2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards

Federal RegisterDec 1, 2011

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 85, 86, and 600

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

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

[EPA-HQ-OAR-2010-0799; FRL-9495-2; NHTSA-2010-0131]

RIN 2060-AQ54; RIN 2127-AK79

2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

EPA and NHTSA, on behalf of the Department of Transportation, are issuing this joint proposal to further reduce greenhouse gas emissions and improve fuel economy for light-duty vehicles for model years 2017-2025. This proposal extends the National Program beyond the greenhouse gas and corporate average fuel economy standards set for model years 2012-2016. On May 21, 2010, President Obama issued a Presidential Memorandum requesting that NHTSA and EPA develop through notice and comment rulemaking a coordinated National Program to reduce greenhouse gas emissions of light-duty vehicles for model years 2017-2025. This proposal, consistent with the President's request, responds to the country's critical need to address global climate change and to reduce oil consumption. NHTSA is proposing Corporate Average Fuel Economy standards under the Energy Policy and Conservation Act, as amended by the Energy Independence and Security Act, and EPA is proposing greenhouse gas emissions standards under the Clean Air Act. These standards apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles, and represent a continued harmonized and consistent National Program. Under the National Program for model years 2017-2025, automobile manufacturers would be able to continue building 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. EPA is also proposing a minor change to the regulations applicable to MY 2012-2016, with respect to air conditioner performance and measurement of nitrous oxides.

DATES:

Comments:

Comments must be received on or before January 30, 2012. Under the Paperwork Reduction Act, comments on the information collection provisions must be received by the Office of Management and Budget (OMB) on or before January 3, 2012. See the

SUPPLEMENTARY INFORMATION

section on “Public Participation” for more information about written comments.

Public Hearings:

NHTSA and EPA will jointly hold three public hearings on the following dates: January 17, 2012, in Detroit, Michigan; January 19, 2012 in Philadelphia, Pennsylvania; and January 24, 2012, in San Francisco, California. EPA and NHTSA will announce the addresses for each hearing location in a supplemental

Federal Register

Notice. The agencies will accept comments to the rulemaking documents, and NHTSA will also accept comments to the Draft Environmental Impact Statement (EIS) at these hearings and to Docket No. NHTSA-2011-0056. The hearings will start at 10 a.m. local time and continue until everyone has had a chance to speak. See the

SUPPLEMENTARY INFORMATION

section on “Public Participation.” for more information about the public hearings.

ADDRESSES:

Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2010-0799 and/or NHTSA-2010-0131, by one of the following methods:

•

Online: www.regulations.gov:

Follow the on-line instructions for submitting comments.

•

Email: a-and-r-Docket@epa.gov

•

Fax:

EPA: (202) 566-9744; NHTSA: (202) 493-2251.

•

Mail:

•

EPA:

Environmental Protection Agency, EPA Docket Center (EPA/DC), Air and Radiation Docket, Mail Code 28221T, 1200 Pennsylvania Avenue NW., Washington, DC 20460, Attention Docket ID No. EPA-HQ-OAR-2010-0799. In addition, please mail a copy of your comments on the information collection provisions to the Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), Attn: Desk Officer for EPA, 725 17th St., NW., Washington, DC 20503.

•

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.

•

Hand Delivery:

•

EPA:

Docket Center, (EPA/DC) EPA West, Room B102, 1301 Constitution Ave. NW., Washington, DC, Attention Docket ID No. EPA-HQ-OAR-2010-0799. Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information.

•

NHTSA:

West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue SE, Washington, DC 20590, between 9 a.m. and 4 p.m. Eastern Time, Monday through Friday, except Federal Holidays.

Instructions:

Direct your comments to Docket ID No. EPA-HQ-OAR-2010-0799 and/or NHTSA-2010-0131. See the

SUPPLEMENTARY INFORMATION

section on “Public Participation” for more information about submitting written comments.

Docket:

All documents in the dockets are listed in the

http://www.regulations.gov

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

e.g.,

confidential business information (CBI) or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available in hard copy in EPA's docket, and electronically in NHTSA's online docket. Publicly available docket materials are available either electronically in

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:

Christopher Lieske, Office of Transportation and Air Quality, Assessment and Standards Division, Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 48105; telephone number: (734) 214-4584; fax number: (734) 214-4816; email address:

lieske.christopher@epa.gov

, or contact the Assessment and Standards Division; email address:

otaqpublicweb@epa.gov

NHTSA:

Rebecca Yoon, Office of the Chief Counsel, National Highway Traffic Safety Administration, 1200 New Jersey

Avenue SE., Washington, DC 20590. Telephone: (202) 366-2992.

SUPPLEMENTARY INFORMATION:

A. 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.

EP01DE11.000

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

B. Public Participation

NHTSA and EPA request comment on all aspects of this joint proposed rule. This section describes how you can participate in this process.

How do I prepare and submit comments?

In this joint proposal, there are many issues common to both EPA's and NHTSA's proposals. For the convenience of all parties, comments submitted to the EPA docket will be considered comments submitted to the NHTSA docket, and vice versa. An exception is that comments submitted to the NHTSA docket on NHTSA's Draft Environmental Impact Statement (EIS) will not be considered submitted to the EPA docket. Therefore, the public only needs to submit comments to either one of the two agency dockets, although they may submit comments to both if they so choose. Comments that are submitted for consideration by one agency should be identified as such, and comments that are submitted for consideration by both agencies should be identified as such. Absent such identification, each agency will exercise its best judgment to determine whether a comment is submitted on its proposal.

Further instructions for submitting comments to either the EPA or NHTSA docket are described below.

EPA:

Direct your comments to Docket ID No EPA-HQ-OAR-2010-0799. EPA's policy is that all comments received will be included in the public docket without change and may be made available online at

http://www.regulations.gov

, including any personal information provided, unless

the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through

http://www.regulations.gov

or email. The

http://www.regulations.gov

Web site is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an email comment directly to EPA without going through

http://www.regulations.gov

your email address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. For additional information about EPA's public docket visit the EPA Docket Center homepage at

http://www.epa.gov/epahome/dockets.htm

NHTSA:

Your comments must be written and in English. To ensure that your comments are correctly filed in the Docket, please include the Docket number NHTSA-2010-0131 in your comments. Your comments must not be more than 15 pages long.

NHTSA established this limit to encourage you to write your primary comments in a concise fashion. However, you may attach necessary additional documents to your comments, and there is no limit on the length of the attachments. If you are submitting comments electronically as a PDF (Adobe) file, we ask that the documents submitted be scanned using the Optical Character Recognition (OCR) process, thus allowing the agencies to search and copy certain portions of your submissions.

Please note that pursuant to the Data Quality Act, in order for the substantive data to be relied upon and used by the agency, it must meet the information quality standards set forth in the OMB and Department of Transportation (DOT) Data Quality Act guidelines. Accordingly, we encourage you to consult the guidelines in preparing your comments. OMB's guidelines may be accessed at

http://www.whitehouse.gov/omb/fedreg/reproducible.html

. DOT's guidelines may be accessed at

http://www.dot.gov/dataquality.htm

See 49 CFR 553.21.

Optical character recognition (OCR) is the process of converting an image of text, such as a scanned paper document or electronic fax file, into computer-editable text.

Tips for Preparing Your Comments

When submitting comments, please remember to:

• Identify the rulemaking by docket number and other identifying information (subject heading,

Federal Register

date and page number).

• Explain why you agree or disagree, suggest alternatives, and substitute language for your requested changes.

• Describe any assumptions and provide any technical information and/or data that you used.

• If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

• Provide specific examples to illustrate your concerns, and suggest alternatives.

• Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

• Make sure to submit your comments by the comment period deadline identified in the DATES section above.

How can I be sure that my comments were received?

NHTSA:

If you submit your comments by mail and wish Docket Management to notify you upon its receipt of your comments, enclose a self-addressed, stamped postcard in the envelope containing your comments. Upon receiving your comments, Docket Management will return the postcard by mail.

How do I submit confidential business information?

Any confidential business information (CBI) submitted to one of the agencies will also be available to the other agency. However, as with all public comments, any CBI information only needs to be submitted to either one of the agencies' dockets and it will be available to the other. Following are specific instructions for submitting CBI to either agency.

EPA:

Do not submit CBI to EPA through

http://www.regulations.gov

or email. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR Part 2.

NHTSA:

If you wish to submit any information under a claim of confidentiality, you should submit three copies of your complete submission, including the information you claim to be confidential business information, to the Chief Counsel, NHTSA, at the address given above under

FOR FURTHER INFORMATION CONTACT.

When you send a comment containing confidential business information, you should include a cover letter setting forth the information specified in our confidential business information regulation.

See 49 CFR part 512.

In addition, you should submit a copy from which you have deleted the claimed confidential business information to the Docket by one of the methods set forth above.

Will the agencies consider late comments?

NHTSA and EPA will consider all comments received before the close of business on the comment closing date indicated above under DATES. To the extent practicable, we will also consider comments received after that date. If interested persons believe that any information that the agencies place in the docket after the issuance of the NPRM affects their comments, they may submit comments after the closing date concerning how the agencies should consider that information for the final rule. However, the agencies' ability to consider any such late comments in this rulemaking will be limited due to the time frame for issuing a final rule.

If a comment is received too late for us to practicably consider in developing a final rule, we will consider that comment as an informal suggestion for future rulemaking action.

How can I read the comments submitted by other people?

You may read the materials placed in the docket for this document (

e.g.,

the comments submitted in response to this document by other interested persons) at any time by going to

http://www.regulations.gov

. Follow the online instructions for accessing the dockets. You may also read the materials at the EPA Docket Center or NHTSA Docket

Management Facility by going to the street addresses given above under

ADDRESSES

How do I participate in the public hearings?

NHTSA and EPA will jointly host three public hearings on the dates and locations described in the DATES section above. At all hearings, both agencies will accept comments on the rulemaking, and NHTSA will also accept comments on the EIS.

If you would like to present testimony at the public hearings, we ask that you notify the EPA and NHTSA contact persons listed under

FOR FURTHER INFORMATION CONTACT

at least ten days before the hearing. Once EPA and NHTSA learn how many people have registered to speak at the public hearing, we will allocate an appropriate amount of time to each participant, allowing time for lunch and necessary breaks throughout the day. For planning purposes, each speaker should anticipate speaking for approximately ten minutes, although we may need to adjust the time for each speaker if there is a large turnout. We suggest that you bring copies of your statement or other material for the EPA and NHTSA panels. It would also be helpful if you send us a copy of your statement or other materials before the hearing. To accommodate as many speakers as possible, we prefer that speakers not use technological aids (

e.g.,

audio-visuals, computer slideshows). However, if you plan to do so, you must notify the contact persons in the

FOR FURTHER INFORMATION CONTACT

section above. You also must make arrangements to provide your presentation or any other aids to NHTSA and EPA in advance of the hearing in order to facilitate set-up. In addition, we will reserve a block of time for anyone else in the audience who wants to give testimony. The agencies will assume that comments made at the hearings are directed to the NPRM unless commenters specifically reference NHTSA's EIS in oral or written testimony.

The hearing will be held at a site accessible to individuals with disabilities. Individuals who require accommodations such as sign language interpreters should contact the persons listed under

FOR FURTHER INFORMATION CONTACT

section above no later than ten days before the date of the hearing.

NHTSA and EPA will conduct the hearing informally, and technical rules of evidence will not apply. We will arrange for a written transcript of the hearing and keep the official record of the hearing open for 30 days to allow you to submit supplementary information. You may make arrangements for copies of the transcript directly with the court reporter.

Table of Contents

I. Overview of Joint EPA/NHTSA Proposed 2017-2025 National PROGRAM

A. Introduction

1. Continuation of the National Program

2. Additional Background on the National Program

3. California's Greenhouse Gas Program

4. Stakeholder Engagement

B. Summary of the Proposed 2017-2025 National Program

1. Joint Analytical Approach

2. Level of the Standards

3. Form of the Standards

4. Program Flexibilities for Achieving Compliance

5. Mid-Term Evaluation

6. Coordinated Compliance

7. Additional Program Elements

C. Summary of Costs and Benefits for the Proposed National Program

1. Summary of Costs and Benefits for the Proposed NHTSA CAFE Standards

2. Summary of Costs and Benefits for the Proposed EPA GHG Standards

D. Background and Comparison of NHTSA and EPA Statutory Authority

1. NHTSA Statutory Authority

2. EPA Statutory Authority

3. Comparing the Agencies' Authority

II. Joint Technical Work Completed for This Proposal

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 2017-2025 Vehicle Reference Fleet?

C. Development of Attribute-Based Curve Shapes

1. Why are standards attribute-based and defined by a mathematical function?

2. What attribute are the agencies proposing to use, and why?

3. What mathematical functions have the agencies previously used, and why?

4. How have the agencies changed the mathematical functions for the proposed MYs 2017-2025 standards, and why?

5. What are the agencies proposing for the MYs 2017-2025 curves?

6. Once the agencies determined the appropriate slope for the sloped part, how did the agencies determine the rest of the mathematical function?

7. Once the agencies determined the complete mathematical function shape, how did the agencies adjust the curves to develop the proposed standards and regulatory alternatives?

D. Joint Vehicle Technology Assumptions

1. What Technologies did the Agencies Consider?

2. How did the Agencies Determine the Costs of Each of these Technologies?

3. How Did the Agencies Determine the Effectiveness of Each of these Technologies?

E. Joint Economic and Other Assumptions

F. Air Conditioning Efficiency CO

Credits and Fuel Consumption Improvement Values, Off-cycle Reductions, and Full-size Pickup Trucks

1. Proposed Air Conditioning CO

Credits and Fuel Consumption Improvement Values

2. Off-Cycle CO

Credits

3. Advanced Technology Incentives for Full Sized Pickup Trucks

G. Safety Considerations in Establishing CAFE/GHG Standards

1. Why do the agencies consider safety?

2. How do the agencies consider safety?

3. What is the current state of the research on statistical analysis of historical crash data?

4. How do the agencies think technological solutions might affect the safety estimates indicated by the statistical analysis?

5. How have the agencies estimated safety effects for the proposed standards?

III. EPA Proposal For MYS 2017-2025 Greenhouse Gas Vehicle Standards

A. Overview of EPA Rule

1. Introduction

2. Why is EPA Proposing this Rule?

3. What is EPA Proposing?

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

5. Other Related EPA Motor Vehicle Regulations

B. Proposed Model Year 2017-2025 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 Proposed CO

Attribute-based Standards?

3. Mid-Term Evaluation

4. Averaging, Banking, and Trading Provisions for CO

Standards

5. Small Volume Manufacturer Standards

6. Nitrous Oxide, Methane, and CO

-equivalent Approaches

7. Small Entity Exemption

8. Additional Leadtime Issues

9. Police and Emergency Vehicle Exemption From CO

Standards

10. Test Procedures

C. Additional Manufacturer Compliance Flexibilities

1. Air Conditioning Related Credits

2. Incentive for Electric Vehicles, Plug-in Hybrid Electric Vehicles, and Fuel Cell Vehicles

3. Incentives for “Game-Changing” Technologies Including use of Hybridization and Other Advanced Technologies for Full-Size Pickup Trucks

4. Treatment of Plug-in Hybrid Electric Vehicles, Dual Fuel Compressed Natural Gas Vehicles, and Ethanol Flexible Fuel Vehicles for GHG Emissions Compliance

5. Off-cycle Technology Credits

D. Technical Assessment of the Proposed CO

Standards

1. How did EPA develop a reference and control fleet for evaluating standards?

2. What are the Effectiveness and Costs of CO

-reducing technologies?

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

4. How does EPA Project how a manufacturer would decide between options to improve CO

performance to meet a fleet average standard?

5. Projected Compliance Costs and Technology Penetrations

6. How does the technical assessment support the proposed CO

standards as compared to the alternatives has EPA considered?

7. To what extent do any of today's vehicles meet or surpass the proposed MY 2017-2025 CO

footprint-based targets with current powertrain designs?

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. Other Certification Issues

8. Warranty, Defect Reporting, and Other Emission-related Components Provisions

9. Miscellaneous Technical Amendments and Corrections

10. Base Tire Definition

11. Treatment of Driver-Selectable Modes and Conditions

F. How Would This Proposal Reduce GHG Emissions and Their Associated Effects?

1. Impact on GHG Emissions

2. Climate Change Impacts From GHG Emissions

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

G. How would the proposal impact non-GHG emissions and their associated effects?

1. Inventory

2. Health Effects of Non-GHG Pollutants

3. Environmental Effects of Non-GHG Pollutants

4. Air Quality Impacts of Non-GHG Pollutants

5. Other Unquantified Health and Environmental Effects

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

1. Conceptual Framework for Evaluating Consumer Impacts

2. Costs Associated With the Vehicle Standards

3. Cost per ton of Emissions Reduced

4. Reduction in Fuel Consumption and its Impacts

5. CO

Emission Reduction Benefits

6. Non-Greenhouse Gas Health and Environmental Impacts

7. Energy Security Impacts

8. Additional Impacts

9. Summary of Costs and Benefits

10. U.S. Vehicle Sales Impacts and Payback Period

11. Employment Impacts

I. Statutory and Executive Order Reviews

J. Statutory Provisions and Legal Authority

IV. NHTSA Proposed Rule for Passenger car and Light Truck Cafe Standards for Model Years 2017-2025

A. Executive Overview of NHTSA Proposed Rule

1. Introduction

2. Why does NHTSA set CAFE standards for passenger cars and light trucks?

3. Why is NHTSA proposing CAFE standards for MYs 2017-2025 now?

B. Background

1. Chronology of events since the MY 2012-2016 final rule was issued

2. How has NHTSA developed the proposed CAFE standards since the President's announcement?

C. Development and Feasibility of the Proposed Standards

1. How was the baseline vehicle fleet developed?

2. How were the technology inputs developed?

3. How did NHTSA develop its economic assumptions?

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

D. Statutory Requirements

1. EPCA, as Amended by EISA

2. Administrative Procedure Act

3. National Environmental Policy Act

E. What are the proposed CAFE standards?

1. Form of the Standards

2. Passenger Car Standards for MYs 2017-2025

3. Minimum Domestic Passenger Car Standards

4. Light Truck Standards

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

1. What are NHTSA's statutory obligations?

2. How did the agency balance the factors for this NPRM?

G. Impacts of the Proposed CAFE Standards

1. How will these standards improve fuel economy and reduce GHG emissions for MY 2017-2025 vehicles?

2. How will these standards improve fleet-wide fuel economy and reduce GHG emissions beyond MY 2025?

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

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

5. How would these proposed standards impact vehicle sales?

6. Social Benefits, Private Benefits, and Potential Unquantified Consumer Welfare Impacts of the Proposed Standards

7. What other impacts (quantitative and unquantifiable) will these proposed 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. What new incentives are being added to the CAFE program for MYs 2017-2025?

5. Other CAFE enforcement issues

J. Regulatory notices and analyses

1. Executive Order 12866, Executive Order 13563, and DOT Regulatory Policies and Procedures

2. National Environmental Policy Act

3. Regulatory Flexibility Act

4. Executive Order 13132 (Federalism)

5. Executive Order 12988 (Civil Justice Reform)

6. Unfunded Mandates Reform Act

7. Regulation Identifier Number

8. Executive Order 13045

9. National Technology Transfer and Advancement Act

10. Executive Order 13211

11. Department of Energy Review

12. Plain Language

13. Privacy Act

I. Overview of Joint EPA/NHTSA Proposed 2017-2025 National Program

Executive Summary

EPA and NHTSA are each announcing proposed rules that call for strong and coordinated Federal greenhouse gas and fuel economy standards for passenger cars, light-duty trucks, and medium-duty passenger vehicles (hereafter light-duty vehicles or LDVs). Together, these vehicle categories, which include passenger cars, sport utility vehicles, crossover utility vehicles, minivans, and pickup trucks, among others, are presently responsible for approximately 60 percent of all U.S. transportation-related greenhouse gas (GHG) emissions and fuel consumption. This proposal would extend the National Program of Federal light-duty vehicle GHG emissions and corporate average fuel economy (CAFE) standards to model years (MYs) 2017-2025. This proposed coordinated program would achieve important reductions in GHG emissions and fuel consumption from the light-duty vehicle part of the transportation sector, based on technologies that either are commercially available or that the agencies project will be commercially available in the rulemaking timeframe and that can be incorporated at a reasonable cost. Higher initial vehicle costs will be more than offset by significant fuel savings for consumers over the lives of the vehicles covered by this rulemaking.

This proposal builds on the success of the first phase of the National Program to regulate fuel economy and GHG emissions from U.S. light-duty vehicles, which established strong and coordinated standards for model years (MY) 2012-2016. As with the first phase of the National Program, collaboration with California Air Resources Board (CARB) and with automobile manufacturers and other stakeholders has been a key element in developing the agencies' proposed rules. Continuing the National Program would ensure that all manufacturers can build a single fleet of U.S. vehicles that would satisfy all requirements under both programs as well as under California's

program, helping to reduce costs and regulatory complexity while providing significant energy security and environmental benefits.

Combined with the standards already in effect for MYs 2012-2016, as well as the MY 2011 CAFE standards, the proposed standards would result in MY 2025 light-duty vehicles with nearly double the fuel economy, and approximately one-half of the GHG emissions compared to MY 2010 vehicles—representing the most significant federal action ever taken to reduce GHG emissions and improve fuel economy in the U.S. EPA is proposing standards that are projected to require, on an average industry fleet wide basis, 163 grams/mile of carbon dioxide (CO

) in model year 2025, which is equivalent to 54.5 mpg if this level were achieved solely through improvements in fuel efficiency.

Consistent with its statutory authority, NHTSA is proposing passenger car and light truck standards for MYs 2017-2025 in two phases. The first phase, from MYs 2017-2021, includes proposed standards that are projected to require, on an average industry fleet wide basis, 40.9 mpg in MY 2021. The second phase of the CAFE program, from MYs 2022-2025, represents conditional

proposed standards that are projected to require, on an average industry fleet wide basis, 49.6 mpg in model year 2025. Both the EPA and NHTSA standards are projected to be achieved through a range of technologies, including improvements in air conditioning efficiency, which reduces both GHG emissions and fuel consumption; the EPA standards also are projected to be achieved with the use of air conditioning refrigerants with a lower global warming potential (GWP), which reduce GHGs (

i.e.,

hydrofluorocarbons) but do not improve fuel economy. The agencies are proposing separate standards for passenger cars and trucks, based on a vehicle's size or “footprint.” For the MYs 2022-2025 standards, EPA and NHTSA are proposing a comprehensive mid-term evaluation and agency decision-making process, given both the long time frame and NHTSA's obligation to conduct a separate rulemaking in order to establish final standards for vehicles for those model years.

Real-world CO

is typically 25 percent higher and real-world fuel economy is typically 20 percent lower than the CO

and CAFE compliance values discussed here. The reference to CO

here refers to CO

equivalent reductions, as this included some degree of reductions in greenhouse gases other than CO

, as one part of the air conditioning related reductions.

By “conditional,” NHTSA means to say that the proposed standards for MYs 2022-2025 represent the agency's current best estimate of what levels of stringency would be maximum feasible in those model years, but in order for the standards for those model years to be legally binding a subsequent rulemaking must be undertaken by the agency at a later time.

See

Section IV for more information.

From a societal standpoint, this second phase of the National Program is projected to save approximately 4 billion barrels of oil and 2 billion metric tons of GHG emissions over the lifetimes of those vehicles sold in MY 2017-2025. The agencies estimate that fuel savings will far outweigh higher vehicle costs, and that the net benefits to society of the MYs 2017-2025 National Program will be in the range of $311 billion to $421 billion (7 and 3 percent discount rates, respectively) over the lifetimes of those vehicles sold in MY 2017-2025.

These proposed standards would have significant savings for consumers at the pump. Higher costs for new vehicle technology will add, on average, about $2000 for consumers who buy a new vehicle in MY 2025. Those consumers who drive their MY 2025 vehicle for its entire lifetime will save, on average, $5200 to $6600 (7 and 3 percent discount rates, respectively) in fuel savings, for a net lifetime savings of $3000 to $4400. For those consumers who purchase their new MY 2025 vehicle with cash, the discounted fuel savings will offset the higher vehicle cost in less than 4 years, and fuel savings will continue for as long as the consumer owns the vehicle. Those consumers that buy a new vehicle with a typical 5-year loan will benefit from an average monthly cash flow savings of about $12 during the loan period, or about $140 per year, on average. So the consumer would benefit beginning at the time of purchase, since the increased monthly fuel savings would more than offset the higher monthly payment due to the higher incremental vehicle cost.

The agencies have designed the proposed standards to preserve consumer choice—that is, the proposed standards should not affect consumers' opportunity to purchase the size of vehicle with the performance, utility and safety features that meets their needs. The standards are based on a vehicle's size, or footprint—that is, consistent with their general performance and utility needs, larger vehicles have numerically less stringent fuel economy/GHG emissions targets and smaller vehicles have more stringent fuel economy/GHG emissions targets, although since the standards are fleet average standards, no specific vehicle

must

meet a target. Thus, consumers will be able to continue to choose from the same mix of vehicles that are currently in the marketplace.

The agencies' believe there is a wide range of technologies available for manufacturers to consider in reducing GHG emissions and improving fuel economy. The proposals allow for long-term planning by manufacturers and suppliers for the continued development and deployment across their fleets of fuel saving and emissions-reducing technologies. The agencies believe that advances in gasoline engines and transmissions will continue for the foreseeable future, and that there will be continual improvement in other technologies, including vehicle weight reduction, lower tire rolling resistance, improvements in vehicle aerodynamics, diesel engines, and more efficient vehicle accessories. The agencies also expect to see increased electrification of the fleet through the expanded production of stop/start, hybrid, plug-in hybrid and electric vehicles. Finally, the agencies expect that vehicle air conditioners will continue to improve by becoming more efficient and by increasing the use of alternative refrigerants. Many of these technologies are already available today, and manufacturers will be able to meet the standards through significant efficiency improvements in these technologies, as well as a significant penetration of these and other technologies across the fleet. Auto manufacturers may also introduce new technologies that we have not considered for this rulemaking analysis, which could make possible alternative, more cost-effective paths to compliance.

A. Introduction

1. Continuation of the National Program

EPA and NHTSA are each announcing proposed rules that call for strong and coordinated Federal greenhouse gas and fuel economy standards for passenger cars, light-duty trucks, and medium-duty passenger vehicles (hereafter light-duty vehicles or LDVs). Together, these vehicle categories, which include passenger cars, sport utility vehicles, crossover utility vehicles, minivans, and pickup trucks, are presently responsible for approximately 60 percent of all U.S. transportation-related greenhouse gas emissions and fuel consumption. The proposal would extend the National Program of Federal light-duty vehicle greenhouse gas (GHG) emissions and corporate average fuel economy (CAFE) standards to model years (MYs) 2017-2025. The coordinated program being proposed would achieve important reductions of greenhouse gas (GHG) emissions and fuel consumption from the light-duty vehicle part of the

transportation sector, based on technologies that either are commercially available or that the agencies project will be commercially available in the rulemaking timeframe and that can be incorporated at a reasonable cost.

In working together to develop the next round of standards for MYs 2017-2025, NHTSA and EPA are building on the success of the first phase of the National Program to regulate fuel economy and GHG emissions from U.S. light-duty vehicles, which established the strong and coordinated standards for model years (MY) 2012-2016. As for the MYs 2012-2016 rulemaking, collaboration with California Air Resources Board (CARB) and with industry and other stakeholders has been a key element in developing the agencies' proposed rules. Continuing the National Program would ensure that all manufacturers can build a single fleet of U.S. vehicles that would satisfy all requirements under both programs as well as under California's program, helping to reduce costs and regulatory complexity while providing significant energy security and environmental benefits.

The agencies have been developing the basis for these joint proposed standards almost since the conclusion of the rulemaking establishing the first phase of the National Program. After much research and deliberation by the agencies, along with CARB and other stakeholders, President Obama announced plans for these proposed rules on July 29, 2011 and NHTSA and EPA issued a Supplemental Notice of Intent (NOI) outlining the agencies' plans for proposing the MY 2017-2025 standards and program.

This July NOI built upon the extensive analysis conducted by the agencies over the past year, including an initial technical assessment report and NOI issued in September 2010, and a supplemental NOI issued in December 2010 (discussed further below). The State of California and thirteen auto manufacturers representing over 90 percent of U.S. vehicle sales provided letters of support for the program concurrent with the Supplemental NOI.

The United Auto Workers (UAW) also supported the announcement,

as well as many consumer and environmental groups. As envisioned in the Presidential announcement and Supplemental NOI, this proposal sets forth proposed MYs 2017-2025 standards as well as detailed supporting analysis for those standards and regulatory alternatives for public review and comment. The program that the agencies are proposing will spur the development of a new generation of clean cars and trucks through innovative technologies and manufacturing that will, in turn, spur economic growth and create high-quality domestic jobs, enhance our energy security, and improve our environment. Consistent with Executive Order 13563, this proposal was developed with early consultation with stakeholders, employs flexible regulatory approaches to reduce burdens, maintains freedom of choice for the public, and helps to harmonize federal and state regulations.

76 FR 48758 (August 9, 2011).

Commitment letters are available at

http://www.epa.gov/otaq/climate/regulations.htm

and at

http://www.nhtsa.gov/fuel-economy

(last accessed Aug. 24, 2011).

The UAW's support was expressed in a statement on July 29, 2011, which can be found at

http://www.uaw.org/articles/uaw-supports-administration-proposal-light-duty-vehicle-cafe-and-greenhouse-gas-emissions-r

(last accessed September 19, 2011).

As described below, NHTSA and EPA are proposing a continuation of the National Program that the agencies believe represents the appropriate levels of fuel economy and GHG emissions standards for model years 2017-2025, given the technologies that the agencies anticipate will be available for use on these vehicles and the agencies' understanding of the cost and manufacturers' ability to apply these technologies during that time frame, and consideration of other relevant factors. Under this joint rulemaking, EPA is proposing GHG emissions standards under the Clean Air Act (CAA), and NHTSA is proposing CAFE standards under EPCA, as amended by the Energy Independence and Security Act of 2007 (EISA). This joint rulemaking proposal reflects a carefully coordinated and harmonized approach to implementing these two statutes, in accordance with all substantive and procedural requirements imposed by law.

For NHTSA, this includes the requirements of the National Environmental Policy Act (NEPA).

The proposed approach allows for long-term planning by manufacturers and suppliers for the continued development and deployment across their fleets of fuel saving and emissions-reducing technologies. NHTSA's and EPA's technology assessment indicates there is a wide range of technologies available for manufacturers to consider in reducing GHG emissions and improving fuel economy. The agencies believe that advances in gasoline engines and transmissions will continue for the foreseeable future, which is a view that is supported in the literature and amongst the vehicle manufacturers and suppliers.

The agencies also believe that there will be continual improvement in other technologies including reductions in vehicle weight, lower tire rolling resistance, improvements in vehicle aerodynamics, diesel engines, and more efficient vehicle accessories. The agencies also expect to see increased electrification of the fleet through the expanded production of stop/start, hybrid, plug-in hybrid and electric vehicles.

Finally, the agencies expect that vehicle air conditioners will continue to improve by becoming more efficient and by increasing the use of alternative refrigerants. Many 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 significant efficiency improvements in these technologies as well as a significant penetration of these and other technologies across the fleet. We project that these potential compliance pathways for manufacturers will result in significant benefits to consumers and to society, as quantified below. Manufacturers may also introduce new technologies that we have not considered for this rulemaking analysis, which could make possible alternative, more cost-effective paths to compliance.

There are a number of competing gasoline engine technologies, with one in particular that the agencies project will be common beyond 2016. This is the gasoline direct injection and downsized engines equipped with turbochargers and cooled exhaust gas recirculation, which has performance characteristics similar to that of larger, less efficient engines. Paired with these engines, the agencies project that advanced transmissions (such as automatic and dual clutch transmissions with eight forward speeds) and higher efficiency gearboxes will provide significant improvements. Transmissions with eight or more speeds can be found in the fleet today in very limited production, and while they are expected to penetrate further by 2016, we anticipate that by 2025 these will be the dominant transmissions in new vehicle sales.

For example, while today less than three percent of annual vehicle sales are strong hybrids, plug-in hybrids and all electric vehicles, by 2025 we estimate these technologies could represent nearly 15 percent of new sales.

As discussed further below, as with the standards for MYs 2012-2016, the agencies believe that the proposed standards would continue to preserve consumer choice, that is, the proposed standards should not affect consumers' opportunity to purchase the size of vehicle that meets their needs. NHTSA and EPA are proposing to continue standards based on vehicle footprint, where smaller vehicles have relatively more stringent standards, and larger vehicles have less stringent standards, so there should not be a significant effect on the relative availability of different size vehicles in the fleet.

Additionally, as with the standards for MYs 2012-2016, the agencies believe that the proposed standards should not have a negative effect on vehicle safety, as it relates to vehicle footprint and mass as described in Section II.C and II.G below, respectively.

We note that as part of this rulemaking, given the long time frame at issue in setting standards for MY 2022-2025 light-duty vehicles, the agencies are discussing a comprehensive mid-term evaluation and agency decision-making process. NHTSA has a statutory obligation to conduct a separate de novo rulemaking in order to establish final standards for vehicles for the 2022-2025 model years and would conduct the mid-term evaluation as part of that rulemaking, and EPA is proposing regulations that address the mid-term evaluation. The mid-term evaluation will assess the appropriateness of the MY 2022-2025 standards considered in this rulemaking, based on an updated assessment of all the factors considered in setting the standards and the impacts of those factors on the manufacturers' ability to comply. NHTSA and EPA fully expect to conduct this mid-term evaluation in coordination with the California Air Resources Board, given our interest in a maintaining a National Program to address GHGs and fuel economy. Further discussion of the mid-term evaluation is found later in this section, as well as in Sections III and IV.

Based on the agencies' analysis, the National Program standards being proposed are currently projected to reduce GHGs by approximately 2 billion metric tons and save 4 billion barrels of oil over the lifetime of MYs 2017-2025 vehicles relative to the MY 2016 standard curves

already in place. The average cost for a MY 2025 vehicle to meet the standards is estimated to be about $2,000 compared to a vehicle that would meet the level of the MY 2016 standards in MY 2025. However, fuel savings for consumers are expected to more than offset the higher vehicle costs. The typical driver would save a total of $5,200 to $6,600 (7 percent and 3 percent discount rate, respectively) in fuel costs over the lifetime of a MY 2025 vehicle and, even after accounting for the higher vehicle cost, consumers would save a net $3,000 to $4,400 (7 percent and 3 percent discount rate, respectively) over the vehicle's lifetime. Further, consumers who buy new vehicles with cash would save enough in lower fuel costs after less than 4 years (at either 7 percent or 3 percent discount rate) of owning a MY 2025 vehicle to offset the higher upfront vehicle costs, while consumers who buy with a 5-year loan would save more each month on fuel than the increased amount they would spend on the higher monthly loan payment, beginning in the first month of ownership.

The calculation of GHG reductions and oil savings is relative to a future in which the MY 2016 standards remain in place for MYs 2017-2025 and manufacturers comply on average at those levels.

Continuing the National Program has both energy security and climate change benefits. Climate change is widely viewed as a significant long-term threat to the global environment. EPA has found that elevated atmospheric concentrations of six greenhouse gases—carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perflurocarbons, and sulfur hexafluoride—taken in combination endanger both the public health and the public welfare of current and future generations. EPA further found that the combined emissions of these greenhouse gases from new motor vehicles and new motor vehicle engines contribute to the greenhouse gas air pollution that endangers public health and welfare. 74 FR 66496 (Dec. 15, 2009). As summarized in 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.

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 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.

18 19

74 FR 66,496,-66,518, December 18, 2009; “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 our energy and national 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 accounted for approximately 51 percent of U.S. petroleum consumption in 2009.

World crude oil production is highly concentrated, exacerbating the risks of supply disruptions and price shocks as the recent unrest in North Africa and the Persian Gulf highlights. Recent tight global oil markets led to prices over $100 per barrel, with gasoline reaching as high as $4 per gallon in many parts of the U.S., causing financial hardship for many families and businesses. The export of U.S. assets for oil imports continues to be an important component of the historically unprecedented U.S. trade deficits. Transportation accounted for about 71 percent of U.S. petroleum consumption in 2009.

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.

Energy Information Administration, “How dependent are we on foreign oil?”

Available at http://www.eia.gov/energy_in_brief/foreign_oil_dependence.cfm

(last accessed August 28, 2011).

Energy Information Administration, Annual Energy Outlook 2011, “Oil/Liquids.”

Available at http://www.eia.gov/forecasts/aeo/MT_liquidfuels.cfm

(last accessed August 28, 2011).

The automotive market is becoming increasingly global. The U.S. auto companies and U.S. suppliers produce and sell automobiles and automotive components around the world, and foreign auto companies produce and sell in the U.S. As a result, the industry has become increasingly competitive. Staying at the cutting edge of automotive technology while maintaining profitability and consumer acceptance has become increasingly important for the sustainability of auto companies. The proposed standards cover model years 2017-2025 for passenger cars and light-duty trucks sold in the United States. Many other countries and regions around the world have in place fuel economy or CO

emission standards for light-duty vehicles. In addition, the European Union is currently discussing more stringent CO

standards for 2020, and the Japanese government has recently issued a draft proposal for new fuel efficiency standards for 2020. The overall trend is clear—globally many of the major economic countries are increasing the stringency of their fuel economy or CO

emission standards for light-duty vehicles. When considering this common trend, the proposed CAFE and CO

standards for MY 2017-2025 may offer some advantages for U.S.-based automotive companies and suppliers. In order to comply with the proposed standards, U.S. firms will need to invest significant research and development dollars and capital in order to develop and produce the technologies needed to reduce CO

emissions and improve fuel economy. Companies have limited budgets for research and development programs. As automakers seek greater commonality across the vehicles they produce for the domestic and foreign markets, improving fuel economy and reducing GHGs in U.S. vehicles should have spillovers to foreign production, and vice versa, thus yielding the ability to amortize investment in research and production over a broader product and geographic spectrum. To the extent that the technologies needed to meet the standards contained in this proposal can also be used to comply with the fuel economy and CO

standards in other countries, this can help U.S. firms in the global automotive market, as the U.S. firms will be able to focus their available research and development funds on a common set of technologies that can be used both domestically as well as internationally.

2. Additional Background on the National Program

Following the successful adoption of a National Program of federal standards for greenhouse gas emissions (GHG) and fuel economy standards for model years (MY) 2012-2016 light duty vehicles, President Obama issued a Memorandum on May 21, 2010 requesting that the National Highway Traffic Safety Administration (NHTSA), on behalf of the Department of Transportation, and the Environmental Protection Agency (EPA) work together to develop a national program for model years 2017-2025. Specifically, he requested that the agencies develop “

* * * a coordinated national program under the CAA [Clean Air Act] and the EISA [Energy Independence and Security Act of 2007] to improve fuel efficiency and to reduce greenhouse gas emissions of passenger cars and light-duty trucks of model years 2017-2025.”

The President recognized that our country could take a leadership role in addressing the global challenges of improving energy security and reducing greenhouse gas pollution, stating that

“America has the opportunity to lead the world in the development of a new generation of clean cars and trucks through innovative technologies and manufacturing that will spur economic growth and create high-quality domestic jobs, enhance our energy security, and improve our environment.”

The Presidential Memorandum is found at:

http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards

. For the reader's reference, the President also requested the Administrators of EPA and NHTSA to issue joint rules under the CAA and EISA to establish fuel efficiency and greenhouse gas emissions standards for commercial medium-and heavy-duty on-highway vehicles and work trucks beginning with the 2014 model year. The agencies recently promulgated final GHG and fuel efficiency standards for heavy duty vehicles and engines for MYs 2014-2018. 76 FR 57106 (September 15, 2011).

The Presidential Memorandum stated “

The program should also seek to achieve substantial annual progress in reducing transportation sector greenhouse gas emissions and fossil fuel consumption, consistent with my Administration's overall energy and climate security goals, through the increased domestic production and use of existing, advanced, and emerging technologies, and should strengthen the industry and enhance job creation in the United States.”

Among other things, the agencies were tasked with researching and then developing standards for MYs 2017 through 2025 that would be appropriate and consistent with EPA's and NHTSA's respective statutory authorities, in order to continue to guide the automotive sector along the road to reducing its fuel consumption and GHG emissions, thereby ensuring corresponding energy security and environmental benefits. During the public comment period for the MY 2012-2016 proposed rulemaking, many stakeholders, including automakers, encouraged NHTSA and EPA to begin working toward standards for MY 2017 and beyond in order to maintain a single nationwide program. Several major automobile manufacturers and CARB sent letters to EPA and NHTSA in support of a MYs 2017 to 2025 rulemaking initiative as outlined in the President's May 21, 2010 announcement.

These letters of support in response to the May 21, 2010 Presidential Memorandum are available at

http://www.epa.gov/otaq/climate/regulations.htm#prez

and

http://www.nhtsa.gov/Laws+&+Regulations/CAFE+-+Fuel+Economy/Stakeholder+Commitment+Letters

(last accessed August 28, 2011).

The President's memo requested that the agencies, “work with the State of California to develop by September 1, 2010, a technical assessment to inform the rulemaking process * * *.” As a first step in responding to the President's request, the agencies collaborated with CARB to prepare an Interim Joint Technical Assessment Report (TAR) to inform the rulemaking process and provide an initial technical assessment for that work. NHTSA, EPA, and CARB issued the joint Technical Assessment Report consistent with Section 2(a) of the Presidential Memorandum.

In developing the technical assessment, EPA, NHTSA, and CARB held numerous meetings with a wide variety of stakeholders including the automobile original equipment manufacturers (OEMs), automotive suppliers, non-governmental organizations, states and local governments, infrastructure providers, and labor unions. The Interim Joint TAR provided an overview of key stakeholder input, addressed other topics noted in the Presidential memorandum, and EPA's and NHTSA's initial assessment of benefits and costs of a range of stringencies of future standards.

This Interim Joint Technical Assessment Report (TAR) is available at

http://www.epa.gov/otaq/climate/regulations/ldv-ghg-tar.pdf

and

http://www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/2017+CAFE-GHG_Interim_TAR2.pdf.

Section 2(a) of the Presidential Memorandum requested that EPA and NHTSA “Work with the State of California to develop by September 1, 2010, a technical assessment to inform the rulemaking process, reflecting input from an array of stakeholders on relevant factors, including viable technologies, costs, benefits, lead time to develop and deploy new and emerging technologies, incentives and other flexibilities to encourage development and deployment of new and emerging technologies, impacts on jobs and the automotive manufacturing base in the United States, and infrastructure for advanced vehicle technologies.”

In accordance with the Presidential Memorandum, NHTSA and EPA also issued a joint Notice of Intent to Issue a Proposed Rulemaking (NOI).

The September 2010 NOI highlighted the results of the analyses contained in the Interim Joint TAR, provided an overview of key program design elements, and announced plans for initiating the joint rulemaking to improve the fuel efficiency and reduce the GHG emissions of passenger cars and light-duty trucks built in MYs 2017-2025. The agencies requested comments on the September NOI and accompanying Interim Joint TAR.

75 FR 62739, October 13, 2010.

The Interim Joint TAR contained an initial fleet-wide analysis of improvements in overall average GHG emissions and equivalent fuel economy

levels. For purposes of an initial assessment, this range was intended to represent a reasonably broad range of stringency increases for potential future GHG emissions standards, and was also consistent with the increases suggested by CARB in its letter of commitment in response to the President's memorandum.

26 27

The TAR evaluated a range of potential stringency scenarios through model year 2025, representing a 3, 4, 5, and 6 percent per year estimated decrease in GHG levels from a model year 2016 fleet-wide average of 250 gram/mile (g/mi). Thus, the model year 2025 scenarios analyzed in the Interim Joint TAR ranged from 190 g/mi on an estimated fleet-wide average (calculated to be equivalent to 47 miles per gallon, mpg, if all improvements were made with fuel economy-improving technologies) under the 3 percent per year reduction scenario, to 143 g/mi on an estimated fleet-wide average (calculated to be equivalent to 62 mpg, if all improvements were made with fuel economy-improving technologies) under the 6 percent per year scenario.

For each of these scenarios, the TAR also evaluated four pre-defined “technological pathways” by which these levels could be attained. These pathways were meant to represent ways that the industry as a whole could increase fuel economy and reduce greenhouse gas emissions, and did not represent ways that individual manufacturers would be required to or necessarily would employ in responding to future standards. Each defined technology pathway emphasized a different mix of advanced technologies, by assuming various degrees of penetration of advanced gasoline technologies, mass reduction, hybrid electric vehicles (HEVs), plug-in hybrids (PHEVs), and electric vehicles (EVs).

75 FR at 62744-45.

Statement of the California Air Resources Board Regarding Future Passenger Vehicle Greenhouse Gas Emissions Standards, California Air Resources Board, May 21, 2010. Available at:

http://www.epa.gov/otaq/climate/regulations.htm

These levels correspond to on-road values of 37 to 50 mpg, respectively, recognizing that on-road fuel economy tends to be about 20 percent worse than calculated mpg values based on the CAFE test cycle. We note, however, that because these mpg values are translated from CO

e values that include reductions in hydrofluorocarbon (HFC) leakage due to use of advanced refrigerants and leakage improvements, therefore these numbers are not as representative of either CAFE test cycle or real-world mpg.

Manufacturers and others commented extensively on the NOI and Interim Joint TAR on a variety of topics, including the stringency of the standards, program design elements, the effect of potential standards on vehicle safety, and the TAR's discussion of technology costs, effectiveness, and feasibility. In response, the agencies and CARB spent the next several months continuing to gather information from the industry and others in response to the agencies' initial analytical efforts. To aid the public's understanding of some of the key issues facing the agencies in developing the proposed rule, EPA and NHTSA also issued a follow-on Supplemental NOI in November 2010.

The Supplemental NOI highlighted many of the key comments the agencies received in response to the September NOI and Interim Joint TAR, and summarized some of the key themes from the comments and the additional stakeholder meetings. We note, as highlighted in the November Supplemental NOI, that there continued to be widespread stakeholder support for continuing the National Program for improved fuel economy and greenhouse gas standards for model years 2017-2025. The November Supplemental NOI also provided an overview of many of the key technical analyses the agencies planned in support the proposed rule.

75 FR 76337, December 8, 2010.

After issuing the November 2010 Supplemental NOI, EPA, NHTSA and CARB continued studies on technology cost and effectiveness and more in-depth and comprehensive analysis of the issues. In addition to this work, the agencies continued meeting with stakeholders, including with manufacturers, manufacturer organizations, automotive suppliers, a labor union, environmental groups, consumer interest groups, and investment organizations. As discussed above, on July 29, 2011 President Obama announced plans for these proposed rules and NHTSA and EPA issued a Supplemental Notice of Intent (NOI) outlining the agencies' plans for proposing the MY 2017-2025 standards and program.

3. California's Greenhouse Gas Program

In 2004, the California Air Resources Board (CARB) approved standards for new light-duty vehicles, regulating the emission of CO

and other GHGs. Thirteen states and the District of Columbia, comprising approximately 40 percent of the light-duty vehicle market, adopted California's standards. On June 30, 2009, EPA granted California's request for a waiver of preemption under the CAA with respect to these standards.

The granting of the waiver permits California and the other states to proceed with implementing the California emission standards for MYs 2009-2016. After EPA and NHTSA issued their MYs 2012-2016 standards, CARB revised its program such that compliance with the EPA greenhouse gas standards will be deemed to be compliance with California's GHG standards.

This facilitates the National Program by allowing manufacturers to meet all of the standards with a single national fleet.

74 FR 32744 (July 8, 2009). See also

Chamber of Commerce

EPA,

642 F.3d 192 (DC Cir. 2011) (dismissing petitions for review challenging EPA's grant of the waiver).

See “California Exhaust Emission Standards and Test Procedures for 2001 and Subsequent Model Passenger Cars, Light-Duty Trucks, and Medium-Duty Vehicles as approved by OAL,” March 29, 2010.

Available at http://www.arb.ca.gov/regact/2010/ghgpv10/oaltp.pdf

(last accessed August 28, 2011).

As requested by the President and in the interest of maximizing regulatory harmonization, NHTSA and EPA have worked closely with CARB throughout the development of this proposal to develop a common technical basis. CARB is releasing a proposal for MY 2017-2025 GHG emissions standards which are consistent with the standards being proposed by EPA and NHTSA. CARB recognizes the benefit for the country of continuing the National Program and plans an approach similar to the one taken for MYs 2012-2016. CARB has committed to propose to revise its GHG emissions standards for MY 2017 and later such that compliance with EPA GHG emissions standards shall be deemed compliance with the California GHG emissions standards, as long as EPA's final GHG standards are substantially as described in the July 2011 Supplemental NOI.

See State of California July 28, 2011 letter available at:

http://www.epa.gov/otaq/climate/regulations.htm

4. Stakeholder Engagement

On July 29, 2010, President Obama announced the support of thirteen major automakers to pursue the next phase in the Administration's national vehicle program, increasing fuel economy and reducing GHG emissions for passenger cars and light trucks built in MYs 2017-2025.

The President was joined by Ford, GM, Chrysler, BMW, Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo, which together account for over 90 percent of all vehicles sold in the United States. The California Air Resources Board (CARB), the United Auto Workers (UAW) and a number of

environmental and consumer groups, also announced their support.

The President's remarks are available at

http://www.whitehouse.gov/the-press-office/2011/07/29/remarks-president-fuel-efficiency-standards

; see also

http://www.nhtsa.gov/fuel-economy

for more information from the agency about the announcement.

On the same day as the President's announcement, the agencies released a second SNOI (published in the

Federal Register

on August 9, 2011) generally describing the joint proposal that the EPA and NHTSA expected to issue to establish the National Program for model years 2017-2025, and which is set forth in this NPRM. The agencies explained that the proposal would be developed based on extensive technical analyses, an examination of the factors required under their respective statutes and discussions with and input from individual motor vehicle manufacturers and other stakeholders. The input of stakeholders, which is encouraged by Executive Order 13563, has been invaluable to the agencies in developing today's NPRM.

For background, as discussed above, after publishing the Supplemental NOI on December 8, 2010 (the December 8 SNOI), NHTSA, EPA and CARB continued studies and conducted more in-depth and comprehensive rulemaking analyses related to technology cost and effectiveness, technological feasibility, reasonable timing for manufacturers to implement technologies, and economic factors, and other relevant considerations. In addition to this ongoing and more in-depth work, the agencies continued meeting with stakeholders and received additional input and feedback to help inform the rulemaking. Meetings were held with and relevant information was obtained from manufacturers, manufacturer organizations, suppliers, a labor union, environmental groups, consumer interest groups, and investment organizations.

This section summarizes NHTSA and EPA stakeholder engagement between December 2010 and July 29, 2011, the date on which President Obama announced the agencies' plans for proposing standards for MY2017-2025, and the support of thirteen major automakers and other stakeholders for these plans.

Information that the agencies presented to stakeholders is posted in the docket and referenced in multiple places in this section.

NHTSA has prepared a list of stakeholder meeting dates and participants, found in a memorandum to the docket, titled “2017-2025 CAFE Stakeholders Meetings List,” at NHTSA-2010-0131.

The agencies' engagement with the large and diverse group of stakeholders described above between December 2010 and July 29, 2011 shared the single aim of ensuring that the agencies possessed the most complete and comprehensive set of information possible to inform the proposed rulemaking.

Throughout this period, the stakeholders repeated many of the broad concerns and suggestions described in the TAR, NOI, and December 8 SNOI. For example, stakeholders uniformly expressed interest in maintaining a harmonized and coordinated national program that would be supported by CARB and allow auto makers to build one fleet and preserve consumer choice. The stakeholders also raised concerns about potential stringency levels, consumer acceptance of some advanced technologies and the potential structure of compliance flexibilities available under EPCA (as amended by EISA) and the CAA. In addition, most of the stakeholders wanted to discuss issues concerning technology availability, cost and effectiveness and economic practicability. The auto manufacturers, in particular, sought to provide the agencies with a better understanding of their respective strategies (and associated costs) for improving fuel economy while satisfying consumer demand in the coming years. Additionally, some stakeholders expressed concern about potential safety impacts associated with the standards, consumer costs and consumer acceptance, and potential disparate treatment of cars and trucks. Some stakeholders also stressed the importance of investing in infrastructure to support more widespread deployment of alternative vehicles and fuels. Many stakeholders also asked the agencies to acknowledge prevailing economic uncertainties in developing proposed standards. In addition, many stakeholders discussed the number of years to be covered by the program and what they considered to be important features of a mid-term review of any standards set or proposed for MY 2022-2025. In all of these meetings, NHTSA and EPA sought additional data and information from the stakeholders that would allow them to refine their initial analyses and determine proposed standards that are consistent with the agencies' respective statutory and regulatory requirements. The general issues raised by those stakeholders are addressed in the sections of this NPRM discussing the topics to which the issues pertain (

e.g.,

the form of the standards, technology cost and effectiveness, safety impacts, impact on U.S. vehicle sales and other economic considerations, costs and benefits).

The first stage of the meetings occurred between December 2010 and June 20, 2011. These meetings covered topics that were generally similar to the meetings that were held prior to the publication of the December 8 Supplemental NOI and that were summarized in the Supplemental NOI. The manufacturers provided the agencies with additional information related to their product plans for vehicle models and fuel efficiency improving technologies and associated cost estimates. Detailed product plans generally extend only five or six model years into the future. Manufacturers also provided estimates of the amount of improvement in CAFE and CO

emissions they could reasonably achieve in model MYs 2017-2025; feedback on the shape of MY 2012-2016 regulatory stringency curves and curve cut points, regulatory program flexibilities; recommendations for and on the structure of one or more mid-term reviews of the later model year standards; estimates of the cost, effectiveness and availability of some fuel efficiency improving technologies; and feedback on some of the cost and effectiveness assumptions used in the TAR analysis. In addition, manufacturers provided input on manufacturer experience with consumer acceptance of some advanced technologies and raised concerns over consumer acceptance if higher penetration of these technologies were needed in the future, consumer's willingness to pay for improved fuel economy, and ideas on enablers and incentives that would increase consumer acceptance. Many manufacturers stated that technology is available to significantly improve fuel economy and CO

emissions; however, they maintained that the biggest challenges relate to the cost of the technologies, consumer willingness to pay and consumer acceptance.

During this first phase NHTSA and EPA continued to meet with other stakeholders, who provided their own perspectives on issues of importance to them. They also provided data to the extent available to them. Information obtained from stakeholders during this phase is contained in the docket.

The second stage of meetings occurred between June 21, 2011 and July 14, 2011, during which time EPA, NHTSA, CARB and several White House Offices kicked-off an intensive series of meetings, primarily with manufacturers, to share tentative regulatory concepts developed by EPA, NHTSA and CARB, which included concept stringency curves and program flexibilities based on the analyses completed by the agencies as of June 21,

and requested

feedback.

In particular, the agencies requested that the manufacturers provide detailed and reliable information on how they might comply with the concepts and, if they projected they could not comply, information supporting their belief that they would be unable to comply. Additionally, EPA and NHTSA sought detailed input from the manufacturers regarding potential changes to the concept stringency levels and program flexibilities available under EPA's and NHTSA's respective authority that might facilitate compliance. In addition, manufacturers provided input related to consumer acceptance and adoption of some advanced technologies and program costs based on their independent assessments or information previously submitted to the agencies.

The agencies consider a range of standards that may satisfy applicable legal criteria, taking into account the complete record before them . The

initial concepts shared with stakeholders were within the range the agencies were considering, based on the information then available to the agencies.

“Agency Materials Provided to Manufacturers” Memo to docket NHTSA-2010-0131.

In these second stage meetings, the agencies received considerable input from the manufacturers. The agencies carefully considered the manufacturer information along with information from the agencies' independent analyses. The agencies used all available information to refine their assessment of the range of program concept stringencies and provisions that the agencies determined were consistent with their statutory mandates.

The third stage of meetings occurred between July 15, 2011 and July 28, 2011. During this time period the agencies continued to refine concept stringencies and compliance flexibilities based on further consideration of the information available to them. They also met with approximately 13 manufacturers who expressed ongoing interest in engaging with the agencies.

“Agency Materials Provided to Manufacturers” Memo to docket NHTSA-2010-0131.

Throughout all three stages, EPA and NHTSA continued to engage other stakeholders to ensure that the agencies were obtaining the most comprehensive and reliable information possible to guide the agencies in developing proposed standards for MY 2017-2025. Many of these stakeholders reiterated comments previously presented to the agencies. For instance, environmental organizations consistently stated that stringent standards are technically achievable and critical to important national interests, such as improving energy independence, reducing climate change, and enabling the domestic automobile industry to remain competitive in the global market. Labor interests stressed the need to carefully consider economic impacts and the opportunity to create and support new jobs, and consumer advocates emphasized the economic and practical benefits to consumers of improved fuel economy and the need to preserve consumer choice. In addition, a number of stakeholders stated that the standards under development should not have an adverse impact on safety.

On July 29, 2011, EPA and NHTSA the agencies issued a new SNOI with concept stringency curves and program provisions based on refined analyses and further consideration of the record before the agencies. The agencies have received letters of support for the concepts laid out in the SNOI from BMW, Chrysler, Ford, General Motors, Global Automakers, Honda, Hyundai, Jaguar Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota, Volvo and CARB. Numerous other stakeholders, including labor, environmental and consumer groups, have expressed their support for the agencies' plans to move forward.

The agencies have considered all of this stakeholder input in developing this proposal, and look forward to continuing the productive dialogue through the comment period following this proposal.

B. Summary of the Proposed 2017-2025 National Program

1. Joint Analytical Approach

This proposed rulemaking continues the collaborative analytical effort between NHTSA and EPA, which began with the MYs 2012-2016 rulemaking. NHTSA and EPA have worked together, and in close coordination with CARB, on nearly every aspect of the technical analysis supporting these joint proposed rules. The results of this collaboration are reflected in the elements of the respective NHTSA and EPA proposed rules, as well as in the analytical work contained in the Draft Joint NHTSA and EPA Technical Support Document (Joint TSD). The agencies have continued to develop and refine supporting analyses since issuing the NOI and Interim Joint TAR last September. The Joint TSD, in particular, describes important details of the analytical work that are common, as well as highlighting any key differences in approach. The joint analyses include the build-up of the baseline and reference fleets, the derivation of the shape of the footprint-based attribute curves that define the agencies' respective standards, a detailed description of the estimated costs and effectiveness of the technologies that are available to vehicle manufacturers, the economic inputs used to calculate the costs and benefits of the proposed rules, a description of air conditioner and other off-cycle technologies, and the agencies' assessment of the effects of the proposed standards on vehicle safety. This comprehensive joint analytical approach has provided a sound and consistent technical basis for both agencies in developing their proposed standards, which are summarized in the sections below.

2. Level of the Standards

EPA and NHTSA are each proposing two separate sets of standards, each under its respective statutory authorities. Both the proposed CO

and CAFE standards for passenger cars and light trucks would be footprint-based, similar to the standards currently in effect through model year 2016, and would become more stringent on average in each model year from 2017 through 2025. The basis for measuring performance relative to standards would continue to be based predominantly on the EPA city and highway test cycles (2-cycle test). However, EPA is proposing optional air conditioning and off-cycle credits for the GHG program and adjustments to calculated fuel economy for the CAFE programs that would be based on test procedures other than the 2-cycle tests.

EPA is proposing standards that are projected to require, on an average industry fleet wide basis, 163 grams/mile of CO

in model year 2025. This is projected to be achieved through improvements in fuel efficiency with some additional reductions achieved through reductions in non-CO

GHG emissions from reduced AC system leakage and the use of lower global warming potential (GWP) refrigerants. The level of 163 grams/mile CO

would be equivalent on a mpg basis to 54.5 mpg, if this level was achieved solely through improvements in fuel efficiency.

Real-world CO

is typically 25 percent higher and real-world fuel economy is typically 20 percent lower than the CO2 and CAFE values discussed here. The reference to CO

here refers to CO

equivalent reductions, as this included some degree of reductions in greenhouse gases other than CO

, as one part of the AC related reductions.

For passenger cars, the CO

compliance values associated with the footprint curves would be reduced on average by 5 percent per year from the model year 2016 projected passenger car industry-wide compliance level through model year 2025. In recognition of manufacturers' unique challenges in improving the fuel economy and GHG emissions of full-size pickup trucks as we transition from the MY 2016

standards to MY 2017 and later, while preserving the utility (

e.g.,

towing and payload capabilities) of those vehicles, EPA is proposing a lower annual rate of improvement for light-duty trucks in the early years of the program. For light-duty trucks, the proposed average annual rate of CO

emissions reduction in model years 2017 through 2021 is 3.5 percent per year. EPA is also proposing to change the slopes of the CO

-footprint curves for light-duty trucks from those in the 2012-2016 rule, in a manner that effectively means that the annual rate of improvement for smaller light-duty trucks in model years 2017 through 2021 would be higher than 3.5 percent, and the annual rate of improvement for larger light-duty trucks over the same time period would be lower than 3.5 percent. For model years 2022 through 2025, EPA is proposing an average annual rate of CO

emissions reduction for light-duty trucks of 5 percent per year.

NHTSA is proposing two phases of passenger car and light truck standards in this NPRM. The first phase runs from MYs 2017-2021, with proposed standards that are projected to require, on an average industry fleet wide basis, 40.9 mpg in MY 2021. For passenger cars, the annual increase in the stringency of the target curves between model years 2017 to 2021 is expected to average 4.1 percent. In recognition of manufacturers' unique challenges in improving the fuel economy and GHG emissions of full-size pickup trucks as we transition from the MY 2016 standards to MY 2017 and later, while preserving the utility (

e.g.,

towing and payload capabilities) of those vehicles, NHTSA is also proposing a slower annual rate of improvement for light trucks in the first phase of the program. For light trucks, the proposed annual increase in the stringency of the target curves in model years 2017 through 2021 would be 2.9 percent per year on average. NHTSA is proposing to change the slopes of the fuel economy footprint curves for light trucks from those in the MYs 2012-2016 final rule, which would effectively make the annual rate of improvement for smaller light trucks in MYs 2017-2021 higher than 2.9 percent, and the annual rate of improvement for larger light trucks over that time period lower than 2.9 percent.

The second phase of the CAFE program runs from MYs 2022-2025 and represents conditional

proposed standards that are projected to require, on an average industry fleet wide basis, 49.6 mpg in model year 2025. For passenger cars, the annual increase in the stringency of the target curves between model years 2022 and 2025 is expected to average 4.3 percent, and for light trucks, the annual increase during those model years is expected to average 4.7 percent. For the first time, NHTSA is proposing to increase the stringency of standards by the amount (in mpg terms) that industry is expected to improve air conditioning system efficiency, and EPA is proposing, under EPCA, to allow manufacturers to include air conditioning system efficiency improvements in the calculation of fuel economy for CAFE compliance. NHTSA notes that the proposed rates of increase in stringency for CAFE standards are lower than EPA's proposed rates of increase in stringency for GHG standards. As in the MYs 2012-2016 rulemaking, this is for purposes of harmonization and in reflection of several statutory constraints in EPCA/EISA. As a primary example, NHTSA's proposed standards, unlike EPA's, do not reflect the inclusion of air conditioning system refrigerant and leakage improvements, but EPA's proposed standards would allow consideration of such A/C refrigerant improvements which reduce GHGs but do not affect fuel economy.

By ”conditional,” NHTSA means to say that the proposed standards for MYs 2022-2025 represent the agency's current best estimate of what levels of stringency would be maximum feasible in those model years, but in order for the standards for those model years to be legally reviewable a subsequent rulemaking must be undertaken by the agency at a later time. See Section IV for more information.

As with the MYs 2012-2016 standards, NHTSA and EPA's proposed MYs 2017-2025 passenger car and light truck standards 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 would be determined by computing the production-weighted average of the targets applicable to each of the manufacturer's fleet of passenger cars and light trucks.

Under these footprint-based standards, the average levels required of individual manufacturers will depend, as noted above, on the mix and volume of vehicles the manufacturer produces. The values in the tables below reflect the agencies' projection of the corresponding average fleet levels that will result from these attribute-based curves given the agencies' current assumptions about the mix of vehicles that will be sold in the model years covered by the proposed standards.

NHTSA is required to set attribute-based CAFE standards for passenger cars and light trucks. 49 U.S.C. 32902(b)(3).

For CAFE calculations, a harmonic average is used.

As shown in Table I-1, NHTSA's fleet-wide required CAFE levels for passenger cars under the proposed standards are estimated to increase from 40.0 to 56.0 mpg between MY 2017 and MY 2025. Fleet-wide required CAFE levels for light trucks, in turn, are estimated to increase from 29.4 to 40.3 mpg. For the reader's reference, Table I-1 also provides the estimated average fleet-wide required levels for the combined car and truck fleets, culminating in an estimated overall fleet average required CAFE level of 49.6 mpg in MY 2025. Considering these combined car and truck increases, the proposed standards together represent approximately a 4.0 percent annual rate of increase,

on average, relative to the MY 2016 required CAFE levels.

This estimated average percentage increase includes the effect of changes in standard stringency and changes in the forecast fleet sales mix.

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The estimated average required mpg levels for cars and trucks under the proposed standards shown in Table I-1 above include the use of A/C efficiency improvements, as discussed above, but do not reflect a number of proposed flexibilities and credits that manufacturers could use for compliance that NHTSA cannot consider in establishing standards based on EPCA/EISA constraints. These flexibilities would cause the actual achieved fuel economy to be lower than the required levels in the table above. The flexibilities and credits that NHTSA cannot consider include the ability of manufacturers to pay civil penalties rather than achieving required CAFE levels, the ability to use FFV credits, the ability to count electric vehicles for compliance, the operation of plug-in hybrid electric vehicles on electricity for compliance prior to MY 2020, and the ability to transfer and carry-forward credits. When accounting for these flexibilities and credits, NHTSA estimates that the proposed CAFE standards would 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 proposed CAFE program includes incentives for full size pick-up trucks that have mild HEV or strong HEV systems, and for full size pick-up trucks that have fuel economy performance that is better than the target curve by more than proposed levels. To receive these incentives, manufacturers must produce vehicles with these technologies or performance levels at volumes that meet or exceed proposed penetration levels (percentage of full size pick-up truck volume). This incentive is described in detail in Section IV.1. The NHTSA estimates in Table I-2 do not account for the reduction in estimated average achieved fleet-wide CAFE fuel economy that would occur if manufacturers use this incentive. NHTSA has conducted a sensitivity study that estimates the effects for manufacturers' potential use of this flexibility in Chapter X of the PRIA.

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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 * * *,” and applies to each manufacturer's fleet of domestically manufactured passenger cars (

i.e.,

like the other CAFE standards, it represents a fleet average requirement, not a requirement for each individual vehicle within the fleet).

Based on NHTSA's current market forecast, the agency's estimates of these proposed minimum standards for domestic passenger cars for MYs 2017-2025 are presented below in Table I-3.

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EPA is proposing GHG emissions standards, and Table I-4 provides estimates of the projected overall fleet-wide CO

emission compliance target levels. The values reflected in Table I-4 are those that correspond to the manufacturers' projected CO

compliance target levels from the car and truck footprint curves, but do not account for EPA's projection of how manufactures will implement two of the proposed incentive programs (advanced technology vehicle multipliers, and hybrid and performance-based incentives for full-size pickup trucks). EPA's projection of fleet-wide emissions levels that do reflect these incentives is shown in Table I-5 below.

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

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As shown in Table I-4, projected fleet-wide CO

emission compliance targets for cars increase in stringency from 213 to 144 g/mi between MY 2017 and MY 2025. Similarly, projected fleet-wide CO

equivalent emission compliance targets for trucks increase in stringency from 295 to 203 g/mi. As shown, the overall fleet average CO

level targets are projected to increase in stringency from 243 g/mi in MY 2017 to 163 g/mi in MY 2025, which is equivalent to 54.5 mpg if all reductions were made with fuel economy improvements.

EPA anticipates that manufacturers would take advantage of proposed program credits and incentives, such as car/truck credit transfers, air conditioning credits, off-cycle credits, advanced technology vehicle multipliers, and hybrid and performance-based incentives for full size pick-up trucks. Two of these flexibility provisions—advanced technology vehicle multipliers and the full size pick-up hybrid/performance incentives—are expected to have an impact on the fleet-wide emissions levels that manufacturers will actually achieve. Therefore, Table I-5 shows EPA's projection of the achieved emission levels of the fleet for MY 2017 through 2025. The differences between the emissions levels shown in Tables I-4 and I-5 reflect the impact on stringency due to the advanced technology vehicle multipliers and the full size pick-up hybrid/performance incentives, but do not reflect car-truck trading, air conditioning credits, or off-cycle credits, because, while those credit provisions should help reduce manufacturers' costs of the program, EPA believes that they will result in real-world emission reductions that will not affect the achieved level of emission reductions. These estimates are more fully discussed in III.B

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A more detailed description of how the agencies arrived at the year by year progression of the stringency of the proposed standards can be found in Sections III and IV of this preamble.

Electric vehicles are assumed at 0 gram/mile in this analysis.

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

Both agencies also considered other alternative standards as part of their respective Regulatory Impact Analyses that span a reasonable range of alternative stringencies both more and less stringent than the standards being proposed. EPA's and NHTSA's analyses of these regulatory alternatives (and explanation of why we are proposing the standards proposed and not the regulatory alternatives) are contained in Sections III and IV of this preamble, respectively, as well as in EPA's DRIA and NHTSA's PRIA.

3. Form of the Standards

As noted, NHTSA and EPA are proposing to continue attribute-based standards for passenger cars and light trucks, as required by EISA and as allowed by the CAA, and continue to use vehicle footprint as the attribute. 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. NHTSA and EPA adopted an attribute-based approach based on vehicle footprint for MYs 2012-2016 light-duty vehicle standards.

The agencies continue to believe that footprint is the most appropriate attribute on which to base the proposed standards, as discussed later in this notice and in Chapter 2 of the Joint TSD.

NHTSA also uses the footprint attribute in its Reformed CAFE program for light trucks for model years 2008-2011 and passenger car CAFE standards for MY 2011.

Under the footprint-based standards, the curve defines a GHG or fuel economy performance target for each separate car or truck footprint. Using the curves, each manufacturer thus will have a GHG and CAFE average standard that is unique to each of its fleets, depending on the footprints and production volumes of the vehicle models produced by that manufacturer. A manufacturer will have separate footprint-based standards for cars and for trucks. The curves are mostly sloped, so that generally, larger vehicles (

i.e.,

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

i.e.,

higher CO

grams/mile targets and lower CAFE mpg targets) 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. Although a manufacturer's fleet average standards could be estimated throughout the model year based on projected production volume of its vehicle fleet, the standards to which the manufacturer must comply will be based on its final model year production figures. A manufacturer's calculation of its fleet average standards as well as its fleets' average performance at the end of the model year will thus be based on the production-weighted average target and performance of each model in its fleet.

As in the MYs 2012-2016 rule, a manufacturer may have some models that exceed their target, and some that are below their target. Compliance with a fleet average standard is determined by comparing the fleet average standard (based on the sales weighted average of the target levels for each model) with fleet average performance (based on the sales weighted average of the performance for each model).

While the concept is the same, the proposed curve shapes for MYs 2017-2025 are somewhat different from the MYs 2012-2016 footprint curves. The passenger car curves are similar in shape to the car curves for MYs 2012-2016. However, the agencies are proposing more significant changes to the light trucks curves for MYs 2017-2025 compared to the light truck curves for MYs 2012-2016. The agencies are proposing changes to the light-truck curve to increase the slope and to

extend the large-footprint cutpoint over time to larger footprints, which we believe represent an appropriate balance of both technical and policy issues, as discussed in Section II.C below and Chapter 2 of the draft Joint TSD.

NHTSA is proposing the attribute curves below for assigning a fuel economy target level to an individual car or truck's footprint value, for model years 2017 through 2025. 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 target curve equation is the same for each vehicle category and each year, the parameters of the curve equation differ for cars and trucks. Each parameter also changes on a model year basis, resulting in the yearly increases in stringency. Figure I-1 below illustrates the passenger car CAFE standard curves for model years 2017 through 2025 while Figure I-2 below illustrates the light truck CAFE standard curves for model years 2017 through 2025.

EPA is proposing the attribute curves shown in Figure I-3 and Figure I-4 below for assigning a CO

target level to an individual vehicle's footprint value, for model years 2017 through 2025. These CO

values would be production weighted to determine each manufacturer's fleet average standard for cars and trucks. As with the CAFE curves, 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 a model year basis, resulting in the yearly increases in stringency. Figure I-3 below illustrates the CO

car standard curves for model years 2017 through 2025 while Figure I-4 shows the CO

truck standard curves for model years 2017-2025.

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NHTSA and EPA are proposing to use the same vehicle category definitions for determining which vehicles are subject to the car curve standards versus the truck curve standards as were used for MYs 2012-2016 standards. As in the MYs 2012-2016 rulemaking, 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.

This approach of using CAFE definitions allows the CO

standards and the CAFE standards to continue to be harmonized across all vehicles for the National Program.

See 49 CFR 523 for NHTSA's definitions for passenger car and light truck under the CAFE program.

As just explained, generally speaking, a smaller footprint vehicle will tend to have higher fuel economy and lower CO

emissions relative to a larger footprint vehicle when both have the same level of fuel efficiency improvement technology. Since the

proposed standards apply to a manufacturer's overall fleet, not to an individual vehicle, if a manufacturer's fleet is dominated by small footprint vehicles, then that fleet will have a higher fuel economy requirement and a lower CO

requirement than a manufacturer whose fleet is dominated by large footprint vehicles. Compared to the non-attribute based CAFE standards in place prior to MY 2011, the proposed standards more evenly distribute the compliance burdens of the standards among different manufacturers, based on their respective product offerings. With this footprint-based standard approach, EPA and NHTSA continue to believe that the rules will not create significant incentives to produce vehicles of particular sizes, and thus there should be no significant effect on the relative availability of different vehicle sizes in the fleet due to the proposed standards, which will help to maintain consumer choice during the rulemaking timeframe. Consumers should still be able to purchase the size of vehicle that meets their needs. Table I-6 helps to illustrate the varying CO

emissions and fuel economy targets under the proposed standards that different vehicle sizes will have, although we emphasize again that these targets are not actual standards—the proposed standards are manufacturer-specific, rather than vehicle-specific.

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4. Program Flexibilities for Achieving Compliance

a. CO

/CAFE Credits Generated Based on Fleet Average Over-Compliance

The MYs 2012-2016 rules contain several provisions which provide flexibility to manufacturers in meeting standards, many of which the agencies are not proposing to change for MYs 2017 and later. For example, the agencies are proposing to continue allowing manufacturers to generate credits for over-compliance with the CO

and CAFE standards.

Under the agencies' footprint-based approach to the standards, a manufacturer's ultimate compliance obligations are determined at the end of each model year, when production of the model year is complete. Since the fleet average standards that apply to a manufacturer's car and truck fleets are based on the applicable footprint-based curves, a production volume-weighted fleet average requirement will be calculated for each averaging set (cars and trucks) based on the mix and volumes of the models manufactured for sale by the manufacturer. If a manufacturer's car and/or truck fleet achieves a fleet average CO

/CAFE level better than the car and/or truck standards, then the manufacturer generates 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). As in the MY 2011 CAFE program under EPCA/EISA, and also in MYs 2012-2016 for the light-duty vehicle GHG and CAFE 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.

This credit flexibility is required by EPCA/EISA, see 49 U.S.C. 32903, and allowed by the CAA.

Credit “carry-back” means that manufacturers are able to use credits to offset a deficit that had accrued in a prior model year, while credit “carry-forward” means that manufacturers can bank credits and use them toward compliance in future model years. EPCA, as amended by EISA, requires NHTSA to allow manufacturers to carry-back credits for up to three model years, and to carry-forward credits for up to five model years. EPA's MYs 2012-2016 light duty vehicle GHG program includes the same limitations and EPA is proposing to continue this limitation in the MY 2017-2025 program. To facilitate the transition to the increasingly more stringent standards, EPA is proposing under its CAA authority a one-time CO

carry-forward beyond 5 years, such that any credits generated from MY 2010 through 2016 will be able to be used any time through MY 2021. This provision would not apply to early credits generated in MY 2009. NHTSA's program will continue the 5-year carry-forward and 3-year carry-back, as required by statute.

Credit “transfer” means the ability of manufacturers to move credits from their passenger car fleet to their light truck fleet, or vice versa. EISA required NHTSA to establish by regulation a CAFE credits transferring program, now codified at 49 CFR part 536, to allow a manufacturer to transfer credits between its car and truck 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. However, EISA imposed a cap on the amount by which a manufacturer could raise its CAFE through transferred credits: 1 mpg for MYs 2011-2013; 1.5 mpg for MYs 2014-2017; and 2 mpg for MYs 2018 and beyond.

Under section 202(a) of the CAA, in contrast, there is no statutory limitation on car-truck credit transfers, and EPA's GHG program 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 setting appropriate GHG standards that manufacturers' can comply with in the lead time provided, and will allow the required GHG emissions reductions to be achieved in the most cost effective way. Therefore, EPA did not constrain the magnitude of allowable car-truck credit transfers,

as doing so would reduce the flexibility for lead time, and would increase costs with no corresponding environmental benefit. EISA also prohibits the use of transferred credits to meet the minimum domestic passenger car fleet CAFE standard.

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

49 U.S.C. 32903(g)(3).

EPA's proposed program will continue to adjust car and truck credits by vehicle miles traveled (VMT), as in the MY 2012-2016 program.

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

Credit “trading” means the ability of manufacturers to sell credits to, or purchase credits from, one another. EISA allowed NHTSA to establish by regulation a CAFE credit trading program, also now codified at 49 CFR Part 536, to allow credits to be traded between vehicle manufacturers. EPA also allows credit trading in the light-duty vehicle GHG program. These sorts of exchanges between averaging sets are typically allowed under EPA's current mobile source emission credit programs (as well as EPA's and NHTSA's recently promulgated GHG and fuel efficiency standards for heavy-duty vehicles and engines). EISA also prohibits manufacturers from using traded credits to meet the minimum domestic passenger car CAFE standard.

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

b. Air Conditioning Improvement Credits/Fuel Economy Value Increases

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). In addition, operation of the A/C system places an additional load on the engine which increases fuel consumption and thus results in additional CO

tailpipe emissions (indirect A/C related emissions). In the MYs 2012-2016 program, EPA allows manufacturers to generate credits by reducing either or both types of GHG emissions related to A/C systems. The expected generation of A/C credits is accounted for in setting the level of the overall CO

standard. For the current proposal, as with the MYs 2012-2016 program, manufacturers will be able to generate CO

-equivalent credits to use in complying with the CO

standards for improvements in air conditioning (A/C) systems, both for efficiency improvements (reduces tailpipe CO

and improves fuel consumption) and for leakage reduction or alternative, lower GWP (global warming potential) refrigerant use (reduces hydrofluorocarbon (HFC) emissions). EPA is proposing that the maximum A/C credit available for cars is 18.8 grams/mile CO

and for trucks is 24.4 grams/mile CO

. The proposed test methods used to calculate these direct and indirect A/C credits are very similar to those of the MYs 2012-2016 program, though EPA is seeking comment on a revised idle test as well as a new test procedure.

For the first time in the current proposal, the agencies are proposing provisions that would account for improvements in air conditioner efficiency in the CAFE program. Improving A/C efficiency leads to real-world fuel economy benefits, because as explained above, A/C operation

represents an additional load on the engine, so more efficient A/C operation imposes less of a load and allows the vehicle to go farther on a gallon of gas. Under EPCA, EPA has authority to adopt procedures to measure fuel economy and calculate CAFE. Under this authority EPA is proposing that manufacturers could generate fuel consumption improvement values for purposes of CAFE compliance based on air conditioning system efficiency improvements for cars and trucks. This increase in fuel economy would be allowed up to a maximum based on 0.000563 gallon/mile for cars and 0.000810 gallon/mile for trucks. This is equivalent to the A/C efficiency CO

credit allowed by EPA under the GHG program. The same methods would be used in the CAFE program to calculate the values for air conditioning efficiency improvements for cars and trucks as are used in EPA's GHG program. NHTSA is including in its proposed passenger car and light truck CAFE standards an increase in stringency in each model year from 2017-2025 by the amount industry is expected to improve air conditioning system efficiency in those years, in a manner consistent with EPA's GHG standards. EPA is not proposing to allow generation of fuel consumption improvement values for CAFE purposes, nor is NHTSA proposing to increase stringency of the CAFE standard, for the use of A/C systems that reduce leakage or employ alternative, lower GWP refrigerant, because those changes do not improve fuel economy.

c. Off-cycle Credits/Fuel Economy Value Increases

For MYs 2012-2016, EPA provided an option for manufacturers to generate credits for employing new and innovative technologies that achieve CO

reductions that are not reflected on current test procedures. EPA noted in the MYs 2012-2016 rulemaking that examples of such “off-cycle” technologies might include solar panels on hybrids, adaptive cruise control, and active aerodynamics, among other technologies. See generally 75 FR at 25438-39. EPA's current program allows off-cycle credits to be generated through MY 2016.

EPA is proposing that manufacturers may continue to use off-cycle credits for MY 2017 and later for the GHG program. As with A/C efficiency, improving efficiency through the use of off-cycle technologies leads to real-world fuel economy benefits and allows the vehicle to go farther on a gallon of gas. Thus, under its EPCA authority EPA is proposing to allow manufacturers to generate fuel consumption improvement values for purposes of CAFE compliance based on the use of off-cycle technologies. Increases in fuel economy under the CAFE program based on off-cycle technology will be equivalent to the off-cycle credit allowed by EPA under the GHG program, and these amounts will be determined using the same procedures and test methods as are used in EPA's GHG program. For the reasons discussed in sections III and IV of this proposal, the ability to generate off-cycle credits and increases in fuel economy for use in compliance will not affect or change the level of the GHG or CAFE standards proposed by each agency.

Many automakers indicated that they had a strong interest in pursuing off-cycle technologies, and encouraged the agencies to refine and simplify the evaluation process to provide more certainty as to the types of technologies the agencies would approve for credit generation. For 2017 and later, EPA is proposing to expand and streamline the MYs 2012-2016 off-cycle credit provisions, including an approach by which the agencies would provide specified amounts of credit and fuel consumption improvement values for a subset of off-cycle technologies whose benefits are readily quantifiable. EPA is proposing a list of technologies and credit values, where sufficient data is available, that manufacturers could use without going through an advance approval process that would otherwise be required to generate credits. EPA believes that our assessment of off-cycle technologies and associated credit values on this proposed list is conservative, and automakers may apply for additional off-cycle credits beyond the minimum credit value if they have sufficient supporting data. Further, manufacturers may also apply for off-cycle technologies beyond those listed, again, if they have sufficient data.

In addition, EPA is providing additional detail on the process and timing for the credit/fuel consumption improvement values application and approval process. EPA is proposing a timeline for the approval process, including a 60-day EPA decision process from the time a manufacturer submits a complete application. EPA is also proposing a detailed, common, step-by-step process, including a specification of the data that manufacturers must submit. For off-cycle technologies that are both not covered by the pre-approved off-cycle credit/fuel consumption improvement values list and that are not quantifiable based on the 5-cycle test cycle option provided in the 2012-2016 rulemaking, EPA is proposing to retain the public comment process from the MYs 2012-2016 rule.

d. Incentives for Electric Vehicles, Plug-in Hybrid Electric Vehicles, and Fuel Cell Vehicles

To facilitate market penetration of the most advanced vehicle technologies as rapidly as possible, EPA is proposing an incentive multiplier for compliance purposes for all electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell vehicles (FCVs) sold in MYs 2017 through 2021. This multiplier approach means that each EV/PHEV/FCV would count as more than one vehicle in the manufacturer's compliance calculation. EPA is proposing that EVs and FCVs start with a multiplier value of 2.0 in MY 2017, phasing down to a value of 1.5 in MY 2021. PHEVs would start at a multiplier value of 1.6 in MY 2017 and phase down to a value of 1.3 in MY 2021.

The multiplier would be 1.0 for MYs 2022-2025.

The multipliers for EV/FCV would be: 2017-2019—2.0, 2020—1.75, 2021—1.5; for PHEV: 2017-2019—1.6, 2020—1.45, 2021—1.3.

NHTSA currently interprets EPCA and EISA as precluding the agency from offering additional incentives for EVs, FCVs and PHEVs, except as specified by statute,

and thus is not proposing incentive multipliers comparable to the EPA incentive multipliers described above.

Because 49 U.S.C. 32904(a)(2)(B) expressly requires EPA to calculate the fuel economy of electric vehicles using the Petroleum Equivalency Factor developed by DOE, which contains an incentive for electric operation already, and because 49 U.S.C. 32905(a) expressly requires EPA to calculate the fuel economy of FCVs using a specified incentive, NHTSA believes that Congress' having provided clear incentives for these technologies in the CAFE program suggests that additional incentives beyond those would not be consistent with Congress' intent. Similarly, because the fuel economy of PHEVs' electric operation must also be calculated using DOE's PEF, the incentive for electric operation appears to already be inherent in the statutory structure.

For EVs, PHEVs and FCVs, EPA is proposing to set a value of 0 g/mile for the tailpipe compliance value for EVs, PHEVs (electricity usage) and FCVs for MY 2017-2021, with no limit on the quantity of vehicles eligible for 0 g/mi tailpipe emissions accounting. For MY 2022-2025, EPA is proposing that 0 g/mi only be allowed up to a per-company cumulative sales cap, tiered as follows: 1) 600,000 vehicles for companies that sell 300,000 EV/PHEV/FCVs in MYs 2019-2021; 2) 200,000 vehicles for all other manufacturers. EPA believes the industry-wide impact of such a tiered cap will be approximately 2 million vehicles. EPA

proposes to phase-in the change in compliance value, from 0 grams per mile to net upstream accounting, for any manufacturer that exceeds its cumulative production cap for EV/PHEV/FCVs. EPA proposes that, starting with MY 2022, the compliance value for EVs, FCVs, and the electric portion of PHEVs in excess of individual automaker cumulative production caps would be based on net upstream accounting.

For EVs and other dedicated alternative fuel vehicles, EPA is proposing to calculate fuel economy for the CAFE program using the same methodology as in the MYs 2012-2016 rulemaking, which aligns with EPCA/EISA statutory requirements. For liquid alternative fuels, this methodology generally counts 15 percent of the volume of fuel used in determine the mpg-equivalent fuel economy. For gaseous alternative fuels, the methodology generally determines a gasoline equivalent mpg based on the energy content of the gaseous fuel consumed, and then adjusts the fuel consumption by effectively only counting 15 percent of the actual energy consumed. For electricity, the methodology generally determines a gasoline equivalent mpg by measuring the electrical energy consumed, and then using a petroleum equivalency factor (PEF) to convert to an mpg-equivalent value. The PEF for electricity includes an adjustment that effectively only counts 15 percent of the actual energy consumed. Counting 15 percent of the volume or energy provides an incentive for alternative fuels in the CAFE program.

The methodology that EPA is proposing for dual fueled vehicles under the GHG program and to calculate fuel economy for the CAFE program is discussed below in subsection I.B.7.a.

e. Incentives for “Game Changing” Technologies Performance for Full-Size Pickup Truck Including Hybridization

The agencies recognize that the standards under consideration for MYs 2017-2025 will be challenging for large trucks, including full size pickup trucks. In order to incentivize the penetration into the marketplace of “game changing” technologies for these pickups, including their hybridization, EPA is proposing a CO

credit in the GHG program and an equivalent fuel consumption improvement value in the CAFE program for manufacturers that employ significant quantities of hybridization on full size pickup trucks, by including a per-vehicle CO

credit and fuel consumption improvement value available for mild and strong hybrid electric vehicles (HEVs). EPA would provide the incentive for the GHG program under EPA's CAA authority and the incentive for the CAFE program under EPA's EPCA authority. EPA's GHG and NHTSA's CAFE proposed standards are set at levels that take into account this flexibility as an incentive for the introduction of advanced technology. This provides the opportunity to begin to transform the most challenging category of vehicles in terms of the penetration of advanced technologies, which, if successful at incentivizing these “game changing technologies,” should allow additional opportunities to successfully achieve the higher levels of truck stringencies in MYs 2022-2025.

EPA is proposing that access to this credit and fuel consumption improvement value be conditioned on a minimum penetration of the technology in a manufacturer's full size pickup truck fleet, and is proposing criteria for a full size pickup truck (

e.g.,

minimum bed size and minimum towing or payload capability). EPA is proposing that mild HEV pickup trucks would be eligible for a per vehicle credit of 10 g/mi

during MYs 2017-2021 if the technology is used on a minimum percentage of a company's full size pickups, beginning with at least 30% of a company's full size pickup production in 2017 and ramping up to at least 80% in MY 2021. Strong HEV pickup trucks would be eligible for a 20 g/mi per

vehicle credit during MYs 2017-2025 if the technology is used on at least 10% of the company's full size pickups. These volume thresholds are being proposed in order to encourage rapid penetration of these technologies in this vehicle segment. EPA and NHTSA are proposing specific definitions of mild and strong HEV pickup trucks.

0.001125 gallon/mile.

0.00225 gallon/mile.

Because there are other technologies besides mild and strong hybrids which can significantly reduce GHG emissions and fuel consumption in pickup trucks, EPA is also proposing a performance-based incentive CO

emissions credit and equivalent fuel consumption improvement value for full size pickup trucks that achieve a significant CO

reduction below/fuel economy improvement above the applicable target. This would be available for vehicles achieving significant CO

reductions/fuel economy improvements through the use of technologies other than hybrid drive systems. EPA is proposing that eligible pickup trucks achieving 15 percent below their applicable CO

target would receive a 10 g/mi credit, and those achieving 20 percent below their target would receive a 20 g/mi credit. The 10 g/mi performance-based credit would be available for MYs 2017 to 2021 and a vehicle meeting the requirements would receive the credit until MY 2021 unless its CO

level increases. The 20 g/mi performance-based credit would be available for a maximum of 5 years within the model years of 2017 to 2025, provided the CO

level does not increase for those vehicles earning the credit. The credits would begin in the model year of the eligible vehicle's introduction, and could not extend past MY 2021 for the 10 g/mi credit and MY 2025 for the 20 g/mi credit.

To avoid double-counting, the same vehicle would not receive credit under both the HEV and the performance based approaches.

5. Mid-Term Evaluation

Given the long time frame at issue in setting standards for MYs 2022-2025, and given NHTSA's obligation to conduct a separate rulemaking in order to establish final standards for vehicles for those model years, EPA and NHTSA are proposing a comprehensive mid-term evaluation and agency decision-making process. As part of this undertaking, both NHTSA and EPA will develop and compile up-to-date information for the evaluation, through a collaborative, robust and transparent process, including public notice and comment. The evaluation will be based on (1) a holistic assessment of all of the factors considered by the agencies in setting standards, including those set forth in the rule and other relevant factors, and (2) the expected impact of those factors on the manufacturers' ability to comply, without placing decisive weight on any particular factor or projection. The comprehensive evaluation process will lead to final agency action by both agencies.

Consistent with the agencies' commitment to maintaining a single national framework for regulation of vehicle emissions and fuel economy, the agencies fully expect to conduct the mid-term evaluation in close coordination with the California Air Resources Board (CARB). Moreover, the agencies fully expect that any adjustments to the GHG standards will be made with the participation of CARB and in a manner that ensures continued harmonization of state and federal vehicle standards.

Further discussion of the mid-term evaluation can be found in section III and IV of the proposal.

6. Coordinated Compliance

The MYs 2012-2016 final rules established detailed and comprehensive regulatory provisions for compliance and enforcement under the GHG and CAFE programs. These provisions remain in place for model years beyond MY 2016 without additional action by the agencies and EPA and NHTSA are not proposing any significant modifications to them. In the MYs 2012-2016 final rule, NHTSA and EPA established 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 earlier model year CAFE standards. The certification, testing, reporting, and associated compliance activities established for the GHG program closely track those in previously existing programs 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 also applies the CAA authorities applicable to its separate in-use requirements in this program.

The compliance approach allows manufacturers to satisfy the GHG program requirements in the same general way they comply with previously existing applicable CAA and CAFE requirements. Manufacturers will 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 includes 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. The program also addresses EPA enforcement in cases of noncompliance.

7. Additional Program Elements

a. Treatment of Compressed Natural Gas (CNG), Plug-in Hybrid Electric Vehicles (PHEVs), and Flexible Fuel Vehicles (FFVs)

EPA is proposing that CO

compliance values for plug-in hybrid electric vehicles (PHEVs) and bi-fuel compressed natural gas (CNG) vehicles will be based on estimated use of the alternative fuels, recognizing that, once a consumer has paid several thousand dollars to be able to use a fuel that is considerably cheaper than gasoline, it is very likely that the consumer will seek to use the cheaper fuel as much as possible. Accordingly, for CO

emissions compliance, EPA is proposing to use the Society of Automotive Engineers “utility factor” methodology (based on vehicle range on the alternative fuel and typical daily travel mileage) to determine the assumed percentage of operation on gasoline and percentage of operation on the alternative fuel for both PHEVs and bi-fuel CNG vehicles, along with the CO

emissions test values on the alternative fuel and gasoline.

EPA is proposing to account for E85 use by flexible fueled vehicles (FFVs) as in the existing MY 2016 and later program, based on actual usage of E85 which represents a real-world reduction attributed to alternative fuels. Unlike PHEV and bi-fuel CNG vehicles, there is not a significant cost differential between an FFV and a conventional gasoline vehicle and historically consumers have only fueled these vehicles with E85 a very small percentage of the time.

In the CAFE program for MYs 2017-2019, the fuel economy of dual fuel vehicles will be determined in the same manner as specified in the MY 2012-2016 rule, and as defined by EISA. Beginning in MY 2020, EISA does not specify how to measure the fuel economy of dual fuel vehicles, and EPA is proposing under its EPCA authority to use the “utility factor” methodology for PHEV and CNG vehicles described above to determine how to proportion the fuel economy when operating on gasoline or diesel fuel and the fuel economy when operating on the alternative fuel. For FFVs, EPA is proposing to use the same methodology as it uses for the GHG program to determine how to proportion the fuel economy, which would be based on actual usage of E85. EPA is proposing to continue to use Petroleum Equivalency Factors and the 0.15 divisor used in the MY 2012-2016 rule for the alternative fuels, however with no cap on the amount of fuel economy increase allowed. This issue is discussed further in Section III.B.10.

b. Exclusion of Emergency and Police Vehicles

Under EPCA, manufacturers are allowed to exclude emergency vehicles from their CAFE fleet

and all manufacturers have historically done so. In the MYs 2012-2016 program, EPA's GHG program applies to these vehicles. However, after further consideration of this issue, EPA is proposing the same type of exclusion provision for these vehicles for MY 2012 and later because of the unique features of vehicles designed specifically for law enforcement and emergency purposes, which have the effect of raising their GHG emissions and calling into question the ability of manufacturers to sufficiently reduce the emissions from these vehicles without compromising necessary vehicle features or dropping vehicles from their fleets.

49 U.S.C. 32902(e).

c. Small Businesses and Small Volume Manufacturers

EPA is proposing provisions to address two categories of smaller manufacturers. The first category is small businesses as defined by the Small Business Administration (SBA). For vehicle manufacturers, SBA's definition of small business is any firm with less than 1,000 employees. As with the MYs 2012-2016 program, EPA is proposing to continue to exempt small businesses from the GHG standards, for any company that meets the SBA's definition of a small business. EPA believes this exemption is appropriate given the unique challenges small businesses would face in meeting the GHG standards, and since these businesses make up less than 0.1% of total U.S. vehicle sales, and there is no significant impact on emission reductions.

EPA's proposal also addresses small volume manufacturers, with U.S. annual sales of less than 5,000 vehicles. Under the MYs 2012-2016 program, these small volume manufacturers are eligible for an exemption from the CO

standards. EPA is proposing to bring small volume manufacturers into the CO

program for the first time starting in MY 2017, and allow them to petition EPA for alternative standards.

EPCA provides NHTSA with the authority to exempt from the generally applicable CAFE standards manufacturers that produce fewer than 10,000 passenger cars worldwide in the model year each of the two years prior to the year in which they seek an exemption.

If NHTSA exempts a manufacturer, it must establish an alternate standard for that manufacturer for that model year, at the level that the agency decides is maximum feasible for that manufacturer. The exemption and alternative standard apply only if the exempted manufacturer also produces fewer than 10,000 passenger cars

worldwide in the year for which the exemption was granted.

49 U.S.C. 32902(d). Implementing regulations may be found in 49 CFR part 525.

Further, the Temporary Lead-time Allowance Alternative Standards (TLAAS) provisions included in EPA's MYs 2012-2016 program for manufacturers with MY 2009 U.S. sales of less than 400,000 vehicles ends after MY 2015 for most eligible manufacturers.

EPA is not proposing to extend or otherwise replace the TLAAS provisions for the proposed MYs 2017-2025 program. However, EPA is inviting comment on whether this or some other form of flexibility is warranted for lower volume, limited line manufacturers, as further discussed in Section III.B.8. With the exception of the small businesses and small volume manufacturers discussed above, the proposed MYs 2017-2025 standards would apply to all manufacturers.

TLAAS ends after MY 2016 for manufacturers with MY 2009 U.S. sales of less than 50,000 vehicles.

C. Summary of Costs and Benefits for the Proposed National Program

This section summarizes the projected costs and benefits of the proposed CAFE and GHG emissions standards. These projections helped inform the agencies' choices among the alternatives considered and provide further confirmation that the proposed standards are appropriate under their respective statutory authorities. 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. The agencies recognize that there are uncertainties regarding the benefit and cost values presented in this proposal. Some benefits and costs are not quantified. The value of other benefits and costs could be too low or too high.

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 proposed GHG standard is more stringent in part due to its assumptions about manufacturers' use of air conditioning leakage credits, which result from reductions in air conditioning-related emissions of HFCs. NHTSA is proposing standards at levels of stringency that assume improvements in the efficiency of air conditioning systems, but that do not account for reductions in HFCs, which are not related to fuel economy or energy conservation. In addition, the CAFE and GHG standards offer somewhat different program flexibilities and provisions, and the agencies' analyses differ in their accounting for these flexibilities (examples include the treatment of EVs, dual-fueled vehicles, and civil penalties), 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. Nevertheless, it is important to note that NHTSA and EPA have harmonized the programs as much as possible, and this proposal to continue the National Program would result in significant cost and other advantages for the automobile industry by allowing them to manufacture one fleet of vehicles across the U.S., rather than comply with potentially multiple state standards that may occur in the absence of the National Program.

See

49 U.S.C. 32902(h).

In summary, the projected costs and benefits presented by NHTSA and EPA are not directly comparable, because the levels being proposed by EPA include air conditioning-related improvements in HFC reductions, and because of the projection by EPA of complete compliance with the proposed GHG standards, whereas NHTSA projects some manufacturers will pay civil penalties as part of their compliance strategy, as allowed by EPCA. It should also be expected that overall EPA's estimates of GHG reductions and fuel savings achieved by the proposed GHG standards will be slightly higher than those projected by NHTSA only for the CAFE standards because of the same reasons described above. For the same reasons, EPA's estimates of manufacturers' costs for complying with the proposed passenger car and light truck GHG standards are slightly higher than NHTSA's estimates for complying with the proposed CAFE standards.

1. Summary of Costs and Benefits for the Proposed NHTSA CAFE Standards

In reading the following section, we note that tables are identified as reflecting “estimated required” values and “estimated achieved” values. When establishing standards, EPCA allows NHTSA to only consider the fuel economy of dual-fuel vehicles (for example, FFVs and PHEVs) when operating on gasoline, and prohibits NHTSA from considering the use of dedicated alternative fuel vehicle credits (including for example EVs), credit carry-forward and carry-back, and credit transfer and trading. NHTSA's primary analysis of costs, fuel savings, and related benefits from imposing higher CAFE standards does not include them. However, EPCA does not prohibit NHTSA from considering the fact that manufacturers may pay civil penalties rather than comply with CAFE standards, and NHTSA's primary analysis accounts for some manufacturers' tendency to do so. The primary analysis is generally identified in tables throughout this document by the term “

estimated required

CAFE levels.”

To illustrate the effects of the flexibilities and technologies that NHTSA is prohibited from including in its primary analysis, NHTSA performed a supplemental analysis of these effects on benefits and costs of the proposed CAFE standards that helps to demonstrate the real-world impacts. As an example of one of the effects, including the use of FFV credits reduces estimated per-vehicle compliance costs of the program, but 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 proposed standards, but also under the baseline MY 2016 CAFE standards. As another example, including the operation of PHEV vehicles on both electricity and gasoline, and the expected use of EVs for compliance may raise the fuel economy levels that manufacturers achieve under the proposed standards. The supplemental analysis is generally identified in tables throughout this document by the term “

estimated achieved

CAFE levels.”

Thus, NHTSA's primary analysis shows the estimates the agency considered for purposes of establishing new CAFE standards, and its supplemental analysis including manufacturer use of flexibilities and advanced technologies currently reflects the agency's best estimate of the potential real-world effects of the proposed CAFE standards.

Without accounting for the compliance flexibilities and advanced technologies that NHTSA is prohibited from considering when determining the maximum feasible level of new CAFE standards, since manufacturers' decisions to use those flexibilities and technologies are voluntary, NHTSA estimates that the required fuel economy increases would lead to fuel savings totaling 173 billion gallons throughout the lives of vehicles sold in MYs 2017-2025. At a 3 percent discount rate, the present value of the economic benefits resulting from those fuel

savings is $451 billion; at a 7 percent private discount rate, the present value of the economic benefits resulting from those fuel savings is $358 billion.

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

emissions totaling 1.8 billion metric tons during the lives of vehicles sold in MYs 2017-2025. The present value of the economic benefits from avoiding those emissions is $49 billion, based on a global social cost of carbon value of $22 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

reductions. The two agencies standards together comprise the National Program, and this discussion of the 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. All costs are in 2009 dollars.

NHTSA also estimated the benefits associated with three more estimates of a one ton GHG reduction in 2009 ($5, $36, and $67), which will likewise grow thereafter.

See

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

The “Earlier” column shows benefits that NHTSA forecasts manufacturers will implement in model years prior to 2017 that are in response to the proposed MY 2017-2025 standards. The CAFE model forecasts that manufactures will implement some technologies, and achieve benefits during vehicle redesigns that occur prior to MY 2017 in order to comply with MY 2017 and later standards in a cost effective manner.

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Considering manufacturers' ability to employ compliance flexibilities and advanced technologies for meeting the standards, NHTSA estimates the following for fuel savings and avoided CO

emissions, assuming FFV credits

would be used toward both the baseline and final standards:

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NHTSA estimates that the fuel economy increases resulting from the proposed standards would produce other benefits both to drivers (

e.g.,

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

e.g.,

reductions in the costs of petroleum imports

beyond

the direct savings from reduced oil purchases),

as well as some disbenefits (

e.g.,

increased 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 proposed standards will produce significant net benefits to society. Using a 3 percent discount rate, NHTSA estimates that the present value of these benefits would total more than $515 billion over the lives of the vehicles sold during MYs 2017-2025; using a 7 percent discount rate, more than $419 billion. More discussion regarding monetized benefits can be found in Section IV of this notice and in NHTSA's PRIA. Note that the benefit calculation in the following tables includes the benefits of reducing CO

emissions,

but not the benefits of reducing other GHG emissions.

We note, of course, that reducing the amount of fuel purchased also reduces tax revenue for the Federal and state/local governments. NHTSA discusses this issue in more detail in Chapter VIII of the PRIA.

benefits for purposes of these tables are calculated using the $22/ton SCC values. Note that the net present value of reduced GHG emissions is calculated differently from 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.

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

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

presents a detailed analysis of specific benefits of the rule.

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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 the incremental costs for achieving the proposed CAFE standards—that is, outlays by vehicle manufacturers over and above those required to comply with the MY 2016 CAFE standards—will total about $157 billion (

i.e.,

during MYs 2017-2025).

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

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NHTSA 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 less extent, the civil penalties that some manufacturers are expected to pay for non-compliance), the agency estimates that the standards would lead to increase in average new vehicle prices ranging from $161 per vehicle in MY 2017 to $1876 per vehicle in MY 2025:

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

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NHTSA estimates, therefore, that the total benefits of these proposed CAFE standards will be more than 2.5 times the magnitude of the corresponding costs. As a consequence, the proposed CAFE standards would produce net benefits of $358 billion at a 3 percent discount rate (with compliance flexibilities, $355 billion), or $262 billion at a 7 percent discount rate (with compliance flexibilities, $264 billion), over the useful lives of the vehicles sold during MYs 2017-2025.

2. Summary of Costs and Benefits for the Proposed EPA GHG Standards

EPA has analyzed in detail the costs and benefits of the proposed GHG standards. Table I-17 shows EPA's estimated lifetime discounted cost, fuel savings, and benefits for all vehicles projected to be sold in model years 2017-2025. The benefits include impacts such as climate-related economic benefits from reducing emissions of CO

(but not other GHGs), reductions in energy security externalities caused by U.S. petroleum consumption and imports, the value of certain health benefits, the value of additional driving attributed to the rebound effect, the value of reduced refueling time needed to fill up a more

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

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Table I-18 shows EPA's estimated lifetime fuel savings and CO

equivalent emission reductions for all vehicles sold in the model years 2017-2025. The values in Table I-18 are projected lifetime totals for each model year and are not discounted. As documented in EPA's draft 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 proposed GHG standards does not change the fact that both the proposed CAFE and GHG standards, jointly, are the source of the benefits and costs of the National Program. In general though, in addition to the added GHG benefit of HFC reductions from the EPA program, the fuel savings benefit are also somewhat higher than that from CAFE, primarily because of the possibility of paying civil penalties in lieu of applying technology in NHTSA's program, which is required by EPCA.

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Table I-19 shows EPA's estimated lifetime discounted benefits for all vehicles sold in model years 2017-2025. Although EPA estimated the benefits

associated with four different values of a one ton GHG reduction ($5, $22 $36, $67 in CY 2010 and in 2009 dollars), for the purposes of this overview presentation of estimated benefits EPA is showing the benefits associated with one of these marginal values, $22 per ton of CO

, in 2009 dollars and 2010 emissions. Table I-19 presents benefits based on the $22 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 GHG reductions, PM benefits, energy security and other externalities such as reduced refueling time 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-19 do not include costs associated with new technology required to meet the GHG standard and they do not include the fuel savings expected from that technology.

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Table I-20 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 fuel savings and CO

emission reductions are projected lifetime values for all vehicles sold in the model years 2017-2025. The estimated fuel savings in billions of gallons and the GHG reductions in million metric tons of CO

shown in Table I-20 are totals for the nine model years throughout their projected lifetime and are not discounted. The monetized values shown in Table I-20 are the summed values of the discounted monetized fuel savings and monetized CO

reductions for the model years 2017-2025 vehicles throughout their lifetimes. The monetized values in Table I-20 reflect

both a 3 percent and a 7 percent discount rate as noted.

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

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

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D. Background and Comparison of NHTSA and EPA Statutory Authority

This section provides the agencies' respective statutory authorities under which CAFE and GHG standards are established.

1. NHTSA Statutory Authority

NHTSA establishes CAFE standards for passenger cars and light trucks for each model year under EPCA, as amended by EISA. EPCA mandates a

motor vehicle fuel economy regulatory program to meet the various facets of the need to conserve energy, including the environmental and foreign policy implications of petroleum use by motor vehicles. EPCA allocates the responsibility for implementing the program between NHTSA and EPA as follows: NHTSA sets CAFE standards for passenger cars and light trucks; EPA establishes the procedures for testing, tests vehicles, collects and analyzes manufacturers' data, and calculates the individual and average fuel economy of each manufacturer's passenger cars and light trucks; and NHTSA enforces the standards based on EPA's calculations.

a. Standard Setting

We have summarized below the most important aspects of standard setting under EPCA, as amended by EISA. For each future model year, EPCA requires that NHTSA establish separate passenger car and light truck standards at “the maximum feasible average fuel economy level that it decides the manufacturers can achieve in that model year,” based on the agency's consideration of four statutory factors: technological feasibility, economic practicability, the effect of other standards of the Government on fuel economy, and the need of the nation to conserve energy. EPCA does not define these terms or specify what weight to give each concern in balancing them; thus, NHTSA defines them and determines the appropriate weighting that leads to the maximum feasible standards given the circumstances in each CAFE standard rulemaking.

For MYs 2011-2020, EPCA further requires that separate standards for passenger cars and for light trucks be set at levels high enough to ensure that the CAFE of the industry-wide combined fleet of new passenger cars and light trucks reaches at least 35 mpg not later than MY 2020. For model years after 2020, standards need simply be set at the maximum feasible level.

See Center for Biological Diversity

NHTSA,

538 F.3d. 1172, 1195 (9th Cir. 2008) (“The EPCA clearly requires the agency to consider these four factors, but it gives NHTSA discretion to decide how to balance the statutory factors—as long as NHTSA's balancing does not undermine the fundamental purpose of the EPCA: energy conservation.”).

Because EPCA states that standards must be set for “* * * automobiles manufactured by manufacturers,” and because Congress provided specific direction on how small-volume manufacturers could obtain exemptions from the passenger car standards, NHTSA has long interpreted its authority as pertaining to setting standards for the industry as a whole. Prior to this NPRM, some manufacturers raised with NHTSA the possibility of NHTSA and EPA setting alternate standards for part of the industry that met certain (relatively low) sales volume criteria—specifically, that separate standards be set so that “intermediate-size,” limited-line manufacturers do not have to meet the same levels of stringency that larger manufacturers have to meet until several years later. NHTSA seeks comment on whether or how EPCA, as amended by EISA, could be interpreted to allow such alternate standards for certain parts of the industry.

i. Factors That Must Be Considered in Deciding the Appropriate Stringency of CAFE Standards

(1) Technological Feasibility

“Technological feasibility” refers to w

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