and on NHTSA’s V of NHTSA’s PRIA. model input and output sheets, which are available Web site. BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C refer to Chapter 3 of the Joint TSD and proposal like higher BMEP turbocharged For purposes of this proposal and as Section V of NHTSA’s PRIA. and downsized engine, advanced discussed in greater detail in the Joint For this proposal the FEV tear down transmission technologies and P2 TSD, NHTSA and EPA built upon the work was expanded to include an 8- Hybrids. While NHTSA and EPA apply list of technologies used by agencies for speed DCT, a power-split hybrid, which technologies differently, the agencies the MYs 2017–2025 CAFE and GHG was used to determine a P2 hybrid cost, have sought to ensure that the resultant standards. NHTSA and EPA had and a mild hybrid with stop-start effectiveness of applying technologies is additional technologies to the list that technology. Additionally, battery costs consistent between the two agencies. that the agencies expect to be in have been revised using Argonne NHTSA notes that, in developing production during the MYs 2017–2025 National Laboratory’s battery cost technology cost and effectiveness timeframe. These new technologies model. The model developed by ANL estimates, the agencies have made every included higher BMEP turbocharged allows users to estimate unique battery effort to hold constant aspects of vehicle and downsized engines, advanced pack cost using user customized input performance and utility typically valued diesel engines, higher efficiency sets for different hybridization by consumers, such as horsepower, transmissions, additional mass applications, such as strong hybrid, carrying capacity, drivability, durability, reduction levels, PHEVs, EVs, etc. PHEV and EV. Based on staff input and noise, vibration and harshness (NVH) public feedback EPA and NHTSA have and towing and hauling capacity. For b. How did NHTSA determine the modified how the indirect costs, using example, NHTSA includes in its costs and effectiveness of each of these ICMs, were derived and applied. The analysis technology cost and technologies for use in its modeling updates are discussed at length in effectiveness estimates that are specific analysis? Chapter 3 of the Joint TSD and in to performance passenger cars (i.e., Building on cost estimates developed Chapter 5 of NHTSA’s PRIA. sports cars), as compared to for the MYs 2012–2016 CAFE and GHG Some of the effectiveness estimates nonperformance passenger cars. NHTSA final rule and the 2010 TAR, the for technologies applied in MYs 2012– seeks comment on the extent to which agencies incorporated new cost and 2016 and 2010 TAR have remained the commenters believe that the agencies effectiveness estimates for the new same. However, nearly all of the have been successful in holding technologies being considered and some effectiveness estimates for carryover constant these elements of vehicle of the technologies carried over from the technologies have been updated based performance and utility in developing MYs 2012–2016 final rule and 2010 on a newer version of EPA’s lumped the technology cost and effectiveness TAR. This joint work is reflected in parameter model, which was calibrated estimates. Chapter 3 of the Joint TSD and in by the vehicle simulation work The agency notes that the technology Section II of this preamble, as performed by Ricardo Engineering. The costs included in this proposal take into summarized below. For more detailed Ricardo simulation study was also used account only those associated with the information on the effectiveness and to estimate the effectiveness for the initial build of the vehicle. Although cost of fuel-saving technologies, please technologies newly considered for this comments were received to the MYs

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2012–2016 rulemaking that suggested R&D and tooling) by the manufacturer requests comment on the likelihood that there could be additional maintenance and its suppliers, incrementally each technology will, if applied in a required with some new technologies improve fuel savings and reduce vehicle manner that holds vehicle performance (e.g., turbocharging, hybrids, etc.), and costs. Nonetheless, in the agency’s and utility constant, be able to both that additional maintenance costs could central analysis, these and other deliver the estimated fuel savings and occur as a result, the agencies have not technologies are applied only insofar as reduce vehicle cost. The agency also explicitly incorporated maintenance is necessary to achieve compliance with invites comment on whether, for the costs (or potential savings) as a separate standards defining any given regulatory final rule, its central analysis should be element in this analysis. The agency alternative (where the baseline no action revised to include estimated market- requests comments on this topic and alternative assumes CAFE standards are driven application of technology. will undertake a more detailed review of held constant after MY 2016). The The tables below provide examples of these potential costs for the final rule. agency has also performed a sensitivity the incremental cost and effectiveness For some of the technologies, analysis involving market-based estimates employed by the agency in NHTSA’s inputs, which are designed to application of technology—that is, the developing this proposal, according to be as consistent as practicable with application of technology beyond the the decision trees used in the CAFE EPA’s, indicate negative incremental point needed to achieve compliance, if modeling analysis. Thus, the costs. In other words, the agency is the cost of the technology is estimated effectiveness and cost estimates are not estimating that some technologies, if to be sufficiently attractive relative to absolute to a single reference vehicle, applied in a manner that holds the accompanying fuel savings. NHTSA but are incremental to the technology or performance and utility constant, will, has invited comment on all of its technologies that precede it. following initial investment (for, e.g., technology estimates, and specifically BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C for a reasonable analysis of or transmission, this may affect multiple c. How does NHTSA use these manufacturer-specific costs and the models. In using this aspect of the assumptions in its modeling analysis? analysis of attribute-based CAFE market forecast file, NHTSA ensures the standards, and is much greater than the CAFE model only applies technologies NHTSA relies on several inputs and level of detail used by many other in an appropriate manner, since before data files to conduct the compliance models and analyses relevant to light- any application of a technology can analysis using the CAFE model, as duty vehicle fuel economy.625 occur, the model checks the market discussed further below and in Chapter In addition to containing data about forecast to see if it is either already 5 of the PRIA. For the purposes of each vehicle, engine, and transmission, present or unavailable. NHTSA seeks applying technologies, the CAFE model this file contains information for each comment on the continued primarily uses three data files, one that technology under consideration as it appropriateness of the engineering contains data on the vehicles expected pertains to the specific vehicle (whether constraints used by the model, and to be manufactured in the model years the vehicle is equipped with it or not), specifically whether many of the covered by the rulemaking and the estimated model year the vehicle is technical constraints will be resolved identifies the appropriate stage within undergoing a refresh or redesign, and (and therefore the engineering the vehicle’s life-cycle for the information about the vehicle’s subclass constraints should be changed) given technology to be applied, one that for purposes of technology application. the increased focus of engineering contains data/parameters regarding the In essence, the model considers whether resources that will be working to solve available technologies the model can it is appropriate to apply a technology these technical challenges. apply, and one that contains economic to a vehicle. Whether a vehicle can be equipped assumption inputs for calculating the with a particular technology could also Is a vehicle already equipped, or can it costs and benefits of the standards. The theoretically depend on certain not be equipped, with a particular inputs for the first two data files are technical considerations related to technology? discussed below. incorporating the technology into As discussed above, the CAFE model The market forecast file provides particular vehicles. For example, GM begins with an initial state of the NHTSA the ability to identify, on a commented on the MY 2012–2016 domestic vehicle market, which in this technology-by-technology basis, which NPRM that there are certain issues in case is the market for passenger cars and technologies may already be present implementing turbocharging and light trucks to be sold during the period (manufactured) on a particular vehicle, downsizing technologies on full-size covered by the proposed standards. The engine, or transmission, or which trucks, like concerns related to engine vehicle market is defined on a year-by- technologies are not applicable (due to knock, drivability, control of boost year, model-by-model, engine-by- technical considerations or engineering pressure, packaging complexity, engine, and transmission-by- constraints) to a particular vehicle, enhanced cooling for vehicles that are transmission basis, such that each engine, or transmission. These designed for towing or hauling, and defined vehicle model refers to a identifications are made on a model-by- noise, vibration and harshness. NHTSA separately defined engine and a model, engine-by-engine, and stated in response that we believed that separately defined transmission. transmission-by-transmission basis. For such technical considerations are well Comparatively, EPA’s OMEGA model example, if the market forecast file recognized within the industry and it is defines the vehicle market using indicates that Manufacturer X’s Vehicle standard industry practice to address representative vehicles at the vehicle Y is manufactured with Technology Z, each during the design and platform level, which are binned into 5 then for this vehicle Technology Z will development phases of applying year timeframes instead of year-by-year. be shown as used. Additionally, NHTSA turbocharging and downsizing For the current standards, which has determined that some technologies technologies. The cost and effectiveness cover MYs 2017–2025, the light-duty are only suitable or unsuitable when estimates used in the final rule for MYs vehicle (passenger car and light truck) certain vehicle, engine, or transmission 2012–2016, as well as the cost and market forecast was developed jointly conditions exist. For example, effectiveness estimates employed in this by NHTSA and EPA staff using MY secondary axle disconnect is only NPRM, are based on analysis that 2008 CAFE compliance data. The MY suitable for 4WD vehicles and cylinder assumes each of these factors is 2008 compliance data includes about deactivation is unsuitable for any engine addressed prior to production 1,100 vehicle models, about 400 specific with fewer than 6 cylinders. Similarly, implementation of the technologies. engines, and about 200 specific comments received to the 2008 NPRM NHTSA continues to believe that these transmissions, which is a somewhat indicated that cylinder deactivation issues are accounted for by industry, but lower level of detail in the could not likely be applied to vehicles we seek comment on whether the representation of the vehicle market equipped with manual transmissions engineering constraints should be used than that used by NHTSA in prior CAFE during the rulemaking timeframe, due to address concerns like these (and if so, analyses—previous analyses would primarily to the cylinder deactivation count a vehicle as ‘‘new’’ in any year how), or alternatively, whether some of system not being able to anticipate gear the things that the agency currently when significant technology differences shifts. The CAFE model employs 624 treats as engineering constraints should are made, such as at a redesign. ‘‘engineering constraints’’ to address However, within the limitations of be (or actually are) accounted for in the issues like these, which are a cost and effectiveness estimates through information that can be made available programmatic method of controlling to the public, it provides the foundation assumptions like those described above, technology application that is and whether the agency might be independent of other constraints. Thus, 639 See, e.g., Kleit A.N., 1990. ‘‘The Effect of double-constraining the application of Annual Changes in Automobile Fuel Economy the market forecast file would indicate technology. Standards.’’ Journal of Regulatory Economics 2: that the technology in question should 151–172 (Docket EPA–HQ–OAR–2009–0472–0015); not be applied to the particular vehicle/ Is a vehicle being redesigned or Berry, Steven, James Levinsohn, and Ariel Pakes, engine/transmission (i.e., is refreshed? 1995. ‘‘Automobile Prices in Market Equilibrium,’’ Econometrica 63(4): 841–940 (Docket NHTSA– unavailable). Since multiple vehicle Manufacturers typically plan vehicle 2009–0059–0031); McCarthy, Patrick S., 1996. models may be equipped with an engine changes to coincide with certain stages

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of a vehicle’s life cycle that are intended to produce results consistent believes that manufacturers can and will appropriate for the change, or in this with how we assume manufacturers will accomplish much improvement in fuel case the technology being applied. In apply technologies in the future based economy and GHG reductions while the automobile industry there are two on how they have historically applying technology consistent with terms that describe when technology implemented new technologies. For their redesign schedules. changes to vehicles occur: Redesign and each technology under consideration, Once the model indicates that a refresh (i.e., freshening). Vehicle NHTSA specifies whether it can be technology should be applied to a redesign usually refers to significant applied any time, at refresh/redesign, or vehicle, the model must evaluate which changes to a vehicle’s appearance, only at redesign. The data forms another technology should be applied. This will shape, dimensions, and powertrain. input to the CAFE model. NHTSA depend on the vehicle subclass to which Redesign is traditionally associated with develops redesign and refresh schedules the vehicle is assigned; what the introduction of ‘‘new’’ vehicles into for each of a manufacturer’s vehicles technologies have already been applied the market, often characterized as the included in the analysis, essentially to the vehicle (i.e., where in the ‘‘next generation’’ of a vehicle, or a new based on the last known redesign year ‘‘decision tree’’ the vehicle is); when the platform. Vehicle refresh usually refers for each vehicle and projected forward technology is first available (i.e., year of to less extensive vehicle modifications, using a 5 to 8-year redesign and a 2–3 availability); whether the technology is such as minor changes to a vehicle’s year refresh cycle, and this data is also still available (i.e., ‘‘phase-in caps’’); and appearance, a moderate upgrade to a stored in the market forecast file. While the costs and effectiveness of the powertrain system, or small changes to most vehicles are projected to follow a technologies being considered. the vehicle’s feature or safety equipment 5-year redesign a few of the niche Technology costs may be reduced, in content. Refresh is traditionally market or small-volume manufacturer turn, by learning effects and short- vs. associated with mid-cycle cosmetic vehicles (i.e. luxury and performance long-term ICMs, while technology changes to a vehicle, within its current vehicles) and large trucks are assumed effectiveness may be increased or generation, to make it appear ‘‘fresh.’’ to have 6- to 8-year redesigns based on reduced by synergistic effects between Vehicle refresh generally occurs no historic redesign schedules and the technologies. In the technology input earlier than two years after a vehicle agency’s understanding of file, NHTSA has developed a separate redesign, or at least two years before a manufacturers’ intentions moving set of technology data variables for each scheduled redesign. To be clear, this is forward. This approach is used because of the twelve vehicle subclasses. Each a general description of how of the nature of the current baseline, set of variables is referred to as an manufacturers manage their product which as a single year of data does not ‘‘input sheet,’’ so for example, the lines and refresh and redesign cycles contain its own refresh and redesign subcompact passenger car input sheet but in some cases the timeframes could cycle cues for future model years, and holds the technology data that is be shorter and others longer depending to ensure the complete transparency of appropriate for the subcompact on market factors, regulations, etc. For the agency’s analysis. We note that this subclass. Each input sheet contains a the majority of technologies discussed approach is different from what NHTSA list of technologies available for today, manufacturers will only be able has employed previously for members of the particular vehicle to apply them at a refresh or redesign, determining redesign and refresh subclass. The following items are because their application would be schedules, where NHTSA included the provided for each technology: The name significant enough to involve some level redesign and refresh dates in the market of the technology, its abbreviation, the of engineering, testing, and calibration forecast file as provided by decision tree with which it is 626 work. manufacturers in confidential product associated, the (first) year in which it is Some technologies (e.g., those that plans. Vehicle redesign/refresh available, the year-by-year cost require significant revision) are nearly assumptions are discussed in more estimates and effectiveness (fuel always applied only when the vehicle is detail in Chapter 5 of the PRIA and in consumption reduction) estimates, its expected to be redesigned, like Chapter 3 of the TSD. applicability and the consumer value turbocharging and engine downsizing, NHTSA has previously received or conversion to diesel or hybridization. comments stating that manufacturers do old model may be dropped in favor of a different Other technologies, like cylinder product.’’ See NHTSA–2008–0089–0170.1, not necessarily adhere to strict five-year Attachment 16, at 8 (393 of pdf). NHTSA explained deactivation, electric power steering, redesign cycles, and may add significant and low rolling resistance tires can be that this description, which states that a vehicle technologies by redesigning vehicles at model will be redesigned or dropped after 4–10 applied either when the vehicle is more frequent intervals, albeit at higher years, was consistent with other characterizations of expected to be refreshed or when it is the redesign and freshening process, and supported costs. Conversely, other comments expected to be redesigned, while low the 5-year redesign and 2–3 year refresh cycle received stated that as compared to full- friction lubricants, can be applied at any assumptions used in the MY 2011 final rule. See line manufacturers, small-volume id., at 9 (394 of pdf). Given that the situation faced time, regardless of whether a refresh or manufacturers in fact may have 7 to 8- by the auto industry today is not so wholly different redesign event is conducted. from that in March 2009, when the MY 2011 final year redesign cycles.627 The agency Accordingly, the model will only apply rule was published, and given that the commenters a technology at the particular point did not present information to suggest that these 627 In the MY 2011 final rule, NHTSA noted that assumptions are unreasonable (but rather simply deemed suitable. These constraints are the CAR report submitted by the Alliance, prepared that different manufacturers may redesign their by the Center for Automotive Research and EDF, vehicles more or less frequently, as the range of 626 For example, applying material substitution stated that ‘‘For a given vehicle line, the time from cycles above indicates), NHTSA believes that the through weight reduction, or even something as conception to first production may span two and assumptions remain reasonable for purposes of this simple as low rolling-resistance tires, to a vehicle one-half to five years,’’ but that ‘‘The time from first NPRM analysis. See also ‘‘Car Wars 2009–2012, The will likely require some level of validation and production (‘‘Job#1’’) to the last vehicle off the line U.S. automotive product pipeline,’’ John Murphy, testing to ensure that the vehicle may continue to (‘‘Balance Out’’) may span from four to five years Research Analyst, Merrill Lynch research paper, be certified as compliant with NHTSA’s Federal to eight to ten years or more, depending on the May 14, 2008 and ‘‘Car Wars 2010–2013, The U.S. Motor Vehicle Safety Standards (FMVSS). Weight dynamics of the market segment.’’ The CAR report automotive product pipeline,’’ John Murphy, reduction might affect a vehicle’s crashworthiness; then stated that ‘‘At the point of final production Research Analyst, Bank of America/Merrill Lynch low rolling-resistance tires might change a vehicle’s of the current vehicle line, a new model with the research paper, July 15, 2009. Available at http:// braking characteristics or how it performs in crash same badge and similar characteristics may be www.autonews.com/assets/PDF/CA66116716.PDF avoidance tests. ready to take its place, continuing the cycle, or the (last accessed October 11, 2011).

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loss. The phase-in values and the NAS also used these vehicle classes inputs, of the applicability, cost, and potential stranded capital costs are along with powertrain configurations effectiveness of each fuel-saving common for all vehicle subclasses and (e.g..4 cylinder, 6 cylinder or 8 cylinder technology. The model’s estimates of are thus listed in a separate input sheet engines) to determine unique cost and the cost to improve the fuel economy of that is referenced for all vehicle effectiveness estimates for each class of each vehicle model thus depend upon subclasses. vehicles. the subclass to which the vehicle model NHTSA similarly differentiates is assigned. Each vehicle’s subclass is To which vehicle subclass is the vehicle vehicles by ‘‘subclass’’ for the purpose assigned? stored in the market forecast file. When of applying technologies to ‘‘like’’ conducting a compliance analysis, if the As part of its consideration of vehicles and assessing their incremental CAFE model seeks to apply technology technological feasibility, the agency costs and effectiveness. NHTSA assigns to a particular vehicle, it checks the evaluates whether each technology each vehicle manufactured in the market forecast to see if the technology could be implemented on all types and rulemaking period to one of 12 is available and if the refresh/redesign sizes of vehicles, and whether some subclasses: For passenger cars, criteria are met. If these conditions are differentiation is necessary in applying Subcompact, Subcompact Performance, satisfied, the model determines the certain technologies to certain types and Compact, Compact Performance, vehicle’s subclass from the market data sizes of vehicles, and with respect to the Midsize, Midsize Performance, Large, file, which it then uses to reference cost incurred and fuel consumption and and Large Performance; and for light another input called the technology CO emissions reduction achieved when 2 trucks, Small SUV/Pickup/Van, Midsize input file. NHTSA reviewed its doing so. The 2010 NAS Report SUV/Pickup/Van, Large SUV/Pickup/ methodology for dividing vehicles into differentiated technology application Van, and Minivan. The agency seeks subclasses for purposes of technology using eight vehicle ‘‘classes’’ (4 car comment on the appropriateness of classes and 4 truck classes).628 NAS’s application that it used in the MY 2011 these 12 subclasses for the MYs 2017– final rule and for the MYs 2012–2016 purpose in separating vehicles into 2025 timeframe. The agency is also these classes was to create groups of rulemaking, and concluded that the seeking comment on the continued same methodology would be ‘‘like’’ vehicles, i.e., vehicles similar in appropriateness of maintaining separate size, powertrain configuration, weight, appropriate for this NPRM for MYs ‘‘performance’’ vehicle classes or if as 2017–2025. Vehicle subclasses are and consumer use, and for which fuel economy stringency increases the similar technologies are applicable. discussed in more detail in Chapter 5 of market for performance vehicles will the PRIA and in Chapter 3 of the TSD. decrease. 628 The NAS classes included two-seater For this NPRM, NHTSA divides the For the reader’s reference, the and coupes; small cars; intermediate subclasses and example vehicles from and large cars; high-performance sedans; unit-body vehicle fleet into subclasses based on standard trucks; unit-body high-performance trucks; model inputs, and applies subclass- the market forecast file are provided in body-on-frame small and midsize trucks; and body. specific estimates, also from model the tables below.

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What technologies have already been individual vehicles, it is clear and easy sequencing architecture, which was applied to the vehicle (i.e., where in the to determine how costs and based on the MY 2011 final rule’s ‘‘decision trees’’ is it)? effectiveness add up as technology decision trees that were jointly levels increase and explicitly developed by NHTSA and Ricardo, and, NHTSA’s methodology for technology accounting for any synergies that exist as appropriate, updated the decision analysis evaluates the application of between technologies which are already trees to include new technologies that individual technologies and their present on the vehicle and new have been defined for the MYs 2017– incremental costs and effectiveness. technologies being applied. 2025 timeframe. Individual technologies are assessed To keep track of incremental costs In general, and as described in great relative to the prior technology state, and effectiveness and to know which detail in Chapter 5 of the current which means that it is crucial to technology to apply and in which order, PRIA,629 each technology is assigned to understand what technologies are the CAFE model’s architecture uses a one of the five following categories already present on a vehicle in order to logical sequence, which NHTSA refers based on the system it affects or determine correct incremental cost and to as ‘‘decision trees,’’ for applying fuel impacts: Engine, transmission, effectiveness values. The benefit of the economy-improving technologies to electrification/accessory, hybrid or incremental approach is transparency in individual vehicles. For purposes of this accounting, insofar as when individual proposal, NHTSA reviewed the MYs 629 Additional details about technologies are technologies are added incrementally to 2012–2016 final rule’s technology categorized can be found in the MY 2011 final rule.

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vehicle. Each of these categories has its component or system with a completely model may elect to apply LUB, EFR, and own decision tree that the CAFE model redesigned one, which is typically a ICP on a dual overhead cam engine, if uses to apply technologies sequentially much more expensive and integration they are not already present, in one during the compliance analysis. The intensive option. In some cases, and as single step. An example simplified decision trees were designed and appropriate, the model may combine the decision tree for engine technologies is configured to allow the CAFE model to sequential technologies shown on a provided below; the other simplified apply technologies in a cost-effective, decision tree and apply them decision trees may be found in Chapter logical order that also considers ease of simultaneously, effectively developing 5 of the PRIA. Expanded decision trees implementation. For example, software dynamic technology packages on an as- are available in the docket for this or control logic changes are needed basis. For example, if NPRM. implemented before replacing a compliance demands indicate, the BILLING CODE 4910–59–P

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Each technology within the decision incremental effectiveness estimate specific to a particular vehicle subclass trees has an incremental cost and an associated with it, and estimates are (see the tables in Chapter 5 of the PRIA).

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Each technology’s incremental estimate however, will not become available for the vehicle manufacturer level.631 They takes into account its position in the purposes of NHTSA’s analysis until are intended to reflect a manufacturer’s decision tree path. If a technology is later in the rulemaking time frame. overall resource capacity available for located further down the decision tree, When the model is considering whether implementing new technologies (such the estimates for the costs and to add a technology to a vehicle, it as engineering and development effectiveness values attributed to that checks its year of availability—if the personnel and financial resources), technology are influenced by the technology is available, it may be added; thereby ensuring that resource capacity incremental estimates of costs and if it is not available, the model will is accounted for in the modeling effectiveness values for prior technology consider whether to switch to a different process. At a high level, phase-in caps applications. In essence, this approach decision tree to look for another and refresh/redesign cycles work in accounts for ‘‘in-path’’ effectiveness technology, or will skip to the next conjunction with one another to avoid synergies, as well as cost effects that vehicle in a manufacturer’s fleet. The the modeling process out-pacing an occur between the technologies in the year of availability for each technology OEM’s limited pool of available same path. When comparing cost and is provided above in Table IV–4. resources during the rulemaking time effectiveness estimates from various frame and the years leading up to the sources and those provided by The agency has received comments rulemaking time frame, especially in commenters in this and the previous previously stating that if a technology is years where many models may be CAFE rulemakings, it is important that currently available or available prior to scheduled for refresh or redesign. Even the estimates evaluated are analyzed in the rulemaking timeframe that it should though this rulemaking is being the proper context, especially as be immediately made available in the proposed 5 years before it takes effect, concerns their likely position in the model. In response, as discussed above, OEM’s will still be utilizing their decision trees and other technologies technology ‘‘availability’’ is not limited resources to meet the MYs that may be present or missing. Not all determined based simply on whether 2012–2016 CAFE standards. This helps estimates available in the public domain the technology exists, but depends also to ensure technological feasibility and or that have been (or will be) offered for on whether the technology has achieved economic practicability in determining the agencies’ consideration can be a level of technical viability that makes the stringency of the standards. evaluated in an ‘‘apples-to-apples’’ it appropriate for widespread NHTSA has been developing the comparison with those used by the application. This depends in turn on concept of phase-in caps for purposes of CAFE model, since in some cases the component supplier constraints, capital the agency’s modeling analysis over the order of application, or included investment and engineering constraints, course of the last several CAFE technology content, is inconsistent with and manufacturer product cycles, rulemakings, as discussed in greater that assumed in the decision tree. among other things. Moreover, even if a detail in the MY 2011 final rule,632 in The MY 2011 final rule discussed in technology is available for application, the MY 2012–2016 final rule and in detail the revisions and improvements it may not be available for every vehicle. Chapter 5 of the PRIA and Chapter 3 of made to the CAFE model and decision Some technologies may have the Joint TSD. The MYs 2012–2016 final trees during that rulemaking process, considerable fuel economy benefits, but rule like the MY 2011 final rule including the improved handling and cannot be applied to some vehicles due employed non-linear phase-in caps (that accuracy of valve train technology to technological constraints—for is, caps that varied from year to year) application and the development and example, cylinder deactivation cannot that were designed to respond to implementation of a method for be applied to vehicles with current 4- previously received comments on accounting path-dependent correction cylinder engines (because not enough technology deployment. factors in order to ensure that cylinders are present to deactivate some For purposes of this NPRM for MYs technologies are evaluated within the and continue moving the vehicle) or on 2017–2025, as in the MY 2011 and MYs proper context. The reader should vehicles with manual transmissions 2012–2016 final rules, NHTSA consult the MY 2011 final rule within the rulemaking timeframe. The combines phase-in caps for some groups documents for further information on agencies have provided for increases of similar technologies, such as valve these modeling techniques, all of which over time to reach the mpg level of the phasing technologies that are applicable continued to be utilized in developing MY 2025 standards precisely because of to different forms of engine design this proposal.630 To the extent that the these types of constraints, because they (SOHC, DOHC, OHV), since they are decision trees have changed for have a real effect on how quickly very similar from an engineering and purposes of the MYs 2012–2016 final manufacturers can apply technology to implementation standpoint. When the rule and this NPRM, it was due not to vehicles in their fleets. NHTSA seeks phase-in caps for two technologies are revisions in the order of technology comment on the appropriateness of the combined, the maximum total application, but rather to redefinitions assumed years of availability. of technologies or addition or 631 While phase-in caps are expressed as specific subtraction of technologies. Has the technology reached the phase- percentages of a manufacturer’s fleet to which a in cap for this model year? technology may be applied in a given model year, Is the next technology available in this phase-in caps cannot always be applied as precise model year? Besides the refresh/redesign cycles limits, and the CAFE model in fact allows ‘‘override’’ of a cap in certain circumstances. When Some of technologies considered are used in the CAFE model, which only a small portion of a phase-in cap limit available on vehicles today, and thus constrain the rate of technology remains, or when the cap is set to a very low value, will be available for application (albeit application at the vehicle level so as to or when a manufacturer has a very limited product ensure a period of stability following line, the cap might prevent the technology from in varying degrees) in the model starting being applied at all since any application would in MY 2017. Other technologies, any modeled technology applications, cause the cap to be exceeded. Therefore, the CAFE the other constraint on technology model evaluates and enforces each phase-in cap 630 See, e.g., 74 FR 14238–46 (Mar. 30, 2009) for application employed in NHTSA’s constraint after it has been exceeded by the a full discussion of the decision trees in NHTSA’s analysis is ‘‘phase-in caps.’’ Unlike application of the technology (as opposed to MY 2011 final rule, and Docket No. NHTSA–2009– vehicle-level cycle settings, phase-in evaluating it before application), which can result 0062–0003.1 for an expanded decision tree used in in the described overriding of the cap. that rulemaking. caps constrain technology application at 632 NEED A FOOTNOTE HERE

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application of either or both to any volume threshold has been reached, but supported in the literature. To avoid manufacturer’s fleet is limited to the not all of these studies specify this confusion, we are now referring to this value of the cap.633 threshold volume. The rate at which learning algorithm as the ‘‘flat portion’’ In developing phase-in cap values for costs decline beyond the initial of the learning curve. This way, we purposes of this NPRM, NHTSA threshold is usually expressed as the maintain the clarity that all learning is, reviewed the MYs 2012–2016 final percent reduction in average unit cost in fact, volume-based learning, and that rule’s phase-in caps, which for the that results from each successive the level of cost reductions depend only majority of technologies were set to doubling of cumulative production on where on the learning curve a reach 85 or 100 percent by MY 2016, volume, sometimes referred to as the technology’s learning progression is. We although more advanced technologies learning rate. Many estimates of distinguish the flat portion of the curve like diesels and strong hybrids reach experience curves do not specify a from the ‘‘steep portion’’ of the curve to only 15 percent by MY 2016. The phase- cumulative production volume beyond indicate the level of learning taking in caps used in the MYs 2012–2016 which cost reductions would no longer place in the years following final were developed to harmonize with occur, instead depending on the implementation of the technology. The EPA’s proposal and consider the fact asymptotic behavior of the effect for agencies have applied the steep portion that manufacturers, as part of the learning rates below 100 percent to learning algorithm for those information shared during the establish a floor on costs. technologies considered to be newer discussions that occurred during In past rulemaking analyses, as noted technologies likely to experience rapid summer 2011, appeared to be above, both agencies have used a cost reductions through manufacturer anticipating higher technology learning curve algorithm that applied a learning, and the flat portion learning application rates than assumed in prior learning factor of 20 percent for each algorithm for those technologies rules. NHTSA determined that these doubling of production volume. NHTSA considered to be mature technologies phase-in caps for MY 2016 were still has used this approach in analyses likely to experience only minor cost reasonable and thus used those caps as supporting recent CAFE rules. In its reductions through manufacturer the starting point for the MYs 2017– analyses, EPA has simplified the learning. As noted above, the steep 2025 phase-in caps. For many of the approach by using an ‘‘every two years’’ portion learning algorithm results in 20 carryover technologies this means that based learning progression rather than a percent lower costs after two full years for MYs 2017–2025 the phase-in caps pure production volume progression of implementation (i.e., the MY 2016 are assumed to be 100 percent. NHTSA (i.e., after two years of production it was costs are 20 percent lower than the MYs along with EPA used confidential OEM assumed that production volumes 2014 and 2015 costs). Once two steep submissions, trade press articles, would have doubled and, therefore, portion learning steps have occurred company publications and press costs would be reduced by 20 (for technologies having the steep releases to estimate the phase-in caps percent).635 portion learning algorithm applied for the newly defined technologies that In the MYs 2012–2016 light-duty rule, while flat portion learning would begin will be entering the market just before the agencies employed an additional in year 2 for technologies having the flat or during the MYs 2017–2025 time learning algorithm to reflect the volume- portion learning algorithm applied), flat frame. For example, advanced cooled based learning cost reductions that portion learning at 3 percent per year EGR engines have a phase-in cap of 3 occur further along on the learning becomes effective for 5 years. Beyond 5 percent per year through MY 2021 and curve. This additional learning years of learning at 3 percent per year, then 10 percent per year through 2025. algorithm was termed ‘‘time-based’’ 5 years of learning at 2 percent per year, The agency seeks comment on the learning simply as a means of then 5 at 1 percent per year become appropriateness of both the carryover distinguishing this algorithm from the effective. volume-based algorithm mentioned phase-in caps and the newly defined Technologies assumed to be on the above, although both of the algorithms ones proposed in this NPRM. steep portion of the learning curve are reflect the volume-based learning curve Is the technology less expensive due to hybrids and electric vehicles, while no learning effects? 635 To clarify, EPA has simplified the steep learning is applied to technologies In the past two rulemakings NHTSA portion of the volume learning curve by assuming likely to be affected by commodity costs that production volumes of a given technology will (LUB, ROLL) or that have loosely- has explicitly accounted for the cost have doubled within two years time. This has been reductions a manufacturer might realize defined BOMs (EFR, LDB), as was the done largely to allow for a presentation of estimated case in the MY 2012–2016 final rule. through learning achieved from costs during the years of implementation, without experience in actually applying a the need to conduct a feedback loop that ensures Chapter 3 of the Joint TSD and the PRIA that production volumes have indeed doubled. If shows the specific learning factors that technology. These cost reductions, due EPA was to attempt such a feedback loop, it would to learning effects, were taken into NHTSA has applied in this analysis for need to estimate first year costs, feed those into each technology, and discusses learning account through two kinds of mutually OMEGA, review the resultant technology exclusive learning, ‘‘volume-based’’ and penetration rate and volume increase, calculate the factors and each agency’s use of them learned costs, feed those into OMEGA (since lower further. EPA and NHTSA included ‘‘time-based.’’ NHTSA and EPA costs would result in higher penetration rates, included a detailed description of the discussion of learning cost assumptions review the resultant technology penetration rate in the RIAs and TSD Chapter 3. Since learning effect in the MYs 2012–2016 and volume increase, etc., until an equilibrium was final rule and the more recent heavy- reached. To do this for the dozens of technologies the agencies had to project how learning 634 considered in the analysis for this rulemaking was will occur with new technologies over duty rule. deemed not feasible. Instead, EPA estimated the Most studies of the effect of a long period of time, we request effects of learning on costs, fed those costs into comments on the assumptions of experience or learning on production OMEGA, and reviewed the resultant penetration costs appear to assume that cost rates. The assumption that volumes have doubled learning costs and methodology. In reductions begin only after some initial after two years is based solely on the assumption particular, we are interested in input on that year two sales are of equal or greater number the assumptions for advanced 27-bar than year one sales and, therefore, have resulted in BMEP cooled EGR engines, which are 633 See 74 FR at 14270 (Mar. 30, 2009) for further a doubling of production. This could be done on discussion and examples. a daily basis, a monthly basis, or a yearly basis as currently still in the experimental stage 634 76 FR 57106, 57320 (Sept. 15, 2011). was done for this analysis. and not expected to be available in

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volume production until 2017. For our where pumping losses are less preceding transmission technologies. analysis, we have based estimates of the significant. These factors are expressed in the fuel costs of high-BMEP engines on current As the complexity of the technology consumption improvement factors in (or soon to be current) production combinations is increased, and the the input files used by the CAFE model. engines, and assumed that learning (and number of interacting technologies For applying incremental synergy the associated cost reductions) begins as grows accordingly, it becomes factors in separate path technologies, early as 2012. We seek comment on the increasingly important to account for the CAFE model uses an input table (see appropriateness of these pre-production these synergies. NHTSA and EPA the tables in Chapter 3 of the TSD and applications of learning. determined synergistic impacts for this in the PRIA) that lists technology proposed rule using EPA’s ‘‘lumped pairings and incremental synergy factors Is the technology more or less effective parameter’’ analysis tool, which EPA associated with those pairings, most of due to synergistic effects? describes at length in Chapter 3 of the which are between engine technologies When two or more technologies are TSD. The lumped parameter tool is a and transmission/electrification/hybrid added to a particular vehicle model to spreadsheet model that represents technologies. When a technology is improve its fuel efficiency and reduce energy consumption in terms of average applied to a vehicle by the CAFE model, CO2 emissions, the resultant fuel performance over the fuel economy test all instances of that technology in the consumption reduction may sometimes procedure, rather than explicitly incremental synergy table which match be higher or lower than the product of analyzing specific drive cycles. The tool technologies already applied to the the individual effectiveness values for begins with an apportionment of fuel vehicle (either pre-existing or those items.636 This may occur because consumption across several loss previously applied by the CAFE model) one or more technologies applied to the mechanisms and accounts for the are summed and applied to the fuel same vehicle partially address the same average extent to which different consumption improvement factor of the source (or sources) of engine, drivetrain technologies affect these loss technology being applied. Many of the or vehicle losses. Alternately, this effect mechanisms using estimates of engine, synergies for the strong hybrid may be seen when one technology shifts drivetrain and vehicle characteristics technology fuel consumption reductions the engine operating points, and that are averaged over the 2-cycle CAFE are included in the incremental value therefore increases or reduces the fuel drive cycle. Results of this analysis were for the specific hybrid technology block consumption reduction achieved by generally consistent with those of full- since the model applies all available another technology or set of scale vehicle simulation modeling electrification, engine and transmission technologies. The difference between performed in 2010–2011 for EPA by technologies before applying strong the observed fuel consumption Ricardo, Inc. hybrid technologies. reduction associated with a set of For the current rulemaking, NHTSA is The U.S. DOT Volpe Center has technologies and the product of the using an updated version of lumped entered into a contract with Argonne individual effectiveness values in that parameter tool that incorporates results National Laboratory (ANL) to provide set is referred to for purposes of this from simulation modeling performed in full vehicle simulation modeling rulemaking as a ‘‘synergy.’’ Synergies 2010–2011 by Ricardo, Inc. NHTSA and support for this MYs 2017–2025 may be positive (increased fuel EPA incorporate synergistic impacts in rulemaking. While this modeling was consumption reduction compared to the their analyses in slightly different not completed in time for use in this product of the individual effects) or manners. Because NHTSA applies NPRM, NHTSA intends to use this negative (decreased fuel consumption technologies individually in its modeling to validate/update technology reduction). An example of a positive modeling analysis, NHTSA incorporates effectiveness estimates and synergy synergy might be a vehicle technology synergistic effects between pairings of factors for the final rulemaking analysis. This simulation modeling will be that reduces road loads at highway individual technologies. The use of accomplished using ANL’s full vehicle speeds (e.g., lower aerodynamic drag or discrete technology pair incremental simulation tool called ‘‘Autonomie,’’ low rolling resistance tires), that could synergies is similar to that in DOE’s which is the successor to ANL’s extend the vehicle operating range over National Energy Modeling System Powertrain System Analysis Toolkit which cylinder deactivation may be (NEMS).637 Inputs to the CAFE model (PSAT) simulation tool, and ANL’s employed. An example of a negative incorporate NEMS-identified pairs, as expertise with advanced vehicle synergy might be a variable valvetrain well as additional pairs from the set of technologies. system technology, which reduces technologies considered in the CAFE pumping losses by altering the profile of model. d. Where can readers find more detailed the engine speed/load map, and a six- NHTSA notes that synergies that information about NHTSA’s technology speed automatic transmission, which occur within a decision tree are already analysis? addressed within the incremental values shifts the engine operating points to a Much more detailed information is assigned and therefore do not require a portion of the engine speed/load map provided in Chapter 5 of the PRIA, and synergy pair to address. For example, all a discussion of how NHTSA and EPA engine technologies take into account 636 More specifically, the products of the jointly reviewed and updated incremental synergy factors of preceding differences between one and the technology- technology assumptions for purposes of specific levels of effectiveness in reducing fuel engine technologies, and all this NPRM is available in Chapter 3 of consumption. For example, not accounting for transmission technologies take into interactions, if technologies A and B are estimated the TSD. Additionally, all of NHTSA’s account incremental synergy factors of to reduce fuel consumption by 10 percent (i.e., 0.1) model input and output files are now and 20 percent (i.e., 0.2) respectively, the ‘‘product of the individual effectiveness values’’ would be 1– 637 U.S. Department of Energy, Energy public and available for the reader’s 0.1 times 1–0.2, or 0.9 times 0.8, which equals 0.72, Information Administration, Transportation Sector review and consideration. The corresponding to a combined effectiveness of 28 Module of the National Energy Modeling System: technology input files can be found in percent rather than the 30 percent obtained by Model Documentation 2007, May 2007, the docket for this NPRM, Docket No. adding 10 percent to 20 percent. The ‘‘synergy Washington, DC, DOE/EIAM070(2007), at 29–30. factors’’ discussed in this section further adjust Available at http://tonto.eia.doe.gov/ftproot/ NHTSA–2010–0131, and on NHTSA’s these multiplicatively combined effectiveness modeldoc/m070(2007).pdf (last accessed Sept. 25, Web site. And finally, because much of values. 2011). NHTSA’s technology analysis for

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purposes of this proposal builds on the forecast variables, economic economy than do others, and the work that was done for the MY 2011 assumptions, and parameter values. following discussion places more and MYs 2012–2016 final rules, we refer This section describes the sources of emphasis on these inputs. readers to those documents as well for these forecasts, the rationale underlying In reviewing these variables and the background information concerning each assumption, and the agency’s agency’s estimates of their values for how NHTSA’s methodology for choices of specific parameter values. purposes of this proposed rule, NHTSA technology application analysis has These economic values play a reconsidered comments it had evolved over the past several significant role in determining the previously received on the NPRM for rulemakings, both in response to benefits of alternative CAFE standards, MYs 2012–16 CAFE standards and to comments and as a result of the agency’s as they have for the last several CAFE the NOI/Interim Joint TAR, and also growing experience with this type of 638 rulemakings. Under those alternatives reviewed newly available literature. The analysis. where standards would be established agency elected to revise some of its 3. How did NHTSA develop its by reference to their costs and benefits, economic assumptions and parameter economic assumptions? these economic values also affect the estimates for this rulemaking, while NHTSA’s analysis of alternative CAFE levels of the CAFE standards retaining others. For the reader’s standards for the model years covered themselves. Some of these variables reference, Table IV–7 below summarizes by this rulemaking relies on a range of have more important effects on the level the values used to calculate the of CAFE standards and the benefits from economic benefits from each alternative. 638 74 FR 14233–308 (Mar. 30, 2009). requiring alternative increases in fuel BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C considered and some of the technologies Chapter 3 of the Joint TSD and Chapter a. Costs of Fuel Economy-Improving carried over from the MYs 2012–2016 V of NHTSA’s PRIA. Technologies final rule and 2010 TAR. This joint The technology cost estimates used in work is reflected in Chapter 3 of the this analysis are intended to represent Building on cost estimates developed Joint TSD and in Section II of this manufacturers’ direct costs for high- for the MYs 2012–2016 CAFE and GHG preamble, as summarized below. For volume production of vehicles with final rule and the 2010 TAR, the more detailed information on cost of these technologies. NHTSA explicitly agencies incorporated new cost fuel-saving technologies, please refer to accounts for the cost reductions a estimates for the new technologies being manufacturer might realize through

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learning achieved from experience in draft joint TSD, and in Chapters V and provisions for accompanying costs that actually applying a technology, which VII of NHTSA’s PRIA. are necessary to prevent any degradation in other vehicle attributes, means that technologies become b. Potential Opportunity Costs of it is possible that they do not include cheaper over the rulemaking time frame; Improved Fuel Economy learning effects are described above and adequate allowance to prevent sacrifices in Chapter 3 of the draft joint TSD and An important concern is whether in these attributes on all vehicle models. Chapters V and VII of NHTSA’s PRIA. achieving the fuel economy If this is the case, the true economic NHTSA notes that, in developing improvements required by the proposed costs of achieving higher fuel economy technology cost estimates, the agencies CAFE standards will require should include the opportunity costs to have made every effort to hold constant manufacturers to modify the vehicle owners of any accompanying aspects of vehicle performance and performance, carrying capacity, safety, reductions vehicles’ performance, utility typically valued by consumers, or comfort of some vehicle models. To carrying capacity, and utility, and such as horsepower, carrying capacity, the extent that it does so, the resulting omitting these will cause the agency’s sacrifice in the value of those models drivability, durability, noise, vibration estimated technology costs to represents an additional cost of and harshness (NVH) and towing and underestimate the true economic costs achieving the required improvements in hauling capacity. For example, NHTSA of improving fuel economy. fuel economy. (This possibility is It would be desirable to estimate includes in its analysis technology cost addressed in detail in Section IV.G.6.) explicitly the changes in vehicle buyers’ estimates that are specific to Although exact dollar values that welfare from the combination of higher performance passenger cars (i.e., sports potential buyers attach to specific prices for new vehicle models, increases cars), as compared to nonperformance vehicle attributes are difficult to infer, in their fuel economy, and any passenger cars. NHTSA seeks comment differences in vehicle purchase prices accompanying changes in other vehicle on the extent to which commenters and buyers’ choices among competing attributes. The net change in buyer’s believe that the agencies have been models that feature varying welfare that results from the successful in holding constant these combinations of these characteristics combination of these changes would elements of vehicle performance and clearly demonstrate that changes in provide a more accurate estimate of the utility in developing the technology cost these attributes affect the utility and true economic costs for improving fuel estimates. Additionally, the agency economic value they offer to potential economy. The agency is in the process notes that the technology costs included buyers.639 of developing a model of potential in this proposal take into account only NHTSA and EPA have approached vehicle buyers’ decisions about whether those associated with the initial build of this potential problem by developing to purchase a new car or light truck and the vehicle. Although comments were cost estimates for fuel economy- their choices from among the available received to the MYs 2012–2016 improving technologies that include any models, which will allow it to conduct rulemaking that suggested there could additional manufacturing costs that such an analysis. This process is be additional maintenance required would be necessary to maintain the expected to be completed for use in with some new technologies (e.g., originally planned levels of analyzing final CAFE standards for MY turbocharging, hybrids, etc.), and that performance, comfort, carrying capacity, 2017–25; in the meantime, Section additional maintenance costs could and safety of any light-duty vehicle IV.G.6 below includes a detailed occur as a result. The agency requests model to which those technologies are analysis and discussion of how omitting comments on this topic and will applied. In doing so, the agencies possible changes in vehicle attributes undertake a more detailed review of followed the precedent established by other than their prices and fuel these potential costs for the final rule. the 2002 NAS Report, which estimated economy might affect its estimates of Additionally, NHTSA recognizes that ‘‘constant performance and utility’’ benefits and costs resulting from the manufacturers’ actual costs for costs for fuel economy technologies. standards proposed in this NPRM. employing these technologies include NHTSA has followed this precedent in c. The On-Road Fuel Economy ‘‘Gap’’ additional outlays for accompanying its efforts to refine the technology costs it uses to analyze alternative passenger Actual fuel economy levels achieved design or engineering changes to models by light-duty vehicles in on-road driving that use them, development and testing car and light truck CAFE standards for MYs 2017–2025. Although the agency fall somewhat short of their levels of prototype versions, recalibrating measured under the laboratory-like test engine operating parameters, and has reduced its estimates of manufacturers’ costs for most conditions used by EPA to establish its integrating the technology with other published fuel economy ratings for attributes of the vehicle. Manufacturers’ technologies for use in this rulemaking, these revised estimates are still intended different models. In analyzing the fuel indirect costs for employing these savings from alternative CAFE technologies also include expenses for to represent costs that would allow manufacturers to maintain the standards, NHTSA has previously product development and integration, adjusted the actual fuel economy modifying assembly processes and performance, carrying capacity, and utility of vehicle models while performance of each light truck model training assembly workers to install downward from its rated value to reflect them, increased expenses for operation improving their fuel economy. While we believe that our cost the expected size of this on-road fuel and maintaining assembly lines, higher estimates for fuel economy-improving economy ‘‘gap.’’ On December 27, 2006, initial warranty costs for new technologies include adequate EPA adopted changes to its regulations technologies, any added expenses for on fuel economy labeling, which were selling and distributing vehicles that use 639 See, e.g., Kleit A.N., 1990. ‘‘The Effect of intended to bring vehicles’ rated fuel these technologies, and manufacturer Annual Changes in Automobile Fuel Economy economy levels closer to their actual on- and dealer profit. These indirect costs Standards.’’ Journal of Regulatory Economics 2: road fuel economy levels.640 have been accounted for in this 151–172 (Docket EPA–HQ–OAR–2009–0472–0015); In its Final Rule, however, EPA rulemaking through use of ICMs, which Berry, Steven, James Levinsohn, and Ariel Pakes, 1995. ‘‘Automobile Prices in Market Equilibrium,’’ estimated that actual on-road fuel have been revised for this rulemaking as Econometrica 63(4): 841–940 (Docket NHTSA– discussed above, in Chapter 3 of the 2009–0059–0031); McCarthy, Patrick S., 1996. 640 71 FR 77871 (Dec. 27, 2006).

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economy for light-duty vehicles registered for use during calendar years years.641 As it shows, FHWA’s estimates averages approximately 20 percent 2000 through 2006, average rated fuel of actual fuel economy for passenger lower than published fuel economy economy for passenger cars and light cars ranged from 21–23 percent lower levels, somewhat larger than the 15 trucks produced during each model than NHTSA’s estimates of its fleet-wide percent shortfall it had previously year, and estimates of average miles average value under test conditions over assumed. For example, if the overall driven per year by cars and light trucks this period, and FHWA’s estimates of EPA fuel economy rating of a light truck of different ages. These data were actual fuel economy for light trucks is 20 mpg, EPA estimated that the on- combined to develop estimates of the ranged from 16–18 percent lower than road fuel economy actually achieved by average fuel economy that the U.S. NHTSA’s estimates of its fleet-wide a typical driver of that vehicle is passenger vehicle fleet would have average value under test conditions. expected to be only 80 percent of that achieved from 2000 through 2006 if cars Thus, these results appear to confirm figure, or 16 mpg (20*.80). NHTSA and light trucks of each model year employed EPA’s revised estimate of this achieved the same fuel economy levels that the 20 percent on-road fuel on-road fuel economy gap in its analysis in actual on-road driving as they did economy gap represents a reasonable of the fuel savings resulting from under test conditions when new. estimate for use in evaluating the fuel alternative CAFE standards evaluated in Table IV–8 compares NHTSA’s savings likely to result from more the MY 2011 final rule. estimates of fleet-wide average fuel stringent fuel economy and CO2 In the course of developing its CAFE economy under test conditions for 2000 standards in MYs 2017–2025. standards for MY 2012–16, NHTSA through 2006 to the Federal Highway conducted additional analysis of this Administration’s (FHWA) published 641 Federal Highway Administration, Highway issue. The agency used data on the estimates of actual on-road fuel Statistics, 2000 through 2006 editions, Table VM– number of passenger cars and light economy achieved by passenger cars 1; See http://www.fhwa.dot.gov/policy/ohpi/hss/ trucks of each model year that were and light trucks during each of those hsspubs.cfm (last accessed March 1, 2010).

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The comparisons reported in this road fuel economy discount represents technical assessment, confidential table must be interpreted with some a reasonable estimate for use in business information (CBI) was supplied caution, however, because the estimates evaluating the fuel savings likely to by several manufacturers which of annual car and truck use used to result from CAFE standards for both indicated that electrically powered develop these estimates are submitted to cars and light trucks. NHTSA employs vehicles had greater variability in their FHWA by individual states, which use this value for vehicles operating on on-road energy consumption than differing definitions of passenger cars liquid fuels (gasoline, diesel, and vehicles powered by internal and light trucks. (For example, some gasoline/alcohol blends), and uses it to combustion engines, although other states classify minivans as cars, while analyze the impacts of proposed CAFE manufacturers suggested that the on- others define them as light trucks.) At standards for model years 2017–25 on road/laboratory differential attributable the same time, while total gasoline the use of these fuels. to electric operation should approach consumption can be reasonably In the recent TAR, EPA and NHTSA that of liquid fuel operation in the estimated from excise tax receipts, assumed that the overall energy shortfall future. Second, data from EPA’s 2006 separate estimates of gasoline for the vehicles employing electric analysis of the ‘‘five cycle’’ fuel consumption by cars and trucks are not drivetrains, including plug-in hybrid economy label as part of the rulemaking available. For these reasons, NHTSA has and battery-powered electric vehicles, is discussed above supported a larger on- chosen not to rely on its separate 30 percent. This value was derived from road shortfall for vehicles with hybrid- estimates of the on-road fuel economy the agencies’ engineering judgment electric drivetrains, partly because real- gap for cars and light trucks. However, based on the limited available world driving tends to have higher the agency does believe that these information. During the stakeholder acceleration/deceleration rates than are results confirm that the 20 percent on- meetings conducted prior to the employed on the 2-cycle test. This

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diminishes the fuel economy benefits of percentage of vehicular fuel vehicles will remain in service.646 To regenerative braking, which can result consumption as engine efficiency obtain fuel price forecasts for the years in a higher test fuel economy for hybrids increases.645 Because these two effects 2036 through 2060, the agency assumes than is achieved under normal on-road are expected approximately to that retail fuel prices will continue to conditions.642 Finally, heavy accessory counterbalance each other, NHTSA has increase after 2035 at the average annual load, extremely high or low elected not to adjust its estimate of the rate (0.7%) projected for 2017–2035 in temperatures, and aggressive driving on-road gap for use in this proposal. the AEO 2011 Reference Case. This assumption results in a projected retail have deleterious impacts of unknown d. Fuel Prices and the Value of Saving price of gasoline that reaches $4.16 in magnitudes on battery performance. Fuel Consequently, the agencies judged that 2050. Over the entire period from 2017– 30 percent was a reasonable estimate for Future fuel prices are the single most 2050, retail gasoline prices are projected use in the TAR, and NHTSA believes important input into the economic to average $3.67, as Table IV–7 reported that it continues to represent the most analysis of the benefits of alternative previously. reliable estimate for use in the current CAFE standards because they determine The value of fuel savings resulting analysis. the value of future fuel savings, which from improved fuel economy to buyers One of the most significant factors account for approximately 90% of total of light-duty vehicles is determined by responsible for the difference between economic benefits from requiring higher the retail price of fuel, which includes test and on-road fuel economy is the use fuel economy. NHTSA relies on the Federal, State, and any local taxes of air conditioning. While the air most recent fuel price projections from imposed on fuel sales. Because fuel conditioner is turned off during the FTP the U.S. Energy Information taxes represent transfers of resources and HFET tests, drivers often use air Administration’s (EIA) Annual Energy from fuel buyers to government conditioning under warm, humid Outlook (AEO) 2011 Reference Case to agencies, however, rather than real conditions. The air conditioning estimate the economic value of fuel resources that are consumed in the compressor can also be engaged during savings projected to result from process of supplying or using fuel, ‘‘defrost’’ operation of the heating alternative CAFE standards for MY NHTSA deducts their value from retail system.643 In the MYs 2012–2016 2017–25. The AEO 2011 Reference Case fuel prices to determine the value of fuel rulemaking, EPA estimated the impact forecasts of gasoline and diesel fuel savings resulting from more stringent of an air conditioning system at prices represents EIA’s most up-to-date CAFE standards to the U.S. economy. NHTSA follows the assumptions used approximately 14.3 grams CO2/mile for estimate of the most likely course of an average vehicle without any of the future prices for petroleum products. by EIA in AEO 2011 that State and local improved air conditioning technologies EIA is widely recognized as an impartial gasoline taxes will keep pace with discussed in that rulemaking. For a 27 and authoritative source of analysis and inflation in nominal terms, and thus remain constant when expressed in mpg (330 g CO2/mile) vehicle, this forecasts of U.S. energy production, would account for is approximately 20 consumption, and prices, and its constant dollars. In contrast, EIA percent of the total estimated on-road forecasts are widely relied upon by assumes that Federal gasoline taxes will gap (or about 4 percent of total fuel federal agencies for use in regulatory remain unchanged in nominal terms, consumption). analysis and for other purposes. Its and thus decline throughout the forecast In the MY 2012–2016 rule, EPA forecasts are derived using EIA’s period when expressed in constant estimated that 85 percent of MY 2016 National Energy Modeling System dollars. These differing assumptions vehicles would reduce their tailpipe (NEMS), which includes detailed about the likely future behavior of Federal and State/local fuel taxes are CO2 emissions attributable to air representations of supply pathways, conditioner efficiency by 40 percent sources of demand, and their interaction consistent with recent historical through the use of advanced air to determine prices for different forms experience, which reflects the fact that conditioning technologies, and that of energy. Federal as well as most State motor fuel incorporating this change would reduce As compared to the gasoline prices taxes are specified on a cents-per-gallon the average on-road gap by about 2 used in NHTSA’s Final Rule rather than an ad valorem basis, and typically require legislation to change. percent.644 However, air conditioning- establishing CAFE standards for MY Subtracting fuel taxes from the retail related fuel consumption does not 2012–2016 (which relied on forecasts prices forecast in AEO 2011 results in decrease proportionally as engine from AEO 2010), the AEO 2011 projected values for saving gasoline of efficiency improves, because the engine Reference Case fuel prices are slightly $3.29 per gallon during 2017, rising to load due attributable to air conditioner higher through the year 2020, but $3.48 per gallon by the year 2035, and operation is approximately constant slightly lower for most years thereafter. to $3.65 by the year 2050. Over this across engine efficiency and technology. Expressed in constant 2009 dollars, the entire period, pre-tax gasoline prices are As a consequence, air conditioning AEO 2011 Reference Case forecast of projected to average $3.32 per gallon. operation represents an increasing retail gasoline prices (which include federal, state, and local taxes) during EIA also includes forecasts reflecting high and low global oil prices in each 642 EPA, Fuel Economy Labeling of Motor 2017 is $3.25 per gallon, rising Vehicles: Revisions To Improve Calculation of Fuel gradually to $3.71 by the year 2035. year’s complete AEO, which reflect Economy Estimates; Final Rule, 40 CFR parts 86 However, valuing fuel savings over the uncertainties regarding OPEC behavior and 600, 71 FR 77872, 77879 (Dec. 27, 2006). as well as future levels of oil production Available at http://www.epa.gov/fedrgstr/EPA-AIR/ full lifetimes of passenger cars and light trucks affected by the standards and demand. These alternative 2006/December/Day-27/a9749.pdf. scenarios project retail gasoline prices 643 EPA, Final Technical Support Document: Fuel proposed for MYs 2017–25 requires fuel Economy Labeling of Motor Vehicle Revisions to price forecasts that extend through that range from a low of $2.30 to a high Improve Calculation of Fuel Economy Estimates, at 2060, approximately the last year during 70. Office of Transportation and Air Quality 646 The agency defines the maximum lifetime of EPA420–R–06–017 December 2006, Chapter II, which a significant number of MY 2025 vehicles as the highest age at which more than 2 http://www.epa.gov/fueleconomy/420r06017.pdf. percent of those originally produced during a model 644 4% of the on-road gap x 40% reduction in air 645 As an example, the air conditioning load of year remain in service. In the case of light trucks, conditioning fuel consumption x 85% of the fleet 14.3 g/mile of CO2 is a smaller percentage (4.3%) for example, this age has typically been 36 years for = ∼2%. of 330 g/mile than 260 (5.4%). recent model years.

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of $4.85 per gallon during 2020, and The average of effective cost to its f. Vehicle Survival and Use from $2.12 to $5.36 per gallon during manufacturer for increasing the fuel Assumptions 2035 (all figures in 2009 dollars). In economy of a model also represents the NHTSA’s analysis of fuel savings and conjunction with our assumption that change in its value from the perspective related benefits from adopting more fuel taxes will remain constant in real of potential buyers. Under the stringent fuel economy standards for or inflation-adjusted terms over this assumption that manufacturers change MYs 2017–2025 passenger cars and light period, these forecasts imply pre-tax the selling price of each model by this trucks begins by estimating the resulting values of saving fuel ranging from $1.91 amount, its average value also changes in fuel use over the entire to $4.46 per gallon during 2020, and represents the average change in its net lifetimes of the affected vehicles. The from $1.77 to $5.01 per gallon in 2035 or effective price to would-be buyers. As change in total fuel consumption by (again, all figures are in constant 2009 part of our sensitivity case analyzing the vehicles produced during each model dollars). In conducting the analysis of potential for manufacturers to over- year is calculated as the difference uncertainty in benefits and costs from comply with CAFE standards—that is, between their total fuel use over their alternative CAFE standards required by to produce a lineup of vehicle models lifetimes with a higher CAFE standard OMB, NHTSA evaluated the sensitivity whose sales-weighted average fuel in effect, and their total lifetime fuel of its benefits estimates to these economy exceeds that required by consumption under a baseline in which alternative forecasts of future fuel prevailing standards—NHTSA used the CAFE standards remained at their 2016 prices; detailed results and discussion extreme assumption that potential levels. The first step in estimating of this sensitivity analysis can be found buyers value fuel savings only during lifetime fuel consumption by vehicles in the agency’s PRIA. Generally, this the first year they expect to own a new produced during a model year is to analysis confirms that the primary vehicle. calculate the number expected to economic benefit resulting from the The agency notes that these varying remain in service during each year rule—the value of fuel savings—is assumptions about future time horizons following their production and sale.647 extremely sensitive to alternative and discount rates for valuing fuel This is calculated by multiplying the forecasts of future fuel prices. savings are used only to analyze number of vehicles originally produced e. Consumer Valuation of Fuel Economy manufacturers’ responses to requiring during a model year by the proportion and Payback Period higher fuel economy and buyers’ typically expected to remain in service behavior in response to manufacturers’ at their age during each later year, often The agency uses slightly different compliance strategies. When estimating referred to as a ‘‘survival rate.’’ assumptions about the length of time the aggregate value to the U.S. economy As discussed in more detail in Section over which potential vehicle buyers of fuel savings resulting from alternative II.B.3 above and in Chapter 1 of the consider fuel savings from higher fuel increases in CAFE standards—or the TSD, to estimate production volumes of economy, and about how they discount ‘‘social’’ value of fuel savings—the passenger cars and light trucks for those future fuel savings, in different agency includes fuel savings over the individual manufacturers, NHTSA aspects of its analysis. For most entire expected lifetimes of vehicles that relied on a baseline market forecast purposes, the agency assumes that would be subject to higher standards, constructed by EPA staff beginning with buyers value fuel savings over the first rather than over the shorter periods we MY 2008 CAFE certification data. After five years of a new vehicle’s lifetime; assume manufacturers employ to constructing a MY 2008 baseline, EPA the five-year figure represents represent the preferences of vehicle and NHTSA used projected car and approximately the current average term buyers, or that buyers use to assess truck volumes for this period from of consumer loans to finance the changes in the net price or new Energy Information Administration’s purchase of new vehicles. vehicles. (EIA’s) Annual Energy Outlook (AEO) To simulate manufacturers’ Valuing fuel savings over vehicles’ 2011 in the NPRM analysis.648 However, assessment of the net change in the entire lifetimes recognizes the savings in value of an individual vehicle model to fuel costs that subsequent owners of 647 Vehicles are defined to be of age 1 during the calendar year corresponding to the model year in prospective buyers from improving its vehicles will experience from higher which they are produced; thus for example, model fuel economy, NHTSA discounts fuel fuel economy, even if their initial year 2000 vehicles are considered to be of age 1 savings over the first five years of its purchasers do not expect to recover the during calendar year 2000, age 2 during calendar lifetime using a 7 percent rate. The remaining value of fuel savings when year 2001, and to reach their maximum age of 26 years during calendar year 2025. NHTSA considers resulting value is deducted from the they re-sell those vehicles, or for other the maximum lifetime of vehicles to be the age after technology costs that would be incurred reasons do not value fuel savings which less than 2 percent of the vehicles originally by its manufacturer to improve that beyond the assumed five-year time produced during a model year remain in service. model’s fuel economy, in order to horizon. The agency acknowledges that Applying these conventions to vehicle registration data indicates that passenger cars have a maximum determine the change in its value to it has not accounted for any effects of age of 26 years, while light trucks have a maximum potential buyers. Since this is also the increased costs for financing, insuring, lifetime of 36 years. See Lu, S., NHTSA, Regulatory additional amount its manufacturer or maintaining vehicles with higher fuel Analysis and Evaluation Division, ‘‘Vehicle could expect to receive when selling the economy, over either this limited Survivability and Travel Mileage Schedules,’’ DOT HS 809 952, 8–11 (January 2006). Available at vehicle after improving its fuel payback period or the full lifetimes of http://www-nrd.nhtsa.dot.gov/Pubs/809952.pdf economy, this can also be viewed as the vehicles. (last accessed Sept. 26, 2011). ‘‘effective cost’’ of the improvement The procedure the agency uses for 648 Available at http://www.eia.gov/forecasts/aeo/ from its manufacturers’ perspective. The calculating lifetime fuel savings is index.cfm (last accessed Sept. 26, 2011). NHTSA discussed in detail in the following and EPA made the simplifying assumption that CAFE model uses these estimates of projected sales of cars and light trucks during each effective costs to identify the sequence section, while discussion about the time calendar year from 2012 through 2016 represented in which manufacturers are likely to horizon over which potential buyers the likely production volumes for the select individual models for may consider fuel savings in their corresponding model year. The agency did not vehicle purchasing decisions is attempt to establish the exact correspondence improvements in fuel economy, as well between projected sales during individual calendar as to identify the most cost-effective provided in more detail in Section years and production volumes for specific model technologies for doing so. IV.G.6 below. years.

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Annual Energy Outlook forecasts only changes in those survival rates over the percent from 2017 through 2030, and total car and light truck sales, rather future. declines to 0.5 percent per year than sales at the manufacturer and The next step in estimating fuel use thereafter. 654 While the adjustment for model-specific level, which the agencies is to calculate the total number of miles future fuel prices reduces average require in order to estimate the effects that cars and light trucks remaining in annual mileage at each age from the new standards will have on individual use will be driven each year. To values derived using the 2001 NHTS, manufacturers.649 estimate the total number of miles the adjustment for expected future To estimate sales of individual car driven by cars or light trucks produced growth in average vehicle use increases and light truck models produced by in a model year during each subsequent it. The net effect of these two each manufacturer, EPA purchased data year, the number projected to remain in adjustments is to increase expected from CSM Worldwide and used its use during that year is multiplied by the lifetime mileage for MY 2017–25 projections of the number of vehicles of average number of miles those vehicles passenger cars and light trucks by about each type (car or truck) that will be are expected to be driven at the age they 22 percent from the estimates originally produced and sold by manufacturers in will have reached in that year. The derived from the 2001 NHTS. model years 2011 through 2015.650 This agency estimated annual usage of cars Finally, the agency estimated total provided year-by-year estimates of the and light trucks of each age using data fuel consumption by passenger cars and percentage of cars and trucks sold by from the Federal Highway light trucks remaining in use each year each manufacturer, as well as the sales Administration’s 2001 National by dividing the total number of miles percentages accounted for by each Household Travel Survey (NHTS).652 surviving vehicles are driven by the fuel vehicle market segment. (The Because these estimates reflect the economy they are expected to achieve distributions of car and truck sales by historically low gasoline prices that under each alternative CAFE standard. manufacturer and by market segment for prevailed at the time the 2001 NHTS Each model year’s total lifetime fuel the 2016 model year and beyond were was conducted, however, NHTSA consumption is the sum of fuel use by assumed to be the same as CSM’s adjusted them to account for the effect the cars or light trucks produced during forecast for the 2015 calendar year.) on vehicle use of the higher fuel prices that model year over its life span. In Normalizing these percentages to the projected over the lifetimes of model turn, the savings in lifetime fuel use by total car and light truck sales volumes year 2017–25 cars and light trucks. cars or light trucks produced during projected for 2017 through 2025 in AEO Details of this adjustment are provided each model year affected by this 2011 provided manufacturer-specific in Chapter VIII of the PRIA and Chapter proposed rule that will result from each market share and model-specific sales 4 of the draft Joint TSD. alternative CAFE standard is the estimates for those model years. The The estimates of annual miles driven difference between its lifetime fuel use volumes were then scaled to AEO 2011 at different vehicle ages derived from at the fuel economy level it attains total volume for each year. the 2001 NHTS were also adjusted to under the Baseline alternative, and its To estimate the number of passenger reflect projected future growth in lifetime fuel use at the higher fuel cars and light trucks originally average use for vehicles at every age economy level it is projected to achieve produced during model years 2017 655 over their lifetimes. Increases in average under that alternative standard. through 2025 that will remain in use annual use of cars and light trucks, during subsequent years, the agency g. Accounting for the Fuel Economy which have averaged approximately 1 applied age-specific survival rates for Rebound Effect percent annually over the past two cars and light trucks to its forecasts of decades, have been an important source The fuel economy rebound effect passenger car and light truck sales for of historical growth in the total number refers to the fact that some of the fuel each of those model years. In 2008, of miles they are driven each year. To NHTSA updated its previous estimates 654 While the adjustment for future fuel prices of car and light truck survival rates estimate future growth in their average reduces average mileage at each age from the values using the most current registration data annual use for purposes of this derived from the 2001 NHTS, the adjustment for expected future growth in average vehicle use for vehicles produced during recent rulemaking, NHTSA calculated the rate of growth in the adjusted mileage increases it. The net effect of these two adjustments model years, in order to ensure that they is to increase expected lifetime mileage by about 18 reflected recent increases in the schedules derived from the 2001 NHTS percent significantly for both passenger cars and durability and expected life spans of that would be necessary for total car and about 16 percent for light trucks. 655 cars and light trucks.651 However, the light truck travel to increase at the rate To illustrate these calculations, the agency’s adjustment of the AEO 2009 Revised Reference Case agency does not attempt to forecast forecast in the AEO 2011 Reference 653 forecast indicates that 9.26 million passenger cars Case. This rate was calculated to be will be produced during 2012, and the agency’s 649 Because AEO 2011’s ‘‘car’’ and ‘‘truck’’ classes consistent with future changes in the updated survival rates show that 83 percent of these did not reflect NHTSA’s recent reclassification (in overall size and age distributions of the vehicles, or 7.64 million, are projected to remain in March 2009 for enforcement beginning MY 2011) of U.S. passenger car and light truck fleets service during the year 2022, when they will have many two wheel drive SUVs from the non- that result from the agency’s forecasts of reached an age of 10 years. At that age, passenger passenger (i.e., light truck) fleet to the passenger car achieving the fuel economy level they are projected fleet, EPA staff made adjustments to account for total car and light truck sales and to achieve under the Baseline alternative are driven such vehicles in the baseline. updated survival rates. The resulting an average of about 800 miles, so surviving model 650 EPA also considered other sources of similar growth rate in average annual car and year 2012 passenger cars will be driven a total of information, such as J.D. Powers, and concluded light truck use is approximately 1.1 82.5 billion miles (= 7.64 million surviving vehicles that CSM was better able to provide forecasts at the × 10,800 miles per vehicle) during 2022. Summing requisite level of detail for most of the model years the results of similar calculations for each year of of interest. 652 For a description of the Survey, see http:// their 26-year maximum lifetime, model year 2012 651 Lu, S., NHTSA, Regulatory Analysis and nhts.ornl.gov/introduction.shtml#2001 (last passenger cars will be driven a total of 1,395 billion Evaluation Division, ‘‘Vehicle Survivability and accessed September 26, 2011). miles under the Baseline alternative. Under that Travel Mileage Schedules,’’ DOT HS 809 952, 8–11 653 This approach differs from that used in the alternative, they are projected to achieve a test fuel (January 2006). Available at http://www- MY 2011 final rule, where it was assumed that economy level of 32.4 mpg, which corresponds to nrd.nhtsa.dot.gov/Pubs/809952.pdf (last accessed future growth in the total number of cars and light actual on-road fuel economy of 25.9 mpg (= 32.4 Sept. 26, 2011). These updated survival rates trucks in use resulting from projected sales of new mpg × 80 percent). Thus their lifetime fuel use suggest that the expected lifetimes of recent-model vehicles was adequate by itself to account for under the Baseline alternative is projected to be passenger cars and light trucks are 13.8 and 14.5 growth in total vehicle use, without assuming 53.9 billion gallons (= 1,395 billion miles divided years. continuing growth in average vehicle use. by 25.9 miles per gallon).

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savings expected to result from higher effect, which is the response of vehicle its long-run magnitude vary, this long- fuel economy, such as an increase in use to differences in fuel economy, the run effect is probably more appropriate fuel economy required by the adoption agency regards these studies as likely to for evaluating the fuel savings likely to of higher CAFE standards, may be offset produce the most reliable estimates of result from adopting stricter CAFE by additional vehicle use. The increase the rebound effect. Other studies have standards for future model years. in vehicle use occurs because higher relied on econometric analysis of annual In order to provide a more fuel economy reduces the fuel cost of U.S. data on vehicle use, fuel efficiency, comprehensive overview of previous driving, which is typically the largest fuel prices, and other variables to estimates of the rebound effect, NHTSA single component of the monetary cost estimate the response of total or average has updated its previous review of of operating a vehicle, and vehicle vehicle use to changes in fleet-wide published studies of the rebound effect owners respond to this reduction in average fuel economy and its effect on to include those conducted as recently operating costs by driving more. Even fuel cost per mile driven. More recent as 2010. The agency performed a with their higher fuel economy, this studies have analyzed yearly variation detailed analysis of several dozen additional driving consumes some fuel, in vehicle ownership and use, fuel separate estimates of the long-run so this effect reduces the fuel savings prices, and fuel economy among states rebound effect reported in these studies, that result when raising CAFE standards over an extended time period in order which is summarized in Table IV–9 requires manufacturers to improve fuel to measure the response of vehicle use below.659 As the table indicates, these economy. The rebound effect refers to to changing fuel costs per mile.658 estimates range from as low as 7 percent the fraction of fuel savings expected to Another important distinction among to as high as 75 percent, with a mean result from increased fuel economy that studies of the rebound effect is whether value of 23 percent. Both the type of is offset by additional driving.656 they assume that the effect is constant, data used and authors’ assumption The magnitude of the rebound effect or allow it to vary in response to about whether the rebound effect varies is an important determinant of the changes in fuel costs, personal income, over time have important effects on its actual fuel savings that are likely to or vehicle ownership. Most studies estimated magnitude. The 34 estimates result from adopting stricter CAFE using aggregate annual data for the U.S. derived from analysis of U.S. annual standards. Research on the magnitude of assume a constant rebound effect, time-series data produce a mean the rebound effect in light-duty vehicle although some of these studies test estimate of 18 percent for the long-run use dates to the early 1980s, and whether the effect varies as changes in rebound effect, while the mean of 23 generally concludes that a significant retail fuel prices or average fuel estimates based on household survey rebound effect occurs when vehicle fuel efficiency alter fuel cost per mile driven. data is considerably larger (31 percent), 657 efficiency improves. The most Studies using household survey data and the mean of 15 estimates based on common approach to estimating its estimate significantly different rebound pooled state data (23 percent) is close to magnitude has been to analyze survey effects for households owning varying that for the entire sample. The 37 data on household vehicle use, fuel numbers of vehicles, with most estimates assuming a constant rebound consumption, fuel prices, and other concluding that the rebound effect is effect produce a mean of 23 percent, factors affecting household travel larger among households that own more identical to the mean of the 29 estimates behavior to estimate the response of vehicles. Finally, recent studies using reported in studies that allowed the vehicle use to differences in the fuel state-level data conclude that the rebound effect to vary in response to efficiency of individual vehicles. rebound effect varies directly in fuel prices and fuel economy levels, Because this approach most closely response to changes in personal income, vehicle ownership, or household matches the definition of the rebound the degree of urbanization of U.S. cities, income. Updated to reflect the most and differences in traffic congestion recent available information on these 656 Formally, the rebound effect is often expressed as the elasticity of vehicle use with respect to the levels, as well as fuel costs. Some variables, the mean of these estimates is cost per mile driven. Additionally, it is consistently studies conclude that the long-run 19 percent, as Table IV–9 reports. expressed as a positive percentage (rather than as rebound effect is significantly larger BILLING CODE 4910–59–P a negative decimal fraction, as this elasticity is normally expressed). than the immediate response of vehicle 657 Some studies estimate that the long-run use to increased fuel efficiency. 659 In some cases, NHTSA derived estimates of rebound effect is significantly larger than the Although their estimates of the time the overall rebound effect from more detailed immediate response to increased fuel efficiency. required for the rebound effect to reach results reported in the studies. For example, where Although their estimates of the adjustment period studies estimated different rebound effects for required for the rebound effect to reach its long-run households owning different numbers of vehicles magnitude vary, this long-run effect is probably 658 In effect, these studies treat U.S. states as a but did not report an overall value, the agency more appropriate for evaluating the fuel savings and data ‘‘panel’’ by applying appropriate estimation computed a weighted average of the reported values emissions reductions resulting from stricter procedures to data consisting of each year’s average using the distribution of households among vehicle standards that would apply to future model years. values of these variables for the separate states. ownership categories.

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BILLING CODE 4910–59–C

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Some recent studies provide evidence Small and Van Dender combined time rebound effect for the period 2000–2004 that the rebound effect has been series data for states to estimate the to 6 percent.661 declining over time. This result appears rebound effect, allowing its magnitude More recently, Hymel, Small and Van plausible for two reasons: First, the to vary in response to fuel prices, fleet- Dender extended the previous analysis responsiveness of vehicle use to wide average fuel economy, the degree to include traffic congestion levels in variation in fuel costs would be of urbanization of U.S. cities, and urbanized areas.662 Although expected to decline as they account for personal income levels.660 The authors controlling for the effect of congestion a smaller proportion of the total employ a model that allows the effect of on vehicle use increased their estimates monetary cost of driving, which has fuel cost per mile on vehicle use to vary of the rebound effect, these authors also been the case until recently. Second, in response to changes in personal found that the rebound effect appeared rising personal incomes would be income levels and increasing to be declining over time. For the time expected to reduce the sensitivity of urbanization of U.S. cities. For the time period 1966–2004, their estimate of the vehicle use to fuel costs as the time period 1966–2001, their analysis long-run rebound effect was 24 percent, component of driving costs—which is implied a long-run rebound effect of 22 while for the last year of that period likely to be related to income levels— percent, which is consistent with their estimate was 13 percent, accounts for a larger fraction the total previously published studies. significantly above the previous Small cost of automobile travel. At the same Continued growth in personal incomes and Van Dender estimate of a 6 percent time, however, rising incomes are over this period reduces their estimate strongly associated with higher auto of the long-run rebound effect during its 661 Small, K. and K. Van Dender, 2007b. ‘‘Long ownership levels, which increase last five years (1997–2001) to 11 Run Trends in Transport Demand, Fuel Price households’ opportunities to substitute percent, and an unpublished update Elasticities and Implications of the Oil Outlook for among vehicles in response to varying through 2004 prepared by the authors Transport Policy,’’ OECD/ITF Joint Transport fuel prices and differences in their fuel reduced their estimate of the long-run Research Centre Discussion Papers 2007/16, OECD, International Transport Forum. economy levels. This is likely to 662 Hymel, Kent M., Kenneth A. Small, and Kurt increase the sensitivity of households’ Van Dender, ‘‘Induced demand and rebound effects overall vehicle use to differences in the 660 Small, K. and K. Van Dender, 2007a. ‘‘Fuel in road transport,’’ Transportation Research Part B: fuel economy levels of individual Efficiency and Motor Vehicle Travel: The Declining Methodological, Volume 44, Issue 10, December Rebound Effect’’, The Energy Journal, vol. 28, no. 2010, Pages 1220–1241, ISSN 0191–2615, DOI: vehicles. 1, pp. 25–51. 10.1016/j.trb.2010.02.007.

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rebound effect for the period 2000– impacts of this rule. The 10 percent frequency provides a time savings 2004. estimate lies between the 10–30 percent benefit to owners.665 Recent research by Greene (under range of estimates for the historical NHTSA estimated a number of contract to EPA) using U.S. national rebound effect reported in most parameters regarding consumers’ time-series data for the period 1966– previous research, and is at the upper refueling habits using newly-available 2007 lends further support to the end of the 5–10 percent range of observational and interview data from a hypothesis that the rebound effect is estimates for the future rebound effect 2010–2011 NASS study conducted at declining over time.663 Greene found reported in recent studies. In summary, fueling stations throughout the nation. that fuel prices had a statistically the 10 percent value was not derived A (non-exhaustive) list of key significant impact on VMT, yet fuel from a single estimate or particular parameters derived from this study is as efficiency did not, and statistical testing study, but instead represents a follows: Average number of gallons of rejected the hypothesis of equal compromise between historical fuel purchased, length of time to refuel elasticities of vehicle use with respect to estimates and projected future and pay, length of time to drive to the gasoline prices and fuel efficiency. estimates. Chapter 4.2.5 of the Joint TSD fueling station, primary reason for Greene also tested model formulations reviews the relevant literature and refueling, and number of adult vehicle that allowed the effect of fuel cost per discusses in more depth the reasoning occupants. mile on vehicle use to decline with for the rebound value used here. Using these and other parameters rising per capita income; his preferred (detailed explanation of parameters and form of this model produced estimates h. Benefits From Increased Vehicle Use methodology provided in Chapter VIII of the rebound effect that declined to 12 The increase in vehicle use from the of NHTSA’s PRIA), NHTSA estimated percent in 2007. rebound effect provides additional the decrease in number of refueling In light of findings from recent benefits to their users, who make more cycles for each model year’s fleet research, the agency’s judgment is that frequent trips or travel farther to reach attributable to improvements in actual the apparent decline over time in the more desirable destinations. This on-road MPG resulting from the magnitude of the rebound effect justifies additional travel provides benefits to proposed CAFE standards. NHTSA using a value for future analysis that is drivers and their passengers by acknowledges—and adjusts for—the fact lower than many historical estimates, improving their access to social and that many refueling trips occur for which average 15–25 percent. Because economic opportunities away from reasons other than a low reading on the the lifetimes of vehicles affected by the home. As evidenced by their decisions gas gauge (for example, many alternative CAFE standards considered to make more frequent or longer trips consumers refuel on a fixed schedule). in this rulemaking will extend from when improved fuel economy reduces NHTSA separately estimated the value 2017 until 2060, a value that is at the their costs for driving, the benefits from of vehicle-hour refueling time and low end of historical estimates appears this additional travel exceed the costs applied this to the projected decrease in to be appropriate. Thus as it elected to drivers and passengers incur in number of refueling cycles to estimate do in its previous analysis of the effects traveling these additional distances. the aggregate fleet-wide value of of raising CAFE standards for MY 2012– The agency’s analysis estimates the refueling time savings for each year that 16 cars and light trucks, NHTSA uses a economic benefits from increased a given model year’s vehicles are 10 percent rebound effect in its analysis rebound-effect driving as the sum of fuel expected to remain in service. As noted in the PRIA, NHTSA of fuel savings and other benefits from costs drivers incur plus the consumer assumed a constant fuel tank size in higher CAFE standards for MY 2017–25 surplus they receive from the additional estimating the impact of higher CAFE vehicles. Recognizing the wide range of accessibility it provides.664 NHTSA uncertainty surrounding its correct requirements on the frequency of estimates the value of the consumer value, however, the agency also refueling. NHTSA seeks comment surplus provided by added travel as employs estimates of the rebound effect regarding this assumption. Specifically, one-half of the product of the decline in ranging from 5 to 20 percent in its NHTSA seeks comment from fuel cost per mile and the resulting sensitivity testing. The 10 percent figure manufacturers regarding their intention increase in the annual number of miles is at the low end of those reported in to retain fuel tank size or driving range driven, a standard approximation for almost all previous research, and it is in their redesigned vehicles. Will fuel changes in consumer surplus resulting also below most estimates of the economy improvements translate into from small changes in prices. Because historical and current magnitude of the increased driving range, or will fuel the increase in travel depends on the rebound effect developed by NHTSA. tanks be reduced in size to maintain extent of improvement in fuel economy, However, other recent research— current driving range? particularly that conducted by Small the value of benefits it provides differs among model years and alternative j. Added Costs From Congestion, and Van Dender and by Greene— Crashes and Noise suggests that the magnitude of the CAFE standards. rebound effect has declined over time, i. The Value of Increased Driving Range Increased vehicle use associated with and is likely to continue to do so. As a the rebound effect also contributes to Improving vehicles’ fuel economy consequence, NHTSA concluded that a increased traffic congestion, motor may also increase their driving range value at the low end of the historical vehicle accidents, and highway noise. before they require refueling. By estimates reported here is likely to To estimate the economic costs extending the upper limit of the range provide a more reliable estimate of its associated with these consequences of vehicles can travel before refueling is magnitude during the future period added driving, NHTSA applies needed, the per-vehicle average number spanned by NHTSA’s analysis of the estimates of per-mile congestion, of refueling trips per year is expected to accident, and noise costs caused by 663 Greene, David, ‘‘Rebound 2007: Analysis of decline. This reduction in refueling National Light-Duty Vehicle Travel Statistics,’’ 665 If manufacturers respond to improved fuel February 9, 2010. This paper has been accepted for 664 The consumer surplus provided by added economy by reducing the size of fuel tanks to an upcoming special issue of Energy Policy, travel is estimated as one-half of the product of the maintain a constant driving range, the resulting cost although the publication date has not yet been decline in fuel cost per mile and the resulting saving will presumably be reflected in lower determined. increase in the annual number of miles driven. vehicle sales prices.

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increased use of automobiles and light consequence of higher CAFE standards itself that results when increased U.S. trucks developed previously by the is anticipated to reduce total U.S. import demand raises the world price of Federal Highway Administration.666 imports of crude petroleum or refined petroleum.671 However, this monopsony These values are intended to measure fuel by 95 gallons.669 cost or premium represents a financial the increased costs resulting from added ii. Benefits From Reducing U.S. transfer from consumers of petroleum congestion and the delays it causes to Petroleum Imports products to oil producers, and does not other drivers and passengers, property entail the consumption of real economic damages and injuries in traffic U.S. consumption and imports of resources. Thus the decline in its value accidents, and noise levels contributed petroleum products impose costs on the that occurs when reduced U.S. demand by automobiles and light trucks. NHTSA domestic economy that are not reflected for petroleum products causes a decline previously employed these estimates in in the market price for crude petroleum, in global petroleum prices produces no its analysis accompanying the MY 2011 or in the prices paid by consumers of savings in economic resources globally final CAFE rule, as well as in its petroleum products such as gasoline. or domestically, although it does reduce analysis of the effects of higher CAFE These costs include (1) Higher prices for the value of the financial transfer from standards for MY 2012–16. After petroleum products resulting from the U.S. consumers of petroleum products reviewing the procedures used by effect of U.S. petroleum demand on the to foreign suppliers of petroleum. FHWA to develop them and considering world oil price; (2) the risk of Accordingly, NHTSA’s analysis of the other available estimates of these values, disruptions to the U.S. economy caused benefits from adopting proposed CAFE the agency continues to find them by sudden reductions in the supply of standards for MY 2017–2025 cars and appropriate for use in this proposal. The imported oil to the U.S.; and (3) light trucks excludes the reduced value agency multiplies FHWA’s estimates of expenses for maintaining a U.S. military of monopsony payments by U.S. oil per-mile costs by the annual increases presence to secure imported oil supplies consumers that would result from lower in automobile and light truck use from from unstable regions, and for fuel consumption. the rebound effect to yield the estimated maintaining the strategic petroleum The second component of external increases in congestion, accident, and reserve (SPR) to cushion against costs imposed by U.S. petroleum 670 noise externality costs during each resulting price increases. Reducing consumption and imports reflects the future year. these costs by lowering U.S. petroleum potential costs to the U.S. economy from imports represents another source of disruptions in the supply of imported k. Petroleum Consumption and Import benefits from stricter CAFE standards Externalities petroleum. These costs arise because and the savings in consumption of interruptions in the supply of petroleum i. Changes in Petroleum Imports petroleum-based fuels that would result products reduces U.S. economic output, Based on a detailed analysis of from higher fuel economy. Higher U.S. as well as because firms are unable to differences in fuel consumption, imports of crude oil or refined adjust prices, output levels, and their petroleum imports, and imports of petroleum products increase the use of energy, labor and other inputs refined petroleum products among magnitude of these external economic smoothly and rapidly in response to the alternative scenarios presented in AEO costs, thus increasing the true economic sudden changes in prices for petroleum 2011, NHTSA estimates that cost of supplying transportation fuels products that are caused by above their market prices. Conversely, approximately 50 percent of the interruptions in their supply. Reducing lowering U.S. imports of crude reduction in fuel consumption resulting U.S. petroleum consumption and petroleum or refined fuels by reducing from adopting higher CAFE standards is imports lowers these potential costs, domestic fuel consumption can reduce likely to be reflected in reduced U.S. and the amount by which it does so these external costs, and any reduction imports of refined fuel, while the represents an economic benefit in in their total value that results from remaining 50 percent would reduce addition to the savings in fuel costs that improved fuel economy represents an domestic fuel refining.667 Of this latter result from higher fuel economy. economic benefit of more stringent figure, 90 percent is anticipated to NHTSA estimates and includes this CAFE standards, in addition to the reduce U.S. imports of crude petroleum value in its analysis of the economic value of saving fuel itself. for use as a refinery feedstock, while the The first component of the external benefits from adopting higher CAFE remaining 10 percent is expected to costs imposed by U.S. petroleum standards for MY 2017–2025 cars and reduce U.S. domestic production of light trucks. 668 consumption and imports (often termed crude petroleum. Thus on balance, the ‘‘monopsony cost’’ of U.S. oil The third component of external costs each 100 gallons of fuel saved as a imports), measures the increase in imposed by U.S. petroleum payments from domestic oil consumers consumption and imports includes 666 These estimates were developed by FHWA for to foreign oil suppliers beyond the expenses for maintaining a U.S. military use in its 1997 Federal Highway Cost Allocation presence to secure imported oil supplies Study; See http://www.fhwa.dot.gov/policy/hcas/ increased purchase price of petroleum final/index.htm (last accessed March 1, 2010). from unstable regions, and for 667 Differences in forecast annual U.S. imports of 669 This figure is calculated as 50 gallons + 50 maintaining the strategic petroleum crude petroleum and refined products among the gallons * 90% = 50 gallons + 45 gallons = 95 reserve (SPR) to cushion against Reference, High Oil Price, and Low Oil Price gallons. resulting price increases. NHTSA scenarios analyzed in EIA’s Annual Energy Outlook 670 See, e.g., Bohi, Douglas R. and W. David recognizes that potential national and 2011 range from 35–74 percent of differences in Montgomery (1982). Oil Prices, Energy Security, projected annual gasoline and diesel fuel and Import Policy, Washington, DC: Resources for energy security risks exist due to the consumption in the U.S. These differences average the Future, Johns Hopkins University Press; Bohi, possibility of tension over oil supplies. 53 percent over the forecast period spanned by AEO D.R. and M.A. Toman (1993). ‘‘Energy and Security: Much of the world’s oil and gas supplies 2011. Externalities and Policies,’’ Energy Policy 21:1093– are located in countries facing social, 668 Differences in forecast annual U.S. imports of 1109 (Docket NHTSA–2009–0062–24); and Toman, crude petroleum among the Reference, High Oil M.A. (1993). ‘‘The Economics of Energy Security: economic, and demographic challenges, Price, and Low Oil Price scenarios analyzed in Theory, Evidence, Policy,’’ in A.V. Kneese and J.L. EIA’s Annual Energy Outlook 2011 range from 67– Sweeney, eds. (1993) (Docket NHTSA–2009–0062– 671 The reduction in payments from U.S. oil 104 percent of differences in total U.S. refining of 23). Handbook of Natural Resource and Energy purchasers to domestic petroleum producers is not crude petroleum, and average 90 percent over the Economics, Vol. III. Amsterdam: North-Holland, pp. included as a benefit, since it represents a transfer forecast period spanned by AEO 2011. 1167–1218. that occurs entirely within the U.S. economy.

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thus making them even more vulnerable recent estimates of the variables and l. Air Pollutant Emissions to potential local instability. Because of parameters that determine their i. Changes in Criteria Air Pollutant 673 U.S. dependence on oil, the military value. The updated ORNL study was Emissions could be called on to protect energy subjected to a detailed peer review Criteria air pollutants include carbon resources through such measures as commissioned by EPA, and ORNL’s monoxide (CO), hydrocarbon securing shipping lanes from foreign oil estimates of the value of oil import fields. Thus, to the degree to which the compounds (usually referred to as externalities were subsequently revised ‘‘volatile organic compounds,’’ or VOC), proposed rules reduce reliance upon to reflect their comments and nitrogen oxides (NOX), fine particulate imported energy supplies or promote recommendations of the peer the development of technologies that matter (PM2.5), and sulfur oxides (SOX). reviewers.674 Finally, at the request of can be deployed by either consumers or These pollutants are emitted during EPA, ORNL has repeatedly revised its the nation’s defense forces, the United vehicle storage and use, as well as States could expect benefits related to estimates of external costs from U.S. oil throughout the fuel production and national security, reduced energy costs, imports to reflect changes in the outlook distribution system. While reductions in and increased energy supply. Although for world petroleum prices, as well as domestic fuel refining, storage, and NHTSA recognizes that there clearly is continuing changes in the structure and distribution that result from lower fuel a benefit to the United States from characteristics of global petroleum consumption will reduce emissions of reducing dependence on foreign oil, we supply and demand. these pollutants, additional vehicle use have been unable to calculate the As the preceding discussion indicates, associated with the fuel economy rebound effect will increase their monetary benefit that the United States NHTSA’s analysis of benefits from emissions. The net effect of stricter will receive from the improvements in adopting higher CAFE standards national security expected to result from CAFE standards on total emissions of includes only the reduction in economic each criteria pollutant depends on the this program. We have therefore disruption costs that is anticipated to included only the macroeconomic relative magnitude of reductions in its result from reduced consumption of emissions during fuel refining and disruption portion of the energy security petroleum-based fuels and the benefits to estimate the monetary value distribution, and increases in its associated decline in U.S. petroleum of the total energy security benefits of emissions resulting from additional this program. We have calculated energy imports. ORNL’s updated analysis vehicle use. Because the relationship security in very specific terms, as the reports that this benefit, which is in between emissions in fuel refining and reduction of both financial and strategic addition to the savings in costs for vehicle use is different for each criteria risks caused by potential sudden producing fuel itself, is most likely to pollutant, the net effect of fuel savings disruptions in the supply of imported amount to $0.185 per gallon of fuel from the proposed standards on total petroleum to the U.S. Reducing the saved by requiring MY 2017–25 cars emissions of each pollutant is likely to amount of oil imported reduces those and light trucks to achieve higher fuel differ. risks, and thus increases the nation’s economy. However, considerable With the exception of SO2, NHTSA energy security. uncertainty surrounds this estimate, and calculated annual emissions of each Similarly, while the costs for building ORNL’s updated analysis also indicates criteria pollutant resulting from vehicle and maintaining the SPR are more that a range of values extending from a use by multiplying its estimates of car and light truck use during each year clearly attributable to U.S. petroleum low of $0.091 per gallon to a high of over their expected lifetimes by per-mile consumption and imports, these costs $0.293 per gallon should be used to emission rates for each vehicle class, have not varied historically in response reflect this uncertainty. to changes in U.S. oil import levels. fuel type, model year, and age. These Thus the agency has not attempted to We note that the calculation of energy emission rates were developed by U.S. estimate the potential reduction in the security benefits does not include EPA using its Motor Vehicle Emission 675 cost for maintaining the SPR that might energy security costs associated with Simulator (MOVES 2010a). Emission result from lower U.S. petroleum reliance on foreign sources of lithium rates for SO2 were calculated by NHTSA imports, or to include an estimate of this and rare earth metals for HEVs and EVs. using average fuel sulfur content value among the benefits of reducing The agencies intend to attempt to estimates supplied by EPA, together petroleum consumption through higher quantify this impact for the final rule with the assumption that the entire CAFE standards. stage, and seek public input on sulfur content of fuel is emitted in the 676 In analyzing benefits from its recent information that would enable agencies form of SO2. Total SO2 emissions actions to increase light truck CAFE to develop this analysis. NHTSA also under each alternative CAFE standard standards for model years 2005–07 and seeks public input on the projections were calculated by applying the 2008–11, NHTSA relied on a 1997 study that energy security benefits will grow resulting emission rates directly to by Oak Ridge National Laboratory rapidly through 2025. estimated annual gasoline and diesel (ORNL) to estimate the value of reduced fuel use by cars and light trucks. economic externalities from petroleum Changes in emissions of criteria air consumption and imports.672 More 673 Leiby, Paul N., ‘‘Estimating the Energy pollutants resulting from alternative recently, ORNL updated its estimates of Security Benefits of Reduced U.S. Oil Imports,’’ Oak increases in CAFE standards for MY the value of these externalities, using Ridge National Laboratory, ORNL/TM–2007/028, the analytic framework developed in its Revised July 23, 2007. Available at http://www.esd. 675 The MOVES model assumes that the per-mile _ rates at which these pollutants are emitted are original 1997 study in conjunction with ornl.gov/eess/energy analysis/files/Leiby2007%20 Estimating%20the%20Energy%20Security%20 determined by EPA regulations and the Benefits%20of%20Reduced%20U.S.%20Oil%20 effectiveness of catalytic after-treatment of engine 672 exhaust emissions, and are thus unaffected by Leiby, Paul N., Donald W. Jones, T. Randall Imports%20ornl-tm-2007–028%20rev2007Jul25.pdf Curlee, and Russell Lee, Oil Imports: An changes in car and light truck fuel economy. (last accessed October 11, 2011). Assessment of Benefits and Costs, ORNL–6851, Oak 676 These are 30 and 15 parts per million (ppm, 674 Ridge National Laboratory, November 1, 1997. Peer Review Report Summary: Estimating the measured on a mass basis) for gasoline and diesel Available at http://www.esd.ornl.gov/eess/energy_ Energy Security Benefits of Reduced U.S. Oil respectively, which produces emission rates of 0.17 analysis/files/ORNL6851.pdf (last accessed October Imports, ICF, Inc., September 2007. Available at grams of SO2 per gallon of gasoline and 0.10 grams 11, 2011). Docket No. NHTSA–2009–0059–0160. per gallon of diesel.

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2017–2025 cars and light trucks are assumed to reduce emissions during all environmental impacts of PM2.5 calculated from the differences between four phases of fuel production and pollution, or reductions in health and emissions under each alternative distribution.679 welfare impacts related to other criteria increase in CAFE standards, and Finally, NHTSA calculated the net air pollutants (ozone, NO2, and SO2) and emissions under the baseline changes in domestic emissions of each air toxics. EPA estimates different per- alternative. criteria pollutant by summing the ton values for reducing emissions of PM Emissions of criteria air pollutants increases in emissions projected to and other criteria pollutants from also occur during each phase of fuel result from increased vehicle use, and vehicle use than for reductions in production and distribution, including the reductions anticipated to result from emissions of those same pollutants crude oil extraction and transportation, lower domestic fuel refining and during fuel production and fuel refining, and fuel storage and distribution.680 As indicated previously, distribution.681 NHTSA applies these transportation. NHTSA estimates the the effect of adopting higher CAFE separate values to its estimates of reductions in criteria pollutant standards on total emissions of each changes in emissions from vehicle use emissions from producing and criteria pollutant depends on the and from fuel production and distributing fuel that would occur under relative magnitude of the resulting distribution to determine the net change alternative CAFE standards using reduction in emissions from fuel in total economic damages from emission rates obtained by EPA from refining and distribution, and the emissions of these pollutants. Argonne National Laboratories’ increase in emissions from additional EPA projects that the per-ton values Greenhouse Gases and Regulated vehicle use. Although these net changes for reducing emissions of criteria Emissions in Transportation (GREET) vary significantly among individual pollutants from both mobile sources model, which provides estimates of air criteria pollutants, the agency projects (including motor vehicles) and pollutant emissions that occur in that on balance, adopting higher CAFE stationary sources such as fuel refineries different phases of fuel production and standards for MY 2017–25 cars and light and storage facilities will increase over distribution.677 678 EPA modified the trucks would reduce emissions of all time. These projected increases reflect GREET model to change certain criteria air pollutants except carbon rising income levels, which are assumed assumptions about emissions during monoxide (CO). to increase affected individuals’ crude petroleum extraction and The net changes in direct emissions of willingness to pay for reduced exposure transportation, as well as to update its fine particulates (PM2.5) and other to health threats from air pollution, as emission rates to reflect adopted and criteria pollutants that contribute to the well as future population growth, which pending EPA emission standards. formation of ‘‘secondary’’ fine increases population exposure to future The resulting emission rates were particulates in the atmosphere (such as levels of air pollution. applied to the agency’s estimates of fuel NOX, SOX, and VOCs) are converted to consumption under alternative CAFE economic values using estimates of the ii. Reductions in CO2 Emissions standards to develop estimates of total reductions in health damage costs per Emissions of carbon dioxide and other emissions of each criteria pollutant ton of emissions of each pollutant that greenhouse gases (GHGs) occur during fuel production and distribution. is avoided, which were developed by throughout the process of producing The agency then employed the estimates EPA. These savings represent the and distributing transportation fuels, as of the effects of changes in fuel estimated reductions in the value of well as from fuel combustion itself. consumption on domestic and imported damages to human health resulting from Emissions of GHGs also occur in sources of fuel supply discussed lower atmospheric concentrations and generating electricity, which NHTSA’s previously to calculate the effects of population exposure to air pollution analysis anticipates will account for an reductions in fuel use on changes in that occur when emissions of each increasing share of energy consumption imports of refined fuel and domestic pollutant that contributes to by cars and light trucks produced in the refining. NHTSA’s analysis assumes that atmospheric PM2.5 concentrations are model years that would be subject to reductions in imports of refined fuel reduced. The value of reductions in the their proposed rules. By reducing the would reduce criteria pollutant risk of premature death due to exposure volume of fuel consumed by passenger emissions during fuel storage and to fine particulate pollution (PM2.5) cars and light trucks, higher CAFE distribution only. Reductions in accounts for a majority of EPA’s standards will reduce GHG emissions domestic fuel refining using imported estimated values of reducing criteria generated by fuel use, as well as crude oil as a feedstock are assumed to pollutant emissions, although the value throughout the fuel supply system. reduce emissions during fuel refining, of avoiding other health impacts is also Lowering these emissions is likely to storage, and distribution. Finally, included in these estimates. slow the projected pace and reduce the reduced domestic fuel refining using These values do not include a number ultimate extent of future changes in the domestically produced crude oil is of unquantified benefits, such as global climate, thus reducing future reduction in the welfare and economic damages that changes in the 677 Argonne National Laboratories, The global climate are expected to cause. By Greenhouse Gas and Regulated Emissions in 679 In effect, this assumes that the distances crude reducing the probability that climate Transportation (GREET) Model, Version 1.8, June oil travels to U.S. refineries are approximately the changes with potentially catastrophic 2007, available at http://www.transportation.anl. same regardless of whether it travels from domestic gov/modeling_simulation/GREET/index.html (last oilfields or import terminals, and that the distances economic or environmental impacts will accessed October 11, 2011). that gasoline travels from refineries to retail stations occur, lowering GHG emissions may 678 Emissions that occur during vehicle refueling are approximately the same as those from import also result in economic benefits that at retail gasoline stations (primarily evaporative terminals to gasoline stations. We note that while exceed the resulting reduction in the emissions of volatile organic compounds, or VOCs) assuming that all changes in upstream emissions are already accounted for in the ‘‘tailpipe’’ emission result from a decrease in petroleum production and expected future economic costs caused factors used to estimate the emissions generated by transport, our analysis of downstream criteria increased light truck use. GREET estimates pollutant impacts assumes no change in the 681 These reflect differences in the typical emissions in each phase of gasoline production and composition of the gasoline fuel supply. geographic distributions of emissions of each 680 distribution in mass per unit of gasoline energy All emissions from increased vehicle use are pollutant, their contributions to ambient PM2.5 content; these factors are then converted to mass assumed to occur within the U.S., since CAFE concentrations, pollution levels (predominantly per gallon of gasoline using the average energy standards would apply only to vehicles produced those of PM2.5), and resulting changes in population content of gasoline. for sale in the U.S. exposure.

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by more gradual changes in the earth’s production of petroleum and refined calculation is repeated for the climatic systems. fuel for export to the U.S. Overseas reductions in CO2 emissions projected Quantifying and monetizing benefits emissions are included because GHG to result from each alternative increase from reducing GHG emissions is thus an emissions throughout the world in CAFE standards. important step in estimating the total contribute equally to the potential for NHTSA evaluates the economic economic benefits likely to result from changes in the global climate. benefits from reducing CO2 emissions establishing higher CAFE standards. using estimates of the SCC developed by Because carbon dioxide emissions iii. Economic Value of Reductions in an interagency working group convened account for nearly 95 percent of total CO2 Emissions for the specific purpose of developing GHG emissions that result from fuel NHTSA takes the economic benefits new estimates for use by U.S. Federal combustion during vehicle use, from reducing CO2 emissions into agencies in regulatory evaluations. The NHTSA’s analysis of the effect of higher account in developing and analyzing the group’s purpose in developing new CAFE standards on GHG emissions alternative CAFE standards it has estimates of the SCC was to allow focuses mainly on estimating changes in considered for MY 2017–25. Because Federal agencies to incorporate the emissions of CO2. The agency estimates research on the impacts of climate social benefits of reducing CO2 emissions of CO2 from passenger car change does not produce direct emissions into cost-benefit analyses of and light truck use by multiplying the estimates of the economic benefits from regulatory actions that have relatively number of gallons of each type of fuel reducing CO2 or other GHG emissions, modest impacts on cumulative global (gasoline and diesel) they are projected these benefits are assumed to be the emissions, as most Federal regulatory to consume under alternative CAFE ‘‘mirror image’’ of the estimated actions can be expected to have. NHTSA standards by the quantity or mass of incremental costs resulting from previously relied on the SCC estimates CO2 emissions released per gallon of increases in emissions. Thus the developed by this interagency group to fuel consumed. This calculation benefits from reducing CO2 emissions analyze the alternative CAFE standards assumes that the entire carbon content are usually measured by the savings in it considered for MY 2012–16 cars and of each fuel is converted to CO2 estimated economic damages that an light trucks, as well as the fuel emissions during the combustion equivalent increase in emissions would efficiency standards it adopted for MY process. otherwise have caused. The agency does 014–18 heavy-duty vehicles. NHTSA estimates emissions of CO2 not include estimates of the economic The interagency group convened on a that occur during fuel production and benefits from reducing GHGs other than regular basis over the period from June distribution using emission rates for CO2 in its analysis of alternative CAFE 2009 through February 2010, to explore each stage of this process (feedstock standards. technical literature in relevant fields production and transportation, fuel NHTSA estimates the value of the and develop key inputs and refining and fuel storage and reductions in emissions of CO2 resulting assumptions necessary to generate distribution) derived from Argonne from adopting alternative CAFE estimates of the SCC. Agencies National Laboratories’ Greenhouse standards using a measure referred to as participating in the interagency process Gases and Regulated Emissions in the ‘‘social cost of carbon,’’ abbreviated included the Environmental Protection Transportation (GREET) model. For SCC. The SCC is intended to provide a Agency and the Departments of liquid fuels, NHTSA converts these monetary measure of the additional Agriculture, Commerce, Energy, rates to a per-gallon basis using the economic impacts likely to result from Transportation, and Treasury. This energy content of each fuel, and changes in the global climate that would process was convened by the Council of multiplies them by the number of result from an incremental increase in Economic Advisers and the Office of gallons of each type of fuel produced CO2 emissions. These potential effects Management and Budget, with active and consumed under alternative include changes in agricultural participation and regular input from the standards to estimate total CO2 productivity, the economic damages Council on Environmental Quality, emissions from fuel production and caused by adverse effects on human National Economic Council, Office of distribution. GREET supplies emission health, property losses and damages Energy and Climate Change, and Office rates for electricity generation that are resulting from rising sea levels, and the of Science and Technology Policy. expressed as grams of CO2 per unit of value of ecosystem services. The SCC is The interagency group’s main energy, so these rates are simply expressed in constant dollars per objective was to develop a range of SCC multiplied by the estimates of electrical additional metric ton of CO2 emissions values using clearly articulated input energy used to charge the on-board occurring during a specific year, and is assumptions grounded in the existing storage batteries of plug-in hybrid and higher for more distant future years scientific and economic literatures, in battery electric vehicles. As with all because the damages caused by an conjunction with a range of models that other effects of alternative CAFE additional ton of emissions increase employ different representations of standards, the reduction in CO2 with larger concentrations of CO2 in the climate change and its economic emissions resulting from each earth’s atmosphere. impacts. The group clearly alternative increase in standards is Reductions in CO2 emissions that are acknowledged the many uncertainties measured by the difference in total projected to result from lower fuel that its process identified, and emissions from producing and production and consumption during recommended that its estimates of the consuming fuel energy used by MY each year over the lifetimes of MY SCC should be updated periodically to 2017–25 cars and light trucks with those 2017–25 cars and light trucks are incorporate developing knowledge of higher CAFE standards in effect, and multiplied by the estimated SCC the science and economics of climate total CO2 emissions from supplying and appropriate for that year to determine impacts. Specifically, it set a using fuel energy consumed under the the economic benefit from reducing preliminary goal to revisit the SCC baseline alternative. Unlike criteria emissions during that year. The net values within two years, or as pollutants, the agency’s estimates of CO2 present value of these annual benefits is substantial improvements in emissions include those occurring in calculated using a discount rate that is understanding of the science and domestic fuel production and consistent with that used to develop the economics of climate impacts and consumption, as well as in overseas estimate of each SCC estimate. This updated models for estimating and

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valuing these impacts become available. percentile SCC estimate from the Table IV–10 summarizes the The group ultimately selected four SCC combined distribution of values interagency group’s estimates of the SCC values for use in federal regulatory generated by the three models at a 3 during various future years, which the analyses. Three values were based on percent discount rate, represents the agency has updated to 2009 dollars to the average of SCC estimates developed possibility of possibility of higher-than- correspond to the other values it uses to using three different climate economic expected impacts from the estimate economic benefits from the models (referred to as integrated accumulation of GHGs in the earth’s alternative CAFE standards considered assessment models), using discount atmosphere, and the consequently larger in this NPRM.682 rates of 2.5, 3, and 5 percent. The fourth economic damages. value, which represents the 95th

682 The SCC estimates reported in the table the baseline emissions forecast incorporated in each that are small relative to cumulative global assume that the damages resulting from increased estimate, an approximation that is reasonable for emissions. emissions are constant for small departures from policies with projected effects on CO2 emissions

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As Table IV–10 shows, the four SCC Carbon for Regulatory Impact Analysis deferred into the future. In evaluating estimates selected by the interagency Under Executive Order 12866, the benefits from alternative increases in group for use in regulatory analyses are Interagency Working Group on Social CAFE standards for MY 2017–2025 $5, $23, $38, and $70 per metric ton (in Cost of Carbon, United States passenger cars and light trucks, NHTSA 2009 dollars) for emissions occurring in Government, February 2010.683 primarily employs a discount rate of 3 the year 2012. The value that the m. Discounting Future Benefits and percent per year, but in accordance with interagency group centered its attention Costs OMB guidance, also presents these on is the average SCC estimate benefit and cost estimates using a 7 Discounting future fuel savings and developed using different models and a percent discount rate. 3 percent discount rate, or $23 per other benefits accounts for the reduction While it presents results that reflect metric ton in 2012. To capture the in their value when they are deferred uncertainties involved in regulatory until some future date, rather than both discount rates, NHTSA believes impact analysis, however, the group received immediately. The value of that the 3 percent rate is more emphasized the importance of benefits that are not expected to occur appropriate for discounting future considering the full range of estimated until the future is lower partly because benefits from increased CAFE standards, SCC values. As the table also shows, the people value current consumption more because the agency expects that most or SCC estimates also rise over time; for highly than equivalent consumption at all of vehicle manufacturers’ costs for example, the average SCC at the 3 some future date—stated simply, they complying with higher CAFE standards percent discount rate increases to $27 are impatient—and partly because they will ultimately be reflected in higher per metric ton of CO by 2020 and expect their living standards to be selling prices for their new vehicle 2 higher in the future, so additional reaches $46 per metric ton of CO2 in models. By increasing sales prices for 2050. consumption will improve their well- new cars and light trucks, CAFE being by more today than it will in the regulations will thus primarily affect Details of the process used by the future. The discount rate expresses the interagency group to develop its SCC vehicle purchases and other private percent decline in the value of these consumption decisions. Both economic estimates, complete results including benefits—as viewed from today’s theory and OMB guidance on year-by-year estimates of each of the perspective—for each year they are four values, and a thorough discussion discounting indicate that the future benefits and costs of regulations that of their intended use and limitations is 683 This document is available in the docket for provided in the document Social Cost of the 2012–2016 rulemaking (NHTSA–2009–0059). mainly affect private consumption

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should be discounted at consumers’ rate percent depending on which estimate of of the draft Joint TSD. In addition, all of of time preference.684 the SCC is being employed.686 NHTSA’s model input and output files are now public and available for the Current OMB guidance also indicates n. Accounting for Uncertainty in reader’s review and consideration. The that savers appear to discount future Benefits and Costs consumption at an average real (that is, economic input files can be found in the In analyzing the uncertainty docket for this proposed rule, NHTSA– adjusted to remove the effect of surrounding its estimates of benefits and inflation) rate of about 3 percent when 2010–0131, and on NHTSA’s Web costs from alternative CAFE standards, site.687 they face little risk about the future. NHTSA considers alternative estimates Since the real interest rate that savers Finally, because much of NHTSA’s of those assumptions and parameters economic analysis for purposes of this require to persuade them to defer likely to have the largest effect. These consumption into the future represents proposal builds on the work that was include the projected costs of fuel done for the final rule establishing a reasonable estimate of consumers’ rate economy-improving technologies and of time preference, NHTSA believes that CAFE standards for MYs 2012–16, we their anticipated effectiveness in refer readers to that document as well. the 3 percent rate is appropriate for reducing fuel consumption, forecasts of discounting projected future benefits It contains valuable background future fuel prices, the magnitude of the information concerning how NHTSA’s and costs resulting from higher CAFE rebound effect, the reduction in external standards. assumptions regarding economic inputs economic costs resulting from lower for CAFE analysis have evolved over the Because there is some uncertainty U.S. oil imports, and the discount rate past several rulemakings, both in about whether vehicle manufacturers applied to future benefits and costs. The response to comments and as a result of will completely recover their costs for range for each of these variables the agency’s growing experience with complying with higher CAFE standards employed in the uncertainty analysis this type of analysis.688 by increasing vehicle sales prices, was previously identified in the sections however, NHTSA also presents benefit of this notice discussing each variable. 4. How does NHTSA use the and cost estimates discounted using a The uncertainty analysis was assumptions in its modeling analysis? conducted by assuming either higher rate. To the extent that In developing today’s proposed CAFE independent normal or beta probability manufacturers are unable to recover standards, NHTSA has made significant distributions for each of these variables, their costs for meeting higher CAFE use of results produced by the CAFE using the low and high estimates for standards by increasing new vehicle Compliance and Effects Model each variable as the values between prices, these costs are likely to displace (commonly referred to as ‘‘the CAFE which 90 percent of observed values are other investment opportunities available Model’’ or ‘‘the Volpe model’’), which to them. OMB guidance indicates that expected to fall. Each trial of the uncertainty analysis employed a set of DOT’s Volpe National Transportation the real economy-wide opportunity cost Systems Center developed specifically of capital is the appropriate discount values randomly drawn from these probability distributions, under the to support NHTSA’s CAFE rulemakings. rate to apply to future benefits and costs The model, which has been constructed when the primary effect of a regulation assumption that the value of each variable is independent from those of specifically for the purpose of analyzing is ‘‘* * * to displace or alter the use of potential CAFE standards, integrates the capital in the private sector,’’ and OMB the others. In cases where the data on the possible distribution of parameters following core capabilities: estimates that this rate currently (1) Estimating how manufacturers 685 was relatively sparse, making a choice averages about 7 percent. Thus the could apply technologies in response to agency’s analysis of alternative of distributions difficult, a beta distribution is commonly employed to new fuel economy standards, increases in CAFE standards for MY (2) Estimating the costs that would be 2017–25 cars and light trucks also give more weight to both tails than would be the case had a normal incurred in applying these technologies, reports benefits and costs discounted at (3) Estimating the physical effects a 7 percent rate. distribution been employed. Benefits and costs of each alternative standard resulting from the application of these One important exception to the were estimated using each combination technologies, such as changes in travel agency’s use of 3 percent and 7 percent of variables, and a total of nearly 40,000 demand, fuel consumption, and discount rates is arises in discounting trials were used to estimate the likely emissions of carbon dioxide and criteria benefits from reducing CO2 emissions range of estimated benefits and costs for pollutants, and over the lifetimes of MY 2017–2025 cars each alternative standard. (4) Estimating the monetized societal and light trucks to their present values. benefits of these physical effects. o. Where can readers find more In order to ensure consistency in the An overview of the model follows information about the economic derivation and use of the interagency below. Separate model documentation assumptions? group’s estimates of the unit values of provides a detailed explanation of the reducing CO2 emissions (or SCC), the Much more detailed information is functions the model performs, the benefits from reducing CO2 emissions provided in Chapter VIII of the PRIA, calculations it performs in doing so, and during each future year are discounted and a discussion of how NHTSA and how to install the model, construct using the same ‘‘intergenerational’’ EPA jointly reviewed and updated inputs to the model, and interpret the discount rates that were used to derive economic assumptions for purposes of model’s outputs. Documentation of the each of the alternative values. As this proposal is available in Chapter 4 model, along with model installation indicated in Table IV–10 above, these files, source code, and sample inputs are rates are 2.5 percent, 3 percent, and 5 686 The fact that the 3 percent discount rate used available at NHTSA’s Web site. The by the interagency group to derive its central estimate of the SCC is identical to the 3 percent model documentation is also available 684 Id. short-term or ‘‘intra-generational’’ discount rate in the docket for today’s proposed rule, 685 Office of Management and Budget, Circular A– used by NHTSA to discount future benefits other as are inputs for and outputs from 4, ‘‘Regulatory Analysis,’’ September 17, 2003, 33. than reductions in CO2 emissions is coincidental, Available at http://www.whitehouse.gov/omb/ and should not be interpreted as a required circulars/a004/a-4.pdf (last accessed Sept. 26, condition that must be satisfied in future 687 See http://www.nhtsa.gov/fuel-economy. 2011). rulemakings. 688 74 FR 14308–14358 (Mar. 30, 2009).

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analysis of today’s proposed CAFE (2) The manufacturer ‘‘exhausts’’ 692 CAFE model accounts explicitly for standards. available technologies; or each model year because EPCA requires (3) For manufacturers estimated to be that NHTSA make a year-by-year a. How does the model operate? willing to pay civil penalties, the determination of the appropriate level of As discussed above, the agency uses manufacturer reaches the point at which stringency and then set the standard at the CAFE model to estimate how doing so would be more cost-effective that level, while ensuring ratable manufacturers could attempt to comply (from the manufacturer’s perspective) increases in average fuel economy.694 with a given CAFE standard by adding than adding further technology.693 The multiyear planning capability and technology to fleets that the agency As discussed below, the model has (optional) simulation of ‘‘voluntary anticipates they will produce in future also been modified in order to—as an overcompliance’’ and EPCA credit model years. This exercise constitutes a option—apply more technology than mechanisms increase the model’s ability simulation of manufacturers’ decisions may be necessary to achieve compliance to simulate manufacturers’ real-world regarding compliance with CAFE in a given model year, or to facilitate behavior, accounting for the fact that standards. compliance in later model years. This manufacturers will seek out compliance This compliance simulation begins ability to simulate ‘‘voluntary paths for several model years at a time, with the following inputs: (a) The overcompliance’’ reflects the potential while accommodating the year-by-year baseline and reference market forecast that manufacturers will apply some requirement. discussed above in Section IV.C.1 and technologies to some vehicles if doing The model also calculates the costs, Chapter 1 of the TSD, (b) technology- so would be sufficiently inexpensive effects, and benefits of technologies that related estimates discussed above in compared to the expected reduction in it estimates could be added in response Section IV.C.2 and Chapter 3 of the owners’ outlays for fuel. to a given CAFE standard.695 It TSD, (c) economic inputs discussed The model accounts explicitly for calculates costs by applying the cost above in Section IV.C.3 and Chapter 4 each model year, applying most estimation techniques discussed above of the TSD, and (d) inputs defining technologies when vehicles are in Section IV.C.2, and by accounting for baseline and potential new CAFE scheduled to be redesigned or the number of affected vehicles. It standards. For each manufacturer, the freshened, and carrying forward accounts for effects such as changes in model applies technologies in a technologies between model years. The vehicle travel, changes in fuel sequence that follows a defined consumption, and changes in engineering logic (‘‘decision trees’’ apply additional technology in early model years if greenhouse gas and criteria pollutant discussed in the MY 2011 final rule and doing so will facilitate compliance in later model emissions. It does so by applying the years. This is designed to simulate a manufacturer’s fuel consumption estimation techniques in the model documentation) and a cost- decision to plan for CAFE obligations several years minimizing strategy in order to identify in advance, which NHTSA believes better replicates also discussed in Section IV.C.2, and the a set of technologies the manufacturer manufacturers’ actual behavior as compared to the vehicle survival and mileage could apply in response to new CAFE year-by-year evaluation which EPCA would accumulation forecasts, the rebound otherwise require. standards.689 The model applies effect estimate and the fuel properties 692 In a given model year, the model makes and emission factors discussed in technologies to each of the projected additional technologies available to each vehicle individual vehicles in a manufacturer’s model within several constraints, including (a) Section IV.C.3. Considering changes in fleet, considering the combined effect of Whether or not the technology is applicable to the travel demand and fuel consumption, regulatory and market incentives. vehicle model’s technology class, (b) whether the the model estimates the monetized vehicle is undergoing a redesign or freshening in value of accompanying benefits to Depending on how the model is the given model year, (c) whether engineering exercised, it will apply technology until aspects of the vehicle make the technology society, as discussed in Section IV.C.3. one of the following occurs: unavailable (e.g., secondary axle disconnect cannot The model calculates both the be applied to two-wheel drive vehicles), and (d) undiscounted and discounted value of (1) The manufacturer’s fleet achieves whether technology application remains within compliance 690 with the applicable benefits that accrue over time in the ‘‘phase in caps’’ constraining the overall share of a future. standard, and continuing to add manufacturer’s fleet to which the technology can be The CAFE model has other technology in the current model year added in a given model year. Once enough capabilities that facilitate the would be attractive neither in terms of technology is added to a given manufacturer’s fleet in a given model year that these constraints make development of a CAFE standard. The stand-alone (i.e., absent regulatory need) further technology application unavailable, integration of (a) Compliance simulation cost effectiveness nor in terms of technologies are ‘‘exhausted’’ for that manufacturer and (b) the calculation of costs, effects, facilitating compliance in future model in that model year. years; 691 693 This possibility was added to the model to account for the fact that under EPCA/EISA, 694 49 U.S.C. 32902(a) states that at least 18 manufacturers must pay fines if they do not achieve months before the beginning of each model year, 689 NHTSA does its best to remain scrupulously compliance with applicable CAFE standards. 49 the Secretary of Transportation shall prescribe by neutral in the application of technologies through U.S.C. 32912(b). NHTSA recognizes that some regulation average fuel economy standards for the modeling analysis, to avoid picking technology manufacturers will find it more cost-effective to pay automobiles manufactured by a manufacturer in ‘‘winners.’’ The technology application fines than to achieve compliance, and believes that that model year, and that each standard shall be the methodology has been reviewed by the agency over to assume these manufacturers would exhaust maximum feasible average fuel economy level that the course of several rulemakings, and commenters available technologies before paying fines would the Secretary decides the manufacturers can have been generally supportive of the agency’s cause unrealistically high estimates of market achieve in that year. NHTSA has long interpreted approach. See, e.g., 74 FR 14238–14246 (Mar. 30, penetration of expensive technologies such as this statutory language to require year-by-year 2009). diesel engines and strong hybrid electric vehicles, assessment of manufacturer capabilities. 49 U.S.C. 690 The model has been modified to provide the as well as correspondingly inflated estimates of 32902(b)(2)(C) also requires that standards increase ability—as an option—to account for credit both the costs and benefits of any potential CAFE ratably between MY 2011 and MY 2020. mechanisms (i.e., carry-forward, carry-back, standards. NHTSA thus includes the possibility of 695 As for all of its other rulemakings, NHTSA is transfers, and trades) when determining whether manufacturers choosing to pay fines in its modeling required by Executive Order 12866 (as amended by compliance has been achieved. For purposes of analysis in order to achieve what the agency Executive Order 13563) and DOT regulations to determining maximum feasible CAFE standards, believes is a more realistic simulation of analyze the costs and benefits of CAFE standards. NHTSA cannot consider these mechanisms, and manufacturer decision-making. Unlike flex-fuel and Executive Order 12866, 58 FR 51735 (Oct. 4, 1993); exercises the CAFE model without enabling these other credits, NHTSA is not barred by statute from DOT Order 2100.5, ‘‘Regulatory Policies and options. considering fine-payment in determining maximum Procedures,’’ 1979, available at http://regs.dot.gov/ 691 In preparation for the MY 2012–2016 feasible standards under EPCA/EISA. 49 U.S.C. rulemakingrequirements.htm (last accessed rulemaking, the model was modified in order to 32902(h). February 21, 2010).

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and benefits facilitates analysis of early version of the CAFE model, DOT determining the extent to which a sensitivity of results to model inputs. modified the CAFE model in order to manufacturer could expand use of the The model can also be used to evaluate account for dependencies between technology, (5) applying technology- many (e.g., 200 per model year) model years and to better represent specific estimates of changes in potential levels of stringency manufacturers’ planning cycles, in a consumer value, (6) simulating the sequentially, and identify the stringency way that still allowed NHTSA to extent to which manufacturers might at which specific criteria are met. For comply with the statutory requirement utilize EPCA’s provisions regarding example, it can identify the stringency to determine the appropriate level of the generation and use of CAFE credits, (7) at which net benefits to society are standards for each model year. applying estimates of fuel economy maximized, the stringency at which a The CAFE model is also able to adjustments (and accompanying costs) specified total cost is reached, or the account for important engineering reflecting increases in air conditioner stringency at which a given average differences between specific vehicle efficiency, (8) reporting privately-valued required fuel economy level is attained. models, and to thereby reduce the risk benefits, (9) simulating the extent to This allows the agency to compare more of applying technologies that may be which manufacturers might voluntarily easily the impacts in terms of fuel incompatible with or already present on apply technology beyond levels needed savings, emissions reductions, and costs a given vehicle model. By combining for compliance with CAFE standards, and benefits of achieving different levels technologies incrementally and on a and (10) estimating changes in highway of stringency according to different model-by-model basis, the CAFE model fatalities attributable to any applied criteria. The model can also be used to is able to account for important reductions in vehicle mass. These perform uncertainty analysis (i.e., engineering differences between vehicle capabilities are described below, and in Monte Carlo simulation), in which input models and avoid unlikely technology greater detail in the CAFE model estimates are varied randomly according combinations documentation.697 The CAFE model also produces a to specified probability distributions, To support evaluation of the effects single vehicle-level output file that, for such that the uncertainty of key electric vehicles (EVs) and plug-in each vehicle model, shows which measures (e.g., fuel consumption, costs, hybrid vehicles (PHEVs) could have on technologies were present at the outset benefits) can be evaluated. energy consumption and associated of modeling, which technologies were costs and environmental effects, DOT b. Has NHTSA considered other superseded by other technologies, and has expanded the CAFE model to models? which technologies were ultimately estimate the amount of electricity that As discussed in the most recent CAFE present at the conclusion of modeling. would be required to charge these rulemaking, while nothing in EPCA For each vehicle, the same file shows requires NHTSA to use the CAFE resultant changes in vehicle weight, fuel vehicles (accounting for the potential model, and in principle, NHTSA could economy, and cost. This provides for that PHEVs can also run on gasoline). perform all of these tasks through other efficient identification, analysis, and The model calculates the cost of this means, the model’s capabilities have correction of errors, a task with which electricity, as well as the accompanying greatly increased the agency’s ability to the public can now assist the agency, upstream criteria pollutant and rapidly, systematically, and since all inputs and outputs are public. greenhouse gas emissions. reproducibly conduct key analyses Such considerations, as well as those Similar to this expansion to account relevant to the formulation and related to the efficiency with which the for the potential the PHEVs can be evaluation of new CAFE standards.696 CAFE model is able to analyze attribute- refueled with gasoline or recharged with NHTSA notes that the CAFE model based CAFE standards and changes in electricity, DOT has expanded the CAFE not only has been formally peer- vehicle classification, and to perform model to account for the potential that reviewed and tested and reviewed higher-level analysis such as stringency other flexible-fuel vehicles can be through three rulemakings, but also has estimation (to meet predetermined operated on multiple fuels. In some features especially important for criteria), sensitivity analysis, and particular, the model can account for the analysis of CAFE standards under uncertainty analysis, lead the agency to ethanol FFVs consuming E85 or EPCA/EISA. Among these are the ability conclude that the model remains the gasoline, and to report consumption of to perform year-by-year analysis, and best available to the agency for the both fuels, as well as corresponding the ability to account for engineering purposes of analyzing potential new costs and upstream emissions. differences between specific vehicle CAFE standards. Among the concerns raised in the past models. regarding how technology costs are EPCA requires that NHTSA set CAFE c. What changes has DOT made to the estimated has been one that stranded standards for each model year at the model? capital costs be considered. Capital level that would be ‘‘maximum feasible’’ Between promulgation of the MY becomes ‘‘stranded’’ when capital for that year. Doing so requires the 2012–2016 CAFE standards and today’s equipment is retired or its use is ability to analyze each model year and, proposal regarding MY 2017–2025 discontinued before the equipment has when developing regulations covering standards, the CAFE model has been been fully depreciated and the multiple model years, to account for the revised to make some minor equipment still retains some value or interdependency of model years in improvements, and to add some usefulness. DOT has modified the CAFE terms of the appropriate levels of significant new capabilities: (1) model to, if specified for a given stringency for each one. Also, as part of Accounting for electricity used to charge technology, when that technology is the evaluation of the economic electric vehicles (EVs) and plug-in replaced by a newly applied technology, practicability of the standards, as hybrid electric vehicles (PHEVs), (2) apply a stream of costs representing the required by EPCA, NHTSA has accounting for use of ethanol blends in stranded capital cost of the replaced traditionally assessed the annual costs flexible-fuel vehicles (FFVs), (3) technology. This cost is in addition to and benefits of the standards. In accounting for costs (i.e., ‘‘stranded the cost for producing the newly response to comments regarding an capital’’) related to early replacement of technologies, (4) accounting for 697 Model documentation is available on 696 75 FR 25598–25599. previously-applied technology when NHTSA’s Web site.

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applied technology in the first year of explained at the time, it was unable to technology, but not enough to comply production. account for other EPCA credit with CAFE standards. In simulating this As documented in prior CAFE mechanisms, because attempts to do so decision-making, the model considers rulemakings, the CAFE model applies had been limited by complex the cost to add the technology, the ‘‘phase-in caps’’ to constrain technology interactions between those mechanisms calculated reduction in civil penalties, application at the vehicle manufacturer and the multiyear planning aspects of and the calculated present value (at the level. They are intended to reflect a the CAFE model. DOT has since time of vehicle purchase) of the change manufacturer’s overall resource capacity modified the CAFE model to provide in fuel outlays over a specified available for implementing new the ability to account for any or all of ‘‘payback period’’ (e.g., 5 years). For a technologies (such as engineering and the following flexibilities provided by manufacturer assumed to be willing to development personnel and financial EPCA: FFV credits, credit carry-forward pay civil penalties, the model stops resources), thereby ensuring that and carry-back (between model years), adding technology once paying fines resource capacity is accounted for in the credit transfers (between passenger car becomes more attractive than modeling process. This helps to ensure and light truck fleets), and credit trades continuing to add technology, technological feasibility and economic (between manufacturers). The model considering these three factors. As an practicability in determining the accounts for EPCA-specified limitations extension of this simulation approach, stringency of the standards. When the applicable to these flexibilities (e.g., DOT has modified the CAFE model to, MY 2012–2016 rulemaking analysis was limits on the amount of credit that can if specified, simulate the potential that completed, the model performed the be transferred between passenger car a manufacturer would add more relevant test by comparing a given and light truck fleets). These capabilities technology than required for purposes phase-in cap to the amount (i.e., the in the model provide a basis for more of compliance with CAFE standards. share of the manufacturer’s fleet) to accurately estimating costs, effects, and When set to operate in this manner, the which the technology had been added benefits that may actually result from model will continue to apply by the model. DOT has since modified new CAFE standards. Insofar as some technology to a manufacturer’s CAFE- the CAFE model to take into account the manufacturers actually do earn and use compliant fleet until applying further extent to which a given manufacturer CAFE credits, this provides NHTSA technology will incur more in cost than has already applied the technology (i.e., with the ability to examine outcomes it will yield in calculated fuel savings as reflected in the market forecast more realistically than EPCA allows for over a specified ‘‘payback period’’ that specified as a model inputs), and to purposes of setting new CAFE is set separately from the payback apply the relevant test based on the total standards. period applicable until compliance is application of the technology. NHTSA is today proposing CAFE achieved. In its analysis supporting MY The CAFE model requires inputs standards reflecting EPA’s proposal to 2012–2016 standards adopted in 2010, defining the technology-specific cost change fuel economy calculation NHTSA estimated the extent to which and efficacy (i.e., percentage reduction procedures such that a vehicle’s fuel reductions in vehicle mass might lead to of fuel consumption), and has, to date, consumption improvement will be changes in the number of highway effectively assumed that these input accounted for if the vehicle has fatalities occurring over the useful life of values reflect application of the technologies that reduce the amount of the MY 2012–2016 fleet. NHTSA technology in a manner that holds energy needed to power the air performed these calculations outside the vehicle performance and utility conditioner. To facilitate analysis of CAFE model (using vehicle-specific these standards, DOT has modified the constant. Considering that some mass reduction calculations from the CAFE model to account for these technologies may, nonetheless, offer model), based on agency analysis of adjustments, based on inputs specifying owners greater or lesser value (beyond relevant highway safety data. DOT has the average amount of improvement that related to fuel outlays, which the since modified the CAFE model to anticipated, and the estimated average model calculates internally based on perform these calculations, using an vehicle fuel type and fuel economy), cost to apply the underlying technology. Considering that past CAFE analytical structure indicated by an DOT has modified the CAFE model to rulemakings indicate that most of the update to the underlying safety analysis. accept and apply technology-specific benefits of CAFE standards are realized The model also applies an input value estimates of any value gain realized or by vehicle owners, DOT has modified indicating the economic value of a loss incurred by vehicle purchasers.698 the CAFE model to estimate not just statistical life, and includes resultant For the MY 2012–2016 CAFE social benefits, but also private benefits. benefits (or disbenefits) in the rulemaking analysis, DOT modified the The model accommodates separate calculation of total social benefits. CAFE model to accommodate discount rates for these two valuation In comments on recent NHTSA specification and accounting for credits methods (e.g., a 3% rate for social rulemakings, some reviewers have a manufacturer is assumed to earn by benefits with a 7% rate for private suggested that the CAFE model should producing flexible fuel vehicles (FFVs). benefits). When calculating private be modified to estimate the extent to Although NHTSA cannot consider such benefits, the model includes changes in which new CAFE standards would credits when determining maximum outlays for fuel taxes (which, as induce changes in the mix of vehicles in feasible CAFE standards, the agency economic transfers, are excluded from the new vehicle fleet. NHTSA agrees presented an analysis that included FFV social benefits) and excludes changes in that a ‘‘market shift’’ model, also called credits, in order to communicate the economic externalities (e.g., monetized a consumer vehicle choice model, could extent to which use of such credits criteria pollutant and greenhouse gas provide useful information regarding might cause actual costs, effects, and emissions). the possible effects of potential new benefits to be lower than estimated in Since 2003, the CAFE model (and its CAFE standards. NHTSA has contracted NHTSA’s formal analysis. As DOT predecessors) have provided the ability with the Brookings Institution (which to estimate the extent to which a has subcontracted with researchers at 698 For example, a value gain could be specified for a technology expected to improve ride quality, manufacturer with a history of paying U.C. Davis, U.C. Irvine) to develop a and a value loss could be specified for a technology civil penalties allowed under EPCA vehicle choice model estimated at the expected to reduce vehicle range. might decide to add some fuel-saving vehicle configuration level that can be

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implemented as part of DOT’s CAFE benefits), but that testing emphasized explains how the model is installed, model. As discussed further in Section shorter modeling periods (e.g., 1–5 how the model inputs (all of which are V of the PRIA, past efforts by DOT staff model years) and less stringent available to the public) 700 and outputs demonstrated that a vehicle could be standards than reflected in today’s are structured, and how the model is added to the CAFE model, but did not proposal. Especially without knowing used. The model can be used on any yield credible coefficients specifying the characteristics of a future vehicle Windows-based personal computer with such a model. If a suitable and credibly choice model, it is difficult to anticipate Microsoft Office 2003 or 2007 and the calibrated vehicle choice model the potential degree to which its Microsoft .NET framework installed (the becomes available in time—whether inclusion would impact analytical latter available without charge from through the Brookings-led research or outcomes. Microsoft). The executable version of from other sources, DOT may integrate NHTSA invites comment on the above the model and the underlying source a vehicle choice model into the CAFE changes to the CAFE model. The code are also available at NHTSA’s Web model for the final rule. agency’s consideration of any site. The input files used to conduct the NHTSA anticipates this integration of alternative approaches will be core analysis documented in this a vehicle choice model would be facilitated by specific recommendations proposal are available in the public structurally and operationally similar to regarding implementation within the docket. With the model and these input the integration we implemented model’s overall structure. NHTSA also files, anyone is capable of previously. As under the version invites comment regarding above- independently running the model to applied in support of today’s mentioned prospects for inclusion of a repeat, evaluate, and/or modify the announcement, the CAFE model would vehicle choice model. The agency’s agency’s analysis. begin with an agency-estimated market consideration will be facilitated by Because the model is available on forecast, estimate to what extent specific information demonstrating that NHTSA’s web site, the agency has no manufacturers might apply additional inclusion of such a model would lead to way of knowing how widely the model fuel-saving technology to each vehicle more realistic estimates of costs, effects, has been used. The agency is, however, model in consideration of future fuel and benefits, or that inclusion of such aware that the model has been used by prices and baseline or alternative CAFE a model would lead to less realistic other federal agencies, vehicle standards and fuel prices, and calculate estimates. manufacturers, private consultants, resultant changes in the fuel economy academic researchers, and foreign d. Does the model set the standards? (and possibly fuel type) and price of governments. Some of these individuals individual vehicle models. With an Since NHTSA began using the CAFE have found the model complex and integrated market share model, the model in CAFE analysis, some challenging to use. Insofar as the CAFE model would then estimate how commenters have interpreted the model’s sole purpose is to help DOT the sales volumes of individual vehicle agency’s use of the model as the way by staff efficiently analyze potential CAFE models would change in response to which the agency chooses the maximum standards, DOT has not expended changes in fuel economy levels and feasible fuel economy standards. As the significant resources trying to make the prices throughout the light vehicle agency explained in its most recent model as ‘‘user friendly’’ as commercial market, possibly taking into account CAFE rulemaking, this is incorrect.699 software intended for wide use. interactions with the used vehicle Although NHTSA currently uses the However, DOT wishes to facilitate market. Having done so, the model CAFE model as a tool to inform its informed comment on the proposed would replace the sales estimates in the consideration of potential CAFE standards, and encourages reviewers to original market forecast with those standards, the CAFE model does not contact the agency promptly if any reflecting these model-estimated shifts, determine the CAFE standards that difficulties using the model are repeating the entire modeling cycle NHTSA proposes or promulgates as encountered. until converging on a stable solution. final regulations. The results it produces NHTSA arranged for a formal peer Based on past experience, we are completely dependent on inputs review of an older version of the model, anticipate that this recursive simulation selected by NHTSA, based on the best has responded to reviewers’ comments, will be necessary to ensure consistency available information and data available and has considered and responded to between sales volumes and modeled in the agency’s estimation at the time model-related comments received over fuel economy standards, because standards are set. Ultimately, NHTSA’s the course of four CAFE rulemakings. In achieved CAFE levels depend on sales selection of appropriate CAFE standards the agency’s view, this steady and mix and, under attribute-based CAFE is governed and guided by the statutory expanding outside review over the standards, required CAFE levels also requirements of EPCA, as amended by course of nearly a decade of model depend on sales mix. NHTSA EISA: NHTSA sets the standard at the development has helped DOT to anticipates, therefore, that application of maximum feasible average fuel economy significantly strengthen the model’s a market share model would impact level that it determines is achievable capabilities and technical quality, and estimates of all of the following for a during a particular model year, has greatly increased transparency, such given schedule of CAFE standards: considering technological feasibility, that all model code is publicly available, overall market volume, manufacturer economic practicability, the effect of and all model inputs and outputs are market shares and product mix, other standards of the Government on publicly available in a form that should required and achieved CAFE levels, fuel economy, and the need of the allow reviewers to reproduce the technology application rates and nation to conserve energy. agency’s analysis. NHTSA is currently corresponding incurred costs, fuel preparing arrangements for a formal consumption, greenhouse gas and e. How does NHTSA make the model peer review of the current CAFE model. criteria pollutant emissions, changes in available and transparent? Depending on the schedule for that highway fatalities, and economic Model documentation, which is benefits. publicly available in the rulemaking 700 We note, however, that files from any Past testing by DOT/NHTSA staff did supplemental analysis conducted that relied in part docket and on NHTSA’s Web site, on confidential manufacturer product plans cannot not indicate major shifts in broad be made public, as prohibited under 49 CFR part measures (e.g., in total costs or total 699 75 FR 25600. 512.

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review, DOT will consider possible footprint, and for this rulemaking has bring a new technology to market. There model revisions and, as feasible, attempt expressed them in the form of a are certain technologies that the agency to make any appropriate revisions constrained linear function that has considered for this rulemaking, for before performing analysis supporting generally sets higher (more stringent) example, that we know to be in the final CAFE standards for MY 2017 and mpg targets for smaller-footprint research phase now but which we are beyond. vehicles and lower (less stringent) mpg fairly confident can be commercially targets for larger-footprint vehicles. D. Statutory Requirements applied by the rulemaking timeframe, Second, the standards are subject to a and very confident by the end of the 1. EPCA, as Amended by EISA minimum requirement regarding rulemaking timeframe. It is important to a. Standard Setting stringency: they must be set at levels remember, however, that while the high enough to ensure that the technological feasibility factor may EPCA, as amended by EISA, contains combined U.S. passenger car and light encourage the agency to look toward a number of provisions regarding how truck fleet achieves an average fuel more technology-forcing standards, and NHTSA must set CAFE standards. economy level of not less than 35 mpg while this could certainly be NHTSA must establish separate CAFE not later than MY 2020.706 Third, appropriate given EPCA’s overarching standards for passenger cars and light between MY 2011 and MY 2020, the 701 702 purpose of energy conservation trucks for each model year, and standards must ‘‘increase ratably’’ in depending on the rulemaking, that each standard must be the maximum each model year.707 This requirement factor must also be balanced with the feasible that NHTSA believes the does not have a precise mathematical other of the four statutory factors. Thus, manufacturers can achieve in that meaning, particularly because it must be while ‘‘technological feasibility’’ can model year.703 When determining the interpreted in conjunction with the drive standards higher by assuming the maximum feasible level achievable by requirement to set the standards for use of technologies that are not yet the manufacturers, EPCA requires that each model year at the level determined commercial, ‘‘maximum feasible’’ is still the agency consider the four statutory to be the maximum feasible level for also defined in terms of economic factors of technological feasibility, that model year. Generally speaking, the practicability, for example, which might economic practicability, the effect of requirement for ratable increases means caution the agency against basing other motor vehicle standards of the that the annual increases should not be standards (even fairly distant future Government on fuel economy, and the disproportionately large or small in standards) entirely on such need of the United States to conserve relation to each other. The second and technologies. By setting standards at energy.704 In addition, the agency has third requirements no longer apply after levels consistent with an analysis that the authority to and traditionally does MY 2020, at which point standards assumes the use of these nascent consider other relevant factors, such as must simply be maximum feasible. And technologies at levels that seem the effect of the CAFE standards on fourth, EISA requires NHTSA to issue reasonable, the agency believes a more motor vehicle safety. The ultimate CAFE standards for ‘‘at least 1, but not reasonable balance is ensured. determination of what standards can be more than 5, model years.’’708 This issue Nevertheless, as the ‘‘maximum considered maximum feasible involves is discussed in section IV.B above. feasible’’ balancing may vary depending a weighing and balancing of these The following sections discuss the on the circumstances at hand for the factors, and the balance may shift statutory factors behind ‘‘maximum model years in which the standards are depending on the information before the feasible’’ in more detail. set, the extent to which technological agency about the expected feasibility is simply met or plays a more circumstances in the model years i. Statutory Factors Considered in dynamic role may also shift. covered by the rulemaking. Always in Determining the Achievable Level of conducting that balancing, however, the Average Fuel Economy (2) Economic Practicability implication of the ‘‘maximum feasible’’ As none of the four factors is defined ‘‘Economic practicability’’ refers to requirement is that it calls for setting a in EPCA and each remains interpreted whether a standard is one ‘‘within the standard that exceeds what might be the only to a limited degree by case law, financial capability of the industry, but minimum requirement if the agency NHTSA has considerable latitude in not so stringent as to’’ lead to ‘‘adverse determines that the manufacturers can interpreting them. NHTSA interprets the economic consequences, such as a achieve a higher level, and that the four statutory factors as set forth below. significant loss of jobs or the agency’s decision support the (1) Technological Feasibility unreasonable elimination of consumer overarching purpose of EPCA, energy choice.’’ 709 The agency has explained in conservation.705 ‘‘Technological feasibility’’ refers to the past that this factor can be especially Besides the requirement that whether a particular technology for important during rulemakings in which standards be maximum feasible for the improving fuel economy is available or the automobile industry is facing fleet in question, EPCA/EISA also can become available for commercial significantly adverse economic contains several other requirements. application in the model year for which conditions (with corresponding risks to The standards must be attribute-based a standard is being established. Thus, jobs). Consumer acceptability is also an and expressed in the form of a the agency is not limited in determining element of economic practicability, one mathematical function—NHTSA has the level of new standards to technology which is particularly difficult to gauge thus far based standards on vehicle that is already being commercially during times of uncertain fuel prices.710 applied at the time of the rulemaking. It 701 49 U.S.C. 32902(b)(1). can, instead, set technology-forcing 709 67 FR 77015, 77021 (Dec. 16, 2002). 702 49 U.S.C. 32902(a). standards, i.e., ones that make it 710 See, e.g., Center for Auto Safety v. NHTSA 703 Id. necessary for manufacturers to engage in (CAS), 793 F.2d 1322 (DC Cir. 1986) 704 49 U.S.C. 32902(f). research and development in order to (Administrator’s consideration of market demand as 705 Center for Biological Diversity v. NHTSA, 538 component of economic practicability found to be F.3d 1172, 1197 (9th Cir. 2008) (‘‘Whatever method reasonable); Public Citizen v. NHTSA, 848 F.2d 256 it uses, NHTSA cannot set fuel economy standards 706 49 U.S.C. 32902(b)(2)(A). (Congress established broad guidelines in the fuel that are contrary to Congress’ purpose in enacting 707 49 U.S.C. 32902(b)(2)(C). economy statute; agency’s decision to set lower the EPCA—energy conservation.’’). 708 49 U.S.C. 32902(b)(3)(B). Continued

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In a rulemaking such as the present one, manufacturer whose vehicles are, on conservation. Depending on the looking out into the more distant future, average, the heaviest and largest. In the conditions of the industry and the economic practicability is a way to first several rulemakings establishing assumptions used in the agency’s consider the uncertainty surrounding attribute-based standards, the agency analysis of alternative stringencies, future market conditions and consumer applied marginal cost benefit analysis. NHTSA could well find that standards demand for fuel economy in addition to This ensured that the agency’s that maximize net benefits, or that are other vehicle attributes. In an attempt to application of technologies was limited higher or lower, could be economically ensure the economic practicability of to those that would pay for themselves practicable, and thus maximum feasible. attribute-based standards, NHTSA and thus should have significant appeal considers a variety of factors, including to consumers. We note that for this (3) The Effect of Other Motor Vehicle the annual rate at which manufacturers rulemaking, the agency can and has Standards of the Government on Fuel can increase the percentage of their fleet limited its application of technologies to Economy that employ a particular type of fuel- those that are projected to be cost- ‘‘The effect of other motor vehicle saving technology, the specific fleet effective within the rulemaking time standards of the Government on fuel mixes of different manufacturers, and frame, with or without the use of such economy,’’ involves an analysis of the assumptions about the cost of the analysis. effects of compliance with emission, standards to consumers and consumers’ Whether the standards maximize net safety, noise, or damageability standards valuation of fuel economy, among other benefits has thus been a touchstone in on fuel economy capability and thus on things. the past for NHTSA’s consideration of average fuel economy. In previous CAFE At the same time, however, the law economic practicability. Executive rulemakings, the agency has said that does not preclude a CAFE standard that Order 12866, as amended by Executive pursuant to this provision, it considers poses considerable challenges to any Order 13563, states that agencies should the adverse effects of other motor individual manufacturer. The ‘‘select, in choosing among alternative vehicle standards on fuel economy. It Conference Report for EPCA, as enacted regulatory approaches, those approaches said so because, from the CAFE in 1975, makes clear, and the case law that maximize net benefits * * *’’ In program’s earliest years 714 until affirms, ‘‘(A) determination of maximum practice, however, agencies, including present, the effects of such compliance feasible average fuel economy should NHTSA, must consider situations in on fuel economy capability over the not be keyed to the single manufacturer which the modeling of net benefits does history of the CAFE program have been which might have the most difficulty not capture all of the relevant negative ones. In those instances in achieving a given level of average fuel considerations of feasibility. In this which the effects are negative, NHTSA economy.’’ 711 Instead, the agency is case, the NHTSA balancing of the has said that it is called upon to ‘‘mak[e] compelled ‘‘to weigh the benefits to the statutory factors suggests that the a straightforward adjustment to the fuel nation of a higher fuel economy maximum feasible stringency for this economy improvement projections to standard against the difficulties of rulemaking points to another level account for the impacts of other Federal individual automobile besides the modeled net benefits standards, principally those in the areas manufacturers.’’ 712 The law permits maximum, and such a situation is well of emission control, occupant safety, CAFE standards exceeding the projected within the guidance provided by EO’s vehicle damageability, and vehicle 713 capability of any particular 12866 and 13563. noise. However, only the unavoidable manufacturer as long as the standard is The agency’s consideration of consequences should be accounted for. economically practicable for the economic practicability depends on a The automobile manufacturers must be industry as a whole. Thus, while a number of factors. Expected availability expected to adopt those feasible particular CAFE standard may pose of capital to make investments in new methods of achieving compliance with difficulties for one manufacturer, it may technologies matters; manufacturers’ other Federal standards which minimize also present opportunities for another. expected ability to sell vehicles with any adverse fuel economy effects of new technologies matters; likely NHTSA has long held that the CAFE those standards.’’ 715 For example, safety consumer choices matter; and so forth. program is not necessarily intended to standards that have the effect of NHTSA’s analysis of the impacts of this maintain the competitive positioning of increasing vehicle weight lower vehicle rulemaking does incorporate each particular company. Rather, it is fuel economy capability and thus assumptions to capture aspects of intended to enhance the fuel economy decrease the level of average fuel consumer preferences, vehicle of the vehicle fleet on American roads, economy that the agency can determine attributes, safety, and other factors while protecting motor vehicle safety to be feasible. relevant to an impact estimate; however, and being mindful of the risk to the The ‘‘other motor vehicle standards’’ it is difficult to capture every such overall United States economy. consideration has thus in practice constraint. Therefore, it is well within Consequently, ‘‘economic functioned in a fashion similar to the the agency’s discretion to deviate from practicability’’ must be considered in provision in EPCA, as originally a modeled net benefits maximum in the the context of the competing concerns enacted, for adjusting the statutorily- face of evidence of economic associated with different levels of specified CAFE standards for MY 1978– impracticability, and if the agency standards. Prior to the MY 2005–2007 1980 passengers cars.716 EPCA did not concludes that the modeled net benefits rulemaking, the agency generally sought permit NHTSA to amend those maximum would not represent the to ensure the economic practicability of standards based on a finding that the maximum feasible level for future CAFE standards in part by setting them at or maximum feasible level of average fuel standards. Economic practicability is a near the capability of the ‘‘least capable economy for any of those three years complex factor, and like the other manufacturer’’ with a significant share was greater or less than the standard of the market, i.e., typically the factors must also be considered in the context of the overall balancing and 714 42 FR 63184, 63188 (Dec. 15, 1977). See also standard was a reasonable accommodation of EPCA’s overarching purpose of energy 42 FR 33534, 33537 (Jun. 30, 1977). conflicting policies). 715 42 FR 33534, 33537 (Jun. 30, 1977). 711 CEI–I, 793 F.2d 1322, 1352 (DC Cir. 1986). 713 See 70 FR at 51435 (Aug. 30, 2005); CBD v. 716 That provision was deleted as obsolete when 712 Id. NHTSA, 538 F.3d at 1197 (9th Cir. 2008). EPCA was codified in 1994.

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specified for that year. Instead, it imported petroleum.’’ 717 Environmental (c) Air Pollutant Emissions provided that the agency could only implications principally include those While reductions in domestic fuel reduce the standards and only on one associated with reductions in emissions refining and distribution that result basis: if the agency found that there had of criteria pollutants and CO2. A prime from lower fuel consumption will been a Federal standards fuel economy example of foreign policy implications reduce U.S. emissions of various reduction, i.e., a reduction in fuel are energy independence and energy pollutants, additional vehicle use economy due to changes in the Federal security concerns. associated with the rebound effect 718 vehicle standards, e.g., emissions and from higher fuel economy will increase (a) Fuel Prices and the Value of Saving safety, relative to the year of enactment, emissions of these pollutants. Thus, the Fuel 1975. net effect of stricter CAFE standards on The ‘‘other motor vehicle standards’’ Projected future fuel prices are a emissions of each pollutant depends on provision is broader than the Federal critical input into the preliminary the relative magnitudes of its reduced standards fuel economy reduction economic analysis of alternative CAFE emissions in fuel refining and provision. Although the effects analyzed standards, because they determine the distribution, and increases in its to date under the ‘‘other motor vehicle emissions from vehicle use.719 Fuel standards’’ provision have been value of fuel savings both to new vehicle buyers and to society, which is savings from stricter CAFE standards negative, there could be circumstances also result in lower emissions of CO , related to the consumer cost (or rather, 2 in which the effects are positive. In the the main greenhouse gas emitted as a benefit) of our need for large quantities event that the agency encountered such result of refining, distribution, and use of petroleum. In this rule, NHTSA relies circumstances, it would be required to of transportation fuels. Reducing fuel on fuel price projections from the U.S. consider those positive effects. For consumption reduces carbon dioxide example, if changes in vehicle safety Energy Information Administration’s emissions directly, because the primary (EIA) most recent Annual Energy technology led to NHTSA’s amending a source of transportation-related CO2 safety standard in a way that permits Outlook (AEO) for this analysis. Federal emissions is fuel combustion in internal manufacturers to reduce the weight government agencies generally use EIA’s combustion engines. added in complying with that standard, projections in their assessments of NHTSA has considered that weight reduction would increase future energy-related policies. environmental issues, both within the vehicle fuel economy capability and (b) Petroleum Consumption and Import context of EPCA and the National thus increase the level of average fuel Externalities Environmental Policy Act, in making economy that could be determined to be decisions about the setting of standards feasible. U.S. consumption and imports of from the earliest days of the CAFE In the wake of Massachusetts v. EPA petroleum products impose costs on the program. As courts of appeal have noted and of EPA’s endangerment finding, domestic economy that are not reflected in three decisions stretching over the granting of a waiver to California for its in the market price for crude petroleum, last 20 years,720 NHTSA defined the motor vehicle GHG standards, and its or in the prices paid by consumers of ‘‘need of the Nation to conserve energy’’ own establishment of GHG standards, petroleum products such as gasoline. in the late 1970s as including ‘‘the NHTSA is confronted with the issue of These costs include (1) Higher prices for consumer cost, national balance of how to treat those standards under petroleum products resulting from the payments, environmental, and foreign EPCA/EISA, such as in the context of effect of U.S. oil import demand on the policy implications of our need for large the ‘‘other motor vehicle standards’’ world oil price; (2) the risk of quantities of petroleum, especially provision. To the extent the GHG 721 disruptions to the U.S. economy caused imported petroleum.’’ In 1988, standards result in increases in fuel NHTSA included climate change by sudden reductions in the supply of economy, they would do so almost concepts in its CAFE notices and imported oil to the U.S.; and (3) exclusively as a result of inducing prepared its first environmental expenses for maintaining a U.S. military manufacturers to install the same types assessment addressing that subject.722 It presence to secure imported oil supplies of technologies used by manufacturers cited concerns about climate change as in complying with the CAFE standards. from unstable regions, and for one of its reasons for limiting the extent Comment is requested on whether maintaining the strategic petroleum of its reduction of the CAFE standard for and in what way the effects of the reserve (SPR) to provide a response MY 1989 passenger cars.723 Since then, California and EPA standards should be option should a disruption in NHTSA has considered the benefits of considered under EPCA/EISA, e.g., commercial oil supplies threaten the reducing tailpipe carbon dioxide under the ‘‘other motor vehicle U.S. economy, to allow the United emissions in its fuel economy standards’’ provision, consistent with States to meet part of its International NHTSA’s independent obligation under Energy Agency obligation to maintain 718 The ‘‘rebound effect’’ refers to the tendency of EPCA/EISA to issue CAFE standards. emergency oil stocks, and to provide a drivers to drive their vehicles more as the cost of The agency has already considered national defense fuel reserve. Higher doing so goes down, as when fuel economy U.S. imports of crude oil or refined improves. EPA’s proposal and the harmonization 719 See Section IV.G below for NHTSA’s benefits of the National Program in petroleum products increase the evaluation of this effect. developing its own proposal. magnitude of these external economic 720 Center for Auto Safety v. NHTSA, 793 F.2d costs, thus increasing the true economic 1322, 1325 n. 12 (DC Cir. 1986); Public Citizen v. (4) The Need of the United States To cost of supplying transportation fuels NHTSA, 848 F.2d 256, 262–3 n. 27 (DC Cir. 1988) Conserve Energy (noting that ‘‘NHTSA itself has interpreted the above the resource costs of producing factors it must consider in setting CAFE standards ‘‘The need of the United States to them. Conversely, reducing U.S. imports as including environmental effects’’); and Center for conserve energy’’ means ‘‘the consumer of crude petroleum or refined fuels or Biological Diversity v. NHTSA, 538 F.3d 1172 (9th cost, national balance of payments, reducing fuel consumption can reduce Cir. 2007). 721 42 FR 63184, 63188 (Dec. 15, 1977) (emphasis environmental, and foreign policy these external costs. added). implications of our need for large 722 53 FR 33080, 33096 (Aug. 29, 1988). quantities of petroleum, especially 717 42 FR 63184, 63188 (1977). 723 53 FR 39275, 39302 (Oct. 6, 1988).

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rulemakings pursuant to the statutory vehicles over 5,000 lbs GVWR,724 but On the other hand, NHTSA does not requirement to consider the nation’s for purposes of today’s proposed believe that flexibilities other than those need to conserve energy by reducing standards, NHTSA has revised its expressly identified in EPCA are fuel consumption. modeling analysis to allow some similarly prohibited from being application of mass reduction for most included in the agency’s determination ii. Other Factors Considered by NHTSA types of vehicles, although it is of what standards would be maximum The agency historically has concentrated in the largest and heaviest feasible. In order to better meet EPCA’s considered the potential for adverse vehicles, because we believe that this is overarching purpose of energy safety consequences in setting CAFE more consistent with how conservation, the agency is therefore considering manufacturers’ ability to standards. This practice is recognized manufacturers will actually respond to increase the calculated fuel economy approvingly in case law. As the courts the standards. However, as discussed levels of their vehicles through A/C have recognized, ‘‘NHTSA has always above, NHTSA does not mandate the efficiency improvements, as proposed examined the safety consequences of the use of any particular technology by by EPA, in the proposed CAFE CAFE standards in its overall manufacturers in meeting the standards. stringency levels for passenger cars and consideration of relevant factors since More information on the approach to modeling manufacturer use of mass light trucks for MYs 2017–2025. NHTSA its earliest rulemaking under the CAFE would similarly consider program.’’ Competitive Enterprise reduction is available in Chapter 3 of the draft Joint TSD and in Section V of manufacturers’ ability to raise their fuel Institute v. NHTSA, 901 F.2d 107, 120 economy using off-cycle technologies as n. 11 (DC Cir. 1990) (‘‘CEI I’’) (citing 42 the PRIA; and the estimated safety impacts that may be due to the proposed potentially relevant to our FR 33534, 33551 (June 30, 1977)). The MY 2017–2025 CAFE standards are determination of maximum feasible courts have consistently upheld described in section IV.G below. CAFE standards, but because we and NHTSA’s implementation of EPCA in EPA do not believe that we can yet this manner. See, e.g., Competitive iii. Factors That NHTSA Is Prohibited From Considering reasonably predict an average amount Enterprise Institute v. NHTSA, 956 F.2d by which manufacturers will take 321, 322 (DC Cir. 1992) (‘‘CEI II’’) (in EPCA also provides that in determining the level at which it should advantage of this opportunity, it did not determining the maximum feasible fuel seem reasonable for the proposed economy standard, ‘‘NHTSA has always set CAFE standards for a particular model year, NHTSA may not consider standards to include it in our stringency taken passenger safety into account.’’) determination at this time. We expect to (citing CEI I, 901 F.2d at 120 n. 11); the ability of manufacturers to take advantage of several EPCA provisions re-evaluate whether and how to include Competitive Enterprise Institute v. off-cycle credits in determining NHTSA, 45 F.3d 481, 482–83 (DC Cir. that facilitate compliance with the CAFE standards and thereby reduce the maximum feasible standards as the off- 1995) (‘‘CEI III’’) (same); Center for cycle technologies and how costs of compliance.725 As discussed Biological Diversity v. NHTSA, 538 F.3d manufacturers may be expected to further below, manufacturers can earn 1172, 1203–04 (9th Cir. 2008) employ them become better defined in compliance credits by exceeding the (upholding NHTSA’s analysis of vehicle the future. CAFE standards and then use those safety issues associated with weight in Additionally, because we interpret the credits to achieve compliance in years connection with the MY 2008–11 light prohibition against including the in which their measured average fuel truck CAFE rule). Thus, in evaluating defined statutory credits in our economy falls below the standards. what levels of stringency would result determination of maximum feasible Manufacturers can also increase their in maximum feasible standards, NHTSA standards as applying only to the CAFE levels through MY 2019 by assesses the potential safety impacts and flexibilities expressly identified in 49 producing alternative fuel vehicles. considers them in balancing the U.S.C. 32902(h), NHTSA must, for the EPCA provides an incentive for statutory considerations and to first time in this rulemaking, determine producing these vehicles by specifying determine the maximum feasible level how to consider the fuel economy of that their fuel economy is to be of the standards. dual-fueled automobiles after the determined using a special calculation statutory credit sunsets in MY 2019. Under the universal or ‘‘flat’’ CAFE procedure that results in those vehicles Once there is no statutory credit to standards that NHTSA was previously being assigned a high fuel economy protect as a compliance flexibility, it authorized to establish, manufacturers level. does not seem reasonable to NHTSA to were encouraged to respond to higher The effect of the prohibitions against continue to interpret the statute as standards by building smaller, less safe considering these statutory flexibilities prohibiting the agency from setting vehicles in order to ‘‘balance out’’ the in setting the CAFE standards is that the maximum feasible levels at a higher larger, safer vehicles that the public flexibilities remain voluntarily- standard, if possible, by considering the generally preferred to buy, which employed measures. If the agency were fuel economy of dual-fueled resulted in a higher mass differential instead to assume manufacturer use of automobiles as measured by EPA. The between the smallest and the largest those flexibilities in setting new overarching purpose of EPCA is better vehicles, with a correspondingly greater standards, that assumption would result served by interpreting 32902(h)(2) as risk to safety. Under the attribute-based in higher standards and thus tend to moot once the statutory credits provided standards being proposed today, that require manufacturers to use those for in 49 U.S.C. 32905 and 32906 have risk is reduced because building smaller flexibilities. By keeping NHTSA from expired. vehicles would tend to raise a including them in our stringency 49 U.S.C. 32905(b) and (d) states that manufacturer’s overall CAFE obligation, determination, the provision ensures the special fuel economy measurement rather than only raising its fleet average that the statutory credits remain prescribed by Congress for dual-fueled CAFE, and because all vehicles are described above remain true compliance automobiles applies only ‘‘in model required to continue improving their flexibilities. years 1993 through 2019.’’ 49 U.S.C. fuel economy. In prior rulemakings, 32906(a) also provides that the section NHTSA limited the application of mass 724 See 74 FR 14396–14407 (Mar. 30, 2009). 32905 calculation will sunset in 2019, reduction in our modeling analysis to 725 49 U.S.C. 32902(h). as evidenced by the phase-out of the

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allowable increase due to that credit; it iv. Determining the Level of the benefit analysis in the first two is clear that the phase-out of the Standards by Balancing the Factors rulemakings to establish attribute-based allowable increase in a manufacturer’s NHTSA has broad discretion in CAFE standards, it was not required to CAFE levels due to use of dual-fueled balancing the above factors in do so and is not required to continue to automobiles relates only to the special determining the appropriate levels of do so. Regardless of what type of statutory calculation (and not to other average fuel economy at which to set the analysis is or is not used, considerations ways of incorporating the fuel economy CAFE standards for each model year. relating to costs and benefits remain an of dual-fueled automobiles into the Congress ‘‘specifically delegated the important part of CAFE standard setting. manufacturer’s fleet calculation) by process of setting * * * fuel economy Because the relevant considerations virtue of language in section 32906(b), standards with broad guidelines and factors can reasonably be balanced which states that ‘‘in applying concerning the factors that the agency in a variety of ways under EPCA, and subsection (a) [i.e., the phasing out must consider.’’ 726 The breadth of those because of uncertainties associated with the many technological and cost inputs, maximum increase], the Administrator guidelines, the absence of any NHTSA considers a wide variety of of the Environmental Protection Agency statutorily prescribed formula for balancing the factors and other alternative sets of standards, each shall determine the increase in a reflecting different balancing of those manufacturer’s average fuel economy considerations, the fact that the relative weight to be given to the various factors policies and concerns, to aid it in attributable to dual fueled automobiles may change from rulemaking to discerning reasonable outcomes. Among by subtracting from the manufacturer’s rulemaking as the underlying facts the alternatives providing for an average fuel economy calculated under change, and the fact that the factors may increase in the standards in this section 32905(e) the number equal to often be conflicting with respect to rulemaking, the alternatives range in what the manufacturer’s average fuel whether they militate toward higher or stringency from a set of standards that economy would be if it were calculated lower standards give NHTSA broad increase, on average, 2 percent annually by the formula under section discretion to decide what weight to give to a set of standards that increase, on 32904(a)(1). * * * ’’ By referring back to each of the competing policies and average, 7 percent annually. the special statutory calculation, concerns and then determine how to v. Other Standards Congress makes clear that the phase-out balance them. The exercise of that applies only to increases in fuel discretion is subject to the necessity of (1) Minimum Domestic Passenger Car economy attributable to dual-fueled ensuring that NHTSA’s balancing does Standard automobiles due to the special statutory not undermine the fundamental purpose The minimum domestic passenger car calculation in sections 32905(b) and (d). of EPCA, energy conservation,727 and as standard was added to the CAFE Similarly, we interpret Congress’ long as that balancing reasonably program through EISA, when Congress statement in section 32906(a)(7) that the accommodates ‘‘conflicting policies that gave NHTSA explicit authority to set maximum increase in fuel economy were committed to the agency’s care by universal standards for domestically- 728 attributable to dual-fueled automobiles the statute.’’ The balancing of the manufactured passenger cars at the level is ‘‘0 miles per gallon for model years factors in any given rulemaking is of 27.5 mpg or 92 percent of the average after 2019’’ within the context of the highly dependent on the factual and fuel economy of the combined domestic policy context of that rulemaking and introductory language of section and import passenger car fleets in that the agency’s assumptions about the 32906(a) and the language of section model year, whichever was greater.730 factual and policy context during the 32906(b), which, again, refers clearly to This minimum standard was intended time frame covered by the standards at to act as a ‘‘backstop,’’ ensuring that the statutory credit, and not to dual- issue. Given the changes over time in fueled automobiles generally. It would domestically-manufactured passenger facts bearing on assessment of the cars reached a given mpg level even if be an absurd result if the phase-out of various factors, such as those relating to the credit meant that manufacturers the market shifted in ways likely to economic conditions, fuel prices, and reduce overall fleet mpg. Congress was would be effectively penalized, in CAFE the state of climate change science, the compliance, for building dual-fueled silent as to whether the agency could or agency recognizes that what was a should develop similar backstop automobiles like plug-in hybrid electric reasonable balancing of competing standards for imported passenger cars vehicles, which may be important statutory priorities in one rulemaking and light trucks. NHTSA has struggled may or may not be a reasonable ‘‘bridge’’ vehicles in helping consumers with this question since EISA was balancing of those priorities in another move toward full electric vehicles. enacted. rulemaking.729 Nevertheless, the agency NHTSA has therefore considered the NHTSA has proposed minimum retains substantial discretion under fuel economy of plug-in hybrid electric standards for domestically- EPCA to choose among reasonable vehicles (the only dual-fueled manufactured passenger cars in Section alternatives. automobiles that we predict in EPCA neither requires nor precludes IV.E below, but we also seek comment significant numbers in MY 2020 and the use of any type of cost-benefit on whether to consider, for the final beyond; E85-capable FFVs are not analysis as a tool to help inform the rule, the possibility of minimum predicted in great numbers after the balancing process. As discussed above, standards for imported passenger cars statutory credit sunsets, and we do not while NHTSA used marginal cost- and light trucks. Although we are not have sufficient information about proposing such standards, we believe it potential dual-fueled CNG/gasoline 726 Center for Auto Safety v. NHTSA, 793 F.2d may be prudent to explore this concept vehicles to make reasonable estimates 1322, 1341 (C.A.D.C. 1986). again given the considerable amount of 727 now of their numbers in that time frame Center for Biological Diversity v. NHTSA, 538 time between now and 2017–2025 F.3d 1172, 1195 (9th Cir. 2008). (particularly the later years), and the in determining the maximum feasible 728 CAS, 1338 (quoting Chevron U.S.A., Inc. v. accompanying uncertainty in our level of the MY 2020–2025 CAFE Natural Resources Defense Council, Inc., 467 U.S. market forecast and other assumptions, standards for passenger cars and light 837, 845). 729 CBD v. NHTSA, 538 F.3d 1172, 1198 (9th Cir. trucks. 2008). 730 49 U.S.C. 32902(b)(4).

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that might make such minimum attribute-based standards sought to provide an illustration of what levels standards relevant to help ensure that avoid, stating that: the additional minimum standards currently-expected fuel economy Unless the backstop was at a very weak would require if the agency followed the improvements occur during that time level, above the high end of this range, then same 92 percent guideline required by frame. To help commenters’ some percentage of manufacturers would be EISA for domestically-manufactured consideration of this question, Section above the backstop even if the performance passenger cars. IV.E presents illustrative levels of of the entire industry remains fully consistent with the emissions and fuel (2) Alternative Standards for Certain minimum standards for those other Manufacturers fleets. economy levels projected for the final standards. For these manufacturers and any Because EPCA states that standards The minimum domestic passenger car other manufacturers who were above the must be set for ‘‘ * * * automobiles standard was added to the CAFE backstop, the objectives of an attribute-based manufactured by manufacturers,’’ and program through EISA, when Congress standard would be compromised and because Congress provided specific gave NHTSA explicit authority to set unnecessary costs would be imposed. This could directionally impose increased costs direction on how small-volume universal standards for domestically- manufacturers could obtain exemptions manufactured passenger cars at the level for some manufacturers. It would be difficult if not impossible to establish the level of a from the passenger car standards, explained above. This minimum backstop standard such that costs are likely NHTSA has long interpreted its standard was intended to act as a to be imposed on manufacturers only when authority as pertaining to setting ‘‘backstop,’’ ensuring that domestically- there is a failure to achieve the projected standards for the industry as a whole. manufactured passenger cars reached a reductions across the industry as a whole. An Prior to this NPRM, some manufacturers given mpg level even if the market example of this kind of industry-wide raised with NHTSA the possibility of shifted in ways likely to reduce overall situation could be when there is a significant NHTSA and EPA setting alternate fleet mpg. Congress was silent as to shift to larger vehicles across the industry as standards for part of the industry that whether the agency could or should a whole, or if there is a general market shift from cars to trucks. The problem the agencies met certain (relatively low) sales volume develop similar backstop standards for are concerned about in those circumstances criteria—specifically, that separate imported passenger cars and light is not with respect to any single standards be set so that ‘‘intermediate- trucks. NHTSA has struggled with this manufacturer, but rather is based on concerns size,’’ limited-line manufacturers do not question since EISA was enacted. over shifts across the fleet as a whole, as have to meet the same levels of In the MY 2011 final rule, facing compared to shifts in one manufacturer’s stringency that larger manufacturers fleet that may be more than offset by shifts comments split fairly evenly between have to meet until several years later. the other way in another manufacturer’s fleet. These manufacturers argued that the support and opposition to additional However, in this respect, a traditional backstop standards, NHTSA noted same level of standards would not be backstop acts as a manufacturer-specific technologically feasible or economically Congress’ silence with respect to standard.733 practicable in the same time frame for minimum standards for imported NHTSA continues to believe that the passenger cars and light trucks and them, due to their inability to spread risk of additional minimum standards compliance burden across a larger ‘‘accept[ed] at least the possibility that imposing inequitable regulatory burdens * * * [it] could be reasonably product lineup, and difficulty in on certain manufacturers is real, but at obtaining fuel economy-improving interpreted as permissive rather than the same time, we recognize that given restrictive,’’ but concluded based on the technologies quickly from suppliers. the time frame of the current NHTSA seeks comment on whether or record for that rulemaking as a whole rulemaking, the agency cannot be as that additional minimum standards how EPCA, as amended by EISA, could certain about the unlikelihood of future be interpreted to allow such alternate were not necessary for MY 2011, given market changes. Depending on the price the lack of leadtime for manufacturers to standards for certain parts of the of fuel and consumer preferences, the industry. change their MY 2011 vehicles, the ‘‘kind of industry-wide situation’’ apparently-growing public preference described in the MYs 2012–2016 rule is 2. Administrative Procedure Act for smaller vehicles, and the anti- possible in the 2017–2025 time frame, To be upheld under the ‘‘arbitrary and backsliding characteristics of the 731 particularly in the later years. capricious’’ standard of judicial review footprint-based curves. Because the agency does not have in the APA, an agency rule must be In the MYs 2012–2016 final rule sufficient information at this time rational, based on consideration of the where NHTSA declined to set minimum regarding what tradeoffs might be relevant factors, and within the scope of standards for imported passenger cars associated with additional minimum the authority delegated to the agency by and light trucks, the agency did so not standards, specifically, whether the risk the statute. The agency must examine because we believed that we did not of backsliding during MYs 2017–2025 the relevant data and articulate a have authority to do so, but because we sufficiently outweighs the possibility of satisfactory explanation for its action believed that our assumptions about the imposing inequitable regulatory burdens including a ‘‘rational connection future fleet mix were reliable within the on certain manufacturers, we are between the facts found and the choice rulemaking time frame, and that seeking comment in this NPRM on these made.’’ Burlington Truck Lines, Inc. v. backsliding was very unlikely and issues but not proposing additional United States, 371 U.S. 156, 168 (1962). would not be sufficient to warrant the minimum standards at this time. We Statutory interpretations included in regulatory burden of additional also seek comment on how to structure an agency’s rule are subjected to the minimum standards for those fleets.732 additional minimum standards (e.g., two-step analysis of Chevron, U.S.A., NHTSA also expressed concern about whether they should be flat or attribute- Inc. v. Natural Resources Defense the possibility of additional minimum based, and if the latter, how that would Council, 467 U.S. 837, 104 S.Ct. 2778, standards imposing inequitable work), and at what level additional 81 L.Ed.2d 694 (1984). Under step one, regulatory burdens of the kind that minimum standards should potentially where a statute ‘‘has directly spoken to be set. The tables in Section IV.E the precise question at issue,’’ id. at 842, 731 74 FR at 14412 (Mar. 30, 2009). 104 S.Ct. 2778, the court and the agency 732 75 FR 25324, at 25368–70 (May 7, 2010). 733 Id. at 25369. ‘‘must give effect to the unambiguously

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expressed intent of Congress,’’ id. at factors of technological feasibility, Methow Valley Citizens Council, 490 843, 104 S.Ct. 2778. If the statute is economic practicability, the effect of U.S. 332, 350, 109 S.Ct. 1835, 104 silent or ambiguous regarding the other motor vehicle standards of the L.Ed.2d 351 (1989). specific question, the court proceeds to Government on fuel economy, and the The agency must identify the step two and asks ‘‘whether the agency’s need of the United States to conserve ‘‘environmentally preferable’’ answer is based on a permissible energy. NEPA directs that alternative, but need not adopt it. construction of the statute.’’ Id. environmental considerations be ‘‘Congress in enacting NEPA * * * did If an agency’s interpretation differs integrated into that process. To not require agencies to elevate from the one that it has previously accomplish that purpose, NEPA requires environmental concerns over other adopted, the agency need not an agency to compare the potential appropriate considerations.’’ Baltimore demonstrate that the prior position was environmental impacts of its proposed Gas and Elec. Co. v. Natural Resources wrong or even less desirable. Rather, the action to those of a reasonable range of Defense Council, Inc., 462 U.S. 87, 97 agency would need only to demonstrate alternatives. (1983). Instead, NEPA requires an that its new position is consistent with To explore the environmental agency to develop alternatives to the the statute and supported by the record, consequences in depth, NHTSA has proposed action in preparing an EIS. 42 and acknowledge that this is a departure prepared a draft environmental impact U.S.C. 4332(2)(C)(iii). The statute does from past positions. The Supreme Court statement (‘‘EIS’’). The purpose of an emphasized this recently in FCC v. Fox not command the agency to favor an EIS is to ‘‘provide full and fair Television, 129 S.Ct. 1800 (2009). When environmentally preferable course of discussion of significant environmental an agency changes course from earlier action, only that it make its decision to impacts and [to] inform decisionmakers regulations, ‘‘the requirement that an proceed with the action after taking a and the public of the reasonable agency provide reasoned explanation for hard look at environmental alternatives which would avoid or its action would ordinarily demand that consequences. minimize adverse impacts or enhance it display awareness that it is changing the quality of the human environment.’’ E. What are the proposed CAFE position,’’ but ‘‘need not demonstrate to 40 CFR 1502.1. standards? a court’s satisfaction that the reasons for the new policy are better than the NEPA is ‘‘a procedural statute that 1. Form of the Standards mandates a process rather than a reasons for the old one; it suffices that Each of the CAFE standards that the new policy is permissible under the particular result.’’ Stewart Park & NHTSA is proposing today for statute, that there are good reasons for Reserve Coal., Inc. v. Slater, 352 F.3d at passenger cars and light trucks is it, and that the agency believes it to be 557. The agency’s overall EIS-related expressed as a mathematical function better, which the conscious change of obligation is to ‘‘take a ‘hard look’ at the that defines a fuel economy target course adequately indicates.’’ 734 The environmental consequences before applicable to each vehicle model and, APA also requires that agencies provide taking a major action.’’ Baltimore Gas & for each fleet, establishes a required notice and comment to the public when Elec. Co. v. Natural Res. Def. Council, CAFE level determined by computing proposing regulations,735 as we are Inc., 462 U.S. 87, 97, 103 S.Ct. 2246, 76 L.Ed.2d 437 (1983). Significantly, ‘‘[i]f the sales-weighted harmonic average of doing here today. 736 the adverse environmental effects of the those targets. 3. National Environmental Policy Act proposed action are adequately As discussed above in Section II.C, As discussed above, EPCA requires identified and evaluated, the agency is NHTSA has determined passenger car the agency to determine what level at not constrained by NEPA from deciding fuel economy targets using a which to set the CAFE standards for that other values outweigh the constrained linear function defined each model year by considering the four environmental costs.’’ Robertson v. according to the following formula:

Here, TARGET is the fuel economy feet). The MIN and MAX functions take target (in mpg) applicable to vehicles of the minimum and maximum, a given footprint (FOOTPRINT, in respectively of the included values. square feet), b and a are the function’s NHTSA is proposing, consistent with lower and upper asymptotes (also in the standards for MYs 2011–2016, that PRODUCTIONi is the number of units mpg), respectively, c is the slope (in the CAFE level required of any given produced for sale in the United States th gallons per mile per square foot) of the manufacturer be determined by of each i unique footprint within each sloped portion of the function, and d is calculating the production-weighted model type, produced for sale in the the intercept (in gallons per mile) of the harmonic average of the fuel economy United States, and TARGETi is the sloped portion of the function (that is, targets applicable to each vehicle model: corresponding fuel economy target the value the sloped portion would take (according to the equation shown above if extended to a footprint of 0 square and based on the corresponding

734 Ibid., 1181. current projection of manufacturers’ vehicle fleets obligation can be determined with certainty. The 735 5 U.S.C. 553. in MYs 2017–2025. Actual required levels are not target curves, as defined by the constrained linear 736 Required CAFE levels shown here are determined until the end of each model year, when function, and as embedded in the function for the all of the vehicles produced by a manufacturer in sales-weighted harmonic average, are the real estimated required levels based on NHTSA’s that model year are known and their compliance ‘‘standards’’ being proposed today.

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footprint), and the summations in the b = lower limit (mpg) constrained linear functions. The numerator and denominator are both c = slope (gallon per mile per square second of these establishes a ‘‘floor’’ performed over all unique footprint and foot) reflecting the MY 2016 standard, after model type combinations in the fleet in d = intercept (gallon per mile) accounting for estimated adjustments question. reflecting increased air conditioner The proposed standards for passenger For light trucks, NHTSA is proposing efficiency. This prevents the target at cars are, therefore, specified by the four to define fuel economy targets in terms any footprint from declining between coefficients defining fuel economy of a mathematical function under which model years. The resultant the target is the maximum of values targets: mathematical function is as follows: a = upper limit (mpg) determined under each of two

The proposed standards for light c = slope (gallon per mile per square 2. Passenger Car Standards for MYs trucks are, therefore, specified by the foot) 2017–2025 eight coefficients defining fuel economy d = intercept (gallon per mile) targets: e = upper limit (mpg) of ‘‘floor’’ For passenger cars, NHTSA is f = lower limit (mpg) of ‘‘floor’’ proposing CAFE standards defined by a = upper limit (mpg) g = slope (gallon per mile per square the following coefficients during MYs b = lower limit (mpg) foot) of ‘‘floor’’ 2017–2025: h = intercept (gallon per mile) of ‘‘floor’’

For reference, the coefficients defining the MYs 2012–2016 passenger car standards are also provided below:

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Also for reference, the following table to the MYs 2012–2016 coefficients that the coefficients in Table IV–11 presents the coefficients based on 2- presented above. We emphasize, again, define the proposed standards. cycle CAFE only for easier comparison

Section II.C above and Chapter 2 of proposed coefficients result in the The MY 2012–2016 final standards are the draft Joint TSD discusses how the footprint-dependent targets shown also shown for comparison. coefficients in Table IV–11 were graphically below for MYs 2017–2025. BILLING CODE 4910–59–P developed for this proposed rule. The

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As discussed, the CAFE levels used to examine today’s proposed CAFE 2017–2025 (an updated estimate of the ultimately required of individual standards, the agency currently average required fuel economy level manufacturers will depend on the mix estimates that the target curves shown under the final MY 2016 standard is of vehicles they produce for sale in the above will result in the following also shown for comparison): 737 United States. Based on the market average required fuel economy levels for forecast of future sales that NHTSA has individual manufacturers during MYs

737 In the May 2010 final rule establishing MY on the agency’s current forecast of the MY 2016 738 For purposes of CAFE compliance, ‘‘Chrysler/ 2016 standards for passenger cars and light trucks, passenger car market, NHTSA again estimates that Fiat’’ is assumed to include Ferrari and Maserati in NHTSA estimated that the required fuel economy the average required fuel economy level for addition to the larger-volume Chrysler and Fiat levels for passenger cars would average 37.8 mpg passenger cars will be 37.8 mpg in MY 2016. brands. under the MY 2016 passenger car standard. Based

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Because a manufacturer’s required advance of the model year, a explained above, and that the mpg level average fuel economy level for a model manufacturer should be able to estimate designated as ‘‘estimated required’’ is year under the final standards will be its required level accurately. Readers exactly that, an estimate. based on its actual production numbers should remember that the mpg levels Additionally, again for reference, the in that model year, its official required describing the ‘‘estimated required following table presents estimated mpg fuel economy level will not be known standards’’ shown throughout this levels based on 2-cycle CAFE for easier until the end of that model year. section are not necessarily the ultimate However, because the targets for each mpg level with which manufacturers comparison to the MYs 2012–2016 vehicle footprint will be established in will have to comply, for the reasons standards.

739 For purposes of CAFE compliance, VW is Lamborghini, along with the larger-volume VW assumed to include Audi-Bentley, Bugatti, and brand.

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3. Minimum Domestic Passenger Car economy standard for domestically 32902(b)(4)), the minimum standard Standards manufactured passenger cars in addition shall be the greater of (A) 27.5 miles per to meeting the standards set by NHTSA. gallon; or (B) 92 percent of the average EISA expressly requires each According to the statute (49 U.S.C. fuel economy projected by the Secretary manufacturer to meet a minimum fuel for the combined domestic and 741 740 For purposes of CAFE compliance, ‘‘Chrysler/ For purposes of CAFE compliance, VW is nondomestic passenger automobile Fiat’’ is assumed to include Ferrari and Maserati in assumed to include Audi-Bentley, Bugatti, and fleets manufactured for sale in the addition to the larger-volume Chrysler and Fiat Lamborghini, along with the larger-volume VW United States by all manufacturers in brands. brand.

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the model year. The agency must passenger car standard for that year is of each model year to finalize the 92 publish the projected minimum promulgated. percent mpg value. standards in the Federal Register when However, we note that we do not read We note also that in the MYs 2012– the passenger car standards for the this language to preclude any change, 2016 final rule, we interpreted EISA as ever, in the minimum standard after it model year in question are promulgated. indicating that the 92 percent minimum is first promulgated for a model year. As As a practical matter, as standards for standard should be based on the long as the 18-month lead-time both cars and trucks continue to rise estimated required CAFE level rather requirement of 49 U.S.C. 32902(a) is over time, 49 U.S.C. 32902(b)(4)(A) will than, as suggested by the Alliance, the respected, NHTSA believes that the likely eventually cease to be relevant. estimated achieved CAFE level (which language of the statute suggests that the As discussed in the final rule 92 percent should be determined anew would likely be lower than the establishing the MYs 2012–2016 CAFE any time the passenger car standards are estimated required level if it reflected standards, because 49 U.S.C. revised. This issue will be particularly manufacturers’ use of dual-fuel vehicle 32902(b)(4)(B) states that the minimum relevant for the current rulemaking, credits under 49 U.S.C. 32905, at least domestic passenger car standard shall given the considerable leadtime in the context of the MYs 2012–2016 be 92 percent of the projected average involved and the necessity of a mid- standards). NHTSA continues to believe fuel economy for the passenger car fleet, term review for the MYs 2022–2025 that this interpretation is appropriate. ‘‘which projection shall be published in standards. We seek comment on this Based on NHTSA’s current market the Federal Register when the standard interpretation, and on whether or not forecast, the agency’s estimates of these for that model year is promulgated in the agency should consider instead for minimum standards under the proposed accordance with this section,’’ NHTSA MYs 2017–2025 designating the MYs 2017–2025 CAFE standards (and, interprets EISA as indicating that the minimum domestic passenger car for comparison, the final MY 2016 minimum domestic passenger car standards proposed here as ‘‘estimated,’’ minimum domestic passenger car standard should be based on the just as the passenger car standards are standard) are summarized below in agency’s fleet assumptions when the ‘‘estimated,’’ and waiting until the end Table IV–16.

Again, for the reader’s reference, the 2-cycle CAFE for easier comparison to following table the following table the MYs 2012–2016 standards. presents estimated mpg levels based on

As discussed in Section IV.D above, whether to consider, for the final rule, for imported passenger cars and light NHTSA is also seeking comment on the possibility of minimum standards trucks. Although we are not proposing

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such standards, we believe it may be market forecast and other assumptions, consideration of this question, prudent to explore this concept again that might make such minimum illustrative levels of minimum standards given the considerable amount of time standards relevant to help ensure that for those other fleets are presented between now and 2017–2025 currently-expected fuel economy below. (particularly the later years), and the improvements occur during that time accompanying uncertainty in our frame. To help commenters’

NHTSA emphasizes again that we are may wait until we are able to observe mid-term review discussed in Section not proposing additional minimum potential market changes during the IV.B above, and potentially revised at standards for imported passenger cars implementation of the MYs 2012–2016 that time. and light trucks at this time, but we may standards and consider additional 4. Light Truck Standards consider including them in the final minimum standards in a future rule if it seems reasonable and rulemaking action. Any additional For light trucks, NHTSA is proposing appropriate to do so based on the minimum standards for MYs 2022–2025 CAFE standards defined by the information provided by commenters that may be set in the future would, like following coefficients during MYs and the agency’s analysis. NHTSA also the primary standards, be subject to the 2017–2025:

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For reference, the coefficients ‘‘floor’’ term defined by coefficients e, f, defining the MYs 2012–2016 light truck g, and h) are also provided below: standards (which did not include a

The proposed coefficients result in MYs 2012–2016 final standards are the footprint-dependent targets shown shown for comparison. graphically below for MYs 2017–2025. BILLING CODE 4910–59–9

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BILLING CODE 4910–59–C cycle CAFE only for easier comparison that the coefficients in Table IV–20 Also for reference, the following table to the MYs 2012–2016 coefficients define the proposed standards. presents the coefficients based on2- presented above. We emphasize, again,

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Again, given these targets, the CAFE (an updated estimate of the average levels required of individual required fuel economy level under the required fuel economy levels will average 28.8 mpg manufacturers will depend on the mix final MY 2016 standard is shown for in MY 2016. However, the agency’s market forecast of vehicles they produce for sale in the comparison): 742 reflects less of a future market shift away from light trucks than reflected in the agency’s prior market United States. Based on the market BILLING CODE 4910–59–P forecast NHTSA has used to examine forecast; as a result, NHTSA currently estimates that the combined (i.e., passenger car and light truck) today’s proposed CAFE standards, the 742 In the May 2010 final rule establishing MYs average required fuel economy in MY 2016 will be agency currently estimates that the 2012–2016 standards for passenger cars and light 33.8 mpg, 0.3 mpg lower than the agency’s earlier targets shown above will result in the trucks, NHTSA estimated that the required fuel estimate of 34.1 mpg. The agency has made no economy levels for light trucks would average 28.8 changes to MY 2016 standards and projects no following average required fuel mpg under the MY 2016 light truck standard. Based economy levels for individual changes in fleet-specific average requirements on the agency’s current forecast of the MY 2016 (although within-fleet market shifts could, under an manufacturers during MYs 2017–2025 light truck market, NHTSA again estimates that the attribute-based standard, produce such changes).

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BILLING CODE 4910–59–C model year under the ultimate final levels based on 2-cycle CAFE for easier As discussed above with respect to standards will be based on its actual comparison to the MYs 2012–2016 the proposed passenger cars standards, production numbers in that model year. standards. we note that a manufacturer’s required Additionally, again for reference, the BILLING CODE 4910–59–P light truck fuel economy level for a following table presents estimated mpg

743 For purposes of CAFE compliance, ‘‘Chrysler/ 744 For purposes of CAFE compliance, VW is Fiat’’ is assumed to include Ferrari and Maserati in assumed to include Audi-Bentley, Bugatti, and addition to the larger-volume Chrysler and Fiat Lamborghini, along with the larger-volume VW brands. brand.

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BILLING CODE 4910–59–C maximum feasible standards for rulemaking: Specifically, technological F. How do the proposed standards fulfill passenger cars and light trucks in MYs NHTSA’s statutory obligations? 2017–2025. EPCA/EISA requires 745 For purposes of CAFE compliance, ‘‘Chrysler/ NHTSA to consider four statutory Fiat’’ is assumed to include Ferrari and Maserati in The discussion that follows is factors in determining the maximum addition to the larger-volume Chrysler and Fiat necessarily complex, but the central brands. feasible CAFE standards in a 746 for purposes of CAFE compliance, VW is points are straightforward. NHTSA has assumed to include Audi-Bentley, Bugatti, and tentatively concluded that the standards Lamborghini, along with the larger-volume VW presented above in Section IV.E are the brand.

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feasibility, economic practicability, the information currently before the agency, fuel economy, and the need of the effect of other motor vehicle standards we have weighed the statutory factors nation to conserve energy.749 NHTSA of the Government on fuel economy, carefully and selected proposed has developed definitions for these and the need of the nation to conserve passenger car and light truck standards terms over the course of multiple CAFE energy. The agency considered a that we believe are the maximum rulemakings750 and determines the number of regulatory alternatives in its feasible for MYs 2017–2025. appropriate weight and balancing of the analysis of potential CAFE standards for 1. What are NHTSA’s statutory terms given the circumstances in each those model years, including several obligations? CAFE rulemaking. For MYs 2011–2020, that increase stringency on average at EPCA further requires that separate set percentages each year, one that As discussed above in Section IV.D, standards for passenger cars and for approximates the point at which the NHTSA sets CAFE standards under light trucks be set at levels high enough modeled net benefits are maximized in EPCA, as amended by EISA, and is also to ensure that the CAFE of the industry- each model year, and one that subject to the APA and NEPA in wide combined fleet of new passenger approximates the point at which the developing and promulgating CAFE cars and light trucks reaches at least 35 modeled total costs equal total benefits standards. mpg not later than MY 2020. For model NEPA requires the agency to develop in each model year. Some of those years after 2020, standards need simply and consider the findings of an alternatives represent standards that be set at the maximum feasible level. would be more stringent than the Environmental Impact Statement (EIS) proposed standards,747 and some are for ‘‘major Federal actions significantly The agency thus balances the relevant less stringent.748 As the discussion affecting the quality of the human factors to determine the maximum below explains, we tentatively conclude environment.’’ NHTSA has determined feasible level of the CAFE standards for that the correct balancing of the relevant that this action is such an action and each fleet, in each model year. The next factors that the agency must consider in therefore that an EIS is necessary, and section discusses how the agency determining the maximum feasible has accordingly prepared a Draft EIS to balanced the factors for this proposal, standards recognizes economic inform its development and and why we believe the proposed practicability concerns as discussed consideration of the proposed standards are the maximum feasible. below, and sets standards accordingly. standards. The agency has evaluated the environmental impacts of a range of 2. How did the agency balance the We expect that the proposed standards factors for this NPRM? will enable further research and regulatory alternatives in our proposal, development into the more advanced and integrated the results of that There are numerous ways that the fuel economy-improving technologies, consideration into our balancing of the relevant factors can be balanced (and and enable significant fuel savings and EPCA/EISA factors, as discussed below. thus weight given to each factor) environmental benefits throughout the The APA and relevant case law depending on the agency’s policy program, with particularly substantial requires our rulemaking decision to be priorities and on the information before benefits in the later years of the program rational, based on consideration of the the agency regarding any given model relevant factors, and within the scope of and beyond. Additionally, consistent year, and the agency therefore the authority delegated to the agency by with Executive Order 13563, the agency considered a range of alternatives that EPCA/EISA. The relevant factors are believes that the benefits of the represent different regulatory options those required by EPCA/EISA and the preferred alternative amply justify the that we thought were potentially additional factors approved in case law costs; indeed, the monetized benefits reasonable for purposes of this as ones historically considered by the exceed the monetized costs by $358 rulemaking. For this proposal, the agency in determining the maximum billion over the lifetime of the vehicles regulatory alternatives considered in the feasible CAFE standards, such as safety. covered by the proposed standards. In agency’s analysis include several The statute requires us to set standards full consideration of all of the alternatives for fuel economy levels that at the maximum feasible level for increase annually, on average, at set passenger cars and light trucks for each 747 We recognize that higher standards would rates—specifically, 2%/year, 3%/year, model year, and the agency tentatively help the need of the nation to conserve more energy 4%/year, 5%/year, 6%/year, and 7%/ and might potentially be technologically feasible (in concludes that the standards, if adopted the narrowest sense) during those model years, but as proposed, would satisfy this 749 based on our analysis and the evidence presented requirement. NHTSA has carefully As explained in Section IV.D, EPCA also by the industry, we tentatively conclude that higher provides that in determining the level at which it standards would not represent the proper balancing examined the relevant data and other should set CAFE standards for a particular model for MYs 2017–2025 cars and trucks, because they considerations, as discussed below in year, NHTSA may not consider the ability of would raise serious questions about economic our explanation of our tentative manufacturers to take advantage of several statutory practicability. As explained above, NHTSA’s conclusion that the proposed standards provisions that facilitate compliance with the CAFE modeled estimates necessarily do not perfectly standards and thereby reduce the costs of capture all of the factors of economic practicability, are the maximum feasible levels for compliance. Specifically, in determining the and this conclusion regarding net benefits versus those model years based on our maximum feasible level of fuel economy for economic practicability is similar to the conclusion evaluation of the information before us passenger cars and light trucks, NHTSA cannot reached in the 2012–2016 analysis. for this NPRM. consider the fuel economy benefits of ‘‘dedicated’’ 748 We also recognize that lower standards might alternative fuel vehicles (like battery electric be less burdensome on the industry, but As discussed in Section IV.D, EPCA/ vehicles or natural gas vehicles), must consider considering the environmental impacts of the EISA requires that NHTSA establish dual-fueled automobiles to be operated only on different regulatory alternatives as required under separate passenger car and light truck gasoline or diesel fuel (at least through MY 2019), NEPA and the need of the nation to conserve standards at ‘‘the maximum feasible and may not consider the ability of manufacturers energy, we do not believe they would have to use, trade, or transfer credits. This provision represented the appropriate balancing of the average fuel economy level that it limits, to some extent, the fuel economy levels that relevant factors, because they would have left decides the manufacturers can achieve NHTSA can find to be ‘‘maximum feasible’’—if technology, fuel savings, and emissions reductions in that model year,’’ based on the NHTSA cannot consider the fuel economy of on the table unnecessarily, and not contributed as agency’s consideration of four statutory electric vehicles, for example, NHTSA cannot set much as possible to reducing our nation’s energy standards predicated on manufacturers’ usage of security and climate change concerns. They would factors: Technological feasibility, electric vehicles to meet the standards. also have lower net benefits than the Preferred economic practicability, the effect of 750 These factors are defined in Section IV.D; for Alternative. other standards of the Government on brevity, we do not repeat those definitions here.

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year.751 Analysis of these various rates comparing the environmental impacts of for the agency to say that the most of increase effectively encompasses the the other alternatives. advanced technologies would be entire range of fuel economy NHTSA believes that this approach available for commercial application in improvements that, based on clearly communicates the level of the model years for which standards information currently available to the stringency of each alternative and were being established. For this agency, could conceivably fall within allows us to identify alternatives that rulemaking, which is longer term, the statutory boundary of ‘‘maximum represent different ways to balance NHTSA has considered all types of feasible’’ standards. The regulatory NHTSA’s statutory factors under EPCA/ technologies that improve real-world alternatives also include two EISA. Each of the listed alternatives fuel economy, including air-conditioner alternatives based on benefit-cost represents, in part, a different way in efficiency and other off-cycle criteria, one in which standards would which NHTSA could conceivably technology, PHEVs, EVs, and highly- be set at the point where the modeled balance different policies and advanced internal combustion engines net benefits would be maximized for considerations in setting the standards not yet in production, but all of which each fleet in each year (MNB), and that achieve the maximum feasible the agencies’ expect to be commercially another in which standards would be levels. For example, the 2% Alternative, applicable by the rulemaking time set at the point at which total costs the least stringent alternative, would frame. On the one hand, we recognize would be most nearly equal to total represent a balancing in which that some technologies that currently benefits for each fleet in each year economic practicability—which include have limited commercial use cannot be (TC=TB),752 as well as the preferred concerns about availability of deployed on every vehicle model in MY alternative, which is within the range of technology, capital, and consumer 2017, but require a realistic schedule for the other alternatives. These alternatives preferences for vehicles built to meet widespread commercialization to be are discussed in more detail in Chapter the future standards—weighs more feasible. On the other hand, however, III of the PRIA accompanying this heavily in the agency’s consideration, the agency expects, based on our NPRM, which also contains an and the need of the nation to conserve analysis, that all of the alternatives extensive analysis of the relative energy would weigh less heavily. In could narrowly be considered as impacts of the alternatives in terms of contrast, under the 7% Alternative, one technologically feasible, in that they fuel savings, costs (both per-vehicle and of the most stringent, the need of the could be achieved based on the aggregate), carbon dioxide emissions nation to conserve energy—which existence or projected future existence avoided, and many other metrics. includes energy conservation and of technologies that could be Because the agency could conceivably climate change considerations—would incorporated on future vehicles, and select any of the regulatory alternatives weigh more heavily in the agency’s enable any of the alternatives to be above, all of which fall between 2%/ consideration, and other factors would achieved on a technical basis alone if year and 7%/year, inclusive, the Draft weigh less heavily. Balancing and the level of resources that might be EIS that accompanies this proposal assessing the feasibility of different required to implement the technologies analyzes these lower and upper bounds alternative can also be influenced by is not considered. If all alternatives are as well as the preferred alternative. differences and uncertainties in the way at least theoretically technologically Additionally, the Draft EIS analyzes a in which key economic factors (e.g., the feasible in the MY 2017–2025 ‘‘No Action Alternative,’’ which price of fuel and the social cost of timeframe, and the need of the nation is assumes that, for MYs 2017 and beyond, carbon) and technological inputs could best served by pushing standards as NHTSA would set standards at the same be assessed and estimated or valued. stringent as possible, then the agency level as MY 2016. The No Action While NHTSA believes that our analysis might be inclined to select the Alternative provides a baseline for conducted in support of this NPRM uses alternative that results in the very most the best and most transparent stringent standards considered. 751 This is an approach similar to that used by the technology-related inputs and economic However, the agency must also agency in the MY 2012–2016 rulemaking, in which assumption inputs that the agencies consider what is required to practically we also considered several alternatives that could derive for MYs 2017–2025, we increased annually, on average, at 3%, 4%, 5%, 6% implement technologies, which is part and 7%/year. The ‘‘percent-per-year’’ alternatives in recognize that there is uncertainty in of economic practicability, and to which this proposal are somewhat different from those these inputs, and the balancing could be the most stringent alternatives give little considered in the MY 2012–2016 rulemaking, different if, for example, the inputs are weight. ‘‘Economic practicability’’ refers however, in terms of how the annual rate of adjusted in response to new increase is applied. For this proposal, the to whether a standard is one ‘‘within the stringency curves are themselves advanced directly information. financial capability of the industry, but This is the first CAFE rulemaking in by the annual increase amount, without reference not so stringent as to lead to adverse to any yearly changes in the fleet mix. In the 2012– which the agency has looked this far economic consequences, such as a 2016 rule, the annual increases for the stringency into the future, which makes our alternatives reflected the estimated required fuel significant loss of jobs or the traditional approach to balancing more economy of the fleet which accounted for both the unreasonable elimination of consumer challenging than in past (even recent changes in the target curves and changes in the fleet choice.’’ Consumer acceptability is also mix. past) rulemakings. NHTSA does not 752 We included the MNB and TC=TB alternatives presently believe, for example, that an element of economic practicability, in part for the reference of commenters familiar one that is particularly difficult to gauge with NHTSA’s past several CAFE rulemakings— technological feasibility as the agency 753 defines it is as constraining in this during times of uncertain fuel prices. these alternatives represent balancings carefully In a rulemaking such as the present one, considered by the agency in past rulemaking rulemaking as it has been in the past in actions as potentially maximum feasible—and light of the time frame of this because Executive Orders 12866 and 13563 focus 753 See, e.g., Center for Auto Safety v. NHTSA attention on an approach that maximizes net rulemaking. ‘‘Technological feasibility’’ (CAS), 793 F.2d 1322 (DC Cir. 1986) benefits. The assessment of maximum net benefits refers to whether a particular method of (Administrator’s consideration of market demand as is challenging in the context of setting CAFE improving fuel economy can be component of economic practicability found to be standards, in part because standards which available for commercial application in reasonable); Public Citizen v. NHTSA, 848 F.2d 256 maximize net benefits for each fleet, for each model (Congress established broad guidelines in the fuel year, would not necessarily be the standards that the model year for which a standard is economy statute; agency’s decision to set lower lead to the greatest net benefits over the entire being established. In previous CAFE standard was a reasonable accommodation of rulemaking period. rulemakings, it has been more difficult conflicting policies).

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determining economic practicability standards that might be technologically NHTSA therefore believes, based on requires consideration of the feasible are, in fact, beyond maximum the information currently before us, that uncertainty surrounding relatively feasible. Standards that require economic practicability concerns render distant future market conditions and aggressive application of and certain standards that might otherwise consumer demand for fuel economy in widespread deployment of advanced be technologically feasible to be beyond addition to other vehicle attributes. In technologies could raise serious issues maximum feasible within the meaning an attempt to evaluate the economic with the adequacy of time to coordinate of the statute for the 2017–2025 practicability of attribute-based such significant changes with standards. Our analysis indicated that standards, NHTSA includes a variety of manufacturers’ redesign cycles, as well technologies seem to exist to meet the factors in its analysis, including the as with the availability of engineering stringency levels required by future annual rate at which manufacturers can resources to develop and integrate the standards under nearly all of the increase the percentage of their fleet that technologies into products, and the pace regulatory alternatives; but it also employ a particular type of fuel-saving at which capital costs can be incurred indicated that manufacturers would not technology, the specific fleet mixes of to acquire and integrate the be able to apply those technologies different manufacturers, and manufacturing and production quickly enough, given their redesign assumptions about the cost of the equipment necessary to increase the cycles, and the level of the resources standards to consumers and consumers’ production volume of the technologies. that would be required to implement valuation of fuel economy, among other Moreover, the agency must consider those technologies widely across their things. Ensuring that a reasonable whether consumers would be likely to products, to meet all applicable amount of lead time exists to make accept a specific technological change standards in every model year under capital investments and to devote the under consideration, and how the cost some of the alternatives. resources and time to design and to the consumer of making that change Another consideration for economic prepare for commercial production of a might affect their acceptance of it. The practicability is incremental per-vehicle more fuel efficient fleet is also relevant agency maintains, as it has in prior increases in technology cost. In looking to the agency’s consideration of CAFE rulemakings, that there is an at the incremental technology cost economic practicability. Yet there are important distinction between results from our modeling analysis, the some aspects of economic practicability considerations of technological agency saw that in progressing from that the agency’s analysis is not able to feasibility and economic practicability. alternatives with lower stringencies to capture at this time—for example, the As explained above, a given level of alternatives with higher stringencies, computer model that we use to analyze performance may be technologically technology cost increases (perhaps alternative standards does not account feasible (i.e., setting aside economic predictably) at a progressively higher for all aspects of uncertainty, in part constraints) for a given vehicle model. rate, until the model projects that because the agency cannot know what However, it would not be economically manufacturers are unable to comply we cannot know. The agency must thus practicable to require a level of fleet with the increasing standards and enter account for uncertainty in the context of average performance that assumes every (or deepen) non-compliance. Table IV– economic practicability as best as we vehicle will in the first year of the 25 and Table IV–26 show estimated can based on the entire record before us. standards perform at the highest cumulative lifetime fuel savings and Both technological feasibility and technologically feasible level, because estimated average vehicle cost increase economic practicability enter into the manufacturers do not have unlimited for passenger cars and light trucks. The agency’s determination of the maximum access to the financial resources or may results show that there is a significant feasible levels of stringency, and not practically be able to hire enough increase in technology cost between the economic practicability concerns may engineers, build enough facilities, and 4% alternatives and the 5% alternatives. cause the agency to decide that install enough tooling. BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C standards would leave fuel-saving We explained above that part of the Thus, if technological feasibility and technologies on the table unnecessarily; way that we try to evaluate economic the need of the nation are not standards that are higher than that point practicability is through a variety of particularly limiting in a given would likely be beyond what the agency model inputs, such as phase-in caps (the rulemaking, then maximum feasible would consider economically annual rate at which manufacturers can standards would be represented by the practicable, and therefore beyond what increase the percentage of their fleet that mpg levels that we could require of the we would consider maximum feasible, employ a particular type of fuel-saving industry to improve fuel economy even if they might be technologically technology) and redesign schedules to before we reach a tipping point that feasible or better meet the need of the account for needed lead time. These presents risk of significantly adverse nation to conserve energy. The agency inputs limit how much technology can economic consequences. Standards that does not believe that standards are be applied to a manufacturer’s fleet in are lower than that point would likely balanced if they weight one or two the agency’s analysis attempting to not be maximum feasible, because such factors so heavily as to ignore another. simulate a way for the manufacturer to

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comply with standards set under increases in incremental technology The analysis showed that for the different regulatory alternatives. If the costs, do not entirely define economic passenger car 5% alternative, there were limits (and technology cost- practicability, but we believe they are significant compliance shortfalls for effectiveness) prevent enough symptomatic of it. In looking at the Chrysler in MY 2025, Ford in MYs 2021 manufacturers from meeting the projected compliance shortfall results and 2023–2025, GM in MYs 2022 and required levels of stringency, the agency from our modeling analysis, the agency 2024–2025, Mazda in MYs 2021 and may decide that the standards under preliminarily concluded, based on the 2024–2025, and Nissan in MY 2025. For consideration may not be economically information before us at the time, that light trucks, the analysis showed the 5% practicable. The difference between the for both passenger car and for light alternative had significant compliance required fuel economy level that applies trucks, the MNB and TC=TB shortfalls for Chrysler in MYs 2022– to a manufacturer’s fleet and the level of alternatives, and the 5%, 6% and 7% 2025, Ford in MY 2025, GM in MYs fuel economy that the agency projects the manufacturer would achieve in that alternatives did not appear to be 2023–2025, Kia in MY 2025, Mazda in year, based on our analysis, is called a economically practicable, and were thus MYs 2022 and 2025, and Nissan in MYs ‘‘compliance shortfall.’’ 754 likely beyond maximum feasible levels 2023–2025. However, the 4%, 3% and We underscore again that the for MYs 2017–2025. In other words, 2% alternatives did not appear, based modeling analysis does not dictate the despite the theoretical technological on shortfalls, to be beyond the level of ‘‘answer,’’ it is merely one source of feasibility of achieving these levels, economic practicability, and thus information among others that aids the various manufacturers would likely lack appeared potentially to be within the agency’s balancing of the standards. the financial and engineering resources range of alternatives that might yet be These considerations, shortfalls and and sufficient lead time to do so. maximum feasible.

754 The agency’s modeling estimates how the standards are performance-based, NHTSA does not Manufacturers may choose a different mix of application of technologies could increase vehicle mandate that specific technologies be used for technologies based on their unique circumstances costs, reduce fuel consumption, and reduce CO2 compliance. CAFE modeling, therefore projects one and products. emissions, and affect other factors. As CAFE way that manufacturers could comply.

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The preliminary analysis referred to analysis indicated that the alternatives their recommendations on program above, in which the agency tentatively including up to 4% per year for cars and stringency and provisions.755 concluded that the 5%, 6%, 7%, MNB, 4% per year for trucks should Regarding passenger cars, several and TC=TB alternatives were likely reasonably remain under consideration. manufacturers shared projections that they would be capable of meeting beyond the level of economic With that preliminary estimate of 4%/ practicability based on the information stringency levels similar to NHTSA’s year for cars and trucks as the upper end preliminary CAFE modeling projections available to the agency at the time, was of the range of alternatives that should conducted following the first SNOI and for the 4% alternative in MY 2020 or in reasonably remain under consideration 2021, with some of those arguing that prior to the second SNOI—thus, for MYs 2017–2025, the agencies began between the end of 2010 and July 2011. they faced challenges in the earlier years meeting again intensely with The agencies stated in the first SNOI of that period with meeting a constant stakeholders, including many that we had not conducted sufficient 4% rate throughout the entire period. individual manufacturers, between June analysis at the time to narrow the range Some manufacturers shared projections 21, 2011 and July 27, 2011 to determine of potential stringencies that had been that they could comply with discussed in the initial NOI and in the whether additional information would stringencies that ramped up, increasing Interim Joint TAR, and that we would aid NHTSA in further consideration. more slowly in MY 2017 and then be conducting more analyses and Beginning in the June 21, 2011 meeting, progressively increasing through MY continuing extensive dialogue with NHTSA and EPA presented the 4% 2021. Most manufacturers provided stakeholders in the coming months to alternative target curves as a potential limited projections beyond MY 2021, refine our proposal. Based on our initial concept along with preliminary program although some stated that they could meet the agency’s concept stringency consideration of how the factors might flexibilities and provisions, in order to targets in MY 2025. Manufacturers be balanced to determine the maximum get feedback from the manufacturer generally suggested that the most feasible standards to propose for MYs stakeholders. Manufacturer stakeholders significant challenges to meeting a 2017–2025 (i.e., where technological provided comments, much of which constant 4% (or faster) year-over-year feasibility did not appear to be was confidential business information, increase in the passenger car standards particularly limiting and the need of the which included projections of how they related to their ability to implement the nation would counsel for choosing more might comply with concept standards, stringent alternatives, but economic the challenges that they expected, and 755 Feedback from these stakeholder meetings is practicability posed significant summarized in section IV.B and documents that are limitations), NHTSA’s preliminary referenced in that section.

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new technologies quickly enough to significantly lower stringencies in those the level of technologies planned for achieve the required levels, given their years would be feasible in their their future products that improve fuel need to implement fuel economy estimation. As for cars, most economy, as well as some estimation of improvements in both the passenger car manufacturers provided limited the resources that would likely be and light truck fleets concurrently; projections beyond MY 2021. needed to support those plans and the challenges related to the cadence of Manufacturers generally stated that the potential future standards. The agency redesign and refresh schedules; the pace most significant challenges to meeting a also considered whether we agreed that at which new technology can be constant 4% (or faster) year-over-year there could conceivably be implemented considering economic increase in the light truck standards compromises to vehicle utility factors such as availability of were similar to what they had described depending on the technologies chosen engineering resources to develop and for passenger cars as enumerated in the to meet the potential new standards, integrate the technologies into products; paragraph above, but were compounded and whether a change in the cadence of and the pace at which capital costs can by concerns that applying technologies the rate at which standards increase be incurred to acquire and integrate the to meet the 4% alternative standards could provide additional opportunity manufacturing and production would result in trucks that were more for industry to develop and implement equipment necessary to increase the expensive and provided less utility to technologies that would not adversely production volume of the technologies. consumers. As was the case for cars, affect utility. NHTSA considered Manufacturers often expressed concern manufacturers argued that their feedback on consumer acceptance of that the 4% levels could require greater technology cost estimates were higher some advanced technologies and numbers of advanced technology than the agencies’ and consumers are consumers’ willingness to pay for vehicles than they thought they would less willing to accept/pay for some improved fuel economy. In addition, the be able to sell in that time frame, given advanced technologies in trucks, but agency carefully considered whether their belief that the cost of some manufacturers argued that these manufacturer assertions about potential technologies was much higher than the concerns were more significant for uncertainties in the agency’s technical, agencies had estimated and their trucks than for cars, and that they were economic, and consumer acceptance observations of current consumer not optimistic that they could recoup assumptions and estimates were acceptance of and willingness to pay for the costs through higher prices for potentially valid, and if so, what the advanced technology vehicles that are vehicles with the technologies that potential effects of these uncertainties available now in the marketplace. A would be needed to comply with the might be on economic practicability. number of manufacturers argued that 4% alternative. Given their concerns Regarding passenger cars, after they did not believe that they could about having to reduce utility and raise considering this feedback from create a sustainable business case under truck prices, and about their ability to stakeholders, the agency considered passenger car standards that increased apply technologies quickly enough further how it thought the factors at the rate required by the 4% given the longer redesign periods for should be balanced to determine the alternative. trucks, a number of manufacturers maximum feasible passenger car Regarding light trucks, most argued that they did not believe that manufacturers expressed significantly they could create a sustainable business standards for MYs 2017–2025. Based on greater concerns over the 4% alternative case under light truck standards that that reconsideration of the information for light trucks than for passenger cars. increased at the rate required by the 4% before the agency and how it informs Many manufacturers argued that alternative. our balancing of the factors, NHTSA increases in light truck standard Other stakeholders, such as tentatively concludes that the points stringency should be slower than environmental and consumer groups, raised may indicate that the agency’s increases in passenger car standard consistently stated that stringent preliminary analysis supporting stringency, based on, among other standards are technically achievable and consideration of standards that things, the greater payload, cargo critical to important national interests, increased up to 4%/year may not have capacity and towing utility such as improving energy captured fully the level of uncertainty requirements of light trucks, and what independence, reducing climate change, that surrounds economic practicability they perceived to be lower consumer and enabling the domestic automobile in these future model years. acceptance of certain (albeit not all) industry to remain competitive in the Nevertheless, while we believe there advanced technologies on light trucks. global market. Labor interests stressed may be some uncertainty, we do not Many manufacturers also commented the need to carefully consider economic agree that it is nearly as significant as a that redesign cycles are longer on trucks impacts and the opportunity to create number of manufacturers maintained, than they are on passenger cars, which and support new jobs, and consumer especially for passenger cars. The most reduces the frequency at which advocates emphasized the economic persuasive information received from significant changes can be made cost- and practical benefits to consumers of stakeholders for passenger cars effectively to comply with increasing improved fuel economy and the need to concerned practicability issues in the standards, and that the significant preserve consumer choice. In addition, first phase of the MY 2017–2025 increases in stringency in the MY 2012– a number of stakeholders stated that the standards. We therefore tentatively 2016 program 756 in combination with standards under development should conclude that the maximum feasible redesign schedules would not make it not have an adverse impact on safety. stringency levels for passenger cars are possible to comply with the 4% NHTSA, in collaboration with EPA only slightly different from the 4%/year alternative in the earliest years of the and in coordination with CARB, levels suggested as the high end MY 2017–2025 program, such that only carefully considered the inputs received preliminarily considered by the agency; from all stakeholders, conducted increasing on average 3.7%/year in MYs 756 Some manufacturers indicated that their light additional independent analyses, and 2017–2021, and on average 4.5%/year in truck fleet fuel economy would be below what they deliberated over the feedback received MYs 2022–2025. For the overall MY anticipated their required fuel economy level would on the agencies’ analyses. NHTSA 2017–2025 period, the maximum be in MY 2016, and that they currently expect that they will need to employ available flexibilities to considered individual manufacturers’ feasible stringency curves increase on comply with that standard. redesign cycles and, where available, average at 4.1%/year, and our analysis

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indicates that the costs and benefits At the same time, the increase in environmental benefits similar to the attributable to the 4% alternative and average vehicle cost in MY 2025 is 9.4 4% alternative beginning in MY 2025. the preferred alternative for passenger percent higher for the 4% alternative We are concerned that requiring cars are very similar: The preferred (the estimated cost increase for the manufacturers to invest that capital to alternative is 8.8 percent less expensive average vehicle is $2,023 for the meet higher standards in MYs 2017– for manufacturers than the 4% preferred alternative, and $2,213 for the 2021, rather than allowing them to alternative (estimated total costs are 4% alternative). The rates of increase in increase fuel economy in those years $113 billion for the preferred alternative stringency for each model year are and $124 billion for the 4% alternative), summarized in Table IV–29. NHTSA slightly more slowly, would reduce the and achieves only $20 billion less in emphasizes that under 49 U.S.C. levels that would be feasible in the total benefits than the 4% alternative 32902(b), the standards must be second phase of the program by (estimated total benefits are $310 billion maximum feasible in each model year diverting research and development for the preferred alternative and $330 without reference to other model years, resources to those earlier model years. billion for the 4% alternative), a very but we believe that the small amount of Thus, after considerable deliberation small difference given that benefits are progressiveness in the proposed with EPA and consultation with CARB, spread across the entire lifetimes of all standards for MYs 2017–2021, which NHTSA selected the preferred vehicles subject to the standards. The has very little effect on total benefits alternative as the maximum feasible analysis also shows that the lifetime attributable to the proposed passenger alternative for MYs 2017–2025 cumulative fuel savings is only 5 car standards, will help to enable the passenger cars based on consideration of percent higher for the 4% alternative continuation of, or increases in, research inputs from manufacturers and the than the preferred alternative (the and development into the more agency’s independent analysis, which estimated fuel savings is 104 billion advanced technologies that will enable reaches the stringency levels of the 4% gallons for the preferred alternative, and greater stringency increases in MYs alternative in MY 2025, but has a 110 billion gallons for the 4% 2022–2025, and help to capture the slightly slower ramp up rate in the alternative). considerable fuel savings and earlier years.

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Regarding light trucks, while NHTSA the need to invest simultaneously in investment to reach the required levels, does not agree with the manufacturer’s raising passenger car fuel economy, may and that given the redesign schedule for overall cost assessments and believe not have been fully captured in our trucks, that level of investment that our technology cost and preliminary analysis. This could lead throughout the entire MYs 2012–2025 effectiveness assumptions should allow manufacturers to implement time period was not sustainable. Based the most capable manufacturers to technologies that do not maintain on the confidential business information preserve all necessary vehicle utility, vehicle utility, based on the cadence of that manufacturers provided to us, we the agencies do believe there is merit to the standards under the 4% alternative. believe that this point may be valid. If some of the concerns raised in A number of manufacturers repeatedly the agency pushes CAFE increases that stakeholder feedback. Specifically, stated, in providing feedback, that the require considerable sustained concerns about longer redesign MYs 2012–2016 standards for trucks, investment at a faster rate than industry schedules for trucks, compounded by while feasible, required significant redesign cycles, adverse economic

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consequences could ensue. The best model years will help address concerns leakage and the use of lower GWP information that the agency has at this raised by manufacturer stakeholders and refrigerants (direct A/C time, therefore, indicates that requiring reduce the risk for adverse economic improvements),758 and that EPA light truck fuel economy improvements consequences, while at the same time provides incentives for PHEV, EV and at the 4% annual rate could create ensuring most of the substantial FCV vehicles, which NHTSA does not potentially severe economic improvements in fuel efficiency initially provide because statutory incentives consequences. envisioned over the entire period and have already been defined for these Thus, evaluating the inputs from supported by other stakeholders. technologies. The stringency of stakeholders and the agency’s NHTSA believes that these stringency NHTSA’s proposed standards for independent analysis, the agency also levels, along with the provisions for passenger cars for MYs 2017–2025 align considered further how it thought the incentives for advanced technologies to with the stringency of EPA’s equivalent factors should be balanced to determine encourage their development and standards when these differences are the maximum feasible light truck implementation, and the agencies’ considered.759 NHTSA is proposing the standards for MYs 2017–2025. Based on expectation that some of the preferred alternative based on the that consideration of the information uncertainties surrounding consumer tentative determination of maximum before the agency and how it informs acceptance of new technologies in light feasibility as described earlier in the our balancing of the factors, NHTSA trucks should have resolved themselves section, but, based on efforts NHTSA tentatively concludes that 4%/year by that time frame based on consumers’ and EPA have made to conduct joint CAFE stringency increases for light experience with the advanced analysis and jointly deliberate on trucks in MYs 2017–2021 are likely technologies, will enable these increases information and tentative conclusions, beyond maximum feasible, and in fact, in stringency over the entire MY 2017– NHTSA has also aligned the proposed in the earliest model years of the MY 2025 period. Although, as stated above, CAFE standards with EPA’s proposed 2017–2021 period, that the 3%/year and the light truck standards must be standards. 2%/year alternatives for trucks are also maximum feasible in each model year Thus, consistent with President likely beyond maximum feasible. without reference to other model years, Obama’s announcement on July 29, NHTSA therefore tentatively concludes we believe that standards set at the 2011, and with the August 9, 2011 that the preferred alternative, which stated levels for MYs 2017–2021 and the SNOI, NHTSA has tentatively would in MYs 2017–2021 increase on incentives for advanced technologies for concluded that the standards average 2.6%/year, and in MYs 2022– pickup trucks will create the best represented by the preferred alternative 2025 would increase on average 4.6%/ opportunity to ensure that the MY are the maximum feasible standards for year, is the maximum feasible level that 2022–2025 standards are economically passenger cars and light trucks in MYs the industry can reach in those model practicable, and avoid adverse 2017–2025. We recognize that higher years. For the overall MY 2017–2025 consequences. The first phase of light standards would help the need of the period, the maximum feasible truck standards, in that respect, acts as nation to conserve more energy and stringency curves would increase on a kind of bridge to the second phase, in might potentially be technologically average 3.5%/year. The rates of increase which industry should be able to realize feasible (in the narrowest sense) during in stringency for each model year are considerable additional improvements those model years, but based on our summarized in Table IV–29 and Table in fuel economy. analysis and the evidence presented by IV–30. The proposed standards also account the industry, we tentatively conclude Our analysis indicates that the for the effect of EPA’s standards, in light that higher standards would not preferred alternative has 48 percent of the agencies’ close coordination and represent the proper balancing for MYs lower cost than the 4% alternative the fact that both sets of standards were 2017–2025 cars and trucks.760 We (estimated total costs are $44 billion for developed together to harmonize as part the preferred alternative and $83 billion of the National Program. Given the close 758 As these A/C system improvements do not for the 4% alternative), and the total relationship between fuel economy and influence fuel economy, the stringency of NHTSA’s benefits of the preferred alternative are CO2 emissions, and the efforts NHTSA preferred alternatives do not reflect the availability 30 percent lower ($87 billion lower) and EPA have made to conduct joint of these technologies. than the 4% alternative (estimated total analysis and jointly deliberate on 759 We note, however, that the alignment is based benefits are $206 billion for the on the assumption that manufacturers implement information and tentative the same level of direct A/C system improvements preferred alternative and $293 billion conclusions,757 the agencies have as EPA currently forecasts for those model years, for the 4% alternative), spread across sought to harmonize and align their and on the assumption of PHEV, EV, and FCV the entire lifetimes of all vehicles proposed standards to the greatest penetration at specific levels. If a manufacturer subject to the standards. The analysis implements a higher level of direct A/C extent possible, consistent with their improvement technology and/or a higher also shows that the lifetime cumulative respective statutory authorities. In penetration of PHEVs, EVs and FCVs, then fuel savings is 42 percent higher for the comparing the proposed standards, the NHTSA’s proposed standards would effectively be 4% alternative than the preferred agencies’ stringency curves are more stringent than EPA’s. Conversely, if a manufacturer implements a lower level of direct A/ alternative (the estimated fuel savings is equivalent, except for the fact that the 69 billion gallons for the preferred C improvement technology and/or a lower stringency of EPA’s proposed passenger penetration of PHEVs, EVs and FCVs, then EPA’s alternative, and 98 billion gallons for car standards reflect the ability to proposed standards would effectively be more the 4% alternative). At the same time, improve GHG emissions through stringent than NHTSA’s. 760 the increase in average vehicle cost in reductions in A/C system refrigerant We note, for example, that while Executive MY 2025 is 54 percent higher for the 4% Orders 12866 and 13563 focus attention on an approach that maximizes net benefits, both alternative (the estimated cost increase 757 NHTSA and EPA conducted joint analysis and Executive Orders recognize that this focus is subject for the average vehicle is $1,578 for the jointly deliberated on information and tentative to the requirements of the governing statute. In this preferred alternative, and $2,423 for the conclusions related to technology cost, rulemaking, the standards represented by the 4% alternative). effectiveness, manufacturers’ capability to ‘‘MNB’’ alternative are more stringent than what implement technologies, the cadence at which NHTSA has tentatively concluded would be While these differences are larger than manufacturers might support the implementation of maximum feasible for MYs 2017–2025, and thus for passenger cars, NHTSA believes that technologies, economic factors, and the assessment setting standards at that level would be inconsistent standards set at these levels for these of comments from manufacturers. Continued

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tentatively conclude that the correct and development into the more G. Impacts of the Proposed CAFE balancing recognizes economic advanced fuel economy-improving Standards practicability concerns as discussed technologies to provide a bridge to more above, and sets standards at the levels stringent standards in MYs 2022–2025, 1. How will these standards improve that the agency is proposing in this and enable significant fuel savings and fuel economy and reduce GHG NPRM.761 In the same vein, lower environmental benefits throughout the emissions for MY 2017–2025 vehicles? standards might be less burdensome on program, and particularly substantial As discussed above, the CAFE level the industry, but considering the benefits in the later years of the program required under an attribute-based environmental impacts of the different and beyond. Additionally, consistent standard depends on the mix of vehicles regulatory alternatives as required under with Executive Order 13563, the agency produced for sale in the U.S. Based on NEPA and the need of the nation to believes that the benefits of the conserve energy, we do not believe they preferred alternative amply justify the the market forecast that NHTSA and would have represented the appropriate costs; indeed, the monetized benefits EPA have used to develop and analyze balancing of the relevant factors, exceed the monetized costs by $358 the proposed CAFE and CO2 emissions because they would have left billion over the lifetime of the vehicles standards, NHTSA estimates that the technology, fuel savings, and emissions covered by the proposed standards. In proposed new CAFE standards would reductions on the table unnecessarily, full consideration of all of the lead average required fuel consumption and not contributed as much as possible information currently before the agency, (fuel consumption is the inverse of fuel to reducing our nation’s energy security we have weighed the statutory factors economy) levels to increase by an and climate change concerns. Standards carefully and selected proposed average of 4.0 percent annually through set at the proposed levels for MYs 2017– passenger car and light truck standards MY 2025, reaching a combined average 2021 will provide the additional benefit that we believe are the maximum fuel economy requirement of 49.6 mpg of helping to promote further research feasible for MYs 2017–2025. in that model year:

with the requirements of EPCA/EISA to set maximum feasible for MYs 2017–2025 is made with rulemaking) presents the agency with new maximum feasible standards. reference to the rulemaking time frame and information that may affect how we balance the 761 We underscore that the agency’s tentative circumstances of this proposal. Each CAFE relevant actors. decision regarding what standards would be rulemaking (indeed, each stage of any given CAFE

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Accounting for differences between conditions, NHTSA estimates that these following required average levels under fuel economy levels under laboratory requirements would translate into the real-world operating conditions:

If manufacturers apply technology average achieved fuel economy levels fuel economy of 47.4 mpg (taking into only as far as necessary to comply with would correspondingly increase through account estimated adjustments CAFE standards, NHTSA estimates that, MY 2025, but that manufacturers would, reflecting improved air conditioner setting aside factors the agency cannot on average, under-comply 763 in some efficiency) in MY 2025: consider for purposes of determining model years and over-comply 764 in maximum feasible CAFE standards,762 others, reaching a combined average

762 49 U.S.C. 32902(h) states that NHTSA may not use of existing or ‘‘banked’’ credits, or through fine (i.e., Jaguar and Rover), and Volkswagen will only consider the fuel economy of dedicated alternative payment. Although, as mentioned above, NHTSA apply technology up to the point that it would be fuel vehicles, the alternative-fuel portion of dual- cannot consider availability of statutorily-provided less expensive to pay civil penalties. fueled automobile fuel economy, or the ability of credits in setting standards, NHTSA is not 764 In NHTSA’s analysis, ‘‘over-compliance’’ manufacturers to earn and use credits for over- prohibited from considering fine payment. occurs through multi-year planning: manufacturers compliance, in determining the maximum feasible Therefore, the estimated achieved CAFE levels apply some ‘‘extra’’ technology in early model years stringency of CAFE standards. presented here include the assumption that Aston (e.g., MY 2014) in order to carry that technology 763 ‘‘Under-compliance’’ with CAFE standards Martin, BMW, Daimler (i.e., Mercedes), Geely (i.e., forward and thereby facilitate compliance in later can be mitigated either through use of FFV credits, Volvo), Lotus, Porsche, Spyker (i.e., Saab), and, Tata model years (e.g., MY 2016).

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Accounting for differences between conditions, NHTSA estimates that these following required average levels under fuel economy levels under laboratory requirements would translate into the real-world operating conditions:

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Setting aside the potential to produce redesigns leading into model years determining maximum feasible additional EVs (or, prior to MY 2020, covered by today’s new standards.765 As stringency of CAFE standards (i.e., PHEVs) or take advantage of EPCA’s shown below, these ‘‘early’’ fuel setting aside EVs, pre-MY 2020 PHEVs, provisions regarding CAFE credits, economy increases yield corresponding and all statutory CAFE credit NHTSA estimates that today’s proposed reductions in fuel consumption and provisions), NHTSA estimates that these standards could increase achieved fuel greenhouse gas emissions, and incur fuel economy increases would lead to economy levels by average amounts of corresponding increases in technology fuel savings totaling 173 billion gallons up to 0.5 mpg during the few model outlays. during the useful lives of vehicles years leading into MY 2017, as Within the context EPCA requires manufactured in MYs 2017–2025 and manufacturers apply technology during NHTSA to apply for purposes of the few MYs preceding MY 2017:

765 This outcome is a direct result of revisions, has estimated that Ford will redesign the F–150 simulation of multiyear planning effects, NHTSA’s made to DOT’s CAFE model in preparation for the pickup truck in MY 2015, and again in MY 2021. analysis indicates that Ford could apply more MY 2012–2016 rule, to simulate ‘‘multiyear As explained in Chapter V of the PRIA, NHTSA technology to the MY 2015 F–150 if standards planning’’ effects—that is, the potential that expects that many technologies would be applied continue to increase after MY 2016 than Ford need manufacturers will apply ‘‘extra’’ technology in one as part of a vehicle redesign. Therefore, in NHTSA’s apply if standards remain unchanged after MY model year if doing so will be sufficiently analysis, if Ford does not anticipate ensuing advantageous with respect to the ability to comply standards when redesigning the MY 2015 F–150, 2016, and that this additional technology would with CAFE standards in later model years. For Ford may find it more difficult to comply with light yield further fuel economy improvements of up to example, for today’s rulemaking analysis, NHTSA truck standard during MY 2016–2020. Through 1.3 mpg, depending on pickup configuration.

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The agency also estimates that these emissions totaling 1,834 million metric vehicles sold in MYs 2017–2025 and the new CAFE standards would lead to tons (mmt) during the useful lives of few MYs preceding MY 2017: corresponding reductions of CO2

2. How will these standards improve because over time, a growing fraction of As Table IV–41 shows, NHTSA fleet-wide fuel economy and reduce the U.S. light-duty vehicle fleet will be estimates that the fuel economy GHG emissions beyond MY 2025? comprised of cars and light trucks that increases resulting from the proposed meet at least the MY 2025 standard. The standards will lead to reductions in total Under the assumption that CAFE impact of the new standards on fuel use fuel consumption by cars and light standards at least as stringent as those and GHG emissions would therefore trucks of 3 billion gallons during 2020, being proposed today for MY 2025 continue to grow through approximately increasing to 40 billion gallons by 2060. would be established for subsequent 2060, when virtually all cars and light Over the period from 2017, when the model years, the effects of the proposed trucks in service will have met proposed standards would begin to take standards on fuel consumption and standards as stringent as those effect, through 2050, cumulative fuel GHG emissions will continue to established for MY 2025. savings would total 1,232 billion increase for many years. This will occur gallons, as Table IV–41 also indicates.

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The energy security analysis ‘‘leakage effect’’ in detail, NHTSA duty vehicle fleet. Specifically, NHTSA conducted for this rule estimates that provides a sample estimate of its estimates that total annual CO2 the world price of oil will fall modestly potential magnitude in its Draft EIS. emissions associated with passenger car in response to lower U.S. demand for This analysis indicates that the leakage and light truck use in the U.S. use refined fuel. One potential result of this effect is likely to offset only a very small would decline by 32 million metric tons decline in the world price of oil would fraction of the reductions in fuel use (mmt) in 2020 as a consequence of the be an increase in the consumption of and emissions projected to result from new CAFE standards, as Table IV–42 petroleum products outside the U.S., the rule. reports. The table also shows that this which would in turn lead to a modest As a consequence of these reductions annual reduction is estimated to grow to increase in emissions of greenhouse in fleet-wide fuel consumption, the nearly 488 million metric tons by the gases, criteria air pollutants, and agency also estimates that the new year 2060, and will total over 13 billion airborne toxics from their refining and CAFE standards for MYs 2017–2025 metric tons over the period from 2017, use. While additional information would lead to corresponding reductions when the proposed standards would would be needed to analyze this in CO2 emissions from the U.S. light- take effect, through 2060.

These reductions in fleet-wide CO2 small but significant reductions in Environmental Impact Statement (EIS) emissions, together with corresponding projected changes in the future global that informed the agency’s decisions reductions in other GHG emissions from climate. These changes, based on regarding this proposal, are summarized fuel production and use, would lead to analysis documented in the draft in Table IV–43 below.

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3. How will these proposed standards the number of miles they are driven, from vehicle use, resulting in a net impact non-GHG emissions and their through the fuel economy ‘‘rebound decline in their total emissions.766 associated effects? effect.’’ In turn, this increase in vehicle Tables IV–44 and IV–45 report Under the assumption that CAFE use will lead to increases in emissions estimated reductions in emissions of standards at least as stringent as those of criteria air pollutants and some selected criteria air pollutants (or their airborne toxics, since these are products proposed for MY 2025 would be chemical precursors) and airborne of the number of miles vehicles are established for subsequent model years, toxics expected to result from the driven. the effects of the new standards on air proposed standards during calendar At the same time, however, the quality and its associated health effects year 2040. By that date, cars and light projected reductions in fuel production will continue to be felt over the trucks meeting the MY 2025 CAFE foreseeable future. This will occur and use reported in Table IV–40 and IV– standards will account for the majority because over time a growing fraction of 41 above will lead to corresponding of light-duty vehicle use, so these the U.S. light-duty vehicle fleet will be reductions in emissions of these comprised of cars and light trucks that pollutants that occur during fuel reductions provide a useful index of the meet the MY 2025 standard, and this production and distribution long-term impact of the final standards growth will continue until (‘‘upstream’’ emissions). For most of on air pollution and its consequences approximately 2060. these pollutants, the reduction in for human health. In the tables below, Increases in the fuel economy of light- upstream emissions resulting from positive values indicate increases in duty vehicles required by the new CAFE lower fuel production and distribution emissions, while negative values standards will cause a slight increase in will outweigh the increase in emissions indicate reductions.

766 As stated elsewhere, while the agency’s emissions in future calendar years also assumes that on air toxics) may be underestimated. See also analysis assumes that all changes in upstream retail gasoline composition is unaffected by this Section III.G above for more information. emissions result from a decrease in petroleum rule; as a result, the impacts of this rule on production and transport, the analysis of non-GHG downstream non-GHG emissions (more specifically,

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In turn, the reductions in emissions per-ton estimates that reflect the necessarily a good indication of local or reported in Tables IV–44 and IV–45 are quantifiable reductions in health regional air quality and health impacts, projected to result in significant impacts likely to result from reduced because the atmospheric chemistry declines in the adverse health effects population exposure to particular matter governing formation and accumulation that result from population exposure to (PM2.5). They do not include all health of ambient concentrations of PM2.5, these pollutants. Table IV–46 reports the impacts related to reduced exposure to ozone, and air toxics is very complex. PM, nor do they include any reductions estimated reductions in selected PM2.5- Full-scale photochemical modeling related human health impacts that are in health impacts resulting from lower would provide the necessary spatial and expected to result from reduced population exposure to other criteria air temporal detail to more completely and pollutants (particularly ozone) and air population exposure to unhealthful accurately estimate the changes in toxics. atmospheric concentrations of PM2.5. There may be localized air quality and ambient levels of these pollutants and The estimates reported in Table IV–46, health impacts associated with this their associated health and welfare based on analysis documented in the rulemaking that are not reflected in the impacts. NHTSA intends to conduct draft Environmental Impact Statement estimates of aggregate air quality such modeling for purposes of the final (EIS) that informed the agency’s changes and health impacts reported in rule, but it was not available in time to decisions regarding this proposed rule, this analysis. Emissions changes and inform these proposed standards or to are derived from PM2.5-related dollar- dollar-per-ton estimates alone are not be included in the Draft EIS.

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4. What are the estimated costs and well as fuel savings to vehicle buyers. cost learning and the conversion from benefits of these proposed standards? Also, as discussed above, NHTSA short- to long-term ICMs. Table I–47 NHTSA estimates that the proposed estimates that today’s proposed represents the CAFE model inputs for standards could entail significant standards could induce manufacturers MY 2012, MY 2017, MY 2021 and MY additional technology beyond the levels to apply technology during redesigns 2025 approximate net (accumulated) that could be applied under baseline leading into model years covered by technology costs for some of the key CAFE standards (i.e., the application of today’s new standards, and to incur enabling technologies as applied to MY 2016 CAFE standards to MYs 2017– corresponding increases in technology Midsize passenger cars.768 Additional 2025). This additional technology will outlays. details on technology cost estimates can lead to increases in costs to Technology costs are assumed to be found in Chapter V of NHTSA’s PRIA manufacturers and vehicle buyers, as change over time due to the influence of and Chapter 3 of the Joint Draft TSD.

768 The net (accumulated) technology costs listed in the table. The baseline vehicle is assumed cylinder engine, 5-speed transmission and no represent the costs from a baseline vehicle (i.e. the to utilize a fixed-valve naturally aspirated inline 4 electrification/hybridization improvements. top of the decision tree) to each of the technologies

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In order to pay for this additional compliance with baseline (MY 2016) passenger car, light truck, and overall technology (and, for some standards by $228–$2,023 and $44– fleets (with corresponding averages for manufacturers, civil penalties), NHTSA $1,578, respectively, during MYs 2017– the industry): estimates that the cost of an average 2025. The following tables summarize BILLING CODE 4910–59–P passenger car and light truck will the agency’s estimates of average cost increase relative to levels resulting from increases for each manufacturer’s

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These cost estimates reflect the smallest relative to baseline production shows relative cost increases declining potential that a given manufacturer’s costs. Therefore, if average incremental as baseline vehicle price increases. efforts to minimize overall regulatory vehicle cost increases (including any Figure IV–3 shows the trend for MY costs could focus technology where the civil penalties) are measured as 2025, for vehicles with estimated most fuel can be saved at the least cost, increases relative to baseline prices baseline prices up to $100,000: and not necessarily, for example, where (estimated by adding baseline costs to the cost to add technology would be MY 2008 prices), the agency’s analysis

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If manufacturers pass along these is worth monitoring in the market going cases where one technology is costs rather than reducing profits, and forward. NHTSA seeks comment on superseded (i.e., displaced) by another. pass these costs along where they are potential market effects related to this For example, the agency estimates that incurred rather than ‘‘cross-subsidizing’’ issue. manufacturers could apply many among products, the quantity of As mentioned above, these estimated improvements to transmissions (e.g., vehicles produced at different price costs derive primarily from the dual clutch transmissions, denoted levels would change. Shifts in additional application of technology below by ‘‘DCT’’) through MY 2025 production may potentially occur, under the proposed standards. The under baseline standards. However, the which could create marketing following three tables summarize the agency also estimates that challenges for manufacturers that are incremental extent to which the agency manufacturers could apply even more active in certain segments. We estimates technologies could be added advanced high efficiency transmissions recognize, however, that many to the passenger car, light truck, and (denoted below by ‘‘HETRANS’’) under manufacturers do in fact cross-subsidize overall fleets in each model year in the proposed standards, and that these to some extent, and take losses on some response to the proposed standards. transmissions would supersede DCTs vehicles while continuing to make Percentages reflect the technology’s and other transmission advances. profits from others. NHTSA has no additional application in the market, Therefore, as shown in the following evidence to indicate that manufacturers relative to the estimated application three tables, the incremental application will inevitably shift production plans in under baseline standards (i.e., of DCTs under the proposed standards response to these proposed standards, application of MY 2016 standards is negative. but nevertheless believes that this issue through MY 2025), and are negative in BILLING CODE 4910–59–P

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Based on the agencies’ estimates of increases associated with this additional 2017) for additional technology manufacturers’ future sales volumes, application of technology will lead to a attributable to the proposed standards: and taking into account early outlays total of nearly $157 billion in BILLING CODE 4910–59–P attributable to multiyear planning incremental outlays during MYs 2017– effects (discussed above), the cost 2025 (and model years leading up to MY

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NHTSA notes that these estimates of Finally, while NHTSA is confident also produce significant benefits to the economic costs for meeting higher that the cost estimates are the best society. Most of these benefits are CAFE standards omit certain potentially available and appropriate for purposes attributable to reductions in fuel important categories of costs, and may of this proposed rule, it is possible that consumption; fuel savings are valued also reflect underestimation (or possibly the agency may have underestimated or using forecasts of pretax prices in EIA’s overestimation) of some costs that are overestimated manufacturers’ direct reference case forecast from AEO 2011. included. For example, although the costs for applying some fuel economy The total benefits also include other agency’s analysis is intended—with technologies, or the increases in benefits and dis-benefits, examples of 769 very limited exceptions —to hold manufacturer’s indirect costs associated which include the social values of vehicle performance, capacity, and with higher vehicle manufacturing reductions in CO2 and criteria pollutant utility constant when applying fuel- costs. In either case, the technology emissions, the value of additional travel saving technologies to vehicles, the outlays reported here will not correctly (induced by the rebound effect), and the analysis imputes no cost to any actual represent the costs of meeting higher social costs of additional congestion, reductions in vehicle performance, CAFE standards. Similarly, NHTSA’s accidents, and noise attributable to that capacity, and utility that may result estimates of increased costs of from manufacturers’ efforts to comply congestion, accidents, and noise additional travel. The PRIA with the proposed CAFE standards. associated with added vehicle use are accompanying today’s proposed rule Although these costs are difficult to drawn from a 1997 study, and the presents a detailed analysis of the rule’s estimate accurately, they nonetheless correct magnitude of these values may specific benefits. represent a notable category of omitted have changed since they were As Tables IV–59 and 60 show, costs if they have not been adequately developed. If this is the case, the costs NHTSA estimates that at the discount accounted for in the cost estimates. of increased vehicle use associated with rates of 3 percent prescribed in OMB Similarly, the agency’s estimates of net the fuel economy rebound effect will guidance for regulatory analysis, the benefits for meeting higher CAFE differ from the agency’s estimates in this present value of total benefits from the standards includes estimates of the analysis. Thus, like the agency’s proposed CAFE standards over the economic value of potential changes in estimates of economic benefits, lifetimes of MY 2017–2025 (and, motor vehicle fatalities that could result estimates of total compliance costs accounting for multiyear planning from reductions in the size or weight of reported here may underestimate or effects discussed above, model years vehicles, but not of changes in non-fatal overestimate the true economic costs of leading up to MY 2017) passenger cars injuries that could result from the proposed standards. and light trucks will be $515 billion. reductions in vehicle size and/or However, offsetting these costs, the weight. achieved increases in fuel economy will

769 For example, the agencies have assumed no towing capability is not maintained; due to due to potential drivability and NVH issues with cost changes due to our assumption that HEV potential drivability issues with the P2 HEV; and the shift optimizer.

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Tables IV–61 and 62 report that the billion when discounted at the 7 percent percent—lower when discounted at a 7 present value of total benefits from rate also required by OMB guidance. percent annual rate than when requiring cars and light trucks to Thus the present value of fuel savings discounted using the 3 percent annual achieve the fuel economy levels and other benefits over the lifetimes of rate.771 specified in the proposed CAFE the vehicles covered by the proposed standards for MYs 2017–25 will be $419 standards is $96 billion—or about 19

770 Unless otherwise indicated, all tables in prescribed in the interagency guidance on the social at 3 percent in order to maintain consistency with Section IV report benefits calculated using the cost of carbon. the discount rate used to develop the reference case Reference Case input assumptions, with future 771 For tables that report total or net benefits using estimate of the social cost of carbon. All other benefits resulting from reductions in carbon dioxide a 7 percent discount rate, future benefits from future benefits reported in these tables are emissions discounted at the 3 percent rate discounted using the 7 percent rate. reducing carbon dioxide emissions are discounted

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For both the passenger car and light economy levels required by the benefits, and not that of technology truck fleets, NHTSA estimates that the proposed standards are incurred during costs. benefits of today’s proposed standards the model years when the vehicles are As Tables IV–63 and 64 show, over will exceed the corresponding costs in produced and sold, however, they are the lifetimes of the affected (MY 2017– every model year, so that the net social not subject to discounting, so that their 2025, and MYs leading up to MY 2017) benefits from requiring higher fuel present value does not depend on the vehicles, the agency estimates that when economy—the difference between the discount rate used. Thus the net benefits total benefits that result from higher fuel of the proposed standards differ the benefits of the proposed standards economy and the technology outlays depending on whether the 3 percent or are discounted at a 3 percent rate, they required to achieve it—will be 7 percent discount rate is used, but only will exceed the costs of the proposed substantial. Because the technology because the choice of discount rates standards by $358 billion: outlays required to achieve the fuel affects the present value of total

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As indicated previously, when fuel to discounting, using the higher 7 are discounted at the higher rate, savings and other future benefits percent discount rate reduces net totaling $262 billion over MYs 2017–25. resulting from the proposed standards benefits by exactly this same amount. Net benefits are thus about 27 percent are discounted at the 7 percent rate Nevertheless, Tables IV–65 and 66 show lower when future benefits are prescribed in OMB guidance, they are that the net benefits from requiring discounted at a 7 percent annual rate $96 billion lower than when the 3 passenger cars and light trucks to than at a 3 percent rate. percent discount rate is applied. achieve higher fuel economy are still Because technology costs are not subject substantial even when future benefits

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NHTSA’s estimates of economic economy stems from its reliance on the higher CAFE standards for MY 2017–25. benefits from establishing higher CAFE Reference Case fuel price forecasts As another example, the agency’s standards are subject to considerable reported in AEO 2011. Although estimate of benefits from reducing the uncertainty. Most important, the NHTSA believes that these forecasts are threat of economic damages from agency’s estimates of the fuel savings the most reliable that are available, they disruptions in the supply of imported likely to result from adopting higher are nevertheless significantly higher petroleum to the U.S. applies to CAFE standards depend critically on the than the fuel price projections reported calendar year 2020. If the magnitude of accuracy of the estimated fuel economy in most previous editions of EIA’s this estimate would be expected to grow levels that will be achieved under both Annual Energy Outlook, and reflect after 2015 in response to increases in the baseline scenario, which assumes projections of world oil prices that are U.S. petroleum imports, growth in the that manufacturers will continue to well above forecasts issued by other level of U.S. economic activity, or comply with the MY 2016 CAFE firms and government agencies. If the increases in the likelihood of standards, and under alternative future fuel prices projected in AEO 2011 disruptions in the supply of imported increases in the standards that apply to prove to be too high, the agency’s petroleum, the agency may have MYs 2017–25 passenger cars and light estimates of the value of future fuel underestimated the benefits from the trucks. Specifically, if the agency has savings—the major component of reduction in petroleum imports underestimated the fuel economy levels benefits from this rule—will also be too expected to result from adopting higher that manufacturers would have high. CAFE standards. achieved under the baseline scenario— However, it is also possible that NHTSA’s benefit estimates could also or is too optimistic about the fuel NHTSA’s estimates of economic benefits be too low because they exclude or economy levels that manufacturers will from establishing higher CAFE understate the economic value of certain actually achieve under the proposed standards underestimate the true potentially significant categories of standards—its estimates of fuel savings economic benefits of the fuel savings benefits from reducing fuel and the resulting economic benefits those standards would produce. If the consumption. As one example, EPA’s attributable to this rule will be too large. AEO 2011 forecast of fuel prices proves estimates of the economic value of Another major source of potential to be too low, for example, NHTSA will reduced damages to human health overestimation in the agency’s estimates have underestimated the value of fuel resulting from lower exposure to criteria of benefits from requiring higher fuel savings that will result from adopting air pollutants includes only the effects

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of reducing population exposure to reducing the pace and extent of global reducing the extent of climate change PM2.5 emissions. Although this is likely climate change.772 For example, none of and these associated impacts would to be the most significant component of the three models used to value climate- increase the agency’s estimates of health benefits from reduced emissions related economic damages includes benefits from adopting higher CAFE of criteria air pollutants, it excludes the those resulting from ocean acidification standards. value of reduced damages to human or loss of species and wildlife. The The following tables present itemized health and other impacts resulting from models also may not adequately capture costs and benefits for the combined lower emissions and reduced certain other impacts, including passenger car and light truck fleets for population exposure to other criteria air potentially abrupt changes in climate each model year affected by the pollutants, including ozone and nitrous associated with thresholds that govern oxide (N O), as well as to airborne proposed standards and for all model 2 climate system responses, interregional years combined, using both discount toxics. EPA’s estimates exclude these interactions such as global security benefits because no reliable dollar-per- rates prescribed by OMB regulatory impacts of extreme warming, or limited ton estimates of the health impacts of guidance. Tables IV–67 and 68 report near-term substitutability between criteria pollutants other than PM or of technology outlays, each separate 2.5 damage to natural systems and the health impacts of airborne toxics component of benefits (including costs were available to use in developing increased consumption. Including associated with additional driving due estimates of these benefits. monetized estimates of benefits from to the rebound effect, labeled ‘‘dis- Similarly, the agency’s estimate of the benefits’’), the total value of benefits, value of reduced climate-related 772 Social Cost of Carbon for Regulatory Impact and net benefits using the 3 percent Analysis Under Executive Order 12866, Interagency discount rate. (Numbers in parentheses economic damages from lower Working Group on Social Cost of Carbon, United emissions of GHGs excludes many States Government, February 2010. Available in represent negative values.) sources of potential benefits from Docket No. NHTSA–2009–0059. BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C (including ‘‘dis-benefits’’ resulting from rate. (Again, numbers in parentheses Similarly, Tables IV–69 and 70 below additional driving) and their total and represent negative values.) report technology outlays, the net benefits using the 7 percent discount BILLING CODE 4910–59–P individual components of benefits

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774 Using the central value of $22 per metric ton Additionally, we note that the $22 per metric ton increases over time. See the interagency guidance for the SCC, and discounting future benefits from value for the SCC applies to calendar year 2010, and on SCC for more information. reduced CO2 emissions at a 3 percent annual rate.

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BILLING CODE 4910–59–C However, the agency notes that, in and benefits taking into account EPCA’s These benefit and cost estimates do reality, manufacturers are likely to rely provisions regarding EVs, PHEVs not reflect the availability and use of to some extent on flexibility produced before MY 2020, FFV credits, certain flexibility mechanisms, such as mechanisms and would thereby reduce and other CAFE credit provisions. compliance credits and credit trading, the cost of complying with the proposed Accounting for these provisions because EPCA prohibits NHTSA from standards to a meaningful extent. indicates that achieved fuel economies considering the effects of those As discussed in the PRIA, NHTSA has would be 0.5–1.6 mpg lower than when mechanisms in setting CAFE standards. performed an analysis to estimate costs these provisions are not considered:

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As a result, NHTSA estimates that, total 163 billion gallons—5.8 percent estimated when these flexibilities are when EPCA AFV and credit provisions less than the 173 billion gallons not considered: are taken into account, fuel savings will

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The agency similarly estimates CO2 million metric tons (mmt), 5.0 percent these EPCA provisions are not emissions reductions will total 1,742 less than the 1,834 mmt estimated when considered: 775

775 Differences in the application of diesel engines differences in the percentage changes in fuel consumption and carbon dioxide emissions and plug-in hybrid electric vehicles lead to between the with- and without-credit cases.

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This analysis further indicates that taken into account. Tables IV–77 and 78 provisions, or about 15 percent less than significant reductions in outlays for below show that, total technology costs the $157 billion estimated when additional technology will result when are estimated to decline to $133 billion excluding these flexibilities: EPCA’s AFV and credit provisions are as a result of manufacturers’ use of these

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Because NHTSA’s analysis indicated the present value of total benefits will benefits is $27 billion, or 5.2 percent, that these EPCA provisions will be $488 billion when discounted at a 3 lower than the $515 billion reported modestly reduce fuel savings and percent annual rate, as Tables IV–79 and previously for the analysis that related benefits, the agency’s estimate of 80 below report. This estimate of total excluded these provisions:

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Similarly, NHTSA estimates that the higher 7 percent rate. Tables IV–81 and discounted using a 7 percent rate, about present value of total benefits will 82 report that the present value of $22 billion (5.3 percent) below the decline modestly from its previous benefits from requiring higher fuel previous $419.2 billion estimate of total estimate when future fuel savings and economy for MY 2017–25 cars and light benefits when FFV credits were not other benefits are discounted at the trucks will total $397 billion when permitted:

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Although the discounted present will reduce net benefits by a smaller billion from the previously-reported value of total benefits will be modestly proportion. As Tables IV–83 and 84 estimate of $358 billion without those lower when EPCA AFV and credit show, the agency estimates that these credits, or by only about 1 percent. provisions are taken into account, the will reduce net benefits from the agency estimates that these provisions proposed CAFE standards to $355

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Similarly, Tables IV–85 and 86 economy for MY 2017–25 cars and light than the previously-reported $262 immediately below show that NHTSA trucks, but very slightly—to $264 billion estimate of net benefits without estimates manufacturers’ use of EPCA billion—if a 7 percent discount rate is the availability of EPCA AFV and credit AFV and credit provisions will increase applied to future benefits. This estimate provisions using that same discount net benefits from requiring higher fuel is $2 billion—or 0.8 percent—higher rate.

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The agency has performed several consumption. In the sensitivity analysis, • ($4.86 per ton CO2) × 0.0089 = sensitivity analyses to examine we examine the following values and $0.043 per gallon discounted at 5% important assumptions. All sensitivity discount rates applied only to the social • ($22.00 per ton CO2) × 0.0089 = analyses were based on the ‘‘standard cost of carbon to value carbon benefits, $0.196 per gallon discounted at 3% setting’’ output of the CAFE model. We considering low, high, and very high (used in the main analysis) examine sensitivity with respect to the valuations of approximately $5, $36, • ($36.13 per ton CO2) ×0.0089 = following economic parameters: and $67 per ton, respectively with $0.322 per gallon discounted at 2.5% • (1) The price of gasoline: The main regard to the benefits of reducing CO2 And a 95th percentile estimate of analysis (i.e., the Reference Case) uses emissions.776 These are the 2010 values, • ($66.88 per ton CO2) × 0.0089 = the AEO 2011 Reference Case estimate which increase over time. These values $0.595 per gallon discounted at 3% for the price of gasoline. In this can be translated into cents per gallon (4) Military security: The main sensitivity analysis we examine the by multiplying by 0.0089,777 giving the analysis does not assign a value to the effect of using the AEO 2011 High Price following values: military security benefits of reducing Case or Low Price Case forecast fuel consumption. In the sensitivity estimates instead. 776 The low, high, and very high valuations of $5, analysis, we examine the impact of (2) The rebound effect: The main $36, and $67 are rounded for brevity; the exact using a value of 12 cents per gallon analysis uses a rebound effect of 10 values are $4.86, $36.13, and $66.88, respectively. instead. percent to project increased miles While the model uses the unrounded values, the (5) Consumer Benefit: The main traveled as the cost per mile driven use of unrounded values is not intended to imply analysis assumes there is no loss in that the chosen values are precisely accurate to the decreases. In the sensitivity analysis, we nearest cent; rather, they are average levels resulting value to consumers resulting from examine the effect of using a 5, 15, or from the many published studies on the topic. vehicles that have an increase in price 20 percent rebound effect instead. 777 The molecular weight of Carbon (C) is 12, the and higher fuel economy. This (3) The value of CO2 benefits: The molecular weight of Oxygen (O) is 16, thus the sensitivity analysis assumes that there is main analysis uses $22 per ton molecular weight of CO2 is 44. 1 gallon of gas a 25, or 50 percent loss in value to discounted at a 3 percent discount rate weighs 2,819 grams, of that 2,433 grams are carbon. consumers—equivalent to the One ton of CO2/One ton of C (44/12)* 2433grams to quantify the benefits of reducing CO2 C/gallon *1 ton/1000kg * 1 kg/1000g = (44 * assumption that consumers will only emissions and $0.174 per gallon to 2433*1*1)/(12*1*1000 * 1000) = 0.0089. Thus, one value the calculated benefits they will quantify the benefits of reducing fuel ton of CO2*0.0089 = 1 gallon of gasoline. achieve at 75, or 50 percent,

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respectively, of the main analysis recommendations from technical developed by ANL and funded by estimates. experts in the field of battery energy DOE.778 The values for these ranges are (6) Battery cost: The agency storage technologies at the Department shown in the table below and are conducted a sensitivity analysis of of Energy (DOE) and at Argonne calculated with 95 percent confidence technology cost in relation to battery National Laboratories (ANL), and were intervals after analyzing the confidence costs for HEV, PHEV, and EV batteries. developed using the Battery bound using the BatPac model. The ranges are based on Performance and Cost (BatPac) model

(7) Mass reduction cost: Due to the performed examining the impact of the reduction is represented as a linear wide range of mass reduction costs as cost of vehicle mass reduction to the function between the unit DMC versus discussed in Chapter 3 of the draft joint total technology cost. The direct percent of mass reduction, as shown in TSD, a sensitivity analysis was manufacturing cost (DMC) for mass the figure below:

The slope of the line used in the central pound per percent of mass reduction. the upper and lower bound for this analysis for this NPRM is $4.32 per The slope of the line is varied + 40% as sensitivity study. The resultant values

778 Section 3.4.3.9 in Chapter 3 of the draft Joint BatPac model and how the agencies used it in this TSD has a detailed description of the history of the NPRM analysis.

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for the range of mass reduction cost are shown in the table below:

(8) Market-driven response: The assumed that manufacturers that were willing to pay for fuel savings to be baseline for the central analysis is based above their MY 2016 CAFE level would realized during the first year of vehicle on the MY 2016 CAFE standards and compare the cost to consumers to the ownership. The ‘market-driven assumes that manufacturers will make fuel savings in the first year of operation response’ assumes that manufacturers no changes in the fuel economy from and decide to voluntarily apply those will overcomply if additional that level through MY 2025. A technologies to their vehicles when technology is sufficiently cost-effective. sensitivity analysis was performed to benefits for the first year exceeded costs Because this assumption has a greater simulate potential increases in fuel for the consumer. For a manufacturer’s impact under the baseline standards, its economy over the compliance level fleet that has not yet achieved application reduces the incremental required if MY 2016 standards were to compliance with CAFE standards, the costs, effects, and benefits attributable to remain in place. The assumption is that agency continued to apply a five-year the new standards. This does not mean the market would drive manufacturers payback period. In other words, for this that costs, effects, and benefits would to put technologies into their vehicles sensitivity analysis the agency assumed actually be smaller with a market-driven that they believe consumers would that manufacturers that have not yet met response; rather, it means that costs, value and be willing to pay for. Using CAFE standards for future model years effects, and benefits would be at least as parameter values consistent with the will apply technology as if buyers were great, but would be partially attributable central analysis, the agency simulated a willing to pay for the technologies as not to the new standards, but instead to market-driven response by applying a long as the fuel savings throughout the the market. payback period of one year for purposes first five years of vehicle ownership Varying each of these eight of calculating the value of future fuel exceeded their costs. Once having parameters in isolation results in a savings when simulating whether complied with those standards, variety of economic scenarios, in manufacturers would apply additional however, manufacturers are assumed to addition to the Reference case. These technology to an already CAFE- consider making further improvements are listed in Table IV–87 below. compliant fleet. In other words we in fuel economy as if buyers were only BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C The basic results of this sensitivity the PRIA, but several selected findings analysis are contained in Chapter X of are as follows:

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(1) Varying the economic assumptions benefits at 50 and 75 percent (¥63.0% markup factor of 1.5 for non- has almost no impact on achieved mpg. and ¥31.5%, respectively), and valuing electrification technologies, which is The mass reduction cost sensitivities, the reduction in CO2 emissions at $67/ consistent with the NAS estimation for battery cost reduction sensitivities, and ton (+28.1%). technologies manufactured by suppliers, the market-based baseline are the only (4) Even if consumers value the and an RPE markup factor of 1.33 for cases in which achieved mpg differs benefits achieved at 50% of the main electrification technologies (HEV, from the Reference Case of the Preferred analysis assumptions, total benefits still PHEV, and EV); three types of learning Alternative. None of these alter the exceed costs. which include no learning for mature Regarding the lower fuel savings and outcome by more than 0.2 mpg for technologies, 1.25 percent annual either fleet. CO2 emissions reductions predicted by learning for evolutionary technologies, (2) Varying the economic assumptions the sensitivity analysis as fuel price has, at most, a small impact on per- increases, which initially may seem and 2.5 percent annual learning for revolutionary technologies; technology vehicle costs, fuel saved, and CO2 counterintuitive, we note that there are emissions reductions, with none of the some counterbalancing factors cost estimates for 52 percent (33 out of variations impacting the outcomes by occurring. As fuel price increases, 63) technologies; and technology more than 10 percent from their central people will drive less and so fuel effectiveness estimates for 56 percent analysis levels, save for several savings and CO2 emissions reductions (35 out of 63) technologies. Cost exceptions including alternate fuel price may decrease. learning was applied to technology costs sensitivities and the sensitivity The agency performed two additional in a manner similar to how cost learning involving a 20 percent rebound effect. sensitivity analyses presented in Tables is applied in the central analysis for (3) The category most affected by IV–88 and IV–89. First, the agency many technologies which have base variations in the economic parameters analyzed the impact that having a retail costs that are applicable to recent or considered in these sensitivity analyses price equivalent (RPE) factor of 1.5 for near-term future model years. As noted is net benefits. The sensitivity analyses all technologies would have on the above, the cost learning factors used for examining the AEO Low and High fuel various alternatives instead of using the the sensitivity case are different from price scenarios demonstrate the indirect cost methodology (ICM). The the values used in the central analysis. potential to negatively impact net ICM methodology in an overall markup For the other inputs in the sensitivity benefits by up to 40.3 percent or to factor of 1.2 to 1.25 compared to the case, where the NAS study has increase net benefits by 29.5 percent RPE markup factor from variable cost of inconsistent information or lacks relative to those of the Preferred 1.5. Next, the agency conducted a Alternative. Other large impacts on net separate sensitivity analysis using projections, NHTSA used the same benefits occurred with the 20 percent values that were derived from the 2011 input values that were used in the rebound effect (-38.4%), valuing NAS Report. This analysis used an RPE central analysis.

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For today’s rulemaking analysis, the additional technology would increase model. This capability, which is agency has also performed a sensitivity vehicle production costs (including discussed further above in section analysis where manufacturers are markup) by less than it would reduce IV.C.4.c and in the CAFE model allowed to voluntarily apply more buyers’ fuel costs during the first year documentation, is a logical extension of technology than would be required to they own the vehicle. This analysis the model’s simulation of some comply with CAFE standards for each makes use of the ‘‘voluntary manufacturers’ decisions to respond to model year. Manufacturers are assumed overcompliance’’ simulation capability EPCA by paying civil penalties once to do so as long as applying each DOT has recently added to its CAFE additional technology becomes

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economically unattractive. It attempts to economy as if buyers were only willing provide a powerful incentive for simulate manufacturers’ responses to to pay for fuel savings to be realized increased fuel economy; this implies buyers’ demands for higher fuel during the first year of vehicle that manufacturers believe buyers are economy levels than prevailing CAFE ownership. This reflects the agency’s willing to pay for some fuel economy standards would require when fuel costs assumptions for this sensitivity analysis, increases, but that buyers’ willingness to are sufficiently high, and technologies that (1) civil penalties, though legally do so depends on their expectations for that manufacturers have not yet fully available, carry a stigma that future fuel prices. In their confidential utilized are available to improve fuel manufacturers will strive to avoid, and statements to the agency, manufacturers economy at relatively low costs. that (2) having achieved compliance have also tended to indicate that in their NHTSA performed this analysis with CAFE standards, manufacturers past product planning processes, they because some stakeholders commenting will avoid competitive risks entailed in have assumed buyers would only be on the recently-promulgated standards charging higher prices for vehicles that willing to pay for technologies that for medium- and heavy-duty vehicles offer additional fuel economy, rather ‘‘break even’’ within a relatively short indicated that it would be unrealistic for than offering additional performance or time—generally the first two to four the agency to assume that in the absence utility. years of vehicle ownership. of new regulations, technology and fuel Since CAFE standards were first NHTSA considers it not only feasible economy would not improve at all in introduced, some manufacturers have but appropriate to simulate such effects the future. In other words, these consistently exceeded those standards, by calculating the present value of fuel stakeholders argued that market forces and the industry as a whole has savings over some ‘‘payback period.’’ are likely to result in some fuel consistently overcomplied with both the The agency also believes it is economy improvements over time, as passenger car and light truck standards. appropriate to assume that specific potential vehicle buyers and Although the combined average fuel improvements in fuel economy will be manufacturers respond to changes in economy of cars and light trucks implemented voluntarily if fuel prices and in the availability and declined in some years, this resulted manufacturers’ costs for adding the costs of technologies to increase fuel from buyers shifting their purchases technology necessary to implement economy. NHTSA agrees that, in from passenger cars to light trucks, not them to specific models would be lower principle, its analysis should estimate a from undercompliance with either than potential buyers’ willingness to potential that manufacturers will apply standard. Even with those declines, the pay for the resulting fuel savings. This technology as if buyers place some industry still overcomplied with both approach takes fuel costs directly into value on fuel economy improvements. passenger car and light truck standards. account, and is therefore responsive to Considering current uncertainties In recent years, between MYs 1999 and manufacturers’ statements regarding the discussed below regarding the degree to 2009, fuel economy overcompliance has role that fuel prices play in influencing which manufacturers will do so, the been increasing on average for both the buyers’ demands and manufacturers’ agency currently judges it appropriate to passenger car and the light truck fleets. planning processes. Under this conduct its central rulemaking analysis NHTSA considers it impossible to say approach, a short payback period can be without attempting to simulate these with certainty why past fuel economy employed if manufacturers are expected effects. Nonetheless, the agency believes levels have followed their observed to act as if buyers place little value on that voluntary overcompliance is path. If the agency could say with fuel economy. Conversely, a longer sufficiently plausible that corresponding certainty how fuel economy would have payback period can be used if sensitivity analysis is warranted. changed in the absence of CAFE manufacturers are expected to act as if NHTSA performed this analysis by standards, it might be able to answer buyers will place comparatively greater simulating potential overcompliance this question; however, NHTSA regards value on fuel economy. under the no-action alternative, the this ‘‘counterfactual’’ case as simply NHTSA cannot be certain to what preferred alternative, and other unknowable. extent vehicle buyers will, in the future, regulatory alternatives. In doing so, the NHTSA has, however, considered be willing to pay for fuel economy agency used all the same parameter other relevant indications regarding improvements, or to what extent values as in the agency’s central manufacturers’ potential future manufacturers would, in the future, analysis, but applied a payback period decisions. Published research regarding voluntarily apply more technology than of one year for purposes of calculating how vehicle buyers have previously needed to comply with fuel economy the value of future fuel savings when viewed fuel economy suggests that they standards. The agency is similarly simulating whether a manufacturer have only a weak quantitative hopeful that future vehicle buyers will would apply additional technology to understanding of the relationship be more willing to pay for fuel economy an already CAFE-compliant fleet. For between fuel economy and future fuel improvements than has historically technologies applied to a manufacturer’s outlays, and that potential buyers value been the case. In meetings preceding fleet that has not yet achieved fuel economy improvements by less today’s proposed standards, two compliance with CAFE standards, the than theoretical present-value manufacturers stated they expected fuel agency continued to apply a five-year calculations of lifetime fuel savings economy to increase two percent to payback period. would suggest. These findings are three percent per year after MY 2016, In other words, for this sensitivity generally consistent with absent more stringent regulations. And analysis the agency assumed that manufacturers’ confidential and, in in August 2010, one manufacturer stated manufacturers that have not yet met some cases, public statements. its combined fleet would achieve 50 CAFE standards for future model years Manufacturers have tended to mpg by MY 2025, supporting that at a will apply technology as if buyers were communicate not that buyers absolutely minimum some manufacturers believe willing to pay for fuel savings ‘‘don’t care’’ about fuel economy, but that exceeding fuel economy standards throughout the first five years of vehicle that buyers have, in the past, not been will provide them a competitive ownership. Once having complied with willing to pay the full cost of most fuel advantage. The agency is hopeful that those standards, however, economy improvements. Manufacturers future vehicle buyers will be better- manufacturers are assumed to consider have also tended to indicate that informed than has historically been the making further improvements in fuel sustained high fuel prices would case, in part because recently-

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promulgated requirements regarding conduct its central rulemaking analysis Results of the agency’s analysis vehicle labels will provide clearer in a manner that ignores the possibility simulating this potential for voluntary information regarding fuel economy and that in the future, manufacturers will overcompliance are summarized below. the dollar value of resulting fuel voluntarily apply more technology than Compared to results from the agencies’ savings. The agency is similarly hopeful the minimum necessary to comply with central analysis presented above, that future vehicle buyers will be more CAFE standards. Also, in conducting its differences are greatest for the baseline willing to pay for fuel economy sensitivity analysis to simulate scenario (i.e., the No-Action improvements than past buyers. In voluntary overcompliance with the Alternative), under which CAFE meetings preceding today’s proposed proposed standards, the agency has standards remain unchanged after MY standards, many manufacturers applied the extremely conservative 2016. These results also suggest, as the indicated significant shifts in their assumption that when considering agency would expect, that because product plans—shifts consistent with whether to employ ‘‘extra’’ technology, increasingly stringent standards require expectations that compared to past progressively more technology than the manufacturers will act as if buyers’ buyers, future buyers will ‘‘care more’’ market will demand, the likelihood of value the resulting savings in fuel costs about fuel economy. voluntary overcompliance will decline Nevertheless, considering the only during their first year of ownership with increasing stringency. Achieved uncertainties mentioned above, NHTSA (i.e., as if a 1-year payback period fuel economy levels under baseline continues to consider it appropriate to applies). standards are as follows:

With no change in standards after MY estimated that combined average overcompliance with the proposed 2016, while combined average fuel achieved fuel economy would reach standards was minimal. Allowing economy is the same in MY 2017 both 35.2 mpg in MY 2025, whereas the manufacturers to overcomply with the with and without simulated voluntary agency estimates that it would reach proposed standards for MY 2025 led to overcompliance, differences grow over 36.0 mpg in that year if voluntary combined average achieved fuel time, reaching 0.8 mpg in MY 2025. In overcompliance occurred. economy levels approximately equal to other words, without simulating In contrast, the effect on achieved fuel levels of values obtained without voluntary overcompliance, the agency economy levels of allowing voluntary simulating voluntary overcompliance:

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As a result, NHTSA estimates that, fuel savings attributable to more billion gallons estimated when potential when the potential for voluntary stringent standards will total 162 billion voluntary overcompliance is not taken overcompliance is taken into account, gallons—6.4 percent less than the 173 into account:

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The agency is not projecting, reduce the agency’s estimate of future or benefit to the workings of the market, however, that fuel consumption will be fuel savings over the baseline scenario. rather than to the proposed standards. greater when voluntary overcompliance Rather it changes the attribution of those The agency similarly estimates CO2 is taken into account. Rather, under fuel savings to the proposed standards, emissions reductions attributable to today’s proposed standards, the because voluntary overcompliance today’s proposed standards will total agency’s analysis shows virtually attributes some of the fuel savings to the 1,726 million metric tons (mmt), 5.8 identical fuel consumption (0.2 percent market. The same holds for the less over the useful lives of MY 2017– attribution of costs, other effects, and percent less than the 1,834 mmt 2025 vehicles) when potential voluntary monetized benefits—inclusion of estimated when potential voluntary overcompliance is taken into account. voluntary overcompliance does not overcompliance is not taken into 779 Simulation of voluntary necessarily change their amounts, but it account: overcompliance, therefore, does not does attribute some of each cost, effect,

779 Differences in the application of diesel engines differences in the incremental percentage changes and plug-in hybrid electric vehicles lead to in fuel consumption and carbon dioxide emissions.

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Conversely, this analysis indicates increases in technology application estimated to increase to $159 billion, or slightly greater outlays for additional when potential voluntary 1.3 percent more than the $157 billion technology under the proposed overcompliance is taken into account. estimated when potential voluntary standards when potential voluntary Tables IV–99 and 100 below show that overcompliance was not taken into overcompliance is taken into account. total technology costs attributable to account: This increase is attributable to slight today’s proposed standards are

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Because NHTSA’s analysis indicated of the present value of total benefits will 6 percent, lower than the $515 billion that voluntary overcompliance with be $484 billion when discounted at a 3 reported previously for the analysis in baseline standards will slightly reduce percent annual rate, as Tables IV–101 which potential voluntary the share of fuel savings attributable to and 102 following report. This estimate overcompliance was not taken into today’s standards, the agency’s estimate of total benefits is $31 billion, or about account:

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Similarly, when accounting for discounted at the higher 7 percent rate. percent rate, about $25 billion (or 6 potential voluntary overcompliance, Tables IV–103 and 104 report that the percent) below the previous $419 billion NHTSA estimates that the present value present value of benefits from requiring estimate of total benefits when potential of total benefits will decline from its higher fuel economy for MY 2017–25 voluntary overcompliance is not taken previous estimate when future fuel cars and light trucks will total $394 into account: savings and other benefits are billion when discounted using a 7

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Based primarily on the reduction of the agency estimates, as shown in than the previously-reported estimate of benefits attributable to the proposed Tables IV–105 and 106, that net benefits $358 billion, which did not incorporate standards when voluntary from the proposed CAFE standards will the potential for voluntary overcompliance is taken into account, be $325 billion—or 9.2 percent—less overcompliance.

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Similarly, Tables IV–107 and 108 billion if a 7 percent discount rate is potential voluntary overcompliance is immediately below show that NHTSA applied to future benefits. This estimate not taken into account, using that same estimates voluntary overcompliance is $24 billion—or 10.3 percent—lower discount rate. could reduce net benefits attributable to than the previously-reported $262 today’s proposed standards to $235 billion estimate of net benefits when

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As discussed above, these reductions • If so, does the agency’s approach— in Chapter XII of the PRIA. Results of in fuel savings and avoided CO2 comparing technology costs to the the uncertainty analysis are summarized emissions (and correspondingly, in total present value of fuel savings over some below for model years 2017–2025 and net benefits) attributable to today’s payback period—provide a reasonable passenger car and light truck fleets proposed standards, do not indicate that means to simulate manufacturers’ combined: • fuel consumption and CO2 emissions decisions? DOT’s consideration of any Total Benefits at 7% discount rate: will be higher when potential voluntary alternative methods will be facilitated Societal benefits will total $46 billion to overcompliance with standards is taken by specific suggestions regarding their $725 billion, with a mean estimate of into account than when it is set aside. integration into DOT’s CAFE model. $373 billion. • Rather, these reductions reflect • Is it appropriate to assume different Total Benefits at 3% discount rate: differences in attribution; when effective payback periods before and Societal benefits will total $53 billion to potential voluntary overcompliance is after compliance has been achieved? $877 billion, with a mean estimate of taken into account, portions of the Why, or why not? $453 billion. • Total Costs at 7% discount rate: avoided fuel consumption and CO2 • What payback period is (or, if more Costs will total between $125 billion emissions (and, correspondingly, in than one, are) most likely to reflect and $247 billion, with a mean estimate total and net benefits) are effectively manufacturers’ decisions regarding attributed to the actions of the market, of $175 billion. technology application through MY • Total Costs at 3% discount rate: rather than to the proposed CAFE 2025? standards. Costs will total between $109 billion For more detailed information and $294 billion, with a mean estimate NHTSA invites comment on this regarding NHTSA’s sensitivity analyses of $175 billion sensitivity analysis, in particular for this proposed rule, please see regarding the following questions: Chapter X of NHTSA’s PRIA. 5. How would these proposed standards • Is it reasonable to assume that, Additionally, due to the uncertainty impact vehicle sales? having achieved compliance with CAFE and difficulty in projecting technology In past fuel economy analyses, the standards, a manufacturer might cost and efficacy through 2025, and agency has made estimates of sales consider further fuel economy consistent with Circular A–4, NHTSA impacts comparing increases in vehicle improvements, depending on conducted a full probabilistic price to the savings in fuel over a 5 year technology costs and fuel prices? uncertainty analysis, which is included period. We chose 5 years because this is

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the average length of time of a financing consumer behavior over time (especially payback period as one of its ways to agreement.780 As discussed below, for with the likelihood of consumer compare benefits to a full lifetime this analysis we have conducted a fresh learning). The effect of this proposed discounting. A survey conducted for the search of the literature for additional regulation on vehicle sales will depend Department of Energy in 2004,783 which estimates of consumer valuation of fuel upon whether the overall value that asked 1,000 households how much they savings, in order to determine whether potential buyers place on the increased would pay for a vehicle that saved them the 5 year assumption was accurate or fuel economy is greater or less than the $400 or $1,200 per year in fuel costs, whether it should be revised. That increase in vehicle prices and how found implied payback periods of 1.5 to search has led us to the conclusion for automakers factor that into price setting 2.5 years In reviewing this survey, this proposed rule that consumer for the various models. Greene concluded: ‘‘The striking valuation of future fuel savings is highly Two economic concepts bear on how similarity of the implied payback uncertain. A negative impact on sales is consumers might value fuel savings. periods from the two subsamples would certainly possible, because the proposed The first relates to the length of time seem to suggest that consumers rule will lead to an increase in the that consumers consider when valuing understand the questions and are giving initial price of vehicles. A positive fuel savings and the second relates to consistent and reliable responses: They impact is also possible, because the the discount rate that consumers apply require payback in 1.5 to 2.5 years.’’ proposed rule will lead to a significant to future savings. These two concepts However, Turrentine and Kurani’s 784 decrease in the lifetime cost of vehicles, are used together to determine in-depth interviews of 57 households and with consumer learning over time, consumer valuation of future fuel found almost no evidence that this effect may produce an increase in savings. The length of time that consumers think about fuel economy in sales. In light of the relevant consumers consider when valuing terms of payback periods. When asked uncertainties, the agency therefore future fuel savings can significantly such questions, some consumers decided not to include a quantitative affect their decision when they compare became confused while others offered sales estimate and requests comments their estimates of fuel savings with the time periods that were meaningful to on all of the discussion here, including increased cost of purchasing higher fuel them for other reasons, such as the the question whether a quantitative economy. There is a significant length of their car loan or lease. estimate (or range) is possible. difference in fuel savings if you The effect of this rule on sales of new consider the savings over 1 year, 3 The Discount Rate That Consumers vehicles depends largely on how years, 5 years, 10 years, or the lifetime Apply to Future Fuel Savings potential buyers evaluate and respond of the vehicle. The discount rate that The effective discount rate that to its effects on vehicle prices and fuel consumers use to discount future fuel consumers have used in the past to economy. The rule will make new cars savings to present value can also have value future fuel economy savings has and light trucks more expensive, as a significant impact. If consumers value been studied in many different ways manufacturers attempt to recover their fuel savings over a short period, such as and by many different economists. costs for complying with the rule by 1 to 2 years, then the discount rate is Greene 785 examined and compiled raising vehicle prices. At the same time, less important. If consumers value fuel many of these analyses and found: the rule will require manufacturers to savings over a long period, then the ‘‘Implicit consumer discount rates were improve the fuel economy of many of discount rate is important. estimated by Greene (1983) based on their models, which will lower their eight early mutinomial logit choice The Length of Time Consumers operating costs. The initial cost of models. * * * The estimates range from Consider When Valuing Fuel Savings vehicles will increase but the overall 0 to 73% * * * Most fall between 4 and cost will decrease. The net effect on Information regarding the number of 40%.’’ Greene added: ‘‘The more recent sales will depend on the extent to which years that consumers value fuel savings studies exhibit as least a wide a range consumers are willing to pay for fuel (or undervalue fuel savings) come from as the earlier studies.’’ economy. several sources. In past analyses NHTSA With such uncertainty about how The earlier discussion of consumer has used five years as representing the consumers value future fuel savings and welfare suggests that by itself, a net average new vehicle loan. A recent the discount rates they might use to decrease in overall cost may not paper by David Greene 781 examined determine the present value of future produce a net increase in sales, because studies from the past 20 years of fuel savings, NHTSA would utilize the many consumers are more affected by consumers’ willingness to pay for fuel standard 3 and 7 percent discount rates. upfront cost than by overall cost, and economy and found that ‘‘the available It is true that some consumers appear to will not be willing to purchase vehicles literature does not provide a reasonable show higher discount rates, which with greater fuel economy even when it consensus.’’ In his paper Greene states would affect the analysis of likely sales appears to be in their economic interest that ‘‘manufacturers have repeatedly consequences; NHTSA invites to do so (assuming standard discount stated that consumers will pay, in comments on the nature and extent of rates). But there is considerable increased vehicle price, for only 2–4 that effect. uncertainty in the economics literature years in fuel savings.’’ These estimates In past analyses, NHTSA assumed about the extent to which consumers were derived from manufacturer’s own that consumers would consider the fuel value fuel savings from increased fuel market research. And the National savings they would obtain over the first economy, and there is still more Research Council 782 used a 3 year uncertainty about possible changes in 783 Opinion Research Corporation (2004), 781 ‘‘Why the Market for New Passenger Cars ‘‘CARAVAN’’ ORC study #7132218, for the National 780 National average financing terms for Generally Undervalues Fuel Economy’’, David Renewable Energy Laboratory Princeton, New automobile loans are available from the Board of Greene, Oak Ridge National Laboratory, 2010, Pg. Jersey, May 20, 2004. Governors of the Federal Reserve System G.19 17, http://www.internationaltransportforum.org/ 784 Turrentine, T.S. and K.S. Kurani, 2007. ‘‘Car ‘‘Consumer Finance’’ release. See http:// jtrc/DiscussionPapers/DP201006.pdf Buyers and Fuel Economy,’’ Energy Policy, vol. 35, www.federalreserve.gov/releases/g19/ (last accessed 782 National Research Council (2002) pp. 1213–1223. August 25, 2011). The average new car loan at an ‘‘Effectiveness and Impact of Corporate Average 785 ‘‘Why the Market for New Passenger Cars auto finance company in the first quarter of 2011 Fuel Economy (CAFE) Standards’’, National Generally Undervalues Fuel Economy’’, David is for 62 months at 4.73%. Academies Press, Washington DC. Greene, Oak Ridge National Laboratory, 2010.

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five years of vehicle ownership, which price increases result from adding in technology costs might affect is consistent with the average loan rates technologies that improve fuel consumers’ buying considerations. and the average length of first vehicle economy. This elasticity is generally First, consumers might consider the ownership. The five-year span is considered to be a short-run elasticity, sales taxes they have to pay at the time somewhat longer than the period found reflecting the immediate impacts of a of purchasing the vehicle. We took sales to be used by consumers in some price change on vehicle sales. taxes in 2010 by state and weighted studies, but use of a shorter period may For a durable good such as an auto, them by population by state to also reflect a lack of salience or related the elasticity may be smaller in the long determine a national weighted-average 790 factors, and as noted, use of the five- run: though people may be able to sales tax of 5.5 percent. year span has the advantage of tracking change the timing of their purchase Second, we considered insurance the average length of first vehicle when price changes in the short run, costs over the 5 year period. More ownership. NHTSA continues to use the they must eventually make the expensive vehicles will require more five-year period here. As with discount investment. Using a smaller elasticity expensive collision and comprehensive rates, NHTSA invites comments on this would reduce the magnitude of the (e.g., theft) car insurance. The increase issue and in particular on the possible estimates presented here for vehicle in insurance costs is estimated from the use of a shorter period. sales, but it would not change the average value of collision plus It is true that the payback period and direction. A short-run elasticity is more comprehensive insurance as a proportion of average new vehicle price. discount rate are conceptual proxies for valid for initial responses to changes in Collision plus comprehensive insurance consumer decisions that may often be price, but, over time, a long-run is the portion of insurance costs that made without any corresponding elasticity may better reflect behavior; depend on vehicle value. The Insurance explicit quantitative analysis. For thus, the results presented for the initial Information Institute 791 provides the example, some buyers choosing among years of the program may be more average value of collision plus some set of vehicles may know what appropriate for modeling with the short- comprehensive insurance in 2006 as they have been paying recently for run elasticity than the later years of the gasoline, may know what they are likely $448, which is $480 in 2009$. The program. A search of the literature has to pay to buy each of the vehicles average consumer expenditure for a new not found studies more recent than the consider, and may know some of the passenger car in 2010, according to the 1970s that specifically investigate long- attributes—including labeled fuel Bureau of Economic Analysis was run elasticities.789 economies—of those vehicles. Such $24,092 and the average price of a new buyers may then make a choice without One approach to determine the light truck $30,641 in $2009.792 Using actually trying to estimate how much breakeven point between vehicle prices sales volumes from the Bureau, we they would pay to fuel each of the and fuel savings is to look at the determined an average passenger car vehicles they are considering buying. In payback periods shown earlier in this and an average light truck price was other words, for such buyers, the idea of analysis. For example at a 3 percent $27,394 in $2009 dollars. Average prices a payback period and discount rate may discount rate, the payback period for and estimated sales volumes are needed have no explicit meaning. This does not, MY 2025 vehicles is 2 years for light because price elasticity is an estimate of however, limit the utility of these trucks and 4 years for passenger cars. how a percent increase in price affects concepts for the agency’s analysis. If, as In determining the payback period we the percent decrease in sales. a group, buyers behave as if they value make several assumptions. For example, Dividing the insurance cost by the fuel consumption considering a payback we follow along with the calculations average price of a new vehicle gives the period and discount rate, these concepts that are used for a 5 year payback proportion of comprehensive plus remain useful as a basis for estimating period, as we have used in previous collision insurance as 1.75% of the the market response to increases in fuel analyses. For the fuel savings part of the price of a vehicle. If we assume that this economy accompanied by increases in equation, we assumed as a starting point premium is proportional to the new price. that the average purchaser considers the vehicle price, it represents about 1.75 fuel savings they would receive over a percent of the new vehicle price and NHTSA’s Previous Analytical Approach 5 year timeframe. The present values of insurance is paid each year for the five Updated these savings were calculated using a 3 year period we are considering for There is a broad consensus in the and 7 percent discount rate. We used a payback. Discounting that stream of economic literature that the price fuel price forecast (see Table VIII–3) that insurance costs back to present value elasticity for demand for automobiles is included taxes, because this is what indicates that the present value of the approximately –1.0.786 787 788 Thus, every consumers must pay. Fuel savings were component of insurance costs that vary one percent increase in the price of the calculated over the first 5 years and with vehicle price is equal to 8.0 vehicle would reduce sales by one discounted back to a present value. percent of the vehicle’s price at a 3 percent. Elasticity estimates assume no The agency believes that consumers percent discount rate. perceived change in the quality of the may consider several other factors over Third, we considered that 70 percent product. However, in this case, vehicle the 5 year horizon when contemplating of new vehicle purchasers take out loans the purchase of a new vehicle. The 786 Kleit, A.N. (1990). ‘‘The Effect of Annual agency added these factors into the 790 Based on data found in http://www.api.org/ Changes in Automobile Fuel Economy Standards,’’ calculation to represent how an increase statistics/fueltaxes/ Journal of Regulatory Economics, vol. 2, pp 151– 791 Insurance Information Institute, 2008, 172. Docket EPA–HQ–OAR–2009–0472–0015. ‘‘Average Expenditures for Auto Insurance By State, 787 Bordley, R. (1994). ‘‘An Overlapping Choice 789 E.g., Hymans, Saul H. ‘‘Consumer Durable 2005–2006,’’ available at http://www.iii.org/media/ Set Model of Automotive Price Elasticities,’’ Spending: Explanation and Prediction.’’ Brookings facts/statsbyissue/auto/ (last accessed March 4, Transportation Research B, vol 28B, no 6, pp 401– Papers on Economic Activity 1 (1970): 173–206. 2010). 408. Docket NHTSA–2009–0059–0153. http://www.brookings.edu/∼/media/Files/ 792 U.S. Department of Commerce, Bureau of 788 McCarthy, P.S. (1996). ‘‘Market Price and Programs/ES/BPEA/1970_2_bpea_papers/1970b_ Economic Analysis, Table 7.2.5S. Auto and Truck Income Elasticities of New Vehicle Demands,’’ The bpea_hymans_ackley_juster.pdf finds a short-run Unit Sales, Production, Inventories, Expenditures, Review of Economics and Statistics, vol. LXXVII, elasticity of auto expenditures (not sales) with and Price, available at http://www.bea.gov/national/ no. 3, pp. 543–547. Docket NHTSA–2009–0059– respect to price of 0.78 to 1.17, and a long-run nipaweb/nipa_underlying/TableView.asp?Selected 0039 elasticity of 0.3 to 0.46. Table=55&ViewSeries=NO&Java=.

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to finance their purchase. The average decision. This process results in economy could increase to match or new vehicle loan in the first quarter of estimates of the payback period for MY exceed their initial investment, resulting 2011 is 5.3 percent.793 At these terms 2025 vehicles of 2 years for light trucks in no impact or even an increase in sales the average person taking a loan will and 4 years for passenger cars at a 3 levels. pay 14 percent more for their vehicle percent discount rate. The agency has been exploring the over the 5 years than a consumer paying question why there is not more A General Discussion of Consumer consumer demand for higher fuel cash for the vehicle at the time of Considerations purchase.794 Discounting the additional economy today when linked with our 2.8 percent (14 percent/5 years) per year If consumers do not value improved methodology that results in projecting over the 5 years using a 3 percent mid- fuel economy at all, and consider increasing sales for the future when year discount rate 795 results in a nothing but the increase in price in their consumers are faced with rising vehicle discounted present value of 12.73 purchase decisions, then the estimated prices and rising fuel economy. Some of percent higher for those taking a loan. impact on sales from price elasticity the discussion of salience, focus on the Multiplying that by the 70 percent that could be applied directly. However, the short-term, loss aversion, and related take a loan, means that the average agency anticipates that consumers will factors (see above) bears directly on that consumer would pay 8.9 percent more place some value improved fuel question. It is possible, in that light, that than the retail price for loans the economy, because they reduce the consumers will not demand increased consumer discounted at a 3 percent operating cost of the vehicles, and fuel economy even when such increases discount rate. because, based on recently-promulgated would produce net benefits for them. Fourth, we considered the residual EPA and DOT regulations, vehicles sold Nonetheless, some current vehicle value (or resale value) of the vehicle during through 2025 will display labels owners, including those who currently after 5 years and expressed this as a that more clearly communicate to drive gas guzzlers, will undoubtedly percentage of the new vehicle price. If buyers the fuel savings, economic, and realize the net benefits to be gained by the price of the vehicle increases due to environmental benefits of more efficient purchasing a more efficient vehicle. fuel economy technologies, the resale vehicles. The magnitude of this effect Some vehicle owners may also react to value of the vehicle will go up remains unclear, and how much persistently higher vehicle costs by proportionately. The average resale consumers value fuel economy is an owning fewer vehicles, and keeping price of a vehicle after 5 years is about ongoing debate. We know that different existing vehicles in service for consumers value different aspects of 35% 796 of the original purchase price. somewhat longer. For these consumers, their vehicle purchase,797 but we do not Discounting the residual value back 5 the possibility exists that there may be have reliable evidence of consumer years using a 3 percent discount rate (35 permanent sales losses, compared with behavior on this issue. Several past a situation in which vehicle prices are percent * .8755) gives an effective consumer surveys lead to different lower. residual value of 30.6 percent. Note that conclusions (and surveys themselves, as There is a wide variety in the number added CAFE technology could also opposed to actual behavior, may not be of miles that owners drive per year. result in more expensive or more entirely informative). We also expect Some drivers only drive 5,000 miles per frequent repairs. However, we do not that consumers will consider other year and others drive 25,000 miles or have data to verify the extent to which factors that affect their costs, and have more. Rationally those that drive many this would be a factor during the first 5 included these in the analysis. miles have more incentive to buy years of vehicle life. One issue that significantly affects vehicles with high fuel economy levels We add these four factors together. At this sales analysis is: How much of the In summary, there are a variety of a 3 percent discount rate, the consumer retail price increase needed to cover the types of consumers that are in different considers he could get 30.6 percent back fuel economy technology investments financial situations and drive different upon resale in 5 years, but will pay 5.5 will manufacturers be able to pass on to mileages per year. Since consumers are percent more for taxes, 8.1 percent more consumers? NHTSA typically assumes different and use different reasoning in in insurance, and 8.9 percent more for that manufacturers will be able to pass purchasing vehicles, and we do not yet loans, results in a 8.1 percent return on all of their costs to improve fuel have an account of the distribution of the increase in price for fuel economy their preferences or how that may ¥ economy on to consumers. Consumer technology (30.6 percent 5.5 percent change over time as a result of this ¥ ¥ valuation of fuel economy 8.1 percent 8.9 percent). Thus, the improvements often depends upon the rulemaking — in other words, the increase in price per vehicle would be answer is quite ambiguous. Some may ¥ price of gasoline, which has recently multiplied by 0.919 (1 0.081) before been very volatile. be induced by better fuel economy to subtracting the fuel savings to determine Sales losses would occur only if purchase vehicles more often to keep up the overall net consumer valuation of consumers fail to value fuel economy with technology, some may purchase no the increase of costs on this purchase improvements at least as much as they new vehicles because of the increase in pay in higher prices. If manufacturers vehicle price, and some may purchase 793 New car loan rates in the first quarter of 2011 are unable to raise prices beyond the fewer vehicles and hold onto their averaged 5.86 percent at commercial banks and 4.73 percent at auto finance companies, so their average level of consumer’s valuation of fuel vehicles longer. There is great is close to 5.3 percent. savings, then manufacturer’s profit uncertainty about how consumers value 794 Based on www.bankrate.com auto loan levels would fall but there would be no fuel economy, and for this reason, the calculator for a 5 year loan at 5.3 percent. impact on sales. Likewise, if fuel prices impact of this fuel economy proposal on 795 For a 3 percent discount rate, the summation rise beyond levels used in this analysis, sales is uncertain. of 2.8 percent × 0.9853 in year one, 2.8 × 0.9566 in year two, 2.8 × 0.9288 in year three, 2.8 × 0.9017 consumer’s valuation of improved fuel For years, consumers have been in year 4, and 2.8 × 0.8755 in year five. learning about the benefits that accrue 796 Consumer Reports, August 2008,’’What That 797 For some consumers there will be a cash-flow to them from owning and operating Car Really Costs to Own,’’ available at http://www. problem in that the vehicle is purchased at a higher vehicles with greater fuel efficiency. consumerreports.org/cro/cars/pricing/what-that- price on day 1 and fuel savings occur over the car-really-costs-to-own-4–08/overview/what-that- lifetime of the vehicle. Increases in prices have Consumer demand has thus shifted car-really-costs-to-own-ov.htm (last accessed March sometimes led to longer loan periods, which would towards such vehicles, not only because 4, 2010). lead to higher overall costs of the loan. of higher fuel prices but also because

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many consumers are learning about the that automobile manufacturers are CAFE model would then estimate how value of purchases based not only on failing to pursue profitable the sales volumes of individual vehicle initial costs but also on the total cost of opportunities to supply the vehicles that models would change in response to owning and operating a vehicle over its consumers demand. In the absence of changes in fuel economy levels and lifetime. This type of learning is the rule, no individual automobile prices throughout the light vehicle expected to continue before and during manufacturer would find it profitable to market, possibly taking into account the model years affected by this rule, move toward the more efficient vehicles interactions with the used vehicle particularly given the new fuel economy mandated under the rule. In particular, market. Having done so, the model labels that clarify potential economic no individual company can fully would replace the sales estimates in the effects and should therefore reinforce internalize the future boost to demand original market forecast with those that learning. Therefore, some increase resulting from the rule. If one company reflecting these model-estimated shifts, in the demand for, and production of, were to make more efficient vehicles, repeating the entire modeling cycle more fuel efficient vehicles is counting on consumer learning to until converging on a stable solution. incorporated in the alternative baseline enhance demand in the future, that We seek comment on the potential for (i.e., without these rules) developed by company would capture only a fraction this approach to help the agency NHTSA. The agency requests comment of the extra sales so generated, because estimate sales effects for the final rule. on the appropriateness of using a flat or the learning at issue is not specific to rising baseline after 2016. any one company’s fleet. Many of the Others Studies of the Sales Effect of Today’s proposed rule, combined extra sales would accrue to that This CAFE Proposal with the new and easier-to-understand company’s competitors. We outline here other relevant studies fuel economy label required to be on all In the language of economics, and seek comment on their assumptions new vehicles beginning in 2012, may consumer learning about the benefits of and projections. increase sales above baseline levels by fuel efficient vehicles involves positive A recent study on the effects on sales, hastening this very type of consumer externalities (spillovers) from one attributed to regulatory programs, learning. As more consumers company to the others.798 These including the fuel economy program experience, as a result of the rule, the positive externalities may lead to was undertaken by the Center for savings in time and expense from benefits for manufacturers as a whole. Automotive Research (CAR).800 CAR owning more fuel efficient vehicles, We emphasize that this discussion examined the impacts of alternative fuel demand may shift yet further in the has been tentative and qualified. To be economy increases of 3%, 4%, 5%, and direction of the vehicles mandated sure, social learning of related kinds has 6% per year on the general outlook for under the rule. This social learning can been identified in a number of the U.S. motor vehicle market, the likely take place both within and across contexts.799 Comments are invited on increase in costs for fuel economy households, as consumers learn from the discussion offered here, with (based on the NAS report, which one another. particular reference to any relevant estimates higher costs than NHTSA’s First and most directly, the time and empirical findings. current estimates) and required safety fuel savings associated with operating How does NHTSA plan to address this features, the technologies used and how more fuel efficient vehicles will be more issue for the final rule? they would affect the market, salient to individuals who own them, production, and automotive causing their subsequent purchase NHTSA seeks comment on how to manufacturing employment in the year decisions to shift closer to minimizing attempt to quantify sales impacts of the 2025. The required safety mandates the total cost of ownership over the proposed MYs 2017–2025 CAFE were assumed to cost $1,500 per vehicle lifetime of the vehicle. Second, this standards in light of the uncertainty in 2025, but CAR did not value the discussed above. The agency is appreciation may spread across safety benefits from those standards. currently sponsoring work to develop a households through word of mouth and NHTSA does not believe that the vehicle choice model for potential use other forms of communications. Third, assumed safety mandates should be a in the agency’s future rulemaking as more motorists experience the time part of this analysis without estimating analysis—this work may help to better and fuel savings associated with greater the benefits achieved by the safety estimate the market’s effective valuation fuel efficiency, the price of used cars mandates. will better reflect such efficiency, of future fuel economy improvements. There are many factors that go into further reducing the cost of owning The agency hopes to evaluate those the CAR analysis of sales. CAR assumes potential impacts through use of a more efficient vehicles for the buyers of a 22.0 mpg baseline, two gasoline price ‘‘market shift’’ or ‘‘consumer vehicle new vehicles (since the resale price will scenarios of $3.50 and $6.00 per gallon, choice’’ model, discussed in Section IV increase). VMT schedules by age, and a rebound of the NPRM preamble. With an If these induced learning effects are rate of 10 percent (although it appears integrated market share model, the strong, the rule could potentially that the CAR report assumes a rebound increase total vehicle sales over time. effect even for the baseline and thus 798 Industry-wide positive spillovers of this type These increased sales would not occur negates the impact of the rebound in the model years first affected by the are hardly unique to this situation. In many industries, companies form trade associations to effect). Fuel savings are assumed to be rule, but they could occur once the promote industry-wide public goods. For example, valued by consumers over a 5 year induced learning takes place. It is not merchants in a given locale may band together to period at a 10 percent discount rate. The promote tourism in that locale. Antitrust law possible to quantify these learning impact on sales varies by scenario, the effects years in advance and that effect recognizes that this type of coordination can increase output. estimates of the cost of technology, the may be speeded or slowed by other 799 See Hunt Alcott, Social Norms and Energy price of gasoline, etc. At $3.50 per factors that enter into a consumer’s Conservation, Journal of Public Economics gallon, the net change in consumer valuation of fuel efficiency in selecting (forthcoming 2011), available at http://web.mit.edu/ savings (costs minus the fuel savings vehicles. allcott/www/Allcott%202011%20JPubEc%20-%20 Social%20Norms%20and%20Energy%20 The possibility that the rule will (after Conservation.pdf; Christophe Chamley, Rational 800 ‘‘The U.S. Automotive Market and Industry in a lag for consumer learning) increase Herds: Economic Models of Social Learning 2025’’, Center for Automotive Research, June 2011. sales need not rest on the assumption (Cambridge, 2003). http://www.cargroup.org/pdfs/ami.pdf.

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valued by consumers) is a net cost to 4% scenario, a net savings of $258 for 2 prices of gasoline on light vehicle consumers of $359 for the 3% scenario, the 5% scenario, and a net consumer sales and automotive employment. The a net cost of $1,644 for the 4% scenario, cost of $3,051 for the 6% scenario. table below shows these estimates. The a net cost of $2,858 for the 5% scenario, Thus, the price of gasoline can be a baseline for the CAR report is 17.9 and a net consumer cost of $6,525 for significant factor in affecting how million sales and 877,075 employees. the 6% scenario. At $6.00 per gallon, consumers view whether they are The price of gasoline at $6.00 per gallon, the net change in consumer savings getting value for their expenditures on rather than $3.50 per gallon results in (costs minus the fuel savings valued by technology. about 2.1 million additional sales per consumers) is a net savings to Table 14 on page 42 of the CAR report year and 100,000 more employees in consumers of $2,107 for the 3% presents the results of their estimates of year 2025. scenario, a net savings of $1,131 for the the 4 alternative mpg scenarios and the

Figure 13 on page 44 of the CAR The combined total of 2.966 million jobs statistical models that CAR develops to report shows a graph of historical generated a further spin-off of 3.466 estimate the effects of price and income automotive labor productivity, million jobs that depend on the changes on vehicle sales. CAR’s analysis indicating that there has been a long consumer spending of direct and assumes continued increases in labor term 0.4 percent productivity growth supplier employees, for a total jobs productivity over time and then rate from 1960–2008, to indicate that contribution from U.S. auto translates the estimated impacts of there will be 12.26 vehicles produced in manufacturing of 6.432 million jobs in higher CAFE standards on net vehicle the U.S. per worker in 2025 (which is 2010. The figure actually rises to 7.96 prices into estimated impacts on sales higher than NHTSA’s estimate—see million when direct jobs located at new and employment in the automobile below). In addition, the CAR report vehicle dealerships (connected to the production and related industries. The discusses the jobs multiplier. For every sale and service of new vehicles) are agency disagrees with the cost estimates one automotive manufacturing job, they considered.’’ in the CAR report for new technologies, estimate the economic contribution to CAR uses econometric estimates of the addition of safety mandates into the 801 the U.S. economy of 7.96 jobs stating the sensitivity of new vehicle purchases costs, and various other assumptions. ‘‘In 2010, about 1 million direct U.S. to prices and consumer incomes and An analysis conducted by Ceres and 802 jobs were located at an auto and auto forecasts of income growth through Citigroup Global Markets Inc. parts manufacturers; these jobs 2025 to translate these estimated examined the impact on automotive generated an additional 1.966 million changes in net vehicle prices to sales in 2020, with a baseline supplier jobs, largely in non- estimates of changes in sales of MY assumption of an industry fuel economy manufacturing sectors of the economy. 2025 vehicles; higher net prices—which standard of 42 mpg, a $4.00 price of occur when increases in vehicle prices 801 Kim Hill, Debbie Menk, and Adam Cooper, exceeds the value of fuel savings— 802 ‘‘U.S. Autos, CAFE and GHG Emissions’’, ‘‘Contribution of the Automotive Industry to the March 2011, Citi Ceres, UMTRI, Baum and Economies of All Fifty States and the United reduce vehicle sales, while lower net Associates, Meszler Engineering Services, and the States’’, The Center for Automotive Research, Ann prices increase new vehicle sales in Natural Resources Defense Council. http://www. Arbor MI, April 2010. 2025. We do not have access to the ceres.org/resources/reports/fuel-economy-focus.

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gasoline, a 12.2 percent discount rate to appreciate how these viewpoints may to improve fuel economy will ultimately and an assumption that buyers value diverge, it is important to distinguish be borne by vehicle buyers in the form 48% of fuel savings over seven years in between costs and benefits that are of higher purchase prices, NHTSA purchasing vehicles. The main finding ‘‘private’’ and costs and benefits that are concludes that the benefits to potential on sales was that light vehicle sales ‘‘social,’’ The agency’s analysis of vehicle buyers from requiring higher were predicted to increase by 6% from benefits and costs from requiring higher fuel efficiency will far outweigh the 16.3 million to 17.3 million in 2020. fuel efficiency, presented above, costs they will be required to pay to Elasticity is not provided in the report includes several categories of benefits obtain it. NHTSA also recognizes that but it states that they use a complex (identified as ‘‘social benefits’’) that are this conclusion raises certain issues, model of price elasticity and cross not limited to automobile purchasers, addressed directly below; NHTSA also elasticities developed by GM. A fuel and that extend throughout the U.S. seeks public comment on its discussion price risk factor 803 was utilized. Little economy. Examples of these benefits here. rationale was provided for the baseline include reductions in the energy As an illustration, Tables IV–110 and assumptions, but sensitivity analyses security costs associated with U.S. 111 report the agency’s estimates of the were examined around the price of fuel petroleum imports, and in the economic average lifetime values of fuel savings ($2, $4, and $7 per gallon), the discount damages expected to result from air for MY 2017–2025 passenger cars and rate (5.2%, 12.2%, 17.2%), purchasers pollution (including, but not limited to, light trucks calculated using projected consider fuel savings over (3, 7, or 15 climate change). In contrast, other future retail fuel prices. The table years), fuel price risk factor of (30%, categories of benefits—principally compares NHTSA’s estimates of the 70%, or 140%), and VMT of (10,000, future fuel savings projected to result average lifetime value of fuel savings for 15,000, and 20,000 in the first year and from higher fuel economy, but also, for cars and light trucks to the price declining thereafter). example, time savings—will be increases it expects to occur as experienced exclusively by the initial manufacturers attempt to recover their 6. Social Benefits, Private Benefits, and purchasers and subsequent owners of costs for complying with increased Potential Unquantified Consumer vehicle models whose fuel economy CAFE standards. As the table shows, the Welfare Impacts of the Proposed manufacturers elect to improve agency’s estimates of the present value Standards (‘‘private benefits’’). of lifetime fuel savings (discounted There are two viewpoints for The economy-wide or ‘‘social’’ using the OMB-recommended 3% rate) evaluating the costs and benefits of the benefits from requiring higher fuel substantially outweigh projected vehicle increase in CAFE standards: the private economy represent an important share price increases for both cars and light perspective of vehicle buyers of the total economic benefits from trucks in every model year, even under themselves on the higher fuel economy raising CAFE standards. At the same the assumption that all of levels that the rule would require, and time, NHTSA estimates that benefits to manufacturers’ technology outlays are the economy-wide or ‘‘social’’ vehicle buyers themselves will passed on to buyers in the form of perspective on the costs and benefits of significantly exceed vehicle higher selling prices for new cars and requiring higher fuel economy. In order manufacturers’ costs for complying with light trucks. By model year 2025, the stricter fuel economy standards this NHTSA projects that average lifetime 802 ‘‘U.S. Autos, CAFE and GHG Emissions’’, rule establishes. In short, consumers fuel savings will exceed the average March 2011, Citi Ceres, UMTRI, Baum and price increase by more than $2,900 for Associates, Meszler Engineering Services, and the will benefit on net. Since the agency Natural Resources Defense Council. http://www. also assumes that the costs of new cars, and by more than $5,200 for light ceres.org/resources/reports/fuel-economy-focus. technologies manufacturers will employ trucks.

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The comparisons above immediately and light trucks. They also raise the value (and thus the selling prices) of raise the question of why current question of whether it is appropriate to many new vehicle models by far more vehicle purchasing patterns do not assume that manufacturers would not than it would raise the cost of producing already result in average fuel economy elect to provide higher fuel economy them. Thus, increasing fuel economy levels approaching those that this rule even in the absence of increases in would be expected to increase sales of would require, and why raising CAFE CAFE standards, since the comparisons new vehicles and manufacturers’ standards should be necessary to in Tables IV–109 and 110 suggest that profits. More specifically, why would increase the fuel economy of new cars doing so would increase the market potential buyers of new vehicles

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hesitate to purchase models offering economy outweigh the costs they will $1 upfront to obtain a $1 reduction in higher fuel economy, when doing so pay to acquire those benefits, even if the discounted present value of future would produce the substantial private markets have not provided that gasoline costs.807 economic returns illustrated by the amount of fuel economy. This research Some research suggests that the comparisons presented in Tables IV–109 identifies aspects of normal behavior market’s apparent unwillingness to and 110? And why would that may explain the market not provide more fuel efficient vehicles manufacturers voluntarily forego providing vehicles whose higher fuel stems from consumers’ inability to value opportunities to increase the economy appears to offer an attractive future fuel savings correctly. For attractiveness, value, and competitive economic return. For example, example, Larrick and Soll (2008) find positioning of their car and light truck consumers’ aversion to the prospect of evidence that consumers do not models—and thus their own profits—by losses (‘‘loss aversion’’) and especially understand how to translate changes in improving their fuel economy? immediate, certain losses, may affect fuel economy, which is denominated in One explanation for why this their decisions when they also have a miles per gallon (MPG), into resulting situation might persist is that the market sense of uncertainty about the value of changes in fuel consumption, measured for vehicle fuel economy does not future fuel savings. Loss aversion, for example in gallons 100 miles appear to work perfectly, in which case accompanied with a sense of traveled or per month or year.808 It is properly designed CAFE standards uncertainty about gains, may make true that the recently redesigned fuel would be expected to increase consumer purchasing a more fuel-efficient vehicle economy and environment label should welfare. Some of these imperfections seem unattractive to some potential help overcome this difficulty, because it might stem from standard market buyers, even when doing so is likely to draws attention to purely economic failures, such as limited availability of be a sound economic decision. As an effects of fuel economy, but MPG information to consumers about the illustration, Greene et al. (2009) remains a prominent measure. Sanstad value of higher fuel economy. It is true, calculate that the expected net present and Howarth (1994) argue that of course, that such information is value of increasing the fuel economy of consumers often resort to imprecise but technically available and that new fuel a passenger car from 28 to 35 miles per convenient rules of thumb to compare economy and environment vehicle gallon falls from $405 when calculated vehicles that offer different fuel labels, emphasizing economic effects, using standard net present value economy ratings, and that this can cause will provide a wide range of relevant calculations, to nearly zero when many buyers to underestimate the value information. Other explanations would uncertainty regarding future cost of fuel savings, particularly from point to phenomena observed elsewhere savings and buyers’ reluctance to accept significant increases in fuel economy.809 in the field of behavioral economics, the risk of losses are taken into If the behavior identified in these including loss aversion, inadequate account.806 studies is widespread, then the agency’s consumer attention to long-term The well-known finding that as gas estimates suggesting that the benefits to savings, or a lack of salience of relevant prices rise, consumers show more vehicle owners from requiring higher benefits (such as fuel savings, or time willingness to pay for fuel-efficient fuel economy significantly exceed the savings associated with refueling) to vehicles is not necessarily inconsistent costs of providing it may be consistent consumers at the time they make with the possibility that many with private markets not providing that purchasing decisions. Both theoretical consumers undervalue potential savings fuel economy level. and empirical research suggests that in gasoline costs and fuel economy The agency projects that the typical many consumers are unwilling to make when purchasing new vehicles. In vehicle buyer will experience net energy-efficient investments even when ordinary circumstances, such costs may savings from the proposed standards, those investments appear to pay off in be a relatively ‘‘shrouded’’ attribute in yet it is not simple to reconcile this 804 the relatively short-term. This consumers’ decisions, in part because projection with the fact that the average research is in line with related findings the savings from purchasing a more fuel fuel economy of new vehicles sold that consumers may undervalue benefits efficient vehicle are cumulative and currently falls well short of the level or costs that are less salient, or that they extend over a significant period of time. those standards would require. The 805 will realize only in the future. At the same time, it may be difficult for foregoing discussion offers several Previous research provides some possible explanations. One possible potential buyers to disentangle the cost support for the agency’s conclusion that explanation for this apparent of purchasing a more fuel-efficient the benefits buyers will receive from inconsistency is that many of the vehicle from its overall purchase price, requiring manufacturers to increase fuel technologies projected by the agency to or to isolate the value of higher fuel be available through MY 2025 offer economy form accompanying 803 Fuel price risk factor measures the rate at significantly improved efficiency per differences in other vehicle attributes. which consumers are willing to trade reductions in unit of cost, but were not available for fuel costs for increases in purchase price. For This possibility is consistent with recent application to new vehicles sold example, a fuel price risk factor of 1.0 would evidence to the effect that many currently. Another is that the perceived indicate the consumers would be willing to pay $1 consumers are willing to pay less than for an improvement in fuel economy that resulted and real values of future savings in reducing by $1 the present value of the savings 805 resulting from the proposed standards in fuel costs. Mutulinggan, S., C. Corbett, S. Benzarti, and will vary widely among potential 804 Jaffe, A. B., and Stavins, R. N. (1994). The B. Oppenheim. ‘‘Investment in Energy Efficiency by Energy Paradox and the Diffusion of Conservation Small and Medium-Size Firms: An Empirical Technology. Resource and Energy Economics, 16(2); Analysis of the Adoption of Process Improvement 807 See, e.g., Alcott and Wozny. On shrouded see Hunt Alcott and Nathan Wozny, Gasoline Recommendations’’ (2011), available at http:// attributes and their importance, see Gabaix, Xavier, Prices, Fuel Economy, and the Energy Paradox papers.ssrn.com/sol3/papers/cfm?abstract_ and David Laibson, 2006. ‘‘Shrouded Attributes, (2009), available at http://web.mit.edu/allcott/www/ id=1947330. Hossain, Janjim, and John Morgan Consumer Myopia, and Information Suppression in Allcott%20and%20Wozny%202010%20-%20 (2009). ’’ * * * Plus Shipping and Handling: Competitive Markets.’’ Quarterly Journal of Gasoline%20Prices,%20Fuel%20Economy,%20and Revenue (Non)Equivalence in Field Experiments on Economics 121(2): 505–540. %20the%20Energy%20Paradox.pdf (last accessed eBay,’’ Advances in Economic Analysis and Policy 808 Larrick, R. P., and J. B. Soll (2008). ‘‘The MPG Sept. 26, 2011). For relevant background, with an vol. 6; Barber, Brad, Terrence Odean, and Lu Zheng illusion’’ Science 320: 1593–1594. emphasis on the importance of salience and (2005). ‘‘Out of Sight, Out of Mind: The Effects of 809 Sanstad, A., and R. Howarth (1994). ‘‘ ‘Normal’ attention, see Kahneman, D. Thinking, Fast and Expenses on Mutual Fund Flows,’’ Journal of Markets, Market Imperfections, and Energy Slow (2011). Business vol. 78, no. 6, pp. 2095–2020. Efficiency.’’ Energy Policy 22(10): 811–818.

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vehicle buyers. When they purchase a vehicles’ actual fuel economy efficiency do not match potential new vehicle, some buyers value fuel performance than is available to their buyers’ assessment of the likely benefits economy very highly, and others value potential buyers—may also prevent and costs from purchasing models with fuel economy very little, if at all. These sellers of new or used vehicles from higher fuel economy ratings. This could differences undoubtedly reflect being able to capture its full value. In occur because the agency’s underlying variation in the amount they drive, this situation, the level of fuel efficiency assumptions about some of the factors differences in their driving styles affect provided in the markets for new or used that affect the value of fuel savings the fuel economy they expect to vehicles might remain persistently differ from those made by potential achieve, and varying expectations about lower than that demanded by well- buyers, because NHTSA has used future fuel prices, but they may also informed potential buyers. different estimates for some components partly reflect differences in buyers’ Constraints on the combinations of of the benefits from saving fuel from understanding of what increased fuel fuel economy, carrying capacity, and those of buyers, or simply because the economy is likely to mean to them performance that manufacturers can agency has failed to account for some financially, or in buyers’ preferences for offer in individual vehicle models using potential costs of achieving higher fuel paying lower prices today versus current technologies undoubtedly limit economy. anticipated savings over the future. the range of fuel economy available For example, buyers may not value Unless the agency has overestimated within certain vehicle classes, increased fuel economy as highly as the their average value, however, the fact particularly those including larger agency’s calculations suggest, because that the value of fuel savings varies vehicles. However, it is also possible they have shorter time horizons than the among potential buyers cannot explain that deliberate decisions by full vehicle lifetimes NHTSA uses in why typical buyers do not currently manufacturers of cars and light trucks these calculations, or because they purchase what appear to be cost-saving further limit the range of fuel economy discount future fuel savings using increases in fuel economy. A possible available to buyers within individual higher rates than those prescribed by explanation for this situation is that the vehicle market segments, such as large OMB for evaluating Federal regulations. effects of differing fuel economy levels automobiles, SUVs, or minivans. Potential buyers may also anticipate are relatively modest when compared to Manufacturers may deliberately limit lower fuel prices in the future than those provided by other, more the range of fuel economy levels they those forecast by the Energy Information prominent features of new vehicles, offer in those market segments (by Administration, or may expect larger such as passenger and cargo-carrying choosing not to invest in fuel economy differences between vehicles’ MPG capacity, performance, or safety. In this and investing instead in providing a ratings and their own actual on-road situation, it may simply not be in many range of other vehicle attributes) fuel economy than the 20 percent gap shoppers’ interest to spend the time and because they underestimate the (30 percent for HEVs) the agency effort necessary to determine the premiums that prospective buyers of estimates. economic value of higher fuel economy, those models are willing to pay for To illustrate the first of these to isolate the component of a new improved fuel economy, and thus possibilities, Table IV–111 shows the vehicle’s selling price that is related to mistakenly believe it will be effect of differing assumptions about its fuel economy, and compare these unprofitable for them to offer more fuel- vehicle buyers’ time horizons on their two. (This possibility is consistent with efficient models within those segments. assessment of the value of future fuel the view that fuel economy is a Of course, this possibility is most savings. Specifically, the table reports relatively ‘‘shrouded’’ attribute.) In this realistic if it is also assumed that buyers the value of fuel savings consumers case, the agency’s estimates of the are imperfectly informed, or if fuel might consider when purchasing a MY average value of fuel savings that will economy savings are not sufficiently 2025 car or light truck that features the result from requiring cars and light salient to shoppers in those particular higher fuel economy levels required by trucks to achieve higher fuel economy market segments. As an illustration, the proposed rule, when those fuel may be correct, yet those savings may once a potential buyer has decided to savings are evaluated over different time not be large enough to lead a sufficient purchase a minivan, the range of horizons. The table then compares these number of buyers to purchase vehicles highway fuel economy ratings among values to the agency’s estimates of the with higher fuel economy to raise current models extends from 22 to 28 increases in these vehicles’ prices that average fuel economy above its current mpg, while their combined city and are likely to result from the standards levels. highway ratings extend only from 18 to proposed for MY 2025. This table shows Defects in the market for cars and 20 mpg.810 If this phenomenon is that when fuel savings are evaluated light trucks could also lead widespread, the average fuel efficiency over the average lifetime of a MY 2025 manufacturers to undersupply fuel of their entire new vehicle fleet could car (approximately 14 years) or light economy, even in cases where many remain below the levels that potential truck (about 16 years), their present buyers were willing to pay the increased buyers demand and are willing to pay value (discounted at 3 percent) exceeds prices necessary to compensate for. the estimated average price increase by manufacturers for providing it. To be Another possible explanation for the more than $2,500 for cars and by over sure, the market for new automobiles as paradox posed by buyers’ apparent $4,500 for light trucks. a whole exhibits a great deal of unwillingness to invest in higher fuel If buyers are instead assumed to competition. But this apparently economy when it appears to offer such consider fuel savings over only a 10- vigorous competition among large financial returns is that NHTSA’s year time horizon, Table IV–112 shows manufacturers may not extend to the estimates of benefits and costs from that this reduces the difference between provision of some individual vehicle requiring manufacturers to improve fuel the present value of fuel savings and the attributes. Incomplete or ‘‘asymmetric’’ projected price increase for a MY 2025 access to information about vehicle 810 This is the range of combined city and car to about $1,800, and to about $3,350 attributes such as fuel economy— highway fuel economy levels from lowest (Toyota for a MY 2025 light truck. Finally, Table Sienna AWD) to highest (Honda Odyssey) available whereby manufacturers of new cars and for model year 2010; http://www.fueleconomy.gov/ IV–112 shows that if buyers consider light trucks or sellers of used models feg/bestworstEPAtrucks.htm (last accessed fuel savings only over the length of time have more complete knowledge about September 26, 2011). for which they typically finance new car

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purchases (slightly more than 5 years price of a MY 2025 car by only about difference is reduced to slightly more during 2011), the value of fuel savings $200, while the corresponding than $1,200 for a MY 2025 light truck. exceeds the estimated increase in the

Potential vehicle buyers may also results from purchasing a vehicle with trucks. If vehicle buyers instead discount future fuel savings using higher fuel economy as risky or discount future fuel savings at the higher rates than those typically used to uncertain, or they may instead discount typical new-car loan rate prevailing evaluate Federal regulations. OMB future consumption at rates reflecting during 2010 (approximately 5.2 guidance prescribes that future benefits their costs for financing the higher percent), however, these differences and costs of regulations that mainly capital outlays required to purchase decline to slightly more than $2,000 for affect private consumption decisions, as more fuel-efficient models. In either cars and $3,900 for light trucks, as Table will be the case if manufacturers’ costs case, buyers comparing models with IV–113 illustrates. This is a plausible for complying with higher fuel economy different fuel economy ratings are likely alternative assumption, because buyers standards are passed on to vehicle to discount the future fuel savings from are likely to finance the increases in buyers, should be discounted using a purchasing one that offers higher fuel purchase prices resulting from consumption rate of time preference.811 economy at rates well above the 3% compliance with higher CAFE standards OMB estimates that savers currently assumed in NHTSA’s evaluation. as part of the process of financing the discount future consumption at an Table IV–113 shows the effects of vehicle purchase itself. average real or inflation-adjusted rate of higher discount rates on vehicle buyers’ Finally, as the table also shows, about 3 percent when they face little evaluation of the fuel savings projected discounting future fuel savings using a risk about its likely level, which makes to result from the CAFE standards consumer credit card rate (which it a reasonable estimate of the proposed in this NPRM, again using MY averaged almost 14 percent during 2010) consumption rate of time preference. 2025 passenger cars and light trucks as reduces these differences to less than However, vehicle buyers may view an example. As Table IV–112 showed $900 for a MY 2025 passenger car and the value of future fuel savings that previously, average future fuel savings about $2,250 for the typical MY 2025 discounted at the OMB 3 percent light truck. Even at these significantly 811 Office of Management and Budget, Circular A– consumer rate exceed the agency’s higher discount rates, however, the table 4, ‘‘Regulatory Analysis,’’ September 17, 2003, 33. Available at http://www.whitehouse.gov/omb/ estimated price increases by more than shows that the private net benefits from assets/regulatory_matters_pdf/a-4.pdf (last accessed $2,500 for MY 2025 passenger cars and purchasing new vehicles with the levels Sept. 26, 2010). by about $4,500 for MY 2025 light of fuel economy this rule would

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require—rather than those that would 2016 CAFE standards to apply to future result from simply extending the MY model years—remain large.

Some evidence also suggests that time horizon and a higher discount rate As these comparisons illustrate, vehicle buyers may employ could further reduce—or potentially reasonable alternative assumptions combinations of high discount rates and even eliminate—the difference between about how consumers might evaluate short time horizons in their purchase the value of fuel savings and the future fuel savings, the major private decisions. For example, consumers agency’s estimates of increases in benefit from requiring higher fuel surveyed by Kubik (2006) reported that vehicle prices. One plausible economy, can significantly affect the fuel savings would have to be adequate combination would be for buyers to benefits they consider when deciding to pay back the additional purchase discount fuel savings over the term of a whether to purchase more fuel-efficient price of a more fuel-efficient vehicle in new car loan, using the interest rate on vehicles. Readily imaginable less than 3 years to persuade them to that loan as a discount rate. Doing so combinations of shorter time horizons, purchase it, and that even over this would reduce the amount by which higher discount rates, and lower short time horizon they were likely to discount fuel savings using credit card- future fuel savings exceed the estimated expectations about future fuel prices or like rates.814 Combinations of a shorter increase in the prices of MY 2025 annual vehicle use and fuel savings vehicles considerably further, to about could make potential buyers hesitant— 812 Interest rates on 48-month new vehicle loans $117 for passenger cars and $1,250 for or perhaps even unwilling—to purchase made by commercial banks during 2010 averaged light trucks. vehicles offering the increased fuel 6.21%, while new car loan rates at auto finance economy levels this proposed rule companies averaged 4.26%; See Board of Governors of the Federal Reserve System, Federal Reserve G.19, Consumer Credit. Available at http:// would require manufacturers to provide Statistical Release G.19, Consumer Credit. Available www.federalreserve.gov/releases/g19/Current (last in future model years. Thus, vehicle at http://www.federalreserve.gov/releases/g19/ accessed September 27, 2011). buyers’ assessment of the benefits and 814 Kubik, M. (2006). Consumer Views on Current (last accessed September 27, 2011). costs of this proposal in their purchase 813 The average rate on consumer credit card Transportation and Energy. Second Edition. accounts at commercial banks during 2010 was Technical Report: National Renewable Energy decisions may differ markedly from 13.78%; See Board of Governors of the Federal Laboratory. Available at Docket No. NHTSA–2009– NHTSA’s estimates. Reserve System, Federal Reserve Statistical Release 0059–0038.

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If consumers’ views about critical established by the 2002 NAS Report on economically desirable outcome, which variables such as future fuel prices or improving fuel economy, which implies that on balance there are likely the appropriate discount rate differ estimated ‘‘constant performance and to be substantial private gains from the sufficiently from the assumptions used utility’’ costs for technologies that proposed rule. The agency will continue by the agency, some or perhaps many manufacturers could employ to increase to investigate new empirical literature potential vehicle buyers might conclude the fuel efficiency of cars or light trucks. addressing this question as it becomes that the value of fuel savings and other Although NHTSA has revised its available, and seeks comment on all of benefits from higher fuel economy they estimates of manufacturers’ costs for the relevant questions. are considering are not sufficient to some technologies significantly for use NHTSA acknowledges the possibility justify the increase in purchase prices in this rulemaking, these revised that it has incorrectly characterized the they expect to pay. In conjunction with estimates are still intended to represent impact on the market of the CAFE the possibility that manufacturers costs that would allow manufacturers to standards this rule proposes, and that misinterpret potential buyers’ maintain the performance, safety, this could cause its estimates of benefits willingness to pay for improved fuel carrying capacity, and utility of vehicle and costs to misrepresent the effects of economy, this might explain why the models while improving their fuel the proposed rule. To recognize this current choices among available models economy, in the majority of cases. The possibility, this section presents an do not result in average fuel economy agency’s continued specification of alternative accounting of the benefits levels approaching those this rule footprint-based CAFE standards also and costs of CAFE standards for MYs would require. addresses this concern, by establishing 2017–2025 passenger cars and light Another possibility is that achieving less demanding fuel economy targets for trucks and discusses its implications. the fuel economy improvements larger cars and light trucks. Table IV–114 displays the economic required by stricter fuel economy Finally, vehicle buyers may simply impacts of the rule as viewed from the standards might lead manufacturers to prefer the choices of vehicle models perspective of potential buyers. forego planned future improvements in they now have available to the As the table shows, the proposed performance, carrying capacity, safety, combinations of price, fuel economy, rule’s total benefits to vehicle buyers or other features of their vehicle models and other attributes that manufacturers (line 4) consist of the value of fuel that provide important sources of utility are likely to offer when required to savings over vehicles’ full lifetimes at to their owners, even if it is achieve the higher overall fuel economy retail fuel prices (line 1), the economic technologically feasible to have both levels proposed in this NPRM. This value of vehicle occupants’ savings in improvements in those other features explanation assumes that auto makers refueling time (line 2), and the and improved fuel economy. Although decide to change vehicle attributes other economic benefits from added rebound- the specific economic values that than price and fuel economy in effect driving (line 3). As the zero vehicle buyers attach to individual response to this rule. If this is the case, entries in line 5 of the table suggest, no vehicle attributes such as fuel economy, their choices among models—and even losses in consumer welfare from performance, passenger- and cargo- some buyers’ decisions about whether to changes in vehicle attributes (other than carrying capacity, or other features are purchase a new vehicle—will respond those from increases in vehicle prices) difficult to infer from vehicle prices or accordingly, and their responses to are assumed to occur. Thus there is no buyers’ choices among competing these new choices will reduce their reduction in the total private benefits to models, changes in vehicle attributes overall welfare. Some may buy models vehicle owners, so that net private can significantly affect the overall utility with combinations of price, fuel benefits to vehicle buyers (line 6) are that vehicles offer to potential buyers. efficiency, and other attributes that they equal to total private benefits (reported Thus if requiring manufacturers to consider less desirable than those they previously in line 4). provide higher fuel economy leads them would otherwise have purchased, while As Table IV–114 also shows, the to sacrifice improvements in these or others may simply postpone buying a decline in fuel tax revenues (line 7) that other highly-valued attributes, potential new vehicle. It leaves open the question, results from reduced fuel purchases is a buyers are likely to view these sacrifices though, why auto makers would change transfer of funds between consumers as an additional cost of improving fuel those other vehicle characteristics if and government and is thus not a social economy. If those attributes are of consumers liked them as they were; as cost.815 (Thus the sum of lines 1 and 7 sufficient value, or if the range of noted, the assumption of ‘‘constant equals the savings in fuel production vehicles offered ensures that vehicles performance and utility’’ built into the costs that were reported previously as with those attributes will continue to be cost estimates means that these changes the value of fuel savings at pre-tax offered, then vehicle buyers will still are not necessary. prices in the agency’s previous have the opportunity to choose those As the foregoing discussion makes accounting of benefits and costs.) Lines attributes, though at increased cost clear, the agency cannot offer a 8 and 9 of Table IV–114 report the value compared to models without the fuel complete answer to the question of why of reductions in air pollution and economy improvements. the apparently large differences between climate-related externalities resulting As indicated in its previous its estimates of private benefits from from lower emissions of criteria air discussion of technology costs, NHTSA requiring higher fuel economy and the has approached this potential problem costs of supplying it would not result in 815 Strictly speaking, fuel taxes represent a by attempting to develop cost estimates higher fuel economy for new cars and transfer of resources from consumers of fuel to for fuel economy-improving light trucks in the absence of this rule. government agencies and not a use of economic technologies that include allowances for One explanation is that these estimates resources. Reducing the volume of fuel purchases simply reduces the value of this transfer, and thus any additional costs that would be are reasonable, but that for the reasons cannot produce a real economic cost or benefit. necessary to maintain the reference fleet outlined above, the market for fuel Representing the change in fuel tax revenues in (or baseline) levels of performance, economy is not operating efficiently. effect as an economy-wide cost is necessary to offset comfort, capacity, or safety of light-duty NHTSA believes the existing literature the portion of fuel savings included in line 1 that represents savings in fuel tax payments by vehicle models to which those offers some support for the view that consumers. This prevents the savings in tax technologies are applied. In doing so, various failures in the market for fuel revenues from being counted as a benefit from the the agency followed the precedent economy prevent it from providing an economy-wide perspective.

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pollutants and GHGs during fuel social cost of requiring higher fuel from the higher fuel economy levels the production and consumption, while line economy. The net social benefits (line proposed rule would require stem from 10 reports the savings in energy security 15 of the table) resulting from the fuel savings to vehicle buyers. Net externalities to the U.S. economy from proposed rule consist of the sum of external benefits from the proposed rule reduced consumption and imports of private (line 6) and external (line 13) are expected to be small, because the petroleum and refined fuel. Line 12 benefits, minus technology costs (line value of reductions in environmental reports the costs of increased congestion 14). As expected, the figures reported in and energy security externalities is delays, accidents, and noise that result line 15 of the table are identical to those likely almost exactly offset by the from additional driving due to the fuel reported previously in Table IV–63. increased costs associated with added economy rebound effect. Net external Table IV–114 highlights several vehicle use. As a consequence, the net benefits from the proposed CAFE important features of this rule’s social benefits of the rule mirror almost standards (line 13) are thus the sum of economic impacts. First, comparing the exactly its net private benefits to vehicle the change in fuel tax revenues, the rule’s net private (line 6) and external buyers, under the assumption that reduction in environmental and energy (line 13) benefits makes it clear that a manufacturers will recover their security externalities, and increased very large proportion of the proposed technology outlays for achieving higher external costs from added driving. rule’s benefits would be experienced by fuel economy by raising new car and Line 14 of Table IV–114 shows vehicle buyers, while the small light truck prices. Once again, this result manufacturers’ technology outlays for remaining fraction would be highlights the extreme importance of meeting higher CAFE standards for experienced throughout the remainder accounting for any other effects of the passenger cars and light trucks, which of the U.S. economy. In turn, the vast rule on the economic welfare of vehicle represent the principal private and majority of private benefits resulting buyers.

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As discussed in detail previously, benefits from this proposed rule amply possible that the agency has NHTSA believes that the aggregate justify its total costs, but it remains overestimated the role of fuel savings to

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buyers and subsequent owners of the passenger cars and light trucks built costs are likely to be directly related to cars and light trucks to which the higher during MYs 2017–2025. We anticipate price increases, but liability premiums CAFE standards it proposes would that the cost, scope, and duration of this will go up by a smaller proportion apply. It is also possible that the agency rule, as well as the steadily rising because the bulk of liability coverage has failed to develop cost estimates that standards it requires, will cause reflects the cost of personal injury. Also, do not require manufacturers to make automakers and suppliers to devote although they represent economic changes in vehicle attributes as part of increased attention to methods of transfers, sales and excise taxes would their efforts to achieve higher fuel improving vehicle fuel economy. also increase with increases in vehicle economy. To acknowledge these This increased attention will prices (unless rates are reduced). The possibilities, NHTSA has examined stimulate additional research and impact on operation and maintenance their potential impact on its estimates of engineering, and we anticipate that, costs is less clear, because the the proposed rule’s benefits and costs. over time, innovative approaches to maintenance burden and useful life of This analysis, which appears in Chapter reducing the fuel consumption of light each technology are not known. VIII of the Preliminary RIA duty vehicles will emerge. These However, one of the common accompanying this proposed rule, innovative approaches may reduce the consequences of using more complex or shows the rule’s economic impacts cost of the proposed rule in its later innovative technologies is a decline in under alternative assumptions about the years, and also increase the set of vehicle reliability and an increase in private benefits from higher fuel feasible technologies in future years. We maintenance costs. These costs are economy, and the value of potential have attempted to estimate the effect of borne in part by vehicle manufacturers changes in other vehicle attributes. One learning effects on the costs of (through warranty costs, which are conclusion is that even if the private producing known technologies within included in the indirect costs of savings are significantly overstated, the the period of the rulemaking, which is production), and in part by vehicle benefits of the proposed standards one way that technologies become owners. NHTSA believes that this effect continue to exceed the costs. We seek cheaper over time, and may reflect is difficult to quantify for purposes of comment on that analysis and the innovations in application and use of this proposed rule, but we seek discussion above. existing technologies to meet the comment on how we might attempt to proposed future. However, we have not do so for the final rule. 7. What other impacts (quantitative and attempted to estimate the extent to Related, to the extent that the unquantifiable) will these proposed which not-yet-invented technologies proposed standards require standards have? will appear, either within the time manufacturers to build and sell more In addition to the quantified benefits period of the current rulemaking or that PHEVs and EVs, vehicle manufacturers and costs of fuel economy standards, the might be available after MY 2016, or and owners may face additional costs final standards will have other impacts whether technologies considered but for charging infrastructure and battery that we have not quantified in monetary not applied in the current rulemaking, disposal. While Chapter 3 of the draft terms. The decision on whether or not due to concern about the likelihood of Joint TSD discusses the costs of to quantify a particular impact depends their commercialization in the charging infrastructure, neither of these on several considerations: rulemaking timeframe, will in fact be costs have been incorporated into the • How likely is it to occur, and can helped towards commercialization as a rulemaking analysis due to time the magnitude of the impact reasonably result of the proposed standards. constraints. We intend to attempt to be attributed to the outcome of this NHTSA seeks comment on whether quantify these additional costs for the rulemaking? there are quantifiable costs and benefits final rule stage, but we believe that • Would quantification of its physical associated with the potential technology doing so will be difficult and we seek magnitude or economic value help forcing effects of the proposed comment on how we might go about it. NHTSA and the public evaluate the standards, and if so, how the agency We also seek comment on other costs or CAFE standards that may be set in should consider attempting to account cost savings that are not accounted for rulemaking? for them in the final rule analysis. in this analysis and how we might go • about quantifying them for the final Is the impact readily quantifiable in Effects on Vehicle Costs physical terms? rule. • If so, can it readily be translated Actions that increases the cost of new And finally on the subject of vehicle into an economic value? vehicles could subsequently make such operation, NHTSA has received • Is this economic value likely to be vehicles more costly to maintain, repair, comments in the past that premium material? and insure. In general, NHTSA expects (higher octane) fuel may be necessary if • Can the impact be quantified with that this effect to be a positive linear certain advanced fuel economy- a sufficiently narrow range of function of vehicle costs. In its central improving technologies are required by uncertainty so that the estimate is analysis, NHTSA estimates that the stringent CAFE standards. The agencies useful? proposed rule could raise average have not assumed in our development NHTSA expects that this rulemaking vehicle technology costs by over $1,800 of technology costs that premium fuel will have a number of genuine, material by 2025, and for some manufacturers, would be required. We seek comment impacts that have not been quantified average costs will increase by more than on this assumption. due to one or more of these $3,000 (for some specific vehicle Effects on Vehicle Miles Traveled considerations. In some cases, further models, we estimate that the proposed (VMT) research may yield estimates that are rule could increase technology costs by useful for future rulemakings. more than $10,000). Depending on the While NHTSA has estimated the retail price of the vehicle, this could impact of the rebound effect on the use Technology Forcing represent a significant increase in the of MY 2017–25 vehicles, we have not The proposed rule will improve the overall vehicle cost and subsequently estimated how a change in new vehicle fuel economy of the U.S. new vehicle increase insurance rates, operation sales would impact aggregate vehicle fleet, but it will also increase the cost costs, and maintenance costs. use. Changes in new vehicle sales may (and presumably, the price) of new Comprehensive and collision insurance be accompanied by complex but

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difficult-to-quantify effects on overall ‘‘turnover’’ of the vehicle fleet—that is, The net effect of incorporating an RFS vehicle use and its composition by the retirement of used vehicles and their then might be to slightly reduce the vehicle type and age, because the same replacement by new models—to benefits of the rule because affected factors affecting sales of new vehicles accelerate slightly, thus accentuating the vehicles might be driven slightly less if are also likely to influence their use, as anticipated effect of the rule on fleet- the RFS makes blended gasoline well as how intensively older vehicles wide fuel consumption and CO2 relatively more expensive, and because are used and when they are retired from emissions. However, if potential buyers fuels blended with more ethanol emit service. These changes may have value future fuel savings resulting from slightly fewer greenhouse gas emissions important consequences for total fleet- the increased fuel efficiency of new per gallon. In addition, there might be wide fuel consumption. NHTSA models at less than the increase in their corresponding benefit losses from the believes that this effect is difficult to average selling price, sales of new induced reduction in VMT. All of these quantify for purposes of this proposed vehicles will decline, as will the rate at effects are difficult to estimate, because rule, but we seek comment on how we which used vehicles are retired from of uncertainty in future crude oil prices, might attempt to do so for the final rule, service. This effect will slow the uncertainty in future tax policy, and if commenters agree that attempting replacement of used vehicles by new uncertainty about how petroleum quantification of this effect could be models, and thus partly offset the marketers will actually comply with the informative. anticipated effects of the final rules on RFS, but they are likely to be small, fuel use and emissions. because the cumulative deviation from Effect on Composition of Passenger Car Because the agencies are uncertain baseline fuel consumption induced by and Light Truck Sales about how the value of projected fuel the final rule will itself be small. To the extent that manufacturers pass savings from the final rules to potential on costs to buyers by raising prices for buyers will compare to their estimates Distributional Effects new vehicle models, they may distribute of increases in new vehicle prices, we The agency’s analysis of the proposed these price increases across their model have not attempted to estimate rule reports impacts only as nationwide lineups in ways that affect the explicitly the effects of the rule on aggregate or per-vehicle average values. composition of their total sales. To the scrappage of older vehicles and the NHTSA also shows the effects of the extent that changes in the composition turnover of the vehicle fleet. EIA high and low fuel price forecasts on of sales occur, this could affect fuel the aggregate benefits in its sensitivity savings to some degree. However, Impacts of Changing Fuel Composition analysis. Generally, this proposed rule NHTSA’s view is that the scope for such on Costs, Benefits, and Emissions would have its largest effects on effects is relatively small, since most EPAct, as amended by EISA, creates a individuals who purchase new vehicles vehicles will to some extent be Renewable Fuels Standard that sets produced during the model years it impacted by the standards. targets for greatly increased usage of would affect (2017–25). New vehicle Compositional effects might be renewable fuels over the next decade. buyers who drive more than the important with respect to compliance The law requires fixed volumes of agency’s estimates of average vehicle costs for individual manufacturers, but renewable fuels to be used—volumes use will experience larger fuel savings are unlikely to be material for the rule that are not linked to actual usage of and economic benefits than the average as a whole. transportation fuels. values reported in this NPRM, while NHTSA is continuing to develop Ethanol and (in the required those who drive less than our average methods of estimating the effects of volumes) may increase or decrease the estimates will experience smaller fuel these proposed standards on the sales of cost of blended gasoline and diesel, savings and benefits. NHTSA believes individual vehicle models, and plans to depending on crude oil prices and tax that this effect is difficult to quantify for apply these methods in analyzing the subsidies offered for renewable fuels. purposes of this proposed rule, but we impacts of its final CAFE standards for The potential extra cost of renewable seek comment on how we might attempt MY 2017–25. In the meantime, the fuels would be borne through a cross- to do so for the final rule, if commenters agency seeks comment on the subsidy: the price of every gallon of agree that attempting quantification of possibility that significant shifts in the blended gasoline could rise sufficiently this effect could be informative. to pay for any extra cost of using composition of new vehicle sales by H. Vehicle Classification type or model could occur, the potential renewable fuels in these blends. effects of such shifts on fuel However, if the price of gasoline or Vehicle classification, for purposes of consumption and fuel savings from the diesel increases enough, the consumer the CAFE program, refers to whether proposed standards, and methods for could actually realize a savings through NHTSA considers a vehicle to be a analyzing the potential extent and the increased usage of renewable fuels. passenger car or a light truck, and thus patterns of shifts in sales. By reducing total fuel consumption, the subject to either the passenger car or the CAFE standards proposed in this rule light truck standards.816 As NHTSA Effects on the Used Vehicle Market could tend to increase any necessary explained in the MY 2011 rulemaking The effect of this rule on the lifetimes, cross-subsidy per gallon of fuel, and and in the MYs 2012–2016 rulemaking, use, and retirement dates (‘‘scrappage’’) hence raise the market price of vehicle classification is based in part on of older vehicles will be related to its transportation fuels, while there would EPCA/EISA, and in part on NHTSA’s effects on new vehicle prices, the fuel be no change in the volume or cost of regulations. EPCA categorizes some efficiency of new vehicle models, and renewable fuels used. light 4-wheeled vehicles as ‘‘passenger total sales of new vehicles. If the value These effects are indirectly automobiles’’ (cars) and the balance as of fuel savings resulting from improved incorporated in NHTSA’s analysis of the ‘‘non-passenger automobiles’’ (light fuel efficiency to the typical potential proposed CAFE rule because they are trucks). EPCA defines passenger buyer of a new vehicle outweighs the reflected in EIA’s projections of future average increase in new models’ prices, gasoline and diesel prices in the Annual 816 For the purpose of the MYs 2012–2016 standards and this NPRM for the MYs 2017–2025 sales of new vehicles will rise, while Energy Outlook, which incorporates in standards, EPA has agreed to use NHTSA’s scrappage rates of used vehicles will its baseline both a Renewable Fuel regulatory definitions for determining which increase slightly. This will cause the Standard and an CAFE standards. vehicles would be subject to which CO2 standards.

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automobiles as any automobile (other or as a light truck, and second, by no one can predict with certainty how than an automobile capable of off- requiring NHTSA to set separate the market will change between now highway operation) which NHTSA standards for passenger cars and for and 2025. The agency therefore has less decides by rule is manufactured light trucks.819 Creating two categories assurance than in prior rulemakings that primarily for use in the transportation of of vehicles and requiring separate manufacturers will not have greater not more than 10 individuals.817 standards for each, however, can lead to incentives and opportunities during that NHTSA created regulatory definitions two issues which may either detract time frame to make more deliberate for passenger automobiles and light from the fuel savings that the program redesign efforts to move vehicles out of trucks, found at 49 CFR Part 523, to is able to achieve, or increase regulatory the car fleet and into the truck fleet in guide the agency and manufacturers in burden for manufacturers simply order to obtain the lower target, and classifying vehicles. because they are trying to meet market potentially reducing overall fuel Under EPCA, there are two general demand. Specifically, savings. Recognizing this possibility, we groups of automobiles that qualify as (1) If the stringency of the standards seek comment on how best to avoid it non-passenger automobiles or light that NHTSA establishes seems to favor while still classifying vehicles trucks: (1) Those defined by NHTSA in either cars or trucks, manufacturers may appropriately based on their its regulations as other than passenger have incentive to change their vehicles’ characteristics and capabilities. automobiles due to their having design characteristics in order to reclassify One of the potential options that we features that indicate they were not them and average them into the ‘‘easier’’ explored in the MYs 2012–2016 manufactured ‘‘primarily’’ for fleet; and rulemaking for MYs 2017 and beyond transporting up to ten individuals; and (2) ‘‘Like’’ vehicles, such as the 2WD was changing the definition of light (2) those expressly excluded from the and 4WD versions of the same CUV, truck to remove paragraph (5) of 49 CFR passenger category by statute due to may have generally similar fuel 523.5(a), which allows vehicles to be their capability for off-highway economy-achieving capabilities, but classified as light trucks if they have operation, regardless of whether they different targets due to differences in the three or more rows of seats that can might have been manufactured car and truck curves. either be removed or folded flat to allow primarily for passenger NHTSA recognizes that manufacturers greater cargo-carrying capacity. NHTSA transportation.818 49 CFR 523 directly may have an incentive to classify has received comments in the past tracks those two broad groups of non- vehicles as light trucks if the fuel arguing that vehicles with three or more passenger automobiles in subsections (a) economy target for light trucks with a rows of seats, unless they are capable of and (b), respectively. We note that given footprint is less stringent than the transporting more than 10 individuals, NHTSA tightened the definition of light target for passenger cars with the same should be classified as passenger cars truck in the MY 2011 rulemaking to footprint. This is often the case given rather than as light trucks because they ensure that only vehicles that actually the current fleet. Because of would not need to have so many seats have 4WD will be classified as off- characteristics like 4WD and towing and if they were not intended primarily to highway vehicles by reason of having hauling capacity (and correspondingly, carry passengers. 4WD (to prevent 2WD SUVs that also although not necessarily, heavier NHTSA recognizes that there are come in a 4WD ‘‘version’’ from weight), the vehicles in the current light arguments both for and against qualifying automatically as ‘‘off-road truck fleet are generally less capable of maintaining the definition as currently capable’’ simply by reason of the achieving higher fuel economy levels as written for MYs 2017 and beyond. The existence of the 4WD version), which compared to the vehicles in the agency continues to believe that three or resulted in the reclassification of over 1 passenger car fleet. 2WD SUVs are the more rows of seats that can be removed million vehicles from the truck fleet to vehicles that could be most readily or folded flat is a reasonable proxy for the car fleet. redesigned so that they can be ‘‘moved’’ a vehicle’s ability to provide expanded Since the original passage of EPCA, from the passenger car to the light truck cargo space, consistent with the and consistently through the passage of fleet. A manufacturer could do this by agency’s original intent in developing EISA, Congress has expressed its intent adding a third row of seats, for example, the light truck definitions that expanded that different vehicles with different or boosting GVWR over 6,000 lbs for a cargo space is a fundamentally ‘‘truck- characteristics and capabilities should 2WD SUV that already meets the ground like’’ characteristic. Much of the public be subject to different CAFE standards clearance requirements for ‘‘off-road reaction to this definition, which is in two ways: first, through whether a capability.’’ A change like this may only mixed, tends to be visceral and vehicle is classified as a passenger car be possible during a vehicle redesign, anecdotal—for example, for parents but since vehicles are redesigned, on with minivans and multiple children, 817 EPCA 501(2), 89 Stat. 901, codified at 49 average, every 5 years, at least some the ability of seats to fold flat to provide U.S.C. 32901(a). manufacturers could possibly choose to more room for child-related cargo may 818 49 U.S.C. 32901(a)(18). The statute refers both have been a paramount consideration in to vehicles that are 4WD and to vehicles over 6,000 make such changes before or during the lbs GVWR as potential candidates for off-road model years covered by this rulemaking, purchasing the vehicle, while for CUV capability, if they also meet the ‘‘significant feature either because of market demands or owners with cramped and largely * * * designed for off-highway operation’’ as because of interest in changing the unused third rows, those extra seats defined by the Secretary. We note that we consider may seem to have sprung up entirely in ‘‘AWD’’ vehicles as 4WD for purposes of this vehicle’s classification. determination—they send power to all wheels of NHTSA continues to believe that the response to the regulation, rather than the vehicle all the time, while 4WD vehicles may definitions as they currently exist are in response to the consumer’s need for only do so part of the time, which appears to make consistent with the text of EISA and utility. If we believe, for the sake of them equal candidates for off-road capability given argument, that the agency’s decision other necessary characteristics. We also underscore, with Congress’ original intent. However, as we have in the past, that despite comments in the time frame of this rulemaking is might be reasonable from both a policy prior rulemakings suggesting that any vehicle that longer than any CAFE rulemaking that and a legal perspective whether we appears to be manufactured ‘‘primarily’’ for NHTSA has previously undertaken, and decided to change the definition or to transporting passengers must be classified as a leave it alone, the most important passenger car, the statute as currently written clearly provides that vehicles that are off-highway 819 See, e.g., discussion of legislative history in 42 questions in making the decision capable are not passenger cars. FR 38362, 38365–66 (Jul. 28, 1977). become (1) whether removing

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523.5(a)(5), and thus causing vehicles slight differences (due to rounding whether and how we should do so for with three or more rows to be classified precision) in the overall average the final rule. If commenters believe that as passenger cars in the future, will save required fuel economy levels in MYs we should attempt to quantify the more fuel, and (2) if more fuel will be 2012–2014, and to the retention of the impact, we specifically seek comment saved, at what cost. relatively high lifetime mileage on how to refit the footprint curves and In considering these questions in the accumulation (compared to how the agency should consider MYs 2012–2016 rulemaking, NHTSA ‘‘traditional’’ passenger cars) of the stringency levels under such a scenario. conducted an analysis in the final rule vehicles moved from the light truck fleet Another potential option that we to attempt to consider the impact of to the passenger car fleet. The net effect explored in the MYs 2012–2016 moving these vehicles. We identified all on technology costs was approximately rulemaking for MYs 2017 and beyond of the 3-row vehicles in the baseline $200 million additional spending on was classifying ‘‘like’’ vehicles together. (MY 2008) fleet,820 and then considered technology each year (equivalent to Many commenters objected in the whether any could be properly about 2 percent of the average increase rulemaking for the MY 2011 standards classified as a light truck under a in annual technology outlays under the to NHTSA’s regulatory separation of different provision of 49 CFR 523.5— final standards). Assuming ‘‘like’’ vehicles. Industry commenters about 40 vehicles were classifiable manufacturers would pass that cost argued that it was technologically under § 523.5(b) as off-highway capable. forward to consumers by increasing inappropriate for NHTSA to place 4WD We then transferred those remaining 3- vehicle costs, NHTSA estimated that and 2WD versions of the same SUV in row vehicles from the light truck to the vehicle prices would increase by an separate classes. They argued that the passenger car input sheets for the CAFE average of approximately $13 during vehicles are the same, except for their model, re-estimated the relative MYs 2012–2016. With less fuel savings drivetrain features, thus giving them stringency of the passenger car and light and higher costs, and a substantial similar fuel economy improvement truck standards, shifted the curves to disruption to the industry, removing potential. They further argued that all obtain the same overall average required 523.5(a)(5) did not seem advisable in the SUVs should be classified as light fuel economy as under the final context of the MYs 2012–2016 trucks. Environmental and consumer standards, and ran the model to evaluate rulemaking. group commenters, on the other hand, potential impacts (in terms of costs, fuel argued that 4WD SUVs and 2WD SUVs Looking forward, however, and given savings, etc.) of moving these vehicles. that are ‘‘off-highway capable’’ by virtue the considerable uncertainty regarding The agency’s hypothesis had been that of a GVWR above 6,000 pounds should moving 3-row vehicles from the truck to the incentive to reclassify vehicles in be classified as passenger cars, since the car fleet would tend to bring the the MYs 2017 and beyond timeframe, they are primarily used to transport achieved fuel economy levels down in the agency considered whether a fresh passengers. In the MY 2011 rulemaking, both fleets—the car fleet achieved levels attempt at this analysis would be NHTSA rejected both of these sets of could theoretically fall due to the warranted, but did not believe that it arguments. NHTSA concluded that 2WD introduction of many more vehicles that would be informative given the SUVs that were neither ‘‘off-highway are relatively heavy for their footprint uncertainty. One important point to capable’’ nor possessed ‘‘truck-like’’ and thus comparatively less fuel note in the comparative analysis in the functional characteristics were economy-capable, while the truck fleet MYs 2012–2016 rulemaking is that, due appropriately classified as passenger achieved levels could theoretically fall to time constraints, the agency did not cars. At the same time, NHTSA also due to the characteristics of the vehicles attempt to refit the respective fleet target concluded that because Congress remaining in the fleet (4WDs and curves or to change the intended explicitly designated vehicles with pickups, mainly) that are often required stringency in MY 2016 of 34.1 GVWRs over 6,000 pounds as ‘‘off- comparatively less fuel economy- mpg for the combined fleets. If we had highway capable’’ (if they meet the capable than 3-row vehicles, although refitted curves, considering the vehicles ground clearance requirements more vehicles would be subject to the in question, we might have obtained a established by the agency), NHTSA did relatively more stringent passenger car somewhat steeper passenger car curve, not have authority to move these standards, assuming the curves were not and a somewhat flatter light truck curve, vehicles to the passenger car fleet. refit to the data. which could have affected the agency’s NHTSA continues to believe that this As the agency found, however, findings. The same is true today. would not be an appropriate solution for moving the vehicles reduced the Without refitting the curves and addressing either the risk of gaming or stringency of the passenger car changing the required levels of perceived regulatory inequity going standards by approximately 0.8 mpg on stringency for cars and trucks, simply forward. As explained in the MYs 2012– average for the five years of the rule, and moving vehicles from one fleet to 2016 final rule, with regard to the first reduced the stringency of the light truck another will not inform the agency in argument, that ‘‘like’’ vehicles should be standards by approximately 0.2 mpg on any substantive way as to the impacts of classified similarly (i.e., that 2WD SUVs average for the five years of the rule, but a change in classification. Moreover, should be classified as light trucks it also resulted in approximately 676 even if we did attempt to make those because, besides their drivetrain, they million fewer gallons of fuel consumed changes, the results would be somewhat are ‘‘like’’ the 4WD version that (equivalent to about 1 percent of the speculative; for example, the agencies qualifies as a light truck), NHTSA reduction in fuel consumption under continue to use the same MY 2008 continues to believe that 2WD SUVs the final standards) and 7.1 mmt fewer baseline used in the MYs 2012–2016 that do not meet any part of the existing CO2 emissions (equivalent to about 1 rulemaking, which may have limited regulatory definition for light trucks percent of the reduction in CO2 utility for predicting relatively small should be classified as passenger cars. emissions under the final standards) changes (moving only 40 vehicles, as However, NHTSA recognizes the over the lifetime of the MYs 2012–2016 noted above) in the fleet makeup during additional point raised by industry vehicles. This result was attributable to the rulemaking timeframe. As a result, commenters in the MY 2011 rulemaking NHTSA did not attempt to quantify the that manufacturers may respond to this 820 Of the 430 light truck models in the fleet, 175 impact of such a reclassification of 3- tighter classification by ceasing to build of these had 3 rows. row vehicles, but we seek comment on 2WD versions of SUVs, which could

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reduce fuel savings. In response to that increasing the use of innovative and year (for the pre-model year report) and point, NHTSA stated in the MY 2011 advanced technologies as they evolve. in July of the given model year (for the final rule that it expects that Additional incentive programs may mid-model year report). NHTSA has manufacturer decisions about whether encourage early adoption of these already received pre-and mid-model to continue building 2WD SUVs will be innovative and advanced technologies year reports from manufacturers for MY driven in much greater measure by and help to maximize both compliance 2011. NHTSA uses these reports for consumer demand than by NHTSA’s flexibility and energy conservation. reference to help the agency, and the regulatory definitions. If it appears, in These incentive programs for CAFE manufacturers who prepare them, the course of the next several model compliance would not be under anticipate potential compliance issues years, that manufacturers are indeed NHTSA’s EPCA/EISA authority, but as early as possible, and help responding to the CAFE regulatory under EPA’s EPCA authority—as manufacturers plan compliance definitions in a way that reduces overall discussed in more detail below and in strategies. NHTSA also uses the reports fuel savings from expected levels, it may Section III of this preamble, EPA for auditing and testing purposes, which be appropriate for NHTSA to review this measures and calculates manufacturer helps manufacturers correct errors prior question again. At this time, however, compliance with the CAFE standards, to the end of the model year and since so little time has passed since our and it would be in the calculation of facilitates acceptance of their final last rulemaking action, we do not fuel economy levels that additional CAFE report by EPA. In addition, believe that we have enough incentives would most appropriately be NHTSA issues reports to the public information about changes in the fleet to applied, as a practical matter. twice a year that provide a summary of ascertain whether this is yet ripe for Specifically, to be included in the CAFE manufacturers’ fleet fuel economy consideration. We seek comment on program, EPA is proposing: (1) Fuel projected performances using pre- and how the agency might go about economy performance adjustments due mid model year data. Currently, NHTSA reviewing this question as more to improvements in air conditioning receives manufacturers’ CAFE reports in information about manufacturer system efficiency; (2) utilization of paper form. In order to facilitate behavior is accumulated over time. ‘‘game changing’’ technologies installed submission by manufacturers, NHTSA on full size pick-up trucks including amended part 537 to allow for electronic I. Compliance and Enforcement hybridization; and (3) installation of submission of the pre- and mid-model 1. Overview ‘‘off-cycle’’ technologies. In addition, for year CAFE reports in 2010 (see 75 FR model years 2020 and later, EPA is 25324). Electronic reports are optional NHTSA’s CAFE enforcement program proposing calculation methods for dual- and must be submitted in a pdf format. is largely established by statute—unlike fueled vehicles, to fill the gap left in NHTSA proposes to modify these the CAA, EPCA, as amended by EISA, EPCA/EISA by the expiration of the provisions in this NPRM, as described is very prescriptive with regard to dual-fuel incentive. A more thorough below, in order to eliminate hardcopy enforcement. EPCA and EISA also description of the basis for the new submissions and help the agency more clearly specify a number of flexibilities incentive programs can be found in readily process and utilize the that are available to manufacturers to Section III. electronically-submitted data. help them comply with the CAFE The following sections explain how Throughout the model year, NHTSA standards. Some of those flexibilities are NHTSA determines whether audits manufacturers’ reports and constrained by statute—for example, manufacturers are in compliance with conducts vehicle testing to confirm the while Congress required that NHTSA the CAFE standards for each model accuracy of track width and wheelbase allow manufacturers to transfer credits year, and how manufacturers may measurements as a part of its footprint earned for over-compliance from their address potential non-compliance validation program,823 which helps the car fleet to their truck fleet and vice situations through the use of agency understand better how versa, Congress also limited the amount compliance flexibilities or fine payment. manufacturers may adjust vehicle by which manufacturers could increase The following sections also explain, for characteristics to change a vehicle’s their CAFE levels using those the reader’s reference, the proposed new footprint measurement, and thus its fuel 821 transfers. NHTSA believes Congress incentives and calculations, but we also economy target. NHTSA resolve balanced the energy-saving purposes of refer readers to Section III.C for EPA’s discrepancies with the manufacturer the statute against the benefits of certain explanation of its authority and more prior to the end of the calendar year flexibilities and incentives and specific detail regarding these proposed corresponding to the respective model intentionally placed some limits on changes to the CAFE program. year with the primary goal of certain statutory flexibilities and manufacturers submitting accurate final incentives. With that goal in mind, of 2. How does NHTSA determine compliance? reports to EPA. NHTSA makes its maximizing compliance flexibility ultimate determination of a while also implementing EPCA/EISA’s a. Manufacturer Submission of Data and manufacturer’s CAFE compliance overarching purpose of energy CAFE Testing by EPA obligation based on official reported and conservation as fully as possible, NHTSA begins to determine CAFE verified CAFE data received from EPA. NHTSA has done its best in crafting the compliance by reviewing projected Pursuant to 49 U.S.C. 32904(e), EPA is credit transfer and trading regulations estimates in pre- and mid-model year responsible for calculating authorized by EISA to ensure that total reports submitted by manufacturers manufacturers’ CAFE values so that fuel savings are preserved when pursuant to 49 CFR part 537, NHTSA can determine compliance with manufacturers exercise their statutorily- Automotive Fuel Economy Reports.822 its CAFE standards. The EPA-verified provided compliance flexibilities. Those reports for each compliance data is based on any considerations Furthermore, to achieve the level of model year are submitted to NHTSA by from NHTSA testing, its own vehicle standards described in this proposal for December of the calendar year prior to testing, and final model year data the 2017–2025 program, NHTSA the corresponding subsequent model expects automakers to continue 823 See http://www.nhtsa.gov/DOT/NHTSA/ 822 49 CFR part 537 is authorized by 49 U.S.C. Vehicle%20Safety/Test%20Procedures/ 821 See 49 U.S.C. 32903(g). 32907. Associated%20Files/TP–537–01.pdf

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submitted by manufacturers to EPA carried forward or back for periods circumstances specified in the statute. pursuant to 40 CFR 600.512. A longer than that specified in the statute. All penalties are paid to the U.S. manufacturer’s final model year report A manufacturer may also transfer Treasury and not to NHTSA itself. must be submitted to EPA no later than credits to another compliance category, Unlike the National Traffic and Motor 90 days after December 31st of the subject to the limitations specified in 49 Vehicle Safety Act, EPCA does not model year. EPA test procedures U.S.C. 32903(g)(3), or trade them to provide for recall and remedy in the including those used to establish the another manufacturer. The value of each event of a noncompliance. The presence new incentive fuel economy credit received via trade or transfer, of recall and remedy provisions 825 in performance values for model year 2017 when used for compliance, is adjusted the Safety Act and their absence in to 2025 vehicles are contained in using the adjustment factor described in EPCA is believed to arise from the sections 40 CFR Part 600 and 40 CFR 49 CFR 536.4, pursuant to 49 U.S.C. difference in the application of the Part 86. 32903(f)(1). As part of this rulemaking, safety standards and CAFE standards. A NHTSA is proposing to set the VMT safety standard applies to individual b. NHTSA Then Analyzes EPA– values that are part of the adjustment vehicles; that is, each vehicle must Certified CAFE Values for Compliance factor for credits earned in MYs 2017– possess the requisite equipment or NHTSA’s determination of CAFE 2025 at a single level that does not feature that must provide the requisite compliance is fairly straightforward: change from model year to model year, type and level of performance. If a after testing, EPA verifies the data as discussed further below. vehicle does not, it is noncompliant. submitted by manufacturers and issues If a manufacturer’s vehicles in a Typically, a vehicle does not entirely final CAFE reports sent to particular compliance category fall lack an item or equipment or feature. manufacturers and to NHTSA in a pdf below the standard fuel economy value, Instead, the equipment or features fails format between April and October of NHTSA will provide written to perform adequately. Recalling the each year (for the previous model year), notification to the manufacturer that it vehicle to repair or replace the and NHTSA then identifies the has not met a particular fleet standard. noncompliant equipment or feature can manufacturers’ compliance categories The manufacturer will be required to usually be readily accomplished. (fleets) that do not meet the applicable confirm the shortfall and must either In contrast, a CAFE standard applies CAFE fleet standards. NHTSA plans to submit a plan indicating it will allocate to a manufacturer’s entire fleet for a construct a new, more automated existing credits, or if it does not have model year. It does not require that a database system in the near future to sufficient credits available in that fleet, particular individual vehicle be store manufacturer data and the EPA how it will earn, transfer and/or acquire equipped with any particular equipment data. The new database is expected to credits, or pay the appropriate civil or feature or meet a particular level of simplify data submissions to NHTSA, penalty. The manufacturer must submit fuel economy. It does require that the improve the quality of the agency’s data, a plan or payment within 60 days of manufacturer’s fleet, as a whole, expedite public reporting, improve receiving agency notification. Credit comply. Further, although under the audit verifications and testing, and allocation plans received from the attribute-based approach to setting enable more efficient tracking of manufacturer will be reviewed and CAFE standards fuel economy targets manufacturers’ CAFE credits with approved by NHTSA. NHTSA will are established for individual vehicles greater transparency. approve a credit allocation plan unless based on their footprints, the vehicles NHTSA uses the verified data from it finds the proposed credits are are not required to comply with those EPA to compare fleet average standards unavailable or that it is unlikely that the targets on a model-by-model or vehicle- with performance. A manufacturer plan will result in the manufacturer by-vehicle basis. However, as a practical complies with NHTSA’s fuel economy earning sufficient credits to offset the matter, if a manufacturer chooses to standard if its fleet average performance subject credit shortfall. If a plan is design some vehicles so they fall below is greater than or equal to its required approved, NHTSA will revise the their target levels of fuel economy, it standard, or if it is able to use available manufacturer’s credit account will need to design other vehicles so compliance flexibilities to resolve its accordingly. If a plan is rejected, they exceed their targets if the non-compliance difference. NHTSA NHTSA will notify the manufacturer manufacturer’s overall fleet average is to calculates a cumulative credit status for and request a revised plan or payment meet the applicable standard. each of a manufacturer’s vehicle of the appropriate fine. Thus, under EPCA, there is no such compliance categories according to 49 In the event that a manufacturer does thing as a noncompliant vehicle, only a U.S.C. 32903. If a manufacturer’s not comply with a CAFE standard even noncompliant fleet. No particular compliance category exceeds the after the consideration of credits, EPCA vehicle in a noncompliant fleet is any applicable fuel economy standard, provides for the assessment of civil more, or less, noncompliant than any NHTSA adds credits to the account for penalties. The Act specifies a precise other vehicle in the fleet. that compliance category. The amount formula for determining the amount of After enforcement letters are sent, of credits earned in a given year are civil penalties for noncompliance.824 NHTSA continues to monitor receipt of determined by multiplying the number The penalty, as adjusted for inflation by credit allocation plans or civil penalty of tenths of an mpg by which a law, is $5.50 for each tenth of a mpg that payments that are due within 60 days manufacturer exceeds a standard for a a manufacturer’s average fuel economy from the date of receipt of the letter by particular category of automobiles by falls short of the standard for a given the vehicle manufacturer, and takes the total volume of automobiles of that model year multiplied by the total further action if the manufacturer is category manufactured by the volume of those vehicles in the affected delinquent in responding. If NHTSA manufacturer for that model year. fleet (i.e., import or domestic passenger receives and approves a manufacturer’s Credits may be used to offset shortfalls car, or light truck), manufactured for carryback plan to earn future credits in other model years, subject to the that model year. The amount of the within the following three years in order three year ‘‘carry-back’’ and five-year penalty may not be reduced except to comply with current regulatory ‘‘carry-forward’’ limitations specified in under the unusual or extreme 49 U.S.C. 32903(a); NHTSA does not 825 49 U.S.C. 30120, Remedies for defects and have authority to allow credits to be 824 See 49 U.S.C. 32912. noncompliance.

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obligations, NHTSA will defer levying a. Dual- and Alternative-Fueled In the case of natural gas, EPA’s fines for non-compliance until the Vehicles calculation is performed in a similar date(s) when the manufacturer’s As discussed at length in prior manner. The fuel economy is the approved plan indicates that credits will rulemakings, EPCA encourages weighted average while operating on be earned or acquired to achieve manufacturers to build alternative- natural gas and operating on gas or compliance, and upon receiving fueled and dual- (or flexible-) fueled diesel. The statute specifies that 100 confirmed CAFE data from EPA. If the vehicles by providing special fuel cubic feet (ft3) of natural gas is manufacturer fails to acquire or earn economy calculations for ‘‘dedicated’’ equivalent to 0.823 gallons of gasoline. sufficient credits by the plan dates, (that is, 100 percent) alternative fueled The CAFE fuel economy while NHTSA will initiate compliance vehicles and ‘‘dual-fueled’’ (that is, operating on the natural gas is proceedings. 49 CFR part 536 contains capable of running on either the determined by dividing its fuel the detailed regulations governing the alternative fuel or gasoline/diesel) economy in equivalent miles per gallon use and application of CAFE credits vehicles. Consistent with the of gasoline by 0.15.828 Thus, if a vehicle authorized by 49 U.S.C. 32903. overarching purpose of EPCA/EISA, averages 25 miles per 100 ft3 of natural these statutory incentives help to reduce gas, then: 3. What compliance flexibilities are petroleum usage and thus improve our CAFE FE = (25/100) * (100/.823)*(1/ available under the CAFE program and nation’s energy security. Per EPCA, the 0.15) = 203 mpg how do manufacturers use them? fuel economy of a dedicated alternative Congress extended the dual-fueled There are three basic flexibilities fuel vehicle is determined by dividing vehicle incentive in EISA for dual- its fuel economy in equivalent miles per outlined by EPCA/EISA that fueled automobiles through MY 2019, gallon of gasoline or diesel fuel by manufacturers can currently use to but provided for its phase-out between 0.15.826 Thus, a 15 mpg dedicated achieve compliance with CAFE MYs 2015 and 2019.829 The maximum alternative fuel vehicle would be rated standards beyond applying fuel fleet fuel economy increase attributable as 100 mpg. to this statutory incentive is thus as economy-improving technologies: (1) For dual-fueled vehicles, EPA follows: Building dual- and alternative-fueled measures the vehicle’s fuel economy vehicles; (2) banking (carry-forward and rating by determining the average of the carry-back), trading, and transferring fuel economy on gasoline or diesel and 828 49 U.S.C. 32905(c). credits earned for exceeding fuel 829 49 U.S.C. 32906(a). NHTSA notes that the the fuel economy on the alternative fuel incentive for dedicated alternative-fuel economy standards; and (3) paying civil 827 vehicle divided by 0.15. This automobiles, automobiles that run exclusively on penalties. We note that while these calculation procedure, provided in an alternative fuel, at 49 U.S.C. 32905(a), was not flexibility mechanisms will reduce EPCA, turns a dual-fueled vehicle that phased-out by EISA. compliance costs to some degree for averages 25 mpg on gasoline or diesel We note additionally and for the reader’s most manufacturers, 49 U.S.C. 32902(h) reference that EPA will be treating dual- and into a 40 mpg vehicle for CAFE alternative-fueled vehicles under its GHG program expressly prohibits NHTSA from purposes. This assumes that (1) the similarly to the way EPCA/EISA provides for CAFE considering the availability of vehicle operates on gasoline or diesel 50 through MY 2015, but for MY 2016, EPA statutorily-established credits (either for percent of the time and on alternative established CO2 emission levels for alternative fuel building dual- or alternative-fueled vehicles based on measurement of actual CO2 fuel 50 percent of the time; (2) fuel emissions during testing, plus a manufacturer vehicles or from accumulated transfers economy while operating on alternative demonstration that the vehicles are actually being or trades) in determining the level of the fuel is 15 mpg (15/.15 = 100 mpg); and run on the alternative fuel. The manufacturer would standards. Thus, NHTSA may not raise (3) fuel economy while operating on gas then be allowed to weight the gasoline and CAFE standards because manufacturers alternative fuel test results based on the proportion or diesel is 25 mpg. Thus: of actual usage of both fuels. Because EPCA/EISA have enough of those credits to meet CAFE FE = 1/{0.5/(mpg gas) + 0.5/(mpg provides the explicit CAFE measurement higher standards. This is an important alt fuel)} = 1/{0.5/25 + 0.5/100} = methodology for EPA to use for dedicated vehicles difference from EPA’s authority under 40 mpg and dual-fueled vehicles through MY 2019, we the CAA, which does not contain such explained in the MYs 2012–2016 final rule that the CAFE program would not require that vehicles a restriction, and which allows EPA to 826 49 U.S.C. 32905(a). manufactured for the purpose of obtaining the set higher standards as a result. 827 49 U.S.C. 32905(b). credit actually be run on the alternative fuel.

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49 CFR part 538 codifies in regulation vehicle (PHEV, that runs on both For clarification in our regulations, the statutory alternative-fueled and gasoline and electricity) and for CNG- NHTSA is proposing to add Part dual-fueled automobile manufacturing gasoline vehicles on both the alternative 536.10(d) which states that for model incentive. fuel and on gasoline, but rather than years 2020 and beyond a manufacturer Given that the statutory incentive for assuming that the dual-fueled vehicle must calculate the fuel economy of dual dual-fueled vehicles in 49 U.S.C. 32906 runs on the alternative fuel 50 percent fueled vehicles in accordance with 40 and the measurement methodology of the time as the current statutory CFR 600.500–12(c), (2)(v) and (vii), the specified in 49 U.S.C. 32905(b) and (d) measurement methodology requires, sections of EPA’s calculation regulations expire in MY 2019, the question EPA will instead use the Society of where EPA is proposing to incorporate becomes, how should the fuel economy Automotive Engineers (SAE) ‘‘utility these changes. of dual-fueled vehicles be determined factor’’ methodology (based on vehicle for CAFE compliance in MYs 2020 and range on the alternative fuel and typical Additionally, to avoid manufacturers beyond? NHTSA and EPA believe that daily travel mileage) to determine the building only dedicated alternative fuel the expiration of the dual-fueled vehicle assumed percentage of operation on vehicles (which may be harder to refuel measurement methodology in the gasoline/diesel and percentage of in some instances) because of the statute leaves a gap to be filled, to avoid operation on the alternative fuel for continued statutory 0.15 CAFE divisor the absurd result of dual-fueled those vehicles. Using the utility factor, under 49 U.S.C. 32905(a) and the vehicles’ fuel economy being measured rather than making an a priori calculation for EV fuel economy under like that of conventional gasoline assumption about the amount of 49 U.S.C. 32904, and declining to build vehicles. If the overarching purpose of alternative fuel used by dual-fueled dual-fueled vehicles which might not the statute is energy conservation and vehicles, recognizes that once a get a similar bonus, EPA is proposing to reducing petroleum usage, the agencies consumer has paid several thousand use the Petroleum Equivalency Factor believe that that goal is best met by dollars to be able to use a fuel that is (PEF) and a 0.15 divisor for calculating continuing to reflect through CAFE considerably cheaper than gasoline or the fuel economy of PHEVs’ electrical calculations the reduced petroleum diesel, it is very likely that the operation and for natural gas operation usage that dual-fueled vehicles achieve. consumer will seek to use the cheaper of CNG-gasoline vehicles.830 This is As discussed in more detail in Section fuel as much as possible. Consistent consistent with the statutory approach III.B.10, for MYs 2020 and beyond, to with this approach, however, EPA is not for dedicated alternative fuel vehicles, fill the gap left by the expiration of the proposing to extend the utility factor and continues to incentivize the usage statutory CAFE measurement method to flexible fueled vehicles of alternative fuels and reduction of methodology for dual-fueled vehicles, (FFVs) that use E–85 and gasoline, since petroleum usage, but when combined EPA is proposing to harmonize with the there is not a significant cost differential with the utility factor approach approach it uses under the GHG between an FFV and conventional described above, does not needlessly program to measure the emissions of gasoline vehicle and historically over-incentivize their usage—it gives dual-fueled vehicles, to reflect the real- consumers have only fueled these credit for what is used, and does not world percentage of usage of alternative vehicles with E85 a very small give credit for what is not used. Because fuels by dual-fueled vehicles, but also to percentage of the time. Therefore, EPA it does not give credit for what is not continue to incentivize the use of is proposing for CAFE compliance in used, EPA would propose that certain alternative fuels in dual-fueled MYs 2020 and beyond to continue manufacturers may increase their vehicles as appropriate under EPCA/ treatment of E85 and other FFVs as calculated fleet fuel economy for dual- EISA to reduce petroleum usage. finalized in the MY 2016 GHG program, Specifically, for MYs 2020 and beyond, based on actual usage of the alternative 830 EPA is also seeking comment on an approach EPA will calculate the fuel economy test fuel which represents a real-world that would not use the PEF and 0.15 multiplier, as values for a plug-in hybrid electric reduction attributed to alternative fuels. discussed above in Section III.

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fueled vehicles by an unlimited amount discussed above, EISA establishes a technology, or when adding fuel using these flexibilities. ‘‘cap’’ for the maximum increase in any economy-improving technology would As an example, for MYs 2020 and compliance category attributable to fundamentally change the beyond, the calculation procedure for a transferred credits: for MYs 2011–2013, characteristics of the vehicle in ways dual-fueled vehicle that uses both transferred credits can only be used to that the manufacturer believes its target gasoline and CNG could result in a increase a manufacturer’s CAFE level in consumers would not accept. NHTSA combined fuel economy value of 150 a given compliance category by 1.0 mpg; has no authority under EPCA/EISA to mpg for CAFE purposes. This assumes for MYs 2014–2017, by 1.5 mpg; and for prevent manufacturers from turning to that (1) the ‘‘utility factor’’ for the MYs 2018 and beyond, by 2.0 mpg. payment of civil penalties if they choose alternative fuel is found to be 95 As part of this rulemaking, NHTSA is to do so. This is another important percent, and so the vehicle operates on proposing to set the VMT estimates used gasoline for the remaining 5 percent of in the credit adjustment factor at difference from EPA’s authority under the time; (2) fuel economy while 195,264 miles for passenger car credits the CAA, which allows EPA to revoke operating on natural gas is 203 mpg and 225,865 miles for light truck credits a manufacturer’s certificate of [(25/100) * (100/.823) * (1/0.15)] as for credits earned in MYs 2017–2025. conformity that permits it to sell shown above utilizing the PEF and the The VMT estimates for MYs 2012–2016 vehicles if EPA determines that the .15 incentive factor; and (3) fuel would not change. NHTSA is proposing manufacturer is in non-compliance, and economy while operating on gasoline is these values in the interest of does not permit manufacturers to pay 25 mpg. Thus: harmonizing with EPA’s GHG program, fines in lieu of compliance with CAFE FE = 1/{0.05/(mpg gas) + 0.95/ and seeks comment on this approach as applicable standards. (mpg CNG)} = 1/{0.05/25 + 0.95/ compared to the prior approach of NHTSA has grappled repeatedly with 203} = 150 mpg adjustment factors with VMT estimates the issue of whether civil penalties are The agencies seek comment on this that vary by year. Additionally, NHTSA motivational for manufacturers, and is proposing to include VMT estimates approach. whether raising them would increase for MY 2011 which the agency manufacturers’ compliance with the b. Credit Trading and Transfer neglected to include in Part 536 as part of the MYs 2012–2016 rulemaking. The standards. EPCA authorizes increasing As part of the MY 2011 final rule, the civil penalty very slightly up to NHTSA created 49 CFR part 536 for proposed MY 2011 VMT estimate for $10.00, exclusive of inflationary credit trading and transfer. Part 536 passenger cars is 152,922 miles, and for adjustments, if NHTSA decides that the implements the provisions in EISA light trucks is 172,552 miles. increase in the penalty ‘‘will result in, authorizing NHTSA to establish by c. Payment of Civil Penalties regulation a credit trading program and or substantially further, substantial directing it to establish by regulation a If a manufacturer’s average miles per energy conservation for automobiles in credit transfer program.831 Since its gallon for a given compliance category the model years in which the increased enactment, EPCA has permitted (domestic passenger car, imported penalty may be imposed; and will not manufacturers to earn credits for passenger car, light truck) falls below have a substantial deleterious impact on the applicable standard, and the exceeding the standards and to carry the economy of the United States, a manufacturer cannot make up the those credits backward or forward. EISA State, or a region of a State.’’ 49 U.S.C. difference by using credits earned or extended the ‘‘carry-forward’’ period 32912(c). acquired, the manufacturer is subject to from three to five model years, and left penalties. The penalty, as mentioned, is To support a decision that increasing the ‘‘carry-back’’ period at three model $5.50 for each tenth of a mpg that a the penalty would result in ‘‘substantial years. Under part 536, credit holders manufacturer’s average fuel economy energy conservation’’ without having ‘‘a (including, but not limited to, falls short of the standard for a given substantial deleterious impact on the manufacturers) will have credit model year, multiplied by the total economy,’’ NHTSA would likely need to accounts with NHTSA, and will be able volume of those vehicles in the affected provide some reasonably certain to hold credits, use them to achieve fleet, manufactured for that model year. quantitative estimates of the fuel that compliance with CAFE standards, NHTSA has collected $794,921,139.50 would be saved, and the impact on the transfer them between compliance to date in CAFE penalties, the largest economy, if the penalty were raised. categories, or trade them. A credit may ever being paid by DaimlerChrysler for also be cancelled before its expiration Comments received on this issue in the its MY 2006 import passenger car fleet, past have not explained in clear date, if the credit holder so chooses. $30,257,920.00. For their MY 2009 Traded and transferred credits are quantitative terms what the benefits and fleets, six manufacturers paid CAFE drawbacks to raising the penalty might subject to an ‘‘adjustment factor’’ to fines for not meeting an applicable ensure total oil savings are preserved, as be. Additionally, it may be that the standard—Fiat, which included Ferrari, range of possible increase that the required by EISA. EISA also prohibits Maserati, and Alfa Romeo; Daimler credits earned before MY 2011 from statute provides, i.e., up to $10 per tenth (Mercedes-Benz); Porsche; and Tata of a mpg, is insufficient to result in being transferred, so NHTSA has (Jaguar Land Rover)—for a total of substantial energy conservation, developed several regulatory restrictions $9,148,425.00. As mentioned above, although changing this would require an on trading and transferring to facilitate civil penalties paid for CAFE non- amendment to the statute by Congress. Congress’ intent in this regard. As compliance go to the U.S. Treasury, and NHTSA continues to seek to gain 831 not to DOT or NHTSA. Congress required that DOT establish a credit NHTSA recognizes that some information on this issue and requests ‘‘transferring’’ regulation, to allow individual that commenters wishing to address this manufacturers to move credits from one of their manufacturers may use the option to fleets to another (e.g., using a credit earned for pay civil penalties as a CAFE issue please provide, as specifically as exceeding the light truck standard for compliance compliance flexibility—presumably, possible, estimates of how raising or not with the domestic passenger car standard). Congress raising the penalty amount will or will allowed DOT to establish a credit ‘‘trading’’ when paying civil penalties is deemed regulation, so that credits may be bought and sold more cost-effective than applying not substantially raise energy between manufacturers and other parties. additional fuel economy-improving conservation and impact the economy.

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4. What new incentives are being added The second incentive would provide a allowed after a manufacturer meets to the CAFE program for MYs 2017– performance-based incentive for full either a minimum penetration of 2025? size pickup trucks that achieve a hybridized technologies or has other All of the CAFE compliance significant reduction in fuel technologies that significantly reduce incentives discussed below are being consumption as compared to the fuel consumption. The proposed proposed by EPA under its EPCA applicable fuel economy target for the improvement would be available on a authority to calculate fuel economy vehicle in question. These incentives per-vehicle basis for mild and strong levels for individual vehicles and for are proposed due to the significant HEVs, as well as for other technologies fleets. Because they are EPA proposals, difficulty of large trucks, including full that significantly improve the efficiency size pickup trucks, in meeting CAFE we refer the reader to Section III for of full sized pickup trucks. The standards while still maintaining the more details, as well as Chapter 5 of the proposed definition would specify that levels of utility to which consumers draft Joint TSD for more information on trucks meeting an overall bed width and have become accustomed, which require the precise mechanics of the incentives, length as well as a minimum towing or higher payload and towing capabilities but we present them here in summary payload capacity could be qualified as and greater cargo volumes than other form so that the reader may understand full size pickup trucks. NHTSA is also light-duty vehicles. Technologies that more comprehensively what compliance proposing to modify Part 523 to include provide substantial fuel economy options are proposed to be available for definitions for mild and strong hybrid benefits are often not attractive to manufacturers for meeting the MYs electric full size pickup trucks, and to manufacturers of large trucks due to include the references in Part 533 2017–2025 CAFE standards. these tradeoffs in utility purposes, and As mentioned above with regard to mentioned above. therefore have not been taken advantage EPA’s proposed changes for the of to the same extent as they have in i. Pickup Truck Hybridization calculation of dual-fueled automobile other vehicle classes. The goal of these One proposed incentive would fuel economy for MYs 2020 and beyond, incentives is to facilitate the application NHTSA is proposing to modify its own provide an adjustment to the fuel of these ‘‘game changing’’ technologies economy of a manufacturer’s full size regulations to reflect the fact that these for large pickups, both to save more fuel pickup trucks if the manufacturer incentives may be used as part of the and to help provide a bridge for employs certain defined hybrid determination of a manufacturer’s CAFE industry to more stringent light truck technologies on defined significant level. The requirements for determining standards in MYs 2022–2025—as quantities of its full size pickup trucks. the vehicle and fleet average manufacturers gain experience with After meeting the minimum production performance for passenger cars and light applying more fuel-saving technology percentages, manufacturers would gain trucks inclusive of the proposed for these vehicles and consumers an adjustment to the fuel economy incentives are defined in 49 CFR part become more accustomed to certain performance for each ‘‘mild’’ or 531 and 49 CFR part 533, respectively. advanced technologies in pickup trucks, ‘‘strong’’ hybrid full size pickup truck it Part 531.6(a) specifies that the average the agencies anticipate that higher CAFE fuel economy of all passenger levels will be more feasible for the fleet produces. Manufacturers producing automobiles that are manufactured by a as a whole.832 In the context of the mild hybrid pickup trucks, as defined in manufacturer in a model year shall be CAFE program, these incentives would Chapter 5 of the draft Joint TSD, would determined in accordance with be used as an adjustment to a full size gain the incentive by applying mild procedures established by the pickup truck’s fuel economy hybrid technology to at least 30 percent Administrator of the Environmental performance. The same vehicle would of the company’s full sized pickups Protection Agency under 49 U.S.C. not be allowed to receive an adjustment produced in MY 2017, which would 32904 of the Act and set forth in 40 CFR to its calculated fuel economy for both increase each year up to at least 80 part 600. Part 533.6 (b) specifies that the the hybridization incentive and the percent of the company’s full size average fuel economy of all non- performance-based incentive, to avoid pickups produced in MY 2021, after passenger automobiles is required to be double-counting. which point the adjustment is no longer determined in accordance with the To accommodate the proposed applicable. For strong hybrids, also procedures established by the changes to the CAFE program, NHTSA defined in Chapter 5 of the draft Joint Administrator of the Environmental is proposing to adopt new definitions TSD, the strong hybrid technology must Protection Agency under 49 U.S.C. into regulation, 49 CFR part 523, be applied to at least 10 percent of a 32904 and set forth in 40 CFR part 600. ‘‘Vehicle Classification.’’ Part 523 was company’s full sized pickup production Proposed changes to these sections established by NHTSA to include its in each year for model years 2017–2025. would simply clarify that in model regulatory definitions for passenger The fuel economy adjustment for each years 2017 to 2025, manufacturers may automobiles and trucks and to guide the mild hybrid full size pickup would be adjust their vehicle fuel economy agency and manufacturers in classifying a decrease in measured fuel performance values in accordance with vehicles. NHTSA proposes to add a consumption of 0.0011gal/mi; for each 40 CFR Part 600 for improvements due definition in Part 523.2 defining the strong hybrid full size pickup, the to the new incentives. We seek characteristics that identify full size decrease in measured fuel consumption comment on this proposed change. pickup trucks. NHTSA believes that the would be 0.0023 gal/mi. These definition is needed to help explain to adjustments are consistent with the a. ‘‘Game Changing’’ Technologies For readers which characteristics of full size GHG credits under EPA’s program of 10 Full Size Pick-Up Trucks pickup truck make them eligible to gain g/mi CO2 for mild hybrid pickups and EPA is proposing to adopt two new fuel economy improvement values 20 g/mi CO2 for strong hybrid pickups. types of incentives for improving the A manufacturer would then be allowed fuel economy performance of full size 832 NHTSA is not prohibited from considering to adjust the fuel economy performance pickup trucks. The first incentive would this availability of this incentive in determining the of its light truck fleet by converting the provide a credit to manufacturers that maximum feasible levels of stringency for the light benefit gained from those improvements truck standards, because it is not one of the employ significant quantities of statutory flexibilities enumerated in 49 U.S.C. in accordance with the procedures hybridization on full size pickup trucks. 32902(h). specified in 40 CFR part 600.

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ii. Performance-Based Incentive for Full- braking energy could quality for the measure A/C related CO2emissions Size Pickups HEV adjustment; alternatively, a PHEV reductions. Some aspects of the AC17 Another proposed incentive for full pickup achieving sufficiently high fuel test are still being developed and size pickup trucks would provide an economy and low CO2 emission could improved, but the basic procedure is adjustment to the fuel economy of a qualify for a performance-based sufficiently complete for EPA to propose manufacturer’s full sized pickup truck if adjustment. it as a reporting option alternative to the Idle Test threshold in 2014, and a it achieves a fuel economy performance b. A/C Efficiency-Improving replacement for the Idle Test in 2017, as level significantly above the CAFE target Technologies for that footprint. This incentive a prerequisite for generating Efficiency Air conditioning (A/C) use places Credits. Manufacturers will use this test recognizes that not all manufacturers excess load on an engine, which results may wish to pursue hybridization for to measure A/C-related CO2 emissions in additional fuel consumption. A from vehicles with improved A/C their pickup trucks, but still rewards number of methods related to the A/C them for applying fuel-saving systems, which would be translated to system components and their controls fuel consumption to establish the ratio technologies above and beyond what can be used to improve A/C system between the baseline vehicle and the they might otherwise do. The fuel efficiencies. Starting in MY 2017, EPA improved-A/C vehicle to determine the economy adjustment for each full size is proposing to allow manufacturers to value of the fuel consumption pickup that exceeds its applicable include fuel consumption reductions improvement. The A/C 17 test footprint curve target by 15 percent resulting from the use of improved A/ procedure is described briefly below. would be a decrease in measured fuel C systems in their CAFE calculations. consumption of 0.0011gal/mi; for each This will more accurately account for i. What is the proposed testing full size pickup that exceeds its achieved real-world fuel economy approach? applicable footprint curve target by 20 improvements due to improved A/C The A/C 17 test is a more extensive percent, the decrease in measured fuel technologies, and better fulfill EPCA’s test than the idle test and has four consumption would be 0.0023 gal/mi. overarching purpose of energy elements, including two drive cycles, These adjustments are consistent with conservation. Manufacturers would not US03 and the highway fuel economy the GHG credits under EPA’s program of be allowed to claim CAFE-related cycle, which capture steady state and 10 g/mi CO2 and 20 g/mi CO2, benefits for reducing A/C leakage or transient operating conditions. It also respectively, for beating the applicable switching to an A/C refrigerant with a includes a solar soak period to measure CO2 targets by 15 and 20 percent, lower global warming potential, because the energy required to cool down a car respectively. while these improvements reduce GHGs that has been sitting in the sun, as well The 0.0011 gal/mi performance-based consistent with the purpose of the CAA, as a pre-conditioning cycle. The A/C 17 adjustment would be available for MYs they do not improve fuel economy and test cycle will be able to capture 2017 to 2021, and a vehicle meeting the thus are not relevant to the CAFE improvements in all areas related to requirement in a given model year program. efficient operation of a vehicle’s A/C would continue to receive the credit The improvements that manufacturers system. The A/C 17 test cycle measures until MY 2021—that is, the credit would likely use to increase A/C CO2 emissions in grams per mile (g/mi), remains applicable to that vehicle efficiency would focus primarily, but and requires that baseline emissions be model if the target is exceeded in only not exclusively, on the compressor, measured in addition to emissions from one model year—unless its fuel electric motor controls, and system vehicles with improved A/C systems. consumption increases. The 0.0023 gal/ controls which reduce load on the A/C EPA is taking comment on whether the mi adjustment would be available for a system (such as reduced ‘‘reheat’’ of the A/C 17 test is appropriate for estimating maximum of 5 years within model years cooled air and increased use of re- the effectiveness of new efficiency- 2017–2025, provided the vehicle circulated cabin air). improving A/C technologies. model’s fuel consumption does not Fuel consumption improvement increase. As explained above for the values for CAFE resulting from A/C ii. How are fuel consumption hybrid incentive, a manufacturer would efficiency improvements would be improvement values then estimated? then be allowed to adjust the fuel quantified using a two-step process, the Manufacturers would run the A/C 17 economy performance of its light truck same as for the related CO2 credits for test procedure on each vehicle platform fleet by converting the benefit gained EPA’s GHG program. First, the vehicle that incorporates the new technologies, from those improvements in accordance with the improved A/C system would be with the A/C system off and then on, with the procedures specified in 40 CFR tested in accordance with EPA testing and then report these test results to the Part 600. guidelines, and compared with the EPA. In addition to reporting the test We note that in today’s analyses, the baseline fuel consumption value for that results, EPA will require that agencies have projected that PHEV vehicle. Second, the difference between manufacturers provide detailed vehicle technology is not available to large the baseline fuel consumption value and and A/C system information for each pickups. While it is technically possible the value for the vehicle with improved vehicle tested (e.g. vehicle class, model to electrify such vehicles, there are A/C technologies would be calculated, type, curb weight, engine size, tradeoffs in terms of cost, electric range, which would determine the fuel transmission type, interior volume, and utility that may reduce the appeal consumption improvement value. climate control type, refrigerant type, of the vehicle to a narrower market. Due In the GHG program for MYs 2012 to compressor type, and evaporator/ to this consideration, the agencies have 2016, EPA finalized the idle test method condenser characteristics). For vehicle not considered giving credit to PHEVs for measuring CO2reductions from models which manufacturers are for large pickup truck. However, the improved AC systems. The idle test seeking to earn A/C related fuel agencies seek comments on this and method measures CO2 in grams per consumption improvement values, the will give further consideration during minute (g/min) while the vehicle is A/C 17 test would be run to validate the final rule. Also, the agencies note stationary and idling. For MYs 2017– that the performance and efficiency of a that under today’s proposal, a PHEV 2025, EPA is proposing that a new test vehicle’s A/C technology is that captures a sufficient proportion of called ‘‘A/C 17’’ replace the idle test to commensurate to the level of

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improvement value that is being earned. value possible is limited to 0.000563 value fraction is calculated in the To determine whether the efficiency gal/mi for cars and 0.000810 gal/mi for following way: The A/C 17 test result improvements of these technologies are trucks. As an example, a manufacturer for both the baseline vehicle and the being realized, the results of an A/C 17 uses two technologies listed in the table, vehicle with an improved A/C system test performed on a new vehicle model for which the combined improvement are measured. The difference in the test will be compared to a ‘‘baseline’’ value equals 0.000282 gal/mi. If the result of the baseline and the improved vehicle which does not incorporate the results of the A/C 17 tests for the vehicle is divided by the test result of efficiency-improving technologies. The baseline and vehicle with improved the baseline vehicle. This fraction is baseline vehicle is defined as one with A/C system demonstrates a 0.000282 multiplied by the fuel consumption characteristics which are similar to the gal/mi improvement, then the full fuel improvement value for the specific new vehicle, only it is not equipped consumption improvement value for technologies. Thus, if the A/C 17 test with efficiency-improving technologies 2 (or they are de-activated). those two technologies can be taken. If yielded an improvement equal to ⁄3 of Manufacturers then take the results of the A/C 17 test result falls short of the the summed values listed in the table, the A/C 17 test and access a credit menu improvement value for the two then 2⁄3 of the summed fuel (shown in the table below) to determine technologies, then a fraction of the consumption improvement values can A/C related fuel consumption improvement value may be counted in be counted. improvement values. The maximum CAFE calculations. The improvement BILLING CODE 4910–59–P

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As stated above, if more than one standards. The off-cycle credit option comment as part of the approval technology is utilized by a manufacturer was intended to encourage the process. for a given vehicle model, the A/C fuel introduction of off-cycle technologies EPA has been encouraged by consumption improvement values can that achieve real-world benefits. The off- automakers’ interest in off-cycle credits be added, but the maximum value cycle credits were to be determined since the program was finalized and possible is limited to 0.000563 gal/mi using the 5-cycle methodology currently believes that extending the program to for cars and 0.000810 gal/mi for trucks. used to determine fuel economy label MY 2017 and beyond may continue to More A/C related fuel consumption values, which EPA established to better encourage automakers to invest in off- improvement values are discussed in represent real-world factors impacting cycle technologies that could have the the off-cycle credits section of this fuel economy, including higher speeds benefit of realizing additional chapter. The approach for determining and more aggressive driving, colder reductions in the light-duty fleet over the manufacturers’ adjusted fleet fuel temperature operation, and the use of the longer-term. Therefore, EPA is economy performance due to air conditioning. A manufacturer must proposing to extend the off-cycle credits improvements in A/C efficiency is determine whether the benefit of the program to 2017 and later model years. described in 40 CFR Part 600. technology could be captured using the EPA is also proposing, under its EPCA The agencies seek comment on the 5-cycle test; if this determination is authority, to make available a proposal to allow manufacturers to affirmative, the manufacture must comparable off-cycle technology estimate fuel consumption reductions follow the 5-cycle procedures to incentive under the CAFE program from the use of A/C efficiency- determine the CO2 reductions. If the beginning in MY 2017. However, improving technologies and to apply manufacturer finds that the technology instead of manufacturers gaining credits these reductions to their CAFE is such that the benefit is not adequately as done under the GHG program, a calculations. captured using the 5-cycle approach, direct adjustment would be made to the then the manufacturer would have to manufacturer’s fuel economy c. Off-Cycle Technologies and develop a robust methodology, subject performance value. Adjustments to EPA approval, to demonstrate the Starting with MY 2017, manufacturers For MYs 2012–2016, EPA provided an benefit and determine the appropriate may generate fuel economy optional credit for new and innovative CO2 gram per mile credit. The improvements by applying technologies ‘‘off-cycle’’ technologies that reduce demonstration program must be robust, listed on the pre-defined and pre- vehicle CO2 emissions, but for which verifiable, and capable of demonstrating approved technology list provided in the CO2 reduction benefits are not the real-world emissions benefit of the Table IV–117. These credits would be recognized under the 2-cycle test technology with strong statistical verified and approved as part of procedure used to determine significance. The non-5-cycle approach certification, with no prior approval compliance with the fleet average includes an opportunity for public process needed. This new option should

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significantly simplify the program for approved technologies. For process for demonstration of fuel manufacturers and provide certainty improvements from technologies not on consumption reductions and approval. that improvement values may be the pre-defined list, EPA is proposing to generated through the use of pre- clarify the step-by-step application

An example of technologies that turned on during testing. Headlights, for economy. More efficient electrical could be used to generate off-cycle example, are always turned off during systems or technologies that offset improvements are those that reduce testing. Turning the headlights on electrical loads will have a real-world electrical load and as a result, fuel during normal driving will add an impact on fuel economy but are not consumption. The 2-cycle test does not additional load on the vehicle’s captured in the 2-cycle test. Therefore, require that all electrical components be electrical system and will affect fuel technologies that reduce or offset

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electrical loads related to the operation and electric heat circulation pumps, NHTSA receives both non-confidential or safety of the vehicle should merit which are HEV-specific, EPA is not and confidential versions of reports, the consideration for off-cycle proposing a minimum penetration rate basic difference being the inclusion of improvements. Reducing the electrical threshold for credit generation. Hybrids projected upcoming production sales load on a vehicle by 100W will result may be a small subset of a volumes in reports seeking in an average of 0.000337 gallons/mile manufacturer’s fleet, less than 10 confidentiality. Manufacturers must reduction in fuel consumption over the percent in some cases, and EPA does include a request for confidentiality, in course of a 2-cycle test, or 0.00042 not believe that establishing a threshold accordance with 49 CFR part 512, along gallons/mile over a 5-cycle test. To for hybrid-based technologies would be with the report for which confidential determine the off-cycle benefit of certain useful and could unnecessarily treatment is sought.833 Manufacturers 100W electrical load reduction complicate the introduction of these may submit reports either in paper form technologies, the benefit of the technologies. The agencies request or electronically to a secure email technology on the 2-cycle test is comments on applying this type of address, [email protected], that allows for subtracted from the benefit of the threshold, the appropriateness of 10 the safe handling of confidential technology on the 5-cycle test. This percent as the threshold for listed materials. All electronic submissions determines the actual benefit of the technologies that are not HEV-specific, submitted to the CAFE email must be technology not realized in the 2-cycle and the proposed treatment of hybrid- provided in a pdf format. NHTSA added test methodology, which in this case is based technologies. electronic reporting to the 2012–2016 0.000416 gal/mi minus 0.000337 gal/mi, Because the proposed improvements CAFE rule as an approach to simplify or 0.000078 gal/mi. This method will are based on limited data, however, and reporting for manufacturers and NHTSA avoid double-counting the benefit of the because some uncertainty is introduced alike. Currently, most manufacturers electrical load reduction, which is when credits are provided based on a submit both electronic and paper already counted on the 2-cycle test. general assessment of off-cycle reports.834 Regardless of whether the off-cycle performance as opposed to testing on NHTSA is proposing to modify its technology fuel consumption benefit is the individual vehicle models, as part of reporting requirements to receive all obtained from the table (columns 2 or 3) the incentive EPA is proposing to cap CAFE reports in electronic format, above or is based on an approved testing the amount of improvement a thereby eliminating the requirement for protocol as indicated in the preceding manufacturer could generate using the paper submissions. In the revised example, under the CAFE program the above list to 0.001125 gal/mile per year requirements, a manufacturer could benefit or credit is treated as an on a combined car and truck fleet-wide either submit its reports on a CD–ROM adjustment and subtracted from the average basis. The cap would not apply or through the existing email subject vehicle’s fuel consumption on a vehicle model basis, allowing procedures. Under the proposal, the performance value determined from the manufacturers the flexibility to focus contents of the CD must include the required CAFE program 2-cycle test off-cycle technologies on certain vehicle manufacturer’s request for results. A manufacturer would then be models and generate improvements for confidentiality, the cover letter, and any allowed to adjust the fuel economy that vehicle model in excess of 0.001125 other supporting documents in a pdf performance of its fleets by converting gal/mile. If manufacturers wish to format. Any data included in the report the benefit gained from those generate improvements in excess of the must be provided in a Microsoft Excel improvements in accordance with the 0.001125 gal/mile limit using listed spreadsheet format. The same approach procedures specified in 40 CFR Part technologies, they could do so by is also proposed for submitting 600. generating necessary data and going information by email. NHTSA Since one purpose of the off-cycle through the approval process. emphasizes that submitting reports to improvement incentive is to encourage For more details on the testing the CAFE email address is completely market penetration of the technologies protocols used for determining off-cycle voluntary, but if the option is selected, (see 75 FR at 25438), EPA is proposing technology benefits and the step-by-step the manufacturer must follow the to require minimum penetration rates EPA review and approval process, refer normal deadline dates as specified in 49 for non-hybrid based listed technologies to Section III.C.5.b.iii and v. The CFR 537.5. NHTSA believes that as a condition for generating approach for determining a receiving CAFE data through electronic improvements from the list as a way to reports would be a significant further encourage their widespread manufacturer’s adjusted fuel economy performance for off-cycle technologies is improvement, improving the quality of adoption by MY 2017 and later. At the its CAFE data, simplifying enforcement end of the model year for which the off- described in 40 CFR Part 600. NHTSA also proposes to incorporate references activities (e.g., auditing the data), and cycle improvement is claimed, helping to expedite the tracking and manufacturers would need to in Part 531.6 and 533.6 to allow manufacturers to adjust their fleet reporting of CAFE credits. The agency demonstrate that production of vehicles also plans to eventually develop an equipped with the technologies for that performance for off-cycle technologies as described above. XML schema for submitting CAFE model year exceeded the percentage reports electronically that will available thresholds in order to receive the listed 5. Other CAFE Enforcement Issues through its Web site. Ultimately, the improvement. EPA proposes to set the a. Electronic Reporting XML schema would be used as part of threshold at 10 percent of a the new database system NHTSA plans manufacturer’s overall combined car Pursuant to 49 CFR part 537, to construct in the future to store its and light truck production for all manufacturers submit pre-model year technologies not specific to HEVs. 10 fuel economy reports to NHTSA by 833 Pursuant to § 537.12, NHTSA’s Office of Chief percent would seem to be an December 31st prior to the model year, Counsel normally grants confidentiality to reports appropriate threshold as it would and mid-model year reports by July 31st with projected production sales volumes until after encourage manufacturers to develop of the model year. Manufacturers may the model year ends. 834 For model year 2011, NHTSA received technologies for use on larger volume also provide supplemental reports electronic mid-model year reports from 12 models and bring the technologies into whenever changes are needed to a manufacturers. Each of the manufacturers also the mainstream. For solar roof panels previously submitted CAFE report. provided hardcopy reports.

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CAFE data. NHTSA seeks comments on c. Base Tire Definition the manufacturer to reduce its required the appropriateness of ending paper Beginning in model year 2011, fleet standard despite a vehicle model submissions, as well as information on manufacturers of light trucks and type not having any inherent differences any other electronic formats that should passenger cars are required to use in physical feature between vehicle be considered for submissions. vehicle footprint to determine the CAFE configurations other than the tire sizes. standards applicable to each of their Other manufacturers, in contrast, avoid b. Reporting of How a Vehicle Is vehicle fleets. To determine the designating multiple base tires and Classified as a Light Truck appropriate footprint-based standards, a choose the standard tire equipped on manufacturer must calculate each the most basic vehicle configuration of As part of the reporting provisions in a model type, even if the most basic 49 CFR part 537, NHTSA requires vehicle’s footprint value, which is the product of the vehicle track width and vehicle is rarely actually sold. In this manufacturers to provide information scenario, the tires being used to derive on some, but not all, of the functions wheelbase dimensions. Vehicle track width dimensions are determined with a manufacturer fleet standard are not the and features that a manufacturer uses to a vehicle equipped with ‘‘base tires,’’ 838 same size tire equipped on the classify an automobile as a light truck. which NHTSA defines as the tire representative number of vehicles being The required data is distributed specified as standard equipment by a sold. Yet others designate the base tire throughout the report, making it manufacturer on each vehicle as the tire most commonly installed on difficult for the agency to clearly and configuration of a model type. a model type having the highest easily determine exactly what functions NHTSA is concerned that the production volume. This approach most or features a manufacturer is actually definition for ‘‘base tire’’ is realistically reflects the manufacturer’s using to make this determination. For insufficiently descriptive, and may lead sales production fleet. example, related to the functions to inconsistencies among To attempt to reconcile the varied specified in 49 CFR 523.5(a) and manufacturers’ base tire selections. In approaches for designating base tires, discussed in Section IV.H above, meetings relating to CAFE enforcement, NHTSA is proposing to modify its manufacturers must provide the manufacturers have stated that various definition for base tire in 49 CFR 523.2. The proposed modification changes the vehicles’ passenger and cargo carrying approaches in selecting base tires exist definition of the base tire by dropping volumes,835 and identify whether their due to differences in the tires the reference to ‘‘standard equipment’’ vehicles are equipped with three rows considered as standard equipment.839 Standard equipment is defined by EPA and adding a reference to the ‘‘the tire of seats that can be removed or folded installed by the vehicle manufacturer flat for expanded cargo carrying regulation as those features or equipment which are marketed on a that is used on the highest production purposes or if the vehicle includes sales volume of vehicles within the temporary living quarters.836 vehicle over which the purchaser can exercise no choice,840 but NHTSA configuration.’’ This modification Manufacturers are not required to regulations have no comparable should ensure that the tires installed on identify whether the vehicles can definition. NHTSA considered whether the vehicle most commonly sold within transport more than 10 persons or if the adding a definition for ‘‘standard a vehicle configuration become the basis vehicles are equipped with an open equipment’’ would clarify and for setting a manufacturer’s fuel cargo bed. Related to the functions strengthen the NHTSA regulations, but economy standards. It is NHTSA’s goal specified in Section 523.5(b), for each some manufacturers indicated that the that a change to the definition of base model type classified as an automobile definition of standard equipment tire for purposes of CAFE will help to capable of off-highway operation, provided by EPA does not effectively reduce inconsistencies and confusion manufacturers are required to provide prevent differences in their for both the agency and the the five suspension parameter interpretations. Some manufacturers, for manufacturers. NHTSA seeks comments measurements and indicate the example, view the base tire as the tire on this approach, as well as other existence of 4-wheel drive,837 but they equipped as standard equipment for approaches that could be used for are not required to identify a vehicle’s each trim level of a model type, as each selecting the base tire(s). GVWR, which is necessary for off-road trim level has standard equipment over d. Confirming Target and Fleet determination when the vehicle is not which the purchaser cannot exercise a Standards choice. This view can allow multiple equipped with 4-wheel drive. NHTSA NHTSA requires manufacturers to base tires and footprint values within proposes to eliminate the language provide reports containing fleet and each model type: A manufacturer may requesting vehicle attribute information model type CAFE standards and have two vehicle configurations for a in Sections 537.7(c)(4)(xvi)(A)(3) to (6) projections of expected performance particular model type, with each and (B)(3) to (6) and to relocate that results for each model year.841 The configuration having three trim levels language into a revised Section footprint, track width and wheelbase with different standard tires sizes. In 537.7(c)(5) to include identification of values are provided for each vehicle that scenario, the model type could have all the functions and features that can be configuration within the model types 6 different trim level vehicle used by a manufacturer for making a making up the manufacturer’s fleets, light truck classification determination. configurations, each having three or more unique footprint values with along with other model type-specific By incorporating all the requirements slightly different targets. The additional information. Because this information is into one section, the agency believes the target fuel economy values could allow organized by vehicle configuration, classification process will become instead of by each vehicle with a unique significantly more accurate and 838 See 49 CFR 523.2. model type and footprint combination, efficient. NHTSA seeks comment on this 839 NHTSA has confirmed these differences in it is not in the format needed to proposed change. approach for the designating base tire exist through calculate performance standards. EPA, review of manufacturer-submitted CAFE reports. in contrast, requires manufacturers to 840 In the EPA regulation 40 CFR 600.002–08, 835 49 CFR 537.7(c)(4)(xvi)(B). standard equipment means those features or provide all of the information necessary 836 49 CFR 537.7(c)(4)(xvii) and (xviii). equipment which are marketed on a vehicle over 837 49 CFR 537.7(c)(5). which the purchaser can exercise no choice. 841 49 CFR part 537.

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to calculate footprint values and CAFE it under Executive Order 12866. The the Small Business Regulatory standards. EPA provides an additional rule, if adopted, would also be Enforcement Fairness Act (SBREFA) of calculator (in the form of an Excel significant within the meaning of the 1996), whenever an agency is required spreadsheet), which all manufacturers Department of Transportation’s to publish a notice of rulemaking for use and submit as part of their end-of- Regulatory Policies and Procedures. any proposed or final rule, it must the-year reports, which includes the The benefits and costs of this proposal prepare and make available for public appropriate breakdown of footprint are described above. Because the comment a regulatory flexibility values for calculating standards. proposed rule would, if adopted, be analysis that describes the effect of the Since NHTSA only requires a economically significant under both the rule on small entities (i.e., small breakdown of footprint values by Department of Transportation’s businesses, small organizations, and vehicle configurations, instead of by procedures and OMB guidelines, the small governmental jurisdictions). The each unique model type and footprint agency has prepared a Preliminary Small Business Administration’s combination, NHTSA is currently Regulatory Impact Analysis (PRIA) and regulations at 13 CFR part 121 define a unable to verify manufacturers’ reported placed it in the docket and on the small business, in part, as a business target standards. By standardizing with agency’s Web site. Further, pursuant to entity ‘‘which operates primarily within EPA’s requirements for reported data, Circular A–4, we have prepared a formal the United States.’’ 13 CFR 121.105(a). NHTSA would both simplify probabilistic uncertainty analysis for No regulatory flexibility analysis is manufacturer reporting efforts and gain this proposal. The circular requires such required if the head of an agency the necessary information for an analysis for complex rules where certifies the rule will not have a calculating attribute-based CAFE there are large, multiple uncertainties significant economic impact of a standards. Therefore, NHTSA is whose analysis raises technical substantial number of small entities. proposing to eliminate the language challenges or where effects cascade and I certify that the proposed rule would requesting information in where the impacts of the rule exceed $1 not have a significant economic impact § 537.7(c)(4)((xvi)(A)(3) through (6) and billion. This proposal meets these on a substantial number of small (B)(3) through (6), and to relocate that criteria on all counts. entities. The following is NHTSA’s statement providing the factual basis for language into a revised § 537.7(b)(3). 2. National Environmental Policy Act NHTSA requests comment on this the certification (5 U.S.C. 605(b)). proposed change. Concurrently with this NPRM, If adopted, the proposal would NHTSA is releasing a Draft directly affect nineteen large single stage J. Regulatory Notices and Analyses Environmental Impact Statement (Draft motor vehicle manufacturers.842 Based 1. Executive Order 12866, Executive EIS), pursuant to the National on our preliminary assessment, the Order 13563, and DOT Regulatory Environmental Policy Act, 42 U.S.C. proposal would also affect a total of Policies and Procedures 4321–4347, and implementing about 21 entities that fit the Small regulations issued by the Council on Business Administration’s criteria for a Executive Order 12866, ‘‘Regulatory Environmental Quality (CEQ), 40 CFR small business. According to the Small Planning and Review’’ (58 FR 51735, part 1500, and NHTSA, 49 CFR part Business Administration’s small Oct. 4, 1993), as amended by Executive 520. NHTSA prepared the Draft EIS to business size standards (see 13 CFR Order 13563, ‘‘Improving Regulation analyze and disclose the potential 121.201), a single stage automobile or and Regulatory Review’’ (76 FR 3821, environmental impacts of the proposed light truck manufacturer (NAICS code Jan. 21, 2011), provides for making CAFE standards and a range of 336111, Automobile Manufacturing; determinations whether a regulatory alternatives. The Draft EIS analyzes 336112, Light Truck and Utility Vehicle action is ‘‘significant’’ and therefore direct, indirect, and cumulative impacts Manufacturing) must have 1,000 or subject to OMB review and to the and analyzes impacts in proportion to fewer employees to qualify as a small requirements of the Executive Order. their significance. business. There are about 4 small The Order defines a ‘‘significant Because of the link between the manufacturers, including 3 electric regulatory action’’ as one that is likely transportation sector and GHG vehicle manufacturers, 8 independent to result in a rule that may: emissions, the Draft EIS considers the commercial importers, and 9 alternative (1) Have an annual effect on the possible impacts on climate and global fuel vehicle converters in the passenger economy of $100 million or more or climate change in the analysis of the car and light truck market which are adversely affect in a material way the effects of these proposed CAFE small businesses. We believe that the economy, a sector of the economy, standards. The Draft EIS also describes rulemaking would not have a significant productivity, competition, jobs, the potential environmental impacts to a economic impact on these small vehicle environment, public health or safety, or variety of resources. Resources that may manufacturers because under 49 CFR State, local, or Tribal governments or be affected by the proposed action and part 525, passenger car manufacturers communities; alternatives include water resources, making fewer than 10,000 vehicles per (2) Create a serious inconsistency or biological resources, land use and year can petition NHTSA to have otherwise interfere with an action taken development, safety, hazardous alternative standards set for those or planned by another agency; materials and regulated wastes, noise, manufacturers. Manufacturers that (3) Materially alter the budgetary socioeconomics, fuel and energy use, air produce only electric vehicles, or that impact of entitlements, grants, user fees, quality, and environmental justice. modify vehicles to make them electric or loan programs or the rights and These resource areas are assessed or some other kind of dedicated obligations of recipients thereof; or qualitatively in the Draft EIS. alternative fuel vehicle, will have (4) Raise novel legal or policy issues For additional information on average fuel economy values far beyond arising out of legal mandates, the NHTSA’s NEPA analysis, please see the President’s priorities, or the principles Draft EIS. 842 BMW, Daimler (Mercedes), Fiat/Chrysler set forth in the Executive Order. (which also includes Ferrari and Maserati for CAFE 3. Regulatory Flexibility Act compliance purposes), Ford, Geely (Volvo), General The rulemaking proposed in this Motors, Honda, Hyundai, Kia, Lotus, Mazda, NPRM will be economically significant Pursuant to the Regulatory Flexibility Mitsubishi, Nissan, Porsche, Subaru, Suzuki, Tata if adopted. Accordingly, OMB reviewed Act (5 U.S.C. 601 et seq., as amended by (Jaguar Land Rover), Toyota, and Volkswagen/Audi.

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those proposed today, so we would not requires Federal agencies to prepare a 8. Executive Order 13045 expect them to need a petition for relief. written assessment of the costs, benefits, Executive Order 13045 845 applies to A number of other small vehicle and other effects of a proposed or final any rule that: (1) is determined to be manufacturers already petition the rule that includes a Federal mandate economically significant as defined agency for relief under Part 525. If the likely to result in the expenditure by under E.O. 12866, and (2) concerns an standard is raised, it has no meaningful State, local, or tribal governments, in the environmental, health, or safety risk that impact on those manufacturers, because aggregate, or by the private sector, of NHTSA has reason to believe may have they are expected to still go through the more than $100 million in any one year a disproportionate effect on children. If same process to petition for relief. Given (adjusted for inflation with base year of the regulatory action meets both criteria, that there is already a mechanism for 1995). Adjusting this amount by the we must evaluate the environmental, handling small businesses, which is the implicit gross domestic product price health, or safety effects of the proposed purpose of the Regulatory Flexibility deflator for 2009 results in $134 million rule on children, and explain why the Act, a regulatory flexibility analysis was (109.729/81.606 = 1.34). Before proposed regulation is preferable to not prepared, but we welcome promulgating a rule for which a written other potentially effective and comments on this issue for the final reasonably foreseeable alternatives rule. statement is needed, section 205 of UMRA generally requires NHTSA to considered by us. 4. Executive Order 13132 (Federalism) identify and consider a reasonable Chapter 5 of NHTSA’s DEIS notes that breathing PM can cause respiratory Executive Order 13132 requires number of regulatory alternatives and ailments, heart attack, and arrhythmias NHTSA to develop an accountable adopt the least costly, most cost- (Dockery et al. 1993, Samet et al. 2000, process to ensure ‘‘meaningful and effective, or least burdensome Pope et al. 1995, 2002, 2004, Pope and timely input by State and local officials alternative that achieves the objectives Dockery 2006, Dominici et al. 2006, in the development of regulatory of the rule. The provisions of section Laden et al. 2006, all in Ebi et al. 2008). policies that have federalism 205 do not apply when they are Populations at greatest risk could implications.’’ 843 The Order defines the inconsistent with applicable law. include children, the elderly, and those term ‘‘Policies that have federalism Moreover, section 205 allows NHTSA to with heart and lung disease, diabetes implications’’ to include regulations adopt an alternative other than the least (Ebi et al. 2008), and high blood that have ‘‘substantial direct effects on costly, most cost-effective, or least pressure (Ku¨ nzli et al. 2005, in Ebi et al. the States, on the relationship between burdensome alternative if the agency 2008). Chronic exposure to PM could the national government and the States, publishes with the final rule an decrease lifespan by 1 to 3 years (Pope or on the distribution of power and explanation of why that alternative was 2000, in American Lung Association responsibilities among the various not adopted. 2008). Increasing PM concentrations are levels of government.’’ Under the Order, expected to have a measurable adverse NHTSA may not issue a regulation that This proposed rule will not result in impact on human health (Confalonieri has federalism implications, that the expenditure by State, local, or tribal governments, in the aggregate, of more et al. 2007). imposes substantial direct compliance Additionally, the DEIS notes that costs, and that is not required by statute, than $134 million annually, but it will result in the expenditure of that substantial morbidity and childhood unless the Federal government provides mortality has been linked to water- and magnitude by vehicle manufacturers the funds necessary to pay the direct food-borne diseases. Climate change is and/or their suppliers. In developing compliance costs incurred by State and projected to alter temperature and the local governments, or NHTSA consults this proposal, NHTSA considered a hydrologic cycle through changes in with State and local officials early in the variety of alternative average fuel precipitation, evaporation, process of developing the proposed economy standards lower and higher transpiration, and water storage. These regulation. than those proposed. NHTSA is changes, in turn, potentially affect NHTSA solicits comment on this statutorily required to set standards at water-borne and food-borne diseases, proposed action from State and local the maximum feasible level achievable such as salmonellosis, campylobacter, officials. The agency believes that it is by manufacturers based on its leptospirosis, and pathogenic species of unnecessary to address the question of consideration and balancing of relevant vibrio. They also have a direct impact preemption further at this time because factors, and has tentatively concluded on surface water availability and water of the consistent and coordinated that the proposed fuel economy quality. It has been estimated that more Federal standards that would apply standards are the maximum feasible than 1 billion people in 2002 did not nationally under the proposed National standards for the passenger car and light have access to adequate clean water Program. truck fleets for MYs 2017–2025 in light (McMichael et al. 2003, in Epstein et al. 5. Executive Order 12988 (Civil Justice of the statutory considerations. 2006). Increased temperatures, greater Reform) evaporation, and heavy rain events have 7. Regulation Identifier Number Pursuant to Executive Order 12988, been associated with adverse impacts on ‘‘Civil Justice Reform,’’ 844 NHTSA has The Department of Transportation drinking water through increased considered whether this rulemaking assigns a regulation identifier number waterborne diseases, algal blooms, and toxins (Chorus and Bartram 1999, Levin would have any retroactive effect. This (RIN) to each regulatory action listed in et al. 2002, Johnson and Murphy 2004, proposed rule does not have any the Unified Agenda of Federal retroactive effect. all in Epstein et al. 2006). A seasonal Regulations. The Regulatory Information signature has been associated with 6. Unfunded Mandates Reform Act Service Center publishes the Unified water-borne disease outbreaks (EPA Agenda in April and October of each Section 202 of the Unfunded 2009b). In the United States, 68 percent Mandates Reform Act of 1995 (UMRA) year. You may use the RIN contained in of all water-borne diseases between the heading at the beginning of this 1948 and 1994 were observed after 843 64 FR 43255 (Aug. 10, 1999). document to find this action in the 844 61 FR 4729 (Feb. 7, 1996). Unified Agenda. 845 62 FR 19885 (Apr. 23, 1997).

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heavy rainfall events (Curriero et al. potentially applicable voluntary If you have any responses to these 2001a, in Epstein et al. 2006). consensus standards, we are required by questions, please include them in your Climate change could further impact the Act to provide Congress, through comments on this proposal. a pathogen by directly affecting its OMB, an explanation of the reasons for 13. Privacy Act lifecycle (Ebi et al. 2008). The global not using such standards. increase in the frequency, intensity, and There are currently no voluntary Anyone is able to search the duration of red tides could be linked to consensus standards relevant to today’s electronic form of all comments local impacts already associated with proposed CAFE standards. received into any of our dockets by the climate change (Harvell et al. 1999, in name of the individual submitting the Epstein et al. 2006); toxins associated 10. Executive Order 13211 comment (or signing the comment, if with red tide directly affect the nervous Executive Order 13211 847 applies to submitted on behalf of an organization, system (Epstein et al. 2006). any rule that: (1) is determined to be business, labor union, etc.). You may Many people do not report or seek economically significant as defined review DOT’s complete Privacy Act medical attention for their ailments of under E.O. 12866, and is likely to have statement in the Federal Register (65 FR water-borne or food-borne diseases; a significant adverse effect on the 19477–78, April 11, 2000) or you may hence, the number of actual cases with supply, distribution, or use of energy; or visit http://www.dot.gov/privacy.html. these diseases is greater than clinical (2) that is designated by the List of Subjects records demonstrate (Mead et al. 1999, Administrator of the Office of in Ebi et al. 2008). Many of the Information and Regulatory Affairs 40 CFR Part 85 gastrointestinal diseases associated with (OIRA) as a significant regulatory action. Confidential business information, water-borne and food-borne diseases If the regulatory action meets either Imports, Labeling, Motor vehicle can be self-limiting; however, criterion, we must evaluate the adverse pollution, Reporting and recordkeeping vulnerable populations include young energy effects of the proposed rule and requirements, Research, Warranties. children, those with a compromised explain why the proposed regulation is immune system, and the elderly. preferable to other potentially effective 40 CFR Part 86 Thus, as detailed in the DEIS, NHTSA and reasonably foreseeable alternatives Administrative practice and has evaluated the environmental, considered by us. procedure, Confidential business health, and safety effects of the The proposed rule seeks to establish information, Incorporation by reference, proposed rule on children. The DEIS passenger car and light truck fuel Labeling, Motor vehicle pollution, also explains why the proposed economy standards that will reduce the Reporting and recordkeeping regulation is preferable to other consumption of petroleum and will not requirements. potentially effective and reasonably have any adverse energy effects. 40 CFR Part 600 foreseeable alternatives considered by Accordingly, this proposed rulemaking the agency. action is not designated as a significant Administrative practice and 9. National Technology Transfer and energy action. procedure, Electric power, Fuel Advancement Act economy, Incorporation by reference, 11. Department of Energy Review Labeling, Reporting and recordkeeping Section 12(d) of the National requirements. Technology Transfer and Advancement In accordance with 49 U.S.C. Act (NTTAA) requires NHTSA to 32902(j)(1), we submitted this proposed 49 CFR Parts 523, 531, and 533 rule to the Department of Energy for evaluate and use existing voluntary Fuel Economy. consensus standards in its regulatory review. That Department did not make activities unless doing so would be any comments that we have not 49 CFR Parts 536 and 537 inconsistent with applicable law (e.g., addressed. Fuel economy, Reporting and the statutory provisions regarding 12. Plain Language recordkeeping requirements. NHTSA’s vehicle safety authority) or Executive Order 12866 requires each Environmental Protection Agency otherwise impractical.846 Voluntary consensus standards are agency to write all rules in plain 40 CFR Chapter I language. Application of the principles technical standards developed or For the reasons set forth in the adopted by voluntary consensus of plain language includes consideration of the following questions: preamble, the Environmental Protection standards bodies. Technical standards • Agency proposes to amend parts 85, 86, are defined by the NTTAA as Have we organized the material to suit the public’s needs? and 600 of title 40, Chapter I of the Code ‘‘performance-based or design-specific • of Federal Regulations as follows: technical specification and related Are the requirements in the rule clearly stated? PART 85—CONTROL OF AIR management systems practices.’’ They • pertain to ‘‘products and processes, Does the rule contain technical POLLUTION FROM MOBILE SOURCES such as size, strength, or technical jargon that isn’t clear? • 1. The authority citation for part 86 performance of a product, process or Would a different format (grouping continues to read as follows: material.’’ and order of sections, use of headings, Examples of organizations generally paragraphing) make the rule easier to Authority: 42 U.S.C. 7401–7671q. regarded as voluntary consensus understand? standards bodies include the American • Would more (but shorter) sections Subpart F—[Amended] Society for Testing and Materials be better? • 2. Section 85.525 is amended by (ASTM), the Society of Automotive Could we improve clarity by adding adding paragraph (a)(2)(i)(D) to read as Engineers (SAE), and the American tables, lists, or diagrams? follows: National Standards Institute (ANSI). If • What else could we do to make the NHTSA does not use available and rule easier to understand? § 85.525 Applicable standards. * * * * * 846 15 U.S.C. 272. 847 66 FR 28355 (May 22, 2001). (a) * * *

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(2) * * * ibr_locations.html and is available from (12) ASTM C1549–09, Standard Test (i) * * * the sources listed below: Method for Determination of Solar (D) Optionally, compliance with (b) American Society for Testing and Reflectance Near Ambient Temperature greenhouse gas emission requirements Materials, 100 Barr Harbor Drive, P.O. Using a Portable Solar Reflectometer may be demonstrated by comparing the Box C700, West Conshohocken, PA, (2009) IBR approved for § 86.1866–12. sum of CH4 plus N2O plus CO2 19428–2959, (610) 832–9585, http:// (c) Society of Automotive Engineers, emissions from the before fuel www.astm.org/. 400 Commonwealth Dr., Warrendale, conversion FTP results to the after fuel (1) ASTM D 975–04c, Standard PA 15096–0001, (877) 606–7323 (U.S. conversion FTP results. This Specification for Diesel Fuel Oils, IBR and Canada) or (724) 776–4970 (outside comparison is based on test results from approved for §§ 86.1910, 86.213–11. the U.S. and Canada), http:// the emission data vehicle (EDV) from (2) ASTM D1945–91, Standard Test www.sae.org. the conversion test group at issue. The Method for Analysis of Natural Gas by (1) SAE J1151, December 1991, summation of the post fuel conversion Gas Chromatography, IBR approved for Methane Measurement Using Gas test results must be lower than the §§ 86.113–94, 86.513–94, 86.1213–94, Chromatography, 1994 SAE summation of the before conversion 86.1313–94. Handbook—SAE International (3) ASTM D2163–91, Standard Test greenhouse gas emission results. CO2 Cooperative Engineering Program, emissions are calculated as specified in Method for Analysis of Liquefied Volume 1: Materials, Fuels, Emissions, Petroleum (LP) Gases and Propane 40 CFR 600.113–12. CH4 and N2O and Noise; Section 13 and page 170 emissions, before and after fuel Concentrates by Gas Chromatography, (13.170), IBR approved for §§ 86.111–94; conversion, are adjusted by applying IBR approved for §§ 86.113–94, 86.1311–94. multiplicative factors of 25 and 298, 86.1213–94, 86.1313–94. (2) SAE J1349, June 1990, Engine respectively, to account for their (4) ASTM D2986–95a, Reapproved Power Test Code—Spark Ignition and increased global warming potential. If 1999, Standard Practice for Evaluation Compression Ignition, IBR approved for statements of compliance are applicable of Air Assay Media by the §§ 86.094–8, 86.096–8. Monodisperse DOP (Dioctyl Phthalate) and accepted in lieu of measuring N2O, (3) SAE J1850, July 1995, Class B Data as permitted by EPA regulation, the Smoke Test, IBR approved for Communication Network Interface, IBR comparison of the greenhouse gas §§ 86.1310–2007. approved for §§ 86.099–17, 86.1806–01. (5) ASTM D5186–91, Standard Test results also need not measure or include (4) SAE J1850, Revised May 2001, Method for Determination of Aromatic N2O in the before and after emission Class B Data Communication Network Content of Diesel Fuels by Supercritical comparisons. Interface, IBR approved for §§ 86.005– Fluid Chromatography, IBR approved 17, 86.007–17, 86.1806–04, 86.1806–05. * * * * * for §§ 86.113–07, 86.1313–91, 86.1313– (5) SAE J1877, July 1994, PART 86—CONTROL OF EMISSIONS 94, 86.1313–98, 1313–2007. (6) ASTM E29–67, Reapproved 1980, Recommended Practice for Bar-Coded FROM NEW AND IN–USE HIGHWAY Standard Recommended Practice for Vehicle Identification Number Label, VEHICLES AND ENGINES Indicating Which Places of Figures Are IBR approved for §§ 86.095–35, 86.1806–01. 3. The authority citation for part 86 To Be Considered Significant in (6) SAE J1892, October 1993, continues to read as follows: Specified Limiting Values, IBR approved for § 86.1105–87. Recommended Practice for Bar-Coded Authority: 42 U.S.C. 7401–7671q. (7) ASTM E29–90, Standard Practice Vehicle Emission Configuration Label, 4. Section 86.1 is revised to read as for Using Significant Digits in Test Data IBR approved for §§ 86.095–35, follows: to Determine Conformance with 86.1806–01. Specifications, IBR approved for (7) SAE J1930, Revised May 1998, § 86.1 Reference materials. §§ 86.609–84, 86.609–96, 86.609–97, Electrical/Electronic Systems Diagnostic (a) Certain material is incorporated by 86.609–98, 86.1009–84, 86.1009–96, Terms, Definitions, Abbreviations, and reference into this part with the 86.1442, 86.1708–99, 86.1709–99, Acronyms, IBR approved for §§ 86.096– approval of the Director of the Federal 86.1710–99, 86.1728–99. 38, 86.004–38, 86.007–38, 86.010–38, Register under 5 U.S.C. 552(a) and 1 (8) ASTM E29–93a, Standard Practice 86.1808–01, 86.1808–07. CFR part 51. To enforce any edition for Using Significant Digits in Test Data (8) SAE J1930, Revised April 2002, other than that specified in this section, to Determine Conformance with Electrical/Electronic Systems Diagnostic the Environmental Protection Agency Specifications, IBR approved for Terms, Definitions, Abbreviations, and must publish a notice of the change in §§ 86.098–15, 86.004–15, 86.007–11, Acronyms—Equivalent to ISO/TR the Federal Register and the material 86.007–15, 86.1803–01, 86.1823–01, 15031–2: April 30, 2002, IBR approved must be available to the public. All 86.1824–01, 86.1825–01, 86.1837–01. for §§ 86.005–17, 86.007–17, 86.010–18, approved material is available for (9) ASTM F1471–93, Standard Test 86.1806–04, 86.1806–05. inspection at U.S. EPA, Air and Method for Air Cleaning Performance of (9) SAE J1937, November 1989, Radiation Docket and Information a High-Efficiency Particulate Air-Filter Engine Testing with Low Temperature Center, 1301 Constitution Ave. NW., System, IBR approved § 86.1310–2007. Charge Air Cooler Systems in a Room B102, EPA West Building, (10) ASTM E903–96, Standard Test Dynamometer Test Cell, IBR approved Washington, DC 20460, (202) 202–1744, Method for Solar Absorptance, for §§ 86.1330–84, 86.1330–90. and is available from the sources listed Reflectance, and Transmittance of (10) SAE J1939, Revised October below. It is also available for inspection Materials Using Integrating Spheres 2007, Recommended Practice for a at the National Archives and Records (Withdrawn 2005), IBR approved for Serial Control and Communications Administration (NARA). For § 86.1866–12. Vehicle Network, IBR approved for information on the availability of this (11) ASTM E1918–06, Standard Test §§ 86.010–18. material at NARA, call (202) 741–6030, Method for Measuring Solar Reflectance (11) SAE J1939–11, December 1994, or go to: http://www.archives.gov/ of Horizontal and Low-Sloped Surfaces Physical Layer—250K bits/s, Shielded federal_register/ in the Field, IBR approved for Twisted Pair, IBR approved for code_of_federal_regulations/ § 86.1866–12. §§ 86.005–17, 86.1806–05.

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(12) SAE J1939–11, Revised October (29) SAE J1979, July 1996, E/E (44) SAE J2064, Revised December 1999, Physical Layer—250K bits/s, Diagnostic Test Modes, IBR approved 2005, R134a Refrigerant Automotive Shielded Twisted Pair, IBR approved for for §§ 86.099–17, 86.1806–01. Air-Conditioned Hose, IBR approved for §§ 86.005–17, 86.007–17, 86.1806–04, (30) SAE J1979, Revised September § 86.166–12(d). 86.1806–05. 1997, E/E Diagnostic Test Modes, IBR (d) American National Standards (13) SAE J1939–13, July 1999, Off- approved for §§ 86.096–38, 86.004–38, Institute, 25 W 43rd Street, 4th Floor, Board Diagnostic Connector, IBR 86.007–38, 86.010–38, 86.1808–01, New York, NY 10036, (212) 642–4900, approved for §§ 86.005–17, 86.007–17, 86.1808–07. http://www.ansi.org. 86.1806–04, 86.1806–05. (31) SAE J1979, Revised April 2002, (1) ANSI/AGA NGV1–1994, Standard (14) SAE J1939–13, Revised March E/E Diagnostic Test Modes—Equivalent for Compressed Natural Gas Vehicle 2004, Off-Board Diagnostic Connector, to ISO/DIS 15031–5; April 30, 2002, IBR (NGV) Fueling Connection Devices, IBR IBR approved for § 86.010–18. approved for §§ 86.099–17, 86.005–17, approved for §§ 86.001–9, 86.004–9, (15) SAE J1939–21, July 1994, Data 86.007–17, 86.1806–01, 86.1806–04, 86.098–8, 86.099–8, 86.099–9, 86.1810– Link Layer, IBR approved for §§ 86.005– 86.1806–05. 01. 17, 86.1806–05. (32) SAE J1979, Revised May 2007, (2) [Reserved] (16) SAE J1939–21, Revised April (R) E/E Diagnostic Test Modes, IBR (e) California Air Resources Board, 2001, Data Link Layer, IBR approved for approved for § 86.010–18, 86.010–38. (916) 322–2884, http://www.arb.ca.gov. §§ 86.005–17, 86.007–17, 86.1806–04, (33) SAE J2012, July 1996, (1) California Regulatory 86.1806–05. Recommended Practice for Diagnostic Requirements Applicable to the ‘‘LEV (17) SAE J1939–31, Revised December Trouble Code Definitions, IBR approved II’’ Program, including: 1997, Network Layer, IBR approved for for §§ 86.099–17, 86.1806–01. (i) [Reserved] §§ 86.005–17, 86.007–17, 86.1806–04, (34) SAE J2012, Revised April 2002, (ii) California Non-Methane Organic 86.1806–05. (R) Diagnostic Trouble Code Definitions Gas Test Procedures, August 5, 1999, (18) SAE J1939–71, May 1996, Vehicle Equivalent to ISO/DIS 15031–6: April IBR approved for §§ 86.1803–01, Application Layer, IBR approved for 30, 2002, IBR approved for §§ 86.005– 86.1810–01, 86.1811–04. §§ 86.005–17, 86.1806–05. 17, 86.007–17, 86.010–18, 86.1806–04, (2) California Regulatory (19) SAE J1939–71, Revised August 86.1806–05. Requirements Applicable to the 2002, Vehicle Application Layer— (35) SAE J2284–3, May 2001, High National Low Emission Vehicle J1939–71 (through 1999), IBR approved Speed CAN (HSC) for Vehicle Program, October 1996, IBR approved for §§ 86.005–17, 86.007–17, 86.1806– Applications at 500 KBPS, IBR for §§ 86.113–04, 86.612–97, 86.1012– 04, 86.1806–05. approved for §§ 86.096–38, 86.004–38, 97, 86.1702–99, 86.1708–99, 86.1709– (20) SAE J1939–71, Revised January 86.007–38, 86.010–38, 86.1808–01, 99, 86.1717–99, 86.1735–99, 86.1771– 2008, Vehicle Application Layer 86.1808–07. 99, 86.1775–99, 86.1776–99, 86.1777– (Through February 2007), IBR approved (36) SAE J2403, Revised August 2007, 99, Appendix XVI, Appendix XVII. for § 86.010–38. Medium/Heavy-Duty E/E Systems (3) California Regulatory (21) SAE J1939–73, February 1996, Diagnosis Nomenclature—Truck and Requirements known as On-board Application Layer—Diagnostics, IBR Bus, IBR approved for §§ 86.007–17, Diagnostics II (OBD–II), Approved on approved for §§ 86.005–17, 86.1806–05. 86.010–18, 86.010–38, 86.1806–05. April 21, 2003, Title 13, California Code (22) SAE J1939–73, Revised June (37) SAE J2534, February 2002, Regulations, Section 1968.2, 2001, Application Layer—Diagnostics, Recommended Practice for Pass-Thru Malfunction and Diagnostic System IBR approved for §§ 86.005–17, 86.007– Vehicle Programming, IBR approved for Requirements for 2004 and Subsequent 17, 86.1806–04, 86.1806–05. §§ 86.096–38, 86.004–38, 86.007–38, Model-Year Passenger Cars, Light-Duty (23) SAE J1939–73, Revised 86.010–38, 86.1808–01, 86.1808–07. Trucks, and Medium-Duty Vehicles and September 2006, Application Layer— (38) SAE J2534–1, Revised December Engines (OBD–II), IBR approved for Diagnostics, IBR approved for 2004, (R) Recommended Practice for § 86.1806–05. §§ 86.010–18, 86.010–38. Pass-Thru Vehicle Programming, IBR (4) California Regulatory (24) SAE J1939–81, July 1997, approved for § 86.010–38. Requirements known as On-board Recommended Practice for Serial (39) SAE J2064, Revised December Diagnostics II (OBD–II), Approved on Control and Communications Vehicle 2005, R134a Refrigerant Automotive November 9, 2007, Title 13, California Network Part 81—Network Air-Conditioned Hose, IBR approved for Code Regulations, Section 1968.2, Management, IBR approved for § 86.166–12. Malfunction and Diagnostic System §§ 86.005–17, 86.007–17, 86.1806–04, (40) SAE J2765, October, 2008, Requirements for 2004 and Subsequent 86.1806–05. Procedure for Measuring System COP Model-Year Passenger Cars, Light-Duty (25) SAE J1939–81, Revised May [Coefficient of Performance] of a Mobile Trucks, and Medium-Duty Vehicles and 2003, Network Management, IBR Air Conditioning System on a Test Engines (OBD–II), IBR approved for approved for § 86.010–38. Bench, IBR approved for § 86.1866–12. §§ 86.007–17, 86.1806–05. (26) SAE J1962, January 1995, (41) SAE J1711, Recommended (f) International Organization for Diagnostic Connector, IBR approved for Practice for Measuring the Exhaust Standardization, Case Postale 56, CH– §§ 86.099–17, 86.1806–01. Emissions and Fuel Economy of Hybrid- 1211 Geneva 20, Switzerland, 41–22– (27) SAE J1962, Revised April 2002, Electric Vehicles, Including Plug-In 749–01–11, http://www.iso.org. Diagnostic Connector Equivalent to ISO/ Hybrid Vehicles, June 2010, IBR (1) ISO 9141–2, February 1, 1994, DIS 15031–3; December 14, 2001, IBR approved for § 86.1811–04(n). Road vehicles—Diagnostic systems— approved for §§ 86.005–17, 86.007–17, (42) SAE J1634, Electric Vehicle Part 2: CARB requirements for 86.010–18, 86.1806–04, 86.1806–05. Energy Consumption and Range Test interchange of digital information, IBR (28) SAE J1978, Revised April 2002, Procedure, Cancelled October 2002, IBR approved for §§ 86.099–17, 86.005–17, OBD II Scan Tool—Equivalent to ISO/ approved for § 86.1811–04(n). 86.007–17, 86.1806–01, 86.1806–04, DIS 15031–4; December 14, 2001, IBR (43) SAE J1100, November, 2009, 86.1806–05. approved for §§ 86.005–17, 86.007–17, Motor Vehicle Dimensions, IBR (2) ISO 14230–4:2000(E), June 1, 2000, 86.010–18, 86.1806–04, 86.1806–05. approved for § 86.1866–12(d). Road vehicles—Diagnostic systems—

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KWP 2000 requirements for Emission- dispersive infrared analyzers (NDIR) for provisions of § 86.110–94. Parallel related systems, IBR approved for the determination of CO and CO2, a samples of the dilution air are similarly §§ 86.099–17, 86.005–17, 86.007–17, chemiluminescence analyzer (CL) for analyzed for THC, CO, CO2, CH4, NOX, 86.1806–01, 86.1806–04, 86.1806–05. the determination of NOX, and an and N2O. For natural gas-fueled, (3) ISO 15765–4.3:2001, December 14, analyzer meeting the requirements -fueled and 2001, Road Vehicles—Diagnostics on specified in 40 CFR 1065.275 for the methanol-fueled vehicles, bag samples Controller Area Networks (CAN)—Part determination of N2O. A heated flame are collected and analyzed for THC (if 4: Requirements for emissions-related ionization detector (HFID) is used for not sampled continuously), CO, CO2, systems, IBR approved for §§ 86.005–17, the continuous determination of THC CH4, NOX, and N2O. For methanol- 86.007–17, 86.1806–04, 86.1806–05. from petroleum-fueled diesel-cycle fueled vehicles, methanol and (4) ISO 15765–4:2005(E), January 15, vehicles (may also be used with formaldehyde samples are taken for 2005, Road Vehicles—Diagnostics on methanol-fueled diesel-cycle vehicles), both exhaust emissions and dilution air Controller Area Networks (CAN)—Part Figure B94–5 (or B94–6). The analytical (a single dilution air formaldehyde 4: Requirements for emissions-related system for methanol consists of a gas sample, covering the total test period systems, IBR approved for §§ 86.007–17, chromatograph (GC) equipped with a may be collected). For ethanol-fueled 86.010–18, 86.1806–05. flame ionization detector. The analysis vehicles, methanol, ethanol, (5) ISO 13837:2008, May 30, 2008, for formaldehyde is performed using acetaldehyde, and formaldehyde Road Vehicles—Safety glazing high-pressure liquid chromatography samples are taken for both exhaust materials. Method for the determination (HPLC) of 2,4-dinitrophenylhydrazine emissions and dilution air (a single of solar transmittance, IBR approved for (DNPH) derivatives using ultraviolet dilution air formaldehyde sample, § 86.1866–12. (UV) detection. The exhaust gas covering the total test period may be (g) Government Printing Office, analytical system shall conform to the collected). Parallel bag samples of Washington, DC 20402, (202) 512–1800 following requirements: dilution air are analyzed for THC, CO, http://www.nist.gov. * * * * * CO2, CH4, NOX, and N2O. (1) NIST Special Publication 811, 6. Section 86.135–12 is amended by * * * * * 1995 Edition, Guide for the Use of the revising paragraph (a) to read as follows: International System of Units (SI), IBR 7. Section 86.165–12 is amended by approved for § 86.1901. § 86.135–12 Dynamometer procedure. revising paragraphs (c)(1) and (2) to read (2) [Reserved] (a) Overview. The dynamometer run as follows: (h) Truck and Maintenance Council, consists of two tests, a ‘‘cold’’ start test, § 86.165–12 Air conditioning idle test 950 North Glebe Road, Suite 210, after a minimum 12-hour and a procedure. Arlington, VA 22203–4181, (703) 838– maximum 36-hour soak according to the * * * * * 1754. provisions of §§ 86.132 and 86.133, and (c) * * * (1) TMC RP 1210B, Revised June a ‘‘hot’’ start test following the ‘‘cold’’ (1) Ambient humidity within the test 2007, start by 10 minutes. Engine startup WINDOWSTMCOMMUNICATION API, (with all accessories turned off), cell during all phases of the test IBR approved for § 86.010–38. operation over the UDDS, and engine sequence shall be controlled to an (2) [Reserved] shutdown make a complete cold start average of 40–60 grains of water/pound (i) U.S. EPA, Office of Air and test. Engine startup and operation over of dry air. Radiation, 2565 Road, Ann the first 505 seconds of the driving (2) Ambient air temperature within Arbor, MI 48105, http://www.epa.gov: schedule complete the hot start test. The the test cell during all phases of the test (1) EPA Vehicle Simulation Tool, sequence shall be controlled to 73–80 °F exhaust emissions are diluted with ± ° Version x.x, November 2011; IBR ambient air in the dilution tunnel as on average and 75 5 F as an approved for § 86.1866–12. The shown in Figure B94–5 and Figure B94– instantaneous measurement. Air computer code for this model is 6. A dilution tunnel is not required for temperature shall be recorded available as noted in paragraph (a) of testing vehicles waived from the continuously at a minimum of 30 this section. A working version of this requirement to measure particulates. Six second intervals. software is also available for download particulate samples are collected on * * * * * at http://www.epa.gov/otaq/climate/ filters for weighing; the first sample plus 8. Section 86.166–12 is amended as ldst.htm. backup is collected during the first 505 follows: (2) [Reserved] seconds of the cold start test; the second a. By revising paragraph (b) sample plus backup is collected during introductory text. Subpart B—[Amended] the remainder of the cold start test b. By revising paragraph (b). 5. Section 86.111–94 is amended by (including shutdown); the third sample c. By revising paragraph (d). revising paragraph (b) introductory text plus backup is collected during the hot § 86.166–12 Method for calculating to read as follows: start test. Continuous proportional samples of gaseous emissions are emissions due to air conditioning leakage. § 86.111–94 Exhaust gas analytical collected for analysis during each test * * * * * system. phase. For gasoline-fueled, natural gas- (b) Rigid pipe connections. For 2017 * * * * * fueled and liquefied petroleum gas- and later model years, manufacturers (b) Major component description. The fueled Otto-cycle vehicles, the may test the leakage of system exhaust gas analytical system, Figure composite samples collected in bags are connections by pressurizing the system B94–7, consists of a flame ionization analyzed for THC, CO, CO2, CH4, NOX, with Helium and using a mass detector (FID) (heated, 235 °±15 °F and N2O. For petroleum-fueled diesel- spectrometer to measure the leakage of (113 °±8 °C) for methanol-fueled cycle vehicles (optional for natural gas- the connections within the system. vehicles) for the determination of THC, fueled, liquefied petroleum gas-fueled Connections that are demonstrated to be a methane analyzer (consisting of a gas and methanol-fueled diesel-cycle free of leaks using Helium mass chromatograph combined with a FID) vehicles), THC is sampled and analyzed spectrometry are considered to have a for the determination of CH4,non- continuously according to the relative emission factor of 10 and are

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accounted for separately in the equation spectrometer to measure the leakage of SWO = The number of seal washer with O- in paragraph (b)(2) of this section. the connections within the system. ring connections. (1) The following equation shall be Connections that are demonstrated to be MG = The number of metal gasket used for the 2012 through 2016 model free of leaks using Helium mass connections. years, and for 2017 and later model spectrometry are considered to have a * * * * * years in cases where the connections are relative emission factor of 10 and are (d) Flexible hoses. Determine the not demonstrated to be leak-free using accounted for separately in the permeation emission rate in grams per Helium mass spectrometry: following equation: year for each segment of flexible hose × × Grams/YRRP = 0.00522 [(125 SO) + Grams/YRRP = 0.00522 × [(125 × SO) + using the following equation, and then (75 × SCO) + (50 × MO) + (10 × SW) (75 × SCO) + (50 × MO) + (10 × SW) sum the values for all hoses in the + (5 × SWO) + (MG)] + (10 × LTO) + (5 × SWO) + (MG)] system to calculate a total flexible hose Where: Where: emission rate for the system. Hose end

Grams/YRRP = Total emission rate for rigid Grams/YRRP = Total emission rate for rigid connections shall be included in the pipe connections in grams per year. pipe connections in grams per year. calculations in paragraph (b) of this SO = The number of single O-ring SO = The number of single O-ring section. connections. connections. × × SCO = The number of single captured O-ring SCO = The number of single captured O-ring Grams/YRFH = 0.00522 (3.14159 ID connections. connections. × L × ER) MO = The number of multiple O-ring MO = The number of multiple O-ring Where: connections. connections. SW = The number of seal washer SW = The number of seal washer Grams/YRFH = Emission rate for a segment of connections. connections. flexible hose in grams per year. SWO = The number of seal washer with O- LTO = The total number of O-ring ID = Inner diameter of hose, in millimeters. ring connections. connections (single, single captured, and L = Length of hose, in millimeters. MG = The number of metal gasket multiple) that have demonstrated no ER = Emission rate per unit internal surface connections. leakage using Helium mass spectrometry. area of the hose, in g/mm2, selected from Connections included here should not be the following table, or, for 2017 and later (2) For 2017 and later model years, counted elsewhere in the equation, and model years, calculated according to manufacturers may test the leakage of all connections counted here must be SAE J2064 ‘‘R134a Refrigerant system connections by pressurizing the tested using Helium mass spectrometry Automotive Air-Conditioned Hose’’ system with Helium and using a mass and demonstrated as free of leaks. (incorporated by reference; see 86.1):

* * * * * proportional samples of gaseous corresponding control tolerances for air 9. Section 86.167–17 is added to read emissions are collected for analysis. The conditioning ambient test conditions. as follows: SC03 driving schedule is followed The entire test sequence is run twice; immediately by the HFET cycle, during with and without the vehicle’s air § 86.167–17 AC17 Air Conditioning which continuous proportional samples Efficiency Test Procedure. conditioner operating during the SC03 of gaseous emissions are collected for and HFET test cycles. For gasoline- (a) Overview. The dynamometer analysis. The entire test, including the fueled Otto-cycle vehicles, the operation consists of four elements: a preconditioning driving, vehicle soak, composite samples collected in bags are pre-conditioning cycle, a 30-minute and SC03 and HFET official test cycles, analyzed for THC, CO, CO , and CH . soak period under simulated solar heat, is conducted in an environmental test 2 4 For petroleum-fueled diesel-cycle an SC03 drive cycle, and a Highway facility. The environmental test facility vehicles, THC is sampled and analyzed Fuel Economy Test (HFET) drive cycle. must be capable of providing the The vehicle is preconditioned with the following nominal ambient test continuously according to the UDDS to bring the vehicle to a warmed- conditions of: 77 °F air temperature, 50 provisions of § 86.110. Parallel bag up stabilized condition. This percent relative humidity, a solar heat samples of dilution air are analyzed for preconditioning is followed by a 30 load intensity of 850 W/m2, and vehicle THC, CO, CO2, and CH4. The following minute vehicle soak (engine off) that cooling air flow proportional to vehicle figure shows the basic sequence of the proceeds directly into the SC03 driving speed. Section 86.161–00 discusses the test procedure. schedule, during which continuous minimum facility requirements and BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C listed in the tabular information of used. A speed vs. time recording, as (b) Dynamometer requirements. (1) § 86.129–00(a) and discussed in evidence of dynamometer test validity, Tests shall be run on a large single roll § 86.129–00(e) and (f). shall be supplied at request of the electric dynamometer or an equivalent (4) Set the dynamometer test inertia Administrator. dynamometer configuration that weight and roadload horsepower (6) The tires may be satisfies the requirements of § 86.108– requirements for the test vehicle (see 00. inflated up to a gauge pressure of 45 psi § 86.129–00 (e) and (f)). The (310 kPa), or the manufacturer’s (2) Position (vehicle can be driven) dynamometer’s horsepower adjustment recommended pressure if higher than 45 the test vehicle on the dynamometer settings shall be set such that the force psi, in order to prevent tire damage. The and restrain. imposed during dynamometer operation drive wheel tire pressure shall be matches actual road load force at all (3) Required dynamometer inertia reported with the test results. weight class selections are determined speeds. by the test vehicle’s test weight basis (5) The vehicle speed as measured (7) The driving distance, as measured and corresponding equivalent weight as from the dynamometer rolls shall be by counting the number of

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dynamometer roll or shaft revolutions, (2) Manual systems shall be set at the § 86.136–90 (Engine starting and shall be determined for the test. start of the SC03 drive cycle to full cool restarting). (8) Four-wheel drive and all-wheel with the fan on the highest setting and (ii) For manual transmission vehicles, drive vehicles may be tested either in a the airflow setting to ‘‘recirculation.’’ the vehicle shall be shifted according four-wheel drive or a two-wheel drive Within the first idle period of the SC03 the provisions of § 86.128–00. mode of operation. In order to test in the drive cycle (186 to 204 seconds) the fan (8) Following the preconditioning two-wheel drive mode, four-wheel drive speed shall be reduced to the setting cycle, the test vehicle and cooling fan(s) and all-wheel drive vehicles may have closest to 6 volts at the motor, the are turned off, all windows are rolled one set of drive wheels disengaged; temperature setting shall be adjusted to up, and the vehicle is allowed to soak four-wheel and all-wheel drive vehicles provide 55 deg F at the center dash air in the ambient conditions of paragraph which can be shifted to a two-wheel outlet, and the airflow setting changed (c)(1) of this section for 30 ±1 minutes. mode by the driver may be tested in a to ‘‘outside air.’’ The solar heat system must be turned on two-wheel drive mode of operation. (f) Vehicle and test activities. The and generating 850 W/m 2 within 1 (c) Test cell ambient conditions. (1) AC17 air conditioning test in an minute of turning the engine off. Ambient air temperature. (i) Ambient environmental test cell is composed of (9) Air conditioning on test. (i) Start air temperature is controlled, within the the following sequence of activities. engine (with air conditioning system test cell, during all phases of the test (1) Drain and fill the vehicle’s fuel also running). Fifteen seconds after the sequence to 77 ±2 °F on average and 77 tank to 40 percent capacity with test engine starts, place vehicle in gear. ±5 °F as an instantaneous measurement. fuel. If a vehicle has gone through the (ii) Eighteen seconds after the engine (ii) Air temperature is recorded drain and fuel sequence less than 72 starts, begin the initial vehicle continuously at a minimum of 30 hours previously and has remained acceleration of the SC03 driving second intervals. Records of cell air under laboratory ambient temperature schedule. temperatures and values of average test conditions, this drain and fill operation (iii) Operate the vehicle according to temperatures are maintained by the can be omitted (see § 86.132– the SC03 driving schedule, as described manufacturer for all certification related 00(c)(2)(ii)). in appendix I, paragraph (h), of this part, while sampling the exhaust gas. programs. (2)(i) Position the variable speed (iv) At the end of the deceleration (2) Ambient humidity. (i) Ambient cooling fan in front of the test vehicle which is scheduled to occur at 594 humidity is controlled, within the test with the vehicle’s hood down. This air seconds, simultaneously switch the cell, during all phases of the test flow should provide representative ± sample flows from the SC03 bags and sequence to an average of 69 5 grains cooling at the front of the test vehicle samples to the ‘‘HFET’’ bags and of water/pound of dry air. (air conditioning condenser and engine) samples, switch off gas flow measuring (ii) Humidity is recorded during the driving cycles. See § 86.161– device No. 1, switch off the No. 1 continuously at a minimum of 30 00(e) for a discussion of cooling fan petroleum-fueled diesel hydrocarbon second intervals. Records of cell specifications. humidity and values of average test integrator, mark the petroleum-fueled (ii) In the case of vehicles with rear diesel hydrocarbon recorder chart, and humidity are maintained by the engine compartments (or if this front manufacturer for all certification related start gas flow measuring device No. 2, location provides inadequate engine and start the petroleum-fueled diesel programs. cooling), an additional cooling fan shall (3) Solar heat loading. The hydrocarbon integrator No. 2. be placed in a position to provide requirements of 86.161–00(d) regarding (v) Allow the vehicle to idle for 14– sufficient air to maintain vehicle solar heat loading specifications shall 16 seconds. Before the end of this idle cooling. The fan capacity shall normally apply. The solar load of 850 W/m2 is period, record the measured roll or shaft not exceed 5300 cfm (2.50 m3/s). If, applied only during specified portions revolutions and reset the counter or however, it can be demonstrated that of the test sequence. switch to a second counter. As soon as during road operation the vehicle (d) Interior temperature measurement. possible transfer the SC03 exhaust and receives additional cooling, and that The interior temperature of the vehicle dilution air samples to the analytical such additional cooling is needed to shall be measured during the emission system and process the samples provide a representative test, the fan sampling phases of the test(s). according to § 86.140 obtaining a (1) Interior temperatures shall be capacity may be increased or additional stabilized reading of the bag exhaust measured by placement of fans used if approved in advance by the sample on all analyzers within 20 thermocouples at the following Administrator. minutes of the end of the sample locations: (3) Open all vehicle windows. collection phase of the test. Obtain (i) The outlet of the center duct on the (4) Connect the emission test methanol and formaldehyde sample dash. sampling system to the vehicle’s analyses, if applicable, within 24 hours (ii) Behind the driver and passenger exhaust tail pipe(s). of the end of the sample collection seat headrests. The location of the (5) Set the environmental test cell phase of the test. temperature measuring devices shall be ambient test conditions to the (vi) Operate the vehicle according to 30 mm behind each headrest and 330 conditions defined in paragraph (c) of the HFET driving schedule, as described mm below the roof. this section, except that the solar heat in 40 CFR 600.109–08, while sampling (2) The temperature at each location shall be off. the exhaust gas. shall be recorded a minimum of every (6) Set the air conditioning system (vii) Turn the engine off 2 seconds 5 seconds. controls to off. after the end of the last deceleration. (e) Air conditioning system settings. (7) Start the vehicle (with air (viii) Five seconds after the engine For the portion of the test where the air conditioning system off) and conduct a stops running, simultaneously turn off conditioner is required to be operating preconditioning EPA urban gas flow measuring device No. 2 and if the settings shall be as follows: dynamometer driving cycle (§ 86.115). applicable, turn off the petroleum- (1) Automatic systems shall be set to (i) If engine stalling should occur fueled diesel hydrocarbon integrator No. automatic and the temperature control during any air conditioning test cycle 2, mark the hydrocarbon recorder chart, set to 72 deg F. operation, follow the provisions of and position the sample selector valves

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to the ‘‘standby’’ position. Record the based businesses. The following d. By revising the definition for ‘‘gross measured roll or shaft revolutions (both categories of businesses (with their vehicle weight rating.’’ gas meter or flow measurement associated NAICS codes) may be eligible e. By adding a definition for instrumentation readings), and re-set the for exemption based on the Small ‘‘platform.’’ counter. As soon as possible, transfer Business Administration size standards The revisions and additions read as the ‘‘HFET’’ exhaust and dilution air in 13 CFR 121.201. follows: samples to the analytical system and (i) Vehicle manufacturers (NAICS § 86.1803–01 Definitions. process the samples according to code 336111). § 86.140, obtaining a stabilized reading (ii) Independent commercial * * * * * of the exhaust bag sample on all importers (NAICS codes 811111, Footprint is the product of average analyzers within 20 minutes of the end 811112, 811198, 423110, 424990, and track width (rounded to the nearest of the sample collection phase of the 441120). tenth of an inch) and wheelbase test. Obtain methanol and formaldehyde (iii) Alternate fuel vehicle converters (measured in inches and rounded to the sample analyses, if applicable, within (NAICS codes 335312, 336312, 336322, nearest tenth of an inch), divided by 144 24 hours of the end of the sample 336399, 454312, 485310, and 811198). and then rounded to the nearest tenth of period. (2) Effective for the 2014 and later a square foot, where the average track (10) Air conditioning off test. The air model years, a manufacturer that would width is the average of the front and rear otherwise be exempt under the conditioning off test is identical to the track widths, where each is measured in provisions of paragraph (j)(1) of this steps identified in paragraphs (d)(1) inches and rounded to the nearest tenth section may optionally comply with the through (9) of this section, except that of an inch. greenhouse gas emission standards the air conditioning system and fan * * * * * specified in § 86.1818. A manufacturer speeds are set to complete off or the Good engineering judgment has the making this choice is required to lowest. It is preferred that the air meaning given in 40 CFR 1068.30. See comply with all the applicable conditioning off test be conducted 40 CFR 1068.5 for the administrative standards and provisions in § 86.1818 sequentially after the air conditioning process we use to evaluate good and in associated provisions in this part on test, following a 10–15 minute soak. engineering judgment. and in part 600 of this chapter. Gross combination weight rating (g) Records required and reporting Manufacturers may optionally earn requirements. For each test the (GCWR) means the value specified by early credits in the 2012 and/or 2013 the vehicle manufacturer as the manufacturer shall record the model years by demonstrating CO2 maximum weight of a loaded vehicle information specified in 86.142–90. emission levels below the fleet average Emission results must be reported for and trailer, consistent with good CO2 standard that would have been engineering judgment. each phase of the test. The manufacturer applicable in those model years if the must also report the following manufacturer had not been exempt. * * * * * information for each vehicle tested: Manufacturers electing to earn these Gross vehicle weight rating (GVWR) vehicle class, model type, carline, curb early credits must comply with the means the value specified by the weight engine displacement, model year reporting requirements in manufacturer as the maximum design transmission class and configuration, § 600.512–12 for each model year. loaded weight of a single vehicle, interior volume, climate control system (k) Conditional exemption from consistent with good engineering type and characteristics, refrigerant greenhouse gas emission standards. judgment. used, compressor type, and evaporator/ Manufacturers meeting the eligibility * * * * * condenser characteristics. requirements described in paragraphs Platform means a group of vehicles with common body floor plan and Subpart S—[Amended] (k)(1) and (2) of this section may request a conditional exemption from construction, chassis construction and 10. Section 86.1801–12 is amended by compliance with the emission standards components, basic engine, and revising paragraphs (b), (j), and (k) described in § 86.1818–12(c) through (e) transmission class. Platform does not introductory text to read as follows: and associated provisions in this part consider any level of de´cor or opulence, and in part 600 of this chapter. A or characteristics such as roof line, § 86.1801–12 Applicability. conditional exemption under this number of doors, seats, or windows. A * * * * * paragraph (k) may be requested for the single platform may include multiple (b) Clean alternative fuel conversions. 2012 through 2016 model years. The fuel economy label classes or car lines, The provisions of this subpart apply to terms ‘‘sales’’ and ‘‘sold’’ as used in this and may include both cars and trucks. clean alternative fuel conversions as paragraph (k) shall mean vehicles * * * * * defined in 40 CFR 85.502, of all model produced and delivered for sale (or 12. Section 86.1818–12 is amended as year light-duty vehicles, light-duty sold) in the states and territories of the follows: trucks, medium duty passenger United States. For the purpose of a. By adding paragraph (b)(4). vehicles, and complete Otto-cycle determining eligibility the sales of b. By revising paragraphs (c)(2)(i)(A) heavy-duty vehicles. related companies shall be aggregated through (C). (j) Exemption from greenhouse gas according to the provisions of c. By revising paragraphs (c)(3)(i)(A) emission standards for small businesses. § 86.1838–01(b)(3). through (C). (1) Manufacturers that qualify as a small * * * * * d. By adding paragraph (c)(3)(i)(D). business under the Small Business 11. Section 86.1803–01 is amended as e. By adding paragraph (c)(4). Administration regulations in 13 CFR follows: f. By revising paragraph (f) part 121 are exempt from the a. By revising the definition for introductory text. greenhouse gas emission standards ‘‘footprint.’’ g. By revising paragraph (f)(3). specified in § 86.1818–12 and in b. By adding a definition for ‘‘good h. By adding paragraph (g). associated provisions in this part and in engineering judgment.’’ i. By adding paragraph (h). part 600 of this chapter. This exemption c. By adding a definition for ‘‘gross The additions and revisions read as applies to both U.S.-based and non-U.S.- combination weight rating.’’ follows:

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§ 86.1818–12 Greenhouse gas emission as an ambulance or combination (A) For passenger automobiles with a standards for light-duty vehicles, light-duty ambulance-hearse or for use by the footprint of less than or equal to 41 trucks, and medium-duty passenger United States Government or a State or square feet, the gram/mile CO target vehicles. 2 local government for law enforcement. value shall be selected for the * * * * * (c) * * * appropriate model year from the (b) * * * (4) Emergency vehicle means a motor (2) * * * following table: vehicle manufactured primarily for use (i) * * *

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(B) For passenger automobiles with a selected for the appropriate model year footprint of greater than 56 square feet, from the following table: the gram/mile CO2 target value shall be

BILLING CODE 4910–59–C shall be calculated using the following Where: (C) For passenger automobiles with a equation and rounded to the nearest 0.1 f is the vehicle footprint, as defined in footprint that is greater than 41 square grams/mile: § 86.1803; and feet and less than or equal to 56 square a and b are selected from the following table feet, the gram/mile CO2 target value Target CO2 = [a × f ] + b for the appropriate model year:

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* * * * * (A) For light trucks with a footprint of selected for the appropriate model year (3) * * * less than or equal to 41 square feet, the from the following table: (i) * * * gram/mile CO2 target value shall be

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(B) For light trucks with a footprint mile CO2 target value shall be calculated Where: that is greater than 41 square feet and using the following equation and f is the footprint, as defined in § 86.1803; and less than or equal to the maximum rounded to the nearest 0.1 grams/mile: a and b are selected from the following table footprint value specified in the table × for the appropriate model year: below for each model year, the gram/ Target CO2 = (a f) + b

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(C) For light trucks with a footprint the table below for each model year, the Target CO2 = (a × f) + b that is greater than the minimum gram/mile CO2 target value shall be Where: footprint value specified in the table calculated using the following equation f is the footprint, as defined in § 86.1803; and below and less than or equal to the and rounded to the nearest 0.1 grams/ a and b are selected from the following table maximum footprint value specified in mile: for the appropriate model year:

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(D) For light trucks with a footprint model year, the gram/mile CO2 target appropriate model year from the greater than the minimum value value shall be selected for the following table: specified in the table below for each

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* * * * * the fleet average standard for a must comply with N2O and CH4 (4) Emergency vehicles. Emergency manufacturer under this paragraph (c) standards using either the provisions of vehicles may be excluded from the fleet and from the calculation of the fleet paragraph (f)(1), (2), or (3) of this average CO2 exhaust emission standards average carbon-related exhaust section. Except with prior EPA described in paragraph (c) of this emissions in 86.510–12. approval, a manufacturer may not use section. The manufacturer should notify * * * * * the provisions of both paragraphs (f)(1) the Administrator that they are making (f) Nitrous oxide (N2O) and methane and (2) of this section in a model year. such an election in the model year (CH4) exhaust emission standards for For example, a manufacturer may not reports required under § 600.512 of this passenger automobiles and light trucks. use the provisions of paragraph (f)(1) of chapter. Such vehicles should be Each manufacturer’s fleet of combined this section for their passenger excluded from both the calculation of passenger automobile and light trucks automobile fleet and the provisions of

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paragraph (f)(2) for their light truck fleet determining eligibility the sales of (ii) Sales of vehicles in the U.S. by in the same model year. The related companies shall be aggregated new entrants must remain below 5,000 manufacturer may use the provisions of according to the provisions of vehicles for the first two model years in both paragraphs (f)(1) and (3) of this § 86.1838–01(b)(3). To be eligible for the U.S. market and the average sales for section in a model year. For example, a alternative standards established under any three consecutive years within the manufacturer may meet the N2O this paragraph (g), the manufacturer’s first five years of entering the U.S. standard in paragraph (f)(1)(i) of this average sales for the three most recent market must remain below 5,000 section and an alternative CH4 standard consecutive model years must remain vehicles. Vehicles sold in violation of determined under paragraph (f)(3) of below 5,000. If a manufacturer’s average these limits will be considered not this section. sales for the three most recent covered by the certificate of conformity * * * * * consecutive model years exceeds 4,999, and the manufacturer will be subject to (3) Optional use of alternative N2O the manufacturer will no longer be penalties on an individual-vehicle basis and/or CH4 standards. Manufacturers eligible for exemption and must meet for sale of vehicles not covered by a may select an alternative standard applicable emission standards starting certificate. In addition, violation of applicable to a test group, for either N2O with the model year according to the these limits will result in loss of or CH4, or both. For example, a provisions in this paragraph (g)(1). eligibility for alternative standards until manufacturer may choose to meet the (i) If a manufacturer’s average sales for such point as the manufacturer three consecutive model years exceeds demonstrates two consecutive model N2O standard in paragraph (f)(1)(i) of 4,999, and if the increase in sales is the years of sales below 5,000 automobiles. this section and an alternative CH4 standard in lieu of the standard in result of corporate acquisitions, mergers, (iii) A manufacturer with sales in the paragraph (f)(1)(ii) of this section. The or purchase by another manufacturer, most recent model year of less than alternative standard for each pollutant the manufacturer shall comply with the 5,000 automobiles, but where prior must be greater than the applicable emission standards described in model year sales were not less than exhaust emission standard specified in § 86.1818–12(c) and (d), as applicable, 5,000 automobiles, is eligible to request paragraph (f)(1) of this section. beginning with the first model year after alternative standards under this the last year of the three consecutive paragraph (g). However, such a Alternative N O and CH standards 2 4 model years. manufacturer will be considered a new apply to emissions measured according (ii) If a manufacturer’s average sales entrant and subject to the provisions to the Federal Test Procedure (FTP) for three consecutive model years regarding new entrants in this paragraph described in Subpart B of this part for exceeds 4,999 and is less than 50,000, (g), except that the requirement to the full useful life, and become the and if the increase in sales is solely the demonstrate an intent to enter the U.S. applicable certification and in-use result of the manufacturer’s expansion market it paragraph (g)(2)(i) of this emission standard(s) for the test group. in vehicle production (not the result of section shall not apply. Manufacturers using an alternative corporate acquisitions, mergers, or (3) How to request alternative fleet standard for N2O and/or CH4 must purchase by another manufacturer), the average standards. Eligible calculate emission debits according to manufacturer shall comply with the manufacturers may petition for the provisions of paragraph (f)(4) of this emission standards described in alternative standards for up to five section for each test group/alternative § 86.1818–12(c) through (e), as consecutive model years if sufficient standard combination. Debits must be applicable, beginning with the second information is available on which to included in the calculation of total model year after the last year of the base such standards. credits or debits generated in a model three consecutive model years. (i) To request alternative standards year as required under § 86.1865– (2) Requirements for new entrants into starting with the 2017 model year, 12(k)(5). For flexible fuel vehicles (or the U.S. market. New entrants are those eligible manufacturers must submit a other vehicles certified for multiple manufacturers without a prior record of completed application no later than July fuels) you must meet these alternative automobile sales in the United States 30, 2013. standards when tested on any and without prior certification to (or (ii) To request alternative standards applicable test fuel type. exemption from, under § 86.1801–12(k)) starting with a model after 2017, eligible * * * * * greenhouse gas emission standards in manufacturers must submit a completed (g) Alternative fleet average standards § 86.1818–12. In addition to the request no later than 36 months prior to for manufacturers with limited U.S. eligibility requirements stated in the start of the first model year to which sales. Manufacturers meeting the paragraph (g)(1) of this section, new the alternative standards would apply. criteria in this paragraph (g) may request entrants must meet the following (iii) The request must contain all the that the Administrator establish requirements: information required in paragraph (g)(4) alternative fleet average CO2 standards (i) In addition to the information of this section, and must be signed by that would apply instead of the required under paragraph (g)(4) of this a chief officer of the company. If the standards in paragraph (c) of this section, new entrants must provide Administrator determines that the section. The provisions of this documentation that shows a clear intent content of the request is incomplete or paragraph (g) are applicable only to the by the company to actually enter the insufficient, the manufacturer will be 2017 and later model years. U.S. market in the years for which notified and given an additional 30 days (1) Eligibility for alternative alternative standards are requested. to amend the request. standards. Eligibility as determined in Demonstrating such intent could (4) Data and information submittal this paragraph (g) shall be based on the include providing documentation that requirements. Eligible manufacturers total sales of combined passenger shows the establishment of a U.S. dealer requesting alternative standards under automobiles and light trucks. The terms network, documentation of work this paragraph (g) must submit the ‘‘sales’’ and ‘‘sold’’ as used in this underway to meet other U.S. following information to the paragraph (g) shall mean vehicles requirements (e.g., safety standards), or Environmental Protection Agency. The produced and delivered for sale (or other information that reasonably Administrator may request additional sold) in the states and territories of the establishes intent to the satisfaction of information as she deems appropriate. United States. For the purpose of the Administrator. The completed request must be sent to

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the Environmental Protection Agency at or projected to be employed by the Administrator shall determine whether the following address: Director, manufacturer. For any technology that is the standards established in paragraph Compliance and Innovative Strategies not projected to be fully employed, (c) of this section for the 2022 through Division, U.S. Environmental Protection explain why this is the case. 2025 model years are appropriate under Agency, 2000 Traverwood Drive, Ann (iii) Alternative fleet average CO2 section 202(a) of the Clean Air Act, in Arbor, Michigan 48105. standards. (A) The most stringent CO2 light of the record then before the (i) Vehicle model and fleet level estimated to be feasible for each Administrator. An opportunity for information. (A) The model years to model, in each model year, and the public comment shall be provided which the requested alternative technological basis for this estimate. before making such determination. If the standards would apply, limited to five (B) For each model year, a projection Administrator determines they are not consecutive model years. of the lowest feasible sales-weighted appropriate, the Administrator shall (B) Vehicle models and projections of fleet average CO2 value, separately for initiate a rulemaking to revise the production volumes for each model passenger automobiles and light trucks, standards, to be either more or less year. and an explanation demonstrating that stringent as appropriate. (C) Detailed description of each these projections are reasonable. (1) In making the determination model, including the vehicle type, (C) A copy of any application, data, required by this paragragh (h), the vehicle mass, power, footprint, and and related information submitted to Administrator shall consider the expected pricing. NHTSA in support of a request for information available on the factors (D) The expected production cycle for alternative Corporate Average Fuel relevant to setting greenhouse gas each model, including new model Economy standards filed under 49 CFR emission standards under section 202(a) introductions and redesign or refresh Part 525. of the Clean Air Act for model years cycles. (iv) Information supporting eligibility. 2022 through 2025, including but not (ii) Technology evaluation (A) U.S. sales for the three previous limited to: information. (A) The CO2 reduction model years and projected sales for the (i) The availability and effectiveness technologies employed by the model years for which the manufacturer of technology, and the appropriate lead manufacturer on each vehicle model, is seeking alternative standards. time for introduction of technology; including information regarding the cost (B) Information regarding ownership (ii) The cost on the producers or and CO2-reducing effectiveness. Include relationships with other manufacturers, purchasers of new motor vehicles or technologies that improve air including details regarding the new motor vehicle engines; conditioning efficiency and reduce air application of the provisions of (iii) The feasibility and practicability conditioning system leakage, and any § 86.1838–01(b)(3) regarding the of the standards; ‘‘off-cycle’’ technologies that potentially aggregation of sales of related (iv) The impact of the standards on provide benefits outside the operation companies, reduction of emissions, oil conservation, represented by the Federal Test (5) Alternative standards. Upon energy security, and fuel savings by Procedure and the Highway Fuel receiving a complete application, the consumers; Economy Test. Administrator will review the (v) The impact of the standards on the (B) An evaluation of comparable application and determine whether an automobile industry; models from other manufacturers, alternative standard is warranted. If the (vi) The impacts of the standards on including CO2 results and air Administrator judges that an alternative automobile safety; conditioning credits generated by the standard is warranted, the (vii) The impact of the greenhouse gas models. Comparable vehicles should be Administrator will publish a proposed emission standards on the Corporate similar, but not necessarily identical, in determination in the Federal Register to Average Fuel Economy standards and a the following respects: vehicle type, establish alternative standards for the national harmonized program; and horsepower, mass, power-to-weight manufacturer that the Administrator (viii) The impact of the standards on ratio, footprint, retail price, and any judges are appropriate. Following a 30 other relevant factors. (2) The Administrator shall make the other relevant factors. For day public comment period, the determination required by this manufacturers requesting alternative Administrator will issue a final paragraph (h) based upon a record that standards starting with the 2017 model determination establishing alternative includes the following: year, the analysis of comparable standards for the manufacturer. If the (i) A draft Technical Assessment vehicles should include vehicles from Administrator does not establish Report addressing issues relevant to the the 2012 and 2013 model years, alternative standards for an eligible standard for the 2022 through 2025 otherwise the analysis should at a manufacturer prior to 12 months before model years; minimum include vehicles from the the first model year to which the (ii) Public comment on the draft most recent two model years. alternative standards would apply, the Technical Assessment Report; (C) A discussion of the CO2-reducing manufacturer may request an extension (iii) Public comment on whether the technologies employed on vehicles of the exemption under 86.1801–12(k) standards established for the 2022 offered outside of the U.S. market but or an extension of previously approved through 2025 model years are not available in the U.S., including a alternative standards, whichever may appropriate under section 202(a) of the discussion as to why those vehicles apply. Clean Air Act; and and/or technologies are not being used (6) Restrictions on credit trading. (iv) Such other materials the to achieve CO2 reductions for vehicles Manufacturers subject to alternative Administrator deems appropriate. in the U.S. market. standards approved by the (3) No later than November 15, 2017, (D) An evaluation, at a minimum, of Administrator under this paragraph (g) the Administrator shall issue a draft the technologies projected by the may not trade credits to another Technical Assessment Report Environmental Protection Agency in a manufacturer. Transfers between car addressing issues relevant to the final rulemaking as those technologies and truck fleets within the manufacturer standards for the 2022 through 2025 likely to be used to meet greenhouse gas are allowed. model years. emission standards and the extent to (h) Mid-term evaluation of standards. (4) The Administrator will set forth in which those technologies are employed No later than April 1, 2018, the detail the bases for the determination

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required by this paragraph (h), total hydrocarbon emissions the (k) * * * including the Administrator’s manufacturer may provide a statement (5) Total credits or debits generated in assessment of each of the factors listed in its application for certification that a model year, maintained and reported in paragraph (h)(1) of this section. such vehicles comply with the separately for passenger automobiles 13. Section 86.1823–08 is amended by applicable standards. Such a statement and light trucks, shall be the sum of the revising paragraph (m)(2)(iii) to read as shall be based on previous emission credits or debits calculated in paragraph follows: tests, development tests, or other (k)(4) of this section and any of the appropriate information and good following credits, if applicable, minus § 86.1823–08 Durability demonstration engineering judgment. any N2O and/or CH4 CO2-equivalent procedures for exhaust emissions. (D) A manufacturer may petition the debits calculated according to the * * * * * Administrator to waive the requirement provisions of § 86.1818–12(f)(4): (m) * * * to measure particulate emissions when (2) * * * * * * * * conducting Selective Enforcement Audit (iv) Full size pickup truck credits (iii) For the 2012 through 2016 model testing of Otto-cycle vehicles. years only, manufacturers may use earned according to the provisions of (E) In lieu of testing a gasoline, diesel, § 86.1866–12(e). alternative deterioration factors. For natural gas, liquefied petroleum gas, or N O, the alternative deterioration factor (6) The expiration date of unused CO2 2 hydrogen fueled Tier 2 or interim non- credits is based on the model year in to be used to adjust FTP and HFET Tier 2 vehicle for formaldehyde emissions is the deterioration factor which the credits are earned, as follows: emissions when such vehicles are (i) Unused CO2 credits from the 2009 determined for (or derived from, using certified based upon NMHC emissions, good engineering judgment) NO model year shall retain their full value X a manufacturer may provide a statement through the 2014 model year. Credits emissions according to the provisions of in its application for certification that this section. For CH , the alternative remaining at the end of the 2014 model 4 such vehicles comply with the year shall expire. deterioration factor to be used to adjust applicable standards. Such a statement FTP and HFET emissions is the (ii) Unused CO2 credits from the 2010 must be based on previous emission through 2015 model years shall retain deterioration factor determined for (or tests, development tests, or other derived from, using good engineering their full value through the 2021 model appropriate information and good year. Credits remaining at the end of the judgment) NMOG or NMHC emissions engineering judgment. according to the provisions of this 2021 model year shall expire. (F) In lieu of testing a petroleum-, (iii) Unused CO credits from the 2016 section. 2 natural gas-, liquefied petroleum gas-, or and later model years shall retain their * * * * * hydrogen-fueled heavy-duty vehicle for full value through the five subsequent 14. Section 86.1829–01 is amended by formaldehyde emissions for model years after the model year in revising paragraph (b)(1)(iii) to read as certification, a manufacturer may which they were generated. Credits follows: provide a statement in its application remaining at the end of the fifth model § 86.1829–01 Durability and emission for certification that such vehicles year after the model year in which they testing requirements; waivers. comply with the applicable standards. were generated shall expire. Such a statement must be based on (7) * * * * * * * * previous emission tests, development (b) * * * (i) Credits generated and calculated tests, or other appropriate information (1) * * * according to the method in paragraphs (iii) Data submittal waivers. (A) In and good engineering judgment. (k)(4) and (5) of this section may not be (G) For the 2012 through 2016 model lieu of testing a methanol-fueled diesel- used to offset deficits other than those years only, in lieu of testing a vehicle cycle light truck for particulate deficits accrued with respect to the for N O emissions, a manufacturer may emissions a manufacturer may provide 2 standard in § 86.1818. Credits may be provide a statement in its application a statement in its application for banked and used in a future model year for certification that such vehicles certification that such light trucks in which a manufacturer’s average CO2 comply with the applicable standards. comply with the applicable standards. level exceeds the applicable standard. Such a statement must be based on Such a statement shall be based on Credits may be transferred between the previous emission tests, development previous emission tests, development passenger automobile and light truck tests, or other appropriate information tests, or other appropriate information fleets of a given manufacturer. Credits and good engineering judgment. and good engineering judgment. may also be traded to another (B) In lieu of testing an Otto-cycle * * * * * manufacturer according to the light-duty vehicle, light-duty truck, or 15. Section 86.1865–12 is amended as provisions in paragraph (k)(8) of this heavy-duty vehicle for particulate follows: section. Before trading or carrying over emissions for certification, a a. By revising paragraph (k)(5) credits to the next model year, a manufacturer may provide a statement introductory text. manufacturer must apply available in its application for certification that b. By redesignating paragraph credits to offset any deficit, where the such vehicles comply with the (k)(5)(iv) as paragraph (k)(5)(v). deadline to offset that credit deficit has applicable standards. Such a statement c. By adding new paragraph (k)(5)(iv). not yet passed. d. By revising paragraph (k)(6). must be based on previous emission * * * * * e. By revising paragraph (k)(7)(i). tests, development tests, or other f. By revising paragraph (k)(8)(iv)(A). (8) * * * appropriate information and good g. By revising paragraph (l)(1)(ii) (iv) * * * engineering judgment. introductory text. (A) If a manufacturer ceases (C) A manufacturer may petition the h. By revising paragraph (l)(1)(ii)(F). production of passenger automobiles Administrator for a waiver of the The revisions read as follows: and light trucks, the manufacturer requirement to submit total hydrocarbon continues to be responsible for offsetting emission data. If the waiver is granted, § 86.1865–12 How to comply with the fleet any debits outstanding within the then in lieu of testing a certification average CO2 standards. required time period. Any failure to light-duty vehicle or light-duty truck for * * * * * offset the debits will be considered a

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violation of paragraph (k)(8)(i) of this l. By revising paragraph (d). use of zero (0) grams/mile CO2 is section and may subject the m. By adding paragraph (e). unrestricted. manufacturer to an enforcement action The revisions and additions read as (iii) Model years 2022 through 2025: for sale of vehicles not covered by a follows: The use of zero (0) grams/mile CO2 is certificate, pursuant to paragraphs limited to the first 200,000 combined (k)(8)(ii) and (iii) of this section. § 86.1866–12 CO2 fleet average credit and incentive programs. electric vehicles, plug-in hybrid electric * * * * * vehicles, and fuel cell vehicles (a) Advanced technology vehicles. (1) (l) * * * produced and delivered for sale by a Electric vehicles, plug-in hybrid electric (1) * * * manufacturer in the 2022 through 2025 vehicles, and fuel cell vehicles, as those (ii) Manufacturers producing any model years, except that a manufacturer terms are defined in § 86.1803–01, that passenger automobiles or light trucks that produces and delivers for sale are certified and produced and subject to the provisions in this subpart 300,000 or more such vehicles in the delivered for sale in the United States in must establish, maintain, and retain all 2019 through 2021 model years shall be the 2012 through 2025 model years may the following information in adequately subject to a limitation on the use of zero use a value of zero (0) grams/mile of organized records for each passenger (0) grams/mile CO to the first 600,000 CO to represent the proportion of 2 automobile or light truck subject to this 2 combined electric vehicles, plug-in electric operation of a vehicle that is subpart: hybrid electric vehicles, and fuel cell derived from electricity that is generated * * * * * vehicles produced and delivered for sale from sources that are not onboard the (F) Carbon-related exhaust emission by a manufacturer in the 2022 through vehicle. standard, N2O emission standard, and 2025 model years. (i) Model years 2012 through 2016: CH4 emission standard to which the The use of zero (0) grams/mile CO2 is (2) For electric vehicles, plug-in passenger automobile or light truck is hybrid electric vehicles, and fuel cell certified. limited to the first 200,000 combined electric vehicles, plug-in hybrid electric vehicles, as those terms are defined in * * * * * vehicles, and fuel cell vehicles § 86.1803–01, that are certified and 16. Section 86.1866–12 is amended as produced and delivered for sale by a produced and delivered for sale in the follows: manufacturer in the 2012 through 2016 United States in the 2017 through 2021 a. By revising the heading, model years, except that a manufacturer model years and that meet the b. By revising paragraphs (a) and (b). additional specifications in this section, c. By revising paragraph (c) that produces and delivers for sale 25,000 or more such vehicles in the the manufacturer may use the introductory text. production multipliers in this paragraph d. By revising paragraphs (c)(1) 2012 model year shall be subject to a limitation on the use of zero (0) grams/ (a)(2) when determining the through (3). manufacturer’s fleet average carbon- e. By revising paragraph (c)(5) mile CO2 to the first 300,000 combined electric vehicles, plug-in hybrid electric related exhaust emissions under introductory text. § 600.512 of this chapter. Full size f. By revising paragraph (c)(5)(i). vehicles, and fuel cell vehicles pickup trucks eligible for and using a g. By revising paragraph (c)(5)(iii) produced and delivered for sale by a production multiplier are not eligible introductory text. manufacturer in the 2012 through 2016 h. By redesignating paragraph model years. for the performance-based credits (c)(5)(iv) and paragraph (c)(5)(v). (ii) Model years 2017 through 2021: described in paragraph (e)(3) of this i. By adding new paragraph (c)(5)(iv). For electric vehicles, plug-in hybrid section. j. By redesignating paragraph (c)(6) as electric vehicles, and fuel cell vehicles (i) The production multipliers, by (c)(8). produced and delivered for sale in the model year, for electric vehicles and k. By adding paragraphs (c)(6) and (7). 2017 through 2021 model years, such fuel cell vehicles, are as follows:

(ii) (A) The production multipliers, by model year, for plug-in hybrid electric vehicles, are as follows:

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(B) The minimum all-electric driving vehicle may qualify for use of a Recommended Practice for Measuring range that a plug-in hybrid electric production multiplier by having an the Exhaust Emissions and Fuel vehicle must have in order to qualify for equivalent all-electric driving range Economy of Hybrid-Electric Vehicles, use of a production multiplier is 10.2 greater than or equal to 10.2 miles Including Plug-In Hybrid Vehicles miles on its nominal storage capacity of during its actual charge-depleting range (incorporated by reference, see § 86.1). electricity when operated on the as measured on the highway fuel The equivalent all-electric range of a highway fuel economy test cycle. economy test cycle and tested according PHEV is determined from the following Alternatively, a plug-in hybrid electric to the requirements of SAE J1711, formula:

Where: Fuel Economy of Hybrid-Electric shall be calculated according to this EAER = the equivalent all-electric range Vehicles, Including Plug-In Hybrid paragraph (b) for each air conditioning attributed to charge-depleting operation Vehicles (incorporated by reference, see system that the manufacturer is using to of a plug-in hybrid electric vehicle on § 86.1). generate CO2 credits. Manufacturers the highway fuel economy test cycle. (iii) The actual production of may also generate early air conditioning RCDA = The actual charge-depleting range determined according to SAE J1711, qualifying vehicles may be multiplied refrigerant leakage credits under this Recommended Practice for Measuring by the applicable value according to the paragraph (b) for the 2009 through 2011 the Exhaust Emissions and Fuel model year, and the result, rounded to model years according to the provisions Economy of Hybrid-Electric Vehicles, the nearest whole number, may be used of § 86.1867–12(b). Including Plug-In Hybrid Vehicles to represent the production of qualifying (incorporated by reference, see § 86.1). (1) The manufacturer shall calculate vehicles when calculating average an annual rate of refrigerant leakage CO2CS = The charge-sustaining CO2 carbon-related exhaust emissions under emissions in grams per mile on the from an air conditioning system in highway fuel economy test determined § 600.512 of this chapter. grams per year according to the according to SAE J1711, Recommended (b) Credits for reduction of air provisions of § 86.166–12. Practice for Measuring the Exhaust conditioning refrigerant leakage. Emissions and Fuel Economy of Hybrid- Manufacturers may generate credits (2) The CO2-equivalent gram per mile leakage reduction to be used to calculate Electric Vehicles, Including Plug-In applicable to the CO2 fleet average Hybrid Vehicles (incorporated by program described in § 86.1865–12 by the total leakage credits generated by the reference, see § 86.1). implementing specific air conditioning air conditioning system shall be CO2CD = The charge-depleting CO2 emissions determined according to the following in grams per mile on the highway fuel system technologies designed to reduce air conditioning refrigerant leakage over formulae, rounded to the nearest tenth economy test determined according to of a gram per mile: SAE J1711, Recommended Practice for the useful life of their passenger Measuring the Exhaust Emissions and automobiles and/or light trucks. Credits (i) Passenger automobiles:

Where: through 2016, and for 2017 and later result is less than zero HiLeakDis shall HiLeakDis means the high leak disincentive, model years is determined using the be set equal to zero and if the result is which is zero for model years 2012 following equation, except that if greater than 1.8 g/mi HiLeakDis shall be GWPREF is greater than 150 or if the set to 1.8 g/mi:

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MaxCredit is 12.6 (grams CO2-equivalent/ only electric compressors), the rate for otherwise determined by the mile) for air conditioning systems using the purpose of this formula shall be 8.3 Administrator; HFC–134a, and 13.8 (grams CO2- grams/year (4.1 grams/year for systems GWPHFC134a means the global warming equivalent/mile) for air conditioning using only electric compressors). potential of HFC–134a as indicated in systems using a refrigerant with a lower The constant 16.6 is the average passenger paragraph (b)(5) of this section or as global warming potential. automobile impact of air conditioning otherwise determined by the Administrator. LeakScore means the annual refrigerant leakage in units of grams/year; leakage rate determined according to the MinScore is 8.3 grams/year, except that for GWPREF means the global warming potential provisions of § 86.166–12(a), except if systems using only electric compressors of the refrigerant as indicated in it is 4.1 grams/year. the calculated rate is less than 8.3 grams/ paragraph (b)(5) of this section or as year (4.1 grams/year for systems using (ii) Light trucks:

Where: through 2016, and for 2017 and later result is less than zero HiLeakDis shall HiLeakDis means the high leak disincentive, model years is determined using the be set equal to zero and if the result is which is zero for model years 2012 following equation, except that if greater than 2.1 g/mi HiLeakDis shall be GWPREF is greater than 150 or if the set to 2.1g/mi:

MaxCredit is 15.6 (grams CO2-equivalent/ Total Credits (megagrams) = (Leakage × Manufacturers may generate credits mile) for air conditioning systems using Production × VLM) ÷ 1,000,000 applicable to the CO2 fleet average HFC–134a, and 17.2 (grams CO2- Where: program described in § 86.1865–12 by equivalent/mile) for air conditioning implementing specific air conditioning systems using a refrigerant with a lower Leakage = the CO2-equivalent leakage credit global warming potential. value in grams per mile determined in system technologies designed to reduce Leakage means the annual refrigerant leakage paragraph (b)(2) of this section. air conditioning-related CO2 emissions rate determined according to the Production = The total number of passenger over the useful life of their passenger provisions of § 86.166–12(a), except if automobiles or light trucks, whichever is automobiles and/or light trucks. Credits the calculated rate is less than 10.4 applicable, produced with the air shall be calculated according to this conditioning system to which to the grams/year (5.2 grams/year for systems paragraph (c) for each air conditioning using only electric compressors), the rate leakage credit value from paragraph (b)(2) of this section applies. system that the manufacturer is using to for the purpose of this formula shall be VLM = vehicle lifetime miles, which for generate CO2 credits. Manufacturers 10.4 grams/year (5.2 grams/year for passenger automobiles shall be 195,264 may also generate early air conditioning systems using only electric compressors). and for light trucks shall be 225,865. The constant 20.7 is the average light truck efficiency credits under this paragraph impact of air conditioning leakage in (4) The results of paragraph (b)(3) of (c) for the 2009 through 2011 model units of grams/year. this section, rounded to the nearest years according to the provisions of GWPREF means the global warming potential whole number, shall be included in the § 86.1867–12(b). For model years 2012 of the refrigerant as indicated in manufacturer’s credit/debit totals and 2013 the manufacturer may paragraph (b)(5) of this section or as calculated in § 86.1865–12(k)(5). determine air conditioning efficiency otherwise determined by the (5) The following values for credits using the requirements in Administrator. refrigerant global warming potential paragraphs (c)(1) through (4) of this GWPR134a means the global warming (GWP ), or alternative values as potential of HFC–134a as indicated in REF section. For model years 2014 and later paragraph (b)(5) of this section or as determined by the Administrator, shall the eligibility requirements specified in otherwise determined by the be used in the calculations of this either paragraph (c)(5) or (6) of this Administrator. paragraph (b). The Administrator will section must be met before an air MinScore is 10.4 grams/year, except that for determine values for refrigerants not conditioning system is allowed to systems using only electric compressors included in this paragraph (b)(5) upon generate credits. it is 5.2 grams/year. request by a manufacturer. (i) For HFC–134a, GWP = 1430; (1)(i) 2012 through 2016 model year REF air conditioning efficiency credits are (3) The total leakage reduction credits (ii) For HFC–152a, GWPREF = 124; generated by the air conditioning system (iii) For HFO–1234yf, GWPREF = 4; available for the following technologies shall be calculated separately for (iv) For CO2, GWPREF = 1. in the gram per mile amounts indicated passenger automobiles and light trucks (c) Credits for improving air in the following table: according to the following formula: conditioning system efficiency. BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C available for the following technologies for each vehicle category in the (i) 2017 and later model year air in the gram per mile amounts indicated following table: conditioning efficiency credits are BILLING CODE 4910–59–P

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BILLING CODE 4910–59–C Credit = the CO2 efficiency credit value in Conditioning Idle Test Procedure (2) Air conditioning efficiency credits grams per mile determined in paragraph specified in § 86.165–12 of this part. (c)(2) or (c)(5) of this section, whichever are determined on an air conditioning * * * * * system basis. For each air conditioning is applicable. Production = The total number of passenger (iii) For an air conditioning system to system that is eligible for a credit based automobiles or light trucks, whichever is on the use of one or more of the items be eligible to generate credits in the applicable, produced with the air 2014 through 2016 model years the listed in paragraph (c)(1) of this section, conditioning system to which to the the total credit value is the sum of the efficiency credit value from paragraph increased CO2 emissions as a result of gram per mile values listed in paragraph (c)(2) of this section applies. the operation of that air conditioning (c)(1) of this section for each item that VLM = vehicle lifetime miles, which for system determined according to the Idle applies to the air conditioning system. passenger automobiles shall be 195,264 Test Procedure in § 86.165–14 must be and for light trucks shall be 225,865. less than 21.3 grams per minute. In lieu (i) In the 2012 through 2016 model * * * * * of using 21.3 grams per minute, years the total credit value for an air (5) For the 2014 through 2016 model manufacturers may optionally use the conditioning system may not be greater years, manufacturers must validate air procedures in paragraph (c)(5)(iv) of this than 5.7 grams per mile. conditioning credits by using the Air section to determine an alternative limit (ii) In the 2017 and later model years Conditioning Idle Test Procedure value. the total credit value for an air according to the provisions of this * * * * * conditioning system may not be greater paragraph (c)(5). In lieu of using the Air than 5.0 grams per mile for any Conditioning Idle Test Procedure to (iv) Optional Air Conditioning Idle passenger automobile or 7.2 grams per determine eligibility to generate air Test limit value for 2014 through 2016 mile for any light truck. conditioning efficiency credits in the model years. For an air conditioning (3) The total efficiency credits 2014 through 2016 model years, the system to be eligible to generate credits generated by an air conditioning system manufacturer may choose the AC17 in the 2014 through 2016 model years, shall be calculated separately for reporting option specified in paragraph the increased CO2 emissions as a result passenger automobiles and light trucks (c)(7) of this section. of the operation of that air conditioning according to the following formula: (i) After the 2013 model year, for each system determined according to the Idle air conditioning system selected by the Test Procedure in § 86.165–12 must be × Total Credits (Megagrams) = (Credit manufacturer to generate air less than the value calculated by the × ÷ Production VLM) 1,000,000 conditioning efficiency credits, the following equation and rounded to the Where: manufacturer shall perform the Air nearest tenth of gram per minute:

(A) If the increased CO2 emissions (B) If the increased CO2 emissions determined from the Idle Test Procedure determined from the Idle Test Procedure in § 86.165–12 is less than or equal to in § 86.165–12 is greater than the Idle Where: the Idle Test Threshold, the total credit Test Threshold and less than the Idle value for use in paragraph (c)(3) of this Test Threshold plus 6.4, the total credit TCV = The total credit value for use in paragraph (c)(3) of this section; section shall be as determined in value for use in paragraph (c)(3) of this TCV1 = The total credit value determined paragraph (c)(2) of this section. section shall be as determined according according to paragraph (c)(2) of this to the following formula: section; and

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ITP = the increased CO2 emissions (iii) For the first model year for which (ii) The manufacturer shall also report determined from the Idle Test Procedure an air conditioning system is expected the following information for each in § 86.165–14. to generate credits, the manufacturer vehicle tested: The vehicle class, model ITT = the Idle Test Threshold from paragraph must select for testing the highest- type, curb weight, engine displacement, (c)(5)(iii) or (c)(5)(iv) of this section, selling subconfiguration within each whichever is applicable. transmission class and configuration, vehicle platform that uses the air interior volume, climate control system (6) For the 2017 and later model conditioning system. Credits may type and characteristics, refrigerant years, manufacturers must validate air continue to be generated by the air used, compressor type, and evaporator/ conditioning credits by using the AC17 conditioning system installed in a condenser characteristics. Test Procedure according to the vehicle platform provided that: (d) Off-cycle credits. Manufacturers provisions of this paragraph (c)(6). (A) The air conditioning system may generate credits for CO2-reducing (i) For each air conditioning system components and/or control strategies do technologies where the CO2 reduction selected by the manufacturer to generate not change in any way that could be benefit of the technology is not air conditioning efficiency credits, the expected to cause a change in its adequately captured on the Federal Test manufacturer shall perform the AC17 efficiency; Procedure and/or the Highway Fuel Air Conditioning Efficiency Test (B) The vehicle platform does not Economy Test. These technologies must Procedure specified in § 86.167–14 of change in design such that the changes have a measurable, demonstrable, and could be expected to cause a change in this part, according to the requirements verifiable real-world CO2 reduction that of this paragraph (c)(6). the efficiency of the air conditioning occurs outside the conditions of the (ii) Each air conditioning system shall system; and Federal Test Procedure and the (C) The manufacturer continues to test be tested as follows: Highway Fuel Economy Test. These at least one sub-configuration within (A) Perform the AC17 test on a vehicle optional credits are referred to as ‘‘off- each platform using the air conditioning cycle’’ credits. Off-cycle technologies that incorporates the air conditioning system, in each model year, until all used to generate emission credits are system with the credit-generating sub-configurations within each platform considered emission-related technologies. have been tested. (B) Perform the AC17 test on a vehicle (iv) Each air conditioning system components subject to applicable which does not incorporate the credit- must be tested and must meet the requirements, and must be generating technologies. The tested testing criteria in order to be allowed to demonstrated to be effective for the full vehicle must be similar to the vehicle generate credits. Using good engineering useful life of the vehicle. Unless the tested under paragraph (c)(6)(ii)(A) of judgment, in the first model year for manufacturer demonstrates that the this section. which an air conditioning system is technology is not subject to in-use (C) Subtract the CO2 emissions expected to generate credits, the deterioration, the manufacturer must determined from testing under manufacturer must select for testing the account for the deterioration in their paragraph (c)(6)(ii)(A) of this section highest-selling subconfiguration within analysis. The manufacturer must use from the CO2 emissions determined each vehicle platform using the air one of the three options specified in this from testing under paragraph conditioning system. Credits may paragraph (d) to determine the CO2 gram (c)(6)(ii)(B) of this section and round to continue to be generated by an air per mile credit applicable to an off-cycle the nearest 0.1 grams/mile. If the result conditioning system in subsequent technology. Note that the option is less than or equal to zero, the air model years if the manufacturer provided in paragraph (d)(1) of this conditioning system is not eligible to continues to test at least one sub- section applies only to the 2017 and generate credits. If the result is greater configuration within each platform on later model years. The manufacturer than or equal to the total of the gram per an annual basis, as long as the air should notify EPA in their pre-model mile credits determined in paragraph conditioning system and vehicle year report of their intention to generate (c)(2) of this section, then the air platform do not change substantially. any credits under this paragraph (d). conditioning system is eligible to (7) AC17 reporting requirements for (1) Credit available for certain off- generate the maximum allowable value model years 2014 through 2016. As an cycle technologies. The provisions of determined in paragraph (c)(2) of this alternative to the use of the Air this paragraph (d)(1) are applicable only section. If the result is greater than zero Conditioning Idle Test to demonstrate to 2017 and later model year vehicles. but less than the total of the gram per eligibility to generate air conditioning (i) The manufacturer may generate a mile credits determined in paragraph efficiency credits, manufacturers may CO2 gram/mile credit for certain (c)(2) of this section, then the air use the provisions of this paragraph technologies as specified in the conditioning system is eligible to (c)(7). following table, provided that each generate credits in the amount (i) The manufacturer shall perform the technology is applied to the minimum determined by subtracting the CO2 AC17 test specified in § 86.167–14 of percentage of the manufacturer’s total emissions determined from testing this part on each vehicle platform for U.S. production of passenger under paragraph (c)(6)(ii)(A) of this which the manufacturer intends to automobiles and light trucks specified section from the CO2 emissions accrue air conditioning efficiency in the table in each model year for determined from testing under credits and report the results separately which credit is claimed. Technology paragraph (c)(6)(ii)(B) of this section and for all four phases of the test to the definitions are in paragraph (d)(1)(iv) of rounding to the nearest 0.1 grams/mile. Environmental Protection Agency. this section.

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(A) Credits may also be accrued for the amounts shown in the following thermal control technologies as defined table: in paragraph (d)(1)(iv) of this section in

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(B) The maximum credit allowed for G = the total glass area of the vehicle, in g/mi credit values from the table in thermal control technologies is limited square meters and rounded to the nearest paragraph (d)(1)(i) of this section does to 3.0 g/mi for passenger automobiles tenth; not exceed 10 g/mi for any passenger and to 4.3 g/mi for light trucks. The Ti = the estimated temperature reduction for automobile or light truck in a maximum credit allowed for glass or the glass area of window i, determined using the following formula: manufacturer’s fleet, then the total off- glazing is limited to 3.0 g/mi for cycle credits may be calculated passenger automobiles and to 4.3 g/mi according to paragraph (d)(5) of this for light trucks. Where: section. If the total of the CO2 g/mi (C) Glass or glazing credits are credit values from the table in paragraph calculated using the following equation: Ttsnew = the total solar transmittance of the glass, measured according to ISO 13837, (d)(1)(i) of this section exceeds 10 g/mi ‘‘Safety glazing materials—Method for for any passenger automobile or light determination of solar transmittance’’ truck in a manufacturer’s fleet, then the (incorporated by reference; see § 86.1). gram per mile decrease for the Ttsbase = 62 for the windshield, side-front, combined passenger automobile and side-rear, rear-quarter, and backlite Where: locations, and 40 for rooflite locations. light truck fleet must be determined Credit = the total glass or glazing credits, in according to paragraph (d)(1)(ii)(A) of grams per mile, for a vehicle, which may (ii) The maximum allowable decrease this section to determine whether the 10 not exceed 3.0 g/mi for passenger in the manufacturer’s combined g/mi limitation has been exceeded. automobiles or 4.3 g/mi for light trucks; passenger automobile and light truck Z = 0.3 for passenger automobiles and 0.4 for (A) Determine the gram per mile light trucks; fleet average CO2 emissions attributable decrease for the combined passenger to use of the default credit values in Gi = the measured glass area of window i, in automobile and light truck fleet using paragraph (d)(1)(i) of this section is 10 square meters and rounded to the nearest the following formula: tenth; grams per mile. If the total of the CO2

Where: ProdC = The number of passenger greater than 10 grams per mile, the total Credits = The total of passenger automobile automobiles produced by the credits, in Megagrams, that may be and light truck credits, in Megagrams, manufacturer and delivered for sale in accrued by a manufacturer using the the U.S. determined according to paragraph (d)(5) default gram per mile values in ProdT = The number of light trucks produced of this section and limited to those by the manufacturer and delivered for paragraph (d)(1)(i) of this section shall credits accrued by using the default gram sale in the U.S. be determined using the following per mile values in paragraph (d)(1)(i) of (B) If the value determined in formula: this section. paragraph (d)(1)(ii)(A) of this section is

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Where: (C) High efficiency exterior lighting that is used to meet the electrical ProdC = The number of passenger means a lighting technology that, when requirements of the vehicle. Such a automobiles produced by the installed on the vehicle, is expected to system must have a capacity of at least manufacturer and delivered for sale in reduce the total electrical demand of the 100W to achieve 0.7 g/mi of credit. the U.S. exterior lighting system by a minimum Every additional 100W of capacity will ProdT = The number of light trucks produced of 60 watts when compared to result in an additional 0.7 g/mi of credit. by the manufacturer and delivered for (I) Active seat ventilation means a sale in the U.S. conventional lighting systems. To be eligible for this credit the high device which draws air from the seating (C) If the value determined in efficiency lighting must be installed in surface which is in contact with the paragraph (d)(1)(ii)(A) of this section is the following components: Parking/ occupant and exhausts it to a location not greater than 10 grams per mile, then position, front and rear turn signals, away from the seat. the credits that may be accrued by a front and rear side markers, stop/brake (J) Solar reflective paint means a manufacturer using the default gram per lights (including the center-mounted vehicle paint or surface coating which mile values in paragraph (d)(1)(i) of this location), taillights, backup/reverse reflects at least 65 percent of the section do not exceed the allowable lights, and license plate lighting. impinging infrared solar energy, as limit, and total credits may be (D) Engine start-stop means a determined using ASTM standards determined for each category of vehicles technology which enables a vehicle to E903, E1918–06, or C1549–09. These according to paragraph (d)(5) of this automatically turn off the engine when ASTM standards are incorporated by section. the vehicle comes to a rest and restart reference; see § 86.1. (D) If the value determined in the engine when the driver applies (K) Passive cabin ventilation means paragraph (d)(1)(ii)(A) of this section is pressure to the accelerator or releases ducts or devices which utilize greater than 10 grams per mile, then the the brake. Off-cycle engine start-stop convective airflow to move heated air combined passenger automobile and credits will only be allowed if the from the cabin interior to the exterior of light truck credits, in Megagrams, that Administrator has made a determination the vehicle. may be accrued using the calculations under the testing and calculation (L) Active cabin ventilation means in paragraph (d)(5) of this section must provisions in 40 CFR part 600 that devices which mechanically move not exceed the value determined in engine start-stop is the predominant heated air from the cabin interior to the paragraph (d)(1)(ii)(B) of this section. operating mode. exterior of the vehicle. This limitation should generally be (E) Solar roof panels means the (2) Technology demonstration using done by reducing the amount of credits installation of solar panels on an electric EPA 5-cycle methodology. To attributable to the vehicle category that vehicle or a plug-in hybrid electric demonstrate an off-cycle technology and caused the limit to be exceeded such vehicle such that the solar energy is to determine a CO2 credit using the EPA that the total value does not exceed the used to provide energy to the electric 5-cycle methodology, the manufacturer value determined in paragraph drive system of the vehicle by charging shall determine the off-cycle city/ (d)(1)(ii)(B) of this section. the battery or directly providing power highway combined carbon-related (iii) In lieu of using the default gram to the electric motor with the equivalent exhaust emissions benefit by using the per mile values specified in paragraph of at least 50 Watts of rated electricity EPA 5-cycle methodology described in (d)(1)(i) of this section for specific output. 40 CFR Part 600. Testing shall be technologies, a manufacturer may (F) Active transmission warmup performed on a representative vehicle, determine an alternative value for any of means a system that uses waste heat selected using good engineering the specified technologies. An from the exhaust system to warm the judgment, for each model type for alternative value must be determined transmission fluid to an operating which the credit is being demonstrated. using one of the methods specified in temperature range quickly using a heat The emission benefit of a technology is paragraph (d)(2) or (3) of this section. exchanger in the exhaust system, determined by testing both with and (iv) Definitions for the purposes of increasing the overall transmission without the off-cycle technology this paragraph (d)(1) are as follows: efficiency by reducing parasitic losses operating. Multiple off-cycle (A) Active aerodynamic associated with the transmission fluid, technologies may be demonstrated on a improvements means technologies that such as losses related to friction and test vehicle. The manufacturer shall are activated only at certain speeds to fluid viscosity. conduct the following steps and submit improve aerodynamic efficiency by a (G) Active engine warmup means a all test data to the EPA. minimum of three percent, while system using waste heat from the (i) Testing without the off-cycle preserving other vehicle attributes or exhaust system to warm up targeted technology installed and/or operating. functions. parts of the engine so that it reduces Determine carbon-related exhaust (B) Electric heater circulation pump engine friction losses and enables the emissions over the FTP, the HFET, the means a pump system installed in a closed-loop fuel control more quickly. It US06, the SC03, and the cold stop-start equipped vehicle or in a would allow a faster transition from temperature FTP test procedures hybrid electric vehicle or plug-in hybrid cold operation to warm operation, according to the test procedure electric vehicle that continues to decreasing CO2 emissions, and provisions specified in 40 CFR part 600 circulate hot coolant through the heater increasing fuel economy. subpart B and using the calculation core when the engine is stopped during (H) Engine heat recovery means a procedures specified in § 600.113–08 of a stop-start event. This system must be system that captures heat that would this chapter. Run each of these tests a calibrated to keep the engine off for 1 otherwise be lost through the exhaust minimum of three times without the off- minute or more when the external system or through the radiator and cycle technology installed and operating ambient temperature is 30 deg F. converting that heat to electrical energy and average the per phase (bag) results

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for each test procedure. Calculate the 5- calculated in paragraph (d)(2)(iii) of this off-cycle credit calculation cycle weighted city/highway combined section is less than three percent of the methodology. The notice will include carbon-related exhaust emissions from value determined in paragraph (d)(2)(i) details regarding the proposed the averaged per phase results, where of this section, then the manufacturer methodology, but will not include any the 5-cycle city value is weighted 55% must verify the emission reduction Confidential Business Information. The and the 5-cycle highway value is potential of the off-cycle technology or notice will include instructions on how weighted 45%. The resulting combined technologies using the EPA Vehicle to comment on the methodology. The city/highway value is the baseline 5- Simulation Tool (incorporated by Administrator will take public cycle carbon-related exhaust emission reference; see § 86.1), and if the results comments into consideration in the value for the vehicle. support a credit value that is less than final determination, and will notify the (ii) Testing with the off-cycle three percent of the value determined in public of the final determination. technology installed and/or operating. paragraph (d)(2)(i) of this section then Credits may not be accrued using an Determine carbon-related exhaust the manufacturer may use the off-cycle approved methodology until the first emissions over the US06, the SC03, and benefit of the technology or technologies model year for which the Administrator the cold temperature FTP test calculated as in paragraph (d)(2)(iii) of has issued a final approval. procedures according to the test this section using all the tests conducted (4) Review and approval process for procedure provisions specified in 40 under paragraph (d) of this section, off-cycle credits. (i) Initial steps CFR part 600 subpart B and using the rounded to the nearest tenth of a gram required. (A) A manufacturer requesting calculation procedures specified in per mile, to determine credits under off-cycle credits under the provisions of § 600.113–08 of this chapter. Run each paragraph (d)(4) of this section. paragraph (d)(2) of this section must of these tests a minimum of three times (3) Technology demonstration using conduct the testing and/or simulation with the off-cycle technology installed alternative EPA-approved methodology. described in that paragraph. and operating and average the per phase (i) This option may be used only with (B) A manufacturer requesting off- (bag) results for each test procedure. EPA approval, and the manufacturer cycle credits under the provisions of Calculate the 5-cycle weighted city/ must be able to justify to the paragraph (d)(3) of this section must highway combined carbon-related Administrator why the 5-cycle option develop a methodology for exhaust emissions from the averaged per described in paragraph (d)(2) of this demonstrating and determining the phase results, where the 5-cycle city section insufficiently characterizes the benefit of the off-cycle technology, and value is weighted 55% and the 5-cycle effectiveness of the off-cycle technology. carry out any necessary testing and highway value is weighted 45%. Use the In cases where the EPA 5-cycle analysis required to support that averaged per phase results for the FTP methodology described in paragraph methodology. (d)(2) of this section cannot adequately and HFET determined in paragraph (C) A manufacturer requesting off- (d)(2)(i) of this section for operation measure the emission reduction cycle credits under paragraph (d) of this without the off-cycle technology in this attributable to an innovative off-cycle section must conduct testing and/or calculation. The resulting combined technology, the manufacturer may prepare engineering analyses that city/highway value is the 5-cycle develop an alternative approach. Prior demonstrate the in-use durability of the carbon-related exhaust emission value to a model year in which a manufacturer technology for the full useful life of the showing the off-cycle benefit of the intends to seek these credits, the vehicle. technology but excluding any benefit of manufacturer must submit a detailed (ii) Data and information the technology on the FTP and HFET. analytical plan to EPA. The requirements. The manufacturer seeking (iii) Subtract the combined city/ manufacturer may seek EPA input on off-cycle credits must submit an highway value determined in paragraph the proposed methodology prior to application for off-cycle credits (d)(2)(i) of this section from the value conducting testing or analytical work, determined under paragraphs (d)(2) and determined in paragraph (d)(2)(ii) of this and EPA will provide input on the (d)(3) of this section. The application section. The result is the off-cycle manufacturer’s analytical plan. The must contain the following: benefit of the technology or technologies alternative demonstration program must (A) A detailed description of the off- being evaluated. If this benefit is greater be approved in advance by the cycle technology and how it functions than or equal to three percent of the Administrator and should: value determined in paragraph (d)(2)(i) (A) Use modeling, on-road testing, on- to reduce CO2 emissions under of this section then the manufacturer road data collection, or other approved conditions not represented on the FTP may use this value, rounded to the analytical or engineering methods; and HFET. nearest tenth of a gram per mile, to (B) Be robust, verifiable, and capable (B) A list of the vehicle model(s) determine credits under paragraph of demonstrating the real-world which will be equipped with the (d)(4) of this section. emissions benefit with strong statistical technology. (iv) If the value calculated in significance; (C) A detailed description of the test paragraph (d)(2)(iii) of this section is (C) Result in a demonstration of vehicles selected and an engineering less than three percent of the value baseline and controlled emissions over analysis that supports the selection of determined in paragraph (d)(2)(i) of this a wide range of driving conditions and those vehicles for testing. section, then the manufacturer must number of vehicles such that issues of (D) All testing and/or simulation data repeat the testing required under data uncertainty are minimized; required under paragraph (d)(2) or (d)(3) paragraphs (d)(2)(i) and (ii) of this (D) Result in data on a model type of this section, as applicable, plus any section, except instead of running each basis unless the manufacturer other data the manufacturer has test three times they shall run each test demonstrates that another basis is considered in the analysis. two additional times. The off-cycle appropriate and adequate. (E) For credits under paragraph (d)(3) benefit of the technology or technologies (ii) Notice and opportunity for public of this section, a complete description of being evaluated shall be calculated as in comment. The Administrator will the methodology used to estimate the paragraph (d)(2)(iii) of this section using publish a notice of availability in the off-cycle benefit of the technology and all the tests conducted under paragraph Federal Register notifying the public of all supporting data, including vehicle (d) of this section. If the value a manufacturer’s proposed alternative testing and in-use activity data.

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(F) An estimate of the off-cycle benefit Megagrams of CO2 (rounded to the centerline, and the length at the floor is by vehicle model and the fleetwide nearest whole number) shall be defined as the longitudinal distance benefit based on projected sales of calculated separately for passenger from the inside front of the pickup bed vehicle models equipped with the automobiles and light trucks according to the inside of the closed endgate as technology. to the following formula: measured at the cargo floor surface (G) An engineering analysis and/or Total Credits (Megagrams) = (Credit × along vehicle centerline. component durability testing data or Production × VLM) ÷ 1,000,000 (C) A minimum towing capability of whole vehicle testing data 5,000 pounds, where minimum towing demonstrating the in-use durability of Where: Credit = the credit value in grams per mile capability is determined by subtracting the off-cycle technology components. the gross vehicle weight rating from the (iii) EPA review of the off-cycle credit determined in paragraph (d)(1), (d)(2) or (d)(3) of this section. gross combined weight rating, or a application. Upon receipt of an Production = The total number of passenger minimum payload capability of 1,700 application from a manufacturer, EPA automobiles or light trucks, whichever is pounds, where minimum payload will do the following: applicable, produced with the off-cycle capability is determined by subtracting (A) Review the application for technology to which to the credit value completeness and notify the determined in paragraph (d)(1), (d)(2), or the curb weight from the gross vehicle manufacturer within 30 days if (d)(3) of this section applies. weight rating. additional information is required. VLM = vehicle lifetime miles, which for (ii) Mild hybrid gasoline-electric (B) Review the data and information passenger automobiles shall be 195,264 vehicle means a vehicle that has start/ provided in the application to and for light trucks shall be 225,865. stop capability and regenerative braking determine if the application supports (e) Credits for certain full-size pickup capability, where the recaptured braking the level of credits estimated by the trucks. Full-size pickup trucks may be energy over the Federal Test Procedure manufacturer. eligible for additional credits based on is at least 15 percent but less than 75 (C) For credits under paragraph (d)(3) the implementation of hybrid percent of the total braking energy, of this section, EPA will make the technologies or on exhaust emission where the percent of recaptured braking application available to the public for performance, as described in this energy is measured and calculated comment, as described in paragraph paragraph (e). Credits may be generated according to § 600.116–12(c). (d)(3)(ii) of this section, within 60 days under either paragraph (e)(2) or (e)(3) of (iii) Strong hybrid gasoline-electric of receiving a complete application. The this section for a qualifying pickup vehicle means a vehicle that has start/ public review period will be specified truck, but not both. stop capability and regenerative braking as 30 days, during which time the (1) The following definitions apply for capability, where the recaptured braking public may submit comments. the purposes of this paragraph (e). energy over the Federal Test Procedure Manufacturers may submit a written (i) Full size pickup truck means a light is at least 75 percent of the total braking rebuttal of comments for EPA truck which has a passenger energy, where the percent of recaptured consideration or may revise their compartment and an open cargo box braking energy is measured and application in response to comments. A and which meets the following calculated according to § 600.116–12(c). revised application should be submitted specifications: (A) A minimum cargo bed width (2) Credits for implementation of after the end of the public review gasoline-electric hybrid technology. Full period, and EPA will review the between the wheelhouses of 48 inches, measured as the minimum lateral size pickup trucks that implement application as if it was a new hybrid gasoline-electric technologies application submitted under this distance between the limiting interferences (pass-through) of the may be eligible for an additional credit paragraph (d)(4)(iii). under this paragraph (e)(2). Pickup (iv) EPA decision. (A) For credits wheelhouses. The measurement shall trucks using the credits under this under paragraph (d)(2) of this section, exclude the transitional arc, local paragraph (e)(2) may not use the credits EPA will notify the manufacturer of its protrusions, and depressions or pockets, described in paragraph (e)(3) of this decision within 60 days of receiving a if present. An open cargo box means a section. complete application. vehicle where the cargo box does not (B) For credits under paragraph (d)(3) have a permanent roof. Vehicles sold (i) Full size pickup trucks that are of this section, EPA will notify the with detachable covers are considered mild hybrid gasoline-electric vehicles manufacturer of its decision after ‘‘open’’ for the purposes of these and that are produced in the 2017 reviewing and evaluating the public criteria. through 2021 model years are eligible comments. EPA will make the decision (B) A minimum open cargo box length for a credit of 10 grams/mile. To receive and rationale available to the public. of 60 inches, where the length is defined this credit, the manufacturer must (C) EPA will notify the manufacturer by the lesser of the pickup bed length produce a quantity of mild hybrid full in writing of its decision to approve or at the top of the body and the pickup size pickup trucks such that the deny the application, and will provide bed length at the floor, where the length proportion of production of such the reasons for the decision. EPA will at the top of the body is defined as the vehicles, when compared to the make the decision and rationale longitudinal distance from the inside manufacturer’s total production of full available to the public. front of the pickup bed to the inside of size pickup trucks, is not less than the (5) Calculation of total off-cycle the closed endgate as measured at the amount specified in the table below for credits. Total off-cycle credits in cargo floor surface along vehicle each model year.

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(ii) Full size pickup trucks that are emission values may include any qualifies for this credit in a model year strong hybrid gasoline-electric vehicles applicable air conditioning leakage and/ may claim this credit for subsequent and that are produced in the 2017 or efficiency credits as determined in model years through the 2021 model through 2025 model years are eligible paragraphs (b) and (c) of this section. year if the carbon-related exhaust for a credit of 20 grams/mile. To receive Pickup trucks using the credits under emissions of that pickup truck do not this credit, the manufacturer must this paragraph (e)(3) may not use the increase relative to the emissions in the produce a quantity of strong hybrid full credits described in paragraph (e)(2) of model year in which the pickup truck size pickup trucks such that the this section or the production qualified for the credit. To qualify for proportion of production of such multipliers described in paragraph (a)(2) this credit in each model year, the vehicles, when compared to the of this section. manufacturer must produce a quantity manufacturer’s total production of full (i) Full size pickup trucks that achieve of full size pickup trucks that meet the size pickup trucks, is not less than 10 carbon-related exhaust emissions less percent for each model year. than or equal to the applicable target initial emission eligibility requirements (3) Credits for emission reduction value determined in 86.1818–12(c)(3) of this paragraph (e)(3)(i) such that the performance. Full size pickup trucks multiplied by 0.85 (rounded to the proportion of production of such that achieve carbon-related exhaust nearest gram/mile) and greater than the vehicles, when compared to the emission values below the applicable applicable target value determined in manufacturer’s total production of full target value determined in 86.1818– 86.1818–12(c)(3) multiplied by 0.80 size pickup trucks, is not less than the 12(c)(3) may be eligible for an additional (rounded to the nearest gram/mile) in a amount specified in the table below for credit. For the purposes of this model year are eligible for a credit of 10 each model year. paragraph (e)(3), carbon-related exhaust grams/mile. A pickup truck that

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(ii) Full size pickup trucks that Total Credits (Megagrams) = ([(10 × PART 600—FUEL ECONOMY AND achieve carbon-related exhaust Production10) + (20 × Production20)] GREENHOUSE GAS EXHAUST emissions less than or equal to the × 225,865) ÷ 1,000,000 EMISSIONS OF MOTOR VEHICLES applicable target value determined in Where: 18. The authority citation for part 600 86.1818–12(c)(3) multiplied by 0.80 Production10 = The total number of full size continues to read as follows: (rounded to the nearest gram/mile) in a pickup trucks produced with a credit model year are eligible for a credit of 20 value of 10 grams per mile from Authority: 49 U.S.C. 32901—23919q, Pub. grams/mile. A pickup truck that paragraphs (e)(2) and (e)(3). L. 109–58. Production = The total number of full size qualifies for this credit in a model year 20 Subpart B—[Amended] may claim this credit for a maximum of pickup trucks produced with a credit value of 20 grams per mile from five subsequent model years if the 19. Section 600.002 is amended by paragraphs (e)(2) and (e)(3). carbon-related exhaust emissions of that revising the definitions of ‘‘combined pickup truck do not increase relative to 17. Section 86.1867–12 is amended by fuel economy’’ and ‘‘fuel economy’’ to the emissions in the model year in revising paragraph (a)(2)(i) to read as read as follows: which the pickup truck first qualified follows: § 600.002 Definitions. for the credit. This credit may not be * * * * * claimed in any model year after 2025. § 86.1867–12 Optional early CO2 credit programs. Combined fuel economy means: To qualify for this credit, the (1) The fuel economy value manufacturer must produce a quantity * * * * * determined for a vehicle (or vehicles) by of full size pickup trucks that meet the (a) * * * harmonically averaging the city and emission requirements of this paragraph (2) * * * highway fuel economy values, weighted (e)(3)(i) such that the proportion of 0.55 and 0.45, respectively. production of such vehicles, when (i) Credits under this pathway shall be (2) For electric vehicles, for the compared to the manufacturer’s total calculated according to the provisions of purpose of calculating average fuel paragraph (a)(1) of this section, except production of full size pickup trucks, is economy pursuant to the provisions of credits may only be generated by not less than 10 percent in each model part 600, subpart F, the term means the vehicles sold in a model year in year. A pickup truck that qualifies for equivalent petroleum-based fuel California and in states with a section this credit in a model year and is subject economy value as determined by the 177 program in effect in that model calculation procedure promulgated by to a major redesign in a subsequent year. For the purposes of this section, model year such that it qualifies for the the Secretary of Energy. For the purpose ‘‘section 177 program’’ means State of labeling pursuant to the provisions of credit in the model year of the redesign regulations or other laws that apply to may be allowed to qualify for an part 600, subpart D, the term means the vehicle emissions from any of the fuel economy value as determined by additional five years (not to go beyond following categories of motor vehicles: the 2025 model year) with the approval the procedures specified in § 600.116– Passenger automobiles, light-duty trucks 12. of the Administrator. up through 6,000 pounds GVWR, and * * * * * (4) Calculation of total full size medium-duty vehicles from 6,001 to Fuel economy means: pickup truck credits. Total credits in 14,000 pounds GVWR, as these (1) The average number of miles Megagrams of CO2 (rounded to the categories of motor vehicles are defined traveled by an automobile or group of nearest whole number) shall be in the California Code of Regulations, automobiles per volume of fuel calculated for qualifying full size pickup Title 13, Division 3, Chapter 1, Article consumed as calculated in this part; or trucks according to the following 1, Section 1900. (2) For the purpose of calculating formula: * * * * * average fuel economy pursuant to the

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provisions of part 600, subpart F, fuel not required to be adjusted by a HC = Grams/mile HC as obtained in economy for electrically powered deterioration factor. paragraph (g)(2) of this section. automobiles means the equivalent * * * * * CO = Grams/mile CO as obtained in petroleum-based fuel economy as (j)(1) For methanol-fueled paragraph (g)(2) of this section. determined by the Secretary of Energy CO2 = Grams/mile CO2 as obtained in automobiles and automobiles designed paragraph (g)(2) of this section. in accordance with the provisions of 10 to operate on mixtures of gasoline and CH3OH = Grams/mile CH3OH (methanol) as CFR part 474. For the purpose of methanol, the fuel economy in miles per obtained in paragraph (g)(2) of this labeling pursuant to the provisions of gallon of methanol is to be calculated section. part 600, subpart D, the term means the using the following equation: HCHO = Grams/mile HCHO (formaldehyde) fuel economy value as determined by mpg = (CWF × SG × 3781.8)/((CWFexHC as obtained in paragraph (g)(2) of this the procedures specified in § 600.116– × HC) + (0.429 × CO) + (0.273 × section. 12. CO ) + (0.375 × CH OH) + (0.400 × 2 3 (ii) For manufacturers complying with * * * * * HCHO)) the fleet averaging option for N2O and 20. Section 600.111–08 is amended by Where CH4 as allowed under § 86.1818 of this revising the introductory text to read as CWF = Carbon weight fraction of the fuel as follows: chapter, the carbon-related exhaust determined in paragraph (f)(2)(ii) of this emissions in grams per mile for 2012 section and rounded according to § 600.111–08 Test procedures. paragraph (g)(3) of this section. and later model year methanol-fueled This section provides test procedures SG = Specific gravity of the fuel as automobiles and automobiles designed for the FTP, highway, US06, SC03, and determined in paragraph (f)(2)(i) of this to operate on mixtures of gasoline and the cold temperature FTP tests. Testing section and rounded according to methanol while operating on methanol shall be performed according to test paragraph (g)(3) of this section. is to be calculated using the following procedures and other requirements CWFexHC = Carbon weight fraction of exhaust equation and rounded to the nearest 1 hydrocarbons = CWF as determined in gram per mile: contained in this part 600 and in part 86 paragraph (f)(2)(ii) of this section and of this chapter, including the provisions rounded according to paragraph (g)(3) of CREE = [(CWFexHC/0.273) × NMHC] + of part 86, subparts B, C, and S. Test this section (for M100 fuel, CWFexHC = (1.571 × CO) + (1.374 × CH3OH) + hybrid electric vehicles using the 0.866). (1.466 × HCHO) + CO2 + (298 × procedures of SAE J1711 (incorporated HC = Grams/mile HC as obtained in N2O) + (25 × CH4) by reference in § 600.011). For FTP paragraph (g)(1) of this section. testing, this generally involves emission CO = Grams/mile CO as obtained in Where: sampling over four phases (bags) of the paragraph (g)(1) of this section. CREE means the carbon-related exhaust CO2 = Grams/mile CO2 as obtained in emission value as defined in § 600.002. UDDS (cold-start, transient, warm-start, paragraph (g)(1) of this section. transient); however, these four phases CWFexHC = Carbon weight fraction of exhaust CH3OH = Grams/mile CH3OH (methanol) as hydrocarbons = CWF as determined in may be combined into two phases obtained in paragraph (g)(1) of this paragraph (f)(2)(ii) of this section and section. (phases 1 + 2 and phases 3 + 4). Test rounded according to paragraph (g)(3) of plug-in hybrid electric vehicles using HCHO = Grams/mile HCHO (formaldehyde) this section (for M100 fuel, CWFexHC = the procedures of SAE J1711 as obtained in paragraph (g)(1) of this section. 0.866). (incorporated by reference in § 600.011) NMHC = Grams/mile HC as obtained in as described in § 600.116–12. Test (2)(i) For 2012 and later model year paragraph (g)(2) of this section. electric vehicles using the procedures of methanol-fueled automobiles and CO = Grams/mile CO as obtained in SAE J1634 (incorporated by reference in automobiles designed to operate on paragraph (g)(2) of this section. § 600.011) as described in § 600.116–12. mixtures of gasoline and methanol, the CO2 = Grams/mile CO2 as obtained in paragraph (g)(2) of this section. * * * * * carbon-related exhaust emissions in grams per mile while operating on CH3OH = Grams/mile CH3OH (methanol) as 21. Section 600.113–12 is amended by obtained in paragraph (g)(2) of this revising paragraphs (g)(2)(iv)(C) and (j) methanol is to be calculated using the following equation and rounded to the section. through (m) to read as follows: HCHO = Grams/mile HCHO (formaldehyde) nearest 1 gram per mile: as obtained in paragraph (g)(2) of this § 600.113–12 Fuel economy, CO2 × CREE = (CWFexHC/0.273 HC) + (1.571 section. emissions, and carbon-related exhaust × CO) + (1.374 × CH3OH) + (1.466 N O = Grams/mile N O as obtained in emission calculations for FTP, HFET, US06, 2 2 × HCHO) + CO paragraph (g)(2) of this section. SC03 and cold temperature FTP tests. 2 Where: CH4 = Grams/mile CH4 as obtained in * * * * * paragraph (g)(2) of this section. (g) * * * CREE means the carbon-related exhaust (2) * * * emission value as defined in § 600.002. (k)(1) For automobiles fueled with (iv) * * * CWFexHC = Carbon weight fraction of exhaust natural gas and automobiles designed to hydrocarbons = CWF as determined in (C) For the 2012 through 2016 model paragraph (f)(2)(ii) of this section and operate on gasoline and natural gas, the years only, manufacturers may use an rounded according to paragraph (g)(3) of fuel economy in miles per gallon of assigned value of 0.010 g/mi for N2O this section (for M100 fuel, CWFexHC = natural gas is to be calculated using the FTP and HFET test values. This value is 0.866). following equation:

Where: CWFHC/NG = carbon weight fraction based on according to paragraph (g)(3) of this

mpge = miles per gasoline gallon equivalent the hydrocarbon constituents in the section. of natural gas. natural gas fuel as obtained in paragraph DNG = density of the natural gas fuel [grams/ (f)(3) of this section and rounded ft3 at 68 °F (20 °C) and 760 mm Hg (101.3

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kPa)] pressure as obtained in paragraph CWFNMHC = carbon weight fraction of the CO2NG = grams of carbon dioxide in the (g)(3) of this section. non-methane HC constituents in the fuel natural gas fuel consumed per mile of CH4, NMHC, CO, and CO2 = weighted mass as determined from the speciated fuel travel. exhaust emissions [grams/mile] for composition per paragraph (f)(3) of this methane, non-methane HC, carbon × × section and rounded according to CO2NG = FCNG DNG WFCO2 monoxide, and carbon dioxide as obtained in paragraph (g)(2) of this paragraph (g)(3) of this section. Where: section.

= cubic feet of natural gas fuel consumed per CREE means the carbon-related exhaust C2H4O = Grams/mile C2H4O (acetaldehyde) mile emission value as defined in § 600.002. as obtained in paragraph (g)(1) of this Where: CH4 = Grams/mile CH4as obtained in section. paragraph (g)(2) of this section. CWFNG = the carbon weight fraction of the (2)(i) For 2012 and later model year NMHC = Grams/mile NMHC as obtained in natural gas fuel as calculated in ethanol-fueled automobiles and paragraph (f)(3) of this section. paragraph (g)(2) of this section. automobiles designed to operate on WFCO2 = weight fraction carbon dioxide of CO = Grams/mile CO as obtained in the natural gas fuel calculated using the paragraph (g)(2) of this section. mixtures of gasoline and ethanol, the mole fractions and molecular weights of CO2 = Grams/mile CO2 as obtained in carbon-related exhaust emissions in the natural gas fuel constituents per paragraph (g)(2) of this section. grams per mile while operating on ASTM D 1945 (incorporated by reference CWFNMHC = carbon weight fraction of the ethanol is to be calculated using the in § 600.011). non-methane HC constituents in the fuel following equation and rounded to the (2)(i) For automobiles fueled with as determined from the speciated fuel nearest 1 gram per mile: composition per paragraph (f)(3) of this natural gas and automobiles CREE = (CWFexHC/0.273 × HC) + (1.571 section and rounded according to × × designed to operate on gasoline and paragraph (f)(3) of this section. CO) + (1.374 CH3OH) + (1.466 × × natural gas, the carbon-related N2O = Grams/mile N2O as obtained in HCHO) + (1.911 C2H5OH) + exhaust emissions in grams per paragraph (g)(2) of this section. (1.998 × C2H4O) + CO2 mile while operating on natural gas (l)(1) For ethanol-fueled automobiles Where: is to be calculated for 2012 and later and automobiles designed to CREE means the carbon-related exhaust model year vehicles using the operate on mixtures of gasoline and emission value as defined in § 600.002. following equation and rounded to ethanol, the fuel economy in miles CWFexHC = Carbon weight fraction of exhaust the nearest 1 gram per mile: per gallon of ethanol is to be hydrocarbons = CWF as determined in CREE = 2.743 × CH4 + CWFNMHC/0.273 paragraph (f)(4) of this section and calculated using the following rounded according to paragraph (f)(3) of × NMHC + 1.571 × CO + CO2 equation: this section. Where: mpg = (CWF × SG × 3781.8)/((CWFexHC× HC = Grams/mile HC as obtained in CREE means the carbon-related exhaust HC) + (0.429 × CO) + (0.273 × CO2) paragraph (g)(2) of this section. emission value as defined in § 600.002. + (0.375 × CH3OH) + (0.400 × CO = Grams/mile CO as obtained in CH4 = Grams/mile CH4 as obtained in HCHO) + (0.521 × C H OH) + (0.545 paragraph (g)(2) of this section. paragraph (g)(2) of this section. 2 5 × C H O)) CO2 = Grams/mile CO2 as obtained in NMHC = Grams/mile NMHC as obtained in 2 4 paragraph (g)(2) of this section. paragraph (g)(2) of this section. Where: CH3OH = Grams/mile CH3OH (methanol) as CO = Grams/mile CO as obtained in CWF = Carbon weight fraction of the fuel as obtained in paragraph (g)(2) of this paragraph (g)(2) of this section. determined in paragraph (f)(4) of this section. CO2 = Grams/mile CO2 as obtained in section and rounded according to HCHO = Grams/mile HCHO (formaldehyde) paragraph (g)(2) of this section. paragraph (f)(3) of this section. as obtained in paragraph (g)(2) of this CWFNMHC = carbon weight fraction of the SG = Specific gravity of the fuel as section. non-methane HC constituents in the fuel determined in paragraph (f)(4) of this C2H5OH = Grams/mile C2H5OH (ethanol) as as determined from the speciated fuel section and rounded according to obtained in paragraph (g)(2) of this composition per paragraph (f)(3) of this paragraph (f)(3) of this section. section. section and rounded according to CWFexHC = Carbon weight fraction of exhaust C2H4O = Grams/mile C2H4O (acetaldehyde) paragraph (f)(3) of this section. hydrocarbons = CWF as determined in as obtained in paragraph (g)(2) of this (ii) For manufacturers complying with paragraph (f)(4) of this section and section. the fleet averaging option for N2O and rounded according to paragraph (f)(3) of (ii) For manufacturers complying with this section. CH4 as allowed under § 86.1818 of this the fleet averaging option for N2O and chapter, the carbon-related exhaust HC = Grams/mile HC as obtained in paragraph (g)(1) of this section. CH4 as allowed under § 86.1818 of this emissions in grams per mile for 2012 CO = Grams/mile CO as obtained in chapter, the carbon-related exhaust and later model year automobiles fueled paragraph (g)(1) of this section. emissions in grams per mile for 2012 with natural gas and automobiles CO2 = Grams/mile CO2 as obtained in and later model year ethanol-fueled designed to operate on gasoline and paragraph (g)(1) of this section. automobiles and automobiles designed natural gas while operating on natural CH3OH = Grams/mile CH3OH (methanol) as to operate on mixtures of gasoline and gas is to be calculated using the obtained in paragraph (g)(1) of this ethanol while operating on ethanol is to following equation and rounded to the section. be calculated using the following nearest 1 gram per mile: HCHO = Grams/mile HCHO (formaldehyde) equation and rounded to the nearest 1 as obtained in paragraph (g)(1) of this CREE = (25 × CH4) + [(CWFNMHC/0.273) gram per mile: × × section. × NMHC] + (1.571 CO) + CO2 + C H OH = Grams/mile C H OH (ethanol) as CREE = [(CWFexHC/0.273) NMHC] + × 2 5 2 5 (298 N2O) obtained in paragraph (g)(1) of this (1.571 × CO) + (1.374 × CH3OH) + Where: section. (1.466 × HCHO) + (1.911 × C2H5OH)

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+ (1.998 × C2H4O) + CO2 + (298 × CH4 = Grams/mile CH4 as obtained in operation that is derived from electricity N2O) + (25 × CH4) paragraph (g)(2) of this section. that is generated from sources that are Where: (m) Manufacturers shall determine not onboard the vehicle. For CREE means the carbon-related exhaust CO2 emissions and carbon-related manufacturers no longer eligible to use emission value as defined in § 600.002. exhaust emissions for electric vehicles, 0 grams per mile to represent electric CWFexHC = Carbon weight fraction of exhaust fuel cell vehicles, and plug-in hybrid operation, the provisions of this hydrocarbons = CWF as determined in electric vehicles according to the paragraph (m) shall be used to paragraph (f)(4) of this section and provisions of this paragraph (m). Subject determine the non-zero value for CREE rounded according to paragraph (f)(3) of to the limitations on the number of for purposes of meeting the greenhouse this section. vehicles produced and delivered for sale gas emission standards described in NMHC = Grams/mile HC as obtained in as described in § 86.1866 of this chapter, § 86.1818 of this chapter. paragraph (g)(2) of this section. the manufacturer may be allowed to use (1) For electric vehicles, but not CO = Grams/mile CO as obtained in a value of 0 grams/mile to represent the paragraph (g)(2) of this section. including fuel cell vehicles, the carbon- emissions of fuel cell vehicles and the CO2 = Grams/mile CO2 as obtained in related exhaust emissions in grams per paragraph (g)(2) of this section. proportion of electric operation of a mile is to be calculated using the CH3OH = Grams/mile CH3OH (methanol) as electric vehicles and plug-in hybrid following equation and rounded to the obtained in paragraph (g)(2) of this electric vehicles that is derived from nearest one gram per mile: section. electricity that is generated from sources HCHO = Grams/mile HCHO (formaldehyde) that are not onboard the vehicle, as CREE = CREEUP ¥ CREEGAS as obtained in paragraph (g)(2) of this described in paragraphs (m)(1) through Where: section. (3) of this section. For purposes of C2H5OH = Grams/mile C2H5OH (ethanol) as CREE means the carbon-related exhaust labeling under this part, the CO2 emission value as defined in § 600.002, obtained in paragraph (g)(2) of this emissions for electric vehicles shall be section. which may be set equal to zero for 0 grams per mile. Similarly, for C2H4O = Grams/mile C2H4O (acetaldehyde) eligible 2012 through 2025 model year as obtained in paragraph (g)(2) of this purposes of labeling under this part, the electric vehicles for a certain number of section. CO2 emissions for plug-in hybrid vehicles produced and delivered for sale N2O = Grams/mile N2O as obtained in electric vehicles shall be 0 grams per as described in § 86.1866–12(a) of this paragraph (g)(2) of this section. mile for the proportion of electric chapter.

Where: calculated using the method specified in (c) Determining the proportion of EC = The vehicle energy consumption in paragraph (m)(1) of this section, except recovered braking energy for hybrid watt-hours per mile, determined that CREEUP shall be determined electric vehicles. Hybrid electric according to procedures established by according to procedures established by vehicles tested under this part may the Administrator under § 600.116–12. the Administrator under § 600.111– GRIDLOSS = 0.93 (to account for grid determine the proportion of braking transmission losses). 08(f). As described in § 86.1866 of this energy recovered over the FTP relative AVGUSUP = 0.642 for the 2012 through 2016 chapter the value of CREE may be set to the total available braking energy model years, and 0.574 for 2017 and later equal to zero for a certain number of required over the FTP. This model years (the nationwide average 2012 through 2025 model year fuel cell determination is required for pickup electricity greenhouse gas emission rate vehicles. trucks accruing credits for at the powerplant, in grams per watt- * * * * * hour). implementation of hybrid technology TargetCO2 = The CO2Target Value 22. Section 600.116–12 is amended as under § 86. 1866–12(e)(2), and requires determined according to § 86.1818 of this follows: the measurement of electrical current chapter for passenger automobiles and light a. By revising the heading. (in amps) flowing into the hybrid trucks, respectively. b. By revising paragraph (a) system battery for the duration of the (2) For plug-in hybrid electric introductory text. test. c. By adding paragraph (c). vehicles the carbon-related exhaust (1) Calculate the theoretical maximum emissions in grams per mile is to be The revisions and additions read as amount of energy that could be calculated according to the provisions of follows: recovered by a hybrid electric vehicle § 600.116, except that the CREE for charge-depleting operation shall be the § 600.116–12 Special procedures related to over the FTP test cycle, where the test electric vehicles, hybrid electric vehicles, cycle time and velocity points are sum of the CREE associated with and plug-in hybrid electric vehicles. gasoline consumption and the net expressed at 10 Hz, and the velocity upstream CREE determined according to (a) Determine fuel economy values for (miles/hour) is expressed to the nearest paragraph (m)(1)(i) of this section, electric vehicles as specified in 0.01 miles/hour, as follows: rounded to the nearest one gram per §§ 600.210 and 600.311 using the (i) For each time point in the 10 Hz mile. procedures of SAE J1634 (incorporated test cycle (i.e., at each 0.1 seconds): (3) For 2012 and later model year fuel by reference in § 600.011), with the follo cell vehicles, the carbon-related exhaust wing clarifications and modifications: (A) Determine the road load power in emissions in grams per mile shall be * * * * * kilowatts using the following equation:

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Where: Vmph = velocity in miles/hour, expressed to the following equation. Positive values A, B, and C are the vehicle-specific the nearest 0.01 miles/hour. indicate acceleration and negative dynamometer road load coefficients in values indicate deceleration. lb-force, lb-force/mph, and lb-force/ (B) Determine the applied mph2, respectively; and deceleration power in kilowatts using

Where: V = velocity in miles/hour, rounded to the table, rounded to the nearest 0.01 miles/ ETW = the vehicle Emission Test Weight nearest 0.01 miles/hour; hour. (lbs); Vt∂1 = the velocity in miles/hour at the next (C) Determine braking power in time point in the 10 Hz speed vs. time kilowatts using the following equation.

Where: (ii) Calculate the change in the state (A) If battery charging is represented Paccel = the value determined in paragraph of charge (current in Watt hours) at each by positive current, then the total energy (c)(1)(i)(B) of this section; second of the test using the following recovered by the hybrid battery system, Proadload = the value determined in paragraph equation: in kilowatt hours, is the sum of the (c)(1)(i)(A) of this section; and P = 0 if P is greater than or equal to positive current values for each second brake accel of the test determined in paragraph Proadload. Where: (c)(3)(ii) of this section, divided by (ii) [Reserved] dSOC = the change in the state of charge of 1,000 and rounded to the nearest 0.01 (2) The total maximum braking energy the hybrid battery system, in Watt hours; kilowatt hours. (B) If battery charging is represented (Ebrake) that could theoretically be AHt = the state of charge of the battery recovered is equal to the absolute value system, in Amp hours, at time t in the by negative current, then the total test; energy recovered by the hybrid battery of the sum of all the values of Pbrake AHt-1 = the state of charge of the battery system, in kilowatt hours, is the determined in paragraph c)(1)(i)(C) of system, in Amp hours, at time t-1 in the this section, divided by 36,000 and absolute value of the sum of the test; and negative current values for each second rounded to the nearest 0.01 kilowatt V = the nominal voltage of the hybrid battery hours. system. of the test determined in paragraph (c)(3)(ii) of this section, divided by (3) Calculate the actual amount of (iii) Depending on the equipment and 1,000 and rounded to the nearest 0.01 energy recovered by a hybrid electric methodology used by a manufacturer, kilowatt hours. vehicle when tested on the FTP batter charging during the test may be (4) The percent of braking energy according to the provisions of this part. represented by either a negative current recovered by a hybrid system relative to (i) Measure the state of charge, in or by a positive current. Determine the the total available energy is determined Amp-hours, of the hybrid battery system total energy recovered by the hybrid by the following equation, rounded to at each second of the FTP. battery system as follows: the nearest one percent:

Where: b. By revising paragraph (b) This section describes how to label Erec = The actual total energy recovered, in introductory text. flexible-fuel vehicles equipped with kilowatt hours, as determined in c. By revising paragraph (b)(6). gasoline engines. If the vehicle has a paragraph (c)(2)(iii) of this section; and d. By revising paragraph (c). diesel engine, all the references to ‘‘gas’’ Emax = The theoretical maximum amount of The revisions read as follows: or ‘‘gasoline’’ in this section are energy, in kilowatt hours, that could be recovered by a hybrid electric vehicle § 600.303–12 Fuel economy label—special understood to refer to ‘‘diesel’’ or over the FTP test cycle, as determined in requirements for flexible-fuel vehicles. ‘‘diesel fuel’’, respectively. All values paragraph (c)(2) of this section. described in this section are based on Fuel economy labels for flexible-fuel 23. Section 600.303–12 is amended as vehicles must meet the specifications gasoline operation, unless otherwise follows: described in § 600.302, with the specifically noted. a. By revising the introductory text. modifications described in this section. * * * * *

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(b) Include the following elements (c) * * * g. By revising paragraph (j)(2)(vii). instead of the information identified in (1) For vehicles with engines that are h. By revising paragraph (k). § 600.302–12(c)(1): not plug-in hybrid electric vehicles, The addition and revisions read as * * * * * calculate the fuel consumption rate in (6) Add the following statement after gallons per 100 miles (or gasoline gallon follows: the statements described in § 600.302– equivalent per 100 miles for fuels other § 600.510–12 Calculation of average fuel 12(c)(2): ‘‘Values are based on gasoline than gasoline or diesel fuel) with the economy and average carbon-related and do not reflect performance and following formula, rounded to the first exhaust emissions. ratings based on E85.’’ Adjust this decimal place: * * * * * statement as appropriate for vehicles Fuel Consumption Rate = 100/MPG (b) * * * designed to operate on different fuels. Where: (c) You may include the sub-heading (4) Emergency vehicles may be ‘‘Driving Range’’ below the combined MPG = The value for combined fuel economy excluded from the fleet average carbon- from § 600.210–12(c), rounded to the related exhaust emission calculations fuel economy value, with range bars nearest whole mpg. below this sub-heading as follows: described in paragraph (j) of this (1) Insert a horizontal range bar * * * * * section. The manufacturer should notify nominally 80 mm long to show how far (e) * * * the Administrator that they are making the vehicle can drive from a full tank of (3) * * * such an election in the model year gasoline. Include a vehicle logo at the (vii) Calculate the annual fuel cost reports required under § 600.512 of this right end of the range bar. Include the based on the combined values for city chapter. Such vehicles should be following left-justified expression inside and highway driving using the excluded from both the calculation of the range bar: ‘‘Gasoline: × miles’’. following equation: the fleet average standard for a × Complete the expression by identifying Annual fuel cost = ($/milecity 0.55 + manufacturer under 40 CFR 86.1818– × × the appropriate value for total driving $/milehwy 0.45) Average 12(c)(4) and from the calculation of the range from § 600.311. Annual Miles fleet average carbon-related exhaust (2) Insert a second horizontal range (4) Round the annual fuel cost to the emissions in paragraph (j) of this bar as described in paragraph (c)(1) of nearest $50 by dividing the unrounded section. this section that shows how far the annual fuel cost by 50, then rounding vehicle can drive from a full tank with (c)(1) Average fuel economy shall be the result to the nearest whole number, calculated as follows: the second fuel. Establish the length of then multiplying this rounded result by the line based on the proportion of 50 to determine the annual fuel cost to (i) Except as allowed in paragraph (d) driving ranges for the different fuels. be used for purposes of labeling. of this section, the average fuel economy for the model years before 2017 will be Identify the appropriate fuel in the * * * * * range bar. 25. Section 600.510–12 is amended as calculated individually for each 24. Section 600.311–12 is amended as follows: category identified in paragraph (a)(1) of follows: a. By removing and reserving this according to the provisions of a. By revising paragraph (c)(1). paragraph (c)(2) of this section. b. By revising paragraph (e)(3)(vii). paragraph (b)(3)(iii). c. By adding paragraph (e)(4). b. By adding paragraph (b)(4). (ii) Except as permitted in paragraph The revisions and addition read as c. By revising paragraph (c). (d) of this section, the average fuel follows: d. By revising paragraph (g)(1) economy for the 2017 and later model introductory text. years will be calculated individually for § 600.311–12 Determination of values for e. By revising paragraph (g)(3). each category identified in paragraph fuel economy labels. f. By revising paragraph (h) (a)(1) of this section using the following * * * * * introductory text. equation:

Where: mile, determined according to paragraph (ii) For alcohol-fueled model types, Average MPG = the fleet average fuel (c)(3)(iii) of this section. the fuel economy value calculated for that model type in accordance with economy for a category of vehicles; (2) Divide the total production paragraph (b)(2) of this section divided MPG = the average fuel economy for a volume of that category of automobiles by 0.15 and rounded to the nearest 0.1 category of vehicles determined by a sum of terms, each of which according to paragraph (c)(2) of this mpg; or corresponds to a model type within that section; (iii) For natural gas-fueled model category of automobiles and is a fraction AC = Air conditioning fuel economy credits types, the fuel economy value determined by dividing the number of for a category of vehicles, in gallons per calculated for that model type in automobiles of that model type mile, determined according to paragraph accordance with paragraph (b)(2) of this (c)(3)(i) of this section; produced by the manufacturer in the section divided by 0.15 and rounded to OC = Off-cycle technology fuel economy model year by: the nearest 0.1 mpg; or credits for a category of vehicles, in (i) For gasoline-fueled and diesel- (iv) For alcohol dual fuel model types, gallons per mile, determined according fueled model types, the fuel economy for model years 1993 through 2019, the to paragraph (c)(3)(ii) of this section; and calculated for that model type in harmonic average of the following two PU = Pickup truck fuel economy credits for accordance with paragraph (b)(2) of this terms; the result rounded to the nearest the light truck category, in gallons per section; or 0.1 mpg:

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(A) The combined model type fuel fuel as determined in § 600.208– combined model type fuel economy economy value for operation on gasoline 12(b)(5)(ii) divided by 0.15 provided the determined according to the following or diesel fuel as determined in requirements of paragraph (g) of this equation and rounded to the nearest 0.1 § 600.208–12(b)(5)(i); and section are met; or mpg: (B) The combined model type fuel (v) For alcohol dual fuel model types, economy value for operation on alcohol for model years after 2019, the

Where: diesel fuel as determined in § 600.208– (B) The combined model type fuel F = 0.00 unless otherwise approved by the 12(b)(5)(i). economy value for operation on natural Administrator according to the gas as determined in § 600.208– provisions of paragraph (k) of this (vi) For natural gas dual fuel model 12(b)(5)(ii) divided by 0.15 provided the section; types, for model years 1993 through requirements of paragraph (g) of this MPGA = The combined model type fuel 2019, the harmonic average of the section are met; or economy for operation on alcohol fuel as following two terms; the result rounded (vii) For natural gas dual fuel model determined in § 600.208–12(b)(5)(ii) to the nearest 0.1 mpg: divided by 0.15 provided the types, for model years after 2019, the requirements of paragraph (g) of this (A) The combined model type fuel combined model type fuel economy section are met; and economy value for operation on gasoline determined according to the following MPGG = The combined model type fuel or diesel as determined in § 600.208– formula and rounded to the nearest 0.1 economy for operation on gasoline or 12(b)(5)(i); and mpg:

Where: MPGG = The combined model type fuel vehicle’s driving range in miles by economy for operation on gasoline or multiplying the combined fuel economy MPGCNG = The combined model type fuel economy for operation on natural gas as diesel fuel as determined in § 600.208– as determined in § 600.208–12(b)(5)(ii) 12(b)(5)(i). by the vehicle’s usable fuel storage determined in § 600.208–12(b)(5)(ii) UF = A Utility Factor (UF) value selected capacity (as defined at § 600.002 and divided by 0.15 provided the from the following table based on the expressed in gasoline gallon requirements of paragraph (g) of this driving range of the vehicle while equivalents), and rounding to the nearest section are met; and operating on natural gas. Determine the 10 miles.

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(3) Fuel consumption improvement. off-cycle, and pickup truck fuel for each category identified in paragraph Calculate the separate air conditioning, consumption improvement as follows: (a)(1) of this section using the following (i) Air conditioning fuel consumption equation: improvements are calculated separately

Where: category, in megagrams, from 40 CFR (ii) Off-cycle technology fuel FE Credit = the fleet production-weighted 86.1866–12(c)(3); consumption improvements are total value of air conditioning efficiency VLM = vehicle lifetime miles, which for calculated separately for each category credits for all air conditioning systems in passenger automobiles shall be 195,264 identified in paragraph (a)(1) of this the applicable fleet, expressed in gallons and for light trucks shall be 225,865; and per mile; Production = the total production volume for section using the following equation: ACCredit = the total of all air conditioning the category of vehicles (either passenger efficiency credits for the vehicle automobiles or light trucks).

Where: category, in megagrams, from 40 CFR (iii) Full size pickup truck fuel FE Credit = the fleet production-weighted 86.1866–12(d)(5); consumption improvements are total value of off-cycle technology credits VLM = vehicle lifetime miles, which for calculated for the light truck category passenger automobiles shall be 195,264 for all off-cycle technologies in the identified in paragraph (a)(1) of this applicable fleet, expressed in gallons per and for light trucks shall be 225,865; and mile; Production = the total production volume for section using the following equation: OCCredit = the total of all off-cycle the category of vehicles (either passenger technology credits for the vehicle automobiles or light trucks).

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Where: Ealt/Epet ≥ 1 Dalt is the density [lb/gallon for liquid fuels or lb/100 standard cubic feet for gaseous FE Credit = the fleet production-weighted Where: total value of full size pickup truck fuels] of the alternative fuel. × × 6 credits for the light truck fleet, expressed Ealt = [FEalt/(NHValt Dalt)] 10 = energy Dpet is the density [lb/gallon] of the in gallons per mile; efficiency while operating on alternative petroleum fuel. PUCredit = the total of all full size pickup fuel rounded to the nearest 0.01 miles/ * * * * * truck credits, in megagrams, from 40 CFR million BTU. (3) Dual fuel passenger automobiles × × 6 86.1866–12(e)(4); and Epet = [FEpet/(NHVpet Dpet)] 10 = energy manufactured during model years 1993 Production = the total production volume for efficiency while operating on gasoline or through 2019 must meet the minimum the light truck category. diesel (petroleum) fuel rounded to the driving range requirements established * * * * * nearest 0.01 miles/million BTU. by the Secretary of Transportation (49 FE is the fuel economy [miles/gallon for (g)(1) Dual fuel automobiles must alt CFR part 538) to obtain the CAFE credit liquid fuels or miles/100 standard cubic provide equal or greater energy feet for gaseous fuels] while operated on determined in paragraphs (c)(2)(iv) and efficiency while operating on the the alternative fuel as determined in (v) of this section. alternative fuel as while operating on § 600.113–12(a) and (b). (h) For model years 1993 and later, gasoline or diesel fuel to obtain the and for each category of automobile FEpet is the fuel economy [miles/gallon] while CAFE credit determined in paragraphs operated on petroleum fuel (gasoline or identified in paragraph (a)(1) of this (c)(2)(iv) and (v) of this section or to diesel) as determined in § 600.113–12(a) section, the maximum increase in obtain the carbon-related exhaust and (b). average fuel economy determined in emissions credit determined in NHValt is the net (lower) heating value [BTU/ paragraph (c) of this section attributable paragraphs (j)(2)(ii) and (iii) of this lb] of the alternative fuel. to dual fuel automobiles, except where section. The following equation must NHVpet is the net (lower) heating value [BTU/ the alternative fuel is electricity, shall hold true: lb] of the petroleum fuel. be as follows:

BILLING CODE 4910–59–C (vii) For natural gas dual fuel model exhaust emissions value determined * * * * * types, for model years 2016 and later, according to the following formula and (j) * * * the combined model type carbon-related rounded to the nearest gram per mile: (2) * * *

Where: for operation on natural gas as operation on gasoline or diesel fuel as

CREECNG = The combined model type determined in § 600.208–12(b)(5)(ii); and determined in § 600.208–12(b)(5)(i). carbon-related exhaust emissions value CREEGAS = The combined model type carbon- UF = A Utility Factor (UF) value selected related exhaust emissions value for from the following table based on the

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driving range of the vehicle while as determined in § 600.208–12(b)(5)(ii) equivalents), and rounding to the nearest operating on natural gas. Determine the by the vehicle’s usable fuel storage 10 miles. vehicle’s driving range in miles by capacity (as defined at § 600.002 and multiplying the combined fuel economy expressed in gasoline gallon

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BILLING CODE 4910–59–C manufacturer’s dual fuel fleet. The vehicles and plug-in hybrid vehicles (k) Alternative in-use weighting manufacturer’s analysis could include using (or projected to use) the advanced factors for dual fuel model types. Using use of data gathered from on-board technology vehicle credit and incentives one of the methods in either paragraph sensors and computers, from dual fuel program; (k)(1) or (2) of this section, vehicles in fleets that are centrally (viii) The methodology which will be manufacturers may request the use of fueled, or from other sources. The used to comply with N2O and CH4 alternative values for the weighting analysis must be based on sound emission standards; factor F in the equations in paragraphs statistical methodology and must (ix) Notification of the manufacturer’s (c)(2)(v) and (j)(2)(vi) of this section. account for analytical uncertainty. Any intent to exclude emergency vehicles Unless otherwise approved by the approval by the Administrator will from the calculation of fleet average Administrator, the manufacturer must pertain to the use of values of F for the standards and the end-of-year fleet use the value of F that is in effect in model types specified by the average, including a description of the paragraphs (c)(2)(v) and (j)(2)(vi) of this manufacturer. excluded emergency vehicles and the section. 26. Section 600.514–12 is amended by quantity of such vehicles excluded. (1) Upon written request from a revising paragraphs (b)(1)(v) and (vii) * * * * * manufacturer, the Administrator will and adding paragraphs (b)(1)(viii) and determine and publish by written (ix) to read as follows: Title 49 guidance an appropriate value of F for National Highway Traffic Safety each requested alternative fuel based on § 600.514–12 Reports to the Environmental Administration the Administrator’s assessment of real- Protection Agency. In consideration of the foregoing, world use of the alternative fuel. Such * * * * * under the authority of 49 U.S.C. 32901, published values would be available for (b) * * * 32902, and 32903, and delegation of any manufacturer to use. The (1) * * * authority at 49 CFR 1.50, NHTSA Administrator will periodically update (v) A description of the various credit, proposes to amend 49 CFR Chapter V as these values upon written request from transfer and trading options that will be follows: a manufacturer. used to comply with each applicable (2) The manufacturer may optionally standard category, including the amount PART 523—VEHICLE CLASSIFICATION submit to the Administrator its own of credit the manufacturer intends to demonstration regarding the real-world generate for air conditioning leakage, air 27. The authority citation for part 523 use of the alternative fuel in their conditioning efficiency, off-cycle continues to read as follows: vehicles and its own estimate of the technology, advanced technology Authority: 49 U.S.C. 32901, delegation of appropriate value of F in the equations vehicles, hybrid or low emission full- authority at 49 CFR 1.50. size pickup trucks, and various early in paragraphs (c)(2)(v) and (j)(2)(vi) of 28. Revise § 523.2 to read as follows: this section. Depending on the nature of credit programs; the analytical approach, the * * * * * § 523.2 Definitions. manufacturer could provide estimates of (vii) A summary by model year Approach angle means the smallest F that are model type specific or that are (beginning with the 2009 model year) of angle, in a plane side view of an generally applicable to the the number of electric vehicles, fuel cell automobile, formed by the level surface

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on which the automobile is standing Commercial medium- and heavy-duty example, a fuel cell and motor used in and a line tangent to the front tire static on-highway vehicle means an on- a heavy-duty vehicle is a heavy-duty loaded radius arc and touching the highway vehicle with a GVWR of 10,000 engine. underside of the automobile forward of lbs or more, as defined in 49 U.S.C. Heavy-duty off-road vehicle means a the front tire. 32901(a)(7). heavy-duty vocational vehicle or Axle clearance means the vertical Complete vehicle means a vehicle that vocational tractor that is intended for distance from the level surface on which requires no further manufacturing off-road use meeting either of the an automobile is standing to the lowest operations to perform its intended following criteria: point on the axle differential of the function and is a functioning vehicle (1) Vehicles with tires installed automobile. that has the primary load-carrying having a maximum speed rating at or Base tire (for passenger automobiles, device or container (or equivalent below 55 mph. light trucks, and medium duty equipment) attached or is designed to (2) Vehicles primarily designed to passenger vehicles) means the tire that pull a trailer. Examples of equivalent perform work off-road (such as in oil has the highest production sales volume equipment include fifth wheel trailer fields, forests, or construction sites), and that is installed by the vehicle hitches, firefighting equipment, and meeting at least one of the criteria of manufacturer on each vehicle utility booms. paragraph (2)(i) of this definition and at configuration of a model type. Curb weight is defined the same as least one of the criteria of paragraph Basic vehicle frontal area is used as vehicle curb weight in 40 CFR 86.1803– (2)(ii) of this definition. defined in 40 CFR 86.1803. 01. (i) Vehicles must have affixed Breakover angle means the Departure angle means the smallest components designed to work in an off- supplement of the largest angle, in a angle, in a plane side view of an road environment (for example, plan side view of an automobile, that automobile, formed by the level surface hazardous material equipment or can be formed by two lines tangent to on which the automobile is standing drilling equipment) or be designed to the front and rear static loaded radii arcs and a line tangent to the rear tire static operate at low speeds making them and intersecting at a point on the loaded radius arc and touching the unsuitable for normal highway underside of the automobile. underside of the automobile rearward of Cab-complete vehicle means a vehicle operation. the rear tire. (ii) Vehicles must: that is first sold as an incomplete Final stage manufacturer has the (A) Have an axle that has a gross axle vehicle that substantially includes the meaning given in 49 CFR 567.3. vehicle cab section as defined in 40 CFR Footprint is defined as the product of weight rating (GAWR), as defined in 49 1037.801. For example, vehicles known track width (measured in inches, CFR 571.3, of 29,000 pounds or more; commercially as chassis-cabs, cab- calculated as the average of front and (B) Have a speed attainable in 2 miles chassis, box-deletes, bed-deletes, and rear track widths, and rounded to the of not more than 33 mph; or cut-away vans are considered cab- nearest tenth of an inch) times (C) Have a speed attainable in 2 miles complete vehicles. A cab includes a wheelbase (measured in inches and of not more than 45 mph, an unloaded steering column and a passenger rounded to the nearest tenth of an inch), vehicle weight that is not less than 95 compartment. Note that a vehicle divided by 144 and then rounded to the percent of its GVWR, and no capacity to lacking some components of the cab is nearest tenth of a square foot. For carry occupants other than the driver a cab-complete vehicle if it substantially purposes of this definition, ‘‘track and operating crew. includes the cab. width’’ is the lateral distance between Heavy-duty vehicle means a vehicle as Cargo-carrying volume means the the centerlines of the base tires at defined in § 523.6. luggage capacity or cargo volume index, ground, including the camber angle. For Incomplete vehicle means a vehicle as appropriate, and as those terms are purposes of this definition, ‘‘wheelbase’’ which does not have the primary load defined in 40 CFR 600.315–08, in the is the longitudinal distance between carrying device or container attached case of automobiles to which either of front and rear wheel centerlines. when it is first sold as a vehicle or any these terms apply. With respect to Full-size pickup truck means a light vehicle that does not meet the definition automobiles to which neither of these truck or medium duty passenger vehicle of a complete vehicle. This may include terms apply, ‘‘cargo-carrying volume’’ that meets the requirements specified in vehicles sold to secondary vehicle means the total volume in cubic feet, 40 CFR 86.1866–12(e). manufacturers. Incomplete vehicles rounded to the nearest 0.1 cubic feet, of Gross combination weight rating include cab-complete vehicles. either an automobile’s enclosed non- (GCWR) means the value specified by Innovative technology means seating space that is intended primarily the manufacturer as the maximum technology certified as such under 40 for carrying cargo and is not accessible allowable loaded weight of a CFR 1037.610. from the passenger compartment, or the combination vehicle (e.g., tractor plus Light truck means a non-passenger space intended primarily for carrying trailer). automobile as defined in § 523.5. cargo bounded in the front by a vertical Gross vehicle weight rating (GVWR) Medium duty passenger vehicle plane that is perpendicular to the means the value specified by the means a vehicle which would satisfy the longitudinal centerline of the manufacturer as the maximum design criteria in § 523.5 (relating to light automobile and passes through the loaded weight of a single vehicle (e.g., trucks) but for its gross vehicle weight rearmost point on the rearmost seat and vocational vehicle). rating or its curb weight, which is rated elsewhere by the automobile’s interior Heavy-duty engine means any engine at more than 8,500 lbs GVWR or has a surfaces. used for (or which the engine vehicle curb weight of more than 6,000 Class 2b vehicles are vehicles with a manufacturer could reasonably expect lbs or has a basic vehicle frontal area in gross vehicle weight rating (GVWR) to be used for) motive power in a heavy- excess of 45 square feet, and which is ranging from 8,501 to 10,000 pounds duty vehicle. For purposes of this designed primarily to transport (lbs). definition in this part, the term passengers, but does not include a Class 3 through Class 8 vehicles are ‘‘engine’’ includes internal combustion vehicle that: vehicles with a GVWR of 10,001 lbs or engines and other devices that convert (1) Is an ‘‘incomplete vehicle’’’ as more, as defined in 49 CFR 565.15. chemical fuel into motive power. For defined in this subpart; or

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(2) Has a seating capacity of more (2) For the volume of seats to the rear typically shorter than that of pickup than 12 persons; or of the front seat, divide 1,728 into the trucks and sport utility vehicles. (3) Is designed for more than 9 product of the following SAE Vocational tractor means a tractor that persons in seating rearward of the dimensions, measured in inches to the is classified as a vocational vehicle driver’s seat; or nearest 0.1 inches, and rounded the according to 40 CFR 1037.630. (4) Is equipped with an open cargo quotient to the nearest 0.001 cubic feet. Vocational vehicle means a vehicle area (for example, a pick-up truck box (i) H63—Effective head room— that is equipped for a particular or bed) of 72.0 inches in interior length second. industry, trade or occupation such as (ii) W4—Shoulder room—second. or more. A covered box not readily construction, heavy hauling, mining, accessible from the passenger (iii) L51—Minimum effective leg room—second. logging, oil fields, refuse and includes compartment will be considered an vehicles such as school buses, open cargo area for purposes of this Pickup truck means a non-passenger automobile which has a passenger motorcoaches and RVs. definition. Work truck means a vehicle that is Mild hybrid gasoline-electric vehicle compartment and an open cargo area (bed). rated at more than 8,500 pounds and means a vehicle as defined by EPA in Recreational vehicle or RV means a less than or equal to 10,000 pounds 40 CFR 86.1866–12(e). motor vehicle equipped with living gross vehicle weight, and is not a Motor home has the meaning given in space and amenities found in a motor medium-duty passenger vehicle as 49 CFR 571.3. home. defined in 40 CFR 86.1803 effective as Motor vehicle has the meaning given Running clearance means the distance of December 20, 2007. in 40 CFR 85.1703. from the surface on which an Passenger-carrying volume means the automobile is standing to the lowest PART 531—PASSENGER sum of the front seat volume and, if any, point on the automobile, excluding AUTOMOBILE AVERAGE FUEL rear seat volume, as defined in 40 CFR unsprung weight. ECONOMY STANDARDS 600.315–08, in the case of automobiles Static loaded radius arc means a to which that term applies. With respect portion of a circle whose center is the 29. The authority citation for part 531 to automobiles to which that term does center of a standard tire-rim continues to read as follows: not apply, ‘‘passenger-carrying volume’’ combination of an automobile and Authority: 49 U.S.C. 32902; delegation of means the sum in cubic feet, rounded to whose radius is the distance from that authority at 49 CFR 1.50. the nearest 0.1 cubic feet, of the volume center to the level surface on which the 30. Amend § 531.5 by revising of a vehicle’s front seat and seats to the automobile is standing, measured with paragraph (a) Introductory text, revising rear of the front seat, as applicable, the automobile at curb weight, the paragraphs (b), (c), and (d), calculated as follows with the head wheel parallel to the vehicle’s redesignating paragraph (e) as paragraph room, shoulder room, and leg room longitudinal centerline, and the tire (f), and adding a new paragraph (e) to dimensions determined in accordance inflated to the manufacturer’s read as follows: with the procedures outlined in Society recommended pressure. of Automotive Engineers Recommended Strong hybrid gasoline-electric vehicle § 531.5 Fuel economy standards. Practice J1100a, Motor Vehicle means a vehicle as defined by EPA in (a) Except as provided in paragraph Dimensions (Report of Human Factors 40 CFR 86.1866–12(e). Engineering Committee, Society of Temporary living quarters means a (e) of this section, each manufacturer of Automotive Engineers, approved space in the interior of an automobile in passenger automobiles shall comply September 1973 and last revised which people may temporarily live and with the fleet average fuel economy September 1975). which includes sleeping surfaces, such standards in Table I, expressed in miles (1) For front seat volume, divide 1,728 as beds, and household conveniences, per gallon, in the model year specified into the product of the following SAE such as a sink, stove, refrigerator, or as applicable: dimensions, measured in inches to the toilet. * * * * * nearest 0.1 inches, and round the Van means a vehicle with a body that (b) For model year 2011, a quotient to the nearest 0.001 cubic feet. fully encloses the driver and a cargo manufacturer’s passenger automobile (i) H61–Effective head room—front. carrying or work performing fleet shall comply with the fleet average (ii) W3—Shoulder room—front. compartment. The distance from the fuel economy level calculated for that (iii) L34—Maximum effective leg leading edge of the windshield to the model year according to Figure 1 and room-accelerator. foremost body section of vans is the appropriate values in Table II.

Where: N is the total number (sum) of passenger Ni is the number (sum) of the ith passenger automobiles produced by a automobile model produced by the manufacturer; manufacturer; and

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Ti is the fuel economy target of the ith model formula, rounded to the nearest passenger automobile, which is hundredth: determined according to the following

Where: Parameters a, b, c, and d are defined in Table x = footprint (in square feet, rounded to the II; nearest tenth) of the vehicle model. e = 2.718; and

(c) For model years 2012–2025, a fleet shall comply with the fleet average model year according to Figure 2 and manufacturer’s passenger automobile fuel economy level calculated for that the appropriate values in Table III.

Where: the applicable fleet, either domestic within each ith designation, i.e., which passenger automobiles or import CAFErequired is the fleet average fuel economy share the same model type and footprint, standard for a given fleet (domestic passenger automobiles; calculated according to Figure 3 and Productioni is the number of passenger passenger automobiles or import rounded to the nearest hundredth of a automobiles produced for sale in the mpg, i.e., 35.455 = 35.46 mpg, and the passenger automobiles); United States within each ith Subscript i is a designation of multiple designation, i.e., which share the same summations in the numerator and groups of automobiles, where each model type and footprint; denominator are both performed over all group’s designation, i.e., i = 1, 2, 3, etc., TARGETi is the fuel economy target in miles models in the fleet in question. represents automobiles that share a per gallon (mpg) applicable to the unique model type and footprint within footprint of passenger automobiles Figure 3:

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Where: Parameters a, b, c, and d are defined in Table The MIN and MAX functions take the TARGET is the fuel economy target (in mpg) III; and minimum and maximum, respectively, applicable to vehicles of a given of the included values. footprint (FOOTPRINT, in square feet); BILLING CODE 4910–59–P

(d) In addition to the requirements of each manufacturer shall also meet the domestically manufactured passenger paragraphs (b) and (c) of this section, minimum fleet standard for automobiles expressed in Table IV:

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(e) For model years 2022–2025, each set at a different level, manufacturers manufacturer in a model year shall be manufacturer shall comply with the shall comply with those different determined in accordance with standards set forth in paragraphs (c) and standards in lieu of the standards set procedures established by the (d) in this section, if NHTSA determines forth for those model years in Administrator of the Environmental in a rulemaking, initiated after January paragraphs (c) and (d), and NHTSA will Protection Agency under 49 U.S.C. 1, 2017, and conducted in accordance revise this section to reflect the different 32904 and set forth in 40 CFR part 600. with 49 U.S.C. 32902, that the standards standards. For model years 2017 to 2025, a in paragraphs (c) and (d) are the * * * * * manufacturer is eligible to increase the maximum feasible standards for model 31. Amend § 531.6 by revising fuel economy performance of passenger years 2022–2025. If, for any of those paragraph (a) to read as follows: cars in accordance with procedures model years, NHTSA determines that § 531.6 Measurement and calculation established by EPA set forth in 40 CFR the maximum feasible standard for procedures. part 600, including any adjustments to passenger cars and the corresponding (a) The fleet average fuel economy fuel economy EPA allows, such as for minimum standard for domestically performance of all passenger fuel consumption improvements related manufactured passenger cars should be automobiles that are manufactured by a

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to air conditioning efficiency and off- Appendix to Part 531—Example of domestic passenger automobiles in MY cycle technologies. Calculating Compliance Under 2012 as follows: * * * * * § 531.5(c) 32. Revise Appendix A to part 531 to Assume a hypothetical manufacturer read as follows: (Manufacturer X) produces a fleet of

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BILLING CODE 4910–59–C

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PART 533—LIGHT TRUCK FUEL 34. Amend § 533.5 by revising average fuel economy standards, ECONOMY STANDARDS paragraphs (a), (f), (g), (h), (i) and adding expressed in miles per gallon, in the paragraphs (j) and (k) to read as follows: model year specified as applicable: 33. The authority citation for part 531 continues to read as follows: § 533.5 Requirements. BILLING CODE 4910–59–P Authority: 49 U.S.C. 32902; delegation of (a) Each manufacturer of light trucks authority at 49 CFR 1.50. shall comply with the following fleet

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Where: Ni is the number (sum) of the ith light truck Ti is the fuel economy target of the ith light N is the total number (sum) of light trucks model type produced by a manufacturer; truck model type, which is determined produced by a manufacturer; and according to the following formula, rounded to the nearest hundredth:

Where: Parameters a, b, c, and d are defined in e = 2.718; and Table V; x = footprint (in square feet, rounded to the nearest tenth) of the model type.

Where: Productioni is the number of light trucks according to either Figure 3 or Figure 4, CAFErequired is the fleet average fuel economy produced for sale in the United States as appropriate, and rounded to the standard for a given light truck fleet; within each ith designation, i.e., which nearest hundredth of a mpg, i.e., 35.455 Subscript i is a designation of multiple share the same model type and footprint; = 35.46 mpg, and the summations in the i groups of light trucks, where each TARGET is the fuel economy target in miles numerator and denominator are both group’s designation, i.e., i = 1, 2, 3, etc., per gallon (mpg) applicable to the performed over all models in the fleet in footprint of light trucks within each ith represents light trucks that share a question. unique model type and footprint within designation, i.e., which share the same the applicable fleet. model type and footprint, calculated

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Where: Parameters a, b, c, and d are defined in Table The MIN and MAX functions take the TARGET is the fuel economy target (in mpg) VI; and minimum and maximum, respectively, applicable to vehicles of a given of the included values. footprint (FOOTPRINT, in square feet);

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* * * * * (j) For model years 2017–2025, a § 533.6 Measurement and calculation (f) For each model year 1996 and manufacturer’s light truck fleet shall procedures. thereafter, each manufacturer shall comply with the fleet average fuel * * * * * combine its captive imports with its economy standard calculated for that (b) The fleet average fuel economy other light trucks and comply with the model year according to Figures 2 and performance of all vehicles subject to fleet average fuel economy standard in 4 and the appropriate values in Table part 533 that are manufactured by a paragraph (a) of this section. VII. manufacturer in a model year shall be (g) For model years 2008–2010, at a (k) For model years 2022–2025, each determined in accordance with manufacturer’s option, a manufacturer’s manufacturer shall comply with the procedures established by the light truck fleet may comply with the standards set forth in paragraph (j) of Administrator of the Environmental fuel economy standard calculated for this section, if NHTSA determines in a Protection Agency under 49 U.S.C. each model year according to Figure 1 rulemaking, initiated after January 1, 32904 and set forth in 40 CFR part 600. and the appropriate values in Table V, 2017, and conducted in accordance with For model years 2017 to 2025, a with said option being irrevocably 49 U.S.C. 32902, that the standards in manufacturer is eligible to increase the chosen for that model year and reported paragraph (j) are the maximum feasible fuel economy performance of light as specified in § 537.8. standards for model years 2022–2025. If, trucks in accordance with procedures (h) For model year 2011, a for any of those model years, NHTSA established by EPA and set forth in 40 manufacturer’s light truck fleet shall determines that the maximum feasible CFR part 600, including any comply with the fleet average fuel standard for light trucks should be set adjustments to fuel economy EPA economy standard calculated for that at a different level, manufacturers shall allows, such as for fuel consumption model year according to Figure 1 and comply with those different standards improvements related to air the appropriate values in Table V. in lieu of the standards set forth for conditioning efficiency, off-cycle (i) For model years 2012–2016, a those model years in paragraph (j), and technologies, and hybridization and manufacturer’s light truck fleet shall NHTSA will revise this section to reflect other over-compliance for full-size comply with the fleet average fuel the different standards. pickup trucks. economy standard calculated for that model year according to Figures 2 and * * * * * 36. Redesignate Appendix A to part 3 and the appropriate values in Table 35. Amend § 533.6 by revising 533 as Appendix to part 533 and revise VI. paragraph (b) to read as follows: it to read as follows:

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Appendix to Part 533—Example of Calculating Compliance Under § 533.5(i) Assume a hypothetical manufacturer (Manufacturer X) produces a fleet of light trucks in MY 2012 as follows:

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Where: PART 536—TRANSFER AND TRADING (c) Adjustment factor. When traded or TARGET is the fuel economy target (in mpg) OF FUEL ECONOMY CREDITS transferred and used, fuel economy applicable to vehicles of a given credits are adjusted to ensure fuel oil footprint (FOOTPRINT, in square feet); 37. Revise the authority citation for savings is preserved. For traded credits, Parameters a, b, c, d, e, f, g, and h are defined part 536 to read as follows: the user (or buyer) must multiply the in Table VII; and Authority: 49 U.S.C. 32903; delegation of calculated adjustment factor by the The MIN and MAX functions take the authority at 49 CFR 1.50. number of its shortfall credits it plans to minimum and maximum, respectively, offset in order to determine the number of the included values. 38. Amend § 536.4 by revising of equivalent credits to acquire from the paragraph (c) to read as follows: earner (or seller). For transferred credits, the user of credits must multiply the § 536.4 Credits. calculated adjustment factor by the * * * * * number of its shortfall credits it plans to

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offset in order to determine the number compliance category holding the is calculated according to the following of equivalent credits to transfer from the available credits. The adjustment factor formula:

Where: VMTe = Lifetime vehicle miles traveled as VMTu = Lifetime vehicle miles traveled as A = Adjustment factor applied to traded and provided in the following table for the provided in the following table for the transferred credits; model year and compliance category in model year and compliance category in which the credit was earned; which the credit is used for compliance;

MPGse = Required fuel economy standard for § 536.10 Treatment of dual-fuel and economy of dual fueled vehicles in the originating (earning) manufacturer, alternative-fuel vehicles. accordance with 40 CFR 600.510– compliance category, and model year in * * * * * 12(c)(2)(v) and (vii). which the credit was earned; (b) If a manufacturer’s calculated fuel MPGae = Actual fuel economy for the economy for a particular compliance PART 537—AUTOMOTIVE FUEL originating manufacturer, compliance category, including any statutorily- ECONOMY REPORTS category, and model year in which the required calculations for alternative fuel 41. The authority citation for part 537 credit was earned; and dual fuel vehicles, is higher or continues to read as follows: MPGsu = Required fuel economy standard for lower than the applicable fuel economy the user (buying) manufacturer, Authority: 49 U.S.C. 32907, delegation of standard, manufacturers will earn authority at 49 CFR 1.50. compliance category, and model year in credits or must apply credits or pay civil which the credit is used for compliance; penalties equal to the difference 42. Amend § 537.5 by revising and between the calculated fuel economy paragraph (c)(4) to read as follows: MPGau = Actual fuel economy for the user level in that compliance category and * * * * * manufacturer, compliance category, and the applicable standard. Credits earned (c) * * * model year in which the credit is used are the same as any other credits, and (4) Be submitted on CD or by email for compliance. may be held, transferred, or traded by with the contents in a pdf or MS Word the manufacturer subject to the format except the information required 39. Amend § 536.9 by revising in 537.7 must be provided in a MS Excel paragraph (c) to read as follows: limitations of the statute and this regulation. format. Submit 2 copies of the CD to: Administrator, National Highway § 536.9 Use of credits with regard to the (c) For model years up to and Traffic Administration, 1200 New Jersey domestically manufactured passenger including MY 2019, if a manufacturer Avenue SW., Washington, DC 20590, or automobile minimum standard. builds enough dual fuel vehicles (except submit reports electronically to the * * * * * plug-in electric vehicles) to improve the following secure email address: calculated fuel economy in a particular (c) Transferred or traded credits may [email protected]; not be used, pursuant to 49 U.S.C. compliance category by more than the limits set forth in 49 U.S.C. 32906(a), * * * * * 32903(g)(4) and (f)(2), to meet the 43. Amend § 537.7 by revising domestically manufactured passenger the improvement in fuel economy for compliance purposes is restricted to the paragraphs (b)(3), (c)(4), and (c)(5) to automobile minimum standard read as follows: specified in 49 U.S.C. 32902(b)(4) and in statutory limit. Manufacturers may not 49 CFR 531.5(d). earn credits nor reduce the application § 537.7 Pre-model year and mid-model of credits or fines for calculated year reports. * * * * * improvements in fuel economy based on * * * * * 40. Amend § 536.10 by revising the dual fuel vehicles beyond the statutory (b) * * * section heading and paragraphs (b) and limit. (3) State the projected required fuel (c) and adding paragraph (d) to read as (d) For model years 2020 and beyond, economy for the manufacturer’s follows: a manufacturer must calculate the fuel passenger automobiles and light trucks

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determined in accordance with 49 CFR (xvii) Full-size pickup truck extending from the forward-most point 531.5(c) and 49 CFR 533.5 and based technologies used to acquire the of installation of those seats to the rear upon the projected sales figures incentive in 40 CFR 86.1866 and the of the automobile’s interior; or provided under paragraph (c)(2) of this amount of the incentive; (2) For non-passenger automobiles section. For each unique model type (xviii) Off-cycle technologies used to manufactured in model year 2008 and and footprint combination of the acquire the incentive in 40 CFR 86.1866 beyond, for vehicles equipped with at manufacturer’s automobiles, provide the and the amount of the incentive; least 3 rows of designated seating information specified in paragraph (xix) (A) In the case of passenger positions as standard equipment, permit (b)(3)(i) and (ii) of this section in tabular automobiles: expanded use of the automobile for form. List the model types in order of (1) Interior volume index, determined cargo-carrying purposes or other increasing average inertia weight from in accordance with subpart D of 40 CFR nonpassenger-carrying purposes top to bottom down the left side of the part 600; through the removal or stowing of table and list the information categories (2) Body style; foldable or pivoting seats so as to create in the order specified in paragraphs (i) (B) In the case of light trucks: a flat, leveled cargo surface extending and (ii) of this section from left to right (1) Passenger-carrying volume; from the forward-most point of across the top of the table. Other (2) Cargo-carrying volume; installation of those seats to the rear of formats, such as those accepted by EPA, (xx) Frontal area; the automobile’s interior. (xxi) Road load power at 50 miles per which contain all of the information in (ii) For an automobile capable of off- hour, if determined by the manufacturer a readily identifiable format are also highway operation, identify which of for purposes other than compliance acceptable. the features below qualify the vehicle as with this part to differ from the road (i) In the case of passenger off-road in accordance with 523.5 (b) load setting prescribed in 40 CFR automobiles: and quantify the values of each feature: 86.177–11(d); (A) Beginning model year 2013, base (A) 4-wheel drive; or (xxii) Optional equipment that the tire as defined in 49 CFR 523.2, (B) A rating of more than 6,000 manufacturer is required under 40 CFR (B) Beginning model year 2013, front pounds gross vehicle weight; and parts 86 and 600 to have actually axle, rear axle and average track width (C) Has at least four of the following installed on the vehicle configuration, as defined in 49 CFR 523.2, characteristics calculated when the or the weight of which must be included (C) Beginning model year 2013, automobile is at curb weight, on a level in the curb weight computation for the wheelbase as defined in 49 CFR 523.2, surface, with the front wheels parallel to vehicle configuration, for fuel economy and the automobile’s longitudinal testing purposes. (D) Beginning model year 2013, (5) For each model type of automobile centerline, and the tires inflated to the footprint as defined in 49 CFR 523.2. which is classified as a non-passenger manufacturer’s recommended pressure. (ii) In the case of light trucks: vehicle (light truck) under part 523 of The exact value of each feature should (A) Beginning model year 2013, base this chapter, provide the following data: be quantified: tire as defined in 49 CFR 523.2, (i) For an automobile designed to (1) Approach angle of not less than 28 (B) Beginning model year 2013, front perform at least one of the following degrees. axle, rear axle and average track width functions in accordance with 523.5 (a) (2) Breakover angle of not less than 14 as defined in 49 CFR 523.2, indicate (by ‘‘yes’’ or ‘‘no’’) whether the degrees. (C) Beginning model year 2013, vehicle can: (3) Departure angle of not less than 20 wheelbase as defined in 49 CFR 523.2, (A) Transport more than 10 persons (if degrees. and yes, provide actual designated seating (4) Running clearance of not less than (D) Beginning model year 2013, positions); 20 centimeters. footprint as defined in 49 CFR 523.2. (B) Provide temporary living quarters (5) Front and rear axle clearances of * * * * * (if yes, provide applicable conveniences not less than 18 centimeters each. (c) * * * as defined in 523.2); * * * * * (4) (i) Loaded vehicle weight; (C) Transport property on an open bed 44. Amend § 537.8 by revising (ii) Equivalent test weight; (if yes, provide bed size width and paragraph (a)(3) to read as follows: (iii) Engine displacement, liters; length); (iv) SAE net rated power, kilowatts; (D) Provide, as sold to the first retail § 537.8 Supplementary reports. (v) SAE net horsepower; purchaser, greater cargo-carrying than (a) * * * (vi) Engine code; passenger-carrying volume, such as in a (3) Each manufacturer whose pre- (vii) Fuel system (number of cargo van and quantify the value; if a model year report omits any of the carburetor barrels or, if fuel injection is vehicle is sold with a second-row seat, information specified in § 537.7 (b), used, so indicate); its cargo-carrying volume is determined (c)(1) and (2), or (c)(4) shall file a (viii) Emission control system; with that seat installed, regardless of supplementary report containing the (ix) Transmission class; whether the manufacturer has described information specified in paragraph (x) Number of forward speeds; that seat as optional; or (b)(3) of this section. (xi) Existence of overdrive (indicate (E) Permit expanded use of the * * * * * yes or no); automobile for cargo-carrying purposes Dated: November 16, 2011. (xii) Total drive ratio (N/V); or other non passenger-carrying Ray LaHood, (xiii) Axle ratio; purposes through: (xiv) Combined fuel economy; (1) For non-passenger automobiles Secretary, Department of Transportation. (xv) Projected sales for the current manufactured prior to model year 2012, Dated: November 16, 2011. model year; the removal of seats by means installed Lisa P. Jackson, (xvi) Air conditioning efficiency for that purpose by the automobile’s Administrator, Environmental Protection improvement technologies used to manufacturer or with simple tools, such Agency. acquire the incentive in 40 CFR 86.1866 as screwdrivers and wrenches, so as to [FR Doc. 2011–30358 Filed 11–30–11; 8:45 am] and the amount of the incentive; create a flat, floor level, surface BILLING CODE 4910–59–P

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