Average Fuel Economy Standards, Passenger Cars and Light Trucks; Model Years 2011-2015

Federal RegisterMay 2, 2008

Ask Donna

What actually matters in this document.

Text

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 523, 531, 533, 534, 536 and 537

[Docket No. NHTSA-2008-0089]

RIN 2127-AK29

Average Fuel Economy Standards, Passenger Cars and Light Trucks; Model Years 2011-2015

AGENCY:

National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT).

ACTION:

Notice of Proposed Rulemaking (NPRM).

SUMMARY:

This document proposes substantial increases in the Corporate Average Fuel Economy (CAFE) standards for passenger cars and light trucks that would enhance energy security by improving fuel economy. Since the carbon dioxide (CO

) emitted from the tailpipes of new motor vehicles is the natural by-product of the combustion of fuel, the increased standards would also address climate change by reducing tailpipe emissions of CO

. Those emissions represent 97 percent of the total greenhouse gas emissions from motor vehicles. Implementation of the new standards would dramatically add to the billions of barrels of fuel already saved since the beginning of the CAFE program in 1975.

DATES:

Comments must be received on or before July 1, 2008.

ADDRESSES:

You may submit comments to the docket number identified in the heading of this document by any of the following methods:

•

Federal eRulemaking Portal:

Go to

http://www.regulations.gov

. Follow the online instructions for submitting comments.

•

Mail:

Docket Management Facility, M-30, U.S. Department of Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590.

•

Hand Delivery or Courier:

West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., between 9 a.m. and 5 p.m. Eastern Time, Monday through Friday, except Federal holidays.

•

Fax:

(202) 493-2251.

Regardless of how you submit your comments, you should mention the docket number of this document.

You may call the Docket Management Facility at 202-366-9826.

Instructions:

For detailed instructions on submitting comments and additional information on the rulemaking process, see the Public Participation heading of the Supplementary Information section of this document. Note that all comments received will be posted without change to

http://www.regulations.gov

, including any personal information provided.

Privacy Act:

Please see the Privacy Act heading under Rulemaking Analyses and Notices.

FOR FURTHER INFORMATION CONTACT:

For policy and technical issues: Ms. Julie Abraham or Mr. Peter Feather, Office of Rulemaking, National Highway Traffic Safety Administration, 1200 New Jersey Avenue, SE., Washington, DC 20590. Telephone: Ms. Abraham (202) 366-1455; Mr. Feather (202) 366-0846.

For legal issues:

Mr. Stephen Wood or Ms. Rebecca Schade, Office of the Chief Counsel, National Highway Traffic Safety Administration, 1200 New Jersey Avenue, SE., Washington, DC 20590. Telephone: (202) 366-2992.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive overview

A. Summary

B. Energy Independence and Security Act of 2007

C. Proposal

1. Standards

a. Stringency

b. Benefits

c. Costs

d. Flexibilities

2. Credits

II. Background

A. Contribution of fuel economy improvements to addressing energy independence and security and climate change

1. Relationship between fuel economy and CO

tailpipe emissions

2. Fuel economy improvements/CO

tailpipe emission reductions since 1975

B. Chronology of events since the National Academy of Sciences called for reforming and increasing CAFE standards

1. National Academy of Sciences CAFE report (February 2002)

a. Significantly increasing CAFE standards without reforming them would adversely affect safety

b. Environmental and other externalities justify increasing the CAFE standards

2. Final rule establishing reformed (attribute-based) CAFE standards for MY 2008-2011 light trucks (March 2006)

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

4. Request for passenger car and light truck product plans (February 2007)

5. Supreme Court decision in

Massachusetts

EPA

(April 2007)

6. Coordination between NHTSA and EPA on development of rulemaking proposals (Summer-Fall 2007)

7. Ninth Circuit decision re final rule for MY 2008-2011 light trucks (November 2007)

8. Enactment of Energy Independence and Security Act of 2007 (December 2007)

C. Energy Policy and Conservation Act, as amended

1. Vehicles subject to standards for automobiles

2. Mandate to set standards for automobiles

3. Structure of standards

4. Factors governing or considered in the setting of standards

5. Consultation in setting standards

6. Compliance flexibility and enforcement

III. Fuel economy enhancing technologies

A. Data sources for technology assumptions

B. Technologies and estimates of costs and effectiveness

1. Engine technologies

2. Transmission technologies

3. Vehicle technologies

4. Accessory technologies

5. Hybrid technologies

C. Technology synergies

D. Technology cost learning curve

E. Ensuring sufficient lead time

1. Linking to redesign and refresh

2. Technology phase-in caps

IV. Basis for attribute-based structure for setting fuel economy standards

A. Why attribute-based instead of a single industry-wide average?

B. Which attribute is most appropriate?

1. Footprint-based function

2. Functions based on other attributes

C. The continuous function

V. Volpe model/analysis/generic description of function

A. The Volpe model

1. What is the Volpe model?

2. How does the Volpe model apply technologies to manufacturers' future fleets?

3. What effects does the Volpe model estimate?

4. How can the Volpe model be used to calibrate and evaluate potential CAFE standards?

5. How has the Volpe model been updated since the April 2006 light truck CAFE final rule?

a. Technology synergies

b. Technology learning curves

c. Calibration of reformed CAFE standards

6. What manufacturer information does the Volpe model use?

7. What economic information does the Volpe model use?

a. Costs of fuel economy technologies

b. Potential opportunity costs of improved fuel economy

c. The on-road fuel economy ‘gap'

d. Fuel prices and the value of saving fuel

e. Consumer valuation of fuel economy and payback period

f. Vehicle survival and use assumptions

g. Growth in total vehicle use

h. Accounting for the rebound effect of higher fuel economy

i. Benefits from increased vehicle use

j. Added costs from congestion, crashes and noise

k. Petroleum consumption and import externalities

l. Air pollutant emissions

(i) Impacts on criteria air pollutant emissions

(ii) Reductions in CO

emissions

(iii) Economic value of reductions in CO

emissions

m. The value of increased driving range

n. Discounting future benefits and costs

o. Accounting for uncertainty in benefits and costs

B. How has NHTSA used the Volpe model to select the proposed standards?

1. Establishing a continuous function standard

2. Calibration of initial continuous function standards

3. Adjustments to address policy considerations

a. Curve crossings

b. Steep curve for passenger cars

c. Risk of upsizing

VI. Proposed fuel economy standards

A. Standards for passenger cars and light trucks

1. Proposed passenger car standards MY 2011-2015

2. Proposed light truck standards MY 2011-2015

3. Energy and environmental backstop

4. Combined fleet performance

B. Estimated technology utilization under proposed standards

C. Costs and benefits of proposed standards

D. Flexibility mechanisms

E. Consistency of proposed standards with EPCA statutory factors

1. Technological feasibility

2. Economic practicability

3. Effect of other motor vehicle standards of the Government on fuel economy

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

F. Other considerations in setting standards under EPCA

1. Safety

2. Alternative fuel vehicle incentives

3. Manufacturer credits

G. Environmental impacts of the proposed standards

H. Balancing the factors to determine maximum feasible CAFE levels

VII. Standards for commercial medium- and heavy-duty on-highway vehicles and “work trucks”

VIII. Vehicle classification

A. Origins of the regulatory definitions

B. Rationale for the regulatory definitions in light of the current automobile market

C. NHTSA is not proposing to change regulatory definitions at this time

IX. Enforcement

A. Overview

B. CAFE credits

1. Credit trading

2. Credit transferring

3. Credit carry-forward/carry-back

C. Extension and phasing out of flexible-fuel incentive program

X. Regulatory alternatives

XI. Sensitivity and Monte Carlo analysis

XII. Public participation

XIII. Regulatory notices and analyses

A. Executive Order 12866 and DOT Regulatory Policies and Procedures

B. National Environmental Policy Act

C. Regulatory Flexibility Act

D. Executive Order 13132 (Federalism)

E. Executive Order 12988 (Civil Justice Reform)

F. Unfunded Mandates Reform Act

G. Paperwork Reduction Act

H. Regulation Identifier Number (RIN)

I. Executive Order 13045

J. National Technology Transfer and Advancement Act

K. Executive Order 13211

L. Department of Energy Review

M. Plain Language

N. Privacy Act

XIV. Regulatory Text

I. Executive overview

A. Summary

This document is being issued pursuant to the Energy Independence and Security Act of 2007 (EISA), which Congress passed in December 2007. EISA mandates the setting of separate maximum feasible standards for passenger cars and for light trucks at levels sufficient to ensure that the average fuel economy of the combined fleet of all passenger cars and light trucks sold by all manufacturers in the U.S. in model year (MY) 2020 equals or exceeds 35 miles per gallon. That is a 40 percent increase above the average of approximately 25 miles per gallon for the current combined fleet.

Congress enabled NHTSA to require these substantial increases in fuel economy by requiring that passenger car standards be reformed through basing them on one or more vehicle attributes. The attribute-based approach was originally recommended by the National Academy of Sciences in 2002 and adopted by NHTSA for light trucks in 2006. The new approach is a substantial improvement over the old approach of specifying the same numerical standard for each manufacturer. It avoids creating undue risks of adverse safety and employment impacts and distributes compliance responsibilities among the vehicle manufacturers more equitably.

This document proposes standards for MYs 2011-2015, the maximum number of model years for which NHTSA can establish standards in a single rulemaking under EISA. Since lead time is a significant consideration in determining the stringency of future standards, the agency needs to establish the standards as far in advance as possible so as to maximize the amount of lead time for manufacturers to develop and implement plans for making the vehicle design changes necessary to achieve the requirements of EISA.

In developing the proposed standards, the agency considered the four statutory factors underlying maximum feasibility (technological feasibility, economic practicability, the effect of other standards of the Government on fuel economy, and the need of the nation to conserve energy) as well as other relevant considerations such as safety. After assessing what fuel saving technologies would be available, how effective they are, and how quickly they could be introduced, and then factoring that information into the computer model its uses for applying technologies to particular vehicle models, the agency then balanced the factors relevant to standard setting. In its decision making, the agency used a marginal benefit-cost analysis that placed monetary values on relevant externalities (both energy security and environmental externalities, including the benefits of reductions in CO

emissions). In the above process, the agency consulted with the Department of Energy and particularly the Environmental Protection Agency regarding a wide variety of matters, including, for example, the cost and effectiveness of available technologies, improvements to the computer model, and the selection of appropriate analytical assumptions.

This document also proposes to add a new regulation designed to give manufacturers added flexibility in using credits earned by exceeding CAFE standards. The regulation would authorize the trading of credits between manufacturers. In addition, it would permit a manufacturer to transfer its credits from one of its compliance categories to another of its categories.

NHTSA is also publishing two companion documents, one requesting vehicle manufacturers to provide up-to-date product plans for the model years covered by this document, and the other inviting Federal, State, and local agencies, Indian tribes, and the public to participate in identifying the environmental issues and reasonable alternatives to be examined in an environmental impact statement.

B. Energy Independence and Security Act of 2007

The Energy Independence and Security Act of 2007 (EISA)

builds on the President's “Twenty in Ten” initiative, which was announced in January 2007. That initiative sought to reduce gasoline usage by 20 percent in the next 10 years. The enactment of EISA represents a major step forward in expanding the production of renewable fuels, reducing oil consumption, and confronting global climate change.

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

EISA will help reduce America's dependence on oil by reducing U.S. demand for oil by setting a national fuel economy standard of at least 35 miles per gallon by 2020—which will increase fuel economy standards by 40 percent and save billions of gallons of fuel. In January 2007, the President called for the first statutory increase in fuel economy standards for passenger

automobiles (referred to below as “passenger cars”) since those standards were mandated in 1975, and EISA delivers on that request. EISA also includes an important reform the President has called for that allows the Transportation Department to issue “attribute-based standards,” which will ensure that increased fuel efficiency does not come at the expense of automotive safety. EISA also mandates increases in the use of renewable fuels by setting a mandatory Renewable Fuel Standard requiring fuel producers to use at least 36 billion gallons of renewable fuels in 2022.

As the President noted in signing EISA, the combined effect of the various actions required by the Act will be to produce some of the largest CO

emission reductions in our nation's history.

EISA made a number of important changes to the Energy Policy and Conservation Act (EPCA) (Pub. L. 94-163), the 1975 statute that governs the CAFE program. EISA:

• Replaces the old statutory default standard of 27.5 mpg for passenger cars with a mandate to establish separate passenger car and light truck standards annually, beginning with MY 2011, set at the maximum feasible level. The standards for MYs 2011-2020 must, as a minimum, be set sufficiently high to ensure that the average fuel economy of the combined industrywide fleet of all new passenger cars and light trucks sold in the United States during MY 2020 is at least 35 mpg.

Although NHTSA established an attribute-based standard for MY 2011 light trucks in its 2006 final rule, EISA mandates a new rulemaking, reflecting new statutory considerations and a new, up-to-date administrative record, and consistent with EPCA as amended by EISA, to establish the standard for those light trucks.

• Limits to five the number of years for which standards can be established in a single rulemaking. That requirement, in combination with the requirement to start rulemaking with MY 2011, necessitates limiting this rulemaking to MYs 2011-2015.

• Mandates the reforming of CAFE standards for passenger cars by requiring that all CAFE standards be based on one or more vehicle attributes, thus ensuring that the improvements in fuel economy do not come at the expense of safety. NHTSA pioneered that approach in its last rulemaking on CAFE standards for light trucks.

• Requires that for each model year, beginning with MY 2011, the domestic passenger cars of each manufacturer of those cars must achieve a measured average fuel economy that is not less than 92 percent of the average fuel economy of the combined fleet of domestic and non-domestic passenger cars sold in the United States in that model year.

• Provides greater flexibility for automobile manufacturers by (a) increasing from three to five the number of years that a manufacturer can carry forward the compliance credits it earns for exceeding CAFE standards, (b) allowing a manufacturer to transfer the credits it has earned from one of its classes of automobiles to another, and (c) authorizing the trading of credits between manufacturers.

C. Proposal

1. Standards

a. Stringency

This document proposes to set attribute-based fuel economy standards for passenger cars and light trucks consistent with the Reformed CAFE approach that NHTSA used in establishing the light truck standards for MY 2008-2011 light trucks. Separate passenger car standards would be set for MYs 2011-2015, and light truck standards would be set for MYs 2011-2015. As noted above, EISA limits the number of model years for which standards may be established in a single rulemaking to five. We are proposing to establish standards for five years to maximize the amount of lead time that we can provide the manufacturers. This is necessary to make it possible to achieve the levels of average fuel economy required by MY 2020.

Each vehicle manufacturer's required level of CAFE would be based on target levels of average fuel economy set for vehicles of different sizes and on the distribution of that manufacturer's vehicles among those sizes. Size would be defined by vehicle footprint. The level of the performance target for each footprint would reflect the technological and economic capabilities of the industry. The target for each footprint would be the same for all manufacturers, regardless of differences in their overall fleet mix. Compliance would be determined by comparing a manufacturer's harmonically averaged fleet fuel economy levels in a model year with a required fuel economy level calculated using the manufacturer's actual production levels and the targets for each footprint of the vehicles that it produces.

The proposed standards were developed using a computer model (known as the “Volpe Model”) that, for any given model year, applies technologies to a manufacturer's fleet until the manufacturer reaches compliance with the standard under consideration. The standards were tentatively set at levels such that, considering the seven largest manufacturers, the cost of the last technology application equaled the benefits of the improvement in fuel economy resulting from that application. We reviewed these proposed standards to consider the underlying increased use of technologies and the associated impact on the industry. This process recognizes that the relevance of costs in achieving benefits, and uses benefit figures that include the value of reducing the negative externalities (economic and environmental) from producing and consuming fuel. These environmental externalities include, among other things, reducing tailpipe emissions of CO

In view of the process used to develop the proposed standards, they are also referred to as “optimized standards.”

The externalities included in our analysis do not, however, include those associated with the reduction of the other GHG emitted by automobiles,

i.e.

, methane (CH

), nitrous oxide (N

O), and hydroflurocarbons (HFCs). Actual air conditioner operation is not included in the test procedures used to obtain both (1) emission rates for purposes of determining compliance with EPA criteria pollutant emission standards and (2) fuel economy values for purposes of determining compliance with NHTSA CAFE standards, although air conditioner operation is included in “supplemental” federal test procedures used to determine compliance with corresponding and separate EPA criteria pollutant emission standards.

Compared to the 2006 rulemaking that established the MY 2008-11 CAFE standards for light trucks, this rulemaking much more fully captures the value of the costs and benefits of setting CAFE standards. This is important because assumptions regarding gasoline price projections, along with assumptions for externalities, are based on changed economic and environmental and energy security conditions and play a big role in the agency's balancing of the statutory considerations in arriving at a determination of maximum feasible. In light of EISA and the need to balance the statutory considerations in a way that reflects the current need of the nation to conserve energy, including the current assessment of the climate change problem, the agency revisited the various assumptions used in the Volpe Model to determine the level of the standards. Specifically, in running the Volpe Model and stopping at a point where marginal costs equaled marginal benefits or where net benefits to society are maximized, the agency used higher gasoline prices and higher estimates for energy security values ($0.29 per gallon instead of $0.09 per gallon). The agency also monetized carbon dioxide (at

$7.00/ton), which it did not do in the previous rulemaking, and expanded its technology list. In addition, the agency used cost estimates that reflect economies of scale and estimated “learning”-driven reductions in the cost of technologies as well as quicker penetration rates for advanced technologies. These changes to the inputs to the model had a major impact on increasing the benefits in certain model years by allowing for greater penetration of technologies.

The agency cannot set out the exact level of CAFE that each manufacturer will be required to meet for each model year under the proposed passenger car or light truck standards since the levels will depend on information that will not be available until the end of each of the model years,

i.e.

, the final actual production figures for each of those years. The agency can, however, project what the industry wide level of average fuel economy would be for passenger cars and for light trucks if each manufacturer produced its expected mix of automobiles and just met its obligations under the proposed “optimized” standards for each model year. Adjacent to each average fuel economy figure is the estimated associated level of tailpipe emissions of CO

that would be achieved.

Given the contributions made by CAFE standards to addressing not only energy independence and security, but also to reducing tailpipe emissions of CO

, fleet performance is stated in the above discussion both in terms of fuel economy and the associated reductions in tailpipe emissions of CO

since the CAFE standard will have the practical effect of limiting those emissions approximately to the indicated levels during the official CAFE test procedures established by EPA. The relationship between fuel consumption and carbon dioxide emissions is discussed ubiquitously, such as at

www.fueleconomy.gov

, a fuel economy-related Web site managed by DOE and EPA (

see http://www.fueleconomy.gov/feg/contentIncludes/co2_inc.htm

, which provides a rounded value of 20 pounds of CO

per gallon of gasoline). (Last accessed April 20, 2008.) The CO

emission rates shown are based on gasoline characteristics. Because diesel fuel contains more carbon (per gallon) than gasoline, the presence of diesel engines in the fleet—which NHTSA expects to increase in response to the proposed CAFE standards—will cause the actual CO

emission rate corresponding to any given CAFE level to be slightly higher than shown here. (The agency projects that 4 percent of the MY 2015 passenger car fleet and 10 percent of the MY 2015 light truck fleet will have diesel engines.) Conversely (and hypothetically), applying the same CO

emission standard to both gasoline and diesel vehicles would discourage manufacturers from improving diesel engines, which show considerable promise as a means to improve fuel economy.

For passenger cars:

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

)

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

)

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

)

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

)

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

)

For light trucks:

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

)

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

)

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

)

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

)

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

)

The combined industry wide average fuel economy (in miles per gallon, or mpg) levels (in grams per mile, or g/mi) for both cars and light trucks, if each manufacturer just met its obligations under the proposed “optimized” standards for each model year, would be as follows:

MY 2011: 27.8 mpg (2.5 mpg increase above MY 2010; 320 g/mi CO

)

MY 2012: 29.2 mpg (1.4 mpg increase above MY 2011; 304 g/mi CO

)

MY 2013: 30.5 mpg (1.3 mpg increase above MY 2012; 291 g/mi CO

)

MY 2014: 31.0 mpg (0.5 mpg increase above MY 2013; 287 g/mi CO

)

MY 2015: 31.6 mpg (0.6 mpg increase above MY 2014; 281 g/mi CO

)

The annual average increase during this five year period is approximately 4.5 percent. Due to the uneven distribution of new model introductions during this period and to the fact that significant technological changes can be most readily made in conjunction with those introductions, the annual percentage increases are greater in the early years in this period.

Given a starting point of 31.8 mpg in MY 2015, the average annual increase for MYs 2016-2020 would need to be only 2.1 percent in order for the projected combined industry wide average to reach at least 35 mpg by MY 2020, as mandated by EISA.

In addition, per EISA, each manufacturer's domestic passenger fleet is required in each model year to achieve 27.5 mpg or 92 percent of the CAFE of the industry wide combined fleet of domestic and non-domestic passenger cars

for that model year, whichever is higher. This requirement results in the following alternative minimum standard (not attribute-based) for domestic passenger cars:

Those numbers set out several paragraphs above.

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

)

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

)

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

)

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

)

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

)

The agency is also issuing, along with this document, a notice requesting updated product plan information and other data to assist in developing a final rule. We recognize that the manufacturer product plans relied upon in developing this proposal—those plans received in late spring of 2007 in response to an early 2007 request for information—may already be outdated in some respects. We fully expect that manufacturers have revised those plans to reflect subsequent developments, especially the enactment of EISA.

We solicit comment on all aspects of this proposal, including the methodology, economic assumptions, analysis and tentative conclusions. In particular, we solicit comment on whether the proposed levels of CAFE satisfy EPCA,

e.g.

, reflect an appropriate balancing of the explicit statutory factors and other relevant factors. Other specific areas where we request comments are identified elsewhere in this preamble and in the Preliminary Regulatory Impact Analysis (PRIA). Based on public comments and other information, including new data and analysis, and updated product plans,

the standards adopted in the final rule could well be different from those proposed in this document.

The proposed standards are, in the first instance, based on the confidential product plans submitted by the manufacturers in the spring of 2006. The final rule will be based on the confidential plans submitted in the next several months. The agency anticipates that those new plans, which presumably will reflect in some measure the enactment of EISA and the issuance of this proposal, will project higher levels of average fuel economy than the 2006 product plans.

b. Benefits

We estimate that the proposed standards for passenger cars would save approximately 18.7 billion gallons of fuel and avoid tailpipe CO

emissions by 178 billion metric tons over the lifetime of the passenger cars sold during those model years, compared to the fuel savings and emissions reductions that would occur if the standards remained at the adjusted baseline (

i.e.

, the higher of manufacturer's plans and the manufacturer's required level of average fuel economy for MY 2010).

We estimate that the value of the total benefits of the proposed passenger car standards would be approximately $31 billion

over the lifetime of the 5 model

years combined. This estimate of societal benefits includes direct impacts from lower fuel consumption as well as externalities and also reflects offsetting societal costs resulting from the rebound effect.

The $22 billion estimate is based on a 7% discount rate for valuing future impacts. NHTSA

estimated benefits using both 7% and 3% discount rates. Under a 3% rate, net consumer benefits for passenger car CAFE improvements total $28 million.

We estimate that the proposed standards for light trucks would save approximately 36 billion gallons of fuel and prevent the tailpipe emission of 343 million metric tons of CO

over the lifetime of the light trucks sold during those model years, compared to the fuel savings and emissions reductions that would occur if the standards remained at the adjusted baseline. We estimate that the value of the total benefits of the proposed light truck standards would be approximately $57 billion

over the lifetime of the 5 model years of light trucks combined. This estimate of societal benefits includes direct impacts from lower fuel consumption as well as externalities and also reflects offsetting societal costs resulting from the rebound effect.

The $56 billion estimate is based on a 7% discount rate for valuing future impacts. NHTSA estimated benefits using both 7% and 3% discount rates. Under a 3% rate, net consumer benefits for light truck CAFE improvements total $70 million.

c. Costs

The total costs for manufacturers just complying with the standards for MY 2011-2015 passenger cars would be approximately $16 billion, compared to the costs they would incur if the standards remained at the adjusted baseline. The resulting vehicle price increases to buyers of MY 2015 passenger cars would be recovered or paid back

in additional fuel savings in an average of 56 months, assuming fuel prices ranging from $2.26 per gallon in 2016 to $2.51 per gallon in 2030.

See Section V.A.7 below for discussion of payback period.

The fuel prices (shown here in 2006 dollars) used to calculate the length of the payback period are those projected (Annual Energy Outlook 2008, revised early release) by the Energy Information Administration over the life of the MY 2011-2015 light trucks, not current fuel prices.

The total costs for manufacturers just complying with the standards for MY 2011-2015 light trucks would be approximately $31 billion, compared to the costs they would incur if the standards remained at the adjusted baseline. The resulting vehicle price increases to buyers of MY 2015 light trucks would be paid back in additional fuel savings in an average of 50 months, assuming fuel prices ranging from $2.26 to $2.51 per gallon.

d. Flexibilities

The agency's benefit and cost estimates do not reflect the availability and use of flexibility mechanisms, such as compliance credits and credit trading because EPCA prohibits NHTSA from considering the effects of those mechanisms in setting CAFE standards. EPCA has precluded consideration of the FFV adjustments ever since it was amended to provide for those adjustments. The prohibition against considering compliance credits was added by EISA.

The benefit and compliance cost estimates used by the agency in determining the maximum feasible level of the CAFE standards assume that manufacturers will rely solely on the installation of fuel economy technology to achieve compliance with the proposed standards. In reality, however, manufacturers are likely to rely to some extent on flexibility mechanisms provided by EPCA (as described in Section VI) and will thereby reduce the cost of complying with the proposed standards to a meaningful extent.

2. Credits

NHTSA is also proposing a new Part 536 on use of “credits” earned for exceeding applicable CAFE standards. Part 536 will implement the provisions in EISA authorizing NHTSA to establish by regulation a credit trading program and directing it to establish by regulation a credit transfer program.

Since its enactment, EPCA has permitted manufacturers to earn credits for exceeding the standards and to apply those credits to compliance obligations in years other than the model year in which it was earned. EISA extended the “carry-forward” period to five model years, and left the “carry-back” period at three model years. Under the proposed Part 536, credit holders (including, but not limited to, manufacturers) will have credit accounts with NHTSA, and will be able to hold credits, apply them to compliance with CAFE standards, transfer them to another “compliance category” for application to compliance there, or trade them. A credit may also be cancelled before its expiry date, if the credit holder so chooses. Traded credits will be subject to an “adjustment factor” to ensure total oil savings are preserved, as required by EISA. EISA also prohibits credits earned before MY 2011 from being transferred, so NHTSA has developed several regulatory restrictions on trading and transferring to facilitate Congress' intent in this regard. Additional information on the proposed Part 536 is available in section IX below.

Congress required that DOT establish a credit “transferring” regulation, to allow individual manufacturers to move credits from one of their fleets to another (e.g., using a credit earned for exceeding the light truck standard for compliance in the domestic passenger car standard). Congress allowed DOT to establish a credit “trading” regulation, so that credits may be bought and sold between manufacturers and other parties.

II. Background

A. Contribution of Fuel Economy Improvements to Addressing Energy Independence and Security and Climate Change

1. Relationship Between Fuel Economy and CO

Tailpipe Emissions

Improving fuel economy reduces the amount of tailpipe emissions of CO

. CO

emissions are directly linked to fuel consumption because CO

is the ultimate end product of burning gasoline. The more fuel a vehicle burns, the more CO

it emits. Since the CO

emissions are essentially constant per gallon of fuel combusted, the amount of fuel consumption per mile is directly related to the amount of CO

emissions per mile. Thus, requiring improvements in fuel economy indirectly, but necessarily requires reductions in tailpipe emissions of CO

emissions. This can be seen in the table below. To take the first value of fuel economy from the table below as an example, a standard of 21.0 mpg would indirectly place substantially the same limit on tailpipe CO

emissions as a tailpipe CO

emission standard of 423.2 g/mi of CO

, and vice versa.

To the extent that manufacturers comply with a CAFE standard with diesel automobiles instead of gasoline ones, the level of CO

tailpipe emissions would be less. As noted above, the agency projects that 4 percent of the MY 2015 passenger car fleet and 10 percent of the MY 2015 light truck fleet will have diesel engines. The CO

tailpipe emissions of a diesel powered passenger car are 15 percent higher than those of a comparable gasoline power passenger car.

Table II-1.—CAFE Standards (mpg) and the Limits They Indirectly Place on Tailpipe Emissions of CO

(g/mi)*

CAFE Std

21.0

444.4

26.0

341.8

31.0

286.7

36.0

246.9

41.0

216.8

46.0

193.2

22.0

404.0

27.0

329.1

32.0

277.7

37.0

240.2

42.0

211.6

47.0

188.3

23.0

386.4

28.0

317.4

33.0

269.3

38.0

233.9

43.0

206.7

48.0

189.1

24.0

370.3

29.0

306.4

34.0

261.4

39.0

227.9

44.0

202.0

49.0

181.4

25.0

355.5

30.0

296.2

35.0

253.9

40.0

222.2

45.0

197.5

50.0

177.7

This table is based on calculations that use the figure of 8,887 grams of CO

per gallon of gasoline consumed, based on characteristics of gasoline vehicle certification fuel. To convert a mpg value into CO

g/mi, divide 8,887 by the mpg value.

2. Fuel Economy Improvements/CO

Tailpipe Emission Reductions Since 1975

The need to take action to reduce greenhouse gas emissions,

e.g.

, motor vehicle tailpipe emissions of CO

, in order to forestall and even mitigate climate change is well recognized.

Less well recognized are two related facts. First, improving fuel economy is the only method available to motor vehicle manufacturers for making significant reductions in the CO

tailpipe emissions of motor vehicles and thus must be the core element of any effort to achieve those reductions. Second, the significant improvements in fuel economy since 1975, due to the CAFE standards and in some measure to market conditions as well, have directly caused reductions in the rate of CO

tailpipe emissions per vehicle.

IPCC (2007):

Climate Change 2007: Mitigation of Climate Change. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change

[B. Metz, O. Davidson, P. Bosch, R. Dave, and L. Meyer (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.

In 1975, passenger cars manufactured for sale in the U.S. averaged only 15.8 mpg (562.5 grams of CO

per mile or 562.5 g/mi of CO

). By 2007, the average fuel economy of passenger cars had increased to 31.3 mpg, causing g/mi of CO

to fall to 283.9. Similarly, in 1975, light trucks averaged 13.7 mpg (648.7 g/mi of CO

). By 2007, the average fuel economy of light trucks had risen to 23.1 mpg, causing g/mi of CO

to fall to 384.7.

Table II-2.—Improvements in MPG/Reductions in G/MI of CO

Passenger Cars

[1975-2007]

MPG

G/MI of CO

1975

15.8

562.5

2007

31.3

283.9

Table II-3.—Improvements in MPG/Reductions in G/MI of CO

Light Trucks

[1975-2007]

MPG

G/MI of CO

1975

13.7

648.7

2007

23.1

384.7

If fuel economy had not increased above the 1975 level, cars and light trucks would have emitted an additional 11 billion metric tons of CO

into the atmosphere between 1975 and 2005. That is nearly the equivalent of emissions from all U.S. fossil fuel combustion for two years (2004 and 2005). The figure below shows the amount of CO

emissions avoided due to increases in fuel economy.

BILLING CODE 4910-59-P

EP02MY08.000

B. Chronology of Events Since the National Academy of Sciences Called for Reforming and Increasing CAFE Standards

1. National Academy of Sciences CAFE Report (February 2002)

a. Significantly Increasing CAFE Standards Without Reforming Them Would Adversely Affect Safety

In the congressionally-mandated report entitled “Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards,”

a committee of the National Academy of Sciences (NAS) (“2002 NAS Report”) concluded that the then-existing form of passenger car and light truck CAFE standards created an incentive for vehicle manufacturers to comply in part by downweighting and even downsizing their vehicles and that these actions had led to additional fatalities. The committee explained that these problems arose because the CAFE standards subjected all passenger cars to the same fuel economy target and all light trucks to the same target, regardless of their weight, size, or load-carrying capacity. The committee said that this experience suggests that consideration should be given to developing a new system of fuel economy targets that reflects differences in such vehicle attributes.

National Research Council, “Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards,” National Academy Press, Washington, DC (2002).

Available at http://www.nap.edu/openbook.php?isbn=0309076013

(last accessed April 20, 2008). The conference committee report for the Department of Transportation and Related Agencies Appropriations Act for FY 2001 (Pub. L. 106-346) directed NHTSA to fund a study by NAS to evaluate the effectiveness and impacts of CAFE standards (H. Rep. No. 106-940, p. 117-118). In response to the direction from Congress, NAS published this lengthy report.

Looking to the future, the committee said that while it is technically feasible and potentially economically practicable to improve fuel economy without reducing vehicle weight or size and, therefore, without significantly affecting the safety of motor vehicle travel, the actual strategies chosen by manufacturers to improve fuel economy will depend on a variety of factors. In the committee's judgment, the extensive downweighting and downsizing that occurred after fuel economy requirements were established in the 1970s suggested that the likelihood of a similar response to further increases in fuel economy requirements must be considered seriously. Any reduction in vehicle size and weight would have safety implications.

The committee cautioned that the safety effects of downsizing and downweighting are likely to be hidden by the generally increasing safety of the light-duty vehicle fleet.

It said that some might argue that this improving safety picture means that there is room to improve fuel economy without adverse safety consequences; however, such an approach would not achieve the goal of avoiding the adverse safety consequences of fuel economy increases. Rather, the safety penalty imposed by increased fuel economy (if weight reduction is one of the measures) will be more difficult to identify in light of the continuing improvement in traffic safety. Although it is anticipated that these safety innovations will improve the safety of vehicles of all sizes, that does not mean that downsizing to achieve fuel economy improvements will not have any safety costs. If two vehicles of the same size are modified, one both by downsizing it and adding the safety innovations and the other just by adding the safety innovations, the latter vehicle will in all likelihood be safer.

Two of the 12 members of the committee dissented from the majority's safety analysis and conclusions.

The committee concluded that if an increase in fuel economy were implemented pursuant to standards that are structured in a way that encourages either downsizing or the increased production of smaller vehicles, some additional traffic fatalities would be expected. Without a thoughtful restructuring of the program, there would be the trade-offs that must be made if CAFE standards were increased by any significant amount.

NAS, p. 9.

In response to these conclusions, NHTSA began issuing attribute-based CAFE standards for light trucks and sought legislative authority to issue attribute-based CAFE standards for passenger cars before undertaking to raise the car standards. Congress went a step further in enacting EISA, not only authorizing the issuance of attribute-based standards, but also mandating them.

Fully realizing all of the safety and other

benefits of these reforms will depend in part on whether the unreformed, non-attribute based greenhouse standards adopted by California and other states are implemented. Apart from issues of relative stringency, the effects on vehicle manufacturers of implementing those state emission standards should be substantially similar to the effects of implementing non-attribute-based CAFE standards, given the nearly identical nature of most aspects of those emission standards and CAFE standards in terms of technological means of compliance and methods of measuring performance.

Reformed CAFE has several advantages compared to Unreformed CAFE:

First, Reformed CAFE increases energy savings. The energy-saving potential of Unreformed CAFE is limited because only a few full-line manufacturers are required to make improvements. Under Reformed CAFE, which accounts for size differences in product mix, virtually all manufacturers will be required to use advanced fuel-saving technologies to achieve the requisite fuel economy for their automobiles.

Second, Reformed CAFE reduces the chances of adverse safety consequences. Downsizing of vehicles as a CAFE compliance strategy is discouraged under Reformed CAFE since as vehicles become smaller, the applicable fuel economy target becomes more stringent.

Third, Reformed CAFE provides a more equitable regulatory framework for different vehicle manufacturers. Under Unreformed CAFE, the cost burdens and compliance difficulties have been imposed nearly exclusively on the full-line manufacturers.

Fourth, Reformed CAFE is more market-oriented because it more fully respects economic conditions and consumer choice. Reformed CAFE does not force vehicle manufacturers to adjust fleet mix toward smaller vehicles although they can make adjustments if that is what consumers are demanding. Instead, it allows the manufacturers to adjust the mix of their product offerings in response to the market place.

b. Environmental and Other Externalities Justify Increasing the CAFE Standards

The 2002 NAS report also concluded that the CAFE standards have contributed to increased fuel economy, which in turn has reduced dependence on imported oil, improved the nation's terms of trade, and reduced emissions of carbon dioxide (a principal greenhouse gas), relative to what they otherwise would have been. If fuel economy had not improved, gasoline consumption (and crude oil imports) would be about 2.8 million barrels per day (mmbd) greater than it is.

Reducing fuel consumption in vehicles also reduces carbon dioxide emissions. If the nation were using 2.8 mmbd more gasoline, carbon emissions would be more than 100 million metric tons of carbon (mmtc) higher. Thus, improvements in light-duty vehicle (4 wheeled motor vehicles under 10,000 pounds gross vehicle weight rating) fuel economy have reduced overall U.S. emissions by about 7 percent.

NAS, pp. 3 and 20.

NAS, p. 20.

The report concluded that technologies exist that could significantly further reduce fuel consumption by passenger cars and light trucks within 15 years, while maintaining vehicle size, weight, utility and performance.

Light duty trucks

were said to offer the greatest potential for reducing fuel consumption.

The report also noted that vehicle development cycles—as well as future economic, regulatory, safety and consumer preferences—would influence the extent to which these technologies could lead to increased fuel economy in the U.S. market. To assess the economic trade-offs associated with the introduction of existing and emerging technologies to improve fuel economy, the NAS conducted what it called a “cost-efficient analysis” based on the direct benefits (value of saved fuel) to the consumer—“that is, the committee identified packages of existing and emerging technologies that could be introduced over the next 10 to 15 years that would improve fuel economy up to the point where further increases in fuel economy would not be reimbursed by fuel savings.”

NAS, p. 3 (Finding 5).

NAS, p. 4 (Finding 5).

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

The committee emphasized that it is critically important to be clear about the reasons for considering improved fuel economy. While the dollar value of the saved fuel would be largest portion of the potential benefits, the committee noted that there is theoretically insufficient reason for the government to issue higher standards just to obtain those direct benefits since consumers have a wide variety of opportunities to buy a fuel-efficient vehicle.

NAS, pp. 8-9.

The committee said that there are two compelling concerns that justify a government mandated increase in fuel economy, both relating to externalities. The most important concern, it argued, is the one about the accumulation in the atmosphere of greenhouse gases, principally carbon dioxide.

NAS, pp. 2, 13, and 83.

A second concern is that petroleum imports have been steadily rising because of the nation's increasing demand for gasoline without a corresponding increase in domestic supply. The high cost of oil imports poses two risks: Downward pressure on the strength of the dollar (which drives up the cost of goods that Americans import) and an increase in U.S. vulnerability to macroeconomic shocks that cost the economy considerable real output.

To determine how much the fuel economy standards should be increased, the committee urged that all social benefits be considered. That is, it urged not only that the dollar value of the saved fuel be considered, but also that the dollar value to society of the resulting reductions in greenhouse gas emissions and in dependence on imported oil should be calculated and considered. The committee said that if it is possible to assign dollar values to these favorable effects, it becomes possible to make at least crude comparisons between the socially beneficial effects of measures to improve fuel economy on the one hand, and the costs (both out-of-pocket and more subtle) on the other. The committee chose a value of about $0.30/gal of gasoline for the externalities associated with the combined impacts of fuel consumption on greenhouse gas emissions and on world oil market conditions.

NAS, pp. 4 and 85-86.

The report expressed concerns about increasing the standards under the CAFE program as currently structured. While raising CAFE standards under the existing structure would reduce fuel consumption, doing so under alternative structures “could accomplish the same end at lower cost, provide more flexibility to manufacturers, or address inequities arising from the present” structure.

Further, the committee said, “to the extent that the size and weight of the fleet have been constrained by CAFE requirements * * * those requirements have caused more injuries and fatalities on the road than would otherwise have occurred.”

Specifically, it noted: “The downweighting and downsizing that occurred in the late 1970s and early 1980s, some of which was due to CAFE standards, probably resulted in an additional 1300 to 2600 traffic fatalities in 1993.”

NAS, pp. 4-5 (Finding 10).

NAS, p. 29.

NAS, p. 3 (Finding 2).

To address those structural problems, the report suggested various possible reforms. The report found that the “CAFE program might be improved significantly by converting it to a system in which fuel targets depend on vehicle attributes.”

The report noted further that under an attribute-based approach, the required CAFE levels could vary among the manufacturers based on the distribution of their product mix. NAS stated that targets could vary among passenger cars and among trucks, based on some attribute of these vehicles such as weight, size, or load-carrying capacity. The report explained that a particular manufacturer's average target for passenger cars or for trucks would depend upon the fractions of vehicles it sold with particular levels of these attributes.

NAS, p. 5 (Finding 12).

NAS, p. 87.

In February 2002, Secretary Mineta asked Congress “to provide the Department of Transportation with the necessary authority to reform the CAFE program, guided by the NAS report's suggestions.”

2. Final Rule Establishing Reformed (Attribute-Based) CAFE Standards for MY 2008-2011 Light Trucks (March 2006)

The 2006 final rule reformed the structure of the CAFE program for light trucks and established higher CAFE standards for MY 2008-2011 light trucks.

Reforming the CAFE program enables it to achieve larger fuel savings, while enhancing safety and preventing adverse economic consequences.

71 FR 17566; April 6, 2006.

During a transition period of MYs 2008-2010, manufacturers may comply with CAFE standards established under the reformed structure (Reformed CAFE) or with standards established in the traditional way (Unreformed CAFE). This permits manufacturers and the agency to gain experience with implementing the Reformed CAFE standards. Under the 2006 rule, all manufacturers were required to comply with a Reformed CAFE standard in MY 2011.

Under Reformed CAFE, fuel economy standards were restructured so that they are based on a measure of vehicle size called “footprint,” which is the product of multiplying a vehicle's wheelbase by average its track width. A target level of fuel economy was established for each increment in footprint (0.1 ft

). Trucks with smaller footprints have higher fuel economy targets; conversely, larger ones have lower targets. A particular manufacturer's compliance obligation for a model year will be calculated as the harmonic average of the fuel economy targets for the manufacturer's vehicles, weighted by the distribution of manufacturer's production volumes among the footprint increments. Thus, each manufacturer will be required to comply with a single overall average fuel economy level for each model year of production.

The approach for determining the fuel economy targets was to set them just below the level where the increased cost of technologies that could be adopted by manufacturers to improve fuel economy would first outweigh the added benefits that would result from such technology. These targets translate into required levels of average fuel economy that are technologically feasible because manufacturers can achieve them using available technologies. Those levels also reflect the need of the nation to reduce

energy consumption because they reflect the economic value of the savings in resources, as well as of the reductions in economic and environmental externalities that result from producing and using less fuel.

The Unreformed CAFE standards are:

22.5 miles per gallon (mpg) for MY 2008, 23.1 mpg for MY 2009, and 23.5 mpg for MY 2010. To aid the transition to Reformed CAFE, the Reformed CAFE standards for those years were set at levels intended to ensure that the industry-wide costs of the Reformed standards are roughly equivalent to the industry-wide costs of the Unreformed CAFE standards in those model years. For MY 2011, the Reformed CAFE standard was set at the level that maximizes net benefits. Net benefits include the increase in light truck prices due to technology improvements, the decrease in fuel consumption, and a number of other factors. All of the standards were set at the maximum feasible level, while accounting for technological feasibility, economic practicability and other relevant factors.

We carefully balanced the costs of the rule with the benefits of reducing energy consumption. Compared to Unreformed CAFE, Reformed CAFE enhances overall fuel savings while providing vehicle manufacturers with the flexibility they need to respond to changing market conditions. Reformed CAFE will also provide a more equitable regulatory framework by creating a level-playing field for manufacturers, regardless of whether they are full-line or limited-line manufacturers. We were particularly encouraged that Reformed CAFE will eliminate the incentive to downsize some of their fleet as a CAFE compliance strategy, thereby reducing the adverse safety risks associated with the Unreformed CAFE program.

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

In his January 2007 State of the Union address, the President announced his Twenty-in-Ten initiative for increasing the supply of renewable and alternative fuels and reforming and increasing the CAFE standards. Consistent with the NAS report, he urged the authority be provided to reform CAFE for passenger cars by adopting an attribute-based system (for example, a size-based system) reduces the risk that vehicle safety is compromised, helps preserve consumer choice, and helps spread the burden of compliance across all product lines and manufacturers. He also urged that authority be provided to set the CAFE standards, based on cost/benefit analysis, using sound science, and without impacting safety.

4. Request for Passenger Car and Light Truck Product Plans (February 2007)

In late February 2007, NHTSA published a notice to acquire new and updated information regarding vehicle manufacturers' future product plans to aid in implementing the President's plan for reforming and increasing CAFE standards for passenger cars and further increasing the already reformed light truck standards. More specifically, the agency said:

* * * we are seeking information related to fuel economy improvements for MY 2007-2017 passenger cars and MY 2010-2017 light trucks. The agency is seeking information in anticipation of obtaining statutory authority to reform the passenger car CAFE program and to set standards under that structure for MY 2010-2017 passenger cars. The agency is also seeking this information in anticipation of setting standards for MY 2012-2017 light trucks.

72 FR 8664; February 27, 2007.

5. Supreme Court Decision in

Massachusetts

EPA

(April 2007)

On April 2, 2007, the U.S. Supreme Court issued its opinion in

Massachusetts

EPA

The Court ruled that the state of Massachusetts had standing because it had already lost a small amount of land and stood to lose more due to global warming induced increases in sea level; that some portion of this harm was traceable to the absence of a regulation issued by EPA requiring reductions in GHG emissions (CO

emissions, most notably) by motor vehicles; and that issuance of such an EPA regulation by EPA would reduce the risk of further harm to Massachusetts. On the merits, the Court ruled that greenhouse gases are “pollutants” under the Clean Air Act and that the Act therefore authorizes EPA to regulate greenhouse gas emissions from motor vehicles if EPA makes the necessary findings and determinations under section 202 of the Act.

127 S.Ct. 1438 (2007).

The Court considered EPCA briefly, noting that it and the Clean Air Act have different overall purposes. It noted further that the two acts overlap, but did not define the nature or extent of that overlap. It concluded that EPCA did not relieve EPA of its statutory obligations and expressed confidence that the two acts could be consistently administered. The Court did not address the express preemption provision in EPCA.

6. Coordination Between NHTSA and EPA on Development of Rulemaking Proposals (Summer-Fall 2007)

In the wake of the Supreme Court's decision and in the absence of the legislation he called for in his 2007 State of the Union message, the President called on NHTSA and EPA to take the first steps toward regulations that would cut gasoline consumption and greenhouse gas emissions from motor vehicles, using his Twenty-in-Ten initiative as a starting point. He asked them “to listen to public input, to carefully consider safety, science, and available technologies, and evaluate the benefits and costs before they put forth the new regulation.” He also issued an executive order directing all of the departments and agencies to work together on the proposal.

Pursuant to the President's directive, NHTSA and EPA staff jointly assessed which technologies would be available and their effectiveness and cost. They also jointly assessed the key economic and other assumptions affecting the stringency of future standards. Finally, they worked together in updating and further improving the Volpe model that had been used to help determine the stringency of the MY 2008-2011 light truck CAFE standards. Much of the work between NHTSA and EPA staff was reflected in rulemaking proposals being developed by NHTSA prior to the enactment of EISA and was substantially retained when NHTSA revised its proposals to be consistent with that legislation. Ultimately, the proposals being published today are based on NHTSA's assessments of how they meet EPCA, as amended by EISA.

7. Ninth Circuit Decision Re Final Rule for MY 2008-2011 Light Trucks (November 2007)

On November 15, 2007, the United States Court of Appeals for the Ninth Circuit issued its decision in

Center for Biological Diversity

NHTSA

the challenge to the MY 2008-11 light truck CAFE rule. The Court rejected the petitioners' argument that EPCA precludes the use of a marginal cost-benefit analysis that attempted to weigh all of the social benefits (

i.e.

, externalities as well as direct benefits to consumers) of improved fuel savings in determining the stringency of the CAFE standards. It cautioned, however, that it had not reviewed whether the agency's balancing of the statutory factors in setting those standards was arbitrary and capricious. In that regard, it noted that much had changed since a court of appeals had last (

i.e.

, in the late 1980's) reviewed the agency's balancing of those factors in a rulemaking. Specifically, it noted increases in scientific knowledge of climate change

and in the need to reduce importation of petroleum since that time.

508 F.3d 508.

Further, the Court found that NHTSA had been arbitrary and capricious in its treatment of the following issues:

• NHTSA's decision not to monetize the benefit of reducing CO

emissions and use that value in conducting its marginal benefit-cost analysis based on its view that the value of the benefit of CO

emission reductions resulting from fuel consumption reductions was too uncertain to permit the agency to determine a value for those emission reductions;

The agency has developed a value for those reductions and used it in the analyses underlying the standards proposed in this NPRM. For further discussion, see section V of this preamble.

• NHTSA's decision not to establish a “backstop” (

i.e.

, a fixed minimum CAFE standard applicable to manufacturers);

EISA's requirement that standards be based on one or more vehicle attributes and its specification for domestic passenger cars, but not for nondomestic passenger cars or light trucks of an absolute CAFE level appear to preclude the specification of such a backstop standard for the latter two categories of automobiles. For further discussion, see Section VI of this preamble.

• NHTSA's decision not to proceed to revise the regulatory definitions for the passenger car and light truck categories of automobiles so that some vehicles currently classified as light trucks are instead classified as passenger cars;

In this NPRM, NHTSA examines the legislative history of the statutory definitions of “automobile” and “passenger automobile” and the term “nonpassenger automobile” and analyses the impact of that moving any vehicles out of the nonpassenger automobile (light truck) category into the passenger automobile (passenger car) category would have the level of standards for both groups of automobiles. For further discussion, see Section VIII of this preamble.

• NHTSA's decision not to subject most medium- and heavy-duty pickups and most medium- and heavy-duty cargo vans (i.e., those between 8,500 and 10,000 pounds gross vehicle weight rating (GVWR,) to the CAFE standards;

EISA removed these vehicles from the statutory definition of “automobile” and mandated the establishment of CAFE standards for them following the completion of reports by the National Academy of Sciences and NHTSA.

• NHTSA's limited assessment of cumulative impacts and regulatory alternatives in its Environmental Assessment (EA) under the National Environmental Policy Act (NEPA), and its decision to prepare and publish an EA, coupled with a finding of no significant impact, instead of an Environmental Impact Statement (EIS).

On February 9, NHTSA filed a petition with the Ninth Circuit for rehearing en banc on the issue of whether the panel in

CBD

acted within its authority in ordering the agency to prepare an EIS instead of remanding the issue to the agency and directing it to conduct a new, fuller environmental analysis and decide whether an EIS is required. In addition, NHTSA has published a notice of intent to prepare an environmental impact statement, thus beginning the EIS process for this rulemaking, as discussed in Section XIII.B. of this NPRM.

The Court did not vacate the standards, but instead said it would remand the rule to NHTSA to promulgate new standards consistent with its opinion “as expeditiously as possible and for the earliest model year practicable.

Under the decision, the standards established by the April 2006 final rule would remain in effect unless and until amended by NHTSA.

The deadline in EPCA for issuing a final rule establishing, for the first time, a CAFE standard for a model year is 18 months before the beginning of that model year. 49 U.S.C. 32902(g)(2). The same deadline applies to issuing a final rule amending an existing CAFE standard so as to increase its stringency. Given that the agency has long regarded October 1 as the beginning of a model year, the statutory deadline for increasing the MY 2009 standard was March 30, 2007, and the deadline for increasing the MY 2010 standard is March 30, 2008. Thus, the only model year for which there is sufficient time to gather all of the necessary information, conduct the necessary analyses and complete a rulemaking is MY 2011. As noted earlier in this document, however, EISA requires that a new standard be established for that model year. This rulemaking is being conducted pursuant to that requirement.

On February 6, 2008, the Government petitioned for en banc rehearing by the Ninth Circuit on the limited issue of whether it was appropriate for the panel, having held that the agency insufficiently explored the environmental implications of the MY 2008-11 rulemaking in its EA, to order the agency to prepare an EIS rather than simply remanding the matter to the agency for further analysis.

As of the date of the issuance of this proposal, the Court has not yet issued its mandate in this case.

8. Enactment of Energy Security and Independence Act of 2007 (December 2007)

As noted above in section I.B., EISA significantly changed the provisions of EPCA governing the establishment of future CAFE standards. These changes made it necessary for NHTSA to pause in its efforts so that it could assess the implications of the amendments made by EISA and then, as required, revise some aspects of the proposals it had been developing (

e.g.

, the model years covered and credit issues).

C. Energy Policy and Conservation Act, as Amended

EPCA, which was enacted in 1975, mandates a motor vehicle fuel economy regulatory program to improve the nation's energy security and energy efficiency. It gives the authority under EPCA to regulate fuel economy to DOT, which has delegated that authority to NHTSA at 49 CFR 1.50. EPCA allocates the responsibility for implementing the program as follows: NHTSA sets CAFE standards for passenger cars and light trucks; EPA calculates the average fuel economy of each manufacturer's passenger cars and light trucks; and NHTSA enforces the standards based on EPA's calculations.

We have summarized below EPCA, as amended by EISA. We request comment on how EPCA should be implemented to achieve the goals and meet the requirements of EISA. For example, what assumptions, methodologies and computations should be used in establishing and implementing the new standards?

1. Vehicles Subject to Standards for Automobiles

With two exceptions, all four-wheeled motor vehicles with a gross vehicle weight rating of 10,000 pounds or less will be subject to the CAFE standards, beginning with MY 2011. The exceptions will be work trucks

and multi-stage vehicles. Work trucks are defined as vehicles that are:

While EISA excluded work trucks from “automobiles,” it did not exclude them from regulation under EPCA. EISA requires that work trucks be subjected to CAFE standards, but only first after the National Academy of Sciences completes a study and then after NHTSA completes a follow-on study. Congress thus recognized and made allowances for the practical difficulties that led NHTSA to decline to include work trucks in its final rule for MY 2008-11 light trucks.

—rated at between 8,500 and 10,000 pounds gross vehicle weight; and

—are not a medium-duty passenger vehicle (as defined in section 86.1803-01 of title 40, Code of Federal Regulations, as in effect on the date of the enactment of the Ten-in-Ten Fuel Economy Act).

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

Medium-duty passenger vehicles (MDPV) include 8,500 to 10,000 lb. GVWR sport utility vehicles (SUVs), short bed pick-up trucks, and passenger vans, but exclude pickup trucks with longer beds and cargo vans rated at between 8,500 and 10,000 lbs GVWR. It is those excluded pickup trucks and cargo vans that are work trucks. “Multi-stage vehicle” includes any vehicle manufactured in different stages by 2 or more manufacturers, if no intermediate or final-stage manufacturer of that vehicle manufactures more than 10,000 multi-stage vehicles per year.

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

Under EPCA, as it existed before EISA, the agency had discretion whether to regulate vehicles with a GVWR between 6,000 and 10,000 lbs., GVWR. It could regulate the fuel

economy of vehicles with a GVWR within that range under CAFE if it determined that (1) standards were feasible for these vehicles, and (2) either (a) that these vehicles were used for the same purpose as vehicles rated at not more than 6,000 lbs. GVWR, or (b) that their regulation would result in significant energy conservation.

EISA eliminated the need for administrative determinations in order to subject vehicles between 6,000 and 10,000 lbs. GVWR to the CAFE standards for automobiles. Congress did so by making the determination itself that all vehicles within that GVWR range should be included, with the exceptions noted above.

2. Mandate To Set Standards for Automobiles

As amended by EISA, EPCA requires that the agency establish standards for all new automobiles for each model year at the maximum feasible levels for that model year. A manufacturer's individual passenger cars and light trucks are not required to meet a particular fuel economy level. Instead, the harmonically averaged fuel economy of a manufacturer's production of passenger cars (or light trucks) in a particular model year must meet the standard for those automobiles for that model year.

For model years 2011-2020, several special requirements, in addition to the maximum feasible requirement, are specified.

Each of the requirements must be interpreted in light of the other requirements. For those model years, separate standards for passenger cars and for light trucks must be set at high enough levels to ensure that the CAFE of the industry wide combined fleet of new passenger cars and light trucks for MY 2020 is not less than 35 mpg. The 35 mpg figure is not a standard applicable to any individual manufacturer. It is a requirement, applicable to the agency, regarding the combined effect of the separate standards for passenger cars and light trucks that NHTSA is to establish for MY 2020. EISA does not specify precisely how compliance with this requirement is to be ensured or how or when the CAFE of the industry wide combined fleet for MY 2020 is to be calculated for purposes of determining compliance. As a practical matter, to ensure that this level is achieved, the standard for MY 2020 passenger cars would have to be above 35 mpg and the one for MY 2020 light trucks might or might not be below 35 mpg. Similarly, the CAFE of some manufacturers' combined fleet of passenger cars and light trucks would be above 35 mpg, while the combined fleet of others might or might not be below 35 mpg. The standards for passenger cars and those for light trucks must increase ratably each year. The CAFE of each manufacturer's fleet of domestic passenger cars must meet a sliding, absolute minimum level in each model year: 27.5 mpg or 92 percent of the projected CAFE of the industry wide fleet of new domestic passenger cars for that model year.

Under EPCA, prior to its amendment by EISA, the standard for passenger cars was 27.5 mpg unless amended to a higher or lower level by DOT. Per EISA, the standard will remain at 27.5 mpg through MY 2010.

EPCA, as it existed before EISA, EPCA required that light truck standards be set at the maximum feasible level for each model year, but simply specified a default standard of 27.5 mpg for passenger cars for MY 1985 and thereafter. It permitted, but did not require that NHTSA establish a higher or lower standard for passenger cars if the agency found that the maximum feasible level of fuel economy is higher or lower than 27.5 mpg.

3. Structure of Standards

The standards for passenger cars and light trucks must be based on one or more vehicle attributes and expressed in terms of a mathematical function. This makes it possible to increase the CAFE standards for both passenger cars and light trucks significantly without creating incentives to improve fuel economy in ways that reduce safety. Formerly, EPCA provided authority for this approach for light trucks, but not passenger cars.

4. Factors Governing or Considered in the Setting of Standards

In determining the maximum feasible level of average fuel economy for a model year, EPCA requires that the agency consider four factors: technological feasibility, economic practicability, the effect of other standards of the Government on fuel economy, and the need of the nation to conserve energy. EPCA does not define these terms or specify what weight to give each concern in balancing them; thus, NHTSA defines them and determines the appropriate weighting based on the circumstances in each CAFE standard rulemaking.

“Technological feasibility” means whether a particular method of improving fuel economy can be available for commercial application in the model year for which a standard is being established.

“Economic practicability” means whether a standard is one “within the financial capability of the industry, but not so stringent as to” lead to “adverse economic consequences, such as a significant loss of jobs or the unreasonable elimination of consumer choice.”

In an attempt to ensure the economic practicability of attribute based standards, the agency considers a variety of factors, including the annual rate at which manufacturers can increase the percentage of its fleet that has a particular type of fuel saving technology, and cost to consumers. Since consumer acceptability is an element of economic practicability, the agency has limited its consideration of fuel saving technologies to be added to vehicles to those that provide benefits that match their costs. Disproportionately expensive technologies are not likely to be accepted by consumers.

67 FR 77015, 77021; December 16, 2002.

At the same time, the law does not preclude a CAFE standard that poses considerable challenges to any individual manufacturer. The Conference Report for EPCA, as enacted in 1975, makes clear, and the case law affirms, “(A) determination of maximum feasible average fuel economy should not be keyed to the single manufacturer which might have the most difficulty achieving a given level of average fuel economy.”

Instead, the agency is compelled “to weigh the benefits to the nation of a higher fuel economy standard against the difficulties of individual automobile manufacturers.”

Id.

The law permits CAFE standards exceeding the projected capability of any particular manufacturer as long as the standard is economically practicable for the industry as a whole. Thus, while a particular CAFE standard may pose difficulties for one manufacturer, it may also present opportunities for another. The CAFE program is not necessarily intended to maintain the competitive positioning of each particular company. Rather, it is intended to enhance fuel economy of the vehicle fleet on American roads, while protecting motor vehicle safety and the totality of American jobs and the overall United States economy.

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

“The effect of other motor vehicle standards of the Government on fuel economy” means “the unavoidable adverse effects on fuel economy of compliance with emission, safety, noise, or damageability standards.” In the case of emission standards, this includes standards adopted by the Federal government and can include standards adopted by the States as well, since in certain circumstances the Clean Air Act

permits States to adopt and enforce State standards in lieu of the Federal ones. It does not, however, include State standards expressly preempted by EPCA.

49 U.S.C. 32919 and 71 FR 17566, 17654-70; April 6, 2006.

“The need of the United States to conserve energy” means “the consumer cost, national balance of payments, environmental, and foreign policy implications of our need for large quantities of petroleum, especially imported petroleum.” Environmental implications principally include reductions in emissions of criteria pollutants and carbon dioxide. A prime example of foreign policy implications are energy independence and security concerns.

The agency has considered environmental issues in making decisions about the setting of standards from the earliest days of the CAFE program. As the three courts of appeal have noted in decisions stretching over the last 20 years,

the agency defined the “need of the Nation to conserve energy” in the late 1970's as including “the consumer cost, national balance of payments, environmental, and foreign policy implications of our need for large quantities of petroleum, especially imported petroleum.”

Pursuant to that view, the agency declined to include diesel engines in determining the maximum feasible level of average fuel economy for passenger cars and for light trucks because particulate emissions from diesels were then both a source of concern and unregulated.

In the late 1980's, NHTSA cited concerns about climate change as one of its reasons for limiting the extent of its reduction of the CAFE standard for MY 1989 passenger cars

and for declining to reduce the standard for MY 1990 passenger cars.

Since then, DOT has considered the indirect benefits of reducing tailpipe carbon dioxide emissions in its fuel economy rulemakings pursuant to the statutory requirement to consider the nation's need to conserve energy by reducing consumption. In this rulemaking, consistent with the Ninth Circuit's decision and its observations about the potential effect of changing information about climate change on the balancing of the EPCA factors and aided by the 2007 reports of the United Nations Intergovernmental Panel on Climate Change

and other information, NHTSA is monetizing the reductions in tailpipe emissions of CO

that will result from the CAFE standards and is proposing to set the MY 2011-15 CAFE standards at levels that reflect the value of those reductions in CO

as well as the value of other benefits of those standards. In setting CAFE standards, NHTSA also considers environmental impacts under NEPA, 42 U.S.C. 4321-4347.

Center for Auto Safety

NHTSA,

793 F.2d 1322, 1325 n. 12 (DC Cir. 1986);

Public Citizen

NHTSA,

848 F.2d 256, 262-3 n. 27 (DC Cir. 1988) (noting that “NHTSA itself has interpreted the factors it must consider in setting CAFE standards as including environmental effects”); and

Center for Biological Diversity

NHTSA,

508 F.3d 508, 529 (9th Cir. 2007).

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

For example, the final rules establishing CAFE standards for MY 1981-84 passenger cars, 42 FR 33,533, 33,540-1 and 33,551; June 30, 1977, and for MY 1983-85 light trucks, 45 FR 81,593, 81,597; December 11, 1980.

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

54 FR 21985,

The IPCC 2007 reports can be found at

http://www.ipcc.ch/.

(Last accessed April 20, 2008.)

In addition, the agency is permitted to consider additional relevant societal considerations. For example, historically, it has considered the potential for adverse safety consequences when deciding upon a maximum feasible level. This practice is sanctioned in case law.

See, e.g., Center for Auto Safety

NHTSA

(CAS), 793 F. 2d 1322 (DC Cir. 1986) (Administrator's consideration of market demand as component of economic practicability found to be reasonable); Public Citizen 848 F.2d 256 (Congress established broad guidelines in the fuel economy statute; agency's decision to set lower standard was a reasonable accommodation of conflicting policies). As the United States Court of Appeals pointed out in upholding NHTSA's exercise of judgment in setting the 1987-1989 passenger car standards, “NHTSA has always examined the safety consequences of the CAFE standards in its overall consideration of relevant factors since its earliest rulemaking under the CAFE program.”

Competitive Enterprise Institute

NHTSA

(CEI I), 901 F.2d 107, 120 at n.11 (DC Cir. 1990).

EPCA requires that the MY 2011-2019 CAFE standards for passenger cars and for light trucks must both increase ratably to at least the levels necessary to meet 35 mpg requirement for MY 2020. NHTSA interprets this to mean that the standards must make steady progress toward the levels necessary for the average fuel economy of the combined industry wide fleet of all new passenger cars and light trucks sold in the United States during MY 2020 to reach at least 35 mpg.

Finally, EPCA provides that in determining the level at which it should set CAFE standards for a particular model year, NHTSA may not consider the ability of manufacturers to take advantage of several EPCA provisions that facilitate compliance with the CAFE standards and thereby reduce the costs of compliance. As noted below in Section II, manufacturers can earn compliance credits by exceeding the CAFE standards and then use those credits to achieve compliance in years in which their measured average fuel economy falls below the standards. Manufacturers can also increase their CAFE levels through MY 2019 by producing alternative fuel vehicles. EPCA provides an incentive for producing these vehicles by specifying that their fuel economy is to be determined using a special calculation procedure that results in those vehicles being assigned a high fuel economy level.

5. Consultation in Setting Standards

EPCA provides that NHTSA is to consult with the Department of Energy (DOE) and Environmental Protection Agency in prescribing CAFE standards. It provides further that NHTSA is to provide DOE with an opportunity to provide written comments on draft proposed and final CAFE standards.

In addition, Executive Order No. 13432 provides that a Federal agency undertaking a regulatory action that can reasonably be expected to directly regulate emissions, or to substantially and predictably affect emissions, of greenhouse gases from motor vehicles, shall act jointly and consistently with other agencies to the extent possible and to consider the views of other agencies regarding such action.

6. Compliance Flexibility and Enforcement

EPCA specifies a precise formula for determining the amount of civil penalties for failure to comply with a standard. The penalty, as adjusted for inflation by law, is $5.50 for each tenth of a mpg that a manufacturer's average fuel economy falls short of the standard for a given model year multiplied by the total volume of those vehicles in the affected fleet (

i.e.

, import or domestic passenger car, or light truck), manufactured for that model year. The amount of the penalty may not be reduced except under the unusual or extreme circumstances specified in the statute.

Likewise, EPCA provides that manufacturers earn credits for exceeding a standard. The amount of credit earned is determined by multiplying the number of tenths of a mpg by which a manufacturer exceeds a standard for a particular category of automobiles by the total volume of automobiles of that category manufactured by the manufacturer for a given model year.

EPA is responsible for measuring automobile manufacturers' CAFE so that NHTSA can determine compliance with the CAFE standards. In making these measurements for passenger cars, EPA is required by EPCA

to use the EPA test

procedures in place as of 1975 (or procedures that give comparable results), which are the city and highway tests of today, with adjustments for procedural changes that have occurred since 1975.

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

EPA's fuel economy test procedures specify equations for calculating fuel economy. These equations are based on the carbon balance technique which allows fuel economy to be determined from measurement of exhaust emissions. This technique relies upon the premise that the quantity of carbon in a vehicle's exhaust gas is equal to the quantity of carbon consumed by the engine as fuel.

When NHTSA finds that a manufacturer is not in compliance, it notifies the manufacturer. Surplus credits generated from the five previous years can be used to make up the deficit. If there are no (or not enough) credits available, then the manufacturer can either pay the fine, or submit a carry back plan to the agency. A carry back plan describes what the manufacturer plans to do in the following three model years to make up for the deficit in credits. NHTSA must examine and determine whether to approve the plan.

III. Fuel Economy Enhancing Technologies

In the Agency's last two rulemakings covering light truck CAFE standards for MYs 2005-2007 and MYs 2008-2011, the agency relied on the 2002 National Academy of Sciences' report, Effectiveness and Impact of Corporate Average Fuel Economy Standards (“the 2002 NAS Report”)

for estimating potential fuel economy benefits and associated retail costs of applying combinations of technologies in 10 classes of production vehicles. The NAS cost and effectiveness numbers were the best available estimates at this time, determined by a panel of experts formed by the National Academy of Sciences, and the report had been peer reviewed by individuals chosen for their diverse perspectives and technical expertise in accordance with procedures approved by the Report Review Committee of the National Research Council. However, since the publication of the 2002 NAS Report, there has been substantial advancement in fuel-saving technologies, including technologies not discussed in the NAS Report that are expected to appear on vehicles in the MY 2011-2015 timeframe. There also have been reports issued and studies conducted by several other organizations and companies that discuss fuel economy technologies and their benefits and costs. NHTSA has contracted with the NAS to update the fuel economy section, Chapter 3, of the 2002 NAS Report. However, this update will not be available in time for this rulemaking. Due to the expedited nature of this rulemaking, NHTSA, in consultation with the Environmental Protection Agency (EPA), developed an updated technology cost and effectiveness list to be used in this document.

National Research Council, “Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards,” National Academy Press, Washington, DC (2002).

Available at http://www.nap.edu/openbook.php?isbn=0309076013

(last accessed April 20, 2008).

This list presents NHTSA and EPA technical staff's current assessment of the costs and effectiveness from a broad range of technologies which can be applied to cars and light-duty trucks. EPA published the results of this collaboration in a report and submitted it to the NAS committee.

A copy of the report and other studies used in the technology update will be placed in NHTSA's docket.

EPA Staff Technical Report: Cost and Effectiveness Estimates of Technologies Used to Reduce Light-duty Vehicle Carbon Dioxide Emissions. EPA420-R-08-008, March, 2008.

NHTSA believes that the estimates used for this document, which rely on the best available public and confidential information, are defensible and reasonable predictions for the next five years. Nevertheless, NHTSA still believes that the ideal source for this information comes from a peer reviewed process such as the NAS. NHTSA will continue to work with NAS to update this list on a five year interval as required by the Energy Independence and Security Act of 2007.

The majority of the technologies discussed in this section are in production and available on vehicles today, either in the United States, Japan, or Europe. A number of the technologies are commonly available, while others have only recently been introduced into the market. In a few cases, we provide estimates on technologies which are not currently in production, but are expected to be so in the next few years. These are technologies which can be applied to cars and trucks that are capable of achieving significant improvements in fuel economy and reductions in carbon dioxide emissions, and improve vehicle fuel economy, at reasonable costs.

NHTSA and EPA conducted the technology examination using concepts from the 2002 NAS report which constituted a starting point for the analysis. In the NAS Report, there were three exemplary technology paths or scenarios identified for each class of production vehicles, which lead to successively greater improvements in fuel consumption and greater costs. Path I included production-intent technologies that will be available within 10 years and could be implemented under current economic and regulatory conditions. Path II included more costly production-intent technologies that are technically feasible for introduction within 10 years if economic and regulatory conditions justify their use. Path III included emerging technologies that will be available within 10 to 15 years but that may require further development prior to commercial introduction. These three paths represented vehicle development steps that would offer increasing levels of fuel economy gains (as incremental gains) at incrementally increasing cost. As stated earlier, since the publication of the 2002 NAS Report, automotive technology has continued to advance and many of the technologies that were identified in the report as emerging have already entered the marketplace.

In this rulemaking, NHTSA in consultation with EPA have examined a variety of technologies, looking beyond path I and path II to path III and to emerging technologies beyond path III. These technologies were in their infancy when the 2002 NAS Report was being formulated. In addition, unlike for past rulemakings where NHTSA projected the use of different variants of a technology as a combined technology, in this rulemaking, NHTSA working with EPA examined advanced forms and subcategories of existing technologies and reflected the effectiveness and cost for each of the variants separately for all ten vehicle classes. The specific technologies affected are variable valve timing (VVT), variable valve lift and timing (VVLT) and cylinder deactivation. Manufacturers are currently using many different types of VVTs and VVLTs, which have a variety of different names and methods. This rulemaking employs specific cost and effectiveness estimates for variants of VVT, including Intake Camshaft Phasing (ICP), Coupled Camshaft Phasing (CCP), and Dual (Independent) Camshaft Phasing (DCP). It also employs specific cost and effectiveness estimates for variants of VVLT, including Discrete Variable Valve Lift (DVVL) and Continuous Variable Valve Lift (CVVL). We also now include the effectiveness and cost estimates for each of the variants of cylinder deactivation. The most common type of cylinder deactivation is one in which an eight-cylinder overhead

valve engine disables four of its cylinders under light loads. Cylinder deactivation could be incorporated on overhead cam engines, and can be applied to four and six cylinder engines as well (we have restricted application to 6 and 8 cylinder engines). Thus, the variants of cylinder deactivation that now have specific cost and effectiveness estimates include both overhead valve engine cylinder deactivation and overhead cam engine cylinder deactivation.

The update also revisited technology lead time issues and took a fresh look at technology application rates, how to link certain technologies to certain redesign and refresh patterns, synergistic impacts resulting from adding technology packaging, and learning costs.

A. Data Sources for Technology Assumptions

A large number of technical reports and papers are available which contain data and estimates of the fuel economy improvements of various vehicle technologies. In addition to specific peer-reviewed papers respecting individual technologies, we also utilized a number of recent reports which had been utilized by various State and Federal Agencies and which were specifically undertaken for the purpose of estimating future vehicle fuel economy reduction effectiveness or improvements in fuel economy. The reports we utilized most frequently were:

• 2002 National Academy of Science (NAS) report titled “Effectiveness and Impact of Corporate Average Fuel Economy Standards”. At the time it was published, the NAS report was considered by many to be the most comprehensive summary of current and future fuel efficiencies improvements which could be obtained by the application of individual technologies. The focus of this report was fuel economy, which can be directly correlated with CO

emissions. The 2002 NAS report contains effectiveness estimates for ten different vehicle classifications (small car, mid-SUV, large truck, etc), but did not differentiate these effectiveness values across the classes. Where other sources or engineering principles indicated that a differentiation was warranted, we utilized the 2002 NAS effectiveness estimates as a starting point and further refined the estimate to one of the vehicle classes using engineering judgment or by consulting additional reliable sources.

• 2004 Northeast States Center for a Clean Air Future (NESCCAF) report “Reducing Greenhouse Gas Emissions from Light-Duty Motor Vehicles”. This report, which was utilized by the California Air Resources Board for their 2004 regulatory action on vehicle CO

emissions, includes a comprehensive vehicle simulation study undertaken by AVL, a world-recognized leader in automotive technology and engineering. In addition, the report included cost estimates developed by the Martec Group, a market-based research and consulting firm which provides services to the automotive industry. The NESCCAF report considered a number of technologies not examined in the 2002 NAS report. In addition, through the use of vehicle simulation modeling, the 2004 NESCCAF report provides a scientifically rigorous estimation of the synergistic impacts of applying multiple fuel economy technologies to a given vehicle.

• 2006 Energy and Environmental Analysis Inc (EEA) report “Technology to Improve the Fuel Economy of Light Duty Trucks to 2015” Prepared for The U.S. Department of Energy and The U.S. Department of Transportation. This update of technology characteristics is based on new data obtained by EEA from technology suppliers and auto-manufacturers, and these data are compared to data from studies conducted earlier by EEA, the National Academy of Sciences (NAS), the Northeast States Center for a Clean Air future (NESCCAF) and California Air Resources Board (CARB).

• Data from Vehicle Manufacturers, Component Suppliers, and other reports. We also evaluated confidential data from a number of vehicle manufacturers as well as a number of technology component suppliers. In February of 2007, the NHTSA published a detailed Request for Comment (RFC) in the

Federal Register

. This RFC included, among other items, a request for information from automotive manufacturers and the public on the fuel economy improvement potential of a large number of vehicle technologies. The manufacturer's submissions to this RFC were supplemented by confidential briefing and data provided by vehicle component suppliers, who for many of the technologies considered are the actual manufacturers of the specific technology and often undertake their own development and testing efforts to investigate the fuel economy improvement potential of their products. Manufacturers that provided NHTSA and EPA with fuel economy cost and effectiveness estimates include BMW, Chrysler, Ford, General Motors, Honda, Nissan, Toyota and Volkswagen. The major suppliers that provided NHTSA with fuel economy cost and effectiveness estimates include Borg-Warner, Bosch, Corning, Delphi, and Siemens.

• Finally, to verify that the fuel economy cost and effectiveness estimates for each of the technologies was reasonable and within currently available estimates for these technologies, NHTSA examined those estimates provided by other reports or sources, such as the Martec (contained in the 2004 NESCAFF report) and Sierra Research reports.

B. Technologies and Estimates of Costs and Effectiveness

This section describes each technology and associated cost and effectiveness numbers. The technologies can be classified into five main groups similar to how they were classified in the NAS Report: engine technologies; transmission technologies; accessory technologies; vehicle technologies; and hybrid technologies.

While NHTSA and EPA followed the general approach taken by the NAS in estimating the cost and effectiveness numbers, we decided to update some of these estimates to reflect better the changed marketplace and regulatory environment, as well as the advancement in and greater penetration of some production-intent and emerging technologies, which have led to lower costs. The values contained in the 2002 NAS report were used to establish a baseline for the fuel economy cost and effectiveness estimates for each of the technologies. We then examined all other estimates provided by manufacturers and major suppliers or other sources. In examining these values, we gave more weight to values or estimates provided by manufacturers that have already implemented these technologies in their fleet, especially those that have introduced them in the largest quantities. Likewise, for technologies that have not penetrated the fleet to date, but will by early in the next decade (according to confidential manufacturer plans), we gave more weight to values or estimates provided by manufacturers that have stated that they will be introducing these technologies in their fleet, especially those that plan to introduce them in the largest quantities. In addition, for the technologies that will appear on vehicles by early in the next decade, we carefully examined the values provided

by those suppliers who have developed these technologies and may have contracts in place to provide them to manufacturers.

Because not all technologies can be applied on all types of vehicles, engines or transmissions, we separately evaluated 10 classes of vehicles to estimate fuel economy cost and effectiveness for each of the technologies. As discussed above, these ten classes, also used in NHTSA's 2006 light truck CAFE rule, were derived from the 2002 NAS Report, which estimated the feasibility, potential incremental fuel consumption benefit and the incremental cost of three product development paths for the following ten vehicle classes: Subcompact passenger cars, compact passenger cars, midsize passenger cars, large passenger cars, small sport utility vehicles, midsize sport utility vehicles, large sport utility vehicles, small pickups, large pickups, and minivans.

“Alternative and Future Technologies for Reducing Greenhouse Gas Emission from Road Vehicles” Sierra Research Report for Environment Canada, 1999 (SR99-07-01).

http://www.sierraresearch.com/ReportListing.htm

(Last accessed April 20, 2008.)

The application of technologies to a vehicle class is limited not only by whether the manufacturer is capable of applying it within a particular development cycle, but also by whether the technology may physically be applied to the vehicle. For example, continuously variable transmissions (CVTs) were only allowed to be projected on vehicles with unibody construction, which includes all passenger cars and minivans and some small and midsize SUVs. CVTs could not be projected for use on vehicles with ladder-frame construction, which includes all pickups and large SUVs and some small and midsize SUVs. Another example is cylinder deactivation being limited to vehicles with 6- or 8-cylinder engines. To simplify the analysis, NHTSA assumed that each class of vehicles would typically have vehicle construction and engines with a specific number of cylinders that is most representative of that vehicle class.

Although we looked at ten vehicle classes separately, for some technologies the estimated incremental fuel consumption benefit and incremental cost were the same across all vehicle classes (as for engine accessory improvement), while for other technologies the estimated incremental fuel consumption benefit and incremental cost differed across classes (as for hybrid drivetrains). The main difference was with which path(s) each technology was expected to be associated.

The exact cost and benefit of a given technology depends on specific vehicle characteristics (size, weight, base engine, etc.) and the existence of additional technologies that were already applied to the vehicle. In the section below, ranges of incremental cost and fuel consumption reduction values are listed where the values depend on vehicle characteristics and are independent of the order in which they are applied to a vehicle. All costs, which are reflective of estimated retail price equivalents (RPEs) were inflated by the producer price index (if needed) and are presented in year 2006 dollars, because this is the last year for which final economic indexing is available. Some cost estimates are based on supplier costs. In those instances, multipliers were included in those costs so that they would be treated in the same manner as cost estimates that are based on manufacturer costs. These incremental values were calculated by subtracting out all same-path synergies associated with a given technology and any preceding items on the same path. Essentially, the incremental percent reduction in fuel consumption and cost impacts represent improvements beyond the ones realized due to technologies already applied to the vehicle. As an example, a 5-speed automatic transmission could incrementally reduce fuel consumption by 2 to 3 percent at an incremental cost of $75 to $165 per vehicle, relative to a 4-speed automatic transmission. In turn, a 6-speed automatic transmission could incrementally reduce fuel consumption by 4.5 to 6.5 percent at an incremental cost of $10 to $20 per vehicle, relative to a 5-speed transmission.

NHTSA acknowledges that this approach is different from the one it followed in establishing the reformed light truck standards for MYs 2008-2011, where we relied nearly exclusively on the 2002 NAS report's estimates. Our preference remains to rely upon peer-review and credible studies, such as the 2002 NAS report; however we believe that the estimates made by the joint EPA/NHTSA team are accurate and defensible. The agency seeks comments on our assumptions and the cost, effectiveness and availability estimates provided. NHTSA also seeks comments on whether the order in which these technologies was applied by the Volpe model is proper and whether we have accurately accounted for technologies already included on vehicles and whether we have accurately accounted for technologies that are projected to be applied to vehicles. The agency also seeks comments on the “synergy” factors (discussed below) it has applied in order to adjust the estimated incremental effectiveness of some pairs of technology and on whether similar adjustments to the estimated incremental cost of some technologies should be made. In preparation for a final rule, NHTSA intends to update its technology-related methodologies and estimates, and expects that these anticipated updates will affect the form and stringency of the final standards.

a. Engine Technologies

Low-Friction Lubricants

The use of lower viscosity engine and transmission lubricants can reduce fuel consumption. More advanced multi-viscosity engine and transmission oils are now available with improved performance in a wider temperature band, with better lubricating properties. However, even without any changes to fuel economy standards, most MY 2011-2015 vehicles are likely to use 5W-30 motor oil, and some will use even less viscous oils, such as 5W-20 or possibly even 0W-20 to reduce cold start friction. This may directionally benefit the fuel economy improvements of valvetrain technologies such as cylinder deactivation, which rely on a minimum oil temperature (viscosity) for operation. Most manufacturers therefore attributed smaller potential fuel economy reductions and cost increases to lubricant improvements.

The NAS Report estimated that low-friction lubricants could incrementally reduce fuel consumption by 1 percent at an incremental cost of $8 to $11.

The NESCCAF study projected that low-friction lubricants could incrementally reduce fuel consumption by 1 percent at an incremental cost of $5 to $15; while the EEA report projected that low-friction lubricants could incrementally reduce fuel consumption by 1 percent at an incremental cost of $10 to $20. In contrast, manufacturer data projected an estimated fuel consumption potential of 0 percent to 1 percent at an incremental cost that ranged from $1 to $11, with many of them stating the costs as ranging from $1 to $5. NHTSA believes that these manufacturer estimates are more accurate and estimates that low-friction lubricants could reduce fuel consumption by 0.5 percent for all vehicle types at an incremental cost of $3, which represents the mid-point of $2.50, rounded up to the next dollar.

The price increases noted in this chapter are slightly higher than shown in the NAS study, since they have been converted into calendar year 2006 prices.

Reduction of Engine Friction Losses

All reciprocating and rotating components in the engine are candidates for friction reduction, and minute improvements in several

components can add to a measurable fuel economy improvement. The amount of energy an engine loses to friction can be reduced in a variety of ways. Improvements in the design of engine components and subsystems will result in friction reduction, improved engine operation, greater fuel economy and reduced emissions. Examples include low-tension piston rings, roller cam followers, crankshaft design, improved material coatings, material substitution, more optimal thermal management, piston surface treatments, and as lubricant friction reduction. Additionally, as computer-aided modeling software continues to improve, more opportunities for incremental friction reduction might become apparent. Even without any changes to fuel economy standards, most MY 2010-2015 vehicles are likely to employ one or more such techniques to reduce engine friction and other mechanical and hydrodynamic losses.

The NAS Report estimated that such technologies could incrementally reduce fuel consumption by 1 to 5 percent at an incremental cost of $36 to $146. NESCCAF predicted that such technologies could incrementally reduce fuel consumption by 0.5 percent at an incremental cost of $5 to $15; while the EEA report predicted that such technologies could reduce fuel consumption at an incremental cost of $10 to $55. Confidential manufacturer data indicates that engine friction reduction could incrementally reduce fuel consumption by 1 to 3 percent at an incremental cost of $0 to $168. Based on available information from these reports and confidential manufacturer data, NHTSA estimates that friction reduction could reduce fuel consumption for all vehicles by 1 to 3 percent at a cost of $21 per cylinder. Thus, the incremental cost of engine friction reduction for a 4-cylinder engine is $0 to $84 (applicable to subcompact and compact cars); for a 6-cylinder engine is $0 to $126 (applicable to midsize cars, large cars, small pickups, small SUVs, minivans and midsize SUVs); and for an 8-cylinder engine is $0 to $168 (applicable to large pickups and SUVs).

Multi-Valve Overhead Camshaft Engine

It appears likely that many vehicles would still use overhead valve (OHV) engines with pushrods and one intake and one exhaust valve per cylinder during the early part of the next decade. Engines with overhead cams (OHC) and more than two valves per cylinder achieve increased airflow at high engine speeds and reductions of the valve train's moving mass and enable central positioning of spark plugs. Such engines, which are already used in some light trucks, typically develop higher power at high engine speeds. The NAS Report projected that multi-valve OHC engines could incrementally reduce fuel consumption by 2 percent to 5 percent at an incremental cost of $109 to $146, and NHTSA found no sources to update these projections.

For purposes of this rule, OHV engines and OHC engines were considered separately, and the model was generally not allowed to apply multivalve OHC technology to OHV engines, except where continuous variable valve timing and lift (CVVL) is applied to OHV engines. In that case, the model assumes conversion to DOHC valvetrain, because DOHC valvetrains are prerequisites for the application of any advanced engine technology over and above CVVL. Since applying CVVL to an OHV is the last improvement that could be made to such an engine, it's logical to assume that manufacturers would redesign that engine as a DOHC and include CVVL as part of that redesign.

For 4-cylinder engines we estimated that the cost to redesign an OHV engine as a DOHC that includes CVVL would be $599 ($169 for conversion to DVVL, $254 for conversion to CVVL, and $176 for conversion to DOHC, which comprises an additional camshaft and valves), with estimated fuel consumption reduction of 2 to 3 percent. For 6-cylinder engines we estimated that the cost to redesign an OHV engine as a DOHC that includes CVVL would be $1262 ($246 for conversion to DVVL, $488 for conversion to CVVL, and $550 for conversion to DOHC, which comprises an additional camshaft and valves), with estimated fuel consumption reduction of 1 to 4 percent. For 8-cylinder engines we estimated that the cost to redesign an OHV engine as a DOHC that includes CVVL would be $1380 ($322 for conversion to DVVL, $508 for conversion to CVVL, and $550 for conversion to DOHC, which comprises an additional camshaft and valves), with estimated fuel consumption reduction of 2 to 3 percent. Incremental cost estimates for DVVL and CVVL are discussed below.

NHTSA believes that the NESCCAF report and confidential manufacturer data are more accurate, and thereby estimates that a conversion of an OHV engine to a DOHC engine with CVVL could incrementally reduce fuel consumption by 1 to 4 percent at an incremental cost of $599 to $1,380 compared to an OHV with VVT.

Cylinder Deactivation

For the vast majority of vehicles, each cylinder is always active while the engine is running. Under partial load conditions, the engine's specific fuel consumption could be reduced if some cylinders could be disabled, such that the active cylinders operate at higher load. In cylinder deactivation, some (usually half) of the cylinders are “shut down” during light load operation—the valves are kept closed, and no fuel is injected—as a result, the trapped air within the deactivated cylinders is simply compressed and expanded as an air spring, with minimal friction and heat losses. The active cylinders combust at almost double the load required if all of the cylinders were operating. Pumping losses are significantly reduced as long as the engine is operated in this “part-cylinder” mode.

The theoretical engine operating region for cylinder deactivation is limited to no more than roughly 50 percent of peak power at any given engine speed. In practice, however, cylinder deactivation is employed primarily at lower engine cruising loads and speeds, where the transitions in and out of deactivation mode are less apparent to the operator and where the noise and vibration (NVH) associated with fewer firing cylinders may be less of an issue. Manufacturers are exploring the possibilities of increasing the amount of time that part-cylinder mode might be suitable to a vehicle with more refined powertrain and NVH treatment strategies.

General Motors and Chrysler Group have incorporated cylinder deactivation across a substantial portion of their V8-powered lineups. Honda (Odyssey, Pilot) and General Motors (Impala, Monte Carlo) offer V6 models with cylinder deactivation.

There are two variants of cylinder deactivation. The most common type of cylinder deactivation is one in which an eight-cylinder overhead valve engine disables four cylinders under light loads. Thus an eight-cylinder engine could disable four cylinders under light loads, such as when the vehicle is cruising at highway speed. This technology could be applied to four and six cylinder engines as well. General Motors and Chrysler Group have incorporated cylinder deactivation across a substantial portion of their V8-powered overhead valve lineups.

Cylinder deactivation could be incorporated on overhead cam engines and can be applied to four and six cylinder engines as well. Honda has already begun offering three V6 models

with cylinder deactivation (Accord, Odyssey, and Pilot) and GM will soon release cylinder deactivation on its 3.9L 6-cylinder engine. Fuel economy improvement potential scales roughly with engine displacement-to-vehicle weight ratio: the higher displacement-to-weight vehicles, operating at lower relative loads for normal driving, have the potential to operate in part-cylinder mode more frequently.

Honda's technology includes the use of active engine mounts and noise damping amongst other items added to its V6 engines with cylinder deactivation. This, of course, increases the cost relative to a four or eight cylinder OHC engine.

Some manufacturers are getting results in excess of 6 percent and most are at the high end of the range. This higher number is supported by official fuel economy test data on a V6 Honda Odyssey with cylinder deactivation compared to the same vehicle (and engine displacement) without cylinder deactivation and by confidential manufacturer information.

The NAS Report projected that cylinder deactivation could incrementally reduce fuel consumption by 3 percent to 6 percent at an incremental cost of $112 to $252. The NESCCAF study projected that cylinder deactivation could incrementally reduce fuel consumption by 1.7 percent to 4.2 percent at an incremental cost of $161 to $210; while the EEA report projected that cylinder deactivation could incrementally reduce fuel consumption by 5.2 percent to 7.2 percent at an incremental cost of $105 to $135. Confidential manufacturer data and official fuel economy test data indicates that cylinder deactivation could incrementally reduce fuel consumption by at least 6 percent at an incremental cost of $203 to $229. NHTSA believes that these manufacturer estimates are more accurate and thus estimates that cylinder deactivation could reduce fuel consumption by 4.5 percent to 6 percent at an incremental cost of $203 to $229.

Variable Valve Timing

Variable valve timing is a classification of valvetrain designs that alter the timing of the intake valve, exhaust valve, or both, primarily to reduce pumping losses, increase specific power, and control residual gases. VVT reduces pumping losses when the engine is lightly loaded by positioning the valve at the optimum position needed to sustain horsepower and torque. VVT can also improve thermal efficiency at higher engine speeds and loads. Additionally, VVT can be used to alter (and optimize) the effective compression ratio where it is advantageous for certain engine operating modes.

Variable valve timing has been available in the market for quite a while. By the early 1990s, VVT had made a significant market penetration with the arrival of Honda's “VTEC” line of engines. VVT has now become a widely adopted technology: for the 2007 model year, over half of all new cars and light trucks have engines with some method of variable valve timing. Therefore, the degree of further improvement across the fleet is limited to vehicles that have not already implemented this technology.

Manufacturers are currently using many different types of variable valve timing, which have a variety of different names and methods. The major types of VVT are listed below:

Intake Camshaft Phasing (ICP)

Valvetrains with ICP—the simplest type of cam phasing—can modify the timing of the intake valve while the exhaust valve timing remains fixed. This requires the addition of a cam phaser for each bank of intake valves on the engine. An in-line 4-cylinder engine has one bank of intake valves, while V-configured engines would have two banks of intake valves. The NAS Report projected that ICP could incrementally reduce fuel consumption by 3 percent to 6 percent at an incremental cost of $35; while the EEA report projected that ICP could reduce fuel consumption at an incremental cost of $35. The NESCCAF study projected that ICP could incrementally reduce fuel consumption by 1 percent to 2 percent at an incremental cost of $49. Consistent with the EEA report and NESCCAF study, we have used this $35 manufacturer cost to arrive at incremental cost of $59 per cam phaser or $59 for an in-line 4 cylinder and $119 for a V-type, thus NHTSA estimates that ICP could incrementally reduce fuel consumption by 1 to 2 percent at an incremental cost of $59 to $119.

Coupled Camshaft Phasing (CCP)

Coupled (or coordinated) cam phasing is a design in which both the intake and exhaust valve timing are varied with the same cam phaser. For an overhead cam engine, the same phaser added for ICP would be used for CCP control. As a result, its costs should be identical to those for ICP. For an overhead valve engine, only one phaser would be required for both inline and V-configured engines since only one camshaft exists. Therefore, for overhead valve engines, the cost is estimated at $59 regardless of engine configuration, using the logic provided for ICP.

The NESCCAF study projected that CCP could incrementally reduce fuel consumption by 1 percent to 3 percent above that obtained by ICP. Confidential manufacturer data also projects that that CCP could incrementally reduce fuel consumption by 1 percent to 3 percent above that obtained by ICP. According to the NESCCAF report and confidential manufacturer data, NHTSA estimates that CCP could incrementally reduce fuel consumption by 1 to 3 percent at an incremental cost of $59 to $119 above ICP valvetrains.

Dual (Independent) Camshaft Phasing (DCP)

The most flexible VVT design is dual cam phasing, where the intake and exhaust valve opening and closing events are controlled independently. This design allows the option of controlling valve overlap, which can be used as an internal EGR strategy. Our estimated incremental compliance cost for this technology is built upon that for VVT-ICP where an additional cam phaser is added to control each bank of exhaust valves less the cost to the manufacturer of the removed EGR valve. The incremental compliance cost for a 4-cylinder engine is estimated to be $59 for each bank of valves, plus an estimated piece cost of $30 for the valves, for a total incremental compliance cost of $89. The incremental compliance cost for a V6 or a V8 engine is estimated to be $59 for each bank of intake valves (

i.e.

, two banks times $59/bank = $119), $59 for each bank of exhaust valves (

i.e.

, another $119) minus an estimated $29 incremental compliance cost for the removed EGR valve; the total incremental compliance cost being $209.

According to the NESCCAF report and confidential manufacturer data, it is estimated that DCP could incrementally reduce fuel consumption by 1 to 3 percent at an incremental cost of $89 to $209 compared to engines with ICP or CCP.

Because ICP and CCP have the same cost and similar effectiveness, it is assumed that manufacturers will choose the technology that best fits the specific engine architecture and application.

Variable Valve Lift and Timing

Some vehicles have engines for which both valve timing and lift can be at least partially optimized based on engine operating conditions. Engines with variable valve timing and lift (VVLT) can achieve further reductions in pumping losses and further increases in thermal efficiency. Controlling the lift

height of the valves provides additional flexibility and potential for further fuel consumption reduction. By reducing the valve lift, engines can decrease the volumetric flow at lower operating loads, improving fuel-air mixing and in-cylinder mixture motion which results in improved thermodynamic efficiency and also potentially reduced overall valvetrain friction. Also, by moving the throttling losses further downstream of the throttle valve, the heat transfer losses that occur from the throttling process are directed into the fresh charge-air mixture just prior to compression, delaying the onset of knock-limited combustion processes. At the same time, such systems may also incur increased parasitic losses associated with their actuation mechanisms.

The NAS report projected that VVLT could incrementally reduce fuel consumption by 1 to 2 percent over VVT alone at an incremental cost of $73 to 218.

Manufacturers are currently using many different types of variable valve lift and timing, which have a variety of different names and methods. The major types of VVLT are listed below:

Discrete Variable Valve Lift

Discrete variable valve lift (DVVL) is a method in which the valvetrain switches between multiple cam profiles, usually 2 or 3, for each valve. These cam profiles consist of a low and a high-lift lobe, and may include an inert or blank lobe to incorporate cylinder deactivation (in the case of a 3-step DVVL system). According to the NESCCAF report and confidential manufacturer data, it is estimated that DVVL could incrementally reduce fuel consumption by 0.5 to 3 percent at an incremental cost of $169 to $322 compared to VVT depending on engine size and overhead cam versus overhead valve engines. Included in this cost estimate is $25 for controls and associated oil supply needs (these costs not reflected in the NESCCAF study). We also project that a single valve lifter could control valve pairs, thus engines with dual intake and/or dual exhaust valves would require only one lifter per pair of valves. Due to this, the estimated costs for applying DVVL to overhead cam and overhead valve engines are the same.

Continuous Variable Valve Lift

Continuous variable valve lift (CVVL) employs a mechanism that varies the pivot point in the rocker arm. This design is realistically limited to overhead cam engines. Currently, BMW has implemented this type of system in its Valvetronic engines, which employs fully flexible valve timing to allow an extra set of rocker arms to vary the valve lift height. CVVL enables intake valve throttling in engines, which allows for the use of more complex systems of sensors and electronic controls to enable further optimization of valve lift.

The NESCCAF study projected incremental costs from $210 to $420, depending on vehicle class, while the EEA report projected incremental costs of $180 to $350, depending on vehicle class. Confidential manufacturer data projects that CVVL could incrementally reduce fuel consumption by 1.5 by 4 percent at an incremental cost of $200 to $515. NHTSA believes that these manufacturer estimates are more accurate than NESCCAF estimates, thus it gives more weight to them. According to the NESCCAF report and confidential manufacturer data, NHTSA estimates that CVVL could incrementally reduce fuel consumption by 1.5 by 4 percent at an incremental cost of $254 to $508 compared to VVT with cost estimates varying from $254, $466, and $508 for a 4-, 6-, and 8-cylinder engine, respectively.

Camless Valve Actuation

Camless valve actuation relies on electromechanical actuators instead of camshafts to open and close the cylinder valves. When electromechanical actuators are used to replace cams and coupled with sensors and microprocessor controls, valve timing and lift can be optimized over all conditions. An engine valvetrain that operates independently of any mechanical means provides the ultimate in flexibility for intake and exhaust timing and lift optimization. With it comes infinite valve overlap variability, the rapid response required to change between operating modes (such as HCCI and GDI), intake valve throttling, cylinder deactivation, and elimination of the camshafts (reduced friction). This level of control can enable even further incremental reductions in fuel consumption.

Camless valvetrains have been under research for many decades due to the design flexibility and the attractive fuel economy improvement potential they might provide. Despite the promising features of camless valvetrains, significant challenges remain. High costs and design complexity have reduced manufacturers' enthusiasm for camless engines in light of other competing valvetrain technologies. The advances in VVT, VVLT, and cylinder deactivation systems demonstrated in recent years have reduced the potential efficiency advantage of camless valvetrains.

The NAS Report projected that camless valve actuation could incrementally reduce fuel consumption by 5 to 10 percent over VVLT at an incremental cost of $336 to $673. Confidential manufacturer information provides incremental fuel consumption losses that range from 2 to 10 percent at costs that range from $300 to $1,100. The NESCCAF study projected that camless valve actuation could incrementally reduce fuel consumption by 11 to 13 percent at an incremental cost of $805 to $1,820; while the EEA report projected that camless valve actuation could incrementally reduce fuel consumption by 10 to 14 percent at an incremental cost of $210 to $600. These benefits and costs are believed to be incremental to engines with VVT.

In reviewing our sources for costs, we have determined that the adjusted costs presented in the 2002 NAS study, which ranged from $336 to $673—depending on vehicle class—represent the best available estimates. Subtracting out the improvements associated with the application of VVLT provides an estimated fuel consumption reduction of 2.5 percent.

Stoichiometric Gasoline Direct Injection Technology

Gasoline direct injection (GDI, or SIDI) engines inject fuel at high pressure directly into the combustion chamber (rather than the intake port in port fuel injection). Direct injection improves cooling of the air/fuel charge within the cylinder, which allows for higher compression ratios and increased thermodynamic efficiency. Injector design advances and increases in fuel pressure have promoted better mixing of the air and fuel, enhancing combustion rates, increasing exhaust gas tolerance and improving cold start emissions. GDI engines achieve higher power density and match well with other technologies, such as boosting and variable valvetrain designs.

Several manufacturers (Audi, BMW, and Volkswagen) have recently released GDI engines while General Motors and Toyota will be introducing GDI engines. In addition, BMW and GM have announced their plans to dramatically increase the number of GDI engines in their portfolios.

The NESCCAF report projected that the incremental cost for GDI of $189 to $294; while the EEA report projected an incremental cost of $77 to $135. Confidential manufacturer data provides data with higher upper end costs than these estimates, with incremental fuel consumption estimates ranging from 1

to 2 percent. For our analysis, we have estimated the costs of individual components of a GDI system and used a “bottom up” approach looking at incremental costs for injectors, fuel pumps, etc., to arrive at system incremental compliance costs ranging from $122 to $420 for small cars and up to $228 to $525 for large trucks. The lower end of the ranges represents our best estimate using a bottom up approach while the upper end of the ranges represent levels more consistent with the manufacturer CBI submittals. As a result, we estimate that stoichiometric GDI could incrementally reduce fuel consumption by 1 to 2 percent at an incremental cost of $122 to $525 compared to engines of similar power output.

Gasoline Engine Turbocharging and Engine Downsizing

The specific power of a naturally aspirated engine is limited, in part, by the rate at which the engine is able to draw air into the combustion chambers. Turbocharging and supercharging are two methods to increase the intake manifold pressure and cylinder charge-air mass above naturally aspirated levels. By increasing the pressure differential between the atmosphere and the charging cylinders, superchargers and turbochargers increase this available airflow, and thus increase the specific power level, and with it the ability to reduce engine size while maintaining performance. This effectively reduces the pumping losses at lighter loads in comparison to a larger, naturally aspirated engine, while at the same time reducing net friction losses

Almost every major manufacturer currently markets a vehicle with some form of boosting. While boosting has been a common practice for increasing performance for several decades, it has considerable fuel economy potential when the engine displacement is reduced. Specific power levels for a boosted engine often exceed 100 hp/L—compared to average naturally aspirated engine power density of roughly 70 hp/L. As a result, engines can conservatively be downsized roughly 30 percent to achieve similar peak output levels.

In the last decade, improvements to turbine design have improved their reliability and performance across the entire engine operating range. New variable geometry turbines spool up to speed faster (eliminating the once-common “turbo lag”) while maintaining high flow rates for increased boost at high speeds.

Turbocharging and downsizing involve the addition of a boost system, removal of two cylinders in most cases (from an 8-cylinder to a 6, or a 6 to a 4) and associated valves, and the addition of some form of cold start control system (

e.g.

, air injection) to address possible cold start emission control. The NAS Report projected that turbocharging and downsizing could incrementally reduce fuel consumption by 5 to 7 percent at an incremental cost of $364 to $582. The EEA report projected turbocharging and downsizing could incrementally reduce fuel consumption by 5.2 to 7.8 percent.

In developing estimated costs for turbocharging and downsizing an engine, NHTSA, in conjunction with EPA, relied upon piece cost estimates contained in the NESCCAF report. The cost estimates provided by the NESCCAF report are as follows: $600 for the turbocharger and associated parts; $90 for an air injection pump and associated parts (each turbocharger requires an air injection pump); $75 per cylinder and associated components; $15 per each valve and associated components; and $150 per camshaft.

In developing the cost estimates for each of the 10 classes of vehicles, we determined the most logical type of downsizing that would occur for each class and starting with the turbocharger and air injector cost, either added or deleted cost, depending on the situation. For subcompact and compact cars, we determined that the downsizing wouldn't involve the removal of any cylinders, valves and camshafts, but instead would result in a manufacturer using a smaller displacement 4-cylinder engine and adding the turbocharger and the air injector to the smaller engine. Thus, for subcompact and compact cars, we estimated the cost of turbocharging and downsizing to be $690 ($600 for the turbocharger plus $90 for the air injector).

For large trucks and large SUVs we determined that the most logical engine downsizing would involve replacing an 8-cylinder overhead valve engine with a turbocharged 6-cylinder dual overhead cam engine. This change would result in the removal of 2 cylinders, and the addition of a turbocharger, an air injector, 8 valves and 2 camshafts. Thus, we have estimated the cost of turbocharging and downsizing to be $810 ($600 for the turbocharger plus $90 for the air injector, plus $120 for eight valves plus $150 for a camshaft and minus $150 for the removal of two cylinders).

For midsize cars, large cars, small trucks, small SUVs, midsize SUVs and minivans, we determined that the most logical engine downsizing would involve replacing a 6-cylinder dual overhead cam engine with a turbocharged 4-cylinder dual overhead cam engine. This change would result in the removal of 2 cylinders, 8 valves and 2 camshafts and the addition of a turbocharger and air injector. Thus, we have estimated the cost of turbocharging and downsizing to be $120 ($600 for the turbocharger plus $90 for the air injector, minus $150 for the removal of two cylinders, minus $120 for the removal of eight valves and minus $300 for the removal of two camshafts).

Thus, we have estimated the cost for a boosted/downsized engine system at $690 for small cars, $810 for large trucks, and $120 for other vehicle classes. Projections of the fuel consumption reduction potential of a turbocharged and downsized engine from the NAS Report are backed by EEA estimates and confidential manufacturer data. According to the NAS Report, the EEA report, cost estimates developed in conjunction with EPA and confidential manufacturer data, NHTSA estimates that downsized turbocharged engines could incrementally reduce fuel consumption from 5 to 7.5 percent at an incremental cost of $120 to $810.

Diesel Engine

Diesel engines have several characteristics that give them superior fuel efficiency to conventional gasoline, spark-ignited engines. Pumping losses are greatly reduced due to lack of (or greatly reduced) throttling. The diesel combustion cycle operates at a higher compression ratio, with a very lean air/fuel mixture, and typically at much higher torque levels than an equivalent-displacement gasoline engine. Turbocharged light-duty diesels typically achieve much higher torque levels at lower engine speeds than equivalent-displacement naturally-aspirated gasoline engines. Additionally, diesel fuel has higher energy content per gallon. However, diesel engines have emissions characteristics that present challenges to meeting Tier 2 emissions standards.

Compliance strategies are expected to include a combination of combustion improvements and after-treatment. Several key advances in diesel technology have made it possible to reduce emissions coming from the engine (prior to after-treatment). These technologies include improved fuel systems (higher pressures and more responsive injectors), advanced controls and sensors to optimize combustion and emissions performance, higher EGR levels to reduce NO

, lower

compression ratios and advanced turbocharging systems.

For after-treatment, the traditional 3-way catalyst found on gasoline-powered vehicles is ineffective due to the lean-burn combustion of a diesel. All diesels will require a particulate filter, an oxidation catalyst, and a NO

reduction strategy to comply with Tier 2 emissions standards.

The NO

reduction strategies most common are outlined below:

Lean NO

Trap Catalyst After-Treatment

A lean NO

trap (LNT) operates, in principle, by storing NO

(NO and NO

) when the engine is running in its normal (lean) state. When the control system determines (via mathematical model or a NO

sensor) that the trap is saturated with NO

, it switches to a rich operating mode. This rich mode produces excess hydrocarbons that act as a reducing agent to convert the stored NO

to N

and water, thereby “regenerating” the LNT and opening up more locations for NO

to be stored. LNTs are sensitive to sulfur deposits which can reduce catalytic performance, but periodically undergo a desulfation engine operating mode to clean it of sulfur buildup.

According to confidential manufacturer data, NHTSA estimates that LNT-based diesels can incrementally reduce fuel consumption by 8 to 15 percent at an incremental cost of $1,500 to $1,600 compared to a direct injected turbocharged and downsized internal combustion engine. These costs are based on a “bottom up” cost analysis that was performed with EPA which then subtracted the costs of all previous steps on the decision tree prior to diesel engines.

Selective Catalytic Reduction NO

After-Treatment

SCR uses a reductant (typically, ammonia derived from urea) continuously injected into the exhaust stream ahead of the SCR catalyst. Ammonia combines with NO

in the SCR catalyst to form N

and water. The hardware configuration for an SCR system is more complicated than that of an LNT, due to the onboard urea storage and delivery system (which requires a urea pump and injector into the exhaust stream). While there is no required rich engine operating mode prescribed for NO

reduction, the urea is typically injected at a rate of 3 to 4 percent of that of fuel consumed. Manufacturers designing SCR systems are intending to align urea tank refills with standard maintenance practices such as oil changes. Incremental fuel consumption reduction estimates for diesel engines with an SCR system range from 11 to 20 percent at an incremental cost of $2,051 to $2,411 compared to a direct injected turbocharged and downsized internal combustion engine. These costs are based on a “bottom up” cost analysis that was performed with EPA, which then subtracted the costs of all previous steps on the decision tree prior to diesel engines.

Based on public information and on recent discussions that NHTSA and EPA have had with auto manufacturers and aftertreatment device manufacturers, NHTSA has received strong indications that LNT systems would probably be used on smaller vehicles while the SCR systems would be used on larger vehicles and trucks. The primary reason given for this choice is the trade off between the rhodium needed for the LNT and the urea injection system needed for SCR. The breakeven point between these two cost factors appears to occur around 3.0 liters. Thus, it is believed that it is cheaper to manufacture diesel engines smaller than 3.0 liters with an LNT system, and that conversely, it is cheaper to manufacture diesel engines larger than 3.0 liters with a SCR system. Of course, there are other factors that influence a manufacturer's decision on which system to use, but we have used this rule-of-thumb for our analysis.

b. Transmission Technologies

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

The number of available transmission speeds influences the width of gear ratio spacing and overall coverage and, therefore, the degree of transmission ratio optimization available under different operating conditions. In general, transmissions can offer a greater available degree of engine optimization and can therefore achieve higher fuel economy when the number of gears is increased. However, potential gains may be reduced by increases in transmission weight and rotating mass. Regardless of possible changes to fuel economy standards, manufacturers are increasingly introducing 5- and 6-speed automatic transmissions on their vehicles. Additionally, some manufacturers are introducing 7-, and 8-speed automatic transmissions, with 7-speed automatic transmissions appearing with increasing frequency.

Automatic 5-Speed Transmissions

As automatic transmissions have been developed over the years, more forward speeds have been added to improve fuel efficiency and performance. Increasing the number of available ratios provides the opportunity to optimize engine operation under a wider variety of vehicle speeds and load conditions. Also, additional gears allow for overdrive ratios (where the output shaft of the transmission is turning at a higher speed than the input shaft) which can lower the engine speed at a given road speed (provided the engine has sufficient power at the lower rpm point) to reduce pumping losses. However, additional gears can add weight, rotating mass, and friction. Nevertheless, manufacturers are increasingly adding 5-speed automatic transmissions to replace 3- and 4-speed automatic transmissions.

The 2002 NAS study projected that 5-speed automatic transmissions could incrementally reduce fuel consumption by 2 to 3 percent at an incremental cost of $76 to $167. The NESCCAF study projected that 5-speed automatic transmissions could incrementally reduce fuel consumption by 1 percent at an incremental cost of $140; while the EEA report projected that 5-speed automatic transmissions could incrementally reduce fuel consumption by 2 to 3 percent at an incremental cost of $130. Confidential manufacturer data projected that 5-speed automatic transmissions could incrementally reduce fuel consumption by 1 to 6 percent at an incremental cost of from $60 to $281. NHTSA believes that the NAS study's estimates are still valid and estimates that 5-speed automatic transmissions could incrementally reduce fuel consumption by 2.5 percent at an incremental cost of $76 to $167 (relative to a 4-speed automatic transmission).

Automatic 6-, 7-, and 8-Speed Transmissions

In addition to 5-speed automatic transmissions, manufacturers can also choose to utilize 6-, 7-, or 8-speed automatic transmissions. Additional ratios allow for further optimization of engine operation over a wider range of conditions, but this is subject to diminishing returns as the number of speeds increases. As additional planetary gear sets are added (which may be necessary in some cases to achieve the higher number of ratios), additional weight and friction are introduced. Also, the additional shifting of such a transmission can be perceived as bothersome to some consumers, so manufacturers need to develop strategies for smooth shifts. Some manufacturers are replacing 4-speed automatics with 6-speed automatics (there are also increasing numbers of 5-speed automatic transmissions that are

being replaced by 6-speed automatic transmissions), and 7-, and 8-speed automatics have entered production, albeit in lower-volume applications.

The NAS study projected that 6-, 7- or 8-speed transmissions could incrementally reduce fuel consumption by 1 to 2 percent at an incremental cost of $70 to $126. Confidential manufacturer data projected that 6-, 7-or 8-speed transmissions could incrementally reduce fuel consumption by 1 to 3 percent at an incremental cost of $20 to $120. However, according to the EEA report, a Lepelletier gear set design provides for 6-speeds at the same cost as a 5-speed automatic. Based on that analysis, we have estimated the cost of a 6-speed automatic to be equivalent to that for a 5-speed automatic. We have not developed any estimate costs for 7-or 8-speed transmissions because of the diminishing returns in efficiency versus the costs for transmissions beyond 6-speeds. NHTSA estimates that 6-, 7-, or 8-speed automatic transmissions could incrementally reduce fuel consumption by 0.5 to 2.5 percent at an incremental cost of $0 to $20 (relative to a 5-speed automatic transmission). We are estimating up to an additional $20 in costs because we have tried to account for the engineering effort in addition to the hardware which we believe the EEA did not and we wanted to capture some of the higher costs reported by manufacturers.

Aggressive Shift Logic

In operation, an automatic transmission's controller decides when to upshift or downshift based on a variety of inputs such as vehicle speed and throttle position according to programmed logic. Aggressive shift logic (ASL) can be employed so that a transmission is engineered in such a way as to maximize fuel efficiency by upshifting earlier and inhibiting downshifts under some conditions. Through partial lock-up under some operating conditions and early lock-up under others, automatic transmissions can achieve some reduction in overall fuel consumption. Aggressive shift logic is applicable to all vehicle types with automatic transmissions, and since in most cases it would require no significant hardware modifications, it can be adopted during vehicle redesign or refresh or even in the middle of a vehicle's product cycle. The application of this technology does, however, require a manufacturer to confirm that driveability, durability, and noise, vibration, and harshness (NVH) are not significantly degraded.

The NAS study projected that aggressive shift logic could incrementally reduce fuel consumption by 1 to 2 percent at an incremental cost of $0 to $70. Confidential manufacturer data projected that aggressive shift logic could incrementally reduce fuel consumption by 0.5 to 3 percent at an incremental cost of $18 to $70. The NAS study estimates and confidential manufacturer data are within the same ranges, thus NHTSA believes that the NAS estimates are still accurate. Thus, NHTSA estimates aggressive shift logic could incrementally reduce fuel consumption by 1 to 2 percent at an incremental cost of $38, which is approximately the average of the midpoint of the NAS cost range and the manufacturer cost range.

Early Torque Converter Lockup

A torque converter is a fluid coupling located between the engine and transmission in vehicles with automatic transmissions and continuously-variable transmissions (CVTs). This fluid coupling allows for slip so the engine can run while the vehicle is idling in gear, provides for smoothness of the powertrain, and also provides for torque multiplication during acceleration. During light acceleration and cruising, this slip causes increased fuel consumption, so modern automatic transmissions utilize a clutch in the torque converter to lock it and prevent this slippage. Fuel consumption can be further reduced by locking up the torque converter early, and/or by using partial-lockup strategies to reduce slippage.

Some torque converters will require upgraded clutch materials to withstand additional loading and the slipping conditions during partial lock-up. As with aggressive shift logic, confirmation of acceptable driveability, performance, durability and NVH characteristics is required to successfully implement this technology.

The 2002 NAS study did not include any estimates for this technology. The NESCCAF study projected that early torque converter lockup could incrementally reduce fuel consumption by 0.5 percent at an incremental cost of $0 to $10; while the EEA report projected that low-friction lubricants could incrementally reduce fuel consumption by 0.5 percent at an incremental cost of $5. NHTSA estimates the cost of this technology (i.e., the calibration effort) at $30 based in part on NESCCAF and the CBI submissions which provided costs with a midpoint of $30. We have used a higher value here than NESCCAF and EEA because we have tried to account for the engineering effort in addition to the hardware which we believe NESCCAF and EEA did not do and which were captured in the manufacturers' higher costs.

NHTSA estimates that early torque converter lockup could incrementally reduce fuel consumption by approximately 0.5 percent at an incremental cost of approximately $30.

Automated Shift Manual Transmissions

An automated manual transmission (AMT) is mechanically similar to a conventional transmission, but shifting and launch functions are controlled by the vehicle. There are two basic types of AMTs, single-clutch and dual-clutch. A single-clutch AMT is essentially a manual transmission with automated clutch and shifting. Because there are some shift quality issues with single-clutch designs, dual-clutch AMTs are more common. A dual-clutch AMT uses separate clutches for the even-numbered gears and odd-numbered gears. In this way, the next expected gear is pre-selected, which allows for faster and smoother shifting.

Overall, AMTs likely offer the greatest potential for fuel consumption reduction among the various transmission options presented in this report because they offer the inherently lower losses of a manual transmission with the efficiency and shift quality advantages of computer control. AMTs offer the lower losses of a manual transmission with the efficiency advantages of computer control. The lower losses stem from the elimination of the conventional lock-up torque converter and a greatly reduced need for high pressure hydraulic circuits to hold clutches to maintain gear ratios (in automatic transmissions) or hold pulleys in position to maintain gear ratio (in continuously variable transmissions, discussed below). However, the lack of a torque converter will affect how the vehicle launches from rest, so an AMT will most likely be paired with an engine that offers enough torque in the low-RPM range to allow for adequate launch performance.

An AMT is mechanically similar to a conventional manual transmission, but shifting and launch functions are controlled by the vehicle rather than the driver. A switch from a conventional automatic transmission with torque converter to an AMT incurs some costs but also allows for some cost savings. Savings can be realized through elimination of the torque converter which is a very costly part of a traditional automatic transmission, and through reduced need for high pressure hydraulic circuits to hold clutches (to maintain gear ratios in automatic transmissions) or hold pulleys (to maintain gear ratios in Continuously

Variable Transmissions). Cost increases would be incurred in the form of calibration efforts since transmission calibrations would have to be redone, and the addition of a clutch assembly for launce and gear changes.

The NESCCAF study projected that AMTs could incrementally reduce fuel consumption by 5 to 8 percent at an incremental cost of $0 to $280; while the EEA report projected that low-friction lubricants could incrementally reduce fuel consumption by 6 to 7 percent at an incremental cost of $195 to $225. Confidential manufacturer data projected that AMTs could incrementally reduce fuel consumption by 2 to 5 percent at an incremental cost of $70 to $400.

Taking all these estimates into consideration, NHTSA estimates that AMTs could incrementally reduce fuel consumption by 4.5 to 7.5 percent at an incremental cost of approximately $141. We believe that, overall, the hardware associated with an AMT, whether single clutch or dual clutch, is no more costly than that for a traditional automatic transmission given the savings associated with removal of the torque converter and high pressure hydraulic circuits, which is estimated to amount to at least $30. Nonetheless, given the need for engineering effort (e.g., calibration and vehicle integration work) when transitioning from a traditional automatic to an AMT, we have estimated the incremental compliance cost at $141, independent of vehicle class, which is the midpoint of the NESCCAF estimates and within the range provided confidential manufacturer data.

Continuously Variable Transmission

A Continuously Variable Transmission (CVT) is unique in that it does not use gears to provide ratios for operation. Unlike manual and automatic transmissions with fixed transmission ratios, CVTs provide, within their operating ranges, fully variable transmission ratios with an infinite number of gears. This enables even finer optimization of the transmission ratio under different operating conditions and, therefore, some reduction of pumping and engine friction losses. CVTs use either a belt or chain on a system of two pulleys.

The main advantage of a CVT is that the engine can operate at its most efficient point more often, since there are no fixed ratios. Also, CVTs often have a wider range of ratios than conventional automatic transmissions.

The most common CVT design uses two V-shaped pulleys connected by a metal belt. Each pulley is split in half and a hydraulic actuator moves the pulley halves together or apart. This causes the belt to ride on either a larger or smaller diameter section of the pulley which changes the effective ratio of the input to the output shafts.

It is assumed that CVTs will only be used on cars, small SUVs, midsize crossover vehicles and minivans because they are currently used mainly in lower-torque applications. While a high-torque CVT could be developed for small pickup trucks and large pickup trucks and large SUVs, it would likely have to be treated separately in terms of effectiveness. We do not see development in the area of high-torque CVTs and therefore did not include this type in our analysis.

The 2002 NAS study projected that CVTs could incrementally reduce fuel consumption by 4 to 8 percent at an incremental cost of $140 to $350. The NESCCAF study projected that CVTs could incrementally reduce fuel consumption by 4 percent at an incremental cost of $210 to $245. Confidential manufacturer data projected that CVTs could incrementally reduce fuel consumption by 3 to 9 percent at an incremental cost of $140 to $800. These values are incremental to a 4-speed transmission.

Based on an aggregation of manufacturers' information, we estimate a CVT benefit of about 6 percent over a 4-speed automatic. This is above the NESCCAF value, but in the range of NAS. In reviewing our sources for costs, we have determined that the adjusted costs presented in the 2002 NESCCAF study represent the best available estimates. Subtracting the estimated fuel consumption reduction and costs of replacing a 4-speed automatic transmission with a 5-speed automatic transmission results in NHTSA's projecting that CVTs could incrementally reduce fuel consumption by 3.5 percent when compared to a conventional 5-speed automatic transmission at an incremental cost of $100 to $139.

Manual 6-, 7-, and 8-Speed Transmissions

As with automatic transmissions, increasing the number of available ratios in a manual transmission can improve fuel economy by allowing the driver to select a ratio that optimizes engine operation at a given speed. Typically, this is achieved through adding additional overdrive ratios to reduce engine speed (which saves fuel through reduced pumping losses). Six-speed manual transmissions have already achieved significant market penetration, so manufacturers have considerable experience with them and the associated costs. For those vehicles with five-speed manual transmissions, an upgrade to a six-speed could incrementally reduce fuel consumption by 0.5 percent. Based on CBI submissions, which provided costs with a midpoint of $107, NHTSA estimates that 6-speed manual transmissions could incrementally reduce fuel consumption by 0.5 percent when compared to 5-speed automatic transmission at an incremental cost of $107.

c. Vehicle Technologies

Rolling Resistance Reduction

Tire characteristics (

e.g.

, materials, construction, and tread design) influence durability, traction control, vehicle handling, and comfort. They also influence rolling resistance—the 30 frictional losses associated mainly with the energy dissipated in the deformation of the tires under load—and therefore, CO

emissions. This technology is applicable to all vehicles, except for body-on-frame light trucks and performance vehicles (described in the next section). Based on a 2006 NAS/NRC report, a 10 percent rolling resistance reduction would provide an increase in fuel economy of 1 to 2 percent. The same report estimates a $1 per tire cost for low rolling resistance tires. For four tires, our incremental compliance cost estimate is $6 per vehicle, independent of vehicle class, although not applicable to large trucks.

Low Drag Brakes

Low drag brakes reduce the sliding friction of disc brake pads on rotors when the brakes are not engaged because the brake shoes are pulled away from the rotating drum. While most passenger cars have already adopted this technology, there are indications that this technology is still available for body-on-frame trucks. According to confidential manufacturer data, low drag brakes could incrementally reduce fuel consumption by 1 to 2 percent at an incremental cost of $85 to $90. NHTSA has adopted these values for its analysis.

Front or Secondary Axle Disconnect for Four-Wheel Drive Systems

To provide shift-on-the-fly capabilities, many part-time four-wheel drive systems use some type of axle disconnect: Front axle disconnect in ladder-frame vehicles, and secondary (

i.e.

, either front or rear) axle disconnect in unibody vehicles. Front and secondary axle d

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.