Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule

Federal RegisterMay 7, 2010

Ask Donna

What actually matters in this document.

Text

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 85, 86, and 600

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 531, 533, 536, 537 and 538

[EPA-HQ-OAR-2009-0472; FRL-9134-6; NHTSA-2009-0059]

RIN 2060-AP58; RIN 2127-AK50

Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule

AGENCY:

Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA).

ACTION:

Final rule.

SUMMARY:

EPA and NHTSA are issuing this joint Final Rule to establish a National Program consisting of new standards for light-duty vehicles that will reduce greenhouse gas emissions and improve fuel economy. This joint Final Rule is consistent with the National Fuel Efficiency Policy announced by President Obama on May 19, 2009, responding to the country's critical need to address global climate change and to reduce oil consumption. EPA is finalizing greenhouse gas emissions standards under the Clean Air Act, and NHTSA is finalizing Corporate Average Fuel Economy standards under the Energy Policy and Conservation Act, as amended. These standards apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles, covering model years 2012 through 2016, and represent a harmonized and consistent National Program. Under the National Program, automobile manufacturers will be able to build a single light-duty national fleet that satisfies all requirements under both programs while ensuring that consumers still have a full range of vehicle choices. NHTSA's final rule also constitutes the agency's Record of Decision for purposes of its National Environmental Policy Act (NEPA) analysis.

DATES:

This final rule is effective on July 6, 2010,

sixty days after date of publication in the

Federal Register.

The incorporation by reference of certain publications listed in this regulation is approved by the Director of the Federal Register as of July 6, 2010.

ADDRESSES:

EPA and NHTSA have established dockets for this action under Docket ID No. EPA-HQ-OAR-2009-0472 and NHTSA-2009-0059, respectively. All documents in the docket are listed on the

http://www.regulations.gov

Web site. Although listed in the index, some information is not publicly available,

e.g.,

CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically through

http://www.regulations.gov

or in hard copy at the following locations:

EPA:

EPA Docket Center, EPA/DC, EPA West, Room 3334, 1301 Constitution Ave., NW., Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744.

NHTSA:

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. The Docket Management Facility is open between 9 a.m. and 5 p.m. Eastern Time, Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT:

EPA:

Tad Wysor, Office of Transportation and Air Quality, Assessment and Standards Division, Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor MI 48105; telephone number: 734-214-4332; fax number: 734-214-4816; e-mail address:

wysor.tad@epa.gov,

or Assessment and Standards Division Hotline; telephone number (734) 214-4636; e-mail address

asdinfo@epa.gov. NHTSA:

Rebecca Yoon, Office of Chief Counsel, National Highway Traffic Safety Administration, 1200 New Jersey Avenue, SE., Washington, DC 20590. Telephone: (202) 366-2992.

SUPPLEMENTARY INFORMATION:

Does this action apply to me?

This action affects companies that manufacture or sell new light-duty vehicles, light-duty trucks, and medium-duty passenger vehicles, as defined under EPA's CAA regulations,

and passenger automobiles (passenger cars) and non-passenger automobiles (light trucks) as defined under NHTSA's CAFE regulations.

Regulated categories and entities include:

“Light-duty vehicle,” “light-duty truck,” and “medium-duty passenger vehicle” are defined in 40 CFR 86.1803-01. Generally, the term “light-duty vehicle” means a passenger car, the term “light-duty truck” means a pick-up truck, sport-utility vehicle, or minivan of up to 8,500 lbs gross vehicle weight rating, and “medium-duty passenger vehicle” means a sport-utility vehicle or passenger van from 8,500 to 10,000 lbs gross vehicle weight rating. Medium-duty passenger vehicles do not include pick-up trucks.

“Passenger car” and “light truck” are defined in 49 CFR part 523.

Category

NAICS codes

Examples of potentially regulated entities

Industry

336111, 336112

Motor vehicle manufacturers.

Industry

811112, 811198, 541514

Commercial Importers of Vehicles and Vehicle Components.

North American Industry Classification System (NAICS).

This list is not intended to be exhaustive, but rather provides a guide regarding entities likely to be regulated by this action. To determine whether particular activities may be regulated by this action, you should carefully examine the regulations. You may direct questions regarding the applicability of this action to the person listed in

FOR FURTHER INFORMATION CONTACT.

Table of Contents

I. Overview of Joint EPA/NHTSA National Program

A. Introduction

1. Building Blocks of the National Program

2. Public Participation

B. Summary of the Joint Final Rule and Differences From the Proposal

1. Joint Analytical Approach

2. Level of the Standards

3. Form of the Standards

4. Program Flexibilities

5. Coordinated Compliance

C. Summary of Costs and Benefits of the National Program

1. Summary of Costs and Benefits of NHTSA's CAFE Standards

2. Summary of Costs and Benefits of EPA's GHG Standards

D. Background and Comparison of NHTSA and EPA Statutory Authority

II. Joint Technical Work Completed for This Final Rule

A. Introduction

B. Developing the Future Fleet for Assessing Costs, Benefits, and Effects

1. Why did the agencies establish a baseline and reference vehicle fleet?

2. How did the agencies develop the baseline vehicle fleet?

3. How did the agencies develop the projected MY 2011-2016 vehicle fleet?

4. How was the development of the baseline and reference fleets for this Final Rule different from NHTSA's historical approach?

5. How does manufacturer product plan data factor into the baseline used in this Final Rule?

C. Development of Attribute-Based Curve Shapes

D. Relative Car-Truck Stringency

E. Joint Vehicle Technology Assumptions

1. What technologies did the agencies consider?

2. How did the agencies determine the costs and effectiveness of each of these technologies?

F. Joint Economic Assumptions

G. What are the estimated safety effects of the final MYs 2012-2016 CAFE and GHG standards?

1. What did the agencies say in the NPRM with regard to potential safety effects?

2. What public comments did the agencies receive on the safety analysis and discussions in the NPRM?

3. How has NHTSA refined its analysis for purposes of estimating the potential safety effects of this Final Rule?

4. What are the estimated safety effects of this Final Rule?

5. How do the agencies plan to address this issue going forward?

III. EPA Greenhouse Gas Vehicle Standards

A. Executive Overview of EPA Rule

1. Introduction

2. Why is EPA establishing this Rule?

3. What is EPA adopting?

4. Basis for the GHG Standards Under Section 202(a)

B. GHG Standards for Light-Duty Vehicles, Light-Duty Trucks, and Medium-Duty Passenger Vehicles

1. What fleet-wide emissions levels correspond to the CO

standards?

2. What are the CO

attribute-based standards?

3. Overview of How EPA's CO

Standards Will Be Implemented for Individual Manufacturers

4. Averaging, Banking, and Trading Provisions for CO

Standards

5. CO

Temporary Lead-Time Allowance Alternative Standards

6. Deferment of CO

Standards for Small Volume Manufacturers With Annual Sales Less Than 5,000 Vehicles

7. Nitrous Oxide and Methane Standards

8. Small Entity Exemption

C. Additional Credit Opportunities for CO

Fleet Average Program

1. Air Conditioning Related Credits

2. Flexible Fuel and Alternative Fuel Vehicle Credits

3. Advanced Technology Vehicle Incentives for Electric Vehicles, Plug-in Hybrids, and Fuel Cell Vehicles

4. Off-Cycle Technology Credits

5. Early Credit Options

D. Feasibility of the Final CO

Standards

1. How did EPA develop a reference vehicle fleet for evaluating further CO

reductions?

2. What are the effectiveness and costs of CO

-reducing technologies?

3. How can technologies be combined into “packages” and what is the cost and effectiveness of packages?

4. Manufacturer's Application of Technology

5. How is EPA projecting that a manufacturer decides between options to improve CO

performance to meet a fleet average standard?

6. Why are the final CO

standards feasible?

7. What other fleet-wide CO

levels were considered?

E. Certification, Compliance, and Enforcement

1. Compliance Program Overview

2. Compliance With Fleet-Average CO

Standards

3. Vehicle Certification

4. Useful Life Compliance

5. Credit Program Implementation

6. Enforcement

7. Prohibited Acts in the CAA

8. Other Certification Issues

9. Miscellaneous Revisions to Existing Regulations

10. Warranty, Defect Reporting, and Other Emission-Related Components Provisions

11. Light Duty Vehicles and Fuel Economy Labeling

F. How will this Final Rule reduce GHG emissions and their associated effects?

1. Impact on GHG Emissions

2. Overview of Climate Change Impacts From GHG Emissions

3. Changes in Global Climate Indicators Associated With the Rule's GHG Emissions Reductions

G. How will the standards impact non-GHG emissions and their associated effects?

1. Upstream Impacts of Program

2. Downstream Impacts of Program

3. Health Effects of Non-GHG Pollutants

4. Environmental Effects of Non-GHG Pollutants

5. Air Quality Impacts of Non-GHG Pollutants

H. What are the estimated cost, economic, and other impacts of the program?

1. Conceptual Framework for Evaluating Consumer Impacts

2. Costs Associated With the Vehicle Program

3. Cost per Ton of Emissions Reduced

4. Reduction in Fuel Consumption and Its Impacts

5. Impacts on U.S. Vehicle Sales and Payback Period

6. Benefits of Reducing GHG Emissions

7. Non-Greenhouse Gas Health and Environmental Impacts

8. Energy Security Impacts

9. Other Impacts

10. Summary of Costs and Benefits

I. Statutory and Executive Order Reviews

1. Executive Order 12866: Regulatory Planning and Review

2. Paperwork Reduction Act

3. Regulatory Flexibility Act

4. Unfunded Mandates Reform Act

5. Executive Order 13132 (Federalism)

6. Executive Order 13175 (Consultation and Coordination With Indian Tribal

Governments)

7. Executive Order 13045: “Protection of Children From Environmental Health Risks and Safety Risks”

8. Executive Order 13211 (Energy Effects)

9. National Technology Transfer Advancement Act

10. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations

J. Statutory Provisions and Legal Authority

IV. NHTSA Final Rule and Record of Decision for Passenger Car and Light Truck CAFE Standards for MYs 2012-2016

A. Executive Overview of NHTSA Final Rule

1. Introduction

2. Role of Fuel Economy Improvements in Promoting Energy Independence, Energy Security, and a Low Carbon Economy

3. The National Program

4. Review of CAFE Standard Setting Methodology per the President's January 26, 2009 Memorandum on CAFE Standards for MYs 2011 and Beyond

5. Summary of the Final MY 2012-2016 CAFE Standards

B. Background

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

2. Energy Policy and Conservation Act, as Amended by the Energy Independence and Security Act

C. Development and Feasibility of the Final Standards

1. How was the baseline and reference vehicle fleet developed?

2. How were the technology inputs developed?

3. How did NHTSA develop the economic assumptions?

4. How does NHTSA use the assumptions in its modeling analysis?

5. How did NHTSA develop the shape of the target curves for the final standards?

D. Statutory Requirements

1. EPCA, as Amended by EISA

2. Administrative Procedure Act

3. National Environmental Policy Act

E. What are the final CAFE standards?

1. Form of the Standards

2. Passenger Car Standards for MYs 2012-2016

3. Minimum Domestic Passenger Car Standards

4. Light Truck Standards

F. How do the final standards fulfill NHTSA's statutory obligations?

G. Impacts of the Final CAFE Standards

1. How will these standards improve fuel economy and reduce GHG emissions for MY 2012-2016 vehicles?

2. How will these standards improve fleet-wide fuel economy and reduce GHG emissions beyond MY 2016?

3. How will these final standards impact non-GHG emissions and their associated effects?

4. What are the estimated costs and benefits of these final standards?

5. How would these standards impact vehicle sales?

6. Potential Unquantified Consumer Welfare Impacts of the Final Standards

7. What other impacts (quantitative and unquantifiable) will these final standards have?

H. Vehicle Classification

I. Compliance and Enforcement

1. Overview

2. How does NHTSA determine compliance?

3. What compliance flexibilities are available under the CAFE program and how do manufacturers use them?

4. Other CAFE Enforcement Issues—Variations in Footprint

5. Other CAFE Enforcement Issues—Miscellaneous

J. Other Near-Term Rulemakings Mandated by EISA

1. Commercial Medium- and Heavy-Duty On-Highway Vehicles and Work Trucks

2. Consumer Information on Fuel Efficiency and Emissions

K. NHTSA's Record of Decision

L. Regulatory Notices and Analyses

1. Executive Order 12866 and DOT Regulatory Policies and Procedures

2. National Environmental Policy Act

3. Clean Air Act (CAA)

4. National Historic Preservation Act (NHPA)

5. Executive Order 12898 (Environmental Justice)

6. Fish and Wildlife Conservation Act (FWCA)

7. Coastal Zone Management Act (CZMA)

8. Endangered Species Act (ESA)

9. Floodplain Management (Executive Order 11988 & DOT Order 5650.2)

10. Preservation of the Nation's Wetlands (Executive Order 11990 & DOT Order 5660.1a)

11. Migratory Bird Treaty Act (MBTA), Bald and Golden Eagle Protection Act (BGEPA), Executive Order 13186

12. Department of Transportation Act (Section 4(f))

13. Regulatory Flexibility Act

14. Executive Order 13132 (Federalism)

15. Executive Order 12988 (Civil Justice Reform)

16. Unfunded Mandates Reform Act

17. Regulation Identifier Number

18. Executive Order 13045

19. National Technology Transfer and Advancement Act

20. Executive Order 13211

21. Department of Energy Review

22. Privacy Act

I. Overview of Joint EPA/NHTSA National Program

A. Introduction

The National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) are each announcing final rules whose benefits will address the urgent and closely intertwined challenges of energy independence and security and global warming. These rules will implement a strong and coordinated Federal greenhouse gas (GHG) and fuel economy program for passenger cars, light-duty-trucks, and medium-duty passenger vehicles (hereafter light-duty vehicles), referred to as the National Program. The rules will achieve substantial reductions of GHG emissions and improvements in fuel economy from the light-duty vehicle part of the transportation sector, based on technology that is already being commercially applied in most cases and that can be incorporated at a reasonable cost. NHTSA's final rule also constitutes the agency's Record of Decision for purposes of its NEPA analysis.

This joint rulemaking is consistent with the President's announcement on May 19, 2009 of a National Fuel Efficiency Policy of establishing consistent, harmonized, and streamlined requirements that would reduce GHG emissions and improve fuel economy for all new cars and light-duty trucks sold in the United States.

The National Program will deliver additional environmental and energy benefits, cost savings, and administrative efficiencies on a nationwide basis that would likely not be available under a less coordinated approach. The National Program also represents regulatory convergence by making it possible for the standards of two different Federal agencies and the standards of California and other states to act in a unified fashion in providing these benefits. The National Program will allow automakers to produce and sell a single fleet nationally, mitigating the additional costs that manufacturers would otherwise face in having to comply with multiple sets of Federal and State standards. This joint notice is also consistent with the Notice of Upcoming Joint Rulemaking issued by DOT and EPA on May 19, 2009

and responds to the President's January 26, 2009 memorandum on CAFE standards for model years 2011 and beyond,

the details of which can be found in Section IV of this joint notice.

President Obama Announces National Fuel Efficiency Policy, The White House, May 19, 2009. Available at:

http://www.whitehouse.gov/the_press_office/President-Obama-Announces-National-Fuel-Efficiency-Policy/.

Remarks by the President on National Fuel Efficiency Standards, The White House, May 19, 2009. Available at:

http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-on-national-fuel-efficiency-standards/.

74 FR 24007 (May 22, 2009).

Available at:

http://www.whitehouse.gov/the_press_office/Presidential_Memorandum_Fuel_Economy/.

Climate change is widely viewed as a significant long-term threat to the global environment. As summarized in the Technical Support Document for EPA's Endangerment and Cause or Contribute Findings under Section 202(a) of the Clear Air Act, anthropogenic emissions of GHGs are very likely (90 to 99 percent probability) the cause of most of the observed global warming over the last 50 years.

The primary GHGs of concern are carbon dioxide (CO

), methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. Mobile sources emitted 31 percent of all U.S. GHGs in 2007 (transportation sources, which do not include certain off-highway sources, account for 28 percent) and have been the fastest-growing source of U.S. GHGs since 1990.

Mobile sources addressed in the recent endangerment and contribution findings under CAA section 202(a)—light-duty vehicles, heavy-duty trucks, buses, and motorcycles—accounted for 23 percent of all U.S. GHG in 2007.

Light-duty vehicles emit CO

, methane, nitrous oxide, and hydrofluorocarbons and are responsible for nearly 60 percent of all mobile source GHGs and over 70 percent of Section 202(a) mobile source GHGs. For light-duty vehicles in 2007, CO

emissions represent about 94 percent of all greenhouse emissions (including HFCs), and the CO

emissions measured over the EPA tests used for fuel economy compliance represent about 90 percent of total light-duty vehicle GHG emissions.

9 10

“Technical Support Document for Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act” Docket: EPA-HQ-OAR-2009-0472-11292,

http://epa.gov/climatechange/endangerment.html.

U.S. Environmental Protection Agency. 2009. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2007. EPA 430-R-09-004. Available at

http://epa.gov/climatechange/emissions/downloads09/GHG2007entire_report-508.pdf.

U.S. EPA. 2009 Technical Support Document for Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act. Washington, DC. pp. 180-194. Available at

http://epa.gov/climatechange/endangerment/downloads/Endangerment%20TSD.pdf.

U.S. Environmental Protection Agency. 2009. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2007. EPA 430-R-09-004. Available at

http://epa.gov/climatechange/emissions/downloads09/GHG2007entire_report-508.pdf.

U.S. Environmental Protection Agency. RIA, Chapter 2.

Improving energy security by reducing our dependence on foreign oil has been a national objective since the first oil price shocks in the 1970s. Net petroleum imports now account for approximately 60 percent of U.S.

petroleum consumption. World crude oil production is highly concentrated, exacerbating the risks of supply disruptions and price shocks. Tight global oil markets led to prices over $100 per barrel in 2008, with gasoline reaching as high as $4 per gallon in many parts of the U.S., causing financial hardship for many families. The export of U.S. assets for oil imports continues to be an important component of the historically unprecedented U.S. trade deficits. Transportation accounts for about two-thirds of U.S. petroleum consumption. Light-duty vehicles account for about 60 percent of transportation oil use, which means that they alone account for about 40 percent of all U.S. oil consumption.

1. Building Blocks of the National Program

The National Program is both needed and possible because the relationship between improving fuel economy and reducing CO

tailpipe emissions is a very direct and close one. The amount of those CO

emissions is essentially constant per gallon combusted of a given type of fuel. Thus, the more fuel efficient a vehicle is, the less fuel it burns to travel a given distance. The less fuel it burns, the less CO

it emits in traveling that distance.

While there are emission control technologies that reduce the pollutants (

e.g.,

carbon monoxide) produced by imperfect combustion of fuel by capturing or converting them to other compounds, there is no such technology for CO

. Further, while some of those pollutants can also be reduced by achieving a more complete combustion of fuel, doing so only increases the tailpipe emissions of CO

. Thus, there is a single pool of technologies for addressing these twin problems,

i.e.,

those that reduce fuel consumption and thereby reduce CO

emissions as well.

Panel on Policy Implications of Greenhouse Warming, National Academy of Sciences, National Academy of Engineering, Institute of Medicine, “Policy Implications of Greenhouse Warming: Mitigation, Adaptation, and the Science Base,” National Academies Press, 1992. p. 287.

a. DOT's CAFE Program

In 1975, Congress enacted the Energy Policy and Conservation Act (EPCA), mandating that NHTSA establish and implement a regulatory program for motor vehicle fuel economy to meet the various facets of the need to conserve energy, including ones having energy independence and security, environmental and foreign policy implications. Fuel economy gains since 1975, due both to the standards and market factors, have resulted in saving billions of barrels of oil and avoiding billions of metric tons of CO

emissions. In December 2007, Congress enacted the Energy Independence and Securities Act (EISA), amending EPCA to require substantial, continuing increases in fuel economy standards.

The CAFE standards address most, but not all, of the real world CO

emissions because a provision in EPCA as originally enacted in 1975 requires the use of the 1975 passenger car test procedures under which vehicle air conditioners are not turned on during fuel economy testing.

Fuel economy is determined by measuring the amount of CO

and other carbon compounds emitted from the tailpipe, not by attempting to measure directly the amount of fuel consumed during a vehicle test, a difficult task to accomplish with precision. The carbon content of the test fuel

is then used to calculate the amount of fuel that had to be consumed per mile in order to produce that amount of CO

. Finally, that fuel consumption figure is converted into a miles-per-gallon figure. CAFE standards also do not address the 5-8 percent of GHG emissions that are not CO

i.e.,

nitrous oxide (N

O), and methane (CH

) as well as emissions of CO

and hydrofluorocarbons (HFCs) related to operation of the air conditioning system.

Although EPCA does not require the use of 1975 test procedures for light trucks, those procedures are used for light truck CAFE standard testing purposes.

This is the method that EPA uses to determine compliance with NHTSA's CAFE standards.

b. EPA's GHG Standards for Light-duty Vehicles

Under the Clean Air Act EPA is responsible for addressing air pollutants from motor vehicles. On April 2, 2007, the U.S. Supreme Court issued its opinion in

Massachusetts

EPA,

a case involving EPA's a 2003 denial of a petition for rulemaking to regulate GHG emissions from motor vehicles under section 202(a) of the Clean Air Act (CAA).

The Court held that GHGs fit within the definition of air pollutant in the Clean Air Act and further held that the Administrator must determine whether or not emissions from new motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, or whether the science is too uncertain to make a reasoned decision. The Court further ruled that, in making these decisions, the EPA Administrator is required to follow the language of section 202(a) of the CAA. The Court rejected the argument that EPA cannot regulate CO

from motor vehicles because to do so would

de facto

tighten fuel economy standards, authority over which has been assigned by Congress to DOT. The Court stated that “[b]ut that DOT sets mileage standards in no way licenses EPA to shirk its environmental responsibilities. EPA has been charged with protecting the public's `health' and `welfare', a statutory obligation wholly independent of DOT's mandate to promote energy efficiency.” The Court concluded that “[t]he two obligations may overlap, but there is no reason to think the two agencies cannot both administer their obligations and yet avoid inconsistency.”

The case was remanded back to the Agency for reconsideration in light of the Court's decision.

549 U.S. 497 (2007).

68 FR 52922 (Sept. 8, 2003).

549 U.S. at 531-32.

For further information on

Massachusetts

EPA

see the July 30, 2008 Advance Notice of Proposed Rulemaking, “Regulating Greenhouse Gas Emissions under the Clean Air Act”, 73 FR 44354 at 44397. There is a comprehensive discussion of the litigation's history, the Supreme Court's findings, and subsequent actions undertaken by the Bush Administration and the EPA from 2007-2008 in response to the Supreme Court remand. Also see 74 FR 18886, at 1888-90 (April 24, 2009).

On December 15, 2009, EPA published two findings (74 FR 66496): That emissions of GHGs from new motor vehicles and motor vehicle engines contribute to air pollution, and that the air pollution may reasonably be anticipated to endanger public health and welfare.

c. California Air Resources Board Greenhouse Gas Program

In 2004, the California Air Resources Board approved standards for new light-duty vehicles, which regulate the emission of not only CO

, but also other GHGs. Since then, thirteen states and the District of Columbia, comprising approximately 40 percent of the light-duty vehicle market, have adopted California's standards. These standards apply to model years 2009 through 2016 and require CO

emissions for passenger cars and the smallest light trucks of 323 g/mi in 2009 and 205 g/mi in 2016, and for the remaining light trucks of 439 g/mi in 2009 and 332 g/mi in 2016. On June 30, 2009, EPA granted California's request for a waiver of preemption under the CAA.

The granting of the waiver permits California and the other states to proceed with implementing the California emission standards.

74 FR 32744 (July 8, 2009).

In addition, to promote the National Program, in May 2009, California announced its commitment to take several actions in support of the National Program, including revising its

program for MYs 2009-2011 to facilitate compliance by the automakers, and revising its program for MYs 2012-2016 such that compliance with the Federal GHG standards will be deemed to be compliance with California's GHG standards. This will allow the single national fleet produced by automakers to meet the two Federal requirements and to meet California requirements as well. California is proceeding with a rulemaking intended to revise its 2004 regulations to meet its commitments. Several automakers and their trade associations also announced their commitment to take several actions in support of the National Program, including not contesting the final GHG and CAFE standards for MYs 2012-2016, not contesting any grant of a waiver of preemption under the CAA for California's GHG standards for certain model years, and to stay and then dismiss all pending litigation challenging California's regulation of GHG emissions, including litigation concerning preemption under EPCA of California's and other states' GHG standards.

2. Public Participation

The agencies proposed their respective rules on September 28, 2009 (74 FR 49454), and received a large number of comments representing many perspectives on the proposed rule. The agencies received oral testimony at three public hearings in different parts of the country, and received written comments from more than 130 organizations, including auto manufacturers and suppliers, States, environmental and other non-governmental organizations (NGOs), and over 129,000 comments from private citizens.

The vast majority of commenters supported the central tenets of the proposed CAFE and GHG programs. That is, there was broad support from most organizations for a National Program that achieves a level of 250 gram/mile fleet average CO

, which would be 35.5 miles per gallon if the automakers were to meet this CO

level solely through fuel economy improvements. The standards will be phased in over model years 2012 through 2016 which will allow manufacturers to build a common fleet of vehicles for the domestic market. In general, commenters from the automobile industry supported the proposed standards as well as the credit opportunities and other compliance provisions providing flexibility, while also making some recommendations for changes. Environmental and public interest non-governmental organizations (NGOs), as well as most States that commented, were also generally supportive of the National Program standards. Many of these organizations also expressed concern about the possible impact on program benefits, depending on how the credit provisions and flexibilities are designed. The agencies also received specific comments on many aspects of the proposal.

Throughout this notice, the agencies discuss many of the key issues arising from the public comments and the agencies' responses. In addition, the agencies have addressed all of the public comments in the Response to Comments document associated with this final rule.

B. Summary of the Joint Final Rule and Differences From the Proposal

In this joint rulemaking, EPA is establishing GHG emissions standards under the Clean Air Act (CAA), and NHTSA is establishing Corporate Average Fuel Economy (CAFE) standards under the Energy Policy and Conservation Action of 1975 (EPCA), as amended by the Energy Independence and Security Act of 2007 (EISA). The intention of this joint rulemaking is to set forth a carefully coordinated and harmonized approach to implementing these two statutes, in accordance with all substantive and procedural requirements imposed by law.

NHTSA and EPA have coordinated closely and worked jointly in developing their respective final rules. This is reflected in many aspects of this joint rule. For example, the agencies have developed a comprehensive Joint Technical Support Document (TSD) that provides a solid technical underpinning for each agency's modeling and analysis used to support their standards. Also, to the extent allowed by law, the agencies have harmonized many elements of program design, such as the form of the standard (the footprint-based attribute curves), and the definitions used for cars and trucks. They have developed the same or similar compliance flexibilities, to the extent allowed and appropriate under their respective statutes, such as averaging, banking, and trading of credits, and have harmonized the compliance testing and test protocols used for purposes of the fleet average standards each agency is finalizing. Finally, under their respective statutes, each agency is called upon to exercise its judgment and determine standards that are an appropriate balance of various relevant statutory factors. Given the common technical issues before each agency, the similarity of the factors each agency is to consider and balance, and the authority of each agency to take into consideration the standards of the other agency, both EPA and NHTSA are establishing standards that result in a harmonized National Program.

This joint final rule covers passenger cars, light-duty trucks, and medium-duty passenger vehicles built in model years 2012 through 2016. These vehicle categories are responsible for almost 60 percent of all U.S. transportation-related GHG emissions. EPA and NHTSA expect that automobile manufacturers will meet these standards by utilizing technologies that will reduce vehicle GHG emissions and improve fuel economy. Although many of these technologies are available today, the emissions reductions and fuel economy improvements finalized in this notice will involve more widespread use of these technologies across the light-duty vehicle fleet. These include improvements to engines, transmissions, and tires, increased use of start-stop technology, improvements in air conditioning systems, increased use of hybrid and other advanced technologies, and the initial commercialization of electric vehicles and plug-in hybrids. NHTSA's and EPA's assessments of likely vehicle technologies that manufacturers will employ to meet the standards are discussed in detail below and in the Joint TSD.

The National Program is estimated to result in approximately 960 million metric tons of total carbon dioxide equivalent emissions reductions and approximately 1.8 billion barrels of oil savings over the lifetime of vehicles sold in model years (MYs) 2012 through 2016. In total, the combined EPA and NHTSA 2012-2016 standards will reduce GHG emissions from the U.S. light-duty fleet by approximately 21 percent by 2030 over the level that would occur in the absence of the National Program. These actions also will provide important energy security benefits, as light-duty vehicles are about 95 percent dependent on oil-based fuels. The agencies project that the total benefits of the National Program will be more than $240 billion at a 3% discount rate, or more than $190 billion at a 7% discount rate. In the discussion that follows in Sections III and IV, each agency explains the related benefits for their individual standards.

Together, EPA and NHTSA estimate that the average cost increase for a model year 2016 vehicle due to the National Program will be less than $1,000. The average U.S. consumer who purchases a vehicle outright is estimated to save enough in lower fuel costs over the first three years to offset

these higher vehicle costs. However, most U.S. consumers purchase a new vehicle using credit rather than paying cash and the typical car loan today is a five year, 60 month loan. These consumers will see immediate savings due to their vehicle's lower fuel consumption in the form of a net reduction in annual costs of $130-$180 throughout the duration of the loan (that is, the fuel savings will outweigh the increase in loan payments by $130-$180 per year). Whether a consumer takes out a loan or purchases a new vehicle outright, over the lifetime of a model year 2016 vehicle, the consumer's net savings could be more than $3,000. The average 2016 MY vehicle will emit 16 fewer metric tons of CO

-equivalent emissions (that is, CO

emissions plus HFC air conditioning leakage emissions) during its lifetime. Assumptions that underlie these conclusions are discussed in greater detail in the agencies' respective regulatory impact analyses and in Section III.H.5 and Section IV.

This joint rule also results in important regulatory convergence and certainty to automobile companies. Absent this rule, there would be three separate Federal and State regimes independently regulating light-duty vehicles to reduce fuel consumption and GHG emissions: NHTSA's CAFE standards, EPA's GHG standards, and the GHG standards applicable in California and other States adopting the California standards. This joint rule will allow automakers to meet both the NHTSA and EPA requirements with a single national fleet, greatly simplifying the industry's technology, investment and compliance strategies. In addition, to promote the National Program, California announced its commitment to take several actions, including revising its program for MYs 2012-2016 such that compliance with the Federal GHG standards will be deemed to be compliance with California's GHG standards. This will allow the single national fleet used by automakers to meet the two Federal requirements and to meet California requirements as well. California is proceeding with a rulemaking intended to revise its 2004 regulations to meet its commitments. EPA and NHTSA are confident that these GHG and CAFE standards will successfully harmonize both the Federal and State programs for MYs 2012-2016 and will allow our country to achieve the increased benefits of a single, nationwide program to reduce light-duty vehicle GHG emissions and reduce the country's dependence on fossil fuels by improving these vehicles' fuel economy.

A successful and sustainable automotive industry depends upon, among other things, continuous technology innovation in general, and low GHG emissions and high fuel economy vehicles in particular. In this respect, this action will help spark the investment in technology innovation necessary for automakers to successfully compete in both domestic and export markets, and thereby continue to support a strong economy.

While this action covers MYs 2012-2016, many stakeholders encouraged EPA and NHTSA to also begin working toward standards for MY 2017 and beyond that would maintain a single nationwide program. The agencies recognize the importance of and are committed to a strong, coordinated national program for light-duty vehicles for model years beyond 2016.

Key elements of the National Program finalized today are the level and form of the GHG and CAFE standards, the available compliance mechanisms, and general implementation elements. These elements are summarized in the following section, with more detailed discussions about EPA's GHG program following in Section III, and about NHTSA's CAFE program in Section IV. This joint final rule responds to the wide array of comments that the agencies received on the proposed rule. This section summarizes many of the major comments on the primary elements of the proposal and describes whether and how the final rule has changed, based on the comments and additional analyses. Major comments and the agencies' responses to them are also discussed in more detail in later sections of this preamble. For a full summary of public comments and EPA's and NHTSA's responses to them, please see the Response to Comments document associated with this final rule.

1. Joint Analytical Approach

NHTSA and EPA have worked closely together on nearly every aspect of this joint final rule. The extent and results of this collaboration are reflected in the elements of the respective NHTSA and EPA rules, as well as the analytical work contained in the Joint Technical Support Document (Joint TSD). The Joint TSD, in particular, describes important details of the analytical work that are shared, as well as any differences in approach. These include the build up of the baseline and reference fleets, the derivation of the shape of the curves that define the standards, a detailed description of the costs and effectiveness of the technology choices that are available to vehicle manufacturers, a summary of the computer models used to estimate how technologies might be added to vehicles, and finally the economic inputs used to calculate the impacts and benefits of the rules, where practicable.

EPA and NHTSA have jointly developed attribute curve shapes that each agency is using for its final standards. Further details of these functions can be found in Sections III and IV of this preamble as well as Chapter 2 of the Joint TSD. A critical technical underpinning of each agency's analysis is the cost and effectiveness of the various control technologies. These are used to analyze the feasibility and cost of potential GHG and CAFE standards. A detailed description of all of the technology information considered can be found in Chapter 3 of the Joint TSD (and for A/C, Chapter 2 of the EPA RIA). This detailed technology data forms the inputs to computer models that each agency uses to project how vehicle manufacturers may add those technologies in order to comply with the new standards. These are the OMEGA and Volpe models for EPA and NHTSA, respectively. The models and their inputs can also be found in the docket. Further description of the model and outputs can be found in Sections III and IV of this preamble, and Chapter 3 of the Joint TSD. This comprehensive joint analytical approach has provided a sound and consistent technical basis for each agency in developing its final standards, which are summarized in the sections below.

The vast majority of public comments expressed strong support for the joint analytical work performed for the proposal. Commenters generally agreed with the analytical work and its results, and supported the transparency of the analysis and its underlying data. Where commenters raised specific points, the agencies have considered them and made changes where appropriate. The agencies' further evaluation of various technical issues also led to a limited number of changes. A detailed discussion of these issues can be found in Section II of this preamble, and the Joint TSD.

2. Level of the Standards

In this notice, EPA and NHTSA are establishing two separate sets of standards, each under its respective statutory authorities. EPA is setting national CO

emissions standards for light-duty vehicles under section 202(a) of the Clean Air Act. These standards will require these vehicles to meet an

estimated combined average emissions level of 250 grams/mile of CO

in model year 2016. NHTSA is setting CAFE standards for passenger cars and light trucks under 49 U.S.C. 32902. These standards will require manufacturers of those vehicles to meet an estimated combined average fuel economy level of 34.1 mpg in model year 2016. The standards for both agencies begin with the 2012 model year, with standards increasing in stringency through model year 2016. They represent a harmonized approach that will allow industry to build a single national fleet that will satisfy both the GHG requirements under the CAA and CAFE requirements under EPCA/EISA.

Given differences in their respective statutory authorities, however, the agencies' standards include some important differences. Under the CO

fleet average standards adopted under CAA section 202(a), EPA expects manufacturers to take advantage of the option to generate CO

-equivalent credits by reducing emissions of hydrofluorocarbons (HFCs) and CO

through improvements in their air conditioner systems. EPA accounted for these reductions in developing its final CO

standards. NHTSA did not do so because EPCA does not allow vehicle manufacturers to use air conditioning credits in complying with CAFE standards for passenger cars.

emissions due to air conditioning operation are not measured by the test procedure mandated by statute for use in establishing and enforcing CAFE standards for passenger cars. As a result, improvement in the efficiency of passenger car air conditioners is not considered as a possible control technology for purposes of CAFE.

There is no such statutory limitation with respect to light trucks.

These differences regarding the treatment of air conditioning improvements (related to CO

and HFC reductions) affect the relative stringency of the EPA standard and NHTSA standard for MY 2016. The 250 grams per mile of CO

equivalent emissions limit is equivalent to 35.5 mpg

if the automotive industry were to meet this CO

level all through fuel economy improvements. As a consequence of the prohibition against NHTSA's allowing credits for air conditioning improvements for purposes of passenger car CAFE compliance, NHTSA is setting fuel economy standards that are estimated to require a combined (passenger car and light truck) average fuel economy level of 34.1 mpg by MY 2016.

The agencies are using a common conversion factor between fuel economy in units of miles per gallon and CO

emissions in units of grams per mile. This conversion factor is 8,887 grams CO

per gallon gasoline fuel. Diesel fuel has a conversion factor of 10,180 grams CO

per gallon diesel fuel though for the purposes of this calculation, we are assuming 100% gasoline fuel.

The vast majority of public comments expressed strong support for the National Program standards, including the stringency of the agencies' respective standards and the phase-in from model year 2012 through 2016. There were a number of comments supporting standards more stringent than proposed, and a few others supporting less stringent standards, in particular for the 2012-2015 model years. The agencies' consideration of comments and their updated technical analyses led to only very limited changes in the footprint curves and did not change the agencies' projections that the nationwide fleet will achieve a level of 250 grams/mile by 2016 (equivalent to 35.5 mpg). The responses to these comments are discussed in more detail in Sections III and IV, respectively, and in the Response to Comments document.

As proposed, NHTSA and EPA's final standards, like the standards NHTSA promulgated in March 2009 for MY 2011, are expressed as mathematical functions depending on vehicle footprint. Footprint is one measure of vehicle size, and is determined by multiplying the vehicle's wheelbase by the vehicle's average track width.

The standards that must be met by each manufacturer's fleet will be determined by computing the sales-weighted average (harmonic average for CAFE) of the targets applicable to each of the manufacturer's passenger cars and light trucks. Under these footprint-based standards, the levels required of individual manufacturers will depend, as noted above, on the mix of vehicles sold. NHTSA's and EPA's respective standards are shown in the tables below. It is important to note that the standards are the attribute-based curves established by each agency. The values in the tables below reflect the agencies' projection of the corresponding fleet levels that will result from these attribute-based curves.

See 49 CFR 523.2 for the exact definition of “footprint.”

As a result of public comments and updated economic and future fleet projections, EPA and NHTSA have updated the attribute based curves for this final rule, as discussed in detail in Section II.B of this preamble and Chapter 2 of the Joint TSD. This update in turn affects costs, benefits, and other impacts of the final standards. Thus, the agencies have updated their overall projections of the impacts of the final rule standards, and these results are only slightly different from those presented in the proposed rule.

As shown in Table I.B.2-1, NHTSA's fleet-wide CAFE-required levels for passenger cars under the final standards are projected to increase from 33.3 to 37.8 mpg between MY 2012 and MY 2016. Similarly, fleet-wide CAFE levels for light trucks are projected to increase from 25.4 to 28.8 mpg. NHTSA has also estimated the average fleet-wide required levels for the combined car and truck fleets. As shown, the overall fleet average CAFE level is expected to be 34.1 mpg in MY 2016. These numbers do not include the effects of other flexibilities and credits in the program. These standards represent a 4.3 percent average annual rate of increase relative to the MY 2011 standards.

Because required CAFE levels depend on the mix of vehicles sold by manufacturers in a model year, NHTSA's estimate of future required CAFE levels depends on its estimate of the mix of vehicles that will be sold in that model year. NHTSA currently estimates that the MY 2011 standards will require average fuel economy levels of 30.4 mpg for passenger cars, 24.4 mpg for light trucks, and 27.6 mpg for the combined fleet.

Table I.B.2-1—Average Required Fuel Economy

(mpg)

Under Final CAFE Standards

2011-base

2012

2013

2014

2015

2016

Passenger Cars

30.4

33.3

34.2

34.9

36.2

37.8

Light Trucks

24.4

25.4

26.0

26.6

27.5

28.8

Combined Cars & Trucks

27.6

29.7

30.5

31.3

32.6

34.1

Accounting for the expectation that some manufacturers could continue to pay civil penalties rather than achieving required CAFE levels, and the ability to use FFV credits,

NHTSA estimates that the CAFE standards will lead to the following average achieved fuel economy levels, based on the projections of what each manufacturer's fleet will comprise in each year of the program:

The penalties are similar in function to essentially unlimited, fixed-price allowances.

NHTSA's estimates account for availability of CAFE credits for the sale of flexible-fuel vehicles (FFVs), and for the potential that some manufacturers will pay civil penalties rather than comply with the CAFE standards. This yields NHTSA's estimates of the real-world fuel economy that will likely be achieved under the final CAFE standards. NHTSA has not included any potential impact of car-truck credit transfer in its estimate of the achieved CAFE levels.

Table I.B.2-2—Projected Fleet-Wide Achieved CAFE Levels Under the Final Footprint-Based CAFE Standards

(mpg)

2012

2013

2014

2015

2016

Passenger Cars

32.3

33.5

34.2

35.0

36.2

Light Trucks

24.5

25.1

25.9

26.7

27.5

Combined Cars & Trucks

28.7

29.7

30.6

31.5

32.7

NHTSA is also required by EISA to set a minimum fuel economy standard for domestically manufactured passenger cars in addition to the attribute-based passenger car standard. The minimum standard “shall be the greater of (A) 27.5 miles per gallon; or (B) 92 percent of the average fuel economy projected by the Secretary for the combined domestic and non-domestic passenger automobile fleets manufactured for sale in the United States by all manufacturers in the model year.* * * ”

49 U.S.C. 32902(b)(4).

Based on NHTSA's current market forecast, the agency's estimates of these minimum standards under the MY 2012-2016 CAFE standards (and, for comparison, the final MY 2011 standard) are summarized below in Table I.B.2-3.

For eventual compliance calculations, the final calculated minimum standards will be updated to reflect the average fuel economy level required under the final standards.

In the March 2009 final rule establishing MY 2011 standards for passenger cars and light trucks, NHTSA estimated that the minimum required CAFE standard for domestically manufactured passenger cars would be 27.8 mpg under the MY 2011 passenger car standard.

Table I.B.2-3—Estimated Minimum Standard for Domestically Manufactured Passenger Cars Under MY 2011 and MY 2012-2016 CAFE Standards for Passenger Cars

(mpg)

2011

2012

2013

2014

2015

2016

27.8

30.7

31.4

32.1

33.3

34.7

EPA is establishing GHG emissions standards, and Table I.B.2-4 provides EPA's estimates of their projected overall fleet-wide CO

equivalent emission levels.

The g/mi values are CO

equivalent values because they include the projected use of air conditioning (A/C) credits by manufacturers, which include both HFC and CO

reductions.

These levels do not include the effect of flexible fuel credits, transfer of credits between cars and trucks, temporary lead time allowance, or any other credits with the exception of air conditioning.

Table I.B.2-4—Projected Fleet-Wide Emissions Compliance Levels Under the Footprint-Based CO

Standards

(g/mi)

2012

2013

2014

2015

2016

Passenger Cars

263

256

247

236

225

Light Trucks

346

337

326

312

298

Combined Cars & Trucks

295

286

276

263

250

As shown in Table I.B.2-4, fleet-wide CO

emission level requirements for cars are projected to increase in stringency from 263 to 225 g/mi between MY 2012 and MY 2016. Similarly, fleet-wide CO

equivalent emission level requirements for trucks are projected to increase in stringency from 346 to 298 g/mi. As shown, the overall fleet average CO

level requirements are projected to increase in stringency from 295 g/mi in MY 2012 to 250 g/mi in MY 2016.

EPA anticipates that manufacturers will take advantage of program flexibilities such as flexible fueled vehicle credits and car/truck credit trading. Due to the credit trading between cars and trucks, the estimated improvements in CO

emissions are distributed differently than shown in Table I.B.2-4, where full manufacturer compliance without credit trading is assumed. Table I.B.2-5 shows EPA's projection of the achieved emission levels of the fleet for MY 2012 through 2016, which does consider the impact of car/truck credit transfer and the increase in emissions due to certain program flexibilities including flex fueled vehicle credits and the temporary lead time allowance alternative standards. The use of optional air conditioning credits is considered both in this analysis of achieved levels and of the

compliance levels described above. As can be seen in Table I.B.2-5, the projected achieved levels are slightly higher for model years 2012-2015 due to EPA's assumptions about manufacturers' use of the regulatory flexibilities, but by model year 2016 the achieved level is projected to be 250 g/mi for the fleet.

Table I.B.2-5—Projected Fleet-Wide Achieved Emission Levels Under the Footprint-Based CO

Standards

(g/mi)

2012

2013

2014

2015

2016

Passenger Cars

267

256

245

234

223

Light Trucks

365

353

340

324

303

Combined Cars & Trucks

305

293

280

266

250

Several auto manufacturers stated that the increasingly stringent requirements for fuel economy and GHG emissions in the early years of the program should follow a more linear phase-in. The agencies' consideration of comments and of their updated technical analyses did not lead to changes to the phase-in of the standards discussed above. This issue is discussed in more detail in Sections II.D, and in Sections III and IV.

NHTSA's and EPA's technology assessment indicates there is a wide range of technologies available for manufacturers to consider in upgrading vehicles to reduce GHG emissions and improve fuel economy. Commenters were in general agreement with this assessment.

As noted, these include improvements to the engines such as use of gasoline direct injection and downsized engines that use turbochargers to provide performance similar to that of larger engines, the use of advanced transmissions, increased use of start-stop technology, improvements in tire rolling resistance, reductions in vehicle weight, increased use of hybrid and other advanced technologies, and the initial commercialization of electric vehicles and plug-in hybrids. EPA is also projecting improvements in vehicle air conditioners including more efficient as well as low leak systems. All of these technologies are already available today, and EPA's and NHTSA's assessments are that manufacturers will be able to meet the standards through more widespread use of these technologies across the fleet.

The close relationship between emissions of CO

—the most prevalent greenhouse gas emitted by motor vehicles—and fuel consumption, means that the technologies to control CO

emissions and to improve fuel economy overlap to a great degree.

With respect to the practicability of the standards in terms of lead time, during MYs 2012-2016 manufacturers are expected to go through the normal automotive business cycle of redesigning and upgrading their light-duty vehicle products, and in some cases introducing entirely new vehicles not on the market today. This rule allows manufacturers the time needed to incorporate technology to achieve GHG reductions and improve fuel economy during the vehicle redesign process. This is an important aspect of the rule, as it avoids the much higher costs that would occur if manufacturers needed to add or change technology at times other than their scheduled redesigns. This time period also provides manufacturers the opportunity to plan for compliance using a multi-year time frame, again consistent with normal business practice. Over these five model years, there will be an opportunity for manufacturers to evaluate almost every one of their vehicle model platforms and add technology in a cost effective way to control GHG emissions and improve fuel economy. This includes redesign of the air conditioner systems in ways that will further reduce GHG emissions. Various commenters stated that the proposed phase-in of the standards should be introduced more aggressively, less aggressively, or in a more linear manner. However, our consideration of these comments about the phase-in, as well as our revised analyses, leads us to conclude that the general rate of introduction of the standards as proposed remains appropriate. This conclusion is also not affected by the slight difference from the proposal in the final footprint-based curves. These issues are addressed further in Sections III and IV.

Both agencies considered other standards as part of the rulemaking analyses, both more and less stringent than those proposed. EPA's and NHTSA's analyses of alternative standards are contained in Sections III and IV of this preamble, respectively, as well as the agencies' respective RIAs.

The CAFE and GHG standards described above are based on determining emissions and fuel economy using the city and highway test procedures that are currently used in the CAFE program. Some environmental and other organizations commented that the test procedures should be improved to reflect more real-world driving conditions; auto manufacturers in general do not support such changes to the test procedures at this time. Both agencies recognize that these test procedures are not fully representative of real-world driving conditions. For example, EPA has adopted more representative test procedures that are used in determining compliance with emissions standards for pollutants other than GHGs. These test procedures are also used in EPA's fuel economy labeling program. However, as discussed in Section III, the current information on effectiveness of the individual emissions control technologies is based on performance over the CAFE test procedures. For that reason, EPA is using the current CAFE test procedures for the CO

standards and is not changing those test procedures in this rulemaking. NHTSA, as discussed above, is limited by statute in what test procedures can be used for purposes of passenger car testing, although there is no such statutory limitation with respect to test procedures for trucks. However, the same reasons for not changing the truck test procedures apply for CAFE as well.

Both EPA and NHTSA are interested in developing programs that employ test procedures that are more representative of real-world driving conditions, to the extent authorized under their respective statutes. This is an important issue, and the agencies intend to continue to evaluate it in the context of a future rulemaking to address standards for model year 2017 and thereafter. This could include consideration of a range of test procedure changes to better represent real-world driving conditions in terms of speed, acceleration, deceleration, ambient temperatures, use of air conditioners, and the like. With respect to air conditioner operation, EPA discusses the public comments on these issues and the final procedures for determining emissions credits for controls on air conditioners in Section III.

Finally, based on the information EPA developed in its recent rulemaking that updated its fuel economy labeling program to better reflect average real-world fuel economy, the calculation of fuel savings and CO

emissions reductions that will be achieved by the CAFE and GHG standards includes adjustments to account for the difference between the fuel economy level measured in the CAFE test procedure and the fuel economy actually achieved on average under real-world driving conditions. These adjustments are industry averages for the vehicles' performance as a whole, however, and are not a substitute for the information on effectiveness of individual control technologies that will be explored for purposes of a future GHG and CAFE rulemaking.

3. Form of the Standards

NHTSA and EPA proposed attribute-based standards for passenger cars and light trucks. NHTSA adopted an attribute approach based on vehicle footprint in its Reformed CAFE program for light trucks for model years 2008-2011,

and recently extended this approach to passenger cars in the CAFE rule for MY 2011 as required by EISA.

The agencies also proposed using vehicle footprint as the attribute for the GHG and CAFE standards. Footprint is defined as a vehicle's wheelbase multiplied by its track width—in other words, the area enclosed by the points at which the wheels meet the ground. Most commenters that expressed a view on this topic supported basing the standards on an attribute, and almost all of these supported the proposed choice of vehicle footprint as an appropriate attribute. The agencies continue to believe that the standards are best expressed in terms of an attribute, and that the footprint attribute is the most appropriate attribute on which to base the standards. These issues are further discussed later in this notice and in Chapter 2 of the Joint TSD.

71 FR 17566 (Apr. 6, 2006).

74 FR 14196 (Mar. 30, 2009).

Under the footprint-based standards, each manufacturer will have a GHG and CAFE target unique to its fleet, depending on the footprints of the vehicle models produced by that manufacturer. A manufacturer will have separate footprint-based standards for cars and for trucks. Generally, larger vehicles (

i.e.,

vehicles with larger footprints) will be subject to less stringent standards (

i.e.,

higher CO

grams/mile standards and lower CAFE standards) than smaller vehicles. This is because, generally speaking, smaller vehicles are more capable of achieving lower levels of CO

and higher levels of fuel economy than larger vehicles. While a manufacturer's fleet average standard could be estimated throughout the model year based on projected production volume of its vehicle fleet, the standard to which the manufacturer must comply will be based on its final model year production figures. A manufacturer's calculation of fleet average emissions at the end of the model year will thus be based on the production-weighted average emissions of each model in its fleet.

The final footprint-based standards are very similar in shape to those proposed. NHTSA and EPA include more discussion of the development of the final curves in Section II below, with a full discussion in the Joint TSD. In addition, a full discussion of the equations and coefficients that define the curves is included in Section III for the CO

curves and Section IV for the mpg curves. The following figures illustrate the standards. First, Figure I.B.3-1 shows the fuel economy (mpg) car standard curve.

Under an attribute-based standard, every vehicle model has a performance target (fuel economy for the CAFE standards, and CO

g/mile for the GHG emissions standards), the level of which depends on the vehicle's attribute (for this rule, footprint). The manufacturers' fleet average performance is determined by the production-weighted

average (for CAFE, harmonic average) of those targets. NHTSA and EPA are setting CAFE and CO

emissions standards defined by constrained linear functions and, equivalently, piecewise linear functions.

As a possible option for future rulemakings, the constrained linear form was introduced by NHTSA in the 2007 NPRM proposing CAFE standards for MY 2011-2015.

Based on vehicles produced for sale in the United States.

The equations are equivalent but are specified differently due to differences in the agencies' respective models.

NHTSA is establishing the attribute curves below for assigning a fuel economy level to an individual vehicle's footprint value, for model years 2012 through 2016. These mpg values will be production weighted to determine each manufacturer's fleet average standard for cars and trucks. Although the general model of the equation is the same for each vehicle category and each year, the parameters of the equation differ for cars and trucks. Each parameter also changes on an annual basis, resulting in the yearly increases in stringency. Figure I.B.3-1 below illustrates the passenger car CAFE standard curves for model years 2012 through 2016 while Figure I.B.3-2 below illustrates the light truck standard curves for model years 2012-2016. The MY 2011 final standards for cars and trucks, which are specified by a constrained logistic function rather than a constrained linear function, are shown for comparison.

BILLING CODE 6560-50-P

ER07MY10.000

ER07MY10.001

EPA is establishing the attribute curves below for assigning a CO

level to an individual vehicle's footprint value, for model years 2012 through 2016. These CO

values will be production weighted to determine each manufacturer's fleet average standard for cars and trucks. As with the CAFE curves above, the general form of the equation is the same for each vehicle category and each year, but the parameters of the equation differ for cars and trucks. Again, each parameter also changes on an annual basis, resulting in the yearly increases in stringency. Figure I.B.3-3 below illustrates the CO

car standard curves for model years 2012 through 2016 while Figure I.B.3-4 shows the CO

truck standard curves for model years 2012-2016.

ER07MY10.002

ER07MY10.003

BILLING CODE 6560-50-C

NHTSA and EPA received a number of comments about the shape of the car and truck curves. We address these comments further in Section II.C below as well as in Sections III and IV.

As proposed, NHTSA and EPA will use the same vehicle category definitions for determining which vehicles are subject to the car curve standards versus the truck curve standards. In other words, a vehicle classified as a car under the NHTSA CAFE program will also be classified as a car under the EPA GHG program, and likewise for trucks. Auto industry commenters generally agreed with this approach and believe it is an important aspect of harmonization across the two agencies' programs. Some other commenters expressed concern about potential consequences, especially in how cars and trucks are distinguished. However, EPA and NHTSA are employing the same car and truck definitions for the MY 2012-2016 CAFE and GHG standards as those used in the CAFE program for the 2011 model year standards.

This issue is further discussed for the EPA standards in Section III, and for the NHTSA standards in Section IV. This approach of using CAFE definitions allows EPA's CO

standards and the CAFE standards to be harmonized across all vehicles for this program. However, EPA is not changing the car/truck definition for the purposes of any other previous rules.

49 CFR 523.

Generally speaking, a smaller footprint vehicle will have higher fuel economy and lower CO

emissions relative to a larger footprint vehicle when both have the same degree of fuel efficiency improvement technology. In this final rule, the standards apply to a manufacturers overall fleet, not an individual vehicle, thus a manufacturers fleet which is dominated by small footprint vehicles will have a higher fuel economy requirement (lower CO

requirement) than a manufacturer whose fleet is dominated by large footprint vehicles. A footprint-based CO

or CAFE standard can be relatively neutral with respect to vehicle size and consumer choice. All vehicles, whether smaller or larger, must make improvements to reduce CO

emissions or improve fuel economy, and therefore all vehicles will be relatively more expensive. With the footprint-based standard approach, EPA and NHTSA believe there should be no significant effect on the relative distribution of different vehicle sizes in the fleet, which means that consumers will still be able to purchase the size of vehicle that meets their needs. While targets are manufacturer specific, rather than vehicle specific, Table I.B.3-1 illustrates the fact that different vehicle sizes will have varying CO

emissions and fuel economy targets under the final standards.

Table I.B.3—1 Model Year 2016 CO

and Fuel Economy Targets for Various MY 2008 Vehicle Types

Vehicle type

Example models

Example model footprint

(sq. ft.)

emissions target

(g/mi)

Fuel economy target

(mpg)

Example Passenger Cars

Compact car

Honda Fit

206

41.1

Midsize car

Ford Fusion

230

37.1

Fullsize car

Chrysler 300

263

32.6

Example Light-duty Trucks

Small SUV

4WD Ford Escape

259

32.9

Midsize crossover

Nissan Murano

279

30.6

Minivan

Toyota Sienna

303

28.2

Large pickup truck

Chevy Silverado

348

24.7

4. Program Flexibilities

EPA's and NHTSA's programs as established in this rule provide compliance flexibility to manufacturers, especially in the early years of the National Program. This flexibility is expected to provide sufficient lead time for manufacturers to make necessary technological improvements and reduce the overall cost of the program, without compromising overall environmental and fuel economy objectives. The broad goal of harmonizing the two agencies' standards includes preserving manufacturers' flexibilities in meeting the standards, to the extent appropriate and required by law. The following section provides an overview of this final rule's flexibility provisions. Many auto manufacturers commented in support of these provisions as critical to meeting the standards in the lead time provided. Environmental groups, some States, and others raised concerns about the possibility for windfall credits and loss of program benefits. The provisions in the final rule are in most cases the same as those proposed. However consideration of the issues raised by commenters has led to modifications in certain provisions. These comments and the agencies' response are discussed in Sections III and IV below and in the Response to Comments document.

a. CO

/CAFE Credits Generated Based on Fleet Average Performance

Under this NHTSA and EPA final rule, the fleet average standards that apply to a manufacturer's car and truck fleets are based on the applicable footprint-based curves. At the end of each model year, when production of the model year is complete, a production-weighted fleet average will be calculated for each averaging set (cars and trucks). Under this approach, a manufacturer's car and/or truck fleet that achieves a fleet average CO

/CAFE level better than the standard can generate credits. Conversely, if the fleet average CO

/CAFE level does not meet the standard, the fleet would incur debits (also referred to as a shortfall).

Under the final program, a manufacturer whose fleet generates credits in a given model year would have several options for using those credits, including credit carry-back, credit carry-forward, credit transfers, and credit trading. These provisions exist in the MY 2011 CAFE program under EPCA and EISA, and similar provisions are part of EPA's Tier 2 program for light-duty vehicle criteria pollutant emissions, as well as many

other mobile source standards issued by EPA under the CAA. The manufacturer will be able to carry back credits to offset a deficit that had accrued in a prior model year and was subsequently carried over to the current model year. EPCA also provides for this. EPCA restricts the carry-back of CAFE credits to three years, and as proposed EPA is establishing the same limitation, in keeping with the goal of harmonizing both sets of standards.

After satisfying any need to offset pre-existing deficits, remaining credits can be saved (banked) for use in future years. Under the CAFE program, EISA allows manufacturers to apply credits earned in a model year to compliance in any of the five subsequent model years.

As proposed, under the GHG program, EPA is also allowing manufacturers to use these banked credits in the five years after the year in which they were generated (

i.e.,

five years carry-forward).

49 U.S.C. 32903(a)(2).

EISA required NHTSA to establish by regulation a CAFE credits transferring program, which NHTSA established in a March 2009 final rule codified at 49 CFR Part 536, to allow a manufacturer to transfer credits between its vehicle fleets to achieve compliance with the standards. For example, credits earned by over-compliance with a manufacturer's car fleet average standard could be used to offset debits incurred due to that manufacturer's not meeting the truck fleet average standard in a given year. EPA's Tier 2 program also provides for this type of credit transfer. As proposed for purposes of this rule, EPA allows unlimited credit transfers across a manufacturer's car-truck fleet to meet the GHG standard. This is based on the expectation that this flexibility will facilitate manufacturers' ability to comply with the GHG standards in the lead time provided, and will allow the required GHG emissions reductions to be achieved in the most cost effective way. Under the CAA, unlike under EISA, there is no statutory limitation on car-truck credit transfers. Therefore, EPA is not constraining car-truck credit transfers, as doing so would reduce the flexibility for lead time, and would increase costs with no corresponding environmental benefit. For the CAFE program, however, EISA limits the amount of credits that may be transferred, which has the effects of limiting the extent to which a manufacturer can rely upon credits in lieu of making fuel economy improvements to a particular portion of its vehicle fleet, but also of potentially increasing the costs of improving the manufacturer's overall fleet. EISA also prohibits the use of transferred credits to meet the statutory minimum level for the domestic car fleet standard.

These and other statutory limits will continue to apply to the determination of compliance with the CAFE standards.

49 U.S.C. 32903(g)(4).

EISA also allowed NHTSA to establish by regulation a CAFE credit trading program, which NHTSA established in the March 2009 final rule at 40 CFR part 536, to allow credits to be traded (sold) to other vehicle manufacturers. As proposed, EPA allows credit trading in the GHG program. These sorts of exchanges are typically allowed under EPA's current mobile source emission credit programs, although manufacturers have seldom made such exchanges. Under the NHTSA CAFE program, EPCA also allows these types of credit trades, although, as with transferred credits, traded credits may not be used to meet the minimum domestic car standards specified by statute.

Comments discussing these provisions supported the proposed approach. These final provisions are the same as proposed.

49 U.S.C. 32903(f)(2).

As further discussed in Section IV of this preamble, NHTSA sought to find a way to provide credits for improving the efficiency of light truck air conditioners (A/Cs) and solicited public comments to that end. The agency did so because the power necessary to operate an A/C compressor places a significant additional load on the engine, thus reducing fuel economy and increasing CO

tailpipe emissions.

See

Section III.C.1 below. The agency would have made a similar effort regarding cars, but a 1975 statutory provision made it unfruitful even to explore the possibility of administratively proving such credits for cars. The agency did not identify a workable way of providing such credits for light trucks in the context of this rulemaking.

b. Air Conditioning Credits Under the EPA Final Rule

Air conditioning (A/C) systems contribute to GHG emissions in two ways. Hydrofluorocarbon (HFC) refrigerants, which are powerful GHGs, can leak from the A/C system (direct A/C emissions). As just noted, operation of the A/C system also places an additional load on the engine, which results in additional CO

tailpipe emissions (indirect A/C related emissions). EPA is allowing manufacturers to generate credits by reducing either or both types of GHG emissions related to A/C systems. Specifically, EPA is establishing a method to calculate CO

equivalent reductions for the vehicle's full useful life on a grams/mile basis that can be used as credits in meeting the fleet average CO

standards. EPA's analysis indicates that this approach provides manufacturers with a highly cost-effective way to achieve a portion of GHG emissions reductions under the EPA program. EPA is estimating that manufacturers will on average generate 11 g/mi GHG credit toward meeting the 250 g/mi by 2016 (though some companies may generate more). EPA will also allow manufacturers to earn early A/C credits starting in MY 2009 through 2011, as discussed further in a later section. There were many comments on the proposed A/C provisions. Nearly every one of these was supportive of EPA including A/C control as part of this rule, though there was some disagreement on some of the details of the program. The HFC crediting scheme was widely supported. The comments mainly were concentrated on indirect A/C related credits. The auto manufacturers and suppliers had some technical comments on A/C technologies, and there were many concerns with the proposed idle test. EPA has made some minor adjustments in both of these areas that we believe are responsive to these concerns. EPA addresses A/C issues in greater detail in Section III of this preamble and in Chapter 2 of EPA's RIA.

c. Flexible-Fuel and Alternative Fuel Vehicle Credits

EPCA authorizes a compliance flexibility incentive under the CAFE program for production of dual-fueled or flexible-fuel vehicles (FFV) and dedicated alternative fuel vehicles. FFVs are vehicles that can run both on an alternative fuel and conventional fuel. Most FFVs are E85 capable vehicles, which can run on either gasoline or a mixture of up to 85 percent ethanol and 15 percent gasoline (E85). Dedicated alternative fuel vehicles are vehicles that run exclusively on an alternative fuel. EPCA was amended by EISA to extend the period of availability of the FFV incentive, but to begin phasing it out by annually reducing the amount of FFV incentive that can be used toward compliance with the CAFE standards.

Although NHTSA

expressed concern about the non-use of alternative fuel by FFVs in a 2002 report to Congress (Effects of the Alternative Motor Fuels Act CAFE Incentives Policy), EISA does not premise the availability of the FFV credits on actual use of alternative fuel by an FFV vehicle. Under NHTSA's CAFE program, pursuant to EISA, no FFV credits will be available for CAFE compliance after MY 2019.

For dedicated alternative fuel vehicles, there are no limits or phase-out of the credits. As required by the statute, NHTSA will continue to allow the use of FFV credits for purposes of compliance with the CAFE standards until the end of the EISA phase-out period.

EPCA provides a statutory incentive for production of FFVs by specifying that their fuel economy is determined using a special calculation procedure that results in those vehicles being assigned a higher fuel economy level than would

otherwise occur. This is typically referred to as an FFV credit.

Id.

For the GHG program, as proposed, EPA will allow FFV credits in line with EISA limits, but only during the period from MYs 2012 to 2015. After MY 2015, EPA will only allow FFV credits based on a manufacturer's demonstration that the alternative fuel is actually being used in the vehicles and based on the vehicle's actual performance. EPA discusses this in more detail in Section III.C of the preamble, including a summary of key comments. These provisions are being finalized as proposed, with further discussion in Section III.C of how manufacturers can demonstrate that the alternative fuel is being used.

d. Temporary Lead-Time Allowance Alternative Standards Under the EPA Final Rule

Manufacturers with limited product lines may be especially challenged in the early years of the National Program, and need additional lead time. Manufacturers with narrow product offerings may not be able to take full advantage of averaging or other program flexibilities due to the limited scope of the types of vehicles they sell. For example, some smaller volume manufacturer fleets consist entirely of vehicles with very high baseline CO

emissions. Their vehicles are above the CO

emissions target for that vehicle footprint, but do not have other types of vehicles in their production mix with which to average. Often, these manufacturers pay fines under the CAFE program rather than meet the applicable CAFE standard. EPA believes that these technological circumstances call for more lead time in the form of a more gradual phase-in of standards.

EPA is finalizing a temporary lead-time allowance for manufacturers that sell vehicles in the U.S. in MY 2009 and for which U.S. vehicle sales in that model year are below 400,000 vehicles. This allowance will be available only during the MY 2012-2015 phase-in years of the program. A manufacturer that satisfies the threshold criteria will be able to treat a limited number of vehicles as a separate averaging fleet, which will be subject to a less stringent GHG standard.

Specifically, a standard of 25 percent above the vehicle's otherwise applicable foot-print target level will apply to up to 100,000 vehicles total, spread over the four year period of MY 2012 through 2015. Thus, the number of vehicles to which the flexibility could apply is limited. EPA also is setting appropriate restrictions on credit use for these vehicles, as discussed further in Section III. By MY 2016, these allowance vehicles must be averaged into the manufacturer's full fleet (

i.e.,

they will no longer be eligible for a different standard). EPA discusses this in more detail in Section III.B of the preamble.

EPCA does not permit such an allowance. Consequently, manufacturers who may be able to take advantage of a lead-time allowance under the GHG standards would be required to comply with the applicable CAFE standard or be subject to penalties for non-compliance.

EPA received comments from several smaller manufacturers that the TLAAS program was insufficient to allow manufacturers with very limited product lines to comply. These manufacturers commented that they need additional lead time to meet the standards, because their CO

baselines are significantly higher and their vehicle product lines are even more limited, reducing their ability to average across their fleets compared even to other TLAAS manufacturers. EPA fully summarizes the public comments on the TLAAS program, including comments not supporting the program, in Section III.B. In summary, in response to the lead time issues raised by manufacturers, EPA is modifying the TLAAS program that applies to manufacturers with between 5,000 and 50,000 U.S. vehicle sales in MY 2009. EPA believes these provisions are necessary given that, compared with other TLAAS manufacturers, these manufacturers have even more limited product offerings across which to average and higher baseline CO

emissions, and thus need additional lead-time to meet the standards. These manufacturers would have an increased allotment of vehicles, a total of 250,000, compared to 100,000 vehicles (for other TLAAS-eligible manufacturers). In addition, the TLAAS program for these manufacturers would be extended by one year, through MY 2016 for these vehicles, for a total of five years of eligibility. The other provisions of the TLAAS program would continue to apply, such as the restrictions on credit trading and the level of the standard. Additional restrictions would also apply to these vehicles, as discussed in Section III. In addition, for the smallest volume manufacturers, those with below 5,000 U.S. vehicle sales, EPA is not setting standards at this time but is instead deferring standards until a future rulemaking. This is essentially the same approach we are using for small businesses, which are exempted from this rule. The unique issues involved with these manufacturers will be addressed in that future rulemaking. Further discussion of the public comment on these issues and details on these changes from the proposed program are included in Section III.

e. Additional Credit Opportunities Under the Clean Air Act (CAA)

EPA is establishing additional opportunities for early credits in MYs 2009-2011 through over-compliance with a baseline standard. The baseline standard is set to be equivalent, on a national level, to the California standards. Credits can be generated by over-compliance with this baseline in one of two ways—over-compliance by the fleet of vehicles sold in California and the CAA section 177 States (

i.e.,

those States adopting the California program), or over-compliance with the fleet of vehicles sold in the 50 States. EPA is also providing for early credits based on over-compliance with CAFE, but only for vehicles sold in States outside of California and the CAA section 177 states. Under the early credit provisions, no early FFV credits would be allowed, except those achieved by over-compliance with the California program based on California's provisions that manufacturers demonstrate actual use of the alternative fuel. EPA's early credits provisions are designed to ensure that there would be no double counting of early credits. NHTSA notes, however, that credits for overcompliance with CAFE standards during MYs 2009-2011 will still be available for manufacturers to use toward compliance in future model years, just as before.

EPA received comments from some environmental organizations and States expressing concern that these early credits were inappropriate windfall credits because they provided credits for actions that were not surplus, that is above what would otherwise be required for compliance with either State or Federal motor vehicle standards. This focused on the credits

for over-compliance with the California standards generated during model years 2009 and perhaps 2010, where according to commenters the CAFE requirements were in effect more stringent than the California standards. EPA believes that early credits provide a valuable incentive for manufacturers that have implemented fuel efficient technologies in excess of their CAFE compliance obligations prior to MY 2012. With appropriate restrictions, these credits, reflecting over-compliance over a three model year time frame (MY 2009-2011) and not just over one or two model years, will be surplus reductions and not otherwise required by law. Therefore, EPA is finalizing these provisions largely as proposed, but in response to comments, with an additional restriction on the trading of MY 2009 credits. The overall structure of this early credit program addresses concerns about the potential for windfall credits in the first one or two model years. This issue is fully discussed in Section III.C.

EPA is providing an additional temporary incentive to encourage the commercialization of advanced GHG/fuel economy control technologies—including electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell vehicles (FCVs)—for model years 2012-2016. EPA's proposal included an emissions compliance value of zero grams/mile for EVs and FCVs, and the electric portion of PHEVs, and a multiplier in the range of 1.2 to 2.0, so that each advanced technology vehicle would count as greater than one vehicle in a manufacturer's fleetwide compliance calculation. EPA received many comments on the proposed incentives. Many State and environmental organization commenters believed that the combination of these incentives could undermine the GHG benefits of the rule, and believed the emissions compliance values should take into account the net upstream GHG emissions associated with electrified vehicles compared to vehicles powered by petroleum based fuel. Auto manufacturers generally supported the incentives, some believing the incentives to be a critical part of the National Program. Most auto makers supported both the zero grams/mile emissions compliance value and the higher multipliers.

Upon considering the public comments on this issue, EPA is finalizing an advanced technology vehicle incentive program that includes a zero gram/mile emissions compliance value for EVs and FCVs, and the electric portion of PHEVs, for up to the first 200,000 EV/PHEV/FCV vehicles produced by a given manufacturer during MY 2012-2016 (for a manufacturer that produces less than 25,000 EVs, PHEVs, and FCVs in MY 2012), or for up to the first 300,000 EV/PHEV/FCV vehicles produced during MY 2012-2016 (for a manufacturer that produces 25,000 or more EVs, PHEVs, and FCVs in MY 2012). For any production greater than this amount, the compliance value for the vehicle will be greater than zero gram/mile, set at a level that reflects the vehicle's net increase in upstream GHG emissions in comparison to the gasoline vehicle it replaces. In addition, EPA is not finalizing a multiplier. EPA will also allow this early advanced technology incentive program beginning in MYs 2009-2011. The purpose of these provisions is to provide a temporary incentive to promote technologies which have the potential to produce very large GHG reductions in the future. The tailpipe GHG emissions from EVs, FCVs, and PHEVs operated on grid electricity are zero, and traditionally the emissions of the vehicle itself are all that EPA takes into account for purposes of compliance with standards set under section 202(a). This has not raised any issues for criteria pollutants, as upstream emissions associated with production and distribution of the fuel are addressed by comprehensive regulatory programs focused on the upstream sources of those emissions. At this time, however, there is no such comprehensive program addressing upstream emissions of GHGs, and the upstream GHG emissions associated with production and distribution of electricity are higher than the corresponding upstream GHG emissions of gasoline or other petroleum based fuels. In the future, vehicle fleet electrification combined with advances in low-carbon technology in the electricity sector have the potential to transform the transportation sector's contribution to the country's GHG emissions. EPA will reassess the issue of how to address EVs, PHEVs, and FCVs in rulemakings for model years 2017 and beyond, based on the status of advanced vehicle technology commercialization, the status of upstream GHG control programs, and other relevant factors. Further discussion of the temporary advanced technology vehicle incentives, including more detail on the public comments and EPA's response, is found in Section III.C.

EPA is also providing an option for manufacturers to generate credits for employing new and innovative technologies that achieve GHG reductions that are not reflected on current test procedures, as proposed. Examples of such “off-cycle” technologies might include solar panels on hybrids, adaptive cruise control, and active aerodynamics, among other technologies. These three credit provisions are discussed in more detail in Section III.

5. Coordinated Compliance

Previous NHTSA and EPA regulations and statutory provisions establish ample examples on which to develop an effective compliance program that achieves the energy and environmental benefits from CAFE and motor vehicle GHG standards. NHTSA and EPA have developed a program that recognizes, and replicates as closely as possible, the compliance protocols associated with the existing CAA Tier 2 vehicle emission standards, and with CAFE standards. The certification, testing, reporting, and associated compliance activities closely track current practices and are thus familiar to manufacturers. EPA already oversees testing, collects and processes test data, and performs calculations to determine compliance with both CAFE and CAA standards. Under this coordinated approach, the compliance mechanisms for both programs are consistent and non-duplicative. EPA will also apply the CAA authorities applicable to its separate in-use requirements in this program.

The compliance approach allows manufacturers to satisfy the new program requirements in the same general way they comply with existing applicable CAA and CAFE requirements. Manufacturers would demonstrate compliance on a fleet-average basis at the end of each model year, allowing model-level testing to continue throughout the year as is the current practice for CAFE determinations. The compliance program design establishes a single set of manufacturer reporting requirements and relies on a single set of underlying data. This approach still allows each agency to assess compliance with its respective program under its respective statutory authority.

NHTSA and EPA do not anticipate any significant noncompliance under the National Program. However, failure to meet the fleet average standards (after credit opportunities are exhausted) would ultimately result in the potential for penalties under both EPCA and the CAA. The CAA allows EPA considerable discretion in assessment of penalties. Penalties under the CAA are typically determined on a vehicle-specific basis by determining the

number of a manufacturer's highest emitting vehicles that caused the fleet average standard violation. This is the same mechanism used for EPA's National Low Emission Vehicle and Tier 2 corporate average standards, and to date there have been no instances of noncompliance. CAFE penalties are specified by EPCA and would be assessed for the entire noncomplying fleet at a rate of $5.50 times the number of vehicles in the fleet, times the number of tenths of mpg by which the fleet average falls below the standard. In the event of a compliance action arising out of the same facts and circumstances, EPA could consider CAFE penalties when determining appropriate remedies for the EPA case.

Several stakeholders commented on the proposed coordinated compliance approach. The comments indicated broad support for the overall approach EPA proposed. In particular, both regulated industry and the public interest community appreciated the attempt to streamline compliance by adopting current practice where possible and by coordinating EPA and NHTSA compliance requirements. Thus the final compliance program design is largely unchanged from the proposal. Some commenters requested additional detail or clarification in certain areas and others suggested some relatively narrow technical changes, and EPA has responded to these suggestions. EPA and NHTSA summarize these comments and the agencies' responses in Sections III and IV, respectively, below. The Response to Comments document associated with this document includes all of the comments and responses received during the comment period.

C. Summary of Costs and Benefits of the National Program

This section summarizes the projected costs and benefits of the CAFE and GHG emissions standards. These projections helped inform the agencies' choices among the alternatives considered and provide further confirmation that the final standards are an appropriate choice within the spectrum of choices allowable under their respective statutory criteria. The costs and benefits projected by NHTSA to result from these CAFE standards are presented first, followed by those from EPA's analysis of the GHG emissions standards.

For several reasons, the estimates for costs and benefits presented by NHTSA and EPA, while consistent, are not directly comparable, and thus should not be expected to be identical. Most important, NHTSA and EPA's standards would require slightly different fuel efficiency improvements. EPA's GHG standard is more stringent in part due to its assumptions about manufacturers' use of air conditioning credits, which result from reductions in air conditioning-related emissions of HFCs and CO

. NHTSA was unable to make assumptions about manufacturers' improving the efficiency of air conditioners due to statutory limitations. In addition, the CAFE and GHG standards offer different program flexibilities, and the agencies' analyses differ in their accounting for these flexibilities (for example, FFVs), primarily because NHTSA is statutorily prohibited from considering some flexibilities when establishing CAFE standards, while EPA is not. These differences contribute to differences in the agencies' respective estimates of costs and benefits resulting from the new standards.

NHTSA performed two analyses: a primary analysis that shows the estimates of costs, fuel savings, and related benefits that the agency considered for purposes of establishing new CAFE standards, and a supplemental analysis that reflects the agency's best estimate of the potential real-world effects of the CAFE standards, including manufacturers' potential use of FFV credits in accordance with the provisions of EISA concerning their availability. Because EPCA prohibits NHTSA from considering the ability of manufacturers to use of FFV credits to increase their fleet average fuel economy when

establishing

CAFE standards, the agency's primary analysis does not include them. However, EPCA does not prohibit NHTSA from considering the fact that manufacturers may pay civil penalties rather than complying with CAFE standards, and NHTSA's primary analysis accounts for some manufacturers' tendency to do so. In addition, NHTSA's supplemental analysis of the effect of FFV credits on benefits and costs from its CAFE standards, demonstrates the real-world impacts of FFVs, and the summary estimates presented in Section IV include these effects. Including the use of FFV credits reduces estimated per-vehicle compliance costs of the program. However, as shown below, including FFV credits does not significantly change the projected fuel savings and CO

reductions, because FFV credits reduce the fuel economy levels that manufacturers achieve not only under the standards, but also under the baseline MY 2011 CAFE standards.

Also, EPCA, as amended by EISA, allows manufacturers to transfer credits between their passenger car and light truck fleets. However, EPCA also prohibits NHTSA from considering manufacturers' ability to increase their average fuel economy through the use of CAFE credits when determining the stringency of the CAFE standards. Because of this prohibition, NHTSA's primary analysis does not account for the extent to which credit transfers might actually occur. For purposes of its supplemental analysis, NHTSA considered accounting for the possibility that some manufacturers might utilize the opportunity under EPCA to transfer some CAFE credits between the passenger car and light truck fleets, but determined that in NHTSA's year-by-year analysis, manufacturers' credit transfers cannot be reasonably estimated at this time.

NHTSA's analysis estimates multi-year planning effects within a context in which each model year is represented explicitly, and technologies applied in one model year carry forward to future model years. NHTSA does not currently have a reasonable basis to estimate how a manufacturer might, for example, weigh the transfer of credits from the passenger car to the light truck fleet in MY 2013 against the potential to carry light truck technologies forward from MY 2013 through MY 2016.

EPA made explicit assumptions about manufacturers' use of FFV credits under both the baseline and control alternatives, and its estimates of costs and benefits from the GHG standards reflect these assumptions. However, under the GHG standards, FFV credits would be available through MY 2015; starting in MY 2016, EPA will only allow FFV credits based on a manufacturer's demonstration that the alternative fuel is actually being used in the vehicles and the actual GHG performance for the vehicle run on that alternative fuel.

EPA's analysis also assumes that manufacturers would transfer credits between their car and truck fleets in the MY 2011 baseline subject to the maximum value allowed by EPCA, and that unlimited car-truck credit transfers would occur under the GHG standards. Including these assumptions in EPA's analysis increases the resulting estimates of fuel savings and reductions in GHG emissions, while reducing EPA's estimates of program compliance costs.

Finally, under the EPA GHG program, there is no ability for a manufacturer to intentionally pay fines in lieu of meeting the standard. Under EPCA, however, vehicle manufacturers are allowed to pay fines as an alternative to compliance with applicable CAFE standards. NHTSA's analysis explicitly estimates the level of voluntary fine payment by individual manufacturers, which reduces NHTSA's estimates of

both the costs and benefits of its CAFE standards. In contrast, the CAA does not allow for fine payment (civil penalties) in lieu of compliance with emission standards, and EPA's analysis of benefits from its standard thus assumes full compliance. This assumption results in higher estimates of fuel savings, of reductions in GHG emissions, and of manufacturers' compliance costs to sell fleets that comply with both NHTSA's CAFE program and EPA's GHG program.

In summary, the projected costs and benefits presented by NHTSA and EPA are not directly comparable, because the GHG emission levels established by EPA include air conditioning-related improvements in equivalent fuel efficiency and HFC reductions, because of the assumptions incorporated in EPA's analysis regarding car-truck credit transfers, and because of EPA's projection of complete compliance with the GHG standards. It should also be expected that overall, EPA's estimates of GHG reductions and fuel savings achieved by the GHG standards will be slightly higher than those projected by NHTSA only for the CAFE standards because of the reasons described above. For the same reasons, EPA's estimates of manufacturers' costs for complying with the passenger car and light trucks GHG standards are slightly higher than NHTSA's estimates for complying with the CAFE standards.

A number of stakeholders commented on NHTSA's and EPA's analytical assumptions in estimating costs and benefits of the program. These comments and any changes from the proposed values are summarized in Section II.F, and further in Sections III (for EPA) and IV (for NHTSA); the Response to Comments document presents the detailed responses to each of the comments.

1. Summary of Costs and Benefits of NHTSA's CAFE Standards

NHTSA has analyzed in detail the costs and benefits of the final CAFE standards. Table I.C.1-1 presents the total costs, benefits, and net benefits for NHTSA's final CAFE standards. The values in Table I.C.1-1 display the total costs for all MY 2012-2016 vehicles and the benefits and net benefits represent the impacts of the standards over the full lifetime of the vehicles projected to be sold during model years 2012-2016. It is important to note that there is significant overlap in costs and benefits for NHTSA's CAFE program and EPA's GHG program and therefore combined program costs and benefits, which together comprise the National Program, are not a sum of the two individual programs.

Table I.C.1-1—NHTSA's Estimated 2012-2016 Model Year Costs, Benefits, and Net Benefits Under the CAFE Standards Before FFV Credits

[2007 dollars]

3% Discount Rate:

$billions

Costs

51.8

Benefits

182.5

Net Benefits

130.7

7% Discount Rate:

Costs

51.8

Benefits

146.3

Net Benefits

94.5

NHTSA estimates that these new CAFE standards will lead to fuel savings totaling 61 billion gallons throughout the useful lives of vehicles sold in MYs 2012-2016. At a 3% discount rate, the present value of the economic benefits resulting from those fuel savings is $143 billion. At a 7% discount rate, the present value of the economic benefits resulting from those fuel savings is $112 billion.

These figures do not account for the compliance flexibilities that NHTSA is prohibited from considering when determining the level of new CAFE standards, because manufacturers' decisions to use those flexibilities are voluntary.

The agency further estimates that these new CAFE standards will lead to corresponding reductions in CO

emissions totaling 655 million metric tons (mmt) during the useful lives of vehicles sold in MYs 2012-2016. The present value of the economic benefits from avoiding those emissions is $14.5 billion, based on a global social cost of carbon value of approximately $21 per metric ton (in 2010, and growing thereafter).

It is important to note that NHTSA's CAFE standards and EPA's GHG standards will both be in effect, and each will lead to increases in average fuel economy and CO

emissions reductions. The two agencies' standards together comprise the National Program, and this discussion of costs and benefits of NHTSA's CAFE standards does not change the fact that both the CAFE and GHG standards, jointly, are the source of the benefits and costs of the National Program.

NHTSA also estimated the benefits associated with three more estimates of a one ton GHG reduction in 2010 ($5, $35, and $65), which will likewise grow thereafter.

See

Section II for a more detailed discussion of the social cost of carbon.

Table I.C.1-2—NHTSA Fuel Saved (Billion Gallons) and CO

Emissions Avoided

(mmt)

Under CAFE Standards (Without FFV Credits)

2012

2013

2014

2015

2016

Total

Fuel (b. gal.)

4.2

8.9

12.5

16.0

19.5

61.0

(mmt)

134

172

210

655

Considering manufacturers' ability to earn credit toward compliance by selling FFVs, NHTSA estimates very little change in incremental fuel savings and avoided CO

emissions, assuming FFV credits would be used toward both the baseline and final standards:

Table I.C.1-3—NHTSA Fuel Saved (Billion gallons) and CO

Emissions Avoided (Million Metric Tons, mmt) Under CAFE Standards (With FFV Credits)

2012

2013

2014

2015

2016

Total

Fuel (b. gal.)

4.9

8.2

11.3

15.0

19.1

58.6

(mmt)

123

163

208

636

NHTSA estimates that these fuel economy increases would produce other benefits both to drivers (

e.g.,

reduced time spent refueling) and to the U.S. (

e.g.,

reductions in the costs of petroleum imports

beyond

the direct savings from reduced oil purchases, as well as some disbenefits (

e.g.,

increase traffic congestion) caused by drivers' tendency to travel more when the cost of driving declines (as it does when fuel economy increases). NHTSA has estimated the total monetary value to society of these benefits and disbenefits, and estimates that the standards will produce significant net benefits to society. Using a 3% discount rate, NHTSA estimates that the present value of these benefits would total more than $180 billion over the useful lives of vehicles sold during MYs 2012-2016. More discussion regarding monetized benefits can be found in Section IV of this notice and in NHTSA's Regulatory Impact Analysis. Note that the benefit calculation in Tables I.C.1-4 through 1-7 includes the benefits of reducing CO

emissions,

but not the benefits of reducing other GHG emissions.

benefits for purposes of these tables are calculated using the $21/ton SCC values. Note that net present value of reduced GHG emissions is calculated differently than other benefits. The same discount rate used to discount the value of damages from future emissions (SCC at 5, 3, and 2.5 percent) is used to calculate net present value of SCC for internal consistency.

Table I.C.1-4—NHTSA Discounted Benefits ($billion) Under the CAFE Standards (Before FFV Credits, Using 3 Percent Discount Rate)

2012

2013

2014

2015

2016

Total

Passenger Cars

6.8

15.2

21.6

28.7

35.2

107.5

Light Trucks

5.1

10.7

15.5

19.4

24.3

75.0

Combined

11.9

25.8

37.1

48.0

59.5

182.5

Using a 7% discount rate, NHTSA estimates that the present value of these benefits would total more than $145 billion over the same time period.

Table I.C.1-5—NHTSA Discounted Benefits ($billion) Under the CAFE Standards (Before FFV Credits, Using 7 Percent Discount Rate)

2012

2013

2014

2015

2016

Total

Passenger Cars

5.5

12.3

17.5

23.2

28.6

87.0

Light Trucks

4.0

8.4

12.2

15.3

19.2

59.2

Combined

9.5

20.7

29.7

38.5

47.8

146.2

NHTSA estimates that FFV credits could reduce achieved benefits by about 3.8%:

Table I.C.1-6a—NHTSA Discounted Benefits ($billion) Under the CAFE Standards (With FFV Credits, Using a 3 Percent Discount Rate)

2012

2013

2014

2015

2016

Total

Passenger Cars

7.6

13.7

19.1

25.6

34.0

100.0

Light Trucks

6.4

10.4

14.6

19.8

24.4

75.6

Combined

14.0

24.1

33.7

45.4

58.4

175.6

Table I.C.1-6b—NHTSA Discounted Benefits ($billion) Under the CAFE Standards (With FFV Credits, Using a 7 Percent Discount Rate)

2012

2013

2014

2015

2016

Total

Passenger Cars

6.1

11.1

15.5

20.7

27.6

80.9

Light Trucks

5.0

8.2

11.5

15.6

19.3

59.7

Combined

11.2

19.3

27.0

36.4

46.9

140.7

NHTSA attributes most of these benefits—about $143 billion (at a 3% discount rate and excluding consideration of FFV credits), as noted above—to reductions in fuel consumption, valuing fuel (for societal purposes) at the future pre-tax prices projected in the Energy Information Administration's (AEO's) reference case forecast from the Annual Energy Outlook (AEO) 2010 Early Release. NHTSA's Final Regulatory Impact Analysis (FRIA) accompanying this rule presents a detailed analysis of specific benefits of the rule.

Table I.C.1-7—Summary of Benefits Fuel Savings and CO

Emissions Reduction Due to the Rule (Before FFV Credits)

Amount

Monetized value (discounted)

3% discount rate

7% discount rate

Fuel savings

61.0 billion gallons

$143.0 billion

$112.0 billion.

emissions reductions

655 mmt

$14.5 billion

$14.5 billion.

NHTSA estimates that the increases in technology application necessary to achieve the projected improvements in fuel economy will entail considerable monetary outlays. The agency estimates that incremental costs for achieving its standards—that is, outlays by vehicle manufacturers over and above those required to comply with the MY 2011 CAFE standards—will total about $52 billion (

i.e.,

during MYs 2012-2016).

Table I.C.1-8—NHTSA Incremental Technology Outlays ($billion) Under the CAFE Standards (Before FFV Credits)

2012

2013

2014

2015

2016

Total

Passenger Cars

4.1

5.4

6.9

8.2

9.5

34.2

Light Trucks

1.8

2.5

3.7

4.3

5.4

17.6

Combined

5.9

7.9

10.5

12.5

14.9

51.7

NHTSA estimates that use of FFV credits could significantly reduce these outlays:

Table I.C.1-9—NHTSA Incremental Technology Outlays ($billion) under CAFE Standards (With FFV Credits)

2012

2013

2014

2015

2016

Total

Passenger Cars

2.6

3.6

4.8

6.1

7.5

24.6

Light Trucks

1.1

1.5

2.5

3.4

4.4

12.9

Combined

3.7

5.1

7.3

9.5

11.9

37.5

The agency projects that manufacturers will recover most or all of these additional costs through higher selling prices for new cars and light trucks. To allow manufacturers to recover these increased outlays (and, to a much lesser extent, the civil penalties that some companies are expected to pay for noncompliance), the agency estimates that the standards would lead to increases in average new vehicle prices ranging from $457 per vehicle in MY 2012 to $985 per vehicle in MY 2016:

Table I.C.1-10—NHTSA Incremental Increases in Average New Vehicle Costs ($) Under CAFE Standards (Before FFV Credits)

2012

2013

2014

2015

2016

Passenger Cars

505

573

690

799

907

Light Trucks

322

416

621

752

961

Combined

434

513

665

782

926

NHTSA estimates that use of FFV credits could significantly reduce these costs, especially in earlier model years:

Table I.C.1-11—NHTSA Incremental Increases in Average New Vehicle Costs ($) Under CAFE Standards (With FFV Credits)

2012

2013

2014

2015

2016

Passenger Cars

303

378

481

593

713

Light Trucks

194

260

419

581

784

Combined

261

333

458

589

737

NHTSA estimates, therefore, that the total benefits of these CAFE standards will be more than three times the magnitude of the corresponding costs. As a consequence, its standards would produce net benefits of $130.7 billion at a 3 percent discount rate (with FFV credits, $138.2 billion) or $94.5 billion at a 7 percent discount rate over the useful lives of vehicles sold during MYs 2012-2016.

2. Summary of Costs and Benefits of EPA's GHG Standards

EPA has analyzed in detail the costs and benefits of the final GHG standards. Table I.C.2-1 shows EPA's estimated lifetime discounted cost, benefits and net benefits for all vehicles projected to be sold in model years 2012-2016. It is important to note that there is significant overlap in costs and benefits for NHTSA's CAFE program and EPA's GHG program and therefore combined program costs and benefits are not a sum of the individual programs.

Table I.C.2-1—EPA's Estimated 2012-2016 Model Year Lifetime Discounted Costs, Benefits, and Net Benefits Assuming the $21/Ton SCC Value

a b c d

[2007 dollars]

3% Discount rate

$Billions

Costs

51.5

Benefits

240

Net Benefits

189

7% Discount rate

Costs

51.5

Benefits

192

Net Benefits

140

Although EPA estimated the benefits associated with four different values of a one ton GHG reduction ($5, $21, $35, $65), for the purposes of this overview presentation of estimated costs and benefits EPA is showing the benefits associated with the marginal value deemed to be central by the interagency working group on this topic: $21 per ton of CO2e, in 2007 dollars and 2010 emissions. The $21/ton value applies to 2010 CO

emissions and grows over time.

As noted in Section III.H, SCC increases over time. The $21/ton value applies to 2010 CO

emissions and grows larger over time.

Note that net present value of reduced GHG emissions is calculated differently than other benefits. The same discount rate used to discount the value of damages from future emissions (SCC at 5, 3, and 2.5 percent) is used to calculate net present value of SCC for internal consistency. Refer to Section III.H for more detail.

Monetized GHG benefits exclude the value of reductions in non-CO

GHG emissions (HFC, CH

and N

O) expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO

emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO

GHGs will contribute to this rule's climate benefits, as explained in Section III.F.2. The SCC TSD notes the difference between the social cost of non-CO

emissions and CO

emissions, and specifies a goal to develop methods to value non-CO

emissions in future analyses.

Table I.C.2-2 shows EPA's estimated lifetime fuel savings and CO

equivalent emission reductions for all vehicles sold in the model years 2012-2016. The values in Table I.C.2-2 are projected lifetime totals for each model year and are not discounted. As documented in EPA's Final RIA, the potential credit transfer between cars and trucks may change the distribution of the fuel savings and GHG emission impacts between cars and trucks. As discussed above with respect to NHTSA's CAFE standards, it is important to note that NHTSA's CAFE standards and EPA's GHG standards will both be in effect, and each will lead to increases in average fuel economy and reductions in CO

emissions. The two agencies' standards together comprise the National Program, and this discussion of costs and benefits of EPA's GHG standards does not change the fact that both the CAFE and GHG standards, jointly, are the source of the benefits and costs of the National Program.

Table I.C.2-2—EPA's Estimated 2012-2016 Model Year Lifetime Fuel Saved and GHG Emissions Avoided

2012

2013

2014

2015

2016

Total

Cars

Fuel (billion gallons)

4.0

5.5

7.3

10.5

14.3

41.6

Fuel (billion barrels)

0.10

0.13

0.17

0.25

0.34

0.99

EQ (mmt)

49.3

68.5

92.7

134

177

521

Light Trucks

Fuel (billion gallons)

3.3

5.0

6.6

9.0

12.2

36.1

Fuel (billion barrels)

0.08

0.12

0.16

0.21

0.29

0.86

EQ (mmt)

39.6

61.7

81.6

111

147

441

Combined

Fuel (billion gallons)

7.3

10.5

13.9

19.5

26.5

77.7

Fuel (billion barrels)

0.17

0.25

0.33

0.46

0.63

1.85

EQ (mmt)

88.8

130

174

244

325

962

Table I.C.2-3 shows EPA's estimated lifetime discounted benefits for all vehicles sold in model years 2012-2016. Although EPA estimated the benefits associated with four different values of a one ton GHG reduction ($5, $21, $35, $65), for the purposes of this overview presentation of estimated benefits EPA is showing the benefits associated with one of these marginal values, $21 per ton of CO

, in 2007 dollars and 2010 emissions. Table I.C.2-3 presents benefits based on the $21 value. Section III.H presents the four marginal values used to estimate monetized benefits of GHG reductions and Section III.H presents the program benefits using each of the four marginal values, which represent only a partial accounting of total benefits due to omitted climate change impacts and other factors that are not readily monetized. The values in the table are discounted values for each model year of vehicles throughout their projected lifetimes. The benefits include all benefits considered by EPA such as fuel savings, GHG reductions, PM benefits, energy security and other externalities such as reduced refueling and accidents, congestion and noise. The lifetime discounted benefits are shown for one of four different social cost of carbon (SCC) values considered by EPA. The values in Table I.C.2-3 do not include costs associated with new technology required to meet the GHG standard.

Table I.C.2-3—EPA's Estimated 2012-2016 Model Year Lifetime Discounted Benefits Assuming the $21/Ton SCC Value

a b c

[Billions of 2007 dollars]

Discount rate

Model year

2012

2013

2014

2015

2016

Total

$21.8

$32.0

$42.8

$60.8

$83.3

$240

17.4

25.7

34.2

48.6

66.4

192

The benefits include all benefits considered by EPA such as the economic value of reduced fuel consumption and accompanying savings in refueling time, climate-related economic benefits from reducing emissions of CO

(but not other GHGs), economic benefits from reducing emissions of PM and other air pollutants that contribute to its formation, and reductions in energy security externalities caused by U.S. petroleum consumption and imports. The analysis also includes disbenefits stemming from additional vehicle use, such as the economic damages caused by accidents, congestion and noise.

Monetized GHG benefits exclude the value of reductions in non-CO

GHG emissions (HFC, CH

and N

O) expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO

emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO

GHGs will contribute to this rule's climate benefits, as explained in Section III.F.2. The SCC TSD notes the difference between the social cost of non-CO

emissions and CO

emissions, and specifies a goal to develop methods to value non-CO

emissions in future analyses. Also, as noted in Section III.H, SCC increases over time. The $21/ton value applies to 2010 emissions and grows larger over time.

Table I.C.2-4 shows EPA's estimated lifetime fuel savings, lifetime CO

emission reductions, and the monetized net present values of those fuel savings and CO

emission reductions. The gallons of fuel and CO

emission reductions are projected lifetime values for all vehicles sold in the model years 2012-2016. The estimated fuel savings in billions of barrels and the GHG reductions in million metric tons of CO

shown in Table I.C.2-4 are totals for the five model years throughout their projected lifetime and are not discounted. The monetized values shown in Table I.C.2-4 are the summed values of the discounted monetized-fuel savings and monetized-CO

reductions for the five model years 2012-2016 throughout their lifetimes. The monetized values in Table I.C.2-4 reflect both a 3 percent and a 7 percent discount rate as noted.

Table I.C.2-4—EPA's Estimated 2012-2016 Model Year Lifetime Fuel Savings, CO

Emission Reductions, and Discounted Monetized Benefits at a 3% Discount Rate

[Monetized values in 2007 dollars]

Amount

$ value

(billions)

Fuel savings

1.8 billion barrels

$182, 3% discount rate.

$142, 7% discount rate.

emission reductions (CO

portion valued assuming $21/ton CO

in 2010)

962 MMT CO

$17

a b

$17 billion for 858 MMT of reduced CO

emissions. As noted in Section III.H, the $21/ton value applies to 2010 emissions and grows larger over time. Monetized GHG benefits exclude the value of reductions in non-CO

GHG emissions (HFC, CH

and N

O) expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO

emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO

GHGs will contribute to this rule's climate benefits, as explained in Section III.F.2. The SCC TSD notes the difference between the social cost of non-CO

emissions and CO

emissions, and specifies a goal to develop methods to value non-CO

emissions in future analyses.

Note that net present value of reduced CO

emissions is calculated differently than other benefits. The same discount rate used to discount the value of damages from future emissions (SCC at 5, 3, and 2.5 percent) is used to calculate net present value of SCC for internal consistency. Refer to Section III.H for more detail.

Table I.C.2-5 shows EPA's estimated incremental and total technology outlays for cars and trucks for each of the model years 2012-2016. The technology outlays shown in Table I.C.2-5 are for the industry as a whole and do not account for fuel savings associated with the program.

Table I.C.2-5—EPA's Estimated Incremental Technology Outlays

[Billions of 2007 dollars]

2012

2013

2014

2015

2016

Total

Cars

$3.1

$5.0

$6.5

$8.0

$9.4

$31.9

Trucks

1.8

3.0

3.9

4.8

6.2

19.7

Combined

4.9

8.0

10.3

12.7

15.6

51.5

Table I.C.2-6 shows EPA's estimated incremental cost increase of the average new vehicle for each model year 2012-2016. The values shown are incremental to a baseline vehicle and are not cumulative. In other words, the estimated increase for 2012 model year cars is $342 relative to a 2012 model year car absent the National Program. The estimated increase for a 2013 model year car is $507 relative to a 2013 model year car absent the National Program (not $342 plus $507).

Table I.C.2-6—EPA's Estimated Incremental Increase in Average New Vehicle Cost

[2007 dollars per unit]

2012

2013

2014

2015

2016

Cars

$342

$507

$631

$749

$869

Trucks

314

496

652

820

1,098

Combined

331

503

639

774

948

D. Background and Comparison of NHTSA and EPA Statutory Authority

Section I.C of the proposal contained a detailed overview discussion of the NHTSA and EPA statutory authorities. In addition to the discussion in the proposal, each agency discusses comments pertaining to its statutory authority and the agency's responses in Sections III and IV of this notice, respectively.

II. Joint Technical Work Completed for This Final Rule

A. Introduction

In this section NHTSA and EPA discuss several aspects of the joint technical analyses on which the two agencies collaborated. These analyses are common to the development of each agency's final standards. Specifically we discuss: the development of the vehicle market forecast used by each agency for assessing costs, benefits, and effects, the development of the attribute-based standard curve shapes, the determination of the relative stringency between the car and truck fleet standards, the technologies the agencies evaluated and their costs and effectiveness, and the economic assumptions the agencies included in their analyses. The Joint Technical Support Document (TSD) discusses the agencies' joint technical work in more detail.

B. Developing the Future Fleet for Assessing Costs, Benefits, and Effects

1. Why did the agencies establish a baseline and reference vehicle fleet?

In order to calculate the impacts of the EPA and NHTSA regulations, it is necessary to estimate the composition of the future vehicle fleet absent these regulations, to provide a reference point relative to which costs, benefits, and effects of the regulations are assessed. As in the proposal, EPA and NHTSA have developed this comparison fleet in two parts. The first step was to develop a baseline fleet based on model year 2008 data. The second step was to project that fleet into model years 2011-2016. This is called the reference fleet.

The third step was to modify that MY 2011-2016 reference fleet such that it had sufficient technology to meet the MY 2011 CAFE standards. This final version of the reference fleet is the light-duty fleet estimated to exist in MY 2012-2016 in the absence of today's standards, based on the assumption that manufacturers would continue to meet the MY 2011 CAFE standards (or pay civil penalties allowed under EPCA

) in the absence of further increases in the stringency of CAFE standards. Each agency used this approach to develop a final reference fleet to use in its modeling. All of the agencies' estimates of emission reductions, fuel economy improvements, costs, and societal impacts are developed in relation to the respective reference fleets.

That is, the manufacturers who have traditionally paid fines under EPCA instead of complying with the CAFE standards were “allowed,” for purposes of the reference fleet, to reach only the CAFE level at which paying fines became more cost-effective than adding technology, even if that fell short of the MY 2011 standards.

EPA and NHTSA proposed a transparent approach to developing the baseline and reference fleets, largely working from publicly available data. This proposed approach differed from previous CAFE rules, which relied on confidential manufacturers' product plan information to develop the baseline. Most of the public comments to the NPRM addressing this issue supported this methodology for developing the inputs to the rule's analysis. Because the input sheets can be made public, stakeholders can verify and check EPA's and NHTSA's modeling, and perform their own analyses with these datasets. In this final rulemaking, EPA and NHTSA are using an approach very similar to that proposed, continuing to rely on publicly available data as the basis for the baseline and reference fleets.

2. How did the agencies develop the baseline vehicle fleet?

At proposal, EPA and NHTSA developed a baseline fleet comprised of model year 2008 data gathered from EPA's emission certification and fuel economy database. MY 2008 was used as the basis for the baseline vehicle fleet because it was the most recent model year for which a complete set of data is publicly available. This remains the case. Manufacturers are not required to submit final sales and mpg figures for MY 2009 until April 2010,

after the CAFE standard's mandated promulgation date. Consequently, in this final rule, EPA and NHTSA made no changes to the method or the results of the MY 2008 baseline fleet used at proposal, except for some specific corrections to engineering inputs for some vehicle models reflected in the market forecast input to NHTSA's CAFE model. More details about how the agencies constructed this baseline fleet can be found in Chapter 1.2 of the Joint TSD. Corrections to engineering inputs for some vehicle models in the market forecast input to NHTSA's CAFE model are discussed in Chapter 2 of the Joint TSD.

40 CFR 600.512-08, Model Year Report.

3. How did the agencies develop the projected MY 2011-2016 vehicle fleet?

EPA and NHTSA have based the projection of total car and total light truck sales for MYs 2011-2016 on projections made by the Department of Energy's Energy Information Administration (EIA). EIA publishes a mid-term projection of national energy use called the Annual Energy Outlook (AEO). This projection utilizes a number of technical and econometric models which are designed to reflect both economic and regulatory conditions expected to exist in the future. In support of its projection of fuel use by light-duty vehicles, EIA projects sales of new cars and light trucks. In the proposal, the agencies used the three reports published by EIA as part of the AEO 2009. We also stated that updated versions of these reports could be used in the final rules should AEO timely issue a new version. EIA published an early version of its AEO 2010 in December 2009, and the agencies are making use of it in this final rulemaking. The differences in projected sales in the 2009 report (used in the NPRM) and the early 2010 report are very small, so NHTSA and EPA have decided to simply scale the NPRM volumes for cars and trucks (in the aggregate) to match those in the 2010 report. We thus employ the sales projections from the scaled updated 2009 Annual Energy Outlook, which is equivalent to AEO 2010 Early Release, for the final rule. The scaling factors for each model year are presented in Chapter 1 of the Joint TSD for this final rule.

The agencies recognize that AEO 2010 Early Release does include some impacts of future projected increases in CAFE stringency. We have closely examined the difference between AEO 2009 and AEO 2010 Early Release and we believe the differences in total sales and the car/truck split attributed to considerations of the standard in the final rule are small.

The agencies have also looked at the impact of the rule in EIA's projection, and concluded that the impact was small. EPA and NHTSA have evaluated the differences between the AEO 2010 (early draft) and AEO 2009 and found little difference in the fleet projections (or fuel prices). This analysis can be found in the memo to the docket: Kahan, A. and Pickrell, D. Memo to Docket EPA-HQ-OAR-2009-0472 and Docket NHTSA-2009-0059. “Energy Information Administration's Annual Energy Outlook 2009 and 2010.” March 24, 2010.

In the AEO 2010 Early Release, EIA projects that total light-duty vehicle sales will gradually recover from their currently depressed levels by around 2013. In 2016, car sales are projected to be 9.4 million (57 percent) and truck sales are projected to be 7.1 million (43 percent). Although the total level of sales of 16.5 million units is similar to pre-2008 levels, the fraction of car sales is projected to be higher than that existing in the 2000-2007 timeframe. This projection reflects the impact of higher fuel prices, as well as EISA's requirement that the new vehicle fleet average at least 35 mpg by MY 2020. The agencies note that AEO does not represent the fleet at a level of detail sufficient to explicitly account for the reclassification—promulgated as part of NHTSA's final rule for MY 2011 CAFE standards—of a number of 2-wheel drive sport utility vehicles from the truck fleet to the car fleet for MYs 2011 and after. Sales projections of cars and trucks for future model years can be found in the Joint TSD for these final rules.

In addition to a shift towards more car sales, sales of segments within both the car and truck markets have been changing and are expected to continue to change. Manufacturers are introducing more crossover models which offer much of the utility of SUVs but use more car-like designs. The AEO 2010 report does not, however, distinguish such changes within the car and truck classes. In order to reflect these changes in fleet makeup, EPA and NHTSA considered several other available forecasts. EPA purchased and shared with NHTSA forecasts from two well-known industry analysts, CSM Worldwide (CSM), and J.D. Powers. NHTSA and EPA decided to use the forecast from CSM, modified as described below, for several reasons presented in the NPRM preamble

and draft Joint TSD. The changes between company market share and industry market segments were most significant from 2011-2014, while for 2014-2015 the changes were relatively small. Noting this, and lacking a credible forecast of company and segment shares after 2015, the agencies assumed 2016 market share and market segments to be the same as for 2015.

See,

e.g.,

74 FR 49484.

CSM Worldwide provides quarterly sales forecasts for the automotive industry. In the NPRM, the agencies identified a concern with the 2nd quarter CSM forecast that was used as a basis for the projection. CSM projections at that time were based on an industry that was going through a significant financial transition, and as a result the market share forecasts for some companies were impacted in surprising ways. As the industry's situation has settled somewhat over the past year, the 4th quarter projection appears to address this issue—for example, it shows nearly a two-fold increase in sales for Chrysler compared to significant loss of market share shown for Chrysler in the 2nd quarter projection. Additionally, some commenters, such as GM, recognized that the fleet appeared to include an unusually high number of large pickup trucks.

In fact, the agencies discovered (independently of the comments) that CSM's standard forecast included all vehicles below 14,000 GVWR, including class 2b and 3 heavy duty vehicles, which are not regulated by this final rule.

The commenters were thus correct that light duty reference fleet projections at proposal had more full size trucks and vans due to the mistaken inclusion of the heavy duty versions of those vehicles. The agencies requested a separate data forecast from CSM that filtered their 4th quarter projection to exclude these heavy duty vehicles. The agencies then used this filtered 4th quarter forecast for the final rule. A detailed comparison of the market by manufacturer can be found in the final TSD. For the public's reference, copies of the 2nd, 3rd, and 4th quarter CSM forecasts have been placed in the docket for this rulemaking.

GM argued that the unusually large volume of large pickups led to higher overall requirements for those vehicles. As discussed below, the agencies' analysis for the final rule corrects the number of large pickups. With this correction and other updates to the agencies' market forecast and other analytical inputs, the target functions defining the final standards (and achieving the average required performance levels defining the national program) are very similar to those from the NPRM, especially for light trucks, as illustrated below in Figures II.C-7 and II.C-8.

These include the Ford F-250 & F-350, Econoline E-250, & E-350; Chevy Express, Silverado 2500, & 3500; GMC Savana, Dodge 2500, & 3500; among others.

The CSM Sales Forecast Excel file (“CSM North America Sales Forecasts 2Q09 3Q09 4Q09 for the Docket”) is available in the docket (Docket EPA-HQ-OAR-2009-0472).

We then projected the CSM forecasts for relative sales of cars and trucks by manufacturer and by market segment onto the total sales estimates of AEO 2010. Tables II.B.3-1 and II.B.3-2 show the resulting projections for the reference 2016 model year and compare these to actual sales that occurred in baseline 2008 model year. Both tables show sales using the traditional definition of cars and light trucks.

Table II.B.3-1—Annual Sales of Light-Duty Vehicles by Manufacturer in 2008 and Estimated for 2016

Cars

2008 MY

2016 MY

Light trucks

2008 MY

2016 MY

Total

2008 MY

2016 MY

BMW

291,796

424,923

61,324

171,560

353,120

596,482

Chrysler

537,808

340,908

1,119,397

525,128

1,657,205

866,037

Daimler

208,052

272,252

79,135

126,880

287,187

399,133

Ford

709,583

1,118,727

1,158,805

1,363,256

1,868,388

2,481,983

General Motors

1,370,280

1,283,937

1,749,227

1,585,828

3,119,507

2,869,766

Honda

899,498

811,214

612,281

671,437

1,511,779

1,482,651

Hyundai

270,293

401,372

120,734

211,996

391,027

613,368

Kia

145,863

455,643

135,589

210,717

281,452

666,360

Mazda

191,326

350,055

111,220

144,992

302,546

495,047

Mitsubishi

76,701

49,914

24,028

88,754

100,729

138,668

Porsche

18,909

33,471

18,797

16,749

37,706

50,220

Nissan

653,121

876,677

370,294

457,114

1,023,415

1,333,790

Subaru

149,370

230,705

49,211

95,054

198,581

325,760

Suzuki

68,720

97,466

45,938

26,108

114,658

123,574

Tata

9,596

65,806

55,584

42,695

65,180

108,501

Toyota

1,143,696

2,069,283

1,067,804

1,249,719

2,211,500

3,319,002

Volkswagen

290,385

586,011

26,999

124,703

317,384

710,011

Total

7,034,997

9,468,365

6,806,367

7,112,689

13,841,364

16,580,353

Table II.B.3-2—Annual Sales of Light-Duty Vehicles by Market Segment in 2008 and Estimated for 2016

Cars

2008 MY

2016 MY

Light trucks

2008 MY

2016 MY

Full-Size Car

829,896

530,945

Full-Size Pickup

1,331,989

1,379,036

Luxury Car

1,048,341

1,548,242

Mid-Size Pickup

452,013

332,082

Mid-Size Car

2,166,849

2,550,561

Full-Size Van

33,384

65,650

Mini Car

617,902

1,565,373

Mid-Size Van

719,529

839,194

Small Car

1,912,736

2,503,566

Mid-Size MAV *

110,353

116,077

Specialty Car

459,273

769,679

Small MAV

231,265

62,514

Full-Size SUV *

559,160

232,619

Mid-Size SUV

436,080

162,502

Small SUV

196,424

108,858

Full-Size CUV *

264,717

260,662

Mid-Size CUV

923,165

1,372,200

Small CUV

1,548,288

2,181,296

Total Sales **

7,034,997

9,468,365

6,806,367

7,079,323

* MAV—Multi-Activity Vehicle, SUV—Sport Utility Vehicle, CUV—Crossover Utility Vehicle.

** Total Sales are based on the classic Car/Truck definition.

Determining which traditionally-defined trucks will be defined as cars for purposes of this final rule using the revised definition established by NHTSA for MYs 2011 and beyond requires more detailed information about each vehicle model. This is described in greater detail in Chapter 1 of the final TSD.

The forecasts obtained from CSM provided estimates of car and truck sales by segment and by manufacturer, but not by manufacturer for each market segment. Therefore, NHTSA and EPA needed other information on which to base these more detailed projected market splits. For this task, the agencies used as a starting point each manufacturer's sales by market segment from model year 2008, which is the baseline fleet. Because of the larger number of segments in the truck market, the agencies used slightly different methodologies for cars and trucks.

The first step for both cars and trucks was to break down each manufacturer's 2008 sales according to the market segment definitions used by CSM. For example, the agencies found that Ford's

cars sales in 2008 were broken down as shown in Table II.B.3-3:

Note

: In the NPRM, Ford's 2008 sales per segment, and the total number of cars was different than shown here. The change in values is due to a correction of vehicle segments for some of Ford's vehicles.

Table II.B.3-3—Breakdown of Ford's 2008 Car Sales

Full-size cars

160,857 units.

Mid-size Cars

170,399 units.

Small/Compact Cars

180,249 units.

Subcompact/Mini Cars

None.

Luxury cars

87,272 units.

Specialty cars

110,805 units.

EPA and NHTSA then adjusted each manufacturer's sales of each of its car segments (and truck segments, separately) so that the manufacturer's total sales of cars (and trucks) matched the total estimated for each future model year based on AEO and CSM forecasts. For example, as indicated in Table II.B.3-1, Ford's total car sales in 2008 were 709,583 units, while the agencies project that they will increase to 1,113,333 units by 2016. This represents an increase of 56.9 percent. Thus, the agencies increased the 2008 sales of each Ford car segment by 56.9 percent. This produced estimates of future sales which matched total car and truck sales per AEO and the manufacturer breakdowns per CSM. However, the sales splits by market segment would not necessarily match those of CSM (shown for 2016 in Table II.B.3-2).

In order to adjust the market segment mix for cars, the agencies first adjusted sales of luxury, specialty and other cars. Since the total sales of cars for each manufacturer were already set, any changes in the sales of one car segment had to be compensated by the opposite change in another segment. For the luxury, specialty and other car segments, it is not clear how changes in sales would be compensated. For example, if luxury car sales decreased, would sales of full-size cars increase, mid-size cars, and so on? The agencies have assumed that any changes in the sales of cars within these three segments were compensated for by proportional changes in the sales of the other four car segments. For example, for 2016, the figures in Table II.B.3-2 indicate that luxury car sales in 2016 are 1,548,242 units. Luxury car sales are 1,048,341 units in 2008. However, after adjusting 2008 car sales by the change in total car sales for 2016 projected by EIA and a change in manufacturer market share per CSM, luxury car sales decreased to 1,523,171 units. Thus, overall for 2016, luxury car sales had to increase by 25,071 units or 6 percent. The agencies accordingly increased the luxury car sales by each manufacturer by this percentage. The absolute decrease in luxury car sales was spread across sales of full-size, mid-size, compact and subcompact cars in proportion to each manufacturer's sales in these segments in 2008. The same adjustment process was used for specialty cars and the “other cars” segment defined by CSM.

The agencies used a slightly different approach to adjust for changing sales of the remaining four car segments. Starting with full-size cars, the agencies again determined the overall percentage change that needed to occur in future year full-size car sales after 1) adjusting for total sales per AEO 2010, 2) adjusting for manufacturer sales mix per CSM and 3) adjusting the luxury, specialty and other car segments, in order to meet the segment sales mix per CSM. Sales of each manufacturer's large cars were adjusted by this percentage. However, instead of spreading this change over the remaining three segments, the agencies assigned the entire change to mid-size vehicles. The agencies did so because the CSM data followed the trend of increasing volumes of smaller cars while reducing volumes of larger cars. If a consumer had previously purchased a full-size car, we thought it unlikely that their next purchase would decrease by two size categories, down to a subcompact. It seemed more reasonable to project that they would drop one vehicle size category smaller. Thus, the change in each manufacturer's sales of full-size cars was matched by an opposite change (in absolute units sold) in mid-size cars.

The same process was then applied to mid-size cars, with the change in mid-size car sales being matched by an opposite change in compact car sales. This process was repeated one more time for compact car sales, with changes in sales in this segment being matched by the opposite change in the sales of subcompacts. The overall result was a projection of car sales for model years 2012-2016—the reference fleet—which matched the total sales projections of the AEO forecast and the manufacturer and segment splits of the CSM forecast. These sales splits can be found in Chapter 1 of the Joint TSD for this final rule.

As mentioned above, the agencies applied a slightly different process to truck sales, because the agencies could not confidently project how the change in sales from one segment preferentially went to or came from another particular segment. Some trend from larger vehicles to smaller vehicles would have been possible. However, the CSM forecasts indicated large changes in total sport utility vehicle, multi-activity vehicle and cross-over sales which could not be connected. Thus, the

agencies applied an iterative, but straightforward process for adjusting 2008 truck sales to match the AEO and CSM forecasts.

The first three steps were exactly the same as for cars. EPA and NHTSA broke down each manufacturer's truck sales into the truck segments as defined by CSM. The agencies then adjusted all manufacturers' truck segment sales by the same factor so that total truck sales in each model year matched AEO projections for truck sales by model year. The agencies then adjusted each manufacturer's truck sales by segment proportionally so that each manufacturer's percentage of total truck sales matched that forecast by CSM. This again left the need to adjust truck sales by segment to match the CSM forecast for each model year.

In the fourth step, the agencies adjusted the sales of each truck segment by a common factor so that total sales for that segment matched the combination of the AEO and CSM forecasts. For example, projected sales of large pickups across all manufacturers were 1,286,184 units in 2016 after adjusting total sales to match AEO's forecast and adjusting each manufacturer's truck sales to match CSM's forecast for the breakdown of sales by manufacturer. Applying CSM's forecast of the large pickup segment of truck sales to AEO's total sales forecast indicated total large pickup sales of 1,379,036 units. Thus, we increased each manufacturer's sales of large pickups by 7 percent.

The agencies applied the same type of adjustment to all the other truck segments at the same time. The result was a set of sales projections which matched AEO's total truck sales projection and CSM's market segment forecast. However, after this step, sales by manufacturer no longer met CSM's forecast. Thus, we repeated step three and adjusted each manufacturer's truck sales so that they met CSM's forecast. The sales of each truck segment (by manufacturer) were adjusted by the same factor. The resulting sales projection matched AEO's total truck sales projection and CSM's manufacturer forecast, but sales by market segment no longer met CSM's forecast. However, the difference between the sales projections after this fifth step was closer to CSM's market segment forecast than it was after step three. In other words, the sales projection was converging to the desired result. The agencies repeated these adjustments, matching manufacturer sales mix in one step and then market segment in the next a total of 19 times. At this point, we were able to match the market segment splits exactly and the manufacturer splits were within 0.1 percent of our goal, which is well within the needs of this analysis.

Note

: In the NPRM this example showed 29 percent instead of 7 percent. The significant decrease was due to using the filtered 4th quarter CSM forecast. Commenters, such as GM, had commented that we had too many full-size trucks and vans, and this change addresses their comment.

The next step in developing the reference fleets was to characterize the vehicles within each manufacturer-segment combination. In large part, this was based on the characterization of the specific vehicle models sold in 2008—

i.e.,

the vehicles comprising the baseline fleet. EPA and NHTSA chose to base our estimates of detailed vehicle characteristics on 2008 sales for several reasons. One, these vehicle characteristics are not confidential and can thus be published here for careful review by interested parties. Two, because it is constructed beginning with actual sales data, this vehicle fleet is limited to vehicle models known to satisfy consumer demands in light of price, utility, performance, safety, and other vehicle attributes.

As noted above, the agencies gathered most of the information about the 2008 baseline vehicle fleet from EPA's emission certification and fuel economy database. The data obtained from this source included vehicle production volume, fuel economy, engine size, number of engine cylinders, transmission type, fuel type, etc. EPA's certification database does not include a detailed description of the types of fuel economy-improving/CO

-reducing technologies considered in this final rule. Thus, the agencies augmented this description with publicly available data which includes more complete technology descriptions from Ward's Automotive Group.

In a few instances when required vehicle information (such as vehicle footprint) was not available from these two sources, the agencies obtained this information from publicly accessible Internet sites such as

Motortrend.com

and

Edmunds.com.

Note that WardsAuto.com is a fee-based service, but all information is public to subscribers.

Motortrend.com and Edmunds.com are free, no-fee Internet sites.

The projections of future car and truck sales described above apply to each manufacturer's sales by market segment. The EPA emissions certification sales data are available at a much finer level of detail, essentially vehicle configuration. As mentioned above, the agencies placed each vehicle in the EPA certification database into one of the CSM market segments. The agencies then totaled the sales by each manufacturer for each market segment. If the combination of AEO and CSM forecasts indicated an increase in a given manufacturer's sales of a particular market segment, then the sales of all the individual vehicle configurations were adjusted by the same factor. For example, if the Prius represented 30 percent of Toyota's sales of compact cars in 2008 and Toyota's sales of compact cars in 2016 was projected to double by 2016, then the sales of the Prius were doubled, and the Prius sales in 2016 remained 30 percent of Toyota's compact car sales.

The projection of average footprint for both cars and trucks remained virtually constant over the years covered by the final rulemaking. This occurrence is strictly a result of the CSM projections. There are a number of trends that occur in the CSM projections that caused the average footprint to remain constant. First, as the number of subcompacts increases, so do the number of 2-wheel drive crossover vehicles (that are regulated as cars). Second, truck volumes have many segment changes during the rulemaking time frame. There is no specific footprint related trend in any segment that can be linked to the unchanging footprint, but there is a trend that non-pickups' volumes will move from truck segments that are ladder frame to those that are unibody-type vehicles. A table of the footprint projections is available in the TSD as well as further discussion on this topic.

4. How was the development of the baseline and reference fleets for this Final Rule different from NHTSA's historical approach?

NHTSA has historically based its analysis of potential new CAFE standards on detailed product plans the agency has requested from manufacturers planning to produce light vehicles for sale in the United States. Although the agency has not attempted to compel manufacturers to submit such information, most major manufacturers and some smaller manufacturers have voluntarily provided it when requested.

The proposal discusses many of the advantages and disadvantages of the market forecast approach used by the agencies, including the agencies' interest in examining product plans as a check on the reference fleet developed by the agencies for this rulemaking. One of the primary reasons for the request for data in 2009 was to obtain permission from the manufacturers to make public their product plan information for model years 2010 and 2011. There are a number of reasons that this could be advantageous in the development of a reference fleet. First,

some known changes to the fleet may not be captured by the approach of solely using publicly available information. For example, the agencies' current market forecast includes some vehicles for which manufacturers have announced plans for elimination or drastic production cuts such as the Chevrolet Trailblazer, the Chrysler PT Cruiser, the Chrysler Pacifica, the Dodge Magnum, the Ford Crown Victoria, the Mercury Sable, the Pontiac Grand Prix, the Pontiac G5 and the Saturn Vue. These vehicle models appear explicitly in market inputs to NHTSA's analysis, and are among those vehicle models included in the aggregated vehicle types appearing in market inputs to EPA's analysis. However, although the agencies recognize that these specific vehicles will be discontinued, we continue to include them in the market forecast because they are useful as a surrogate for successor vehicles that may appear in the rulemaking time frame to replace the discontinued vehicles in that market segment.

An example of this is in the GM Pontiac line, which is in the process of being phased out during the course of this rulemaking. GM has similar vehicles within their other brands (like Chevy) that will “presumably” pick up the loss in Pontiac share. We model this simply by leaving the Pontiac brand in.

Second, the agencies' market forecast does not include some forthcoming vehicle models, such as the Chevrolet Volt, the Ford Fiesta and several publicly announced electric vehicles, including the announcements from Nissan regarding the Leaf. Nor does it include several MY 2009 or 2010 vehicles, such as the Honda Insight, the Hyundai Genesis and the Toyota Venza, as our starting point for defining specific vehicle models in the reference fleet was Model Year 2008. Additionally, the market forecast does not account for publicly announced technology introductions, such as Ford's EcoBoost system, whose product plans specify which vehicles and how many are planned to have this technology. Chrysler Group LLC has announced plans to offer small- and medium-sized cars using Fiat powertrains. Were the agencies to rely on manufacturers' product plans (that were submitted), the market forecast would account for not only these specific examples, but also for similar examples that have not yet been announced publicly.

Some commenters, such as CBD and NESCAUM, suggested that the agencies' omission of known future vehicles and technologies in the reference fleet causes inaccuracies, which CBD further suggested could lead the agencies to set lower standards. On the other hand, CARB commented that “the likely impact of this omission is minor.” Because the agencies' analysis examines the costs and benefits of progressively adding technology to manufacturers' fleets, the omission of future vehicles and technologies primaril

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.