[Federal Register Volume 77, Number 199 (Monday, October 15, 2012)]
[Rules and Regulations]
[Pages 62623-63200]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-21972]



[[Page 62623]]

Vol. 77

Monday,

No. 199

October 15, 2012

Part II





Environmental Protection Agency

40 CFR Parts 85, 86, and 600





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Department of Transportation

National Highway Traffic Safety Administration

49 CFR Parts 523, 531, 533, et al.





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

Federal Register / Vol. 77, No. 199 / Monday, October 15, 2012 / 
Rules and Regulations

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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-9706-5; 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

AGENCIES: Environmental Protection Agency (EPA) and National Highway 
Traffic Safety Administration (NHTSA), DOT.

ACTION: Final rule.

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SUMMARY: EPA and NHTSA, on behalf of the Department of Transportation, 
are issuing final rules to further reduce greenhouse gas emissions and 
improve fuel economy for light-duty vehicles for model years 2017 and 
beyond. 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 improve fuel 
economy and reduce greenhouse gas emissions of light-duty vehicles for 
model years 2017-2025, building on the success of the first phase of 
the National Program for these vehicles for model years 2012-2016. This 
final rule, 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 finalizing Corporate Average Fuel Economy 
standards for model years 2017-2021 and issuing augural standards for 
model years 2022-2025 under the Energy Policy and Conservation Act, as 
amended by the Energy Independence and Security Act. NHTSA will set 
final standards for model years 2022-2025 in a future rulemaking. EPA 
is finalizing greenhouse gas emissions standards for model years 2017-
2025 under the Clean Air Act. These standards apply to passenger cars, 
light-duty trucks, and medium-duty passenger vehicles, and represent 
the continuation of a harmonized and consistent National Program. Under 
the National Program automobile manufacturers will 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 that are available today. EPA is 
also finalizing minor changes to the regulations applicable to model 
years 2012-2016, with respect to air conditioner performance, nitrous 
oxides measurement, off-cycle technology credits, and police and 
emergency vehicles.

DATES: This final rule is effective on December 14, 2012, sixty days 
after date of publication in the Federal Register. The incorporation by 
reference of certain publications listed in this regulation is approved 
by the Director of the Federal Register as of December 14, 2012.

ADDRESSES: EPA and NHTSA have established dockets for this action under 
Docket ID No. EPA-HQ-OAR-2010-0799 and NHTSA 2010-0131, respectively. 
All documents in the docket 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 can be 
found either electronically in www.regulations.gov by searching for the 
dockets using the Docket ID numbers above, 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 (DOT), West Building, Ground Floor, Rm. 
W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590. The DOT 
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,\1\ and passenger automobiles 
(passenger cars) and non-passenger automobiles (light trucks) as 
defined under NHTSA's CAFE regulations.\2\ Regulated categories and 
entities include:
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    \1\ ``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.
    \2\ ``Passenger car'' and ``light truck'' are defined in 49 CFR 
Part 523.

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                                                  NAICS Codes
                   Category                           \A\          Examples of potentially regulated entities
----------------------------------------------------------------------------------------------------------------
Industry......................................          336111  Motor Vehicle Manufacturers.
                                                        336112
Industry......................................          811111  Commercial Importers of Vehicles and Vehicle
                                                                 Components.
                                                        811112
                                                        811198
                                                        423110
Industry......................................          335312  Alternative Fuel Vehicle Converters.
                                                        336312

[[Page 62625]]

 
                                                        336399
                                                        811198
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\A\ North American Industry Classification System (NAICS).

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

Table of Contents

I. Overview of Joint EPA/NHTSA Final 2017-2025 National Program
    A. Executive Summary
    1. Purpose of the Regulatory Action
    2. Summary of the Major Provisions of the Final Rule
    3. Costs and Benefits of National Program
    B. Introduction
    1. Continuation of the National Program
    2. Additional Background on the National Program and Stakeholder 
Engagement Prior to the NPRM
    3. Public Participation and Stakeholder Engagement Since the 
NPRM Was Issued
    4. California's Greenhouse Gas Program
    C. Summary of the Final 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
    D. Summary of Costs and Benefits for the National Program
    1. Summary of Costs and Benefits for the NHTSA CAFE Standards
    2. Summary of Costs and Benefits for the EPA's GHG Standards
    3. Why are the EPA and NHTSA MY 2025 estimated per-vehicle costs 
different?
    E. 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 Final Rule
    A. Introduction
    B. Developing the Future Fleet for Assessing Costs, Benefits, 
and Effects
    1. Why did the agencies establish baseline and reference vehicle 
fleets?
    2. What comments did the agencies receive regarding fleet 
projections for the NPRM?
    3. Why were two fleet projections created for the FRM?
    4. How did the agencies develop the MY 2008 baseline vehicle 
fleet?
    5. How did the agencies develop the projected MY 2017-2025 
vehicle reference fleet for the 2008 model year based fleet?
    6. How did the agencies develop the model year 2010 baseline 
vehicle fleet as part of the 2010 based fleet projection?
    7. How did the agencies develop the projected my 2017-2025 
vehicle reference fleet for the 2010 model year based fleet?
    8. What are the differences in the sales volumes and 
characteristics of the MY 2008 based and the MY 2010 based fleets 
projections?
    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 adopting, and why?
    3. How have the agencies changed the mathematical functions for 
the MYs 2017-2025 standards, and why?
    4. What curves are the agencies promulgating for MYs 2017-2025?
    5. Once the agencies determined the slope, how did the agencies 
determine the rest of the mathematical function?
    6. 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?
    4. How did the agencies consider real-world limits when defining 
the rate at which technologies can be deployed?
    5. Maintenance and Repair Costs Associated With New Technologies
    E. Joint Economic and Other Assumptions
    F. CO2 Credits and Fuel Consumption Improvement 
Values for Air Conditioning Efficiency, Off-cycle Reductions, and 
Full-size Pickup Trucks
    1. Air Conditioning Efficiency Credits and Fuel Consumption 
Improvement Values
    2. Off-Cycle CO2 Credits
    3. Advanced Technology Incentives for Full-Size 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 final 
rule?
III. EPA MYs 2017-2025 Light-Duty Vehicle Greenhouse Gas Emissions 
Standards
    A. Overview of EPA Rule
    1. Introduction
    2. Why is EPA establishing MYs 2017-2025 standards for light-
duty vehicles?
    3. What is EPA finalizing?
    4. Basis for the GHG Standards Under Section 202(a)
    5. Other Related EPA Motor Vehicle Regulations
    B. 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 
CO2 standards?
    2. What are the CO2 attribute-based standards?
    3. Mid-Term Evaluation
    4. Averaging, Banking, and Trading Provisions for CO2 
Standards
    5. Small Volume Manufacturer Standards
    6. Additional Lead Time for Intermediate Volume Manufacturers
    7. Small Business Exemption
    8. Police and Emergency Vehicle Exemption From GHG Standards
    9. Nitrous Oxide, Methane, and CO2-equivalent 
Approaches
    10. Test Procedures
    C. Additional Manufacturer Compliance Flexibilities
    1. Air Conditioning Related Credits
    2. Incentives for Electric Vehicles, Plug-in Hybrid Electric 
Vehicles, Fuel Cell Vehicles, and Dedicated and Dual Fuel Compressed 
Natural Gas Vehicles
    3. Incentives for Using Advanced ``Game-Changing'' Technologies 
in 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 CO2 Standards
    1. How did EPA develop reference and control fleets for 
evaluating standards?
    2. What are the effectiveness and costs of CO2-
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 CO2 performance to meet a fleet 
average standard?
    5. Projected Compliance Costs and Technology Penetrations
    6. How does the technical assessment support the final 
CO2 standards as compared to the alternatives has EPA 
considered?
    7. Comments Received on the Analysis of Technical Feasibility 
and Appropriateness of the Standards

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    8. To what extent do any of today's vehicles meet or surpass the 
final MY 2017-2025 CO2 footprint-based targets with 
current powertrain designs?
    E. Certification, Compliance, and Enforcement
    1. Compliance Program Overview
    2. Compliance With Fleet-Average CO2 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
    12. Publication of GHG Compliance Information
    F. How will this rule 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 This 
Rule's GHG Emissions Reductions
    G. How will the rule 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 rule?
    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. Cost of Ownership, Payback Period and Lifetime Savings on New 
Vehicle Purchases
    6. CO2 Emission Reduction Benefits
    7. Non-Greenhouse Gas Health and Environmental Impacts
    8. Energy Security Impacts
    9. Additional Impacts
    10. Summary of Costs and Benefits
    11. U.S. Vehicle Sales Impacts and Affordability of New Vehicles
    12. Employment Impacts
    I. Statutory and Executive Order Reviews
    J. Statutory Provisions and Legal Authority
IV. NHTSA Final Rule for Passenger Car and Light Truck CAFE 
Standards for Model Years 2017 and Beyond
    A. Executive Overview of NHTSA Final Rule
    1. Introduction
    2. Why does NHTSA set CAFE standards for passenger cars and 
light trucks?
    3. Why is NHTSA presenting 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 CAFE standards since the 
President's announcement, and what has changed between the proposal 
and the final rule?
    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 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 final standards fulfill NHTSA's statutory 
obligations?
    1. Overview
    2. What are NHTSA's statutory obligations?
    3. How did the agency balance the factors for the NPRM?
    4. What comments did the agency receive regarding the proposed 
maximum feasible levels?
    5. How has the agency balanced the factors for this final rule?
    G. Impacts of the Final 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 standards impact non-GHG emissions and their 
associated effects?
    4. What are the estimated costs and benefits of these standards?
    5. How would these final standards impact vehicle sales and 
employment?
    6. Social Benefits, Private Benefits, and Potential Unquantified 
Consumer Welfare Impacts of the Standards
    7. What other impacts (quantitative and unquantifiable) will 
these 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. Record of Decision
    1. The Agency's Decision
    2. Alternatives NHTSA Considered in Reaching its Decision
    3. NHTSA's Environmental Analysis, Including Consideration of 
the Environmentally Preferable Alternative
    4. Factors Balanced by NHTSA in Making its Decision
    5. How the Factors and Considerations Balanced by NHTSA Entered 
Into its Decision
    6. The Agency's Preferences Among Alternatives Based on Relevant 
Factors, Including Economic and Technical Considerations and Agency 
Statutory Missions
    7. Mitigation
    K. Regulatory Notices and Analyses
    1. Executive Order 12866, Executive Order 13563, and DOT 
Regulatory Policies and Procedures
    2. National Environmental Policy Act
    3. Clean Air Act (CAA) as Applied to NHTSA's Action
    4. National Historic Preservation Act (NHPA)
    5. Fish and Wildlife Conservation Act (FWCA)
    6. Coastal Zone Management Act (CZMA)
    7. Endangered Species Act (ESA)
    8. Floodplain Management (Executive Order 11988 and DOT Order 
5650.2)
    9. Preservation of the Nation's Wetlands (Executive Order 11990 
and DOT Order 5660.1a)
    10. Migratory Bird Treaty Act (MBTA), Bald and Golden Eagle 
Protection Act (BGEPA), Executive Order 13186
    11. Department of Transportation Act (Section 4(f))
    12. Regulatory Flexibility Act
    13. Executive Order 13132 (Federalism)
    14. Executive Order 12988 (Civil Justice Reform)
    15. Unfunded Mandates Reform Act
    16. Regulation Identifier Number
    17. Executive Order 13045
    18. National Technology Transfer and Advancement Act
    19. Executive Order 13211
    20. Department of Energy Review
    21. Privacy Act

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

A. Executive Summary

1. Purpose of the Regulatory Action
a. The Need for the Action and How the Action Addresses the Need
    NHTSA, on behalf of the Department of Transportation, and EPA are 
issuing final rules to further reduce greenhouse gas emissions and 
improve fuel economy for light-duty vehicles for model years 2017 and 
beyond. On May 21, 2010, President Obama issued a Presidential 
Memorandum requesting that EPA and NHTSA develop through notice and 
comment rulemaking a coordinated National Program to improve fuel 
economy and reduce greenhouse gas emissions of light-duty vehicles for 
model years 2017-2025, building on the success of the first phase of 
the National Program for these vehicles for model years 2012-2016. 
These final rules are consistent with the President's request and 
respond to the country's critical need to address global

[[Page 62627]]

climate change and to reduce oil consumption.
    These standards apply to passenger cars, light-duty trucks, and 
medium-duty passenger vehicles (i.e. sport utility vehicles, cross-over 
utility vehicles, and light trucks), and represent the continuation of 
a harmonized and consistent National Program for these vehicles. Under 
the National Program automobile manufacturers will be able to continue 
building a single light-duty national fleet that satisfies all 
requirements under both programs.
    The National Program is estimated to save approximately 4 billion 
barrels of oil and to reduce GHG emissions by the equivalent of 
approximately 2 billion metric tons over the lifetimes of those light 
duty vehicles produced in MYs 2017-2025. The agencies project 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 $326 billion to $451 billion (7 and 3 percent discount 
rates, respectively) over the lifetimes of those light duty vehicles 
sold in MYs 2017-2025.
    The National Program is projected to provide significant savings 
for consumers due to reduced fuel use. Although the agencies estimate 
that technologies used to meet the standards will add, on average, 
about $1,800 to the cost of a new light duty vehicle in MY 2025, 
consumers who drive their MY 2025 vehicle for its entire lifetime will 
save, on average, $5,700 to $7,400 (7 and 3 percent discount rates, 
respectively) in fuel, for a net lifetime savings of $3,400 to $5,000. 
This estimate assumes gasoline prices of $3.87 per gallon in 2025 with 
small increases most years throughout the vehicle's lifetime.
b. Legal Authority
    EPA and NHTSA are finalizing separate sets of standards for 
passenger cars and for light trucks, under their respective statutory 
authority. EPA is setting national CO2 emissions standards 
for passenger cars and light-trucks under section 202 (a) of the Clean 
Air Act (CAA) ((42 U.S.C. 7521 (a)), and under its authority to measure 
passenger car and passenger car fleet fuel economy pursuant to the 
Energy Policy and Conservation Act (EPCA) 49 U.S.C. 32904 (c). NHTSA is 
setting national corporate average fuel economy (CAFE) standards under 
the Energy Policy and Conservation Act (EPCA), as amended by the Energy 
Independence and Security Act (EISA) of 2007 (49 U.S.C. 32902).
    Section 202 (a) of the Clean Air Act requires EPA to establish 
standards for emissions of pollutants from new motor vehicles which 
emissions cause or contribute to air pollution which may reasonably be 
anticipated to endanger public health or welfare. See Coalition for 
Responsible Regulation v. EPA, No. 09-1322 (D.C. Cir. June 26, 2012) 
slip op. p. 41 (``'[i]f EPA makes a finding of endangerment, the Clean 
Air Act requires the [a]gency to regulate emissions of the deleterious 
pollutant from new motor vehicles. `* * * Given the non-discretionary 
duty in Section 202 (a)(1) and the limited flexibility available under 
Section 202 (a)(2), which this court has held relates only to the 
motor-vehicle industry,* * * EPA had no statutory basis on which it 
could `ground [any] reasons for further inaction'' (quoting State of 
Massachusetts v. EPA, 549 U.S. 497, 533, 535 (2007). In establishing 
such standards, EPA must consider issues of technical feasibility, 
cost, and available lead time. Standards under section 202 (a) thus 
take effect only ``after providing such period as the Administrator 
finds necessary to permit the development and application of the 
requisite technology, giving appropriate consideration to the cost of 
compliance within such period'' (CAA section 202 (a)(2) (42 U.S.C. 7512 
(a)(2)).
    EPCA, as amended by EISA, contains a number of provisions regarding 
how NHTSA must set CAFE standards. EPCA requires that NHTSA establish 
separate passenger car and light truck standards (49 U.S.C. 
32902(b)(1)) at ``the maximum feasible average fuel economy level that 
it decides the manufacturers can achieve in that model year (49 U.S.C. 
32902(a)),'' 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 (49 U.S.C. 32902(f)). 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 (49 U.S.C. 
32902(b)(2)(A))]. For model years 2021-2030, standards need simply be 
set at the maximum feasible level (49 U.S.C.32903(b)(2)(B).
    Section I.E of the preamble contains a detailed discussion of both 
agencies' statutory authority.
2. Summary of the Major Provisions of the Final Rule
    NHTSA and EPA are finalizing rules for light-duty vehicles that the 
agencies believe represent the appropriate levels of fuel economy and 
GHG emissions standards for model years 2017 and beyond pursuant to 
their respective statutory authorities.
a. Standards
    EPA is establishing standards that are projected to require, on an 
average industry fleet wide basis, 163 grams/mile of carbon dioxide 
(CO2) in model year 2025, which is equivalent to 54.5 mpg if 
this level were achieved solely through improvements in fuel 
efficiency.\3\ Consistent with its statutory authority, NHTSA has 
developed two phases of passenger car and light truck standards in this 
rulemaking action. The first phase, from MYs 2017-2021, includes final 
standards that are projected to require, on an average industry fleet 
wide basis, a range from 40.3-41.0 mpg in MY 2021. The second phase of 
the CAFE program, from MYs 2022-2025, includes standards that are not 
final, due to the statutory requirement that NHTSA set average fuel 
economy standards not more than 5 model years at a time. Rather, those 
standards are augural, meaning that they represent NHTSA's current best 
estimate, based on the information available to the agency today, of 
what levels of stringency might be maximum feasible in those model 
years. NHTSA projects that those standards could require, on an average 
industry fleet wide basis, a range from 48.7-49.7 mpg in model year 
2025.
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    \3\ Real-world CO2 is typically 25 percent higher and 
real-world fuel economy is typically 20 percent lower than the 
CO2 and CAFE compliance values discussed here. 163g/mi 
would be equivalent to 54.5 mpg, if the entire fleet were to meet 
this CO2 level through tailpipe CO2 and fuel 
economy improvements. The agencies expect, however, that a portion 
of these improvements will be made through improvements in air 
conditioning leakage and through use of alternative refrigerants, 
which would not contribute to fuel economy.
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    Both the CO2 and CAFE standards are footprint-based, as 
are the standards currently in effect for these vehicles through model 
year 2016. The standards will become more stringent on average in each 
model year from 2017 through 2025. Generally, the larger the vehicle 
footprint, the less numerically stringent the corresponding vehicle 
CO2 emissions and MPG targets. As a result of the footprint-
based standards, the burden of compliance is distributed

[[Page 62628]]

across all vehicle footprints and across all manufacturers. 
Manufacturers are not compelled to build vehicles of any particular 
size or type (nor do the rules create an incentive to do so), and each 
manufacturer will have its own fleet-wide standard that reflects the 
light duty vehicles it chooses to produce.
b. Mid-Term Evaluation
    The agencies will conduct a comprehensive mid-term evaluation and 
agency decision-making process for the MYs 2022-2025 standards as 
described in the proposal. The mid-term evaluation reflects the rules' 
long time frame and, for NHTSA, the agency's statutory obligation to 
conduct a de novo rulemaking in order to establish final standards for 
MYs 2022-2025. In order to align the agencies' proceedings for MYs 
2022-2025 and to maintain a joint national program, EPA and NHTSA will 
finalize their actions related to MYs 2022-2025 standards concurrently. 
If the EPA determination is that standards may change, the agencies 
will issue a joint NPRM and joint final rules. NHTSA and EPA fully 
expect to conduct this mid-term evaluation in coordination with the 
California Air Resources Board, given our interest in maintaining a 
National Program to address GHG emissions and fuel economy. Further 
discussion of the mid-term evaluation is found in Sections III.B.3 and 
IV.A.3.b.
c. Compliance Flexibilities
    As proposed, the agencies are finalizing several provisions which 
provide compliance flexibility to manufacturers to meet the standards 
without compromising the program's overall environmental and energy 
security objectives. Further discussion of compliance flexibilities is 
in Section C.4, II.F, III.B, III.C, IV.I.
Credit Averaging, Banking and Trading
    The agencies are continuing to allow manufacturers to generate 
credits for over-compliance with the CO2 and CAFE 
standards.\4\ A manufacturer will generate credits if its car and/or 
truck fleet achieves a fleet average CO2/CAFE level better 
than its car and/or truck standards. Conversely, a manufacturer will 
incur a debit/shortfall if its fleet average CO2/CAFE level 
does not meet the standard when all credits are taken into account. As 
in the prior CAFE and GHG programs, 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.
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    \4\ This credit flexibility is required by EPCA/EISA, see 49 
U.S.C. 32903, and is well within EPA's discretion under section 202 
(a) of the CAA.
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Air Conditioning Improvement Credits
    As proposed, EPA is establishing that the maximum total A/C credits 
available for cars will be 18.8 grams/mile CO2-equivalent 
and 24.4 grams/mile for trucks CO2-equivalent.\5\ The 
approaches used to calculate these credits for direct and indirect A/C 
improvement (i.e., improvements to A/C leakage (including substitution 
of low GHG refrigerant) and A/C efficiency) are generally consistent 
with those of the MYs 2012-2016 program, although there are several 
revisions. Most notably, a new test for A/C efficiency, optional under 
the GHG program starting in MY 2014, will be used exclusively in MY 
2017 and beyond. Under its EPCA authority, EPA proposed and is 
finalizing provisions to allow manufacturers to generate fuel 
consumption improvement values for purposes of CAFE compliance based on 
these same improvements in air conditioner efficiency.
---------------------------------------------------------------------------

    \5\ This is further broken down by 5.0 and 7.2 g/mi respectively 
for car and truck A/C efficiency credits, and 13.8 and 17.2 g/mi 
respectively for car and truck alternative refrigerant credits.
---------------------------------------------------------------------------

Off-Cycle Credits
    EPA proposed and is finalizing provisions allowing manufacturers to 
continue to generate and use off-cycle credits to demonstrate 
compliance with the GHG standards. These credits are for measureable 
GHG emissions and fuel economy improvements attributable to use of 
technologies whose benefits are not measured by the two-cycle test 
mandated by EPCA. Under its EPCA authority, EPA proposed and is 
finalizing provisions to allow manufacturers to generate fuel 
consumption improvement values for purposes of CAFE compliance based on 
the use of off-cycle technologies.
Incentives for Electric Vehicles, Plug-in Hybrid Electric Vehicles, 
Fuel Cell Vehicles and Compressed Natural Gas Vehicles
    In order to provide temporary regulatory incentives to promote the 
penetration of certain ``game changing'' advanced vehicle technologies 
into the light duty vehicle fleet, EPA is finalizing, as proposed, an 
incentive multiplier for CO2 emissions compliance purposes 
for all electric vehicles (EVs), plug-in hybrid electric vehicles 
(PHEVs), and fuel cell vehicles (FCVs) sold in MYs 2017 through 2021. 
The incentives are expected to promote increased application of these 
advanced technologies in the program's early model years, which could 
achieve economies of scale that will support the wider application of 
these technologies to help achieve the more stringent standards in MYs 
2022-2025. In addition, in response to public comments persuasively 
explaining how infrastructure for compressed natural gas (CNG) vehicles 
could serve as a bridge to use of advanced technologies such as 
hydrogen fuel cells, EPA is finalizing an incentive multiplier for CNG 
vehicles sold in MYs 2017 through 2021.
    NHTSA currently interprets EPCA and EISA as precluding it from 
offering incentives for the alternative fuel operation of EVs, PHEVs, 
FCVs, and NGVs, except as specified by statute, and thus did not 
propose and is not including incentive multipliers comparable to the 
EPA incentive multipliers described above.
Incentives for Use of Advanced Technologies Including Hybridization for 
full-Size Pick-up Trucks
    The agencies recognize that the standards presented in this final 
rule for MYs 2017-2025 will be challenging for large vehicles, 
including full-size pickup trucks. To help address this challenge, the 
program will, as proposed, contain incentives for the use of hybrid 
electric and other advanced technologies in full-size pickup trucks.
3. Costs and Benefits of National Program
    It is important to note that NHTSA's CAFE standards and EPA's GHG 
standards will both be in effect, and both will lead to increases in 
average fuel economy and reductions in GHGs. The two agencies' 
standards together comprise the National Program, and the following 
discussions of the respective costs and benefits of NHTSA's CAFE 
standards and EPA's GHG standards does not change the fact that both 
the CAFE and GHG standards, jointly, are the source of the benefits and 
costs of the National Program.
    The costs and benefits projected by NHTSA to result from the CAFE 
standards are presented first, followed by those projected by EPA to 
result from the GHG emissions standards. For several reasons, the 
estimates for costs and benefits presented by NHTSA and EPA for their 
respective rules, while consistent, are not directly comparable, and 
thus should not be expected to be identical. See Section I.D of the 
preamble for further details and discussion.
    NHTSA has analyzed in detail the projected costs and benefits for 
the 2017-2025 CAFE standards for light-

[[Page 62629]]

duty vehicles. NHTSA estimates that the fuel economy increases would 
lead to fuel savings totaling about 170 billion gallons throughout the 
lives of light duty 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 between $481 billion and $488 billion; at a 
7 percent private discount rate, the present value of the economic 
benefits resulting from those fuel savings is between $375 billion and 
$380 billion. The agency further estimates that these new CAFE 
standards will lead to corresponding reductions in CO2 
emissions totaling 1.8 billion metric tons during the lives of light 
duty vehicles sold in MYs 2017-2025. The present value of the economic 
benefits from avoiding those emissions is approximately $49 billion, 
based on a global social cost of carbon value of about $26 per metric 
ton (in 2017, and growing thereafter).
    The Table below shows NHTSA's estimated overall lifetime discounted 
costs and benefits, and net benefits for the model years 2017-2025 CAFE 
standards.

      NHTSA's Estimated MYs 2017-2021 and MYs 2017-2025 Costs, Benefits, and Net Benefits (Billions of 2010 dollars)) under the CAFE Standards \6\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Totals                                       Annualized
                                        Baseline fleet     ---------------------------------------------------------------------------------------------
                                                               3% Discount rate        7% Discount rate        3% Discount rate       7% Discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Cumulative for MYs 2017-2021 Final Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs.............................  2010..................  ($61)-................  ($58)-................  ($2.4)-..............  ($3.6)-
                                    2008..................  ($57).................  ($54).................  ($2.2)...............  ($3.3)
Benefits..........................  2010..................  $243-.................  $195-.................  $9.2-................  $11.3-
                                    2008..................  $240..................  $194..................  $9.0.................  $11.0
Net Benefits......................  2010..................  $183-.................  $137-.................  $6.8-................  $7.7-
                                    2008..................  $184..................  $141..................  $6.8.................  $7.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Cumulative for MYs 2017--2025 (Includes MYs 2022-2025 Augural Standards)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs.............................  2010..................  ($154)-...............  ($147)-...............  ($5.4)-..............  ($7.6)-
                                    2008..................  ($156)................  ($148)................  ($5.4)...............  ($7.5)
Benefits..........................  2010..................  $629-.................  $502-.................  $21.0-...............  $24.2-
                                    2008..................  $639..................  $510..................  $21.3................  $24.4
Net Benefits......................  2010..................  $476-.................  $356-.................  $15.7-...............  $16.7-
                                    2008..................  $483..................  $362..................  $15.9................  $16.9
--------------------------------------------------------------------------------------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \6\ ``The ``Estimated Achieved'' analysis includes accounting 
for compliance flexibilities and advanced technologies that 
manufacturers may voluntarily use for compliance, but that NHTSA is 
prohibited from considering when determining the maximum feasible 
level of new CAFE standards.
---------------------------------------------------------------------------

    EPA has analyzed in detail the projected costs and benefits of the 
2017-2025 GHG standards for light-duty vehicles. The Table below shows 
EPA's estimated lifetime discounted cost, fuel savings, and benefits 
for all such vehicles projected to be sold in model years 2017-2025. 
The benefits include impacts such as climate-related economic benefits 
from reducing emissions of CO2 (but not other GHGs), 
reductions in energy security externalities caused by U.S. petroleum 
consumption and imports, the value of certain particulate matter-
related health benefits (including premature mortality), the value of 
additional driving attributed to the VMT rebound effect, the value of 
reduced refueling time needed to fill up a more fuel efficient vehicle. 
The analysis also includes estimates of economic impacts stemming from 
additional vehicle use, such as the economic damages caused by 
accidents, congestion and noise (from increased VMT rebound driving).

     EPA's Estimated 2017-2025 Model Year Lifetime Discounted Costs,
 Benefits, and Net Benefits Assuming the 3% Discount Rate SCC Value \7\
                       (Billions of 2010 dollars)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
              Lifetime Present Value \d\--3% Discount Rate
------------------------------------------------------------------------
Program Costs...........................................            $150
Fuel Savings............................................             475
Benefits................................................             126
Net Benefits \d\........................................             451
------------------------------------------------------------------------
                 Annualized Value \f\--3% Discount Rate
------------------------------------------------------------------------
Annualized costs........................................            6.49
Annualized fuel savings.................................            20.5
Annualized benefits.....................................            5.46
Net benefits............................................            19.5
------------------------------------------------------------------------
              Lifetime Present Value \d\--7% Discount Rate
------------------------------------------------------------------------
 
Program Costs...........................................             144
Fuel Savings............................................             364
Benefits................................................             106
Net Benefits \e\........................................             326
------------------------------------------------------------------------
                 Annualized Value \f\--7% Discount Rate
------------------------------------------------------------------------
Annualized costs........................................            10.8
Annualized fuel savings.................................            27.3
Annualized benefits.....................................            7.96
Net benefits............................................            24.4
------------------------------------------------------------------------

B. Introduction
---------------------------------------------------------------------------

    \7\ Further notes and details concerning these SCC. Value are 
found in Section I.D.2. Table I-17.
---------------------------------------------------------------------------

    EPA is announcing final greenhouse gas emissions standards for 
model years 2017-2025 and NHTSA is announcing final Corporate Average 
Fuel Economy standards for model years 2017-2021 and issuing augural 
\8\ standards for

[[Page 62630]]

model years (MYs) 2022-2025. These rules establish 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. These final rules extend the MYs 2012-2016 National 
Program by establishing more stringent Federal light-duty vehicle GHG 
emissions and corporate average fuel economy (CAFE) standards in MYs 
2017 and beyond. This coordinated program will 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. NHTSA's final rule 
also constitutes the agency's Record of Decision for purposes of its 
NEPA analysis.
---------------------------------------------------------------------------

    \8\ For the NPRM/PRIA/Draft EIS, NHTSA described the proposed 
standards for MYs 2022-2025 as ``conditional.'' ``Conditional'' was 
understood and objected to by some readers as implying that the 
future proceeding would consist merely of a confirmation of the 
conclusions and analysis of the current rulemaking, which would be 
incorrect and inconsistent with the agency's obligations under both 
EPCA/EISA and the Administrative Procedure Act. The agency must 
conduct a de novo rulemaking for MYs 2022-2025. To avoid creating an 
incorrect impression, the agency is changing the descriptor for the 
MY 2022-2025 standards that are presented and discussed in these 
documents. The descriptor must convey that the standards we are now 
presenting for MYs 2022-2025 reflect the agency's current best 
judgment of what we would have set at this time had we the authority 
to do so, but also avoid suggesting that the future process for 
establishing final standards for MYs 2022-2025 would be anything 
other than a new and separate rulemaking based on the freshly 
gathered and solicited information before the agency at that future 
time and on a fresh assessing and balancing of all statutorily 
relevant factors, in light of the considerations existing at the 
time of that rulemaking. The agency deliberated extensively, 
considering many alternative descriptors, and concluded that the 
best descriptor was ``augural,'' from the verb ``to augur,'' meaning 
to foretell future events based on current information (as in, 
``these standards may augur well for what the agency might establish 
in the future''). This is precisely what the MYs 2022-2025 standards 
presented in these documents are--our effort to help interested 
parties anticipate the future by providing our current best judgment 
as to what standards we would now set, based on the information 
before us today, recognizing that our future decision as to what 
standards we will actually set will be based on the information then 
before us.
---------------------------------------------------------------------------

    This joint rulemaking 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 MYs 2012-2016. As with the MY 2012-2016 final rules, a 
key element in developing this rulemaking was the agencies' discussions 
with automobile manufacturers, the California Air Resources Board 
(CARB) and many other stakeholders. During the extended public comment 
period, the agencies received nearly 300,000 written comments (and 
nearly 400 oral comments through testimony at three public hearings 
held in Detroit, Philadelphia and San Francisco) on this rule and 
received strong support from most auto manufacturers, the United Auto 
Workers (UAW), nongovernmental organizations (NGOs), consumer groups, 
national security experts and veterans, State/local government and auto 
suppliers.
    Continuing the National Program in coordination with California 
will help to ensure that all manufacturers can build a single fleet of 
vehicles that satisfy all requirements under both federal programs as 
well as under California's program,\9\ which will in turn help to 
reduce costs and regulatory complexity while providing significant 
energy security, consumer savings, and environmental benefits.\10\
---------------------------------------------------------------------------

    \9\ Section I.B.4 provides a explanation of California's 
authority to set air pollution standards for vehicles.
    \10\ The California Air Resources Board (CARB) adopted 
California MYs 2017-2025 GHG emissions standards on January 26, 
2012. At its March 22, 2012 meeting the Board gave final approval to 
the California standards. The Board directed CARB's Executive 
Officer to ``continue collaborating with EPA and NHTSA as their 
standards are finalized and in the mid-term review * * *'' and the 
Board also reconfirmed its commitment to propose to revise its GHG 
emissions standards for MYs 2017 to 2025 ``to accept compliance with 
the 2017 through 2025 MY National Program as compliance with 
California's greenhouse gas emission standards in the 2017 through 
2025 model years if the Executive Officer determines that U.S. EPA 
has adopted a final rule that at a minimum preserve greenhouse 
reductions benefits set forth'' in the NPRM issued by EPA on 
December 1, 2011. State of California Air Resources Board, 
Resolution 12-11, January 26, 2012, at 20. Available at http://www.arb.ca.gov/regact/2012/cfo2012/res12-11.pdf (last accessed July 
9, 2012).
---------------------------------------------------------------------------

    Combined with the standards already in effect for MYs 2012-2016, as 
well as the MY 2011 CAFE standards, the final standards will 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 actions ever taken 
to reduce GHG emissions and improve fuel economy in the U.S.
    EPA is establishing standards that are projected to require, on an 
average industry fleet wide basis, 163 grams/mile of carbon dioxide 
(CO2) in model year 2025, which is equivalent to 54.5 mpg if 
this level were achieved solely through improvements in fuel 
efficiency.\11\ Consistent with its statutory authority,\12\ NHTSA has 
developed two phases of passenger car and light truck standards in this 
rulemaking action. The first phase, from MYs 2017-2021, includes final 
standards that are projected to require, on an average industry fleet 
wide basis, a range from 40.3-41.0 mpg in MY 2021.\13\ The second phase 
of the CAFE program, from MYs 2022-2025, includes standards that are 
not final due to the statutory provision that NHTSA shall issue 
regulations prescribing average fuel economy standards for at least 1 
but not more than 5 model years at a time.\14\ The MYs 2022-2025 CAFE 
standards, then, are not final based on this rulemaking, but rather 
augural, meaning that they represent the agency's current judgment, 
based on the information available to the agency today, of what levels 
of stringency would be maximum feasible in those model years. NHTSA 
projects that those standards could require, on an average industry 
fleet wide basis, a range from 48.7-49.7 mpg in model year 2025. The 
agencies note that these estimated combined fleet average mpg levels 
are projections and, in fact the agencies are establishing separate 
standards for passenger cars and trucks, based on a vehicle's size or 
``footprint,'' and the actual average achieved fuel economy and GHG 
emissions levels will be determined by the actual footprints and 
production volumes of the vehicle models that are produced. NHTSA will 
undertake a de novo rulemaking at a later date to set legally binding 
CAFE standards for MYs 2022-2025. See

[[Page 62631]]

Section IV for more information. The agencies will conduct a 
comprehensive mid-term evaluation and agency decision-making process 
for the MYs 2022-2025 standards as described in the proposal. The mid-
term evaluation reflects the rules' long time frame and, for NHTSA, the 
agency's statutory obligation to conduct de novo rulemaking in order to 
establish final standards for vehicles for those model years. In order 
to align the agencies' proceedings for MYs 2022-2025 and to maintain a 
joint national program, EPA and NHTSA will finalize their actions 
related to MYs 2022-2025 standards concurrently.
---------------------------------------------------------------------------

    \11\ Real-world CO2 is typically 25 percent higher 
and real-world fuel economy is typically 20 percent lower than the 
CO2 and CAFE compliance values discussed here. 163g/mi 
would be equivalent to 54.5 mpg, if the entire fleet were to meet 
this CO2 level through tailpipe CO2 and fuel 
economy improvements. The agencies expect, however, that a portion 
of these improvements will be made through improvements in air 
conditioning leakage and use of alternative refrigerants, which 
would not contribute to fuel economy.
    \12\ 49 U.S.C. 32902.
    \13\ The range of values here and through this rulemaking 
document reflect the results of co-analyses conducted by NHTSA using 
two different light-duty vehicle market forecasts through model year 
2025. To evaluate the effects of the standards, the agencies must 
project what vehicles and technologies will exist in future model 
years and then evaluate what technologies can feasibly be applied to 
those vehicles to raise their fuel economy and reduce their 
greenhouse gas emissions. To project the future fleet, the agencies 
must develop a baseline vehicle fleet. For this final rule, the 
agencies have analyzed the impacts of the standards using two 
different forecasts of the light-duty vehicle fleet through MY 2025. 
The baseline fleets are discussed in detail in Section II.B of this 
preamble, and in Chapter 2 of the Technical Support Document. EPA's 
sensitivity analysis of the alternative fleet is included in Chapter 
10 of its RIA.
    \14\ 49 U.S.C. 32902(b)(3)(B).
---------------------------------------------------------------------------

    The agencies project that manufacturers will comply with the final 
rules by using a range of technologies, including improvements in air 
conditioning efficiency, which reduce both GHG emissions and fuel 
consumption. Compliance with EPA's GHG standards is also likely to be 
achieved through improvements in air conditioning system leakage and 
through the use of alternative air conditioning refrigerants with a 
lower global warming potential (GWP), which reduce GHGs (i.e., 
hydrofluorocarbons) but which do not generally improve fuel economy. 
The agencies believe there is a wide range of technologies already 
available to reduce GHG emissions and improve fuel economy from both 
passenger cars and trucks. The final rules facilitate long-term 
planning by manufacturers and suppliers for the continued development 
and deployment across their fleets of fuel saving and GHG 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 and lower leakage air conditioning systems. 
Many of these technologies are already available today, some on a 
limited number of vehicles while others are more widespread in the 
fleet, and manufacturers will be able to meet the standards through 
significant efficiency improvements in these technologies, as well as 
through 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 result in possible alternative, more cost-effective paths 
to compliance.
    From a societal standpoint, this second phase of the National 
Program is estimated to save approximately 4 billion barrels of oil and 
to reduce GHG emissions by the equivalent of approximately 2 billion 
metric tons over the lifetimes of those light duty vehicles produced in 
MYs 2017-2025. These savings and reductions come on top of those that 
are being achieved through the MYs 2012-2016 standards.\15\ The 
agencies project 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 $326 billion to $451 billion 
(7 and 3 percent discount rates, respectively) over the lifetimes of 
those light duty vehicles sold in MY 2017-2025.
---------------------------------------------------------------------------

    \15\ The cost and benefit estimates provided in this final rule 
are only for the MYs 2017-2025 rulemaking. EPA and DOT's rulemaking 
establishing standards for MYs 2012-2016 are already part of the 
baseline for this analysis.
---------------------------------------------------------------------------

    These final standards are projected to provide significant savings 
for consumers due to reduced fuel use. Although the agencies estimate 
that technologies used to meet the standards will add, on average, 
about $1,800 to the cost of a new light duty vehicle in MY 2025, 
consumers who drive their MY 2025 vehicle for its entire lifetime will 
save, on average, $5,700 to $7,400 (7 and 3 percent discount rates, 
respectively) in fuel, for a net lifetime savings of $3,400 to $5,000. 
This estimate assumes gasoline prices of $3.87 per gallon in 2025 with 
small increases most years throughout the vehicle's lifetime.\16\ For 
those consumers who purchase their new MY 2025 vehicle with cash, the 
discounted fuel savings will offset the higher vehicle cost in roughly 
3.3 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 immediately benefit from an average monthly cash flow 
savings of about $12 during the loan period, or about $140 per year, on 
average. So this type of consumer would benefit immediately from the 
time of purchase: the increased monthly fuel savings would more than 
offset the higher monthly payment. Section I.D provides a detailed 
discussion of the projected costs and benefits of the MYs 2017-2025 for 
CAFE and GHG emissions standards for light-duty vehicles.
---------------------------------------------------------------------------

    \16\ See Chapter 4.2.2 of the Joint TSD for full discussion of 
fuel price projections over the vehicle's lifetime.
---------------------------------------------------------------------------

    In addition to saving consumers money at the pump, the agencies 
have designed their final standards to preserve consumer choice--that 
is, the 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 
(technically they are based on vehicle footprint, which is the area 
defined by the points where the tires contact the ground), and larger 
vehicles have numerically less stringent fuel economy/GHG emissions 
targets and smaller vehicles have numerically more stringent fuel 
economy/GHG emissions targets. Footprint based standards promote fuel 
economy and GHG emissions improvements in vehicles of all sizes, and 
are not expected to create incentives for manufacturers to change the 
size of their vehicles in order to comply with the standards. Moreover, 
since the standards are fleet average standards for each manufacturer, 
no specific vehicle must meet a target.\17\ Thus, nothing in these 
rules prevents consumers in the 2017 to 2025 timeframe from choosing 
from the same mix of vehicles that are currently in the marketplace.
---------------------------------------------------------------------------

    \17\ A specific vehicle would only have to meet a fuel economy 
or GHG target value on the target curve standards being finalized 
today in the rare event that a manufacturer produces a single 
vehicle model.
---------------------------------------------------------------------------

1. Continuation of the National Program
    EPA is adopting final greenhouse gas emissions standards for model 
years 2017-2025 and NHTSA is adopting final Corporate Average Fuel 
Economy standards for model years 2017-2021 and presenting augural 
standards for model years 2022-2025. These rules will implement strong 
and coordinated Federal greenhouse gas and fuel economy standards for 
passenger cars, light-duty trucks, and medium-duty passenger vehicles. 
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 final rules continue the National Program by setting 
more stringent standards for MY 2017 and beyond light duty vehicles. 
This coordinated program will achieve important reductions of

[[Page 62632]]

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 finalize these standards, 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 light duty vehicle 
standards for model years (MY) 2012-2016. As with the MY 2012-2016 
final rules, a key element in developing the final rules was the 
agencies' collaboration with the California Air Resources Board (CARB) 
and discussions with automobile manufacturers and many other 
stakeholders. Continuing the National Program will help to ensure that 
all manufacturers can build a single fleet of U.S. light duty vehicles 
that satisfy all requirements under both federal programs as well as 
under California's program, helping to reduce costs and regulatory 
complexity while providing significant energy security, consumer 
savings and environmental benefits.
    The agencies have been developing the basis for these final 
standards almost since the conclusion of the rulemaking establishing 
the first phase of the National Program. Consistent with Executive 
Order 13563, this rule 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. After much research and deliberation by 
the agencies, along with CARB and other stakeholders, on July 29, 2011 
President Obama announced plans for extending the National Program to 
MY 2017-2025 light duty vehicles and NHTSA and EPA issued a 
Supplemental Notice of Intent (NOI) outlining the agencies' plans for 
proposing the MY 2017-2025 standards and program.\18\ This July NOI 
built upon the extensive analysis conducted by the agencies during 2010 
and 2011, including an initial technical assessment report and NOI 
issued in September 2010, and a supplemental NOI issued in December 
2010. 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.\19\ The 
United Auto Workers (UAW) also supported the announcement,\20\ as did 
many consumer and environmental groups. As envisioned in the 
Presidential announcement, Supplemental NOI, and the December 2011 
Notice of Proposed Rulemaking (NPRM), these final rules establish 
standards for MYs 2017- and beyond light duty vehicles. These standards 
take into consideration significant public input that was received in 
response to the NPRM from the regulated industry, consumer groups, 
labor unions, states, environmental organizations, national security 
experts and veterans, industry suppliers and dealers, as well as other 
organizations and by thousands of U.S. citizens. The agencies 
anticipate that these final standards will spur the development of a 
new generation of clean and more fuel efficient 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.
---------------------------------------------------------------------------

    \18\ 76 FR 48758 (August 9, 2011).
    \19\ Letters of support are available at http://www.epa.gov/otaq/climate/regulations.htm and at http://www.nhtsa.gov/fuel-economy (last accessed June 12, 2012).
    \20\ 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 June 12, 2012).
---------------------------------------------------------------------------

    As described below, NHTSA and EPA are finalizing a continuation of 
the National Program for light-duty vehicles that the agencies believe 
represents the appropriate levels of fuel economy and GHG emissions 
standards for model years 2017 and beyond, given the technologies that 
the agencies project 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 
establishing GHG emissions standards under the Clean Air Act (CAA), and 
NHTSA is establishing CAFE standards under EPCA, as amended by the 
Energy Independence and Security Act of 2007 (EISA). This joint final 
rulemaking reflects a carefully coordinated and harmonized approach to 
implementing these two statutes, in accordance with all substantive and 
procedural requirements imposed by law.\21\
---------------------------------------------------------------------------

    \21\ For NHTSA, this includes the requirements of the National 
Environmental Policy Act (NEPA).
---------------------------------------------------------------------------

    These final rules 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. NHTSA's and 
EPA's technology assessment indicates there is a wide range of 
technologies available for manufacturers to consider utilizing to 
reduce GHG emissions and improve fuel economy. The agencies believe 
that advances in gasoline engines and transmissions will continue 
during these model years and that these technologies are likely to play 
a key role in compliance strategies for the MYs 2017-2025 standards, 
which is a view that is supported in the literature, among the vehicle 
manufacturers, suppliers, and by public comments.\22\ The agencies also 
believe that there will be continued improvement in diesel engines, 
vehicle aerodynamics, and tires as well as the use of lighter weight 
materials and optimized designs that will reduce vehicle mass. 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.\23\ Finally, the agencies expect that vehicle 
air conditioners will continue to become more efficient, thereby 
improving fuel efficiency. The agencies also expect that air 
conditioning leakage will be reduced and that manufacturers will use 
reduced global warming refrigerants. Both of these improvements will 
reduce GHG emissions.
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    \22\ There are a number of competing gasoline engine 
technologies, with one in particular that the agencies project will 
increase beyond MY 2016. This is the downsized gasoline direct 
injection engine equipped with a turbocharger and cooled exhaust gas 
recirculation, which has better fuel efficiency than a larger engine 
and similar steady-state power performance. 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 contribute to providing fuel 
efficiency 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 MY 2016, we anticipate 
that by MY 2025 these will be common in new light duty vehicles.
    \23\ For example, while today less than three percent of annual 
vehicle sales are strong hybrids, plug-in hybrids and all electric 
vehicles, by MY 2025 we estimate in our analyses for this final rule 
that these technologies could represent 3-7%, while ``mild'' hybrids 
may be as high as 17- 27% of new sales and vehicles with stop/start 
systems only may be as high as 6-15% of new sales. Thus by MY 2025, 
26-49% of the fleet may have some level of electrification.
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    Although a number of these technologies are available today, the 
agencies' assessments support that there will be continuing 
improvements in the efficiency of some of the technologies and that the 
cost of many of the technologies will be lower in the future.

[[Page 62633]]

We anticipate that the standards will require most manufacturers to 
considerably increase the application of these technologies across 
their light duty vehicle fleets in order to comply with the standards. 
Manufacturers may also develop and introduce other technologies that we 
have not considered for this rulemaking analysis, which could play 
important roles in compliance with the standards and potentially offer 
more cost effective alternatives. Due to the relatively long lead time 
for the later model years in this rule, it is quite possible that 
innovations may arise that the agencies (and the automobile 
manufacturers) are not considering today, which may even become 
commonplace by MY 2025.
    As discussed further below, and as with the standards for MYs 2012-
2016, the agencies believe that the final standards help to preserve 
consumer choice, that is, the standards should not affect consumers' 
opportunity to purchase the size and type of vehicle that meets their 
needs, and should not otherwise affect vehicles' performance 
attributes. NHTSA and EPA are finalizing standards based on vehicle 
footprint, which is the area defined by the points where the tires 
contact the ground, where smaller vehicles have relatively more 
stringent targets, and larger vehicles have less stringent targets. 
Footprint based standards promote fuel economy and GHG emissions 
improvements in vehicles of all sizes, and are not expected to create 
incentives for manufacturers to change the size of their vehicles in 
order to comply with the standards. Consequently, these rules should 
not have a significant effect on the relative availability of different 
size vehicles in the fleet. The agencies' analyses used a constraint of 
preserving all other aspects of vehicles' functionality and 
performance, and the technology cost and effectiveness estimates 
developed in the analyses reflect this constraint.\24\ In addition, as 
with the standards for MYs 2012-2016, the agencies believe that the 
standards should not have a negative effect on vehicle safety, as it 
relates to vehicle size and mass as described in Section II.C and II.G 
below, respectively. Because the standards are fleet average standards 
for each manufacturer, no specific vehicle must meet a target.\25\ 
Thus, nothing in these rules prevents consumers in the 2017 to 2025 
timeframe from choosing from the same mix of vehicles that are 
currently in the marketplace.
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    \24\ One commenter asserted that the standards ``value purported 
consumer choice and the continued production of every vehicle in its 
current form over the need to conserve energy: as soon as increased 
fuel efficiency begins to affect any attribute of any existing 
vehicle, stringency increases cease.'' CBD Comments p. 4. This 
assertion is incorrect. As explained in the text above, the 
agencies' cost estimates include costs of preserving existing 
attributes, such as vehicle performance. These costs are reflected 
in the agencies' analyses of reasonableness of the costs of the 
rule, but do not by themselves dictate any particular level of 
standard stringency much less cause stringency to ``cease'' as the 
commenter would have it.
    \25\ A specific vehicle would only have to meet a fuel economy 
or GHG target value on the target curve standards being finalized 
today in the rare event that a manufacturer produces a single 
vehicle model.
---------------------------------------------------------------------------

    Given the long time frame at issue in setting standards for MYs 
2022-2025 light-duty vehicles, and given NHTSA's statutory obligation 
to conduct a de novo rulemaking in order to establish final standards 
for vehicles for the 2022-2025 model years, the agencies will conduct a 
comprehensive mid-term evaluation and agency decision-making process 
for the MYs 2022-2025 standards, as described in the proposal. As 
stated in the proposal, both NHTSA and EPA will develop and compile up-
to-date information for the mid-term evaluation, through a 
collaborative, robust and transparent process, including public notice 
and comment. The mid-term evaluation will assess the appropriateness of 
the MYs 2022-2025 standards, based on information available at the time 
of the mid-term evaluation and 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 maintaining a National 
Program to address GHG emissions and fuel economy. NHTSA's rulemaking, 
which will incorporate findings from the mid-term evaluation, will be a 
totally fresh consideration of all relevant information and fresh 
balancing of statutory and other relevant factors in order to determine 
the maximum feasible CAFE standards for MYs 2022-2025. In order to 
align the agencies proceedings for MYs 2022-2025 and to maintain a 
joint national program, if the EPA determination is that its standards 
will not change, NHTSA will issue its final rule concurrently with the 
EPA determination. If the EPA determination is that standards may 
change, the agencies will issue a joint NPRM and joint final rule. 
Further discussion of the mid-term evaluation is found later in this 
section, as well as in Sections III.B.3 and IV.A.3.b.
    The 2017-2025 National Program is estimated to reduce GHGs by 
approximately 2 billion metric tons and to save 4 billion barrels of 
oil over the lifetime of MYs 2017-2025 vehicles relative to the MY 2016 
standard curves already in place.\26\ The average cost for a MY 2025 
vehicle to meet the standards is estimated to be about $1800 compared 
to a vehicle that meets the level of the MY 2016 standards in MY 2025. 
Fuel savings for consumers are expected to more than offset the higher 
vehicle costs. The typical driver will save a total of $5,700 to $7,400 
(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 will save a net $3,400 to $5,000 (7 
percent and 3 percent discount rate, respectively) over the vehicle's 
lifetime. This estimate assumes a gasoline price of $3.87 per gallon in 
2025 with small increases most years over the vehicle's lifetime.\27\ 
Further, the payback period for a consumer purchasing a 2025 light-duty 
vehicle with cash would be, on average, 3.4 years at a 7 percent 
discount rate or 3.2 years at a 3 percent discount rate, while 
consumers who buy with a 5-year loan would save more each month on fuel 
than the increased amount they will spend on the higher monthly loan 
payment, beginning in the first month of ownership.
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    \26\ The cost and benefit estimates provided here are only for 
the MY 2017-2025 rulemaking. The CAFE and GHG emissions standards 
for MYs 2012-2016 and CAFE standards for MY 2011 are already part of 
the baseline for this analysis.
    \27\ See Chapter 4.2.2 of the Joint TSD for full discussion of 
fuel price projections of the vehicle lifetimes.
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    Continuing the National Program has both energy security and 
climate change benefits. Climate change is 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, perfluorocarbons, 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 Clean 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

[[Page 62634]]

50 years.\28\ Mobile sources emitted 30 percent of all U.S. GHGs in 
2010 (transportation sources, which do not include certain off-highway 
sources, account for 27 percent) and have been the source of the 
largest absolute increases in U.S. GHGs since 1990.\29\ 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 emissions in 
2010.\30\ Light-duty vehicles emit CO2, methane, nitrous 
oxide, and hydrofluorocarbons and were responsible for nearly 60 
percent of all mobile source GHGs and over 70 percent of Section 202(a) 
mobile source GHGs in 2010.\31\ For light-duty vehicles in 2010, 
CO2 emissions represented about 94 percent of all greenhouse 
emissions (including HFCs), and similarly, the CO2 emissions 
measured over the EPA tests used for fuel economy compliance represent 
about 90 percent of total light-duty vehicle GHG 
emissions.32,33
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    \28\ 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/index.html (last accessed August 9. 2012)
    \29\ Memorandum: Mobile Source Contribution to U.S. GHGs in 2010 
(Docket EPA-HQ-OAR-2010-0799). See generally, U.S. Environmental 
Protection Agency. 2012. Inventory of U.S. Greenhouse Gas Emissions 
and Sinks: 1990-2010. EPA 430-R-12-001. Available at http://epa.gov/climatechange/emissions/downloads12/US-GHG-Inventory-2012-Main-Text.pdf (last accessed June 12, 2012).
    \30\ Section 202(a) sources include passenger cars, light-duty 
trucks, motorcycles, buses, and medium- and heavy-duty trucks. EPA's 
GHG Inventory groups these modes into on-road totals. However, the 
on-road totals in the Inventory include refrigerated transport for 
medium- and heavy-duty trucks, which is not considered a source for 
Section 202(a). In order to determine the Section 202(a) total, we 
took the on-road GHG total of 1556.8 Tg and subtracted the 11.6 Tg 
of refrigerated transport to yield a value of 1545.2 Tg.
    \31\ Memorandum: Mobile Source Contribution to U.S. GHGs in 2010 
(Docket EPA-HQ-OAR-2010-0799). See generally, U.S. Environmental 
Protection Agency. 2012. Inventory of U.S. Greenhouse Gas Emissions 
and Sinks: 1990-2010. EPA 430-R-12-001. Available at http://epa.gov/climatechange/emissions/downloads12/US-GHG-Inventory-2012-Main-Text.pdf (last accessed June 12, 2012)
    \32\ Memorandum: Mobile Source Contribution to U.S. GHGs in 2010 
(Docket EPA-HQ-OAR-2010-0799). See generally, 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.
    \33\ Memorandum: Mobile Source Contribution to U.S. GHGs in 2010 
(Docket EPA-HQ-OAR-2010-0799). See generally, U.S. Environmental 
Protection Agency. 2012. Inventory of U.S. Greenhouse Gas Emissions 
and Sinks: 1990-2010. EPA 430-R-12-001. Available at http://epa.gov/climatechange/emissions/downloads12/US-GHG-Inventory-2012-Main-Text.pdf
---------------------------------------------------------------------------

    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. Although our dependence on foreign 
petroleum has declined since peaking in 2005, net petroleum imports 
accounted for approximately 45 percent of U.S. petroleum consumption in 
2011.\34\ 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 over $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 72 percent of U.S. petroleum consumption in 
2010.\35\ 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.\36\
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    \34\ 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 June12, 2012).
    \35\ Energy Information Administration, Annual Energy Outlook 
2011, ``Oil/Liquids.'' Available at http://www.eia.gov/forecasts/aeo/MT_liquidfuels.cfm (last accessed June 12, 2012).
    \36\ Energy Information Administration, Annual Energy Outlook 
2012 Early Release Overview. Available at http://www.eia.gov/forecasts/aeo/er/early_fuel.cfm (last accessed Jun. 14, 2012).
---------------------------------------------------------------------------

2. Additional Background on the National Program and Stakeholder 
Engagement Prior to the NPRM
    Following the successful adoption of a National Program for model 
years (MY) 2012-2016 light duty vehicles, President Obama issued a 
Memorandum on May 21, 2010 requesting that the NHTSA, on behalf of the 
Department of Transportation, and the U.S. EPA 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 for model years 2017-2025.'' \37\ 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. 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 announcement.\38\
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    \37\ 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).
    \38\ These letters of support in response to the May 21, 2010 
Presidential Memorandum are available at http://www.epa.gov/otaq/climate/letters.htm (last accessed August 9, 2012).
---------------------------------------------------------------------------

    The President's memorandum requested that the agencies, ``work with 
the State of California to develop by September 1, 2010, a technical 
assessment to inform the rulemaking process * * *''. Together, NHTSA, 
EPA, and CARB issued the joint Technical Assessment Report (TAR) 
consistent with Section 2(a) of the Presidential Memorandum.\39\ In 
developing this assessment, the agencies 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. Concurrent with issuing the 
TAR, NHTSA and EPA also issued a joint Notice of Intent to Issue a 
Proposed Rulemaking (NOI) \40\ which highlighted the results of the TAR 
analyses, 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.
---------------------------------------------------------------------------

    \39\ This Interim Joint Technical Assessment Report (TAR) is 
available at http://www.epa.gov/otaq/climate/regulations/ldv-ghg-tar.pdf (last accessed August 9, 2012) 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.''
    \40\ 75 FR 62739, October 13, 2010.
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    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

[[Page 62635]]

year 2016 fleet-wide average of 250 gram/mile (g/mi), which 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.41,42 For each of 
these scenarios, the TAR also evaluated four illustrative 
``technological pathways'' by which these levels could be attained, 
each pathway offering a different mix of advanced technologies and 
assuming various degrees of penetration of advanced gasoline 
technologies, mass reduction, hybrid electric vehicles (HEVs), plug-in 
hybrids (PHEVs), and electric vehicles (EVs). 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.
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    \41\ 75 FR 62744-45.
    \42\ 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/letters.htm (last accessed August 9, 2012).
---------------------------------------------------------------------------

    Manufacturers and others commented extensively on a variety of 
topics in the TAR, 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. EPA and NHTSA 
issued a follow-on Supplemental NOI in November 2010,\43\ highlighting 
many of the key comments the agencies received in response to the 
September NOI and TAR, and summarized some of the key themes from the 
comments and the additional stakeholder meetings.
---------------------------------------------------------------------------

    \43\ 75 FR 76337, December 8, 2010.
---------------------------------------------------------------------------

    The agencies' stakeholder engagement between December 2010 and July 
29, 2011 focused on ensuring that the agencies possessed the most 
complete and comprehensive set of information to inform the proposed 
rulemaking. Information that the agencies presented to stakeholders is 
posted in the NPRM docket and referenced in multiple places in the 
NPRM. Throughout this period, the stakeholders repeated many of the 
broad concerns and suggestions described in the TAR, NOI, and November 
2010 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 final rule 
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 
November 2010 Supplemental NOI and that were summarized in that 
document. Manufacturers provided the agencies more detailed information 
related to their product plans for vehicle models and fuel efficiency 
improving technologies and associated cost estimates, as well as more 
detailed feedback regarding the potential program design elements to be 
included in the program. The second stage of meetings occurred between 
June 21, 2011 and July 14, 2011, during which EPA, NHTSA, CARB and 
several components of the Executive Office of the President kicked-off 
an intensive series of meetings, primarily with manufacturers, to share 
tentative regulatory concepts including concept stringency curves and 
program flexibilities based on the analyses completed by the agencies 
as of June 21, 2011 \44\ and requested manufacturer feedback; 
specifically \45\ detailed and reliable information on how they might 
comply with the concepts, potential changes to the concept stringency 
levels and program flexibilities available under EPA's and NHTSA's 
respective authority that might facilitate compliance, and if they 
projected they could not comply, information supporting that belief. In 
these second stage meetings, the agencies received considerable input 
from the manufacturers related to the questions asked by the agencies 
and also related to consumer acceptance and adoption of some advanced 
technologies and program costs based on their independent assessment or 
information previously submitted to the agencies. The third stage of 
meetings occurred between July 15, 2011 and July 28, 2011 during which 
the agencies continued to refine concept stringencies and compliance 
flexibilities based on further consideration of the information 
available to them as well as meeting with manufacturers who expressed 
ongoing interest in engaging with the agencies.\46\
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    \44\ 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.
    \45\ ``Agency Materials Provided to Manufacturers'' Memo to 
docket NHTSA-2010-0131.
    \46\ ``Agency Materials Provided to Manufacturers'' Memo to 
docket NHTSA-2010-0131.
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    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. Environmental 
organizations consistently stated that stringent standards are 
technically achievable and critical to important national interests. 
Labor interests stressed the need to

[[Page 62636]]

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.
    On July 29, 2011, President Obama with the support of thirteen 
major automakers, announced plans 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.\47\ 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.
---------------------------------------------------------------------------

    \47\ The President's remarks are available at http://www.whitehouse.gov/the-press-office/2011/07/29/remarks-president-fuel-efficiency-standards (last accessed August 9, 2012); 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, EPA and NHTSA 
released a second SNOI (published in the Federal Register on August 9, 
2011) describing the joint proposal that the agencies expected to issue 
to establish the National Program for model years 2017-2025. The 
agencies 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. The input of stakeholders, which is encouraged 
by Executive Order 13563, was invaluable to the agencies in developing 
the NPRM. A more detailed summary of the process leading to the 
proposed rulemaking is found at 76 FR 74862-865.
3. Public Participation and Stakeholder Engagement Since the NPRM Was 
Issued
    The agencies signed their respective proposed rules on November 16, 
2011 (76 FR 74854 (December 1, 2011)), and subsequently received a 
large number of comments representing many perspectives. Between 
January 17 and 24, 2012 the EPA and NHTSA held three public hearings in 
Detroit, Philadelphia and San Francisco. Nearly 400 people testified 
and many more attended the hearings. In response to requests, the 
written comment period was extended by two weeks for a total of 74 days 
from Federal Register publication, closing on February 13, 2012. The 
agencies received extensive written comments from more than 140 
organizations, including auto manufacturers and suppliers, State and 
local governments and their associations, consumer groups, labor 
unions, fuels and energy providers, auto dealers, academics, national 
security experts and veterans, environmental and other non-governmental 
organizations (NGOs), and nearly 300,000 comments from private 
individuals. In addition to comments received on the proposal, the 
agencies met with many different stakeholder groups between issuance of 
the NPRM and this final rule. Generally, the agencies met with nearly 
all automakers individually to discuss flexibilities such as the A/C, 
off-cycle, and pickup truck incentives, as well as different ways to 
meet the standards; with suppliers to discuss the same flexibilities; 
with environmental groups to discuss flexibilities and that the 
agencies maintain strong standards for the final rule; and with the 
natural gas interests to discuss incentives for natural gas in the 
final rule. Memoranda summarizing these meetings can be found in the 
EPA and NHTSA dockets for this rulemaking. EPA-HQ-OAR-2010-0799 and 
NHTSA-2010-0131.\48\
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    \48\ NHTSA is required to provide information on these meetings 
per DOT Order 2100.2, available at http://www.reg-group.com/library/DOT2100-2.PDF (last accessed Jun. 12, 2012). The agencies have 
placed memos summarizing these meetings in their respective dockets.
---------------------------------------------------------------------------

    An overwhelming majority of commenters supported the proposed 2017-
2025 CAFE and GHG standards with most organizations and nearly all of 
the private individuals expressing broad support for the program and 
for the continuation of the National Program to model years (MY) 2017-
2025 light-duty vehicles, and the Program's projected achievement of an 
emissions level of 163 gram/mile fleet average CO2, which 
would be equivalent to 54.5 miles per gallon if the automakers were to 
meet this CO2 level solely through fuel economy 
improvements.\49\
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    \49\ Real-world CO2 is typically 25 percent higher 
and real-world fuel economy is typically 20 percent lower than the 
CO2 and CAFE compliance values discussed here. 163 g/mi 
would be equivalent to 54.5 mpg, if the entire fleet were to meet 
this CO2 level through tailpipe CO2 and fuel 
economy improvements, and assumes gasoline fueled vehicles 
(significant diesel fuel penetration would have a different mpg 
equivalent). The agencies expect, however, that a portion of these 
improvements will be made through improvements in air conditioning 
leakage and alternative refrigerants, which would not contribute to 
fuel economy.
---------------------------------------------------------------------------

    In general, more than a dozen automobile manufacturers supported 
the proposed standards as well as the credit opportunities and other 
provisions that provide compliance flexibility, while also recommending 
some changes to the credit and flexibility provisions--in fact, a 
significant majority of comments from industry focused on the credit 
and flexibility provisions. Nearly all automakers stressed the 
importance of the mid-term evaluation to assess the progress of 
technology development and cost, and the accuracy of the agencies' 
assumptions due to the long time-frame of the rule. Many industry 
commenters expressly predicated their support of the 2017-2025 National 
Program on the existence of this evaluation. Environmental and public 
interest non-governmental organizations (NGOs), as well as States that 
commented were also very supportive of extending the National Program 
to MYs 2017-2025 passenger vehicles and light trucks. Many of these 
organizations expressed concern that the mid-term evaluation might be 
used as an opportunity to weaken standards or to delay the 
environmental benefits of the National Program.
    The agencies also received comments that either opposed the 
issuance of the standards, or that argued that they should be modified 
in various ways. The Center for Biological Diversity (CBD) commented 
that the proposed standards were not sufficiently stringent, 
recommending that the agencies increase the standards to 60-70 mpg in 
2025. CBD, as well as several other organizations,\50\ also argued that 
minimum standards (``backstops'') were necessary for all fleets in 
order to ensure anticipated fuel economy gains. Several environmental 
groups expressed concern that flexibilities, such as off-cycle credits, 
could result in significantly lower gains through double-counting and 
allowing manufacturers to avoid making fuel economy improvements.
---------------------------------------------------------------------------

    \50\ The Natural Resources Defense Council, the Union of 
Concerned Scientists, the Sierra Club, and the Consumer's Union.
---------------------------------------------------------------------------

    Some car-focused manufacturers objected to the truck curves, which 
they considered lenient while some small truck manufacturers objected 
to the large truck targets, which they considered lenient; and some 
intermediate and small volume manufacturers with limited product lines 
requested additional lead time, as well as less stringent standards for 
their vehicles. Manufacturers in general argued that backstops were not

[[Page 62637]]

necessary for fuel economy gains and would be outside NHTSA's 
authority. Manufacturers also commented extensively on the programs' 
flexibilities, such as off-cycle credits, generally requesting more 
permissive applications and requirements.
    The National Automobile Dealers Association (NADA) opposed the MYs 
2017-2025 proposed standards, arguing that the agencies should delay 
rulemaking since they believe there was no need to set standards so far 
in advance, that the costs of the proposed program are higher than 
agencies have projected, and that some (mostly low income) consumers 
will not be able to acquire financing for new cars meeting these more 
stringent standards.
    Many environmental and consumer groups commented that the benefits 
of the rule were understated and the costs overstated, arguing that 
several potential benefits had not been included and the technology 
effectiveness estimates were overly conservative. Some environmental 
groups also expressed concern that the benefits of the rule could be 
eroded if the agencies' assumptions about the market do not come to 
pass or if manufacturers build larger vehicles. Other groups, such as 
NADA, Competitive Enterprise Institute, and the Institute for Energy 
Research, argued that the benefits of the rule were overstated and the 
costs understated, asserting that manufacturers would have already made 
improvements if the agencies' calculations were correct.
    Many commenters discussed potential environmental and health 
aspects of the rule. Producers of specific materials, such as aluminum, 
steel, or plastic, commented that standards should ultimately reflect a 
life cycle analysis that accounts for the greenhouse gas emissions 
attributable to the materials from which vehicles are manufactured. 
Some environmental groups requested that standards for electrified 
vehicles reflect emissions attributable to upstream electricity 
generation. Many commenters expressed support for the rule and its 
health benefits, while other commenters were concerned about possible 
negative health impacts due to assumptions about future fuel 
properties.
    Many commenters also addressed issues relating to safety, with most 
generally supporting the agencies' efforts to continue to improve their 
understanding of the relationship between mass reduction and safety. 
Consistent with their comments in prior rulemakings, several 
environmental and consumer organizations commented that data exist that 
mass reduction does not have adverse safety impacts, and stated that 
the use of better designs and materials can improve both fuel economy 
and safety. Dynamic Research Institute (DRI) submitted a study, and 
other commenters pointed to DRI's work and additional studies for the 
agencies' consideration, as discussed in more detail in Section II.G 
below. Materials producers (aluminum, steel, composite, etc.) commented 
that their respective materials can be used to improve safety. The 
Alliance commented that while some recent mass reduction vehicle design 
concept studies have created designs that perform well in simulation 
modeling of safety standard and voluntary safety guideline tests, the 
design concepts yield aggressively stiffer crash pulses may be 
detrimental to rear seat occupants, vulnerable occupants and potential 
crash partners. The Alliance also commented that there are simulation 
model uncertainties with respect to advanced materials, and the real-
world crash behavior of these concepts may not match that predicted in 
those studies. The Alliance and Volvo commented that it is important to 
monitor safety trends, and the Alliance urged that the agencies revisit 
this topic during the mid-term evaluation.
    Additional comments touched on the use of ``miles per gallon'' to 
describe the standards, the agencies' baseline market forecast, 
consumer welfare and trends in consumer preferences for fuel economy, 
and a wide range of other topics.
    Throughout this notice, the agencies discuss key issues arising 
from the public comments and the agencies' responses to those comments. 
The agencies also respond to comments in the Joint TSD and in their 
respective RIAs. In addition, EPA has addressed all of the public 
comments specific to the GHG program in a Response to Comments 
document.\51\
---------------------------------------------------------------------------

    \51\ EPA Response to Comments document. (EPA-420-F-12-017) 
Available in the docket and at: http://www.epa.gov/otaq/climate/regs-light-duty.htm (last accessed August 8, 2012).
---------------------------------------------------------------------------

4. California's Greenhouse Gas Program
    In 2004, the California Air Resources Board (CARB) approved 
standards for new light-duty vehicles, regulating the emission of 
CO2 and other GHGs.\52\ On June 30, 2009, EPA granted 
California's request for a waiver of preemption under the CAA with 
respect to these standards.\53\ Thirteen states and the District of 
Columbia, comprising approximately 40 percent of the light-duty vehicle 
market, adopted California's standards.\54\ The granting of the waiver 
permits California and the other states to proceed with implementing 
the California emission standards for MYs 2009 and later. 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.\55\ This 
facilitates the National Program by allowing manufacturers to meet all 
of the standards with a single national fleet.
---------------------------------------------------------------------------

    \52\ Through operation of section 209(b) of the Clean Air Act, 
California is able to seek and receive a waiver of section 209(a)'s 
preemptions to enforce such standards. Section 209(b)(1) requires a 
waiver to be granted for any State that had adopted standards (other 
than crankcase emission standards) for the control of emissions from 
new motor vehicles or new motor vehicles' engines prior to March 30, 
1966. California is the only state to have adopted standards prior 
to 1966 and is therefore the only state qualified to seek and 
receive a waiver. EPA evaluates California's request under the three 
waiver criteria set forth in section 209(b)(1)(A)-(C) and must grant 
a waiver under section 209(e)(2) if these criteria are met.
    \53\ 74 FR 32744 (July 8, 2009). See also Chamber of Commerce v. 
EPA, 642 F.3d 192 (D.C. Cir. 2011) (dismissing petitions for review 
challenging EPA's grant of the waiver).
    \54\ The Clean Air Act allows other states to adopt California's 
motor vehicle emissions standards under section 177 if such 
standards are identical to the California standards for which a 
waiver has been granted. States are not required to seek EPA 
approval under the terms of section 177.
    \55\ 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 at 7. Available at http://www.arb.ca.gov/regact/2010/ghgpv10/oaltp.pdf (last accessed June 12, 2012).
---------------------------------------------------------------------------

    As requested by the President and in the interest of maximizing 
regulatory harmonization, NHTSA and EPA worked closely with CARB 
throughout the development of the proposed rules. CARB staff released 
its proposal for MYs 2017-2025 GHG emissions standards consistent with 
the standards proposed by EPA on December 9, 2011 and the California 
Air Resources Board adopted these standards at its January 26, 2012 
Board meeting, with final approval at its March 22, 2012 Board 
meeting.\56\ In adopting their GHG standards the California Air 
Resources Board directed the Executive Officer to ``continue 
collaborating with EPA and NHTSA as their standards are finalized and 
in the mid-term review to minimize potential lost benefits from federal 
treatment of upstream emissions of electricity and hydrogen fueled 
vehicles,'' and also, ``to participate in U.S. EPA's review of the 2022 
through 2025 model year

[[Page 62638]]

passenger vehicle greenhouse gas standards being proposed under the 
2017 through 2025 MY National Program.'' \57\ CARB also reconfirmed its 
commitment, previously made in July 2011 in conjunction with release of 
the Supplemental NOI,\58\ to propose to revise its GHG emissions 
standards for MYs 2017-2025 such that compliance with EPA GHG emissions 
standards shall be deemed compliance with the California GHG emissions 
standards. The Board directed CARB's Executive Officer that, ``it is 
appropriate to accept compliance with the 2017 through 2025 model year 
National Program as compliance with California's greenhouse gas 
emission standards in the 2017 through 2025 model years, once United 
States Environmental Protection Agency (U.S. EPA) issues their final 
rule on or after its current July 2012 planned release, provided that 
the greenhouse gas reductions set forth in U.S. EPA's December 1, 2011 
Notice of Proposed Rulemaking for 2017 through 2025 model year 
passenger vehicles are maintained, except that California shall 
maintain its own reporting requirements.'' \59\
---------------------------------------------------------------------------

    \56\ See California Low-Emission Vehicles (LEV) & GHG 2012 
regulations adopted by State of California Air Resources Board, 
March 22, 2012, Resolution 12-21 incorporating by reference 
Resolution 12-11 (see especially Resolution 12-11 at 20) which was 
adopted January 26, 2012. Available at http://www.arb.ca.gov/regact/2012/leviiighg2012/leviiighg2012.htm (last accessed July 9, 2012).
    \57\ Id.
    \58\ See State of California July 28, 2011 letter available at: 
http://www.epa.gov/otaq/climate/letters.htm (last accessed August 9, 
2012).
    \59\ Id., CARB Resolution 12-21 (March 22, 2012) (last accessed 
June 6, 2012).
---------------------------------------------------------------------------

C. Summary of the Final 2017-2025 National Program

1. Joint Analytical Approach
    These final rules continue the collaborative analytical effort 
between NHTSA and EPA, which began with the MYs 2012-2016 rulemaking 
for light-duty vehicles. NHTSA and EPA have worked together on nearly 
every aspect of the technical analysis supporting these joint rules. 
The results of this collaboration are reflected in key elements of the 
respective NHTSA and EPA rules, as well as in the analytical work 
contained in the Joint Technical Support Document (Joint TSD). The 
agencies have continued to develop and refine the supporting analyses 
since issuing the proposed rule last December. The Joint TSD, in 
particular, describes important details of the analytical work that are 
common to both agencies' rules, and also explains any key differences 
in approach. The joint analyses addressed in the TSD 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 final rules, a description of air conditioner and other 
off-cycle technologies, and the agencies' assessment of the impacts of 
hybrid technology incentive provisions for full-size pick-up trucks. 
This comprehensive joint analytical approach has provided a sound and 
consistent technical basis for both agencies in developing their final 
standards, which are summarized in the sections below.
2. Level of the Standards
    EPA and NHTSA are finalizing separate sets of standards for 
passenger cars and for light trucks, each under its respective 
statutory authority. EPA is setting national CO2 emissions 
standards for passenger cars and light-trucks under section 202(a) of 
the Clean Air Act (CAA), while NHTSA is setting national corporate 
average fuel economy (CAFE) standards under the Energy Policy and 
Conservation Act (EPCA), as amended by the Energy Independence and 
Security Act (EISA) of 2007 (49 U.S.C. 32902). Both the CO2 
and CAFE standards for passenger cars and standards for light trucks 
are footprint-based, similar to the standards currently in effect for 
these vehicles through model year 2016, and will become more stringent 
on average in each model year from 2017 through 2025. The basis for 
measuring performance relative to standards continues to be based 
predominantly on the EPA city and highway test cycles (2-cycle test). 
However, EPA is finalizing optional air conditioning and off-cycle 
credits for the GHG program and adjustments to calculated fuel economy 
for the CAFE program that are based on test procedures other than the 
2-cycle tests.
    As proposed, EPA is finalizing standards that are projected to 
require, on an average industry fleet wide basis, 163 grams/mile of 
CO2 in model year 2025. This is projected to be achieved 
through improvements in fuel efficiency and improvements in non-
CO2 GHG emissions from reduced air conditioning (A/C) system 
leakage and use of lower global warming potential (GWP) refrigerants. 
The level of 163 grams/mile CO2 is equivalent on a mpg basis 
to 54.5 mpg, if this level was achieved solely through improvements in 
fuel efficiency.\60\
---------------------------------------------------------------------------

    \60\ Real-world CO2 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 
CO2 here refers to CO2 equivalent reductions, 
as this included some degree of reductions in greenhouse gases other 
than CO2, as one part of the A/C-related reductions. In 
addition, greater penetration of diesel fuel (as opposed to 
gasoline) will change the fuel economy equivalent.
---------------------------------------------------------------------------

    Consistent with the proposal, for passenger cars, the 
CO2 compliance values associated with the footprint curves 
will 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 the fleet transitions 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 finalizing standards reflecting 
an annual rate of improvement for light-duty trucks which is lower than 
that for passenger cars in the early years of the program. For light-
duty trucks, the average annual rate of CO2 emissions 
reduction in model years 2017 through 2021 is 3.5 percent per year. As 
proposed, EPA is also changing the slopes of the CO2-
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 will be higher than 3.5 percent, and the annual rate of 
improvement for larger light-duty trucks over the same time period will 
be lower than 3.5 percent. For model years 2022 through 2025, EPA is 
finalizing an average annual rate of CO2 emissions reduction 
for light-duty trucks of 5 percent per year.
    Consistent with its statutory authority,\61\ NHTSA has developed 
two phases of passenger car and light truck standards in this 
rulemaking action. The first phase, from MYs 2017-2021, includes final 
standards that are projected to require, on an average industry fleet 
wide basis, a range from 40.3 to 41 mpg in MY 2021.\62\ For passenger 
cars, the annual increase in

[[Page 62639]]

the stringency of the target curves between model years 2017 to 2021 is 
expected to average 3.8 to 3.9 percent. In recognition of 
manufacturers' unique challenges in improving the fuel economy and GHG 
emissions of full-size pickup trucks as the fleet transitions 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 finalizing a lower annual rate of improvement for light trucks in 
the first phase of the program. For light trucks, the annual increase 
in the stringency of the target curves in model years 2017 through 2021 
is 2.5 to 2.7 percent per year on average. NHTSA is changing the slopes 
of the fuel economy footprint curves for light trucks from those in the 
MYs 2012-2016 final rule, which effectively make the annual rate of 
improvement for smaller light trucks in MYs 2017-2021 higher than 2.5 
or 2.7 percent per year, and the annual rate of improvement for larger 
light trucks over that time period lower than 2.5 or 2.7 percent per 
year.
---------------------------------------------------------------------------

    \61\ 49 U.S.C. 32902.
    \62\ The range of values here and through this rulemaking 
document reflect the results of co-analyses conducted by NHTSA using 
two different light-duty vehicle market forecasts through model year 
2025. To evaluate the effects of the standards, the agencies must 
project what vehicles and technologies will exist in future model 
years and then evaluate what technologies can feasibly be applied to 
those vehicles to raise their fuel economy and reduce their 
greenhouse gas emissions. To project the future fleet, the agencies 
must develop a baseline vehicle fleet. For this final rule, the 
agencies have analyzed the impacts of the standards using two 
different forecasts of the light[hyphen]duty vehicle fleet through 
MY 2025. The baseline fleets are discussed in detail in Section II.B 
of this preamble, and in Chapter 1 of the Technical Support 
Document. EPA's sensitivity analysis of the alternative fleet is 
included in Chapter 10 of its RIA.
---------------------------------------------------------------------------

    The second phase of the CAFE program, from MYs 2022-2025, includes 
standards that are not final due to the statutory provision that NHTSA 
shall issue regulations prescribing average fuel economy standards for 
at least 1 but not more than 5 model years at a time.\63\ The MYs 2022-
2025 standards, then, are not final as part of this rulemaking, but 
rather augural, meaning that they represent the agency's current 
judgment, based on the information available to the agency today, of 
what levels of stringency would be maximum feasible in those model 
years. NHTSA projects that those standards would require, on an average 
industry fleet wide basis, a range from 48.7 to 49.7 mpg in model year 
2025. NHTSA will undertake a de novo rulemaking at a later date to set 
legally binding standards for MYs 2022-2025. See Section IV for more 
information. For passenger cars, the annual increase in the stringency 
of the target curves between model years 2022 and 2025 is expected to 
average 4.7 \64\ percent, and for light trucks, the annual increase 
during those model years is expected to average 4.8 to 4.9 percent.
---------------------------------------------------------------------------

    \63\ 49 U.S.C. 32902(b)(3)(B).
    \64\ The rate of increase is rounded at 4.7 percent per year 
using 2010 and 2008 baseline.
---------------------------------------------------------------------------

    NHTSA notes that for the first time in this rulemaking, EPA is 
finalizing, under its EPCA authority, rules allowing the impact of air 
conditioning system efficiency improvements to be included in the 
calculation of fuel economy for CAFE compliance. Given that these real-
world improvements will be available to manufacturers for compliance, 
NHTSA has accounted for this by determining the amount that industry is 
expected to improve air conditioning system efficiency in each model 
year from 2017-2025, and setting the CAFE standards to reflect these 
improvements, in a manner consistent with EPA's GHG standards. See 
Sections III.B.10 and IV.I.4.b of this final rule preamble for more 
information.
    NHTSA also notes that the rates of increase in stringency for CAFE 
standards are lower than EPA's 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 standards, unlike EPA's, do 
not reflect the inclusion of air conditioning system refrigerant and 
leakage improvements, but EPA's standards allows consideration of such 
A/C refrigerant improvements which reduce GHGs but do not affect fuel 
economy. As another example, the Clean Air Act allows various 
compliance flexibilities (among them certain credit generating 
mechanisms) not present in EPCA.
    As with the MYs 2012-2016 standards, NHTSA and EPA's final MYs 
2017-2025 passenger car and light truck standards are expressed as 
mathematical functions depending on the vehicle footprint 
attribute.\65\ Footprint is one measure of vehicle size, and is 
determined by multiplying the vehicle's wheelbase by the vehicle's 
average track width. The standards that must be met by each 
manufacturer's fleet will be determined by computing the production-
weighted average of the targets applicable to each of the 
manufacturer's fleet of passenger cars and light trucks.\66\ 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 in any given model year. 
The values in the tables below reflect the agencies' projection of the 
range 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 these standards. EPA and NHTSA have each finalized the attribute-
based curves, as proposed, for the model years covered by these final 
rules, as discussed in detail in Section II.B of this preamble and 
Chapter 2 of the Joint TSD. The agencies have updated their projections 
of the impacts of the final rule standards since the proposal, as 
discussed in Sections III and IV of this preamble and in the agencies' 
respective RIAs.
---------------------------------------------------------------------------

    \65\ NHTSA is required to set attribute-based CAFE standards for 
passenger cars and light trucks. 49 U.S.C. 32902(b)(3).
    \66\ For CAFE calculations, a harmonic average is used.
---------------------------------------------------------------------------

    As shown in Table I-1 NHTSA's fleet-wide estimated required CAFE 
levels for passenger cars would increase from between 40.1 and 39.6 mpg 
in MY 2017 to between 55.3 and 56.2 mpg in MY 2025. Fleet-wide required 
CAFE levels for light trucks, in turn, are estimated to increase from 
between 29.1 and 29.4 mpg in MY 2017 and between 39.3 and 40.3 mpg in 
MY 2025. 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 a range from 48.7 to 49.7 mpg in MY 2025. 
Considering these combined car and truck increases, the standards 
together represent approximately a 4.0 percent annual rate of 
increase,\67\ on average, relative to the MY 2016 required CAFE levels.
---------------------------------------------------------------------------

    \67\ This estimated average percentage increase includes the 
effect of changes in standard stringency and changes in the forecast 
fleet sales mix.

---------------------------------------------------------------------------

[[Page 62640]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.000

    The estimated average required mpg levels for passenger cars and 
trucks under the 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 flexibilities and credits that manufacturers may use for 
compliance that NHTSA cannot consider in establishing standards based 
on EPCA/EISA constraints. These flexibilities 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 Flexible Fuel Vehicle (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 CAFE standards will lead to the following 
average achieved fuel economy levels, based on the agencies' 
projections of what each manufacturer's fleet will comprise in each 
year of the program: \68\
---------------------------------------------------------------------------

    \68\ The 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 final levels. To receive these 
incentives, manufacturers must produce vehicles with these 
technologies or performance levels at volumes that meet or exceed 
final penetration levels (percentage of full size pick-up truck 
volume). This incentive is described in detail in Section IV.I.3.a.. 
The NHTSA estimates in Table I-2 do not account for the reduction in 
estimated average achieved fleet-wide CAFE fuel economy that will 
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 RIA.

---------------------------------------------------------------------------

[[Page 62641]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.001

    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 is finalizing 
minimum standards for domestic passenger cars for MYs 2017-2021 and 
providing augural standards for MYs 2022-2025 as presented below in 
Table I-3.

                                     Table I-3--Minimum Standard for Domestically Manufactured Passenger Cars (mpg)
--------------------------------------------------------------------------------------------------------------------------------------------------------
      2017              2018             2019             2020             2021             2022             2023             2024             2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
         36.7              38.0             39.4             40.9             42.7             44.7             46.8             49.0             51.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    EPA is finalizing GHG emissions standards, and Table I-4 provides 
estimates of the projected overall fleet-wide CO2 emission 
compliance target levels. The values reflected in Table I-4 are those 
that correspond to the manufacturers' projected CO2 
compliance target levels from the passenger car and truck footprint 
curves, but do not account for EPA's projection of how manufacturers 
will implement two of the incentive programs being finalized in today's 
rulemaking (advanced technology vehicle multipliers, and hybrid and 
performance-based incentives for full-size pickup trucks). Table I-4 
also does not account for the intermediate volume manufacturer lead-
time provisions that EPA is adopting. EPA's projection of fleet-wide 
emissions levels that do reflect these provisions is shown in Table I-5 
below.

               Table I-4--Projected Fleet-Wide CO2 Compliance Targets Under the Footprint-Based CO2 Standards (g/mi) (Primary Analysis) a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  2016
                                                                  base     2017     2018     2019     2020     2021     2022     2023     2024     2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger Cars................................................      225      212      202      191      182      172      164      157      150      143
Light Trucks..................................................      298      295      285      277      269      249      237      225      214      203
Combined Cars and Trucks......................................     \69\      243      232      222      213      199      190      180      171      163
                                                                    250
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Projected results using MY 2008 based fleet projection analysis. These values differ slightly from those shown in the proposal because of revisions
  to the MY 2008 based fleet.


[[Page 62642]]

    As shown in Table I-4, projected fleet-wide CO2 emission 
compliance targets for cars increase in stringency from 212 to 143 g/mi 
between MY 2017 and MY 2025. Similarly, projected fleet-wide 
CO2 equivalent emission compliance targets for trucks 
increase in stringency from 295 to 203 g/mi. As shown, the overall 
fleet average CO2 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 are made with fuel economy 
improvements.
     
---------------------------------------------------------------------------

    \69\ As noted at proposal, the projected fleet compliance levels 
for 2016 are different for trucks and the fleet than were projected 
in the 2012-2016 rule. See 76 FR 74868 n. 44. Our assessment for 
this final rule is based on a predicted 2016 car value of 224, a 
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.
---------------------------------------------------------------------------

    EPA anticipates that manufacturers will take advantage of program 
flexibilities, credits and incentives, such as car/truck credit 
transfers, air conditioning credits, off-cycle credits, advanced 
technology vehicle multipliers, intermediate volume manufacturer lead-
time provisions, and hybrid and performance-based incentives for full 
size pick-up trucks. Three of these flexibility provisions--advanced 
technology vehicle multipliers, intermediate volume manufacturer lead-
time provisions, 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.\70\ 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 EPA's 
projection of manufacturers' use of the advanced technology vehicle 
multipliers, and the full size pick-up hybrid/performance incentives, 
but does not reflect car-truck trading, air conditioning credits, or 
off-cycle credits, because, while the latter credit provisions 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.
---------------------------------------------------------------------------

    \70\ There are extremely small (and unquantified) impacts on the 
achieved values from other flexibilities such as small volume 
manufacturer specific standards and emergency vehicle exemptions.

    Table I-5--Projected Fleet-Wide Achieved CO2-Equivalent Emission Levels Under the Footprint-Based CO2 Standards (g/mi) \71\ (Primary Analysis) a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     2016
                                                                     base     2017     2018     2019     2020     2021     2022     2023     2024   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger Cars...................................................      225      213      203      193      183      173      164      157      150  143
Light Trucks.....................................................      298      295      287      278      270      250      238      226      214  204
Combined Cars and Trucks.........................................     \72\      243      234      223      214      200      190      181      172  163
                                                                       250
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Projected results using 2008 based fleet projection analysis. These values differ slightly from those shown in the proposal because of revisions to
  the MY 2008 based fleet and updates to the analysis.

    A more detailed description of how the agency arrived at the year 
by year progression of both the projected compliance targets and the 
achieved CO2 emission levels can be found in Sections III of 
this preamble.
---------------------------------------------------------------------------

    \71\ Electric vehicles are assumed at 0 gram/mile in this 
analysis.
    \72\ The projected fleet achieved levels for 2016 are different 
for the fleet than were projected in the 2012-2016 rule. Our 
assessment is based on a predicted 2016 car value of 224, and a 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 achieved levels for any model year will 
not be known until the end of that model year based on actual 
vehicle sales.
---------------------------------------------------------------------------

    As previously stated, there was broad support for the proposed 
standards by auto manufacturers including BMW, Chrysler, Ford, GM, 
Honda, Hyundai, Kia, Jaguar/Land Rover, Mazda, Mitsubishi, Nissan, 
Tesla, Toyota, Volvo, as well as the Global Automakers. Of the larger 
manufacturers, Volkswagen and Mercedes commented that the proposed 
passenger car standards were relatively too stringent while light truck 
standards were relatively too lenient and suggested several 
alternatives to the proposed standards. Toyota also commented that 
lower truck stringency puts more burdens on small cars. Honda was 
concerned that small light trucks face disproportionate stringency 
compared to larger footprint trucks under the proposed standards. The 
agencies' consideration of these and other comments and of the updated 
technical analyses did not lead to changes to the stringency of the 
standards nor in the shapes of the curves discussed above. These issues 
are discussed in more detail in Sections II, III and IV.
    NHTSA and EPA reviewed the technology assessment employed in the 
proposal in developing this final rule, and concluded that there is a 
wide range of technologies available in the MY 2017-2025 timeframe for 
manufacturers to consider in upgrading light-duty vehicles to reduce 
GHG emissions and improve fuel economy. Commenters generally agreed 
with this assessment and conclusion.\73\ The final technology 
assessment relied on our joint analyses for the proposed rule, as well 
as some new information and analyses, including information we received 
during the public comment period, as discussed in Section II.D below. 
The analyses performed for this final rule included an updated 
assessment of the cost, effectiveness and availability of several 
technologies.
---------------------------------------------------------------------------

    \73\ For more detail on comments regarding the agencies' 
technology assessment, see Section II.D.
---------------------------------------------------------------------------

    As noted further in Section II.D, for this final rule, the agencies 
considered over 40 current and evolving vehicle and engine technologies 
that manufacturers could use to improve the fuel economy and reduce 
CO2 emissions of their vehicles during the MYs 2017-2025 
timeframe. Many of the technologies we considered are available today, 
some on a limited number of vehicles and others more widespread 
throughout the fleet, and the agencies believe they could be 
incorporated into vehicles as manufacturers make their product 
development decisions. These ``near-term'' technologies are identical 
or very similar to those anticipated in the agencies' analyses of 
compliance strategies for the MYs 2012-2016 final rule, but we believe 
they can achieve wider penetration throughout the

[[Page 62643]]

vehicle fleet during the MYs 2017-2025 timeframe. For this rulemaking, 
given its timeframe, we also considered other technologies that are not 
currently in production, but that are beyond the initial research 
phase, and are under development and expected to be in production in 
the next 5-10 years. Examples of these technologies are downsized and 
turbocharged engines operating at combustion pressures even higher than 
today's turbocharged engines, and emerging hybrid architecture combined 
with an 8-speed dual clutch transmission, a combination that is not 
available today. These are technologies that the agencies believe that 
manufacturers can, for the most part, apply both to cars and trucks, 
and that we expect will achieve significant improvements in fuel 
economy and reductions in CO2 emissions at reasonable cost 
in the MYs 2017-2025 timeframe. Chapter 3 of the joint TSD provides the 
full assessment of these technologies. Due to the relatively long lead 
time before MY 2017, the agencies expect that manufacturers will be 
able to employ combinations of these and potentially other technologies 
and that manufacturers and the supply industry will be able to produce 
them in sufficient volumes to comply with the final standards.
    A number of commenters suggested that the proposed standards were 
either too stringent or not stringent enough (either in some model 
years or in all model years, depending on the commenter), and nearly 
all auto manufacturers and their associations stressed the importance 
of the mid-term evaluation of the MYs 2022-2025 standards in their 
comments due to the long timeframe of the rule and uncertainty in 
assumptions given this timeframe. Our consideration of these comments 
as well as our revised analyses, leads us to conclude that the general 
rate of increase in the stringency of the standards as proposed remains 
appropriate. The comprehensive mid-term evaluation process being 
finalized and our evaluation of the stringency of the standards is 
discussed further in Sections III and IV.
    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 
final standards. EPA's and NHTSA's analyses of these regulatory 
alternatives (and explanation of why we are finalizing the standards) 
are contained in Sections III and IV of this preamble, respectively, as 
well as in the agencies' respective Regulatory Impact Analyses (RIAs).
3. Form of the Standards
    NHTSA and EPA are finalizing attribute-based standards for 
passenger cars and light trucks, as required by EISA and as allowed by 
the CAA, and will continue to use vehicle footprint as the 
attribute.\74\ Footprint is defined as a vehicle's wheelbase multiplied 
by its average 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.\75\ The agencies continue to believe that 
footprint is the most appropriate attribute on which to base the 
proposed standards, as discussed in Section II.C and in Chapter 2 of 
the Joint TSD. The majority of commenters supported the continued use 
of footprint as the vehicle attribute; those comments and the agencies' 
response are discussed in Section II.C below.
---------------------------------------------------------------------------

    \74\ NHTSA and EPA 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 common definitions allows the CO2 
standards and the CAFE standards to continue to be harmonized across 
all vehicles for the National Program.
    \75\ NHTSA also used 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 higher CO2 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 CO2 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 the projected production 
volume of its vehicle fleet (and are estimated as part of the EPA 
certification process), the standards to which the manufacturer must 
comply will be determined by 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.\76\
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    \76\ 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 production 
weighted average of the target levels for each model) with fleet 
average performance (based on the production weighted average of the 
performance for each model).
---------------------------------------------------------------------------

    The final footprint-based standards are identical to those 
proposed. The passenger car curves are also similar in shape to the car 
curves for MYs 2012-2016. However, as proposed, the final light truck 
curves for MYs 2017-2025 reflect more significant changes compared to 
the light truck curves for MYs 2012-2016; specifically, the agencies 
have increased the slope and extended the large-footprint cutpoint for 
the light truck curves over time to larger footprints. We continue to 
believe that these changes from the MYs 2012-2016 curves represent an 
appropriate balance of both technical and policy issues, as discussed 
in Section II.C below and Chapter 2 of the Joint TSD.
    NHTSA is adopting the attribute curves below for model years 2017 
through 2021 and presenting the augural attribute curves below for 
model years 2022-2025. As just explained, these targets, expressed as 
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 curves for model years 2017 through 
2025 while Figure I-2 below illustrates the light truck CAFE curves for 
model years 2017 through 2025.
    EPA is finalizing the attribute curves shown in Figure I-3 and 
Figure I-4 below, for model years 2017 through 2025. 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 CO2 car standard curves for model 
years 2017 through 2025 while Figure I-

[[Page 62644]]

4 shows the CO2 truck standard curves for model years 2017-
2025.
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BILLING CODE 6560-50-C
    EPA and NHTSA received a number of comments about the shape of the 
car and truck curves. Some commenters, including Honda, Toyota and 
Volkswagen, stated that the light truck curve was too lenient for large 
trucks, while Nissan and Honda stated the light truck curve was too 
stringent for small trucks; Porsche and Volkswagen stated the car curve 
was too stringent generally, and Toyota stated it was too stringent for 
small cars. A number of NGOs (Center for Biological Diversity, 
International Council on Clean Transportation, Natural Resources 
Defense Council, Sierra Club, Union of Concerned Scientists) also 
commented on the truck curves as well as the relationship between the 
car and truck curves. We address all these comments further in Section 
II.C as well as in Sections III and IV.
    Generally speaking, a smaller footprint vehicle will tend to have 
higher fuel economy and lower CO2 emissions relative to a 
larger footprint vehicle when both have a comparable level of fuel 
efficiency improvement technology. Since the finalized standards apply 
to a manufacturer's overall passenger car fleet and overall light truck 
fleet, not to an individual vehicle, if one of a manufacturer's fleets 
is dominated by small footprint vehicles, then that fleet will have a 
higher fuel economy requirement and a lower CO2 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 final 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 
these standards, which will help to maintain consumer choice during the 
MY 2017 to MY 2025 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 CO2 emissions and fuel economy 
targets under the final standards that different vehicle sizes will 
have, although we emphasize again that these targets are not actual 
standards--the standards are manufacturer-specific, rather than 
vehicle-specific.

[[Page 62648]]



            Table I-6--Model Year 2025 CO2 and Fuel Economy Targets for Various MY 2012 Vehicle Types
----------------------------------------------------------------------------------------------------------------
                                                                   Example model  CO2  Emissions   Fuel economy
             Vehicle type                    Example models       footprint (sq.  target  (g/mi)   target (mpg)
                                                                       ft.)             \a\             \b\
----------------------------------------------------------------------------------------------------------------
                                             Example Passenger Cars
----------------------------------------------------------------------------------------------------------------
Compact car..........................  Honda Fit................              40             131            61.1
Midsize car..........................  Ford Fusion..............              46             147            54.9
Full size car........................  Chrysler 300.............              53             170            48.0
----------------------------------------------------------------------------------------------------------------
                                            Example Light-duty Trucks
----------------------------------------------------------------------------------------------------------------
Small SUV............................  4WD Ford Escape..........              43             170            47.5
Midsize crossover....................  Nissan Murano............              49             188            43.4
Minivan..............................  Toyota Sienna............              56             209            39.2
Large pickup truck...................  Chevy Silverado (extended              67             252            33.0
                                        cab, 6.5 foot bed).
----------------------------------------------------------------------------------------------------------------
a,b Real-world CO2 is typically 25 percent higher and real-world fuel economy is typically 20 percent lower than
  the CO2 and fuel economy target values presented here.

4. Program Flexibilities for Achieving Compliance
a. CO2/CAFE Credits Generated Based on Fleet Average Over-
Compliance
    As proposed, the agencies are finalizing several provisions which 
provide compliance flexibility to manufacturers to meet the standards. 
Many of the provisions are also found in the MYs 2012-2016 rules. For 
example, the agencies are continuing to allow manufacturers to generate 
credits for over-compliance with the CO2 and CAFE 
standards.\77\ As noted above, under the footprint-based standards, a 
manufacturer's ultimate compliance obligations are determined at the 
end of each model year, when production of vehicles for that 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 CO2/CAFE level better than its car and/or 
truck standards, then the manufacturer generates credits. Conversely, 
if the fleet average CO2/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.
---------------------------------------------------------------------------

    \77\ This credit flexibility is required by EPCA/EISA, see 49 
U.S.C. 32903, and is well within EPA's discretion under section 
202(a) of 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, as proposed, EPA is 
continuing this limitation in the MY 2017-2025 program. In its 
comments, Volkswagen requested that credits under the GHG rules be 
allowed to be carried back for five model years rather than three as 
proposed. A five year carry back could create a perverse incentive for 
shortfalls to accumulate past the point where they can be rectified by 
later model year performance. EPA is therefore adopting the three year 
carry back period in its rule. NHTSA is required to allow a three year 
carry-back period by statute.
    However, to facilitate the transition to the increasingly more 
stringent standards, EPA proposed, and is finalizing under its CAA 
authority a one-time CO2 carry-forward beyond 5 years, such 
that any credits generated from MYs 2010 through 2016 will be able to 
be used to comply with light duty vehicle GHG standards at any time 
through MY 2021. This provision does not apply to early credits 
generated in MY 2009. EPA received comments from the Alliance of 
Automobile Manufacturers and several individual manufacturers 
supporting the proposed additional credit carry-forward flexibility and 
also comments from the Center for Biological Diversity opposing the 
additional credit carry-forward provisions which are addressed in 
section III.B.4. 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. As part of the EISA amendments to EPCA, NHTSA was required 
to establish by regulation a CAFE credit 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 standards through 
transferred credits: 1 mpg for MYs 2011-2013; 1.5 mpg for MYs 2014-
2017; and 2 mpg for MYs 2018 and beyond.\78\ These statutory limits 
will continue to apply to the determination of compliance with the CAFE 
standards. EISA also prohibits the use of transferred credits to meet 
the minimum domestic passenger car fleet CAFE standard.\79\
---------------------------------------------------------------------------

    \78\ 49 U.S.C. 32903(g)(3).
    \79\ 49 U.S.C. 32903(g)(4).
---------------------------------------------------------------------------

    Under section 202 (a) of the CAA there is no statutory limitation 
on car-truck credit transfers, and EPA's GHG program allows unlimited 
credit transfers across a manufacturer's car-light truck fleet to meet 
the GHG

[[Page 62649]]

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 in the MY 2012-2016 rule,\80\ as doing so would reduce 
the flexibility to achieve the standards in the lead time provided, and 
would increase costs with no corresponding environmental benefit. EPA 
did not propose and is not finalizing any constraints on credit 
transfers for MY 2017 and later, consistent with the MY 2012-2016 
program. As discussed in Section III.B.4, EPA received one comment from 
Center for Biological Diversity that it should be consistent with EISA 
and establish limitations on credit transfers. EPA disagrees with the 
commenter and continues to believe that limiting transfers and trading 
would unnecessarily constrain program flexibility as discussed in 
section III.B.4 below.
---------------------------------------------------------------------------

    \80\ EPA's GHG program will continue to adjust car and truck 
credits by vehicle miles traveled (VMT), as in the MY2012-2016 
program.
---------------------------------------------------------------------------

    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. EISA also prohibits manufacturers from using traded credits 
to meet the minimum domestic passenger car CAFE standard.\81\
---------------------------------------------------------------------------

    \81\ 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. The primary refrigerant used in automotive air conditioning 
systems today--a hydrofluorocarbon (HFC) refrigerant and potent GHG 
called HFC-134a--can leak directly from the A/C system (direct A/C 
emissions). In addition, operation of the A/C system places an 
additional load on the engine that increases fuel consumption and thus 
results in additional CO2 tailpipe emissions (indirect A/C 
emissions). In the MY 2012-2016 program, EPA allows manufacturers to 
generate credits by reducing either or both types of GHG emissions 
related to A/C systems. For those model years, EPA anticipated that 
manufacturers would pursue these relatively inexpensive reductions in 
GHGs due to improvements in A/C systems and accounted for generation 
and use of both of these credits in setting the levels of the 
CO2 standards.
    For this rule, as with the MYs 2012-2016 program, EPA is finalizing 
its proposal to allow manufacturers to generate CO2-
equivalent\82\ credits to use in complying with the CO2 
standards by reducing direct and/or indirect A/C emissions. These 
reductions can be achieved by improving A/C system efficiency (and thus 
reducing tailpipe CO2 and improving fuel consumption), by 
reducing refrigerant leakage, and by using refrigerants with lower 
global warming potentials (GWPs) than HFC-134a. As proposed, EPA is 
establishing that the maximum total A/C credits available for cars will 
be 18.8 grams/mile CO2-equivalent and for trucks will be 
24.4 grams/mile CO2-equivalent.\83\ The approaches to be 
used to calculate these direct and indirect A/C credits are generally 
consistent with those of the MYs 2012-2016 program, although there are 
several revisions, including as proposed the introduction of a new A/C 
efficiency test procedure that will be applicable starting in MY 2014 
for compliance with EPA's GHG standards.
---------------------------------------------------------------------------

    \82\ CO2 equivalence (CO2e) expresses the 
global warming potential of a greenhouse gas (for A/C, 
hydrofluorocarbons) by normalizing that potency to CO2's. 
Thus, the maximum A/C credit for direct emissions is the equivalent 
of 18.8 grams/mile of CO2 for cars.
    \83\ This is further broken down by 5.0 and 7.2 g/mi 
respectively for car and truck AC efficiency credits, and 13.8 and 
17.2 g/mi respectively for car and truck alternative refrigerant 
credits.
---------------------------------------------------------------------------

    In addition to the grams-per-mile CO2-equivalent 
credits, for the first time the agencies are establishing provisions in 
the CAFE program that would account for improvements in air conditioner 
efficiency. 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. Thus, 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 to calculate CAFE compliance values.\84\ Under this 
authority, EPA is establishing that manufacturers can generate fuel 
consumption improvement values for purposes of CAFE compliance based on 
air conditioning system efficiency improvements for cars and trucks. An 
increase in a vehicle's CAFE grams-per-mile value would be allowed up 
to a maximum based on 0.000563 gallon/mile for cars and on 0.000810 
gallon/mile for trucks. This is equivalent to the A/C efficiency 
CO2 credit allowed by EPA under the GHG program. For the 
CAFE program, EPA would use the same methods to calculate the values 
for air conditioning efficiency improvements for cars and trucks as are 
used in EPA's GHG program. Additionally, given that these real-world 
improvements will be available to manufacturers for compliance, NHTSA 
has accounted for this by determining the amount that industry is 
expected to improve air conditioning system efficiency in each model 
year from 2017-2025, and setting the CAFE standards to reflect these 
improvements, in a manner consistent with EPA's GHG standards. EPA is 
not allowing generation of fuel consumption improvement values for CAFE 
purposes, nor is NHTSA increasing stringency of the CAFE standard, for 
the use of A/C systems that reduce leakage or employ alternative, lower 
GWP refrigerant. This is because those changes do not generally affect 
fuel economy. Most industry commenters supported this proposal, while 
one NGO noted that the inclusion of air conditioning improvements for 
purposes of CAFE car compliance was a change from prior 
interpretations.
---------------------------------------------------------------------------

    \84\ See 49 U.S.C. 32904(c).
---------------------------------------------------------------------------

c. Off-cycle Credits/Fuel Economy Value Increases
    For MYs 2012-2016, EPA provided an option for manufacturers to 
generate credits for utilizing new and innovative technologies that 
achieve CO2 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 and active aerodynamics, among other technologies. See 
generally 75 FR 25438-39. EPA's current program allows off-cycle 
credits to be generated through MY 2016.
    EPA proposed and is finalizing provisions allowing manufacturers to 
continue to generate and use off-cycle credits for MY 2017 and later to 
demonstrate compliance with the light-duty vehicle GHG standards. In 
addition, 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 proposed and is finalizing provisions to allow 
manufacturers to generate fuel consumption improvement

[[Page 62650]]

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.D and IV.I of this 
final rule preamble, the ability to generate off-cycle credits and 
increases in fuel economy for use in compliance will not affect or 
change the stringency of the GHG or CAFE standards established by each 
agency.\85\
---------------------------------------------------------------------------

    \85\ The agencies have developed estimates for the cost and 
effectiveness of various off-cycle technologies, including active 
aerodynamics and stop-start. For the final rule analysis, NHTSA 
assumed that these two technologies are available to manufacturers 
for compliance with the standards, similar to all of the other fuel 
economy improving technologies that the analysis assumes are 
available. The costs and benefits of these technologies are included 
in the analysis, similar to all other available technologies and 
therefore, NHTSA has included the assessment of off-cycle credits in 
the assessment of maximum feasible standards. EPA has included the 
2-cycle benefit of stop-start and active aerodynamics in the 
standards setting analysis because these technologies have 2-cycle, 
in addition to off-cycle, effectiveness. As with all the 
technologies considered in TSD Chapter 3 which are modeled as part 
of potential compliance paths, EPA considers the 2-cycle 
effectiveness when setting the standard. The only exception where 
off-cycle effectiveness is reflected in the standard is for 
improvements to air conditioning leakage and efficiency.
---------------------------------------------------------------------------

    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. 
Other commenters, such as suppliers and some NGOs, also provided 
technical input on various aspects of the off-cycle credit program. 
Some environmental groups expressed concerns about the uncertainties in 
calculating off-cycle credits and that the ability for manufacturer's 
to earn credits from off-cycle technologies should not be a 
disincentive for implementing other (2-cycle) technologies. For MY 2017 
and later, EPA is finalizing several proposed provisions to expand and 
streamline the MYs 2012-2016 off-cycle credit provisions, including an 
approach by which the agencies will provide default values, which will 
eliminate the need for case-by-case-testing, for a subset of off-cycle 
technologies whose benefits are reliably and conservatively quantified. 
EPA is finalizing a list of technologies and default credit values for 
these technologies, as well as capping the maximum amount of these 
credits which can be utilized unless a manufacturer demonstrates 
through testing that greater amounts are justified. The agencies 
believe that our assessment of off-cycle technologies and associated 
credit values on this list is conservative, and emphasize that 
automakers may apply for additional off-cycle credits beyond the 
minimum credit value and cap if they present sufficient supporting 
data. Manufacturers may also apply to receive credit for off-cycle 
technologies besides those listed, again, if they have sufficient data. 
EPA received several comments regarding the list of technologies and 
associated credit values and has modified the list somewhat in response 
to these comments, as discussed in Section II.F.2. EPA was also 
persuaded by the public comments that the default credit values should 
not be contingent upon a minimum penetration of the technology into a 
manufacturer's fleet, and so is not adopting this aspect of the 
proposal. Manufacturers often apply new technologies on a limited basis 
to gain experience, gauge consumer acceptance, allow refinement of the 
manufacturing and production processes for quality and cost, and other 
legitimate reasons. The proposed minimum penetration requirement might 
have discouraged introduction of off-cycle technologies in these 
legitimate circumstances.
    In addition, as requested by commenters, EPA is providing 
additional detail on the process and timing for the credit/fuel 
consumption improvement values application and approval process for 
those instances where manufacturers seek off-cycle credits rather than 
using the default values from the list provided, or seek credits for 
technologies other than those provided through the list. EPA is 
finalizing a timeline for the approval process, including a 60-day EPA 
decision process from the time a manufacturer submits a complete 
application for credits based on 5-cycle testing. As proposed, EPA is 
also finalizing a detailed, step-by-step process, including a 
specification of the data that manufacturers must submit. EPA will also 
consult with NHTSA during the review process. 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 retaining the public comment process from 
the MYs 2012-2016 rule, and will consult with NHTSA during the review 
process.
    Finally, in response to many OEM and supplier comments encouraging 
EPA to allow access to the pre-defined credit menu earlier than MY 
2017, EPA is allowing use of the credit menu for the GHG program 
beginning in MY 2014 to facilitate compliance with the GHG standards 
for MYs 2014-2016. This provision is for the GHG rules only, and does 
not apply to the 2012-2016 CAFE standards; the off-cycle credit program 
will not begin until MY 2017 for the CAFE program, as discussed in 
Section IV.I.4.c. A full description of the program, including an 
overview of key comments and responses, is provided in Section III.C.5. 
A number of technical comments were also submitted by a variety of 
stakeholders, which are addressed in Chapter 5 of the joint TSD.
d. Incentives for Electric Vehicles, Plug-in Hybrid Electric Vehicles, 
Fuel Cell Vehicles, and Compressed Natural Gas Vehicles
    In order to provide temporary regulatory incentives to promote 
advanced vehicle technologies, EPA is finalizing, as proposed, an 
incentive multiplier for CO2 emissions compliance purposes 
for all electric vehicles (EVs), plug-in hybrid electric vehicles 
(PHEVs), and fuel cell vehicles (FCVs) sold in MYs 2017 through 2021. 
In addition, in response to public comments explaining how 
infrastructure and technologies for compressed natural gas (CNG) 
vehicles could serve as a bridge to use of advanced technologies such 
as hydrogen fuel cells, EPA is finalizing an incentive multiplier for 
CNG vehicles sold in MYs 2017 through 2021. This multiplier approach 
means that each EV/PHEV/FCV/CNG vehicle would count as more than one 
vehicle in the manufacturer's compliance calculation. EPA is 
finalizing, as proposed, that EVs and FCVs start with a multiplier 
value of 2.0 in MY 2017 and phase down to a value of 1.5 in MY 2021, 
and that 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.\86\ EPA is finalizing 
multiplier values for both dedicated and dual fuel CNG vehicles for MYs 
2017-2021 that are equivalent to the multipliers for PHEVs. All 
incentive multipliers in EPA's program expire at the end of MY 2021. 
See Section III.C.2 for more discussion of these incentive multipliers.
---------------------------------------------------------------------------

    \86\ The multipliers are for EV/FCVs: 2017-2019--2.0, 2020--
1.75, 2021--1.5; for PHEVs and dedicated and dual fuel CNG vehicles: 
2017-2019--1.6, 2020--1.45, 2021--1.3.

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[[Page 62651]]

    NHTSA currently interprets EPCA and EISA as precluding it from 
offering additional incentives for the alternative fuel operation of 
EVs, PHEVs, FCVs, and NGVs, except as specified by statute,\87\ and 
thus did not propose and is not including incentive multipliers 
comparable to the EPA incentive multipliers described above.
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    \87\ 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, 49 U.S.C. 32905(a) expressly requires 
EPA to calculate the fuel economy of FCVs using a specified 
incentive, and 49 U.S.C. 32905(c) expressly requires EPA to 
calculate the fuel economy of natural gas vehicles 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 also finalizing, as proposed, to 
set a value of 0 g/mile for the tailpipe CO2 emissions 
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 finalizing, 
as proposed, that 0 g/mi only be allowed up to a per-company cumulative 
sales cap, tiered as follows: 1) 600,000 EV/PHEV/FCVs for companies 
that sell 300,000 EV/PHEV/FCVs in MYs 2019-2021; or 2) 200,000 EV/PHEV/
FCVs for all other manufacturers. Starting with MY 2022, the compliance 
value for EVs, FCVs, and the electric portion of PHEVs in excess of 
individual automaker cumulative production caps must be based on net 
upstream accounting. These provisions are discussed in detail in 
Section III.C.2.
    As proposed and as discussed above, for EVs and other dedicated 
alternative fuel vehicles, EPA will calculate fuel economy for the CAFE 
program (under its EPCA statutory authority, as further described in 
Section I.E.2.a) using the same methodology as in the MYs 2012-2016 
rulemaking.\88\ For liquid alternative fuels, this methodology 
generally counts 15 percent of the volume of fuel used in determining 
the mpg-equivalent fuel economy. For gaseous alternative fuels (such as 
natural gas), 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 uses a petroleum equivalency 
factor to convert to a mpg-equivalent value. The petroleum equivalency 
factor for electricity includes an adjustment that effectively only 
counts 15 percent of the actual energy consumed. Counting 15 percent of 
the fuel volume or energy provides an incentive for alternative fuels 
in the CAFE program.
---------------------------------------------------------------------------

    \88\ See 49 U.S.C. 32904 and 32905.
---------------------------------------------------------------------------

    The methodology that EPA is finalizing for dual fueled vehicles 
under the GHG program and to calculate fuel economy for the CAFE 
program is discussed below in subsection I.C.7.a.
e. Incentives for Using Advanced, ``Game-Changing'' Technologies in 
Full-Size Pickup Trucks
    The agencies recognize that the standards presented in this final 
rule for MYs 2017-2025 will be challenging for large vehicles, 
including full-size pickup trucks often used in commercial 
applications. To help address this challenge, the program will, as 
proposed, adopt incentives for the use of hybrid electric and non-
hybrid electric ``game changing'' technologies in full-size pickup 
trucks.
    EPA is providing the incentive for the GHG program under EPA's CAA 
authority, and for the CAFE program under EPA's EPCA authority. EPA's 
GHG and NHTSA's CAFE standards are set at levels that take into account 
this flexibility as an incentive for the introduction of advanced 
technology. This provides the opportunity in the program's early model 
years to begin penetration of advanced technologies into this category 
of vehicles, and in turn creates more opportunities for achieving the 
more stringent MYs 2022-2025 truck standards.
    EPA is providing a per-vehicle CO2 credit in the GHG 
program and an equivalent fuel consumption improvement value in the 
CAFE program for manufacturers that sell significant numbers of large 
pickup trucks that are mild or strong hybrid electric vehicles (HEVs). 
To qualify for these incentives, a truck must meet minimum criteria for 
bed size, and for towing or payload capability. In order to encourage 
rapid penetration of these technologies in this vehicle segment, the 
final rules also establish minimum HEV sales thresholds, in terms of a 
percentage of a manufacturer's full-size pickup truck fleet, which a 
manufacturer must satisfy in order to qualify for the incentives.
    The program requirements and incentive amounts differ somewhat for 
mild and strong HEV pickup trucks. As proposed, mild HEVs will be 
eligible for a per-vehicle CO2 credit of 10 g/mi (equivalent 
to 0.0011 gallon/mile for a gasoline-fueled truck) during MYs 2017-
2021. To be eligible a manufacturer would have to show that the mild 
hybrid technology is utilized in a specified portion of its truck fleet 
beginning with at least 20% of a company's full-size pickup production 
in MY 2017 and ramping up to at least 80% in MY 2021. The final rule 
specifies a lower level of technology penetration for MYs 2017 and 2018 
than the 30% and 40% penetration rates proposed, based on our 
consideration of industry comments that too high a penetration 
requirement could discourage introduction of the technology. The lower 
required rates will help factor in the early experience gained with 
this technology and allow for a more efficient ramp up in manufacturing 
capacity. As proposed, strong HEV pickup trucks will be eligible for a 
20 g/mi credit (0.0023 gallon/mile) during MYs 2017-2025 if the 
technology is used on at least 10% of a company's full-size pickups in 
that model year. EPA and NHTSA are adopting specific definitions for 
mild and strong HEV pickup trucks, based on energy flow to the high-
voltage battery during testing. These definitions are slightly 
different from those proposed--reflecting the agencies' consideration 
of public comments and additional pertinent data. The details of this 
program are described in Sections II.F.3 and III.C.3, as well as in 
Chapter 5.3 of the joint TSD.
    Because there are other promising technologies besides 
hybridization that can provide significant reductions in GHG emissions 
and fuel consumption from full size pickup trucks, EPA is also 
adopting, as proposed, a performance-based CO2 emissions 
credit and equivalent fuel consumption improvement value for full-size 
pickup trucks. Eligible pickup trucks certified as performing 15 
percent better than their applicable CO2 target will receive 
a 10 g/mi credit (0.0011 gallon/mile), and those certified as 
performing 20 percent better than their target will receive a 20 g/mi 
credit (0.0023 gallon/mile). The 10 g/mi performance-based credit will 
be available for MYs 2017 to 2021 and, once qualifying; a vehicle model 
will continue to receive the credit through MY 2021, provided its 
CO2 emissions level does not increase. The 20 g/mi 
performance-based credit will be provided to a vehicle model for a 
maximum of 5 years within the 2017 to 2025 model year period provided 
its

[[Page 62652]]

CO2 emissions level does not increase. Minimum sales 
penetration thresholds apply for the performance-based credits, similar 
to those adopted for HEV credits.
    To avoid double-counting, no truck will receive credit under both 
the HEV and the performance-based approaches. Further details on the 
full-size truck technology credit program are provided in sections 
II.F.3 and III.C.3, as well as in Chapter 5.3 of the joint TSD.
    The agencies received a variety of comments on the proposal for 
this technology incentive program for full size pickup trucks. Some 
environmental groups and manufacturers questioned the need for it, 
arguing that this vehicle segment is not especially challenged by the 
standards, that hybrid systems would readily transfer to it from other 
vehicle classes, and that the credit essentially amounts to an economic 
advantage for manufacturers of these trucks. Other industry commenters 
requested that it be made available to a broader class of vehicles, or 
that the minimum penetration thresholds be removed or relaxed. There 
were also a number of comments on the technical requirements defining 
eligibility and mild/strong HEV performance. In response to the 
comments, the agencies made some changes to the proposed program, 
including adjustments to the penetration thresholds for mild HEVs, 
clarification that non-gasoline HEVs can qualify, and improvements to 
the technical criteria for mild and strong hybrids. The comments and 
changes are discussed in detail in sections II.F.3, and III.C.3, and in 
Chapter 5 of the TSD.
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 de novo rulemaking 
in order to establish final standards for vehicles for those model 
years, the agencies will conduct a comprehensive mid-term evaluation 
and agency decision-making process for the MYs 2022-2025 standards, as 
described in the proposal.
    The agencies received many comments about the importance of the 
proposed mid-term evaluation due to the long time-frame of the rule and 
the uncertainty in assumptions due to this long timeframe. Nearly all 
auto manufacturers and associations predicated their support of the MY 
2017-2025 National Program on the agencies conducting this evaluation 
and decision-making process. In addition, a number of auto 
manufacturers suggested additional factors that the agencies should 
consider during the evaluation process and also stressed the importance 
of completing the evaluation no later than April 1, 2018, the timeframe 
proposed by the agencies. Several associations also asked for more 
detail to be codified regarding the timeline, content and procedures of 
the review process. Several automakers and organizations suggested that 
the agencies also conduct a series of smaller, focused evaluations or 
``check-ins'' on key issues and technological and market trends. 
Several organizations and associations stressed the importance of 
involving CARB and broad public participation in the review process.
    The agencies also received a number of comments from environmental 
and consumer organizations expressing concerns about the mid-term 
evaluation--that it could occur too early, before reliable data on the 
new standards is available, be disruptive to auto manufacturers' 
product planning and add uncertainty, and that it should not be used as 
an opportunity to delay benefits or weaken the overall National Program 
for MY 2022-2025. Those organizations commented that if the agencies 
determined that a mid-term evaluation was necessary, it should be used 
as an opportunity to increase the stringency of the 2022-2025 
standards. Some environmental groups opposed the concept of the 
agencies performing additional interim reviews. Finally, several 
environmental organizations urged transparency and recommended that the 
agencies provide periodic updates on technology progress and compliance 
trends. One commenter, NADA, stated that the rule should not be 
organized in a way that would require a mid-term evaluation and that 
the agencies should wait to set standards for MYs 2017-2021 until more 
information is available. The mid-term evaluation comments are 
discussed in detail in sections III.B.3 and IV.A.3.b.
    The agencies are finalizing the mid-term evaluation and agency 
decision-making process as proposed. As stated in the proposal, both 
NHTSA and EPA will develop and compile up-to-date information for the 
mid-term 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 this 
final 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. In order to 
align the agencies' rulemaking for MYs 2022-2025 and to maintain a 
joint national program, if the EPA determination is that standards will 
not change, NHTSA will issue its final rule concurrently with the EPA 
determination. If the EPA determination is that standards may change, 
the agencies will issue a joint NPRM and joint final rule. The 
comprehensive evaluation process will lead to final agency action by 
both agencies, as described in sections III.B.3 and IV.A.3 of this 
Notice.
    NHTSA's final action will be a de novo rulemaking conducted, as 
explained, with fresh inputs and a fresh consideration and balancing of 
all relevant factors, based on the best and most current information 
before the agency at that time. EPA will conduct a mid-term evaluation 
of the later model year light-duty GHG standards (MY2022-2025). The 
evaluation will determine what standards are appropriate for those 
model years.
    Consistent with the agencies' commitment to maintaining a single 
national framework for regulation of vehicle GHG emissions and fuel 
economy, the agencies fully expect to conduct the mid-term evaluation 
in close coordination with the California Air Resources Board (CARB). 
In adopting their GHG standards on March 22, 2012, the California Air 
Resources Board directed the Executive Officer to continue 
collaborating with EPA and NHTSA as the Federal GHG standards were 
finalized and also ``to participate in U.S. EPA's mid-term review of 
the 2022 through 2025 model year passenger vehicle greenhouse gas 
standards being proposed under the 2017 through 2025 MY National 
Program''.\89\ In addition, in order to align the agencies' proceedings 
for MYs 2022-2025 and to maintain a joint national program, if the EPA 
determination is that standards will not change, NHTSA will issue its 
final rule concurrently with the EPA determination. If the EPA 
determination is that standards may change, the agencies will issue a 
joint NPRM and joint final rule.
---------------------------------------------------------------------------

    \89\ See California Low-Emission Vehicles (LEV) & GHG 2012 
regulations approved by State of California Air Resources Board, 
Resolution 12-11. Available at: http://www.arb.ca.gov/regact/2012/cfo2012/res12-11.pdf (last accessed August 9, 2012).
---------------------------------------------------------------------------

    Further discussion of the mid-term evaluation can be found in 
Sections III.B.3 and IV.A.3.b of this final rule preamble.
6. Coordinated Compliance
    The MYs 2012-2016 final rules established detailed and 
comprehensive regulatory provisions for compliance and enforcement 
under the GHG and

[[Page 62653]]

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 finalizing 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 is also continuing the provisions adopted in 
the MYs 2012-2016 GHG rule for in-use compliance with the GHG emissions 
standards.
    This 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 instances of noncompliance.
7. Additional Program Elements
a. Compliance Treatment of Plug-in Hybrid Electric Vehicles (PHEVs), 
Dual Fuel Compressed Natural Gas (CNG) Vehicles, and Flexible Fuel 
Vehicles (FFVs)
    As proposed, EPA is finalizing provisions which state that 
CO2 emissions compliance values for plug-in hybrid electric 
vehicles (PHEVs) and dual fuel compressed natural gas (CNG) vehicles 
will be based on estimated use of the alternative fuels, recognizing 
that if a consumer incurs significant cost for a dual fuel vehicle and 
can use an alternative fuel that has significantly lower cost than 
gasoline, it is very likely that the consumer will seek to use the 
lower cost alternative fuel whenever possible. Accordingly, for 
CO2 emissions compliance, EPA is using 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 dual 
fuel CNG vehicles, along with the CO2 emissions test values 
on the alternative fuel and gasoline. Dual fuel CNG vehicles must have 
a minimum natural gas range-to-gasoline range of 2.0 in order to use 
this utility factor approach. Any dual fuel CNG vehicles that do not 
meet this requirement would use a utility factor of 0.50, the value 
that has been used in the past for dual fuel vehicles under the CAFE 
program. EPA is also finalizing, as proposed, an option allowing the 
manufacturer to use this utility factor methodology for CO2 
emissions compliance for dual fuel CNG vehicles for MY 2012 and later 
model years.
    As proposed, EPA is accounting 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 tailpipe emissions 
reduction attributed to alternative fuels. Unlike PHEV and dual fuel 
CNG vehicles, there is not a significant cost differential between an 
FFV and a conventional gasoline vehicle and historically consumers have 
fueled these vehicles with E85 a very small percentage of the time. But 
E85 use in FFVs is expected to rise in the future due to Renewable Fuel 
Standard program requirements. GHG emissions compliance issues for dual 
fuel vehicles are discussed further in Section III.C.4.a.
    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 finalizing its proposal, under its EPCA authority, to use 
the ``utility factor'' methodology for PHEV and CNG vehicles described 
above to determine how to apportion the fuel economy when operating on 
gasoline or diesel fuel and the fuel economy when operating on the 
alternative fuel. For FFVs under the CAFE program, EPA is using the 
same methodology it uses for the GHG program to apportion the fuel 
economy, namely based on actual usage of E85. As proposed, EPA is 
continuing 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.C.4.b and in Section IV.I.3.a.
b. Exclusion of Emergency and Police Vehicles
    Under EPCA, manufacturers are allowed to exclude emergency vehicles 
from their CAFE fleet \90\ and all manufacturers that produce emergency 
vehicles 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 proposed and is finalizing the same 
type of exclusion provision for these vehicles for MY 2012 and later 
because of their unique features. Law enforcement and emergency 
vehicles are necessarily equipped with features which reduce the 
ability of manufacturers to sufficiently improve the emissions control 
without compromising necessary vehicle utility. Manufacturers commented 
in support of this provision and EPA received only one comment against 
exempting emergency vehicles. These comments are addressed in Section 
III.B.8.
---------------------------------------------------------------------------

    \90\ 49 U.S.C. 32902(e).
---------------------------------------------------------------------------

c. Small Businesses, Small Volume Manufacturers, and Intermediate 
Volume Manufacturers
    As proposed, EPA is finalizing 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 
exempting small businesses--that is, any company that meets the SBA's 
definition of a small business--from the MY 2017 and later GHG 
standards. 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, there is no significant impact on emission reductions. As 
proposed, EPA is also finalizing an opt-in provision that will allow 
small businesses wishing to waive their exemption and comply with the 
GHG standards to do so. EPA received no adverse comments on its 
proposed approach for small businesses.
    EPA's final rule also addresses small volume manufacturers, those 
with U.S. annual sales of less than 5,000 vehicles.

[[Page 62654]]

Under the MYs 2012-2016 program, these small volume manufacturers are 
eligible for an exemption from the CO2 standards. As 
proposed, EPA will bring small volume manufacturers into the 
CO2 program for the first time starting in MY 2017, and 
allow them to petition EPA for alternative standards to be developed 
manufacturer-by-manufacturer in a public process. 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.\91\ 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.\92\ 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. NHTSA is not changing its regulations pertaining to exemptions 
and alternative standards (49 CFR Part 525) as part of this rulemaking.
---------------------------------------------------------------------------

    \91\ 49 U.S.C. 32902(d). Implementing regulations may be found 
in 49 CFR Part 525.
    \92\ NHTSA may also apply an alternative average fuel economy 
standard to all automobiles manufactured by small volume 
manufacturers, or to classes of automobiles manufactured by small 
manufacturers, per EPCA, although this particular provision has not 
yet been exercised. See 49 U.S.C. 32902(d)(2).
---------------------------------------------------------------------------

    Also, EPA requested comment on allowing manufacturers able to 
demonstrate that they are operationally independent from a parent 
company (defined as 10% or greater ownership), to also be eligible for 
small volume manufacturer alternative standards and treatment under the 
GHG program. Under the current program, the vehicle sales of such 
companies must be aggregated with the parent company in determining 
eligibility for small volume manufacturer provisions. The only comments 
addressing this issue supported including a provision recognizing 
operational independence in the rules. EPA has continued to evaluate 
the issue and the final GHG rule includes provisions allowing 
manufacturers to demonstrate to EPA that they are operationally 
independent. This is different from the CAFE program, which aggregates 
manufacturers for compliance purposes if a control relationship exists, 
either in terms of stock ownership or design control, or both.\93\
---------------------------------------------------------------------------

    \93\ See 49 U.S.C. 32901(a)(4) and 49 CFR Part 534.
---------------------------------------------------------------------------

    EPA sought comment on whether additional lead-time is needed for 
niche intermediate sized manufacturers. Under the Temporary Lead-time 
Allowance Alternative Standards (TLAAS) provisions in the MYs 2012-2016 
GHG rules (see 75 FR 25414-417), manufacturers with sales of less than 
50,000 vehicles were provided additional flexibility through MY 2016. 
EPA invited comment on whether this or some other form of flexibility 
is warranted for niche intermediate volume, limited line manufacturers 
(see section III.B.7).
    NRDC commented in support of EPA's proposal not to extend the TLAAS 
program. EPA received comments from Jaguar Land Rover, Porsche and 
Suzuki that the standards will raise significant feasibility concerns 
for some intermediate volume manufacturers that will be part of the 
expanded TLAAS program in MY 2016, especially in the early transition 
years of the program. Porsche commented that they would need to meet 
standards up to 25 percent more stringent in MY 2017 compared to MY 
2016, requiring utilization of advanced technologies at rates wholly 
disproportionate to rates expected for larger manufacturers with more 
diverse product lines. EPA is persuaded that these manufacturers 
require additional lead-time to make the transition from the TLAAS 
regime to the more stringent standards. To provide this needed lead-
time, EPA is finalizing provisions for manufacturers with sales below 
50,000 vehicles per year that are part of the TLAAS program through MY 
2016, which will allow eligible manufacturers to remain at their MY 
2016 standards through MY 2018 and then begin making the transition to 
more stringent standards. The manufacturers that utilize this added 
lead time will be required to meet the primary program standards in MY 
2021 and later. The intermediate volume manufacturer lead-time 
provisions are discussed in detail in Section III.B.8.
d. Nitrous Oxide and Methane Standards
    As proposed, EPA is extending to MY 2017 and later the flexibility 
for manufacturers to use CO2 credits on a CO2-
equivalent basis to comply with the nitrous oxides (N2O) and 
methane (CH4) cap standards. These cap standards, 
established in the MYs 2012-2016 rulemaking were intended to prevent 
future emissions increases and were generally not expected to result in 
the application of new technologies or significant costs for 
manufacturers using current vehicle designs. EPA is also finalizing 
additional lead time for manufacturers to use compliance statements in 
lieu of N2O testing through MY 2016, as proposed. In 
addition, in response to comments, EPA is allowing the continued use of 
compliance statements in MYs 2017-2018 in cases where manufacturers are 
not conducting new emissions testing for a test group, but rather 
carrying over certification data from a previous year. EPA is also 
clarifying that manufacturers will not be required to conduct in-use 
testing for N2O in cases where a compliance statement has 
been used for certification. All of these provisions are discussed in 
detail below in section III.B.9.

D. Summary of Costs and Benefits for the National Program

    This section summarizes the projected costs and benefits of the MYs 
2017-2025 CAFE and GHG emissions standards for light-duty vehicles. 
These projections helped inform the agencies' choices among the 
alternatives considered and provide further confirmation that the final 
standards are appropriate under the agencies' respective statutory 
authorities. The costs and benefits projected by NHTSA to result from 
the CAFE standards are presented first, followed by those projected by 
EPA to result from the GHG emissions standards.
    For several reasons, the estimates for costs and benefits presented 
by NHTSA and EPA, while consistent, are not directly comparable, and 
thus should not be expected to be identical. NHTSA and EPA's standards 
are projected to result in slightly different fuel efficiency 
improvements. EPA's GHG standard is more stringent in part due to its 
assumptions about manufacturers' use of air conditioning leakage/
refrigerant replacement credits, which will result in reduced emissions 
of HFCs. NHTSA's final standards are at levels of stringency that 
assume improvements in the efficiency of air conditioning systems, but 
these standards do not require reductions in HFC emissions, which are 
generally not related to fuel economy or energy conservation. In 
addition, as noted above, the CAFE and GHG standards offer somewhat 
different program flexibilities and provisions, and the agencies' 
analyses differ in their accounting for these flexibilities, primarily 
because NHTSA is statutorily prohibited from considering some 
flexibilities when establishing CAFE standards,\94\ while EPA is not. 
These differences contribute to differences in the agencies' respective 
estimates of

[[Page 62655]]

costs and benefits resulting from the new standards.
---------------------------------------------------------------------------

    \94\ See 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

    Specifically, the projected costs and benefits presented by NHTSA 
and EPA are not directly comparable because EPA's standards include air 
conditioning-related improvements in HFC reductions, and reflect 
compliance with the GHG standards, whereas NHTSA projects some 
manufacturers will pay civil penalties as part of their compliance 
strategy, as allowed by EPCA. EPCA also prohibits NHTSA from 
considering manufacturers' ability to earn, transfer or trade credits 
earned for over-compliance when setting standards. The Clean Air Act 
imposes no such limitations. The Clean Air Act also allows EPA to 
provide incentives for particular technologies, such as for electric 
vehicles and dual fueled vehicles. For these reasons, EPA's estimates 
of GHG reductions and fuel savings achieved by the GHG standards are 
higher than those projected by NHTSA for the CAFE standards. For these 
same reasons, EPA's estimates of manufacturers' costs for complying 
with the passenger car and light truck GHG standards are slightly 
higher than NHTSA's estimates for complying with the CAFE standards.
    It also bears discussion here that, for this final rulemaking, the 
agencies have analyzed the costs and benefits of the standards using 
two different forecasts of the light vehicle fleet through MY 2025. The 
agencies have concluded that the significant uncertainty associated 
with forecasting sales volumes, vehicle technologies, fuel prices, 
consumer demand, and so forth out to MY 2025, make it reasonable and 
appropriate to evaluate the impacts of the final CAFE and GHG standards 
using two baselines.\95\ One market forecast (or fleet projection), 
very similar to the one used for the NPRM, uses (corrected) MY 2008 
CAFE certification data, information from AEO 2011, and information 
purchased from CSM in December of 2009. The agencies received comments 
regarding the market forecast used in the NPRM suggesting that updates 
in several respects could be helpful to the agencies' analysis of final 
standards; given those comments and since the agencies were already 
considering producing an updated fleet projection, the final 
rulemakings also utilize a second market forecast using MY 2010 CAFE 
certification data, information from AEO 2012, and information 
purchased from LMC Automotive (formerly J.D. Power Forecasting).
---------------------------------------------------------------------------

    \95\ We refer to these baselines as ``fleet projections'' or 
``market forecasts'' in Section II.B of the preamble and Chapter 1 
of the TSD and elsewhere in the administrative record. The term 
``baseline'' has a specific definition and is described in Chapter 1 
of the TSD.
---------------------------------------------------------------------------

    These two market forecasts contain certain differences, although as 
will be discussed below, the differences are not significant enough to 
change the agencies' decision as to the structure and stringency of the 
final standards, and indeed corroborate the reasonableness of the EPA 
final GHG standards and that the NHTSA standards are the maximum 
feasible. For example, the 2008 based fleet forecast uses the MY 2008 
``baseline'' fleet, which represents the most recent model year for 
which the industry had sales data that was not affected by the 
subsequent economic recession. On the other hand, the 2010 based fleet 
projection employs a market forecast (provided by LMC Automotive) which 
is more current than the projection provided by CSM (utilized for the 
MY 2008 based fleet projection). The CSM forecast appears to have been 
particularly influenced by the recession, showing major declines in 
market share for some manufacturers (e.g., Chrysler) which the agencies 
do not believe are reasonably reflective of future trends.
    However, the MY 2010 based fleet projection also is highly 
influenced by the economic recession. The MY 2010 CAFE certification 
data has become available since the proposal (see section 1.2.1 of the 
Joint TSD for the proposed rule, which noted the possibility of these 
data becoming available), and is used in EPA's alternative analysis, 
and continues to show the effects of the recession. For example, 
industry-wide sales were skewed down 20% \96\ compared to pre-recession 
MY 2008 levels. For some companies like Chrysler, Mitsubishi, and 
Subaru, sales were down 30-40% \97\ from MY 2008 levels. For BMW, 
General Motors, Jaguar/Land Rover, Porsche, and Suzuki, sales were down 
more than 40% \98\ from 2008 levels. Using the MY 2008 vehicle data 
avoids projecting these abnormalities in predicting the future fleet, 
although it also perpetuates vehicle brands and models (and thus, their 
outdated fuel economy levels and engineering characteristics) that have 
since been discontinued. The MY 2010 CAFE certification data accounts 
for the phase-out of some brands (e.g., Saab) and the introduction of 
some technologies (e.g., Ford's Ecoboost engine), which may be more 
reflective of the future fleet in this respect.
---------------------------------------------------------------------------

    \96\ These figures are derived from the manufacturer and fleet 
volume tables in Chapter 1 of the TSD.
    \97\ These figures are derived from the manufacturer and fleet 
volume tables in Chapter 1 of the TSD.
    \98\ These figures are derived from the manufacturer and fleet 
volume tables in Chapter 1 of the TSD.
---------------------------------------------------------------------------

    Thus, given the volume of information that goes into creating a 
baseline forecast and given the significant uncertainty in any 
projection out to MY 2025, the agencies think that the best way to 
illustrate the possible impacts of that uncertainty for purposes of 
this rulemaking is the approach taken here of analyzing the effects of 
the final standards under both the MY 2008-based and the MY 2010-based 
fleet projections. EPA is presenting its primary analysis of the 
standards using the same baseline/future fleet projection that was used 
in the NPRM (i.e., corrected MY 2008 CAFE certification data, 
information from AEO 2011, and a future fleet forecast purchased from 
CSM). EPA also conducted an alternative analysis of the standards based 
on MY 2010 CAFE certification data, updated AEO 2012 (early release) 
projections of the future fleet sales volumes, and a forecast of the 
future fleet mix projections to MY 2025 purchased from LMC Automotive. 
At the same time, given that EPA believes neither projection is 
strongly superior to the other, EPA has performed a detailed analysis 
of the final standards using the MY 2010 baseline, and we have 
concluded that the final standards are likewise appropriate using this 
alternative baseline/fleet projection. EPA's analysis of the 
alternative baseline/future fleet (based on MY 2010) is presented in 
EPA's Final Regulatory Impact Analysis (RIA), Chapter 10. NHTSA's 
primary analysis uses both market forecasts, and accordingly presents 
values from both in tables throughout this preamble and in NHTSA's 
FRIA. Joint TSD Chapter 1 includes a full description of the two market 
projections and their derivation.
    As with the MYs 2012-2016 standards, and the MYs 2014-2018 
standards for heavy duty vehicles and engines, NHTSA and EPA have 
harmonized the programs as much as possible, and continuing the 
National Program to MYs 2017-2025 will result in significant cost 
savings and other advantages for the automobile industry by allowing 
them to manufacture and sell one fleet of vehicles across the U.S., 
rather than potentially having to comply with multiple state standards 
that may occur in the absence of the National Program. It is also 
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 GHGs. The two agencies' standards together 
comprise the National Program,

[[Page 62656]]

and the following discussions of the respective costs and benefits of 
NHTSA's CAFE standards and EPA's GHG standards do not change the fact 
that both the CAFE and GHG standards, jointly, are the source of the 
benefits and costs of the National Program.
1. Summary of Costs and Benefits for the 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 CAFE standards that helps to illustrate their 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 
CO2 reductions, because FFV credits reduce the fuel economy 
levels that manufacturers achieve not only under the 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 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 a range from 180 billion to 184 billion gallons 
throughout the lives of light duty 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 between $513 billion and $525 
billion; at a 7 percent private discount rate, the present value of the 
economic benefits resulting from those fuel savings is between $400 
billion and $409 billion.
    The agency further estimates that these new CAFE standards will 
lead to corresponding reductions in CO2 emissions totaling 
1.9 billion metric tons during the lives of light duty vehicles sold in 
MYs 2017-2025. The present value of the economic benefits from avoiding 
those emissions is approximately $53 billion, based on a global social 
cost of carbon value of about $26 per metric ton (in 2017, and growing 
thereafter).\99\ All costs are in 2010 dollars.
---------------------------------------------------------------------------

    \99\ NHTSA also estimated the benefits associated with three 
more estimates of a one ton GHG reduction in 2017 ($6, $41, and 
$79), which will likewise grow thereafter. See Section II.E for a 
more detailed discussion of the social cost of carbon.
---------------------------------------------------------------------------

    Accounting for compliance flexibilities reduces the fuel savings 
achieved by the standards, as manufacturers are able to comply through 
credit mechanisms that reduce the amount of fuel economy technology 
that must be added to new vehicles in order to meet the targets set by 
the standards. NHTSA estimates that the fuel economy increases would 
lead to fuel savings totaling about 170 billion gallons throughout the 
lives of light duty vehicles sold in MYs 2017-2025, when compliance 
flexibilities are considered. At a 3 percent discount rate, the present 
value of the economic benefits resulting from those fuel savings is 
between $481 billion and $488 billion; at a 7 percent private discount 
rate, the present value of the economic benefits resulting from those 
fuel savings is between $375 billion and $380 billion. The agency 
further estimates that these new CAFE standards will lead to 
corresponding reductions in CO2 emissions totaling 1.8 
billion metric tons during the lives of light duty vehicles sold in MYs 
2017-2025. The present value of the economic benefits from avoiding 
those emissions is approximately $49 billion, based on a global social 
cost of carbon value of about $26 per metric ton (in 2017, and growing 
thereafter).

Table I-7--NHTSA's Estimated MYs 2017-2025 Costs, Benefits, and Net Benefits ($Billion) Under the CAFE Standards
                                              (Estimated Achieved)
----------------------------------------------------------------------------------------------------------------
                                                              Totals                        Annualized
                                                 ---------------------------------------------------------------
                                  Baseline Fleet    3% Discount     7% Discount     3% Discount     7% Discount
                                                       rate            rate            rate            rate
----------------------------------------------------------------------------------------------------------------
                                  Cumulative for MYs 2017-2021 Final Standards
----------------------------------------------------------------------------------------------------------------
Costs...........................            2010          ($61)-          ($58)-         ($2.4)-         ($3.6)-
                                            2008           ($57)           ($54)          ($2.2)          ($3.3)
Benefits........................            2010           $243-           $195-           $9.2-          $11.3-
                                            2008            $240            $194            $9.0           $11.0
Net Benefits....................            2010           $183-           $137-           $6.8-           $7.7-
                                            2008            $184            $141            $6.8            $7.8
----------------------------------------------------------------------------------------------------------------

[[Page 62657]]

 
                     Cumulative for MYs 2017-2025 (Includes MYs 2022-2025 Augural Standards)
----------------------------------------------------------------------------------------------------------------
Costs...........................            2010         ($154)-         ($147)-         ($5.4)-         ($7.6)-
                                            2008          ($156)          ($148)          ($5.4)          ($7.5)
Benefits........................            2010           $629-           $502-          $21.0-          $24.2-
                                            2008            $639            $510           $21.3           $24.4
Net Benefits....................            2010           $476-           $356-          $15.7-          $16.7-
                                            2008            $483            $362           $15.9           $16.9
----------------------------------------------------------------------------------------------------------------


   Table I-8--NHTSA's Estimated Fuel Saved (Billion Gallons and Barrels) and CO2 Emissions Avoided (mmt) Under the CAFE Standards (Estimated Required)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Total                                         Total
                                     MY     Earlier    2017     2018     2019     2020     2021   through    2022     2023     2024     2025    through
                                  baseline                                                          2021                                          2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger Cars:
    Fuel (b. gallons)...........      2008     5.3-     2.8-     5.3-     7.7-    10.9-    13.0-    45.0-    14.4-    15.8-    18.0-    19.7-     112.9-
                                      2010      7.7      3.6      5.3      8.3     10.8     13.0     48.7     14.3     16.2     18.3     20.0      117.4
    Fuel (b. barrels)...........      2008     0.1-     0.1-     0.1-     0.2-     0.3-     0.3-     1.1-     0.3-     0.4-     0.4-     0.5-       2.7-
                                      2010      0.2      0.1      0.1      0.2      0.3      0.3      1.2      0.3      0.4      0.4      0.5        2.8
    CO2 (mmt)...................      2008    58.1-    31.0-    58.1-    84.0-   116.9-   139.9-   488.0-   155.5-   171.0-   192.7-   210.9-   1,218.2-
                                      2010     83.9     39.5     57.2     90.1    117.4    140.9    529.0    155.8    176.3    198.5    216.4    1,275.9
Light Trucks:
    Fuel (b. gallons)...........      2008     0.5-     1.0-     2.5-     4.8-     6.8-     9.4-    25.0-    10.3-    10.9-    11.8-    12.7-      70.7-
                                      2010      0.9      0.8      1.5      3.7      5.6      8.2     20.7      8.9     10.0     11.1     12.1       62.9
    Fuel (b. barrels)...........      2008     0.0-     0.0-     0.1-     0.1-     0.2-     0.2-     0.6-     0.2-     0.3-     0.3-     0.3-       1.7-
                                      2010      0.0      0.0      0.0      0.1      0.1      0.2      0.4      0.2      0.2      0.3      0.3        1.5
    CO2 (mmt)...................      2008     5.8-    11.1-    26.8-    52.1-    74.0-   102.1-   271.9-   112.1-   118.6-   128.5-   138.0-     769.1-
                                      2010     10.1      8.6     16.1     39.9     60.1     87.8    222.6     95.8    107.5    119.9    130.8      676.6
Combined
    Fuel (b. gallons)...........      2008     5.9-     3.9-     7.8-    12.5-    17.7-    22.3-    70.1-    24.7-    26.7-    29.8-    32.4-     183.5-
                                      2010      8.6      4.4      6.7     12.0     16.4     21.1     69.2     23.2     26.2     29.5     32.1      180.3
    Fuel (b. barrels)...........      2008     0.1-     0.1-     0.2-     0.3-     0.4-     0.5-     1.6-     0.6-     0.6-     0.7-     0.8-       4.4-
                                      2010      0.2      0.1      0.2      0.3      0.4      0.5      1.7      0.6      0.6      0.7      0.8        4.3
    CO2 (mmt)...................      2008    63.9-    42.1-    84.9-   136.1-   191.0-   242.0-   760.0-   267.7-   289.6-   321.2-   348.9-   1,987.3-
                                      2010     93.9     48.1     73.3    130.0    177.5    228.6    751.4    251.6    283.9    318.4    347.2    1,952.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Considering manufacturers' ability to employ compliance 
flexibilities and advanced technologies for meeting the standards, 
NHTSA estimates the following for fuel savings and avoided 
CO2 emissions, assuming FFV credits will be used toward both 
the baseline and final standards:

   Table I-9--NHTSA's Estimated Fuel Saved (Billion Gallons and Barrels) and CO2 Emissions Avoided (mmt) Under the CAFE Standards (Estimated Achieved)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Total                                         Total
                                     MY     Earlier    2017     2018     2019     2020     2021   through    2022     2023     2024     2025    through
                                  baseline                                                          2021                                          2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger Cars:
    Fuel (b. gallons)...........      2008     5.5-     2.9-     5.1-     7.5-    10.3-    12.0-    43.3-    13.7-    14.9-    16.8-    18.5-     107.3-
                                      2010      6.1      3.5      5.1      7.8      9.7     12.0     44.2     13.2     15.0     17.1     18.2      107.7
    Fuel (b. barrels)...........      2008     0.1-     0.1-     0.1-     0.2-     0.2-     0.3-     1.0-     0.3-     0.4-     0.4-     0.4-       2.6-
                                      2010      0.1      0.1      0.1      0.2      0.2      0.3      1.0      0.3      0.4      0.4      0.4        2.6
    CO2 (mmt)...................      2008    59.9-    32.2-    55.1-    81.5-   111.7-   130.6-   471.0-   148.8-   161.2-   180.8-   196.6-   1,158.3-
                                      2010     66.5     38.7     55.6     85.3    105.4    130.4    481.9    143.7    162.9    185.4    196.9    1,170.7
Light Trucks:
    Fuel (b. gallons)...........      2008     0.8-     1.0-     2.2-     4.1-     5.9-     7.9-    21.9-     9.0-     9.6-    10.7-    11.8-      62.8-
                                      2010      2.0      1.2      1.6      4.2      5.6      7.7     22.3      8.4      9.5     10.4     10.7       61.5
    Fuel (b. barrels)...........      2008     0.0-     0.0-     0.1-     0.1-     0.1-     0.2-     0.5-     0.2-     0.2-     0.3-     0.3-       1.5-
                                      2010      0.0      0.0      0.0      0.1      0.1      0.2      0.4      0.2      0.2      0.2      0.3        1.5
    CO2 (mmt)...................      2008     8.1-    10.4-    24.1-    44.5-    63.9-    86.4-   237.4-    97.9-   104.7-   116.2-   128.3-     684.5-
                                      2010     22.2     13.3     17.8     45.6     60.2     82.4    241.5     90.5    101.8    112.3    115.5      661.5
Combined
    Fuel (b. gallons)...........      2008     6.3-     3.9-     7.3-    11.6-    16.2-    20.0-    65.3-    22.7-    24.5-    27.4-    30.3-     170.1-
                                      2010      8.1      4.8      6.7     12.0     15.2     19.7     66.5     21.6     24.5     27.5     28.9      169.2
    Fuel (b. barrels)...........      2008     0.1-     0.1-     0.2-     0.3-     0.4-     0.5-     1.6-     0.5-     0.6-     0.7-     0.7-       4.0-
                                      2010      0.2      0.1      0.2      0.3      0.4      0.5      1.7      0.5      0.6      0.7      0.7        4.0
    CO2 (mmt)...................      2008    68.0-    42.6-    79.2-   126.0-   175.5-   216.9-   708.2-   246.6-   265.9-   296.9-   324.9-   1,842.7-
                                      2010     88.7     51.9     73.5    130.9    165.5    212.8    723.3    234.2    264.7    297.6    312.4    1,832.2
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 62658]]

     NHTSA estimates that the fuel economy increases resulting from the 
standards will 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),\100\ 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 standards will produce 
significant net benefits to society. Using a 3 percent discount rate, 
NHTSA estimates that the present value of these net benefits will range 
from $498 billion to $507 billion over the lives of the vehicles sold 
during MYs 2017-2025; using a 7 percent discount rate a narrower range 
from $372 billion to $377 billion. More discussion regarding monetized 
benefits can be found in Section IV of this preamble and in NHTSA's 
FRIA. Note that the benefit calculation in the following tables 
includes the benefits of reducing CO2 emissions,\101\ but 
not the benefits of reducing other GHG emissions (those have been 
addressed in a sensitivity analysis discussed in Section IV of this 
preamble and in NHTSA's FRIA).
---------------------------------------------------------------------------

    \100\ 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 its RIA.
    \101\ CO2 benefits for purposes of these tables are 
calculated using the $26/ton SCC value. 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.

                              Table I-10 NHTSA's Discounted Benefits ($Billion) Under the CAFE Standards Using a 3 and 7 Percent Discount Rate (Estimated Required)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                      Total                                        Total
                                       MY baseline                             Earlier    2017     2018     2019     2020     2021   through    2022     2023     2024     2025   through
                                                                                                                                       2021                                         2025
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        3% discount rate
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger  2008..............................................................    19.2-    10.4-    19.6-    28.6-    40.2-    48.4-  166.4-1    54.2-    60.1-    68.6-    75.9-   425.3-
      cars 2010..............................................................     27.5     13.2     19.3     30.5     40.1     48.5     79.1     54.0     61.6     70.1     77.0    441.9
    Light  2008 2010.........................................................     1.9-     3.7-     8.9-    17.3-    24.8-    34.4-  91.0-73    38.1-    40.7-    44.5-    48.3-   262.6-
    trucks                                                                         3.3      2.8      5.3     13.1     19.9     29.4       .8     32.4     36.7     41.3     45.6    229.9
 Combined  2008 2010.........................................................    21.1-    14.1-    28.5-    45.9-    65.0-    82.8-  257.4-2    92.3-   100.7-   113.1-   124.2-   687.5-
                                                                                  30.8     16.0     24.5     43.6     60.0     77.9     52.8     86.4     98.3    111.3    122.5    671.4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        7% discount rate
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger  2008..............................................................    15.3-     8.3-    15.7-    22.9-    32.2-    38.8-  133.2-1    43.4-    48.2-    55.0-    60.8-   340.7-
      cars 2010..............................................................     22.0     10.6     15.5     24.5     32.1     38.9     43.6     43.3     49.4     56.2     61.7    354.1
    Light  2008 2010.........................................................     1.5-     2.9-     7.0-    13.7-    19.7-    27.3-  72.1-58    30.2-    32.3-    35.3-    38.3-   208.2-
    trucks                                                                         2.6      2.2      4.2     10.4     15.8     23.4       .6     25.7     29.1     32.8     36.1    182.3
 Combined  2008 2010.........................................................    16.8-    11.2-    22.7-    36.6-    51.9-    66.0-  205.2-2    73.6-    80.4-    90.3-    99.1-   548.6-
                                                                                  24.7     12.8     19.6     34.8     47.9     62.2     02.0     69.0     78.4     88.8     97.8    536.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

                              Table I-11 NHTSA's Discounted Benefits ($Billion) under the CAFE Standards Using a 3 and 7 Percent Discount Rate (Estimated Achieved)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             Total                                                       Total
                                 MY baseline    Earlier        2017         2018         2019        2020        2021       through      2022        2023        2024        2025       through
                                                                                                                             2021                                                        2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        3% discount rate
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008.......  19.7-......  10.8-......  18.7-......  27.8-......  38.4-.....  45.2-.....  160.6-163.  51.9-.....  56.8-.....  64.4-.....  71.1-.....  404.8-
                                 2010.......  21.8.......  12.9.......  18.7.......  28.9.......  36.0......  44.9......   2.         49.9......  57.0......  65.4......  70.2......  405.6
Light trucks...................  2008.......  2.7-.......  3.4-.......  8.0-.......  14.8-......  21.5-.....  29.2-.....  79.6-80.0.  33.4-.....  36.0-.....  40.3-.....  44.8-.....  234.2-
                                 2010.......  7.2........  4.4........  5.9........  15.0.......  19.9......  27.6......              30.6......  34.7......  38.7......  40.2......  224.1
Combined.......................  2008.......  22.4-......  14.2-......  26.6-......  42.5-......  59.8-.....  74.4-.....  239.9-242.  85.2-.....  92.7-.....  104.6-....  115.9-....  638.5-
                                 2010.......  29.0.......  17.3.......  24.6.......  43.8.......  55.8......  72.4......   9.         80.3......  91.6......  104.0.....  110.2.....  629.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        7% discount rate
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008.......  15.8-......  8.7-.......  15.0-......  22.3-......  30.8-.....  36.2-.....  128.8-130.  41.6-.....  45.5-.....  51.6-.....  57.0-.....  324.3-
                                 2010.......  17.4.......  10.3.......  15.0.......  23.1.......  28.8......  36.0......   6.         40.0......  45.7......  52.5......  56.2......  325.0
Light trucks...................  2008.......  2.1-.......  2.7-.......  6.3-.......  11.8-......  17.1-.....  23.2-.....  63.2-63.5.  26.5-.....  28.6-.....  32.0-.....  35.5-.....  185.7-
                                 2010.......  5.7........  3.5........  4.7........  11.9.......  15.8......  21.9......              24.3......  27.5......  30.7......  31.8......  177.7
Combined.......................  2008.......  17.9-......  11.4-......  21.3-......  34.0-......  47.8-.....  59.4-.....  191.8-194.  68.0-.....  74.0-.....  83.5-.....  92.5-.....  509.7-
                                 2010.......  23.2.......  13.8.......  19.6.......  35.0.......  44.6......  57.8......   0.         64.1......  73.1......  83.0......  88.0......  502.2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    NHTSA attributes most of these benefits (between $513 billion and 
$525 billion at a 3 percent discount rate, or between $400 billion and 
$409 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

[[Page 62659]]

forecast from the Annual Energy Outlook (AEO) 2012. NHTSA's RIA 
accompanying this rulemaking presents a detailed analysis of specific 
benefits of the rule.

   Table I-12--Summary of NHTSA's Fuel Savings and CO2 Emissions Reduction Under the CAFE Standards (Estimated
                                                    Required)
----------------------------------------------------------------------------------------------------------------
                                                                                    3% discount     7% discount
                                                    MY baseline       Amount           rate            rate
----------------------------------------------------------------------------------------------------------------
2017-2021 standards:
    Fuel savings (billion gallons)..............            2008          70.1 -          $196 -          $153 -
                                                            2010            69.2            $193            $151
    CO2 emissions reductions (million metric                2008           760 -         $19.3 -         $19.3 -
     tons)......................................
                                                            2010          751.40             $19             $19
2017-2025 standards:
    Fuel savings (billion gallons)..............            2008         183.5 -          $525 -          $409 -
                                                            2010           180.3            $513            $400
    CO2 emissions reductions (million metric                2008         1,987 -           $53 -           $53 -
     tons)......................................
                                                            2010           1,953             $52             $52
----------------------------------------------------------------------------------------------------------------

    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 CAFE standards--that is, outlays by 
vehicle manufacturers over and above those required to comply with the 
MY 2016 CAFE standards--will total between about $134 billion and $140 
billion.

                                           Table I-13--NHTSA's Incremental Technology Outlays ($Billion) Under the CAFE Standards (Estimated Required)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Total
                                 MY baseline    Earlier      2017        2018        2019        2020        2021       through       2022         2023        2024        2025         Total
                                                                                                                         2021                                                       through 2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars................  2008........  3.9 -.....  2.3 -.....  4.3 -.....  6.1 -.....  9.4 -.....  11.7 -....  37.7 -....  13.1 -......  14.6 -....  18.8 -....  20.2 -....  104.4 -
                                2010........  7.7.......  3.6.......  4.8.......  6.5.......  8.5.......  9.9.......  41.0......  11.0........  12.4......  15.5......  16.7......  96.6
Light trucks..................  2008........  0.1 -.....  0.4 -.....  1.1 -.....  2.3 -.....  3.4 -.....  4.8 -.....  12.1 -....  5.4 -.......  5.6 -.....  6.1 -.....  6.6 -.....  35.9 -
                                2010........  1.1.......  0.8.......  1.1.......  2.2.......  3.4.......  4.9.......  13.5......  5.1.........  5.7.......  6.2.......  6.6.......  37.1
Combined......................  2008........  4.0 -.....  2.8 -.....  5.4 -.....  8.4 -.....  12.8 -....  16.5 -....  49.9 -....  18.5 -......  20.2 -....  24.9 -....  26.8 -....  140.3 -
                                2010........  8.7.......  4.4.......  5.8.......  8.7.......  11.9......  14.9......  54.4......  16.1........  18.1......  21.7......  23.3......  133.7
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

                                           Table I-14--NHTSA's Incremental Technology Outlays ($Billion) Under the CAFE Standards (Estimated Achieved)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Total
                                 MY baseline    Earlier      2017        2018        2019        2020        2021       through       2022         2023        2024        2025         Total
                                                                                                                         2021                                                       through 2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars................  2008........  3.3 -.....  2.0 -.....  3.6 -.....  5.5 -.....  8.5 -.....  10.6 -....  33.5 -....  12.2 -......  13.2 -....  15.6 -....  17.5 -....  91.9 -
                                2010........  4.6.......  2.8.......  4.2.......  6.0.......  7.6.......  9.4.......  34.6......  10.3........  11.5......  13.9......  14.4......  84.6
Light trucks..................  2008........  0.4 -.....  0.5 -.....  1.0 -.....  1.8 -.....  2.6 -.....  3.6 -.....  9.9 -.....  4.2 -.......  4.5 -.....  5.0 -.....  5.8 -.....  29.5 -
                                2010........  1.6.......  0.9.......  1.0.......  2.3.......  3.2.......  4.7.......  13.7......  4.9.........  5.4.......  5.8.......  5.7.......  35.5
Combined......................  2008........  3.7 -.....  2.5 -.....  4.6 -.....  7.3 -.....  11.1 -....  14.2 -....  43.4 -....  16.4 -......  17.8 -....  20.6 -....  23.3 -....  121.4 -
                                2010........  6.2.......  3.7.......  5.2.......  8.3.......  10.8......  14.0......  48.2......  15.3........  16.9......  19.7......  20.0......  120.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    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 will lead to increase in average new vehicle prices ranging 
from $183 to $287 per vehicle in MY 2017 to between $1,461 and $1,616 
per vehicle in MY 2025:

                Table I-15--NHTSA's Incremental Increases in Average New Vehicle Costs ($) Under the CAFE Standards (Estimated Required)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 MY baseline     2017        2018        2019        2020        2021        2022        2023        2024        2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars................  2008........  244 -.....  455 -.....  631 -.....  930 -.....  1,143 -...  1,272 -...  1,394 -...  1,751 -...  1,827 -

[[Page 62660]]

 
                                2010........  364.......  484.......  659.......  858.......  994.......  1,091.....  1,221.....  1,482.....  1,578
Light trucks..................  2008........  78 -......  192 -.....  423 -.....  622 -.....  854 -.....  951 -.....  997 -.....  1,081 -...  1,183 -
                                2010........  147.......  196.......  397.......  629.......  908.......  948.......  1,056.....  1,148.....  1,226
Combined......................  2008........  183 -.....  360 -.....  557 -.....  823 -.....  1,043 -...  1,162 -...  1,259 -...  1,528 -...  1,616 -
                                2010........  287.......  382.......  567.......  779.......  964.......  1,042.....  1,165.....  1,370.....  1,461
--------------------------------------------------------------------------------------------------------------------------------------------------------

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

                Table I-16--NHTSA's Incremental Increases in Average New Vehicle Costs ($) Under the CAFE Standards (Estimated Achieved)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 MY baseline     2017        2018        2019        2020        2021        2022        2023        2024        2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars................  2008........  208-......  377-......  571-......  837-......  1,034-....  1,168-....  1,255-....  1,440-....  1,577-
                                2010........  284.......  424.......  603.......  762.......  934.......  1,024.....  1,129.....  1,328.....  1,361
Light trucks..................  2008........  87-.......  179-......  331-......  470-......  648-......  752-......  808-......  888-......  1,040-
                                2010........  158.......  187.......  416.......  596.......  863.......  911.......  1,000.....  1,081.....  1,047
Combined......................  2008........  164-......  306-......  486-......  709-......  900-......  1,025-....  1,104-....  1,256-....  1,400-
                                2010........  239.......  340.......  537.......  704.......  909.......  985.......  1,085.....  1,245.....  1,257
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Despite estimated increases in average vehicle prices of between 
$183 to $287 per vehicle in MY 2017 to between $1,461 and $1,616 per 
vehicle in MY 2025, NHTSA estimates that discounted fuel savings over 
the vehicles' lifetimes will be sufficient to offset initial costs. 
Even discounted at 7%, lifetime fuel savings are estimated to be more 
than 2.5 times the incremental price increase induced by manufacturers' 
compliance with the standards. Although NHTSA estimates lifetime fuel 
cost savings using 3% and 7% discount rates based on OMB guidance, it 
is possible that consumers use different discount rates when valuing 
fuel savings, or value savings over a period of time shorter than the 
vehicle's full useful life. A more nuanced discussion of consumer 
valuation of fuel savings appears in Section IV.G.6.

[[Page 62661]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.006

    As is the case with technology costs, accounting for the program's 
compliance flexibilities reduces savings in lifetime fuel expenditures 
due to lower levels of achieved fuel economy than are required under 
the standards.

[[Page 62662]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.007

    The CAFE standards are projected to produce net benefits in a range 
from $498 billion to $507 billion at a 3 percent discount rate (a range 
of $476 billion to $483 billion, with compliance flexibilities), or 
between $372 billion and $377 billion at a 7 percent discount rate (a 
range of $356 billion to $362 billion, with compliance flexibilities), 
over the useful lives of the light duty vehicles sold during MYs 2017-
2025.
    While the estimated incremental technology outlays and incremental 
increases in average vehicle costs for the final MYs 2017-2021 
standards in today's analysis are similar to the estimates in the 
proposal, we note for the reader's reference that the incremental cost 
estimates for the augural standards in MYs 2022-2025 are lower than in 
the proposal. The lower costs in those later model years result from 
the updated analysis used in this final rule. In MY 2021, the estimated 
incremental technology outlays for the combined fleet range from $14.9 
billion to $16.5 billion as compared to $17 billion in the proposal, 
while the estimated incremental increases in average vehicle costs 
range from $964 to $1,043, as compared to $1,104 in the proposal. In MY 
2025, the estimated incremental technology outlays for the combined 
fleet range from $23.3 billion to $26.8 billion, as compared to $32.4 
billion in the proposal, while the estimated incremental increases in 
average vehicle costs range from $1,461 to $1,616, as compared to 
$1,988 in the proposal. The changes in the MY 2025 incremental costs 
reflect the combined result of a number of changes and corrections to 
the CAFE model and inputs, including (but not limited to) the following 
items:
     Focused corrections were made to the MY2008-based market 
forecast;
     A new MY2010-based market forecast was introduced;
     Mild HEV technology and off-cycle technologies are now 
available in the analysis;
     The amount of mass reduction applied in the analysis \102\ 
has changed;
---------------------------------------------------------------------------

    \102\ The agencies limited the maximum amount of mass reduction 
technology that was applied to lighter vehicles in order that the 
analysis would show a way manufacturers could comply with the 
standards while maintaining overall societal safety. to demonstrate 
a path that industry could use to meet standards while maintaining 
societal safety
---------------------------------------------------------------------------

     The effectiveness of advanced transmissions when applied 
to conventional naturally aspirated engines has been revised based on a 
study completed by Argonne National Laboratory for NHTSA;
     Estimates of future fuel prices were updated;
     The model was corrected to ensure that post-purchase fuel 
prices are

[[Page 62663]]

applied when calculating the effective cost of available options to add 
technologies to specific vehicle models; and
     The model was corrected to ensure that the incremental 
costs and fuel savings are fully accounted for when applying diesel 
engines.
    These changes to the model and inputs are discussed in detail in 
Sections II.G, IV.C.2, and IV.C.4 of the preamble; Chapter V of NHTSA's 
FRIA, and Chapters 3 and 4 of the joint TSD.
    Acting together, these changes and corrections caused technology 
costs attributable to the baseline MYs 2009-2016 CAFE standards to 
increase for both fleets in most model years. In addition, the changes 
and corrections had the combined effect of reducing the total 
technology costs (i.e., including technology attributable to the 
baseline standards) in MYs 2022-2025, when greater levels of fuel 
economy-improving technologies would be required to comply with the 
augural standards. Because today's analysis applies these changes 
simultaneously, and because they likely interact in ways that would 
complicate attribution of impact, the agency has not attempted to 
quantify the extent to which each change impacted results. The combined 
effect of the increase in the baseline technology costs and reduction 
in the total technology costs in MYs 2022-2025 led to a reduction in 
the estimated incremental technology cost in MYs 2022-2025 in NHTSA's 
analysis, although estimated incremental technology costs were higher 
than or very similar to those reported in the NPRM for model years 
prior to MY 2022.
    While the incremental costs for MYs 2022-2025 are lower than in the 
NPRM, the total estimated costs for compliance (inclusive of baseline 
costs) were reduced to a lesser extent. In assessing the appropriate 
level for maximum feasible standards, NHTSA takes into consideration a 
number of factors, including technological feasibility, economic 
practicability (which includes the consideration of cost as well as 
many other factors), the effect of other motor vehicle standards of the 
Government on fuel economy, the need of the United States to conserve 
energy, and safety, as well as other factors. Considering all of these 
factors, NHTSA continues to believe that the final standards are 
maximum feasible, as discussed below in Section IV.F.
2. Summary of Costs and Benefits for the EPA's GHG Standards
    EPA has analyzed in detail the projected costs and benefits of the 
2017-2025 GHG standards for light-duty vehicles. Table I-19 shows EPA's 
estimated lifetime discounted cost, fuel savings, and benefits for all 
such vehicles projected to be sold in model years 2017-2025. The 
benefits include impacts such as climate-related economic benefits from 
reducing emissions of CO2 (but not other GHGs), reductions 
in energy security externalities caused by U.S. petroleum consumption 
and imports, the value of certain particulate matter-related health 
benefits (including premature mortality), the value of additional 
driving attributed to the VMT rebound effect, the value of reduced 
refueling time needed to fill up a more fuel efficient vehicle. The 
analysis also includes estimates of economic impacts stemming from 
additional vehicle use, such as the economic damages caused by 
accidents, congestion and noise (from increased VMT rebound driving).

  Table I-19--EPA's Estimated 2017-2025 Model Year Lifetime Discounted
   Costs, Benefits, and Net Benefits Assuming the 3% Discount Rate SCC
                               Value a b c
                       [Billions of 2010 dollars]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
               Lifetime Present Value d--3% Discount Rate
------------------------------------------------------------------------
Program Costs...........................................           -$150
Fuel Savings............................................             475
Benefits................................................             126
Net Benefits\d\.........................................             451
------------------------------------------------------------------------
                  Annualized Value f--3% Discount Rate
------------------------------------------------------------------------
Annualized costs........................................           -6.49
Annualized fuel savings.................................            20.5
Annualized benefits.....................................            5.46
Net benefits............................................            19.5
------------------------------------------------------------------------
               Lifetime Present Value d--7% Discount Rate
------------------------------------------------------------------------
Program Costs...........................................            -144
Fuel Savings............................................             364
Benefits................................................             106
Net Benefits \e\........................................             326
------------------------------------------------------------------------
                  Annualized Value f--7% Discount Rate
------------------------------------------------------------------------
Annualized costs........................................           -10.8
Annualized fuel savings.................................            27.3
Annualized benefits.....................................            7.96
Net benefits............................................            24.4
------------------------------------------------------------------------
Notes:
a The agencies estimated the benefits associated with four different
  values of a one ton CO2 reduction (model average at 2.5% discount
  rate, 3%, and 5%; 95th percentile at 3%), which each increase over
  time. For the purposes of this overview presentation of estimated
  costs and benefits, however, we are showing the benefits associated
  with the marginal value deemed to be central by the interagency
  working group on this topic: the model average at 3% discount rate, in
  2010 dollars. Section III.H provides a complete list of values for the
  4 estimates.
b Note that net present value of reduced GHG emissions is calculated
  differently than other benefits. The same discount rate used to
  discount the value of damages from future emissions (SCC at 5, 3, and
  2.5 percent) is used to calculate net present value of SCC for
  internal consistency. Refer to Section III.H for more detail.
c Projected results using 2008 based fleet projection analysis.
d Present value is the total, aggregated amount that a series of
  monetized costs or benefits that occur over time is worth in a given
  year. For this analysis, lifetime present values are calculated for
  the first year of each model year for MYs 2017-2025 (in year 2010
  dollar terms). The lifetime present values shown here are the present
  values of each MY in its first year summed across MYs.
e Net benefits reflect the fuel savings plus benefits minus costs.
f The annualized value is the constant annual value through a given time
  period (the lifetime of each MY in this analysis) whose summed present
  value equals the present value from which it was derived. Annualized
  SCC values are calculated using the same rate as that used to
  determine the SCC value, while all other costs and benefits are
  annualized at either 3% or 7%.

    Table I-20 shows EPA's estimated lifetime fuel savings and 
CO2 equivalent emission reductions for all light-duty 
vehicles sold in the model years 2017-2025. The values in Table I-20 
are projected lifetime totals for each model year and are not 
discounted. As documented in EPA's 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.

[[Page 62664]]



                   Table I-20--EPA's Estimated 2017-2025 Model Year Lifetime Fuel Saved and GHG Emissions Avoided (Primary Analysis) a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  2017     2018     2019     2020     2021     2022     2023     2024     2025
                                                                   MY       MY       MY       MY       MY       MY       MY       MY       MY     Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cars:
    Fuel (billion gallons)...........................      2.4      4.5      6.8      9.3     11.9     14.8     17.4     20.2     23.0    110.3
    Fuel (billion barrels)...........................     0.06     0.11     0.16     0.22     0.28     0.35     0.41     0.48     0.55     2.63
    CO2 EQ (mmt).....................................     29.7     55.7     83.0      113      146      178      207      238      269    1,319
Light Trucks:
    Fuel (billion gallons)...........................      0.1      1.0      1.7      2.6      5.5      7.5      9.4     11.3     13.1     52.2
    Fuel (billion barrels)...........................     0.00     0.02     0.04     0.06     0.13     0.18     0.22     0.27     0.31     1.24
    CO2 EQ (mmt).....................................      0.8     13.9     24.6       36       70       92      113      134      154      638
Combined:
    Fuel (billion gallons)...........................      2.5      5.5      8.5     11.9     17.4     22.3     26.8     31.5     36.2    162.5
    Fuel (billion barrels)...........................     0.06     0.13     0.20     0.28     0.41     0.53     0.64     0.75     0.86     3.87
    CO2 EQ (mmt).....................................     30.5     69.6      108      149      216      270      320      371      423    1,956
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Projected results using 2008 based fleet projection analysis.

    Table I-21 shows EPA's estimated lifetime discounted benefits for 
all light-duty vehicles sold in model years 2017-2025. Although EPA 
estimated the benefits associated with four different values of a one 
ton CO2 reduction ($6, $26, $41, $79 in CY 2017 and in 2010 
dollars, see Section III.H), for the purposes of this overview 
presentation of estimated benefits EPA is showing the benefits 
associated with one of these marginal values, $26 per ton of 
CO2, in 2010 dollars and 2017 emissions. The values in Table 
I-21 are discounted values for each model year of vehicles throughout 
their projected lifetimes. The estimated benefits include GHG 
reductions, particulate matter-related health impacts (including 
premature mortality), energy security, reduced refueling time and 
additional driving as well as the impacts of accidents, congestion and 
noise from VMT rebound driving. The values in Table I-21 do not include 
costs associated with new technology projected to be needed to meet the 
GHG standards and they do not include the fuel savings expected from 
that technology.

                  Table I-21--EPA's Estimated 2017-2025 Model Year Lifetime Discounted Benefits Assuming the $26/ton SCC Value a b c d
                                                               [Billions of 2010 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Model year
                                           -------------------------------------------------------------------------------------------------------------
               Discount rate                                                                                                                     Sum of
                                               2017       2018       2019       2020       2021       2022       2023       2024       2025     Present
                                                                                                                                                 Values
--------------------------------------------------------------------------------------------------------------------------------------------------------
3%........................................      $1.81      $4.05      $6.37       $9.0      $13.4      $17.3      $20.9      $24.7      $28.6       $126
7%........................................      $1.52      $3.41      $5.35       $7.6      $11.3      $14.6      $17.6      $20.8      $24.1       $106
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Note that net present value of reduced CO2 emissions is calculated differently than other benefits. The same discount rate used to discount the
  value of damages from future emissions (SCC at 5, 3, and 2.5 percent) is used to calculate net present value of SCC for internal consistency. The
  estimates in this table are based on the average SCC at a 3 percent discount rate. Refer to Section III.H.6 for more detail.
\b\ As noted in Section III.H.6, the $26/ton (2010$) value applies to 2017 emissions and grows larger over time. The estimates in this table include
  monetized benefits for CO2 impacts but exclude the monetized benefits of impacts on non-CO2 GHG emissions (HFC, CH4, N2O). EPA has instead conducted a
  sensitivity analysis of the final rule's monetized non-CO2 GHG impacts in section III.H.6.
\c\ Model year values are discounted to the first year of each model year; the ``Sum'' represents those discounted values summed across model years.
\d\ Projected results using 2008 based fleet projection analysis.

    Table I-22 shows EPA's estimated lifetime fuel savings, lifetime 
CO2 emission reductions, and the monetized net present 
values of those fuel savings and CO2 emission reductions. 
The fuel savings and CO2 emission reductions are projected 
lifetime values for all light-duty 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 CO2 shown in Table 
I-22 are totals for the nine model years throughout these vehicles' 
projected lifetime and are not discounted. The monetized values shown 
in Table I-22 are the summed values of the discounted monetized fuel 
savings and monetized CO2 reductions for the model years 
2017-2025 vehicles throughout their lifetimes. The monetized values in 
Table I-22 reflect both a 3 percent and a 7 percent discount rate as 
noted.

[[Page 62665]]



 Table I-22--EPA's Estimated 2017-2025 Model Year Lifetime Fuel Savings,
CO2 Emission Reductions, and Discounted Monetized SCC Benefits Using the
                         $26/ton SCC Value a,b,c
                   [Monetized values in 2010 dollars]
------------------------------------------------------------------------
                                                              $ value
                                          Amount            (billions)
------------------------------------------------------------------------
Fuel savings (3% discount rate)  163 billion gallons....            $475
                                 (3.9 billion barrels)..
Fuel savings (7% discount rate)  163 billion gallons....            $364
                                 (3.9 billion barrels)..
CO2e emission reductions
(CO2 portion valued assuming     1,956 MMT CO2e.........      a, b $46.6
 $22/ton CO2 in 2010).
------------------------------------------------------------------------
\a\ $46.6 billion for 1,747 MMT of reduced CO2 emissions. As noted in
  Section III.H.6, the $26/ton (2010$) value applies to 2017 emissions
  and grows larger over time. The estimates in this table include
  monetized benefits for CO2 impacts but exclude the monetized benefits
  of impacts on non-CO2 GHG emissions (HFC, CH4, N2O). EPA has instead
  conducted a sensitivity analysis of the final rule's monetized non-CO2
  GHG impacts in section III.H.6.
\b\ Note that net present value of reduced CO2 emissions is calculated
  differently than other benefits. The same discount rate used to
  discount the value of damages from future emissions (SCC at 5, 3, and
  2.5 percent) is used to calculate net present value of SCC for
  internal consistency. The estimates in this table are based on one of
  four SCC estimates (average SCC at a 3 percent discount rate). Refer
  to Section III.H.6 for more detail.
\c\ Projected results using 2008 based fleet projection analysis.

    Table I-23 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. Also, 
the technology outlays shown in Table I-21 do not include the estimated 
maintenance costs which are included in the program costs presented in 
Table I-19. Table I-24 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 $206 
relative to a 2017 model year car meeting the MY 2016 standards. The 
estimated increase for a 2018 model year car is $374 relative to a 2018 
model year car meeting the MY 2016 standards (not $206 plus $374).

                              Table I-23--EPA's Estimated Incremental Technology Outlays Associated With the Standards a b
                                                               [Billions of 2010 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                 Sum of
                                                              2017 MY  2018 MY  2019 MY  2020 MY  2021 MY  2022 MY  2023 MY  2024 MY  2025 MY   present
                                                                                                                                                 values
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate:
    Cars....................................................    $2.03    $3.65    $5.02    $6.43    $7.94    $11.4    $14.7    $18.0    $19.6      $88.8
    Trucks..................................................     0.33     1.10     1.67     2.29     4.28     6.67     8.75    10.70     11.6       47.4
    Combined................................................     2.40     4.78     6.72     8.73     12.2     18.1     23.4     28.7     31.2        136
7% discount rate:
    Cars....................................................     1.99     3.58     4.93     6.32     7.80     11.2     14.4     17.7     19.3       87.2
    Trucks..................................................     0.32     1.08     1.64     2.25     4.20     6.54     8.59    10.51     11.4       46.5
    Combined................................................     2.36     4.69     6.59     8.57     12.0     17.7     23.0     28.1     30.6        134
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Model year values are discounted to the first year of each model year; the ``Sum'' represents those discounted values summed across model years.
\b\ Projected results from using 2008 based fleet projection analysis.


                     Table I-24--EPA's Estimated Incremental Increase in Average New Vehicle Cost Relative to the Reference Case a b
                                                                 [2010 dollars per unit]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 2017 MY   2018 MY   2019 MY   2020 MY   2021 MY   2022 MY   2023 MY   2024 MY   2025 MY
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cars..........................................................      $206      $374      $510      $634      $767    $1,079    $1,357    $1,622    $1,726
Trucks........................................................        57       196       304       415       763     1,186     1,562     1,914     2,059
Combined......................................................       154       311       438       557       766     1,115     1,425     1,718     1,836
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ The reference case assumes the 2016MY standards continue indefinitely.
\b\ Projected results from using 2008 based fleet projection analysis.


[[Page 62666]]

3. Why are the EPA and NHTSA MY 2025 Estimated Per-Vehicle Costs 
Different?
    In Section I.C.1 and I.C.2 NHTSA and EPA present the agencies' 
estimates of the incremental costs and benefits of the final CAFE and 
GHG standards, relative to costs and benefits estimated to occur absent 
the new standards. Taken as a whole, these represent the incremental 
costs and benefits of the National Program for Model Years 2017-2025. 
On a year-by-year comparison for model years 2017-2025, the two 
agencies' per-vehicle cost estimates are similar for the beginning 
years of the program, but in the last few model years, EPA's cost 
estimates are significantly higher than the NHTSA cost estimates. When 
comparing the CAFE required new vehicle cost estimate in Table I-15 
with the GHG standard new vehicle cost estimate in Table I-24, we see 
that the model year 2025 CAFE incremental new vehicle cost estimate is 
$1,461-$1,616 per vehicle (when, as required by EISA/EPCA, NHTSA sets 
aside EVs, pre-MY2019 PHEVs, and credit-based CAFE flexibilities), and 
the GHG standard incremental cost estimate is $1,836 per vehicle--a 
difference of $220-$375. The agencies have examined these cost estimate 
differentials, and as discussed below, it is principally explained by 
how the two agencies modeled future compliance with their respective 
standards, and by the application of low-GWP refrigerants attributable 
only to EPA's standards. As also described below, in reality auto 
companies will build a single fleet of vehicles to comply with both the 
CAFE and GHG standards, and the only significant real-world difference 
in the program costs are is limited to the hydrofluorocarbon (HFC) 
reductions expected under the GHG standards, which EPA estimates at 
$68/vehicle cost.
    As documented below in Section IV, although NHTSA is precluded by 
EISA/EPCA from considering CAFE credits, EVs, and pre-MY2019 PHEVs when 
determining the maximum feasible stringency of new CAFE standards, 
NHTSA has conducted additional analysis that accounts for EISA/EPCA's 
provisions regarding CAFE credits, EVs, and PHEVs. Under that analysis, 
as shown in Table I-16, NHTSA's estimate of the incremental new vehicle 
costs attributable to the new CAFE standards ranges from $1,257 to 
$1,400. Insofar as EPA's analysis focuses on the agencies' MY 2008-
based market forecast and attempts to account for some CAA-based 
flexibilities (most notably, unlimited credit transfers between the PC 
and LT fleets), NHTSA's $1,400 result is based on methods conceptually 
more similar to those applied by EPA. Therefore, although the 
difference in MY 2025 is considerably greater than differences in 
earlier model years, the agencies have focused on understanding the 
$436 difference between NHTSA's $1,400 result and EPA's $1,836 result, 
both for the MY 2008-based market forecast.
    Of this $436 difference, $247 is explained by NHTSA's simulation of 
EISA/EPCA's credit carry-forward provisions. EISA/EPCA allows 
manufacturers to ``carry forward'' credits up to five model years, 
applying those credits to offset compliance shortfalls and thereby 
avoid civil penalties.\103\ In meetings with the agency, some 
manufacturers have indicated that, even under the preexisting MY 2012-
2016 standards, they would make full use of these provisions, 
effectively entering MY 2017 with little, if any, credit ``in 
reserve.'' \104\ As in the NPRM, NHTSA's analysis exercises its CAFE 
model in a manner that simulates manufacturers' carrying-forward and 
use of CAFE credits. This simulation of credit carry-forward acts in 
combination with the model's explicit simulation of multiyear 
planning--that is, the tendency of manufacturers to apply ``extra'' 
technology in earlier model years if doing so would economically 
facilitate compliance in later model years, considering estimated 
product cadence (i.e., estimated timing of vehicle redesigns) 
facilitate. When the potential to carry forward CAFE credits is also 
simulated, multiyear planning simulation estimates the extent to which 
manufacturers could generate CAFE credits in earlier model years and 
use those credits in later model years. In meetings with the agency, 
manufacturers have often provided forward-looking plans exhibiting this 
type of strategic timing of investment in technology. For the NPRM, 
NHTSA estimated that in MY 2025, accounting for credit carry-forward 
(and other flexibilities offered under EISA/EPCA), manufacturers could, 
on average, achieve 47.0 mpg, 2.6 mpg less than the agency's 49.6 mpg 
estimate of the average of manufacturers' fuel economy requirements in 
that model year. Using the corrected MY 2008-based market forecast, 
NHTSA today estimates that in MY 2025, manufacturers could achieve 47.4 
mpg, 2.3 mpg less than the agency's current 49.7 mpg estimate (also 
under the corrected MY 2008-based market forecast) of the average of 
the manufacturers' fuel economy requirements in MY 2025. This 47.4 mpg 
estimate corresponds to the incremental cost estimate of $1,400 cited 
above. When credit carry-forward is excluded from this analysis, 
NHTSA's estimate of manufacturers' average achieved fuel economy in MY 
2025 increases to 49.0 mpg, and NHTSA's estimate of the average 
incremental cost in MY 2025 increases to $1,647, an increase of $247. 
Although EPA's GHG standards allow manufacturers to bank (i.e., carry 
forward) GHG-based credits up to five years, EPA's OMEGA model was 
designed to estimate the costs of a specific standard in a specific 
year and EPA for this action did not estimate the potential credit bank 
companies could have on a year-by-year basis. As explained, this 
difference in simulation capabilities explains $247 of the $436 
difference mentioned above.
---------------------------------------------------------------------------

    \103\ 49 U.S.C. 32903.
    \104\ On the other hand, although EISA/EPCA also allows 
manufacturers to carry back CAFE credits, most manufacturers have 
indicated extreme reluctance to make use of these provisions, 
insofar as doing so would constitute ``borrowing against the 
future'' and incurring risk of paying civil penalties in the future.
---------------------------------------------------------------------------

    As it has in past rulemakings and in the NPRM preceding today's 
final rule, NHTSA has also applied its CAFE model in a manner that 
simulates the potential that, as allowed under EISA/EPCA and as 
suggested by their past CAFE levels, some manufacturers could elect to 
pay civil penalties rather than achieving compliance with future CAFE 
standards.\105\ EISA/EPCA allows NHTSA to take this flexibility into 
account when determining the maximum feasible stringency of future CAFE 
standards. As in the NPRM, simulating this flexibility leads NHTSA to 
estimate that, under EISA/EPCA, some manufacturers (e.g., BMW, 
Mercedes, Porsche, and Volkswagen) could achieve fuel economy levels 6 
to 9 mpg or more short of their respective required CAFE levels in MY 
2025. Having set aside the potential to carry forward CAFE credits, 
when NHTSA also sets aside the potential to pay civil penalties, NHTSA 
estimates that manufacturers could achieve a fuel economy average of 
49.7 mpg in MY 2025, reflecting, on average, manufacturers' achievement 
of their respective required CAFE levels. For MY 2025, this analysis 
shows this 0.7 mpg increase in average achieved fuel economy 
accompanied by a $119 increase in average incremental cost, increasing 
the average incremental cost to $1,766. Because the Clean Air Act, 
unlike EISA/EPCA, does not allow manufacturers to pay civil penalties 
rather than achieving compliance with GHG standards, EPA's OMEGA model

[[Page 62667]]

does not simulate this type of flexibility.\106\ Therefore, this 
further difference in simulation capabilities explains $119 of the $436 
difference mentioned above, and results in an estimated average 
incremental cost of $1,766 in MY 2025.
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    \105\ 49 U.S.C. 32912.
    \106\ See 75 FR 25341.
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    In addition to these differences in modeling of programmatic 
features, EPA projects that manufacturers will achieve significant GHG 
emissions reductions through the use of different air conditioning 
refrigerants (the HFC refrigerant in today's vehicles is a powerful 
greenhouse gas, with a global warming potential 1,430 times that of 
CO2).\107\ EPA estimates that in 2025, the incremental cost of the 
substitute is $68/vehicle. While all other technologies in the 
agencies' analyses are equally relevant to compliance with both CAFE 
and GHG standards, CAFE standards do not address HFC emissions, and 
NHTSA's analysis therefore does not include the costs of this HFC 
substitution. This factor results in the EPA 2025 cost estimate being 
$68/vehicle higher than the NHTSA MY 2025 per-vehicle cost estimate.
---------------------------------------------------------------------------

    \107\ As with the MY 2012-2016 Light Duty rule and the MY 2014-
2018 Medium and Heavy Duty rule, the GWPs used in this rule are 
consistent with 100-year time frame values in the 2007 
Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment 
Report (AR4). At this time, the 100-year GWP values from the 1995 
IPCC Second Assessment Report are used in the official U.S. GHG 
inventory submission to the United Nations Framework Convention on 
Climate Change (UNFCCC) per the reporting requirements under that 
international convention. The UNFCCC recently agreed on revisions to 
the national GHG inventory reporting requirements, and will begin 
using the 100-year GWP values from AR4 for inventory submissions in 
the future.
---------------------------------------------------------------------------

    Taken together, as shown in Table I-25, these three factors suggest 
a difference of $434, based on $247 and $119 for NHTSA's simulation of 
EISA/EPCA's credit carry-forward and civil penalty provisions, 
respectively, and $68 for EPA's estimate of HFC costs. While $2 lower 
than the $436 difference mentioned above, the agencies consider this 
remaining difference to be small (about 0.1% of average incremental 
cost) and well within the range of differences to be anticipated given 
other structural differences between the agencies analyses and modeling 
systems.

 Table I--25--Major Factors Contributing to Difference in EPA and NHTSA
        Achieved MY2025 Per-Vehicle Cost Estimates (2010 dollars)
------------------------------------------------------------------------
                                                           Average per-
 Factor contributing to epa and nhtsa my2025 per-vehicle   vehicle cost
                cost estimate difference                   impact in MY
                                                               2025
------------------------------------------------------------------------
Air conditioning refrigerant substitution...............             $68
CAFE program provisions for civil penalties.............             119
CAFE program credit carry-forward value.................             247
                                                         ---------------
    Total impact on the difference between EPAs 2025                 434
     estimate and NHTSA's 2025 achieved estimate (sum of
     individual factors)................................
------------------------------------------------------------------------

    The agencies' estimates are based on each agency's different 
modeling tools for forecasting costs and benefits between now and MY 
2025. As described in detail in the Joint Technical Support Document, 
the agencies harmonized inputs for our modeling tools. However, our 
modeling tools (the NHTSA-developed CAFE model and the EPA-developed 
OMEGA model), while similar in core function, were developed to 
estimate the program costs based on each agencies' respective statutory 
authorities, which in some cases include specific constraints. It is 
important to note that these are modeling tool differences, but that, 
while the models result in different estimates of the costs of 
compliance, manufacturers will ultimately produce a single fleet of 
vehicles to be sold in the United States that considers both EPA 
greenhouse gas emissions standards and NHTSA CAFE standards. 
Manufacturers are currently selling MY2012 and MY2013 vehicles based on 
considering these standards. Every technology an automotive company 
applies to its vehicles that improves fuel economy will also lower 
CO2 emissions--thus each dollar of technology investment 
will count towards the company's overall compliance with the CAFE 
standard as well as the CO2 standard. The agencies' final 
footprint curve standards for passenger cars and for light trucks have 
been closely coordinated, with the principle difference being EPA's 
estimate of the application of HFC air conditioning refrigerant 
technology across a company's fleet of vehicles. Thus, within the 
entire fleet of vehicle models ultimately produced for sale in the 
United States, the agencies expect the only technology attributable 
solely to EPA's standards will be the low-GWP refrigerants, which EPA 
estimates at an average incremental unit cost of $68 in 2025.

E. Background and Comparison of NHTSA and EPA Statutory Authority

    Section I.E of the preamble contains a detailed overview discussion 
of the NHTSA and EPA respective statutory authorities. In addition, 
each agency discusses comments pertaining to its statutory authority 
and the agencies' responses in Sections III and IV, respectively and 
EPA responds as well in its response to comment documents.
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

[[Page 62668]]

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.\108\ 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.
---------------------------------------------------------------------------

    \108\ See Center for Biological Diversity v. 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 sought comment in the NPRM on whether 
or how EPCA, as amended by EISA, could be interpreted to allow such 
alternate standards for certain parts of the industry. Suzuki requested 
that NHTSA and EPA both adopt an approach similar to California's of 
providing more lead time to manufacturers with national average sales 
below 50,000 units, by allowing those ``limited line manufacturers'' to 
meet the MY 2017 standards in MY 2020, the MY 2018 standards in MY 
2021, and so on, with a 3-year time lag in complying with the standards 
generally applicable for a compliance category. Suzuki stated simply 
that the standards are harder for small manufacturers to meet than for 
larger manufacturers, because the per-vehicle cost of developing or 
purchasing the necessary technology is higher, and that since the GHG 
emissions attributable to vehicles built by manufacturers who would be 
eligible for this option represent a very small portion of overall 
emissions, the impact should be minimal.\109\
---------------------------------------------------------------------------

    \109\ Suzuki comments, at 2-3. Available at http://www.regulations.gov, Docket No. ID No. EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------

    Although EPA is adopting such an approach as part of its final rule 
(see Section I.C.7.c above and III.X), no commenter provided legal 
analysis that might lead NHTSA to change its current interpretation of 
EPCA/EISA. Thus, NHTSA is not finalizing such an option for purposes of 
this rulemaking.
i. Factors That Must Be Considered in Deciding the Appropriate 
Stringency of CAFE Standards
(1) Technological Feasibility
    ``Technological feasibility'' refers to whether a particular method 
of improving fuel economy can be available for commercial application 
in the model year for which a standard is being established. Thus, the 
agency is not limited in determining the level of new standards to 
technology that is already being commercially applied at the time of 
the rulemaking, a consideration which is particularly relevant for a 
rulemaking with a timeframe as long as the present one. For this 
rulemaking, NHTSA has considered all types of technologies that improve 
real-world fuel economy, including air-conditioner efficiency, due to 
EPA's decision to allow generation of fuel consumption improvement 
values for CAFE purposes based on improvements to air-conditioner 
efficiency that improves fuel efficiency.
(2) Economic Practicability
    ``Economic practicability'' refers to whether a standard is one 
``within the financial capability of the industry, but not so stringent 
as to'' lead to ``adverse economic consequences, such as a significant 
loss of jobs or the unreasonable elimination of consumer choice.'' 
\110\ The agency has explained in the past that this factor can be 
especially important during rulemakings in which the automobile 
industry is facing significantly adverse economic conditions (with 
corresponding risks to jobs). Consumer acceptability is also an element 
of economic practicability, one which is particularly difficult to 
gauge during times of uncertain fuel prices.\111\ In a rulemaking such 
as the present one, looking out into the more distant future, economic 
practicability is a way to consider the uncertainty surrounding future 
market conditions and consumer demand for fuel economy in addition to 
other vehicle attributes. In an attempt to ensure the economic 
practicability of attribute-based standards, NHTSA considers a variety 
of factors, including the annual rate at which manufacturers can 
increase the percentage of their fleet that employ a particular type of 
fuel-saving technology, the specific fleet mixes of different 
manufacturers, and assumptions about the cost of the standards to 
consumers and consumers' valuation of fuel economy, among other things.
---------------------------------------------------------------------------

    \110\ 67 FR 77015, 77021 (Dec. 16, 2002).
    \111\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F.2d 
1322 (D.C. Cir. 1986) (Administrator's consideration of market 
demand as component of economic practicability found to be 
reasonable); Public Citizen v. NHTSA, 848 F.2d 256 (Congress 
established broad guidelines in the fuel economy statute; agency's 
decision to set lower standard was a reasonable accommodation of 
conflicting policies).
---------------------------------------------------------------------------

    It is important to note, however, that the law does not preclude a 
CAFE standard that poses considerable challenges to any individual 
manufacturer. The Conference Report for EPCA, as enacted in 1975, makes 
clear, and the case law affirms, ``a determination of maximum feasible 
average fuel economy should not be keyed to the single manufacturer 
which might have the most difficulty achieving a given level of average 
fuel economy.'' \112\ Instead, NHTSA is compelled ``to weigh the 
benefits to the nation of a higher fuel economy standard against the 
difficulties of individual automobile manufacturers.'' \113\ The law 
permits CAFE standards exceeding the projected capability of any 
particular manufacturer as long as the standard is economically 
practicable for the industry as a whole. Thus, while a particular CAFE 
standard may pose difficulties for one manufacturer, it may also 
present opportunities for another. NHTSA has long held that the CAFE 
program is not necessarily intended to maintain the competitive 
positioning of each particular company. Rather, it is intended to 
enhance the fuel economy of the vehicle fleet on American roads, while 
protecting motor vehicle safety and being mindful of the risk to the 
overall United States economy.
---------------------------------------------------------------------------

    \112\ CEI-I, 793 F.2d 1322, 1352 (D.C. Cir. 1986).
    \113\ Id.

---------------------------------------------------------------------------

[[Page 62669]]

(3) The Effect of Other Motor Vehicle Standards of the Government on 
Fuel Economy
    ``The effect of other motor vehicle standards of the Government on 
fuel economy,'' involves an analysis of the effects of compliance with 
emission, safety, noise, or damageability standards on fuel economy 
capability and thus on average fuel economy. In previous CAFE 
rulemakings, the agency has said that pursuant to this provision, it 
considers the adverse effects of other motor vehicle standards on fuel 
economy. It said so because, from the CAFE program's earliest years 
\114\ until present, the effects of such compliance on fuel economy 
capability over the history of the CAFE program have been negative 
ones. For example, safety standards that have the effect of increasing 
vehicle weight lower vehicle fuel economy capability and thus decrease 
the level of average fuel economy that the agency can determine to be 
feasible.
---------------------------------------------------------------------------

    \114\ 42 FR 63184, 63188 (Dec. 15,1977). See also 42 FR 33534, 
33537 (Jun. 30, 1977).
---------------------------------------------------------------------------

    In the wake of Massachusetts v. EPA, 549 U.S. 497 (2007), and of 
EPA's endangerment finding, granting of a waiver to California for its 
motor vehicle GHG standards, and its own establishment of GHG 
standards, NHTSA is confronted with the issue of how to treat those 
standards under EPCA/EISA, such as in the context of the ``other motor 
vehicle standards'' provision. To the extent the GHG standards result 
in increases in fuel economy, they would do so almost exclusively as a 
result of inducing manufacturers to install the same types of 
technologies used by manufacturers in complying with the CAFE 
standards.
    In the NPRM, NHTSA sought comment on whether and in what way the 
effects of the California and EPA standards should be considered under 
EPCA/EISA, e.g., under the ``other motor vehicle standards'' provision, 
consistent with NHTSA's independent obligation under EPCA/EISA to issue 
CAFE standards. NHTSA explained that the agency had already considered 
EPA's proposal and the harmonization benefits of the National Program 
in developing its own proposal. The only comment received was from the 
Sierra Club, noting that the structure of the National Program accounts 
for both NHTSA's and EPA's authority and requires no separate 
action.\115\ NHTSA agrees that no further action is required as part of 
this rulemaking.
---------------------------------------------------------------------------

    \115\ Sierra Club et al. comments, at 10. Available at http://www.regulations.gov, Docket No. ID No. EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------

(4) The Need of the United States To Conserve Energy
    ``The need of the United States to conserve energy'' means ``the 
consumer cost, national balance of payments, environmental, and foreign 
policy implications of our need for large quantities of petroleum, 
especially imported petroleum.'' \116\ Environmental implications 
principally include reductions in emissions of carbon dioxide and 
criteria pollutants and air toxics. Prime examples of foreign policy 
implications are energy independence and security concerns.
---------------------------------------------------------------------------

    \116\ 42 FR 63184, 63188 (1977).
---------------------------------------------------------------------------

(5) Fuel Prices and the Value of Saving Fuel
    Projected future fuel prices are a critical input into the economic 
analysis of alternative CAFE standards, because they determine the 
value of fuel savings both to new vehicle buyers and to society, which 
is related to the consumer cost (or rather, benefit) of our need for 
large quantities of petroleum. In this rule, NHTSA relies on fuel price 
projections from the U.S. Energy Information Administration's (EIA) 
most recent Annual Energy Outlook (AEO) for this analysis. Federal 
government agencies generally use EIA's projections in their 
assessments of future energy-related policies.
(6) Petroleum Consumption and Import Externalities
    U.S. consumption and imports of petroleum products impose costs on 
the domestic economy that are not reflected in the market price for 
crude petroleum, or in the prices paid by consumers of petroleum 
products such as gasoline. These costs include (1) higher prices for 
petroleum products resulting from the effect of U.S. oil import demand 
on the world oil price; (2) the risk of disruptions to the U.S. economy 
caused by sudden reductions in the supply of imported oil to the U.S.; 
and (3) expenses for maintaining a U.S. military presence to secure 
imported oil supplies from unstable regions, and for maintaining the 
strategic petroleum reserve (SPR) to provide a response option should a 
disruption in commercial oil supplies threaten the U.S. economy, to 
allow the United States to meet part of its International Energy Agency 
obligation to maintain emergency oil stocks, and to provide a national 
defense fuel reserve. Higher U.S. imports of crude oil or refined 
petroleum products increase the magnitude of these external economic 
costs, thus increasing the true economic cost of supplying 
transportation fuels above the resource costs of producing them. 
Conversely, reducing U.S. imports of crude petroleum or refined fuels 
or reducing fuel consumption can reduce these external costs.
(7) Air Pollutant Emissions
    While reductions in domestic fuel refining and distribution that 
result from lower fuel consumption will reduce U.S. emissions of 
various pollutants, additional vehicle use associated with the rebound 
effect \117\ from higher fuel economy will increase emissions of these 
pollutants. Thus, the net effect of stricter CAFE standards on 
emissions of each pollutant depends on the relative magnitudes of its 
reduced emissions in fuel refining and distribution, and increases in 
its emissions from vehicle use. Fuel savings from stricter CAFE 
standards also result in lower emissions of CO2, the main 
greenhouse gas emitted as a result of refining, distribution, and use 
of transportation fuels. Reducing fuel consumption reduces carbon 
dioxide emissions directly, because the primary source of 
transportation-related CO2 emissions is fuel combustion in 
internal combustion engines.
---------------------------------------------------------------------------

    \117\ The ``rebound effect'' refers to the tendency of drivers 
to drive their vehicles more as the cost of doing so goes down, as 
when fuel economy improves.
---------------------------------------------------------------------------

    NHTSA has considered environmental issues, both within the context 
of EPCA and the National Environmental Policy Act, in making decisions 
about the setting of standards from the earliest days of the CAFE 
program. As courts of appeal have noted in three decisions stretching 
over the last 20 years,\118\ NHTSA defined the ``need of the Nation to 
conserve energy'' in the late 1970s as including ``the consumer cost, 
national balance of payments, environmental, and foreign policy 
implications of our need for large quantities of petroleum, especially 
imported petroleum.'' \119\ In 1988, NHTSA included climate change 
concepts in its CAFE notices and prepared its first environmental 
assessment addressing that subject.\120\ It cited concerns about 
climate change as

[[Page 62670]]

one of its reasons for limiting the extent of its reduction of the CAFE 
standard for MY 1989 passenger cars.\121\ Since then, NHTSA has 
considered the benefits of reducing tailpipe carbon dioxide emissions 
in its fuel economy rulemakings pursuant to the statutory requirement 
to consider the nation's need to conserve energy by reducing fuel 
consumption.
---------------------------------------------------------------------------

    \118\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 n. 12 
(D.C. Cir. 1986); Public Citizen v. NHTSA, 848 F.2d 256, 262-3 n. 27 
(D.C. Cir. 1988) (noting that ``NHTSA itself has interpreted the 
factors it must consider in setting CAFE standards as including 
environmental effects''); and Center for Biological Diversity v. 
NHTSA, 538 F.3d 1172 (9th Cir. 2007).
    \119\ 42 FR 63184, 63188 (Dec. 15, 1977) (emphasis added).
    \120\ 53 FR 33080, 33096 (Aug. 29, 1988).
    \121\ 53 FR 39275, 39302 (Oct. 6, 1988).
---------------------------------------------------------------------------

ii. Other Factors Considered by NHTSA
    NHTSA considers the potential for adverse safety consequences when 
establishing CAFE standards. This practice is recognized approvingly in 
case law.\122\ Under the universal or ``flat'' CAFE standards that 
NHTSA was previously authorized to establish, the primary risk to 
safety came from the possibility that manufacturers would respond to 
higher standards by building smaller, less safe vehicles in order to 
``balance out'' the larger, safer vehicles that the public generally 
preferred to buy. Under the attribute-based standards being presented 
in this final rule, that risk is reduced because building smaller 
vehicles tends to raise a manufacturer's overall CAFE obligation, 
rather than only raising its fleet average CAFE. However, even under 
attribute-based standards, there is still risk that manufacturers will 
rely on down-weighting to improve their fuel economy (for a given 
vehicle at a given footprint target) in ways that may reduce 
safety.\123\
---------------------------------------------------------------------------

    \122\ As the United States Court of Appeals pointed out in 
upholding NHTSA's exercise of judgment in setting the 1987-1989 
passenger car standards, ``NHTSA has always examined the safety 
consequences of the CAFE standards in its overall consideration of 
relevant factors since its earliest rulemaking under the CAFE 
program.'' Competitive Enterprise Institute v. NHTSA (CEI I), 901 
F.2d 107, 120 at n.11 (D.C. Cir. 1990).
    \123\ For example, by reducing the mass of the smallest vehicles 
rather than the largest, or by reducing vehicle overhang outside the 
space measured as ``footprint,'' which results in less crush space.
---------------------------------------------------------------------------

iii. Factors That NHTSA Is Statutorily Prohibited From Considering in 
Setting Standards
    EPCA provides that in determining the level at which it should set 
CAFE standards for a particular model year, NHTSA may not consider the 
ability of manufacturers to take advantage of several EPCA provisions 
that facilitate compliance with the CAFE standards and thereby reduce 
the costs of compliance. Specifically, in determining the maximum 
feasible level of fuel economy for passenger cars and light trucks, 
NHTSA cannot consider the fuel economy benefits of ``dedicated'' 
alternative fuel vehicles (like battery electric vehicles or natural 
gas vehicles), must consider dual-fueled automobiles to be operated 
only on gasoline or diesel fuel, and may not consider the ability of 
manufacturers to use, trade, or transfer credits.\124\ This provision 
limits, to some extent, the fuel economy levels that NHTSA can find to 
be ``maximum feasible''--if NHTSA cannot consider the fuel economy of 
electric vehicles, for example, NHTSA cannot set a standards predicated 
on manufacturers' usage of electric vehicles to meet the standards.
---------------------------------------------------------------------------

    \124\ 49 U.S.C. 32902(h). We note, as discussed in greater 
detail in Section IV, that NHTSA interprets 32902(h) as reflecting 
Congress' intent that statutorily-mandated compliance flexibilities 
remain flexibilities. When a compliance flexibility is not 
statutorily mandated, therefore, or when it ceases to be available 
under the statute, we interpret 32902(h) as no longer binding the 
agency's determination of the maximum feasible levels of fuel 
economy. For example, when the manufacturing incentive for dual-
fueled automobiles under 49 U.S.C. 32905 and 32906 expires in MY 
2019, there is no longer a flexibility left to protect per 32902(h), 
so NHTSA considers the calculated fuel economy of plug-in hybrid 
electric vehicles for purposes of determining the maximum feasible 
standards in MYs 2020 and beyond.
---------------------------------------------------------------------------

iv. Weighing and Balancing of Factors
    NHTSA has broad discretion in balancing the above factors in 
determining the average fuel economy level that the manufacturers can 
achieve. Congress ``specifically delegated the process of setting * * * 
fuel economy standards with broad guidelines concerning the factors 
that the agency must consider.'' \125\ The breadth of those guidelines, 
the absence of any statutorily prescribed formula for balancing the 
factors, the fact that the relative weight to be given to the various 
factors may change from rulemaking to rulemaking as the underlying 
facts change, and the fact that the factors may often be conflicting 
with respect to whether they militate toward higher or lower standards 
give NHTSA discretion to decide what weight to give each of the 
competing policies and concerns and then determine how to balance 
them--``as long as NHTSA's balancing does not undermine the fundamental 
purpose of the EPCA: Energy conservation,'' \126\ and as long as that 
balancing reasonably accommodates ``conflicting policies that were 
committed to the agency's care by the statute.'' \127\ Thus, EPCA does 
not mandate that any particular number be adopted when NHTSA determines 
the level of CAFE standards.
---------------------------------------------------------------------------

    \125\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, at 1341 
(D.C. Cir. 1986).
    \126\ CBD v. NHTSA, 538 F.3d at 1195 (9th Cir. 2008).
    \127\ Id.
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v. Other Requirements Related to Standard Setting
    The standards for passenger cars and for light trucks must increase 
ratably each year through MY 2020.\128\ This statutory requirement is 
interpreted, in combination with the requirement to set the standards 
for each model year at the level determined to be the maximum feasible 
level that manufacturers can achieve for that model year, to mean that 
the annual increases should not be disproportionately large or small in 
relation to each other.\129\ Standards after 2020 must simply be set at 
the maximum feasible level.\130\
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    \128\ 49 U.S.C. 32902(b)(2)(C).
    \129\ See 74 FR 14196, 14375-76 (Mar. 30, 2009).
    \130\ 49 U.S.C. 32902(b)(2)(B).
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    The standards for passenger cars and light trucks must also be 
based on one or more vehicle attributes, like size or weight, which 
correlate with fuel economy and must be expressed in terms of a 
mathematical function.\131\ Fuel economy targets are set for individual 
vehicles and increase as the attribute decreases and vice versa. For 
example, footprint-based standards assign higher fuel economy targets 
to smaller-footprint vehicles and lower ones to larger footprint-
vehicles. The fleetwide average fuel economy that a particular 
manufacturer is required to achieve depends on the footprint mix of its 
fleet, i.e., the proportion of the fleet that is small-, medium- or 
large-footprint.
---------------------------------------------------------------------------

    \131\ 49 U.S.C. 32902(b)(3).
---------------------------------------------------------------------------

    This approach can be used to require virtually all manufacturers to 
increase significantly the fuel economy of a broad range of both 
passenger cars and light trucks, i.e., the manufacturer must improve 
the fuel economy of all the vehicles in its fleet. Further, this 
approach can do so without creating an incentive for manufacturers to 
make small vehicles smaller or large vehicles larger, with attendant 
implications for safety.
b. Test Procedures for Measuring Fuel Economy
    EPCA provides EPA with the responsibility for establishing 
procedures to measure fuel economy and to calculate CAFE. Current test 
procedures measure the effects of nearly all fuel saving technologies. 
EPA is revising the procedures for measuring fuel economy and 
calculating average fuel economy for the CAFE program, however, to 
account for certain impacts on fuel economy not currently included

[[Page 62671]]

in these procedures, specifically increases in fuel economy because of 
increases in efficiency of the air conditioning system; increases in 
fuel economy because of technology improvements that achieve ``off-
cycle'' benefits; incentives for use of certain hybrid technologies in 
a significant percentage of pick-up trucks; and incentives for 
achieving fuel economy levels in a significant percentage pick-up 
trucks that exceeds the target curve by specified amounts, in the form 
of increased values assigned for fuel economy. NHTSA has considered 
manufacturers' ability to comply with the CAFE standards using these 
efficiency improvements in determining the stringency of the fuel 
economy standards presented in this final rule. These changes would be 
the same as program elements that are part of EPA's greenhouse gas 
performance standards, discussed in Section III.B.10. As discussed 
below, these three elements will be implemented in the same manner as 
in the EPA's greenhouse gas program--a vehicle manufacturer would have 
the option to generate these fuel economy values for vehicle models 
that meet the criteria for these elements and to use these values in 
calculating their fleet average fuel economy. This revision to the CAFE 
calculations is discussed in more detail in Sections III.B.10 and III.C 
and IV.I.4 below.
c. Enforcement and Compliance Flexibility
    NHTSA determines compliance with the CAFE standards based on 
measurements of automobile manufacturers' CAFE from EPA. If a 
manufacturer's passenger car or light truck CAFE level exceeds the 
applicable standard for that model year, the manufacturer earns credits 
for over-compliance. The amount of credit earned is determined by 
multiplying the number of tenths of a mpg by which a manufacturer 
exceeds a standard for a particular category of automobiles by the 
total volume of automobiles of that category manufactured by the 
manufacturer for a given model year. As discussed in more detail in 
Section IV.I, credits can be carried forward for 5 model years or back 
for 3, and can also be transferred between a manufacturer's fleets or 
traded to another manufacturer.
    If a manufacturer's passenger car or light truck CAFE level does 
not meet the applicable standard for that model year, NHTSA notifies 
the manufacturer. The manufacturer may use ``banked'' credits to make 
up the shortfall, but if there are no (or not enough) credits 
available, then the manufacturer has the option to submit a ``carry 
back plan'' to NHTSA. A carry back plan describes what the manufacturer 
plans to do in the following three model years to earn enough credits 
to make up for the shortfall through future over-compliance. NHTSA must 
examine and determine whether to approve the plan.
    In the event that a manufacturer does not comply with a CAFE 
standard, even after the consideration of credits, EPCA provides for 
the assessing of civil penalties.\132\ The Act specifies a precise 
formula for determining the amount of civil penalties for such a 
noncompliance. The penalty, as adjusted for inflation by law, is $5.50 
for each tenth of a mpg that a manufacturer's average fuel economy 
falls short of the standard for a given model year multiplied by the 
total volume of those vehicles in the affected fleet (i.e., import or 
domestic passenger car, or light truck), manufactured for that model 
year.\133\ The amount of the penalty may not be reduced except under 
the unusual or extreme circumstances specified in the statute, which 
have never been exercised by NHTSA in the history of the CAFE program.
---------------------------------------------------------------------------

    \132\ EPCA does not provide authority for seeking to enjoin 
violations of the CAFE standards.
    \133\ 49 U.S.C. 32912(b), 49 CFR 578.6(h)(2).
---------------------------------------------------------------------------

    Unlike the National Traffic and Motor Vehicle Safety Act, EPCA does 
not provide for recall and remedy in the event of a noncompliance. The 
presence of recall and remedy provisions \134\ in the Safety Act and 
their absence in EPCA is believed to arise from the difference in the 
application of the safety standards and CAFE standards. A safety 
standard applies to individual vehicles; that is, each vehicle must 
possess the requisite equipment or feature that must provide the 
requisite type and level of performance. If a vehicle does not, it is 
noncompliant. Typically, a vehicle does not entirely lack an item or 
equipment or feature. Instead, the equipment or features fails to 
perform adequately. Recalling the vehicle to repair or replace the 
noncompliant equipment or feature can usually be readily accomplished.
---------------------------------------------------------------------------

    \134\ 49 U.S.C. 30120, Remedies for defects and noncompliance.
---------------------------------------------------------------------------

    In contrast, a CAFE standard applies to a manufacturer's entire 
fleet for a model year. It does not require that a particular 
individual vehicle be equipped with any particular equipment or feature 
or meet a particular level of fuel economy. It does require that the 
manufacturer's fleet, as a whole, comply. Further, although under the 
attribute-based approach to setting CAFE standards fuel economy targets 
are established for individual vehicles based on their footprints, the 
individual vehicles are not required to meet or exceed those targets. 
However, as a practical matter, if a manufacturer chooses to design 
some vehicles that fall below their target levels of fuel economy, it 
will need to design other vehicles that exceed their targets if the 
manufacturer's overall fleet average is to meet the applicable 
standard.
    Thus, under EPCA, there is no such thing as a noncompliant vehicle, 
only a noncompliant fleet. No particular vehicle in a noncompliant 
fleet is any more, or less, noncompliant than any other vehicle in the 
fleet.
2. EPA Statutory Authority
    Title II of the Clean Air Act (CAA) provides for comprehensive 
regulation of mobile sources, authorizing EPA to regulate emissions of 
air pollutants from all mobile source categories. Pursuant to these 
sweeping grants of authority, EPA considers such issues as technology 
effectiveness, its cost (both per vehicle, per manufacturer, and per 
consumer), the lead time necessary to implement the technology, and 
based on this the feasibility and practicability of potential 
standards; the impacts of potential standards on emissions reductions 
of both GHGs and non-GHGs; the impacts of standards on oil conservation 
and energy security; the impacts of standards on fuel savings by 
consumers; the impacts of standards on the auto industry; other energy 
impacts; as well as other relevant factors such as impacts on safety
    Pursuant to Title II of the Clean Air Act, EPA has taken a 
comprehensive, integrated approach to mobile source emission control 
that has produced benefits well in excess of the costs of regulation. 
In developing the Title II program, the Agency's historic, initial 
focus was on personal vehicles since that category represented the 
largest source of mobile source emissions. Over time, EPA has 
established stringent emissions standards for large truck and other 
heavy-duty engines, nonroad engines, and marine and locomotive engines, 
as well. The Agency's initial focus on personal vehicles has resulted 
in significant control of emissions from these vehicles, and also led 
to technology transfer to the other mobile source categories that made 
possible the stringent standards for these other categories.
    As a result of Title II requirements, new cars and SUVs sold today 
have emissions levels of hydrocarbons, oxides of nitrogen, and carbon 
monoxide that are 98-99% lower than new vehicles sold in the 1960s, on 
a per

[[Page 62672]]

mile basis. Similarly, standards established for heavy-duty highway and 
nonroad sources require emissions rate reductions on the order of 90% 
or more for particulate matter and oxides of nitrogen. Overall ambient 
levels of automotive-related pollutants are lower now than in 1970, 
even as economic growth and vehicle miles traveled have nearly tripled. 
These programs have resulted in millions of tons of pollution reduction 
and major reductions in pollution-related deaths (estimated in the tens 
of thousands per year) and illnesses. The net societal benefits of the 
mobile source programs are large. In its annual reports on federal 
regulations, the Office of Management and Budget reports that many of 
EPA's mobile source emissions standards typically have projected 
benefit-to-cost ratios of 5:1 to 10:1 or more. Follow-up studies show 
that long-term compliance costs to the industry are typically lower 
than the cost projected by EPA at the time of regulation, which result 
in even more favorable real world benefit-to-cost ratios.\135\ 
Pollution reductions attributable to Title II mobile source controls 
are critical components to attainment of primary National Ambient Air 
Quality Standards, significantly reducing the national inventory and 
ambient concentrations of criteria pollutants, especially 
PM2.5 and ozone. See e.g. 69 FR 38958, 38967-68 (June 29, 
2004) (controls on non-road diesel engines expected to reduce entire 
national inventory of PM2.5 by 3.3% (86,000 tons) by 2020). 
Title II controls have also made enormous reductions in air toxics 
emitted by mobile sources. For example, as a result of EPA's 2007 
mobile source air toxics standards, the cancer risk attributable to 
total mobile source air toxics will be reduced by 30% in 2030 and the 
risk from mobile source benzene (a leukemogen) will be reduced by 37% 
in 2030. (reflecting reductions of over three hundred thousand tons of 
mobile source air toxic emissions) 72 FR 8428, 8430 (Feb. 26, 2007).
---------------------------------------------------------------------------

    \135\ OMB, 2011. 2011 Report to Congress on the Benefits and 
Costs of Federal Regulations and Unfunded Mandates on State, Local, 
and Tribal Entities. Office of Information and Regulatory Affairs. 
June, 2011. http://www.whitehouse.gov/omb/inforeg_regpol_reports_congress/ (Last accessed on August 12, 2012). Several commenters 
asserted that EPA had underestimated costs of rules controlling 
emissions of criteria pollutants from heavy duty diesel engines. 
These comments, which are incorrect and misplaced, are addressed in 
EPA's Response to Comments Section 18.2.
---------------------------------------------------------------------------

    Title II emission standards have also stimulated the development of 
a much broader set of advanced automotive technologies, such as on-
board computers and fuel injection systems, which are the building 
blocks of today's automotive designs and have yielded not only lower 
pollutant emissions, but improved vehicle performance, reliability, and 
durability.
    This final rule implements a specific provision from Title II, 
section 202(a).\136\ Section 202(a)(1) of the Clean Air Act (CAA) 
states that ``the Administrator shall by regulation prescribe (and from 
time to time revise) * * * standards applicable to the emission of any 
air pollutant from any class or classes of new motor vehicles * * * 
which in his judgment cause, or contribute to, air pollution which may 
reasonably be anticipated to endanger public health or welfare.'' If 
EPA makes the appropriate endangerment and cause or contribute 
findings, then section 202(a) authorizes EPA to issue standards 
applicable to emissions of those pollutants. Indeed, EPA's obligation 
to do so is mandatory: ``Coalition for Responsible Regulation v. EPA, 
No. 09-1322, slip op. at pp. 40-1 (D.C. Cir. June 26, 2012); 
Massachusetts v. EPA, 549 U.S. at 533. Moreover, EPA's mandatory legal 
duty to promulgate these emission standards derives from ``a statutory 
obligation wholly independent of DOT's mandate to promote energy 
efficiency.'' Massachusetts, 549 U.S. at 532. Consequently, EPA has no 
discretion to decline to issue greenhouse standards under section 
202(a), or to defer issuing such standards due to NHTSA's regulatory 
authority to establish fuel economy standards. Rather, ``[j]ust as EPA 
lacks authority to refuse to regulate on the grounds of NHTSA's 
regulatory authority, EPA cannot defer regulation on that basis.'' 
Coalition for Responsible Regulation v. EPA, slip op. at p. 41.
---------------------------------------------------------------------------

    \136\ 42 U.S.C. 7521 (a)
---------------------------------------------------------------------------

    Any standards under CAA section 202(a)(1) ``shall be applicable to 
such vehicles * * * for their useful life.'' Emission standards set by 
the EPA under CAA section 202(a)(1) are technology-based, as the levels 
chosen must be premised on a finding of technological feasibility. 
Thus, standards promulgated under CAA section 202(a) are to take effect 
only ``after providing such period as the Administrator finds necessary 
to permit the development and application of the requisite technology, 
giving appropriate consideration to the cost of compliance within such 
period'' (section 202 (a)(2); see also NRDC v. EPA, 655 F. 2d 318, 322 
(D.C. Cir. 1981)). EPA must consider costs to those entities which are 
directly subject to the standards. Motor & Equipment Mfrs. Ass'n Inc. 
v. EPA, 627 F. 2d 1095, 1118 (D.C. Cir. 1979). Thus, ``the [s]ection 
202 (a)(2) reference to compliance costs encompasses only the cost to 
the motor-vehicle industry to come into compliance with the new 
emission standards.'' Coalition for Responsible Regulation v. EPA, slip 
op. p. 44; see also id. at pp. 43-44 rejecting arguments that EPA was 
required to, or should have considered costs to other entities, such as 
stationary sources, which are not directly subject to the emission 
standards. EPA is afforded considerable discretion under section 202(a) 
when assessing issues of technical feasibility and availability of lead 
time to implement new technology. Such determinations are ``subject to 
the restraints of reasonableness'', which ``does not open the door to 
`crystal ball' inquiry.'' NRDC, 655 F. 2d at 328, quoting International 
Harvester Co. v. Ruckelshaus, 478 F. 2d 615, 629 (D.C. Cir. 1973). 
However, ``EPA is not obliged to provide detailed solutions to every 
engineering problem posed in the perfection of the trap-oxidizer. In 
the absence of theoretical objections to the technology, the agency 
need only identify the major steps necessary for development of the 
device, and give plausible reasons for its belief that the industry 
will be able to solve those problems in the time remaining. The EPA is 
not required to rebut all speculation that unspecified factors may 
hinder `real world' emission control.'' NRDC, 655 F. 2d at 333-34. In 
developing such technology-based standards, EPA has the discretion to 
consider different standards for appropriate groupings of vehicles 
(``class or classes of new motor vehicles''), or a single standard for 
a larger grouping of motor vehicles (NRDC, 655 F. 2d at 338). Finally, 
with respect to regulation of vehicular greenhouse gas emissions, EPA 
is not ``required to treat NHTSA's * * * regulations as establishing 
the baseline for the [section 202 (a) standards].'' Coalition for 
Responsible Regulation v. EPA, slip op. at p. 42 (noting further that 
``the [section 202 (a) standards] provid[e] benefits above and beyond 
those resulting from NHTSA's fuel-economy standards''.)
    Although standards under CAA section 202(a)(1) are technology-
based, they are not based exclusively on technological capability. EPA 
has the discretion to consider and weigh various factors along with 
technological feasibility, such as the cost of compliance (see section 
202(a) (2)), lead time necessary for compliance (section 202(a)(2)), 
safety (see NRDC, 655 F. 2d at 336 n. 31) and other impacts on

[[Page 62673]]

consumers,\137\ and energy impacts associated with use of the 
technology. See George E. Warren Corp. v. EPA, 159 F.3d 616, 623-624 
(D.C. Cir. 1998) (ordinarily permissible for EPA to consider factors 
not specifically enumerated in the Act).
---------------------------------------------------------------------------

    \137\ Since its earliest Title II regulations, EPA has 
considered the safety of pollution control technologies. See 45 
Fed.Reg. 14,496, 14,503 (1980). (``EPA would not require a 
particulate control technology that was known to involve serious 
safety problems. If during the development of the trap-oxidizer 
safety problems are discovered, EPA would reconsider the control 
requirements implemented by this rulemaking'').
---------------------------------------------------------------------------

    In addition, EPA has clear authority to set standards under CAA 
section 202(a) that are technology forcing when EPA considers that to 
be appropriate, but is not required to do so (as compared to standards 
set under provisions such as section 202(a)(3) and section 213(a)(3)). 
EPA has interpreted a similar statutory provision, CAA section 231, as 
follows:

    While the statutory language of section 231 is not identical to 
other provisions in title II of the CAA that direct EPA to establish 
technology-based standards for various types of engines, EPA 
interprets its authority under section 231 to be somewhat similar to 
those provisions that require us to identify a reasonable balance of 
specified emissions reduction, cost, safety, noise, and other 
factors. See, e.g., Husqvarna AB v. EPA, 254 F.3d 195 (D.C. Cir. 
2001) (upholding EPA's promulgation of technology-based standards 
for small non-road engines under section 213(a)(3) of the CAA). 
However, EPA is not compelled under section 231 to obtain the 
``greatest degree of emission reduction achievable'' as per sections 
213 and 202 of the CAA, and so EPA does not interpret the Act as 
requiring the agency to give subordinate status to factors such as 
cost, safety, and noise in determining what standards are reasonable 
for aircraft engines. Rather, EPA has greater flexibility under 
section 231 in determining what standard is most reasonable for 
aircraft engines, and is not required to achieve a ``technology 
forcing'' result.\138\
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    \138\ 70 FR 69664, 69676, November 17, 2005.

    This interpretation was upheld as reasonable in NACAA v. EPA, (489 
F.3d 1221, 1230 (D.C. Cir. 2007)). CAA section 202(a) does not specify 
the degree of weight to apply to each factor, and EPA accordingly has 
discretion in choosing an appropriate balance among factors. See Sierra 
Club v. EPA, 325 F.3d 374, 378 (D.C. Cir. 2003) (even where a provision 
is technology-forcing, the provision ``does not resolve how the 
Administrator should weigh all [the statutory] factors in the process 
of finding the `greatest emission reduction achievable' ''). Also see 
Husqvarna AB v. EPA, 254 F. 3d 195, 200 (D.C. Cir. 2001) (great 
discretion to balance statutory factors in considering level of 
technology-based standard, and statutory requirement ``to [give 
appropriate] consideration to the cost of applying * * * technology'' 
does not mandate a specific method of cost analysis); see also Hercules 
Inc. v. EPA, 598 F. 2d 91, 106 (D.C. Cir. 1978) (``In reviewing a 
numerical standard we must ask whether the agency's numbers are within 
a zone of reasonableness, not whether its numbers are precisely 
right''); Permian Basin Area Rate Cases, 390 U.S. 747, 797 (1968) 
(same); Federal Power Commission v. Conway Corp., 426 U.S. 271, 278 
(1976) (same); Exxon Mobil Gas Marketing Co. v. FERC, 297 F. 3d 1071, 
1084 (D.C. Cir. 2002) (same).
    One commenter mistakenly characterized section 202(a) as a 
``technology-forcing'' provision. Comments of CBD p. 5. As just 
explained, it is not, but even if it were, EPA retains considerable 
discretion to balance the various relevant statutory factors, again as 
just explained. The same commenter maintained that the GHG standards 
should ``protect the public health and welfare with an adequate margin 
of safety.'' Id. p. 2. The commenter paraphrases the statutory standard 
for issuing health-based National Ambient Air Quality Standards under 
section 109(b) of the CAA.\139\ Section 202(a) is a technology-based 
provision with an entirely different legal standard. Moreover, the 
commenter's assertion that the standards must reduce the amount of 
greenhouse gases emitted by light duty motor vehicles (id. pp. 2-3) has 
no statutory basis. Section 202(a)(2) does not spell out any minimum 
level of effectiveness for standards, but instead directs EPA to set 
the standards at a level that is reasonable in light of applicable 
compliance costs and technology considerations. Nor is there any 
requirement that the GHG standards result in some specific quantum of 
amelioration of the endangerment to which light-duty vehicle emissions 
contribute. See Coalition for Responsible Regulation v. EPA, slip op. 
pp. 42-43. In addition, substantial GHG emission reductions required by 
section 202(a) standards in and of themselves constitute ``meaningful 
mitigation of greenhouse gas emissions'' without regard to the extent 
to which these reductions ameliorate the endangerment to public health 
and welfare caused by greenhouse gas emissions. Coalition for 
Responsible Regulation v. EPA, slip op. p. 43.
---------------------------------------------------------------------------

    \139\ 42 U.S.C. 7409(b).
---------------------------------------------------------------------------

a. EPA's Testing Authority
    Under section 203 of the CAA, sales of vehicles are prohibited 
unless the vehicle is covered by a certificate of conformity. EPA 
issues certificates of conformity pursuant to section 206 of the Act, 
based on (necessarily) pre-sale testing conducted either by EPA or by 
the manufacturer. The Federal Test Procedure (FTP or ``city'' test) and 
the Highway Fuel Economy Test (HFET or ``highway'' test) are used for 
this purpose. Compliance with standards is required not only at 
certification but throughout a vehicle's useful life, so that testing 
requirements may continue post-certification. Useful life standards may 
apply an adjustment factor to account for vehicle emission control 
deterioration or variability in use (section 206(a)).
    Pursuant to EPCA, EPA is required to measure fuel economy for each 
model and to calculate each manufacturer's average fuel economy.\140\ 
EPA uses the same tests--the FTP and HFET--for fuel economy testing. 
EPA established the FTP for emissions measurement in the early 1970s. 
In 1976, in response to the Energy Policy and Conservation Act (EPCA) 
statute, EPA extended the use of the FTP to fuel economy measurement 
and added the HFET.\141\ The provisions in the 1976 regulation, 
effective with the 1977 model year, established procedures to calculate 
fuel economy values both for labeling and for CAFE purposes. Under 
EPCA, EPA is required to use these procedures (or procedures which 
yield comparable results) for measuring fuel economy for cars for CAFE 
purposes, but not for labeling purposes.\142\ EPCA does not pose this 
restriction on CAFE test procedures for light trucks, but EPA does use 
the FTP and HFET for this purpose. EPA determines fuel economy by 
measuring the amount of CO2 and all other carbon compounds 
(e.g. total hydrocarbons (THC) and carbon monoxide (CO)), and then, by 
mass balance, calculating the amount of fuel consumed. EPA's final 
changes to the procedures for measuring fuel economy and calculating 
average fuel economy are discussed in section III.B.10.
---------------------------------------------------------------------------

    \140\ See 49 U.S.C. 32904(c).
    \141\ See 41 FR 38674 (Sept. 10, 1976), which is codified at 40 
CFR Part 600.
    \142\ See 49 U.S.C. 32904(c).
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b. EPA Enforcement Authority
    Section 207 of the CAA grants EPA broad authority to require 
manufacturers to remedy vehicles if EPA determines there are a 
substantial number of noncomplying vehicles. In addition, section 205 
of the CAA

[[Page 62674]]

authorizes EPA to assess penalties of up to $37,500 per vehicle for 
violations of various prohibited acts specified in the CAA. In 
determining the appropriate penalty, EPA must consider a variety of 
factors such as the gravity of the violation, the economic impact of 
the violation, the violator's history of compliance, and ``such other 
matters as justice may require.'' Unlike EPCA, the CAA does not 
authorize vehicle manufacturers to pay fines in lieu of meeting 
emission standards.
c. Compliance
    EPA oversees testing, collects and processes test data, and 
performs calculations to determine compliance with both CAA and CAFE 
standards. CAA standards apply not only at the time of certification 
but also throughout the vehicle's useful life, and EPA is accordingly 
finalizing in-use standards as well as standards based on testing 
performed at time of production. See section III.E. Both the CAA and 
EPCA provide for penalties should manufacturers fail to comply with 
their fleet average standards, but, unlike EPCA, there is no option for 
manufacturers to pay fines in lieu of compliance with the standards. 
Under the CAA, penalties are typically determined on a vehicle-specific 
basis by determining the number of a manufacturer's highest emitting 
vehicles that cause the fleet average standard violation. Penalties 
under Title II of the CAA are capped at $25,000 per day of violation 
and apply on a per vehicle basis. See CAA section 205(a).
d. Test Procedures
    EPA establishes the test procedures under which compliance with 
both the CAA GHG standards and the EPCA fuel economy standards are 
measured. EPA's testing authority under the CAA is flexible, but 
testing for fuel economy for passenger cars is by statute is limited to 
the Federal Test procedure (FTP) or test procedures which provide 
results which are equivalent to the FTP. 49 U.S.C. Sec.  32904 and 
section III.B, below. EPA developed and established the FTP in the 
early 1970s and, after enactment of EPCA in 1976, added the Highway 
Fuel Economy Test (HFET) to be used in conjunction with the FTP for 
fuel economy testing. EPA has also developed tests with additional 
cycles (the so-called 5-cycle test) which test is used for purposes of 
fuel economy labeling and is also used in the EPA program for extending 
off-cycle credits under both the light-duty and (along with NHTSA) 
heavy-duty vehicle GHG programs. See 75 FR 25439; 76 FR 57252. In this 
rule, EPA is retaining the FTP and HFET for purposes of testing the 
fleetwide average standards, and is further modifying the N2O 
measurement test procedures and the A/C CO2 efficiency test 
procedures EPA initially adopted in the 2012-2016 rule.
3. Comparing the Agencies' Authority
    As the above discussion makes clear, there are both important 
differences between the statutes under which each agency is acting as 
well as several important areas of similarity. One important difference 
is that EPA's authority addresses various GHGs, while NHTSA's authority 
addresses fuel economy as measured under specified test procedures and 
calculated by EPA. This difference is reflected in this rulemaking in 
the scope of the two standards: EPA's rule takes into account 
reductions of direct air conditioning emissions, and establishes 
standards for methane and N2O, but NHTSA's do not, because 
these emissions generally do not relate to fuel economy. A second 
important difference is that EPA is adopting certain compliance 
flexibilities, such as the multiplier for advanced technology vehicles, 
and has taken those flexibilities into account in its technical 
analysis and modeling supporting the GHG standards. EPCA specifies a 
number of particular compliance flexibilities for CAFE, and expressly 
prohibits NHTSA from considering the impacts of those statutory 
compliance flexibilities in setting the CAFE standard so that the 
manufacturers' election to avail themselves of the permitted 
flexibilities remains strictly voluntary.\143\ The Clean Air Act, on 
the other hand, contains no such prohibition. As explained earlier, 
these considerations result in some differences in the technical 
analysis and modeling used to support the agencies' respective 
standards.
---------------------------------------------------------------------------

    \143\ 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

    Another important area where the two agencies' authorities are 
similar but not identical involves the transfer of credits between a 
single firm's car and truck fleets. EISA revised EPCA to allow for such 
credit transfers, but placed a cap on the amount of CAFE credits which 
can be transferred between the car and truck fleets. 49 U.S.C. 
32903(g)(3). Under CAA section 202(a), EPA is continuing to allow 
CO2 credit transfers between a single manufacturer's car and 
truck fleets, with no corresponding limits on such transfers. In 
general, the EISA limit on CAFE credit transfers is not expected to 
have the practical effect of limiting the amount of CO2 
emission credits manufacturers may be able to transfer under the CAA 
program, recognizing that manufacturers must comply with both the CAFE 
standards and the GHG standards. However, it is possible that in some 
specific circumstances the EPCA limit on CAFE credit transfers could 
constrain the ability of a manufacturer to achieve cost savings through 
unlimited use of GHG emissions credit transfers under the CAA program.
    These differences, however, do not change the fact that in many 
critical ways the two agencies are charged with addressing the same 
basic issue of reducing GHG emissions and improving fuel economy. The 
agencies are looking at the same set of control technologies (with the 
exception of the air conditioning leakage-related technologies). The 
standards set by each agency will drive the kind and degree of 
penetration of this set of technologies across the vehicle fleet. As a 
result, each agency is trying to answer the same basic question--what 
kind and degree of technology penetration is necessary to achieve the 
agencies' objectives in the rulemaking time frame, given the agencies' 
respective statutory authorities?
    In making the determination of what standards are appropriate under 
the CAA and EPCA, each agency is to exercise its judgment and balance 
many similar factors. NHTSA's factors are provided by EPCA: 
Technological feasibility, economic practicability, the effect of other 
motor vehicle standards of the Government on fuel economy, and the need 
of the United States to conserve energy. EPA has the discretion under 
the CAA to consider many related factors, such as the availability of 
technologies, the appropriate lead time for introduction of technology, 
and based on this the feasibility and practicability of their 
standards; the impacts of their standards on emissions reductions (of 
both GHGs and non-GHGs); the impacts of their standards on oil 
conservation; the impacts of their standards on fuel savings by 
consumers; the impacts of their standards on the auto industry; as well 
as other relevant factors such as impacts on safety. Conceptually, 
therefore, each agency is considering and balancing many of the same 
concerns, and each agency is making a decision that at its core is 
answering the same basic question of what kind and degree of technology 
penetration is it appropriate to call for in light of all of the 
relevant factors in a given rulemaking, for the model years concerned. 
Finally, each agency has the authority to take into consideration 
impacts of the standards of the other agency. Among the other factors 
that is considers in determining maximum

[[Page 62675]]

feasible standards, EPCA calls for NHTSA to take into consideration the 
effects of EPA's emissions standards on fuel economy capability (see 49 
U.S.C. 32902(f)), and EPA has the discretion to take into consideration 
NHTSA's CAFE standards in determining appropriate action under section 
202(a).\144\ This is consistent with the Supreme Court's statement that 
EPA's mandate to protect public health and welfare is wholly 
independent from NHTSA's mandate to promote energy efficiency, but 
there is no reason to think the two agencies cannot both administer 
their obligations and yet avoid inconsistency. Massachusetts v. EPA, 
549 U.S. 497, 532 (2007).
---------------------------------------------------------------------------

    \144\ It should be noted, however, that the D.C. Circuit noted 
the absence of an explicit obligation for EPA to consider NHTSA fuel 
economy standards as one basis for holding that the existence of 
NHTSA's fuel economy regulatory program provides no basis for EPA 
deferring regulation of vehicular greenhouse gas emissions. 
Coalition for Responsible Regulation v. EPA, slip op. pp. 41-42.
---------------------------------------------------------------------------

    In this context, it is in the Nation's interest for the two 
agencies to continue to work together in developing these standards, 
and they have done so. For example, the agencies have committed 
considerable effort to develop a joint Technical Support Document that 
provides a technical basis underlying each agency's analyses. The 
agencies also have worked closely together in developing and reviewing 
their respective modeling, to develop the best analysis and to promote 
technical consistency. The agencies have developed a common set of 
attribute-based curves that each agency supports as appropriate both 
technically and from a policy perspective. The agencies have also 
worked closely to ensure that their respective programs will work in a 
coordinated fashion, and will provide regulatory compatibility that 
allows auto manufacturers to build a single national light-duty fleet 
that would comply with both the GHG and the CAFE standards. The 
resulting overall close coordination of the GHG and CAFE standards 
should not be surprising, however, as each agency is using a jointly 
developed technical basis to address the closely intertwined challenges 
of energy security and climate change.
    As set out in detail in Sections III and IV of this notice, both 
EPA and NHTSA believe the agencies' standards are fully justified under 
their respective statutory criteria. The standards are feasible in each 
model year within the lead time provided, based on the agencies' 
projected increased use of various technologies which in most cases are 
already in commercial application in the fleet to varying degrees. 
Detailed assessment of the technologies that could be employed by each 
manufacturer supports this conclusion. The agencies also carefully 
assessed the costs of the rules, both for the industry as a whole and 
per manufacturer, as well as the costs per vehicle, and consider these 
costs to be reasonable during the rulemaking time frame and recoverable 
(from fuel savings). The agencies recognize the significant increase in 
the application of technology that the standards would require across a 
high percentage of vehicles, which will require the manufacturers to 
devote considerable engineering and development resources before 2017 
laying the critical foundation for the widespread deployment of 
upgraded technology across a high percentage of the 2017-2025 fleet. 
This clearly will be challenging for automotive manufacturers and their 
suppliers, especially in the current economic climate, and given the 
stringency of the recently-established MYs 2012-2016 standards. 
However, based on all of the analyses performed by the agencies, our 
judgment is that it is a challenge that can reasonably be met.
    The agencies also evaluated the impacts of these standards with 
respect to the expected reductions in GHGs and oil consumption and, 
found them to be very significant in magnitude. The agencies considered 
other factors such as the impacts on noise, energy, and vehicular 
congestion. The impact on safety was also given careful consideration. 
Moreover, the agencies quantified the various costs and benefits of the 
standards, to the extent practicable. The agencies' analyses to date 
indicate that the overall quantified benefits of the standards far 
outweigh the projected costs. All of these factors support the 
reasonableness of the standards. See Section III (GHG standards) and 
Section IV (CAFE standards) for a detailed discussion of each agency's 
basis for its selection of its standards.
    The fact that the benefits are estimated to considerably exceed 
their costs supports the view that the standards represent an 
appropriate balance of the relevant statutory factors.\145\ In drawing 
this conclusion, the agencies acknowledge the uncertainties and 
limitations of the analyses. For example, the analysis of the benefits 
is highly dependent on the estimated price of fuel projected out many 
years into the future. There is also significant uncertainty in the 
potential range of values that could be assigned to the social cost of 
carbon. There are a variety of impacts that the agencies are unable to 
quantify, such as non-market damages, extreme weather, socially 
contingent effects, or the potential for longer-term catastrophic 
events, or the impact on consumer choice. The cost-benefit analyses are 
one of the important things the agencies consider in making a judgment 
as to the appropriate standards to propose under their respective 
statutes. Consideration of the results of the cost-benefit analyses by 
the agencies, however, includes careful consideration of the 
limitations discussed above.
---------------------------------------------------------------------------

    \145\ The comment that the standards are insufficiently 
stringent because estimated benefits of the standards substantially 
exceed the estimated costs shows (Comment of CBD p.8) is misplaced. 
Neither EPCA/EISA nor the CAA dictates a particular weighing of 
costs and benefits, so the commenter's insistence that the 
respective statutes require ``maximized societal benefits, where the 
benefits most optimally compare to the anticipated costs'' (id. p. 
23) is not correct.
---------------------------------------------------------------------------

II. Joint Technical Work Completed for This Final Rule

A. Introduction

    In this section, NHTSA and EPA discuss several aspects of our joint 
technical analyses. These analyses are common to the development of 
each agency's standards. Specifically we discuss: The development of 
the vehicle market forecasts used by each agency for assessing costs, 
benefits, and effects; the development of the attribute-based standard 
curve shapes; the technologies the agencies evaluated and their costs 
and effectiveness; the economic assumptions the agencies included in 
their analyses; a description of the credit programs for air 
conditioning; off-cycle technology, and full-sized pickup trucks; as 
well as the effects of the standards on vehicle safety. The Joint 
Technical Support Document (TSD) discusses the agencies' joint 
technical work in more detail.
    The agencies have based this final rule on a very significant body 
of data and analysis that we believe is the best information currently 
available on the full range of technical and other inputs utilized in 
our respective analyses. As noted in various places throughout this 
preamble, the Joint TSD, the NHTSA RIA, and the EPA RIA, new 
information has become available since the proposal from a range of 
sources. These include work the agencies have completed (e.g., work on 
technology costs and effectiveness and creating a second future fleet 
forecast based on model year 2010 baseline data). In addition, 
information from other sources is now incorporated into our analyses, 
including the Energy Information

[[Page 62676]]

Agency's Annual Energy Outlook 2012 Early Release, as well as other 
information from the public comment process. Wherever appropriate, and 
as summarized throughout this preamble, we have used inputs for the 
final rule based on information from the proposal as well as new data 
and information that has become available since the proposal (either 
through the comments or through the agencies' analyses).

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

1. Why did the agencies establish baseline and reference vehicle 
fleets?
    In order to calculate the impacts of the EPA and NHTSA regulations, 
it is necessary to estimate the composition of the future vehicle fleet 
absent regulatory action, to provide a reference point relative to 
which costs, benefits, and effects of the regulations are assessed. As 
in the NPRM, EPA and NHTSA have developed comparison fleets in two 
parts. The first step was to develop baseline estimates of the fleets 
of new vehicles to be produced for sale in the U.S. through MY2025, one 
starting with the actual MY 2008 fleet, and one starting with the 
actual MY 2010 fleet. These baselines include vehicle sales volumes, 
GHG/fuel economy performance levels, and contain listings of the base 
technologies on every MY 2008 or MY 2010 vehicle sold. This information 
comes from CAFE certification data submitted by manufacturers to EPA, 
and for purposes of rulemaking analysis, was supplemented with publicly 
and commercially available information regarding some vehicle 
characteristics (e.g., footprint). The second step was to project the 
baseline fleet volumes into model years 2017-2025. The vehicle volumes 
projected out to MY 2025 are referred to as the reference fleet 
volumes. The third step was to modify those MY 2017-2025 reference 
fleets such that they reflect the technology that manufacturers could 
apply if the MY 2016 standards were extended without change through MY 
2025.\146\ Each agency used its modeling system to develop modified or 
final reference fleets, or adjusted baselines, for use in its analysis 
of regulatory alternatives, as discussed below and in each agency's 
RIA. All of the agencies' estimates of emission reductions, fuel 
economy improvements, costs, and societal impacts are developed in 
relation to the respective reference fleets. This section discusses the 
first two steps, development of the baseline fleets and the reference 
fleets.
---------------------------------------------------------------------------

    \146\ EPA's MY 2016 GHG standards under the CAA would continue 
into the future absent this final rule. While NHTSA must actively 
promulgate standards in order for CAFE standards to extend past MY 
2016, the agency has, as in all recent CAFE rulemakings, defined a 
no-action (i.e., baseline) regulatory alternative as an indefinite 
extension of the last-promulgated CAFE standards for purposes of the 
main analysis of the standards in this preamble.
---------------------------------------------------------------------------

    EPA and NHTSA used a transparent approach to developing the 
baseline and reference fleets, largely working from publicly available 
data. Because both input and output sheets from our modeling are 
public, stakeholders can verify and check EPA's and NHTSA's modeling, 
and perform their own analyses with these datasets.\147\
---------------------------------------------------------------------------

    \147\ EPA's Omega Model and input sheets are available at http://www.epa.gov/oms/climate/models.htm; DOT/NHTSA's CAFE Compliance and 
Effects Modeling System (commonly known as the ``Volpe Model'') and 
input and output sheets are available at http://www.nhtsa.gov/fuel-economy.
---------------------------------------------------------------------------

2. What comments did the agencies receive regarding fleet projections 
for the NPRM?
    During the comment period, the agencies also received formal 
comments regarding the NPRM baseline and reference fleets. Chrysler 
questioned the agencies' assumption that the company's sales would 
decline by 53% over 17 years, and stated that the forecast had 
implications not just for the agencies' analysis, but also, indirectly, 
for Chrysler's competitiveness, because suppliers and customers who 
``see [such] projections supported by Federal agencies * * * are 
potentially given a highly negative view of the viability of the 
company * * * [which] may result in less favorable contracts with 
suppliers and lower sales to customers.'' Chrysler requested that the 
agencies update their volume projections for the final rule.\148\
---------------------------------------------------------------------------

    \148\ Chrysler, Docket No. NHTSA-2010-0131-0241, at 21.
---------------------------------------------------------------------------

    The agencies' projection that Chrysler's sales would steadily 
decline was primarily attributable to the manufacturer- and segment-
level forecasts provided in December 2009 by CSM. The agencies thought 
that forecast to have been credible at the time considering economic 
and industry conditions during the months before CSM provided the 
agencies with a long-range forecast, when the overall light vehicle 
market was severely depressed and Chrysler and GM were--with nascent 
federal assistance--in the process of reorganizing. We recognize that 
Chrysler's production has since recovered to levels suggesting much 
better long-term prospects than forecast by CSM in 2009. While the 
agencies are continuing to use the market forecast developed for the 
NPRM (after minor corrections unrelated to Chrysler's comments), we are 
also using a second market forecast we have developed for today's final 
rule, making use of a newer forecast (in this case, from LMC) of 
manufacturer- and segment-level shares, a forecast that shows 
significantly higher sales (more than double that of the earlier 
forecast) for Chrysler in 2025.
    Environmental Consultants of Michigan commented that use of 4-year-
old certification data was ``unconscionable'' and unreflective of 
technology improvements already made to vehicles since then, requesting 
that the agencies delay the final rule until the market forecast can be 
updated with appropriate data.\149\ As described in this chapter, even 
though the year of publication of this rule is 2012, model year 2010 
was the most recent baseline dataset available due to the lag between 
the actual conclusion of a given model year and the submission (for 
CAFE compliance purposes) of production volumes for that model year. 
Moreover, as explained below in the joint TSD and in our respective 
RIAs, EPA and NHTSA measure the costs and benefits of new standards as 
incremental levels beyond those that would result from the application 
of technology given continuation of baseline standards (i.e., 
continuation of the standards that will be in place in MY 2016). 
Therefore, our analysis of manufacturers' capabilities is informed by 
analysis of technology that could be applied in the future even absent 
the new standards, not just technology that had been applied in 2008 or 
2010. We further note that, while NHTSA has, in the past, made use of 
confidential product planning information provided to the agency by 
many manufacturers--information that typically extended roughly five 
years into the future--other stakeholders previously commented 
negatively regarding the agency's resultant inability to publish some 
of the detailed inputs to and outputs of its analysis. As during the 
rulemaking establishing the MYs 2012-2016 standards, EPA and NHTSA have 
determined that the benefits of a fully transparent market forecast 
outweigh the disbenefits of a market forecast that may not fully 
reflect likely forthcoming changes in manufacturers' products.
---------------------------------------------------------------------------

    \149\ Environmental Consultants of Michigan, Docket No. NHTSA-
2010-0131-0166, at 7.
---------------------------------------------------------------------------

    The agencies also received a comment from Volkswagen, stating that 
``Volkswagen sees no evidence that would suggest a near 30% decline in 
truck market share from domestic OEMs

[[Page 62677]]

[original emphasis].'' \150\ Volkswagen further suggested that the 
agencies' forecast was based on confidential ``strategic plans by 
[Volkswagen's] competitors''. On the contrary, the agencies' forecast 
was based on public and commercial information made fully available to 
all stakeholders, including Volkswagen. Also, while the agencies' 2008 
based fleet projection showed a decline in the share of light trucks 
expected to be produced by the aggregate of Chrysler, Ford, and General 
Motors, Volkswagen's statement mischaracterized the magnitude and 
nature of the decline. Between MY2008 and MY2025, the agencies' 
forecast showed declines from 17.8% to 5.8% for Chrysler, from 14.5% to 
12.0% for Ford, from 26.8% to 27.8% from General Motors, and from 58.3% 
to 44.5% for the aggregate of these three manufacturers. The latter 
represents a 22.5% reduction, not the 30% reduction cited by 
Volkswagen, and is dominated by the underlying forecast regarding 
Chrysler's overall position in the market; for General Motors, the 
agencies' forecast showed virtually no loss of share in the light truck 
market. As discussed above, the agencies' market forecast for the NPRM 
was informed by CSM's forecast of manufacturer- and segment-level 
shares, and by EIA's forecast of overall volumes of the passenger car 
and light truck markets, and CSM's forecast, in particular, was 
provided at a time when market conditions were economically severe. 
While the agencies are continuing to use this forecast, this agency is 
also using a second forecast, informed by MY 2010 certification data, 
an updated AEO-based forecast of overall volumes of passenger cars and 
light trucks, and an updated manufacturer- and segment-level market 
forecast from LMC Automotive.
---------------------------------------------------------------------------

    \150\ Volkswagen, NHTSA-2010-0131-0247, at 9.
---------------------------------------------------------------------------

    The Union of Concerned Scientists (UCS) expressed concern that if 
the light vehicle market does not shift toward passenger cars as 
indicated in the agencies' market forecast, energy and environmental 
benefits of the new standards could be less than projected.\151\ As 
discussed below, our MY 2008-based and MY 2010-based market forecasts, 
while both subject to uncertainty, reflect passenger car market shares 
estimated using EIA's National Energy Modeling System (NEMS). For both 
market forecasts, we re-ran NEMS by holding standards constant after MY 
2016 and also preventing the model from increasing the passenger car 
market share to achieve increases in fleetwide average fuel economy 
levels. Having done so, we obtained a somewhat lower passenger car 
market share than EIA obtained for AEO 2011 and AEO 2012, respectively. 
In our judgment, this approach provides a reasonable basis for 
developing a forecast of the overall sales of passenger cars and light 
trucks, while remaining consistent with our use of EIA's reference case 
estimates of future fuel prices. In any event, we note that EPCA/EISA 
requires NHTSA to ensure that the overall new vehicle fleet achieves 
average fuel economy of at least 35 mpg by MY 2020. Our analysis, 
discussed below, indicates based on the information currently before us 
that the fleet could achieve 39.9-40.8 mpg by MY 2020 (accounting for 
flexibilities available under EPCA)--well above the 35 mpg statutory 
requirement. However, NHTSA will monitor the fleet's progress and, if 
necessary, adjust standards to ensure that EPCA/EISA's ``35-by-2020'' 
requirement is met, even if this requires issuing revised fuel economy 
standards before the planned joint mid-term evaluation process has been 
completed. However, insofar as NHTSA's current analysis indicates the 
fleet could achieve 40-41 mpg by MY 2020, NHTSA currently expects the 
need for such a rulemaking to be unlikely. Beyond MY 2020, EPCA/EISA 
does not provide a minimum requirement for the overall fleet, but 
requires NHTSA to continue setting separate standards for passenger 
cars and light trucks, such that each standard is at the maximum 
feasible level in each model year. In other words, as long as the ``35-
by-2020'' requirement is achieved, NHTSA is required to consider 
stringency for passenger cars and light trucks separately, not to set 
those standards at levels achieving any particular level of average 
performance for the overall fleet.
---------------------------------------------------------------------------

    \151\ UCS, Docket No. EPA-HQ-OAR-2010-0799-9567, p. 8.
---------------------------------------------------------------------------

    Nonetheless, the agencies recognize that overall fuel consumption 
and GHG emissions by the light vehicle fleet will depend on, among many 
other things, the relative market shares of passenger cars and light 
trucks. In its probabilistic uncertainty analysis, presented in NHTSA's 
RIA accompanying today's notice as required by OMB for significant 
rulemakings, NHTSA has varied the passenger car share (as a function of 
fuel price), such that the resultant distributions of estimated model 
results--including fuel savings and CO2 emission 
reductions--reflect uncertainty regarding the relative market shares of 
passenger cars and light trucks. The results of the probabilistic 
uncertainty analysis along with the other analysis in this rulemaking 
support that the NHTSA standards are maximum feasible standards. The 
probabilistic uncertainty analysis is discussed in NHTSA's RIA Chapter 
XII. Like all other aspects of the outlook for the future light vehicle 
market, the agencies will closely monitor the relative market shares of 
passenger cars and light trucks in preparation for the planned midterm 
review.
3. Why were two fleet projections created for the FRM?
    Although much of the discussion in this and following sections 
describes the methodology for creating a single baseline and reference 
fleet, for this final rule the agencies actually developed two baseline 
and reference fleets. In the NPRM, the agencies used MY 2008 CAFE 
certification data to establish the ``2008-based fleet projection.'' 
\152\ The agencies noted that MY 2009 CAFE certification data was not 
likely to be representative of future conditions since it was so 
dramatically influenced by the economic recession (Joint Draft TSD 
section 1.2.1). The agencies further noted that MY 2010 CAFE 
certification data might be available for use in the final rulemaking 
for purposes of developing a baseline fleet. The agencies stated that a 
copy of the MY 2010 CAFE certification data would be put in the public 
docket if it became available during the comment period. The MY 2010 
data was reported by the manufacturers throughout calendar year 2011 as 
the final sales figures were compiled and submitted to the EPA 
database. Due to the lateness of the CAFE data submissions,\153\ 
however, it was not possible to submit the new 2010 data into the 
docket during the public comment period. As explained below, however, 
consistent with the agencies' expectations at proposal, and with the 
agencies' standard practice of updating relevant information as 
practicable between proposals and final rules, the agencies are using 
these data in one of the two fleet-based projections we are using to 
estimate the impacts of the final rules.
---------------------------------------------------------------------------

    \152\ ``2008 based fleet projection'' is a new term that is the 
same as the reference fleet. The term is added to clarify when we 
are using the 2008 baseline and reference fleet vs. the 2010 
baseline and reference fleet.
    \153\ Partly due to the earthquake and tsunami in Japan and the 
significant impact this had on their facilities, some manufacturers 
requested and were granted an extension on the deadline to submit 
their CAFE data.
---------------------------------------------------------------------------

    For analysis supporting the NPRM, the agencies developed a forecast 
of the light vehicle market through MY 2025

[[Page 62678]]

based on (a) the vehicle models in the MY 2008 CAFE certification data, 
(b) the AEO 2011 interim projection of future fleet sales volumes, and 
(c) the future fleet forecast conducted by CSM in 2009. In the 
proposal, the agencies stated we would consider using MY 2010 CAFE 
certification data, if available, for analysis supporting the final 
rule (Joint Draft TSD, p. 1-2). Shortly after the NPRM was issued, the 
agencies reiterated this intention in statements to Automotive News in 
response to a pending article by that publication.\154\ The agencies 
also indicated our intention to, for analysis supporting the final 
rule, use the most recent version of EIA's AEO available, and a market 
forecast updated relative to that purchased from CSM (Joint Draft TSD 
section 1.3.5).
---------------------------------------------------------------------------

    \154\ ``For CAFE rules, feds look at aging sales data'', 
Automotive News, December 22, 2011. Available at http://www.autonews.com/article/20111222/OEM11/111229956 (last accessed 
Jun. 27, 2012).
---------------------------------------------------------------------------

    For this final rulemaking, the agencies have analyzed the costs and 
benefits of the standards using two different forecasts of the light 
vehicle fleet through MY 2025. The agencies have concluded that the 
significant uncertainty associated with forecasting sales volumes, 
vehicle technologies, fuel prices, consumer demand, and so forth out to 
MY 2025 makes it reasonable and appropriate to evaluate the impacts of 
the final CAFE and GHG standards using two baselines. One market 
forecast, similar to the one used for the NPRM, uses corrected data 
regarding the MY 2008 fleet, information from AEO 2011, and information 
purchased from CSM. As noted above, the agencies received comments 
regarding the market forecast used in the NPRM suggesting that updates 
in several respects could be helpful to the agencies' analysis of final 
standards; given those comments and since the agencies were already 
planning to produce an updated market forecast, the final rule also 
contains another market forecast using MY 2010 CAFE certification data, 
information from AEO 2012, and information purchased from LMC 
Automotive (formerly JD Powers Automotive).
    The two market forecasts contain certain differences, although as 
will be discussed below, the differences are not significant enough to 
change the agencies' decision as to the structure and stringency of the 
final standards. For example, MY 2008 certification data represents the 
most recent model year for which the industry's offerings were not 
strongly affected by the subsequent economic recession, which may make 
it reasonable to use if we believe that the future vehicle mix of 
models are more likely to be reflective of the pre-recession mix than 
mix of models produced after MY 2008 (e.g., in MY 2010). Also, the MY 
2010-based fleet projection employs a future fleet forecast provided by 
LMC Automotive, which is more current than the projection provided by 
CSM in 2009. The CSM forecast, utilized for the MY 2008-based fleet 
projection, appears to have been influenced by the recession, in 
particular in predicting major declines in market share for some 
manufacturers (e.g., Chrysler) which the agencies do not believe are 
reasonably reflective of future trends.
    The MY 2010 based fleet projection, which is used in EPA's 
alternative analysis and in NHTSA's co-analysis, employs a future fleet 
forecast provided by LMC Automotive, which is more current than the 
projection provided by CSM in 2009, and which reflects the post-
proposal MY 2010 CAFE certification data. However, this MY 2010 CAFE 
data also shows effects of the economic recession. For example, 
industry-wide sales were skewed down 20% compared to MY 2008 levels. 
For some companies like Chrysler, Mitsubishi, and Subaru, sales were 
down by 30-40% from MY 2008 levels, as documented in today's joint TSD. 
For BMW, General Motors, Jaguar/Land Rover, Porsche, and Suzuki, sales 
were down by more than 40%. Employing the MY 2008 vehicle data avoids 
using these baseline market shifts when projecting the future fleet. On 
the other hand, it also perpetuates vehicle brands and models (and 
thus, their outdated fuel economy levels and engineering 
characteristics) that have since been discontinued. The MY 2010 CAFE 
certification data accounts for the phase-out of some brands (e.g., 
Saab, Pontiac, Hummer) \155\ and the introduction of some technologies 
(e.g., Ford's Ecoboost engine), which may be more reflective of the 
future fleet in this respect.
---------------------------------------------------------------------------

    \155\ Based on our review of the CAFE certification, the MY 
2010-based fleet contains no Saabs, and compared to the MY 2008-
based fleet, about 90% fewer Hummers and about 75% fewer Pontiacs.
---------------------------------------------------------------------------

    Thus, given the volume of information that goes into creating a 
baseline forecast and given the significant uncertainty in any 
projection out to MY 2025, the agencies think that a reasonable way to 
illustrate the possible impacts of that uncertainty for purposes of 
this rulemaking is the approach taken here of analyzing the effects of 
the final standards under both the MY 2008-based baseline and the MY 
2010-based baseline. The agencies' analyses are presented in our 
respective RIAs and preamble sections.
4. How did the Agencies develop the MY 2008 baseline vehicle fleet?
    NHTSA and EPA developed a baseline fleet comprised of model year 
2008 data gathered from EPA's emission and fuel economy database. This 
baseline fleet was used for the NPRM and was updated for this FRM.
    There was only one change since the NPRM. A contractor working on a 
market share model noted some problems with some of the 2008 MY vehicle 
wheelbase data. Each of the affected vehicle's wheelbase and footprint 
were corrected for the MY 2008-based fleet used for this final rule. A 
more complete discussion of these changes is available in Chapter 1.3.1 
of the TSD.
    The 2008 baseline fleet reflects all fuel economy technologies in 
use on MY 2008 light duty vehicles as reported by manufacturers in 
their CAFE certification data. The 2008 emission and fuel economy 
database included data on vehicle production volume, fuel economy, 
engine size, number of engine cylinders, transmission type, fuel type, 
etc.; however it did not contain complete information on technologies. 
Thus, the agencies relied on publicly available data like the more 
complete technology descriptions from Ward's Automotive Group.\156\ In 
a few instances when required vehicle information (such as vehicle 
footprint) was not available from these two sources, the agencies 
obtained this information from publicly accessible internet sites such 
as Motortrend.com and Edmunds.com.\157\ A description of all of the 
technologies used in modeling the 2008 vehicle fleet and how it was 
constructed are available in Chapter 1 of the Joint TSD.
---------------------------------------------------------------------------

    \156\ Note that WardsAuto.com is a fee-based service, but all 
information is public to subscribers.
    \157\ Motortrend.com and Edmunds.com are free, no-fee internet 
sites.
---------------------------------------------------------------------------

5. How did the Agencies develop the projected MY 2017-2025 vehicle 
reference fleet for the 2008 model year based fleet?
    As in the NPRM, EPA and NHTSA have based the projection of total 
car and total light truck sales for MYs 2017-2025 on projections made 
by the Department of Energy's Energy Information Administration (EIAEIA 
publishes a mid-term projection of national energy use called the 
Annual Energy Outlook (AEO). This projection utilizes a number of 
technical and econometric models which are designed to reflect both 
economic and regulatory

[[Page 62679]]

conditions expected to exist in the future. In support of its 
projection of fuel use by light-duty vehicles, EIA projects sales of 
new cars and light trucks. EIA published its Early Annual Energy 
Outlook for 2011 in December 2010. EIA released updated data to NHTSA 
in February (Interim AEO). The final release of AEO for 2011 came out 
in May 2011 and early release AEO came out in December of 2011, but for 
consistency with the NPRM, EPA and NHTSA chose to use the data from 
February 2011.
    The agencies used the Energy Information Administration's (EIA's) 
National Energy Modeling System (NEMS) to estimate the future relative 
market shares of passenger cars and light trucks. However, NEMS 
methodology includes shifting vehicle sales volume, starting after 
2007, away from fleets with lower fuel economy (the light truck fleet) 
towards vehicles with higher fuel economies (the passenger car fleet) 
in order to facilitate projected compliance with CAFE and GHG 
standards. Because we use our market projection as a baseline relative 
to which we measure the effects of new standards, and we attempt to 
estimate the industry's ability to comply with new standards without 
changing product mix (i.e., we analyze the effects of the rules 
assuming manufacturers will not change fleet composition as a 
compliance strategy, as opposed to changes that might happen due to 
market forces), the Interim AEO 2011-projected shift in passenger car 
market share as a result of required fuel economy improvements creates 
a circularity. Therefore, for the NPRM analysis, the agencies developed 
a new projection of passenger car and lighttruck sales shares by 
running scenarios from the Interim AEO 2011 reference case that first 
deactivate the above-mentioned sales-volume shifting methodology and 
then hold post-2017 CAFE standards constant at MY 2016 levels. As 
discussed in Chapter 1 of the agencies' joint Technical Support 
Document, incorporating these changes reduced the NEMS-projected 
passenger car share of the light vehicle market by an average of about 
5% during 2017-2025.
    In the AEO 2011 Interim data, EIA projects that total light-duty 
vehicle sales will gradually recover from their currently depressed 
levels by around 2013. In 2017, car sales are projected to be 8.4 
million (53 percent) and truck sales are projected to be 7.3 million 
(47 percent). Although the total level of sales of 15.8 million units 
is similar to pre-2008 levels, the fraction of car sales is projected 
to be higher than that existing in the 2000-2007 timeframe. This 
projection reflects the impact of assumed higher fuel prices. Sales 
projections of cars and trucks for future model years can be found in 
Chapter 1 of the joint TSD.
    In addition to a shift towards more car sales, sales of segments 
within both the car and truck markets have been changing and are 
expected to continue to change. Manufacturers are introducing more 
crossover utility vehicles (CUVs), which offer much of the utility of 
sport utility vehicles (SUVs) but use more car-like designs. The AEO 
2011 report does not, however, distinguish such changes within the car 
and truck classes. In order to reflect these changes in fleet makeup, 
EPA and NHTSA used a long range forecast\158\ from CSM Worldwide (CSM) 
the firm which, at the time of proposal development, offered the most 
detailed forecasting for the model years in question. The long range 
forecast from CSM Worldwide is a custom forecast covering the years 
2017-2025 which the agencies purchased from CSM in December of 2009. 
Since proposal, the agencies have worked with LMC Automotive (formerly 
J.D. Powers Forecasting) and found them to be capable of doing 
forecasting of equivalent detail and are using the LMC forecast for the 
2010 baseline fleet projection.
---------------------------------------------------------------------------

    \158\ The CSM Sales Forecast Excel file (``CSM North America 
Sales Forecasts 2017-2025 for the Docket'') is available in the 
docket (Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------

    The next step was to project the CSM forecasts for relative sales 
of cars and trucks by manufacturer and by market segment onto the total 
sales estimates of AEO 2011. Table II-1 and Table II-2 show the 
resulting projections for the reference 2025 model year and compare 
these to actual sales that occurred in the baseline 2008 model year. 
Both tables show sales using the traditional definition of cars and 
light trucks.

                             Table II-1--Annual Sales of Light-Duty Vehicles by Manufacturer in 2008 and Estimated for 2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Cars                        Light trucks                        Total
                                                         -----------------------------------------------------------------------------------------------
                                                              2008 MY         2025 MY         2008 MY         2025 MY         2008 MY         2025 MY
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aston Martin............................................           1,370           1,182               0               0           1,370           1,182
BMW.....................................................         291,796         405,256          61,324         145,409         353,120         550,665
Chrysler/Fiat...........................................         703,158         436,479         956,792         331,762       1,659,950         768,241
Daimler.................................................         208,195         340,719          79,135         101,067         287,330         441,786
Ferrari.................................................           1,450           7,658               0               0           1,450           7,658
Ford....................................................         956,699       1,540,109         814,194         684,476       1,770,893       2,224,586
Geely/Volvo.............................................          65,649         101,107          32,748          42,588          98,397         143,696
GM......................................................       1,587,391       1,673,936       1,507,797       1,524,008       3,095,188       3,197,943
Honda...................................................       1,006,639       1,340,321         505,140         557,697       1,511,779       1,898,018
Hyundai.................................................         337,869         677,250          53,158         168,136         391,027         845,386
Kia.....................................................         221,980         362,783          59,472          97,653         281,452         460,436
Lotus...................................................             252             316               0               0             252             316
Mazda...................................................         246,661         306,804          55,885          61,368         302,546         368,172
Mitsubishi..............................................          85,358          73,305          15,371          36,387         100,729         109,692
Nissan..................................................         717,869       1,014,775         305,546         426,454       1,023,415       1,441,229
Porsche.................................................          18,909          40,696          18,797          11,219          37,706          51,915
Spyker/Saab.............................................          21,706          23,130           4,250           3,475          25,956          26,605
Subaru..................................................         116,035         256,970          82,546          74,722         198,581         331,692
Suzuki..................................................          79,339         103,154          35,319          21,374         114,658         124,528
Tata/JLR................................................           9,596          65,418          55,584          56,805          65,180         122,223
Tesla...................................................             800          31,974               0               0             800          31,974
Toyota..................................................       1,260,364       2,108,053         951,136       1,210,016       2,211,500       3,318,069

[[Page 62680]]

 
Volkswagen..............................................         291,483         630,163          26,999         154,284         318,482         784,447
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................       8,230,568      11,541,560       5,621,193       5,708,899      13,851,761      17,250,459
--------------------------------------------------------------------------------------------------------------------------------------------------------


        Table II-2--Annual Sales of Light-Duty Vehicles by Market Segment in 2008 and Estimated for 2025
----------------------------------------------------------------------------------------------------------------
                             Cars                                                 Light trucks
----------------------------------------------------------------------------------------------------------------
                                    2008 MY         2025 MY                           2008 MY         2025 MY
----------------------------------------------------------------------------------------------------------------
Full-Size Car.................         829,896         245,355  Full-Size Pickup       1,332,335       1,002,806
Luxury Car....................       1,048,341       1,637,410  Mid-Size Pickup.         452,013         431,272
Mid-Size Car..................       2,103,108       2,713,078  Full-Size Van...          33,384          88,572
Mini Car......................         617,902       1,606,114  Mid-Size Van....         719,529         839,452
Small Car.....................       1,912,736       2,826,190  Mid-Size MAV*...         110,353         548,457
Specialty Car.................         469,324         808,183  Small MAV.......         231,265         239,065
                                ..............  ..............  Full-Size SUV*..         559,160          46,978
                                ..............  ..............  Mid-Size SUV....         436,080         338,849
                                ..............  ..............  Small SUV.......         196,424          71,827
                                ..............  ..............  Full-Size CUV*..         264,717         671,665
                                ..............  ..............  Mid-Size CUV....         923,165       1,259,483
                                ..............  ..............  Small CUV.......       1,612,029       1,875,703
                               ---------------------------------------------------------------------------------
    Total Sales**.............       6,981,307       9,836,330  ................       6,870,454       7,414,129
----------------------------------------------------------------------------------------------------------------
* MAV--Multi-Activity Vehicle, or a vehicle with a tall roof and elevated seating positions such as a Mazda5.
  SUV--Sport Utility Vehicle, CUV--Crossover Utility Vehicle.
**Total Sales are based on the classic Car/Truck definition.

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

                 Table II-3--New and Old Car and Truck Definition in 2008, 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                  Vehicle type                         2008         2016 \159\         2021            2025
----------------------------------------------------------------------------------------------------------------
Old Cars Definition.............................       6,981,307       8,576,717       8,911,173       9,836,330
New Cars Definition.............................       8,230,568      10,140,463      10,505,165      11,541,560
Old Truck Definition............................       6,870,454       7,618,459       7,277,894       7,414,129
New Truck Definition............................       5,621,193       6,054,713       5,683,902       5,708,899
----------------------------------------------------------------------------------------------------------------

    The CSM forecast provides estimates of car and truck sales by 
segment and by manufacturer separately. The forecast was broken up into 
two tables: one table with manufacturer volumes by year and the other 
with vehicle segments percentages by year. Table II-4 and
---------------------------------------------------------------------------

    \159\ In the NPRM, MY 2016 values reported for the New Cars 
Definition and Old Truck Definition were erroneously reversed.
---------------------------------------------------------------------------

    Table II--5 are examples of the data received from CSM. The task of 
estimating future sales using these tables is complex. We used the same 
methodology as in the previous rulemaking. A detailed description of 
how the projection process was done is found in Chapter 1.3.2 of the 
TSD.

                          Table II-4--CSM Manufacturer Volumes in 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                                                                       2016            2021            2025
----------------------------------------------------------------------------------------------------------------
BMW.............................................................         328,220         325,231         317,178
Chrysler/Fiat...................................................         391,165         346,960         316,043
Daimler.........................................................         298,676         272,049         271,539
Ford*...........................................................         971,617         893,528         858,215
Subaru..........................................................         205,486         185,281         181,062
General Motors..................................................       1,309,246       1,192,641       1,135,305
Honda...........................................................       1,088,449         993,318         984,401
Hyundai.........................................................         429,926         389,368         377,500

[[Page 62681]]

 
Kia.............................................................         234,246         213,252         205,473
Mazda...........................................................         215,117         200,003         199,193
Mitsubishi......................................................          47,414          42,693          42,227
Spyker/Saab.....................................................               6               6               6
Tesla...........................................................             800             800             800
Aston Martin....................................................           1,370           1,370           1,370
Lotus...........................................................             252             252             252
Porsche.........................................................              12              12              12
Nissan..........................................................         803,177         729,723         707,361
Suzuki..........................................................          88,142          81,042          76,873
Tata/JLR........................................................          58,594          53,143          52,069
Toyota..........................................................       1,751,661       1,576,499       1,564,975
Volkswagen......................................................         578,420         530,378         494,596
----------------------------------------------------------------------------------------------------------------
*Ford volumes include Volvo in this table.


                           Table II-5--CSM Segment Percentages in 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                                                                       2016            2021            2025
                                                                     (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Full-Size CUV...................................................            3.66            8.34            9.06
Full-Size Pickup................................................           19.39           15.42           13.53
Full-Size SUV...................................................            3.27            0.90            0.63
Full-Size Van...................................................            0.92            1.29            1.19
Mid-Size CUV....................................................           19.29           16.88           16.99
Mid-Size MAV....................................................            1.63            5.93            7.40
Mid-Size Pickup.................................................            4.67            5.74            5.82
Mid-Size SUV....................................................            2.28            4.73            4.57
Mid-Size Van....................................................           11.80           11.63           11.32
Small CUV.......................................................           30.67           25.06           25.30
Small MAV.......................................................            0.88            2.98            3.22
Small Pickup....................................................            0.00            0.00            0.00
Small SUV.......................................................            1.53            1.12            0.97
----------------------------------------------------------------------------------------------------------------

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

                                     Table II-6--Car and Truck Volumes and Split Based on NHTSA New Truck Definition
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  2016     2017     2018     2019     2020     2021     2022     2023     2024     2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Car Volume*...................................................   10,140    9,988    9,905    9,996   10,292   10,505   10,736   10,968   11,258   11,542
Truck Volume*.................................................    6,054    5,819    5,671    5,583    5,604    5,684    5,704    5,687    5,676    5,709
Car Split.....................................................    62.6%    63.2%    63.6%    64.2%    64.7%    64.9%    65.3%    65.9%    66.5%    66.9%
Truck Split...................................................    37.4%    36.8%    36.4%    35.8%    35.3%    35.1%    34.7%    34.1%    33.5%    33.1%
--------------------------------------------------------------------------------------------------------------------------------------------------------
*In thousands

    Given publicly- and commercially-available sources that can be made 
equally transparent to all reviewers, the forecast described above 
represented the agencies' best forecast available at the time of its 
publishing regarding the likely composition direction of the fleet. EPA 
and NHTSA recognize that it is impossible to predict with certainty how 
manufacturers' product offerings and sales volumes will evolve through 
MY 2025 under baseline conditions--that is, without further changes in 
standards after MY 2016. While the agencies have not included 
variations in the market forecast as aspects of our respective 
sensitivity analyses, we have conducted our central analyses twice--
once each for the MY 2008- and MY 2010-based market forecasts that 
reflect differences in available vehicle models, differences in 
manufacturer- and segment-level market shares, and differences in the 
overall volumes of passenger cars and light trucks. In addition, as 
discussed above, NHTSA's probabilistic uncertainty analysis accounts 
for uncertainty regarding the relative market shares of passenger cars 
and light trucks.
    The final step in the construction of the 2008 based fleet 
projection involves applying additional technology to individual 
vehicle models--that is, technology beyond that already present in MY 
2008--reflecting already-promulgated standards through MY 2016, and 
reflecting the assumption that MY 2016 standards would apply through MY 
2025. A description of the agencies' modeling work to develop their 
respective final reference (or adjusted baseline) fleets appear in the 
agencies' respective RIAs.
6. How did the agencies develop the model year 2010 baseline vehicle 
fleet as part of the 2010 based fleet projection?
    NHTSA and EPA also developed a baseline fleet comprised of model 
year

[[Page 62682]]

2010 data gathered from EPA's emission and fuel economy database. This 
alternative baseline fleet has the model year 2010 vehicle volumes and 
attributes. The 2010 baseline fleet reflects all fuel economy 
technologies in use on MY 2010 light duty vehicles as reported by 
manufacturers in their CAFE certification data. The 2010 emission and 
fuel economy database included data on vehicle production volume, fuel 
economy, engine size, number of engine cylinders, transmission type, 
fuel type, etc.; however it did not contain complete information on 
technologies. Thus, as with the 2008 baseline fleet, the agencies 
relied on publicly available data like the more complete technology 
descriptions from Ward's Automotive Group. In a few instances when 
required vehicle information (such as vehicle footprint) was not 
available from these two sources, the agencies obtained this 
information from publicly accessible internet sites such as 
Motortrend.com and Edmunds.com. A description of all of the 
technologies used in modeling the 2010 vehicle fleet and how it was 
constructed are available in Chapter 1.4 of the Joint TSD.
7. How did the Agencies develop the projected my 2017-2025 vehicle 
reference fleet for the 2010 model year based fleet?
    EPA and NHTSA have based the projection of total car and total 
light truck sales for MYs 2017-2025 on projections made by the 
Department of Energy's Energy Information Administration (EIA). EIA 
published its Early Annual Energy Outlook for 2012 in December 2011. 
EIA released updated data to NHTSA in February (AEO Early Release). The 
final version of AEO 2012 was released June 25, 2012, after the 
agencies had already completed our analyses using the early release 
results.
    As the we did with the Interim 2011 AEO data, the agencies 
developed a new projection of passenger car and light truck sales 
shares by running scenarios from the Early Release AEO 2012 reference 
case that first deactivate the above-mentioned sales-volume shifting 
methodology and then hold post-2017 CAFE standards constant at MY 2016 
levels. As discussed in Chapter 1 of the agencies' joint Technical 
Support Document, incorporating these changes reduced the NEMS-
projected passenger car share of the light vehicle market by an average 
of about 5% during 2017-2025.
    In the AEO 2012 Early Release data, EIA projects that total light-
duty vehicle sales will gradually recover from their currently 
depressed levels by around 2013. In 2017, car sales are projected to be 
8.7 million (55 percent) and truck sales are projected to be 7.1 
million (45 percent). Although the total level of sales of 15.8 million 
units is similar to pre-2008 levels, the fraction of car sales is 
projected to be higher than that existing in the 2000-2007 timeframe. 
This projection reflects the impact of assumed higher fuel prices. 
Sales projections of cars and trucks for future model years can be 
found in Chapter 1.4.3 of the joint TSD.
    In addition to a shift towards more car sales, sales of segments 
within both the car and truck markets have been changing and are 
expected to continue to change. Manufacturers are introducing more 
crossover utility vehicles (CUVs), which offer much of the utility of 
sport utility vehicles (SUVs) but use more car-like designs. The AEO 
2012 report does not, however, distinguish such changes within the car 
and truck classes. In order to reflect these changes in fleet makeup, 
EPA and NHTSA used a custom long range forecast purchased from LMC 
Automotive (formerly J.D. Powers Forecasting). NHTSA and EPA decided to 
use the forecast from LMC for the 2010 model year based fleet for 
several reasons discussed in Chapter 1 of the Joint TSD, and believe 
the projection provides a useful cross-check for the forecast used for 
the projections reflected in the 2008 model year based fleet. For the 
public's reference, a copy of LMC's long range forecast has been placed 
in the docket for this rulemaking.\160\
---------------------------------------------------------------------------

    \160\ The LMC Automotive's Sales Forecast Excel file (``LMC 
North America Sales Forecasts 2017-2025 for the Docket'') is 
available in the docket (Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------

    The next step was to project the LMC forecasts for relative sales 
of cars and trucks by manufacturer and by market segment onto the total 
sales estimates of AEO 2012. Table II-7 and Table II-8 show the 
resulting projections for the reference 2025 model year and compare 
these to actual sales that occurred in the baseline 2010 model year. 
Both tables show sales using the traditional definition of cars and 
light trucks. As discussed above, the new forecast from LMC shown in 
Table II-7 shows a significant increase in Chrysler/Fiat's sales (1.6 
million) from those projected by CSM (768 thousand).

                             Table II-7--Annual Sales of Light-Duty Vehicles by Manufacturer in 2010 and Estimated for 2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Cars                        Light trucks                        Total
                                                         -----------------------------------------------------------------------------------------------
                                                              2010 MY         2025 MY         2010 MY         2025 MY         2010 MY         2025 MY
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aston Martin............................................             601             639               0               0             601             639
BMW.....................................................         143,638         363,380          26,788         101,013         170,426         464,394
Chrysler/Fiat...........................................         496,998         899,843         665,806         726,403       1,162,804       1,626,246
Daimler.................................................         157,453         261,242          72,393         119,090         229,846         380,332
Ferrari.................................................           1,780           1,894               0               0           1,780           1,894
Ford....................................................         940,241       1,441,350         858,798         997,694       1,799,039       2,439,045
Geely...................................................          28,223          65,883          29,719          31,528          57,942          97,411
GM......................................................       1,010,524       1,696,474         735,367       1,261,546       1,745,891       2,958,020
Honda...................................................         845,318       1,295,234         390,028         504,020       1,235,346       1,799,254
Hyundai.................................................         375,656         935,619          35,360         117,662         411,016       1,053,281
Kia.....................................................         226,157         350,765          21,721          37,957         247,878         388,723
Lotus...................................................             354             377               0               0             354             377
Mazda...................................................         249,489         262,732          61,451          53,183         310,940         315,916
Mitsubishi..............................................          54,263          67,925           9,146          15,464          63,409          83,389
Nissan..................................................         619,918         919,920         255,566         312,005         875,484       1,231,925
Porsche.................................................          11,937          17,609           3,978          19,091          15,915          36,701
Spyker..................................................               0               0               0               0               0               0
Subaru..................................................         184,587         218,870          73,665          96,326         258,252         315,196
Suzuki..................................................          25,002          48,710           3,938           4,173          28,940          52,883

[[Page 62683]]

 
Tata/JLR................................................          11,279          30,949          37,475          50,369          48,754          81,319
Tesla...................................................               0               0               0               0               0               0
Toyota..................................................       1,508,866       1,622,242         696,324         921,183       2,205,190       2,543,426
Volkswagen..............................................         284,046         479,423          36,327         105,009         320,373         584,432
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................       7,176,330      10,981,082       4,013,850       5,473,718      11,190,180      16,454,800
--------------------------------------------------------------------------------------------------------------------------------------------------------


        Table II-8--Annual Sales of Light-Duty Vehicles by Market Segment in 2010 and Estimated for 2025
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
                             Cars                 Light Trucks
----------------------------------------------------------------------------------------------------------------
                                    2010 MY         2025 MY                           2010 MY         2025 MY
----------------------------------------------------------------------------------------------------------------
Compact Conventional..........       2,107,568       2,380,540  Compact CUV.....       1,201,018       1,172,645
Compact Premium Conventional..         498,107         868,582  Compact MPV.....         250,816         409,034
Compact Premium Sporty........          45,373          59,523  Compact Premium          154,808         204,204
                                                                 CUV.
Compact Sporty................         136,464         170,121  Compact Utility.         216,634         234,737
Large Conventional............         485,656         832,113  Large Pickup....         992,473       1,426,193
Large Premium Conventional....          61,291         187,898  Large Premium             72,411         139,719
                                                                 Utility.
Large Premium Sporty..........           8,551          21,346  Large Utility...         164,416         323,992
Midsize Conventional..........       1,742,494       3,353,080  Large Van.......          17,516          31,198
Midsize Premium Conventional..         176,193         412,950  Midsize CUV.....         825,743       1,351,888
Midsize Premium Sporty........          27,023          67,005  Midsize Pickup..         288,508         443,502
Midsize Sporty................         244,895         257,865  Midsize Premium          333,790         493,977
                                                                 CUV.
Sub-Compact Conventional......         336,971         748,210  Midsize Premium           18,584          33,087
                                                                 Utility.
Unity Class *.................           7,351           7,820  Midsize Utility.         267,035         331,291
                                ..............  ..............  Midsize Van.....         508,491         492,280
                               ---------------------------------------------------------------------------------
    Total Sales * *...........       5,877,937       9,367,054  ................       5,312,243       7,087,746
----------------------------------------------------------------------------------------------------------------
* Unity Class--Is a special class created by the EPA for luxury brands that were not covered by the forecast.
* * Total Sales are based on the classic Car/Truck definition.

    NHTSA has changed the definition of a truck for 2011 model year and 
beyond. The new definition has moved some 2 wheel drive SUVs and CUVs 
to the car category. Table II-9 shows the different volumes for car and 
trucks based on the new and old NHTSA definition. The table shows the 
difference in 2010, 2021, and 2025 to give a feel for how the change in 
definition changes the car/truck split.

                 Table II-9--New and Old Car and Truck definition in 2010, 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                  Vehicle type                         2010            2016            2021            2025
----------------------------------------------------------------------------------------------------------------
Old Cars Definition.............................       6,016,063       8,725,700       8,898,400       9,525,700
New Cars Definition.............................       7,176,330      10,227,185      10,310,594      10,981,082
----------------------------------------------------------------------------------------------------------------
Old Truck Definition............................       5,174,117       7,136,500       6,831,700       6,929,100
New Truck Definition............................       4,013,850       5,635,015       5,419,506       5,473,718
----------------------------------------------------------------------------------------------------------------

    The LMC forecast provides estimates of car and truck sales by 
manufacturer segment and by manufacturer separately. The forecast was 
broken up into two tables: one table with manufacturer volumes by year 
and the other with vehicle segments percentages by year. Table II-10 is 
an example of the data received from LMC. The task of estimating future 
sales using these tables is complex. Table II-11 is the LMC projected 
volumes for each manufacturer.
    Table II-12 has the LMC segment percentages for 2016, 2021, and 
2025. We used a new methodology that is different than we used for the 
2008 fleet projection. A detailed description of how the projection 
process was done is found in Chapter 1 of the TSD.

               Table II-10--Example of the LMC Segmented Chrysler Volumes in 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
            Manufacturer                     LMC segment               2016            2021            2025
----------------------------------------------------------------------------------------------------------------
Chrysler/Fiat......................  Compact Basic..............               0               0               0
Chrysler/Fiat......................  Compact Conventional.......          66,300          80,131          90,032
Chrysler/Fiat......................  Compact CUV................          66,861          73,867          79,812
Chrysler/Fiat......................  Compact MPV................          42,609          73,673         108,134

[[Page 62684]]

 
Chrysler/Fiat......................  Compact Premium                      32,080          36,654          40,287
                                      Conventional.
Chrysler/Fiat......................  Compact Premium CUV........          10,780          11,229          11,811
Chrysler/Fiat......................  Compact Premium Sporty.....             164             151             140
Chrysler/Fiat......................  Compact Utility............         227,901         249,383         274,171
Chrysler/Fiat......................  Large Conventional.........         182,468         231,692         251,766
Chrysler/Fiat......................  Large Pickup...............         334,980         366,592         382,492
Chrysler/Fiat......................  Large Van..................          19,981          20,639          21,569
Chrysler/Fiat......................  Midsize Conventional.......         106,105         108,965         112,637
Chrysler/Fiat......................  Midsize CUV................          82,615          90,608          95,281
Chrysler/Fiat......................  Midsize Pickup.............          31,246          42,374          48,862
Chrysler/Fiat......................  Midsize Premium                       9,078          13,074          15,891
                                      Conventional.
Chrysler/Fiat......................  Midsize Premium CUV........          10,983          19,432          24,749
Chrysler/Fiat......................  Midsize Premium Sporty.....           4,132           3,753           3,728
Chrysler/Fiat......................  Midsize Sporty.............               0               0               0
Chrysler/Fiat......................  Midsize Utility............         219,206         185,386         162,149
Chrysler/Fiat......................  Midsize Van................         181,402         155,543         145,019
Chrysler/Fiat......................  Sub-Compact Conventional...          77,361          75,478          79,533
Chrysler/Fiat......................  Unity Class*...............           3,163           3,163           3,163
----------------------------------------------------------------------------------------------------------------
* Note: Unity Class is created by EPA to account for luxury brands.


                          Table II-11 LMC Manufacturer Volumes in 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                          Manufacturer                                 2016            2021            2025
----------------------------------------------------------------------------------------------------------------
Aston Martin....................................................             601             601             601
BMW.............................................................         411,137         441,500         461,752
Daimler.........................................................         354,175         385,197         404,899
Chrysler/Fiat...................................................       1,709,415       1,841,787       1,951,226
Ford............................................................       2,692,193       2,818,737       2,935,409
Geely...........................................................          91,711          97,548         100,912
GM..............................................................       3,382,343       3,532,217       3,676,282
Honda...........................................................       1,635,473       1,758,092       1,838,444
Hyundai.........................................................       1,325,712       1,378,186       1,438,427
Lotus...........................................................             354             354             354
Mazda...........................................................         309,864         308,298         318,450
Mitsubishi......................................................          69,397          80,028          87,468
Nissan..........................................................       1,221,374       1,247,279       1,288,609
Subaru..........................................................         313,619         321,934         339,206
Spyker..........................................................  ..............  ..............  ..............
Suzuki..........................................................          44,935          48,861          52,594
Tata/JLR........................................................          83,824          87,169          89,011
Toyota..........................................................       2,492,707       2,582,404       2,658,145
Volkswagen......................................................         608,484         604,255         619,274
----------------------------------------------------------------------------------------------------------------


                          Table II-12--LMC Segment Percentages in 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                                                                       2016            2021            2025
                           LMC segment                               (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Unity Class*....................................................            0.04            0.04            0.04
Compact Basic...................................................            0.00            0.00            0.00
Compact Conventional............................................           12.44           12.07           12.03
Compact CUV.....................................................            7.74            7.38            7.30
Compact MPV.....................................................            2.61            2.47            2.56
Compact Premium Conventional....................................            4.59            4.68            4.69
Compact Premium CUV.............................................            1.49            1.54            1.55
Compact Premium Sporty..........................................            0.41            0.34            0.31
Compact Sporty..................................................            0.95            0.91            0.88
Compact Utility.................................................            1.37            1.45            1.53
Large Conventional..............................................            3.95            4.27            4.27
Large Pickup....................................................           12.62           12.95           12.92
Large Premium Conventional......................................            0.88            0.95            0.98
Large Premium Pickup............................................            0.00            0.00            0.00
Large Premium Sporty............................................            0.09            0.11            0.11
Large Premium Utility...........................................            0.91            0.91            0.91
Large Utility...................................................            2.32            2.21            2.11
Large Van.......................................................            2.24            2.34            2.40
Midsize Conventional............................................           16.49           17.04           17.17
Midsize CUV.....................................................            9.28            8.84            8.92
Midsize Pickup..................................................            2.56            2.79            2.89

[[Page 62685]]

 
Midsize Premium Conventional....................................            2.06            2.18            2.21
Midsize Premium CUV.............................................            2.87            3.08            3.11
Midsize Premium Sporty..........................................            0.40            0.36            0.34
Midsize Premium Utility.........................................            0.23            0.22            0.22
Midsize Sporty..................................................            1.59            1.41            1.33
Midsize Utility.................................................            2.57            2.42            2.16
Midsize Van.....................................................            3.53            3.32            3.21
Sub-Compact Conventional........................................            3.77            3.72            3.85
----------------------------------------------------------------------------------------------------------------
* Note: Unity Class is created by EPA to account for luxury brands.

    The overall result was a projection of car and truck sales for 
model years 2017-2025--the reference fleet--which matched the total 
sales projections of the AEO forecast and the manufacturer and segment 
splits of the LMC forecast. These sales splits are shown in Table II-13 
below.

                                    Table II-13--Car and Truck Volumes and Split Based on NHTSA New Truck Definition
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        2016      2017      2018      2019      2020      2021      2022      2023      2024      2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Car Volume*.........................................    10,227    10,213    10,089    10,140    10,194    10,311    10,455    10,594    10,812    10,981
Truck Volume*.......................................     5,635     5,599     5,516     5,522     5,436     5,420     5,432     5,413     5,435     5,474
Car Split...........................................     64.5%     64.6%     64.7%     64.7%     65.2%     65.5%     65.8%     66.2%     66.5%     66.7%
Truck Split.........................................     35.5%     35.4%     35.3%     35.3%     34.8%     34.5%     34.2%     33.8%     33.5%     33.3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
\*\ In thousands.

    The final step in the construction of the 2010 model year based 
fleet involves applying additional technology to individual vehicle 
models--that is, technology beyond that already present in MY 2010----
reflecting already-promulgated standards through MY 2016, and 
reflecting the assumption that MY 2016 standards would continue to 
apply in each model year through MY 2025. A description of the 
agencies' modeling work to develop their respective final reference (or 
adjusted baseline) fleets appear in the agencies' respective RIAs.
8. What are the Differences in the Sales Volumes and Characteristics of 
the MY 2008 Based and the MY 2010 Based Fleets Projections?
    Table II-14 is the difference in actual and projected sales volumes 
between the 2010 based and the 2008 based fleet forecast. This summary 
table is the most convenient way to compare the projections from CSM 
and LMC, since the forecasting companies use different segmentations of 
vehicles. It also provides a comparison of the two AEO forecasts since 
the projections are normalized to AEO's total volume of cars and trucks 
in each year of the projection. The table shows a total projected 
reduction from the 2008 fleet to the 2010 fleet in 2025 of .5 million 
cars and .8 million trucks. The largest manufacturer changes in the 
2025 model projections are for Chrysler and Toyota. The newer 
projection increases Chrysler's total vehicles by .9 million vehicles, 
while it decreases Toyota's total vehicles by .8 million.
    The table also shows that the total actual reduction in cars from 
2008 MY to 2010 MY is 1.0 million vehicles, and the reduction in trucks 
is 1.6 million vehicles.

                                     Table II-14--Differences in Annual Sales of Light-Duty Vehicles by Manufacturer
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Cars                        Light trucks                        Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           2010-2008 MY       2025 MY      2010-2008 MY       2025 MY      2010-2008 MY       2025 MY
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aston Martin............................................            -769            -543               0               0            -769            -543
BMW.....................................................        -148,158         -41,876         -34,536         -44,396        -182,694         -86,271
Chrysler/Fiat...........................................        -206,160         463,364        -290,986         394,641        -497,146         858,005
Daimler.................................................         -50,742         -79,477          -6,742          18,023         -57,484         -61,454
Ferrari.................................................             330          -5,764               0               0             330          -5,764
Ford....................................................         -16,458         -98,759          44,604         313,218          28,146         214,459
Geely...................................................         -37,426         -35,224          -3,029         -11,060         -40,455         -46,285
GM......................................................        -576,867          22,538        -772,430        -262,462      -1,349,297        -239,923
Honda...................................................        -161,321         -45,087        -115,112         -53,677        -276,433         -98,764
Hyundai.................................................          37,787         258,369         -17,798         -50,474          19,989         207,895
Kia.....................................................           4,177         -12,018         -37,751         -59,696         -33,574         -71,713
Lotus...................................................             102              61               0               0             102              61
Mazda...................................................           2,828         -44,072           5,566          -8,185           8,394         -52,256
Mitsubishi..............................................         -31,095          -5,380          -6,225         -20,923         -37,320         -26,303
Nissan..................................................         -97,951         -94,855         -49,980        -114,449        -147,931        -209,304
Porsche.................................................          -6,972         -23,087         -14,819           7,872         -21,791         -15,214
Spyker..................................................          -21706          -23130           -4250           -3475          -25956          -26605
Subaru..................................................          68,552         -38,100          -8,881          21,604          59,671         -16,496

[[Page 62686]]

 
Suzuki..................................................         -54,337         -54,444         -31,381         -17,201         -85,718         -71,645
Tata/JLR................................................           1,683         -34,469         -18,109          -6,436         -16,426         -40,904
Tesla...................................................            -800          -31974               0               0            -800          -31974
Toyota..................................................         248,502        -485,811        -254,812        -288,833          -6,310        -774,643
Volkswagen..............................................          -7,437        -150,740           9,328         -49,275           1,891        -200,015
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................      -1,054,238        -560,478      -1,607,343        -235,181      -2,661,581        -795,659
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table II-15 shows the change in volumes between the two forecasts 
for cars and trucks based on the new and old NHTSA definition. The 
table shows the change to give a feel for how the change in definition 
impacts the car/truck split. Many factors impact the changes shown here 
including differences in AEO, differences in the number of SUV and CUV 
vehicles becoming cars, and the future volume projected by CSM and LMC.

         Table II-15--Differences in New and Old Car and Truck definition in 2008, 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                  Vehicle type                       2010-2008         2016            2021            2025
----------------------------------------------------------------------------------------------------------------
Old Cars Definition.............................        -965,244         148,983         -12,773        -310,630
New Cars Definition.............................      -1,054,238          86,722        -194,571        -560,478
Old Truck Definition............................      -1,696,337        -481,959        -446,194        -485,029
New Truck Definition............................      -1,607,343        -419,698        -264,396        -235,181
----------------------------------------------------------------------------------------------------------------

    Table II-16 is the changes in car and truck split due to the 
difference between the 2010 and 2008 forecast. The table shows that the 
different AEO forecasts, CSM and LMC projections have an insignificant 
impact on the car and truck split.

                             Table II-16--Differences in Car and Truck Volumes and Split Based on NHTSA New Truck Definition
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2016       2017       2018       2019       2020       2021       2022       2023       2024       2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Car Volume \*\............................         87        225        184        144        -98       -194       -281       -374       -446       -561
Truck Volume \*\..........................       -419       -220       -155        -61       -168       -264       -272       -274       -241       -235
Car Split.................................       1.9%       1.4%       1.1%       0.5%       0.5%       0.6%       0.5%       0.3%       0.0%      -0.2%
Truck Split...............................      -1.9%      -1.4%      -1.1%      -0.5%      -0.5%      -0.6%      -0.5%      -0.3%       0.0%       0.2%
--------------------------------------------------------------------------------------------------------------------------------------------------------
\*\ in thousands.

    The joint TSD contains further comparisons of the two projections 
at the end of Chapter 1.
    So, given all of the discussion above, the agencies have created 
these two baselines to illustrate possible uncertainty in the future 
market forecast. The industry-wide differences between the forecasts 
are relatively minor, even if there are some fairly significant 
differences for individual manufacturers. Analysis under both baselines 
supports the agencies' respective decisions as to the stringency of the 
final standards, as discussed further in Sections III and IV below.

C. Development of Attribute-Based Curve Shapes

1. Why are standards attribute-based and defined by a mathematical 
function?
    As in the MYs 2012-2016 CAFE/GHG rules, and as NHTSA did in the MY 
2011 CAFE rule, NHTSA and EPA are promulgating attribute-based CAFE and 
CO2 standards that are defined by a mathematical function. 
EPCA, as amended by EISA, expressly requires that CAFE standards for 
passenger cars and light trucks be based on one or more vehicle 
attributes related to fuel economy, and be expressed in the form of a 
mathematical function.\161\ The CAA has no such requirement, although 
such an approach is permissible under section 202 (a) and EPA has used 
the attribute-based approach in issuing standards under analogous 
provisions of the CAA (e.g., criteria pollutant standards for non-road 
diesel engines using engine size as the attribute,\162\ in the recent 
GHG standards for heavy duty pickups and vans using a work factor 
attribute,\163\ and in the MYs 2012-2016 GHG rule itself which used 
vehicle footprint as the attribute). As for the MYs 2012-2016 
rulemaking, public comments on the MYs 2017-2025 proposal widely 
supported attribute-based standards for both agencies' standards as 
further discussed in section II.C.2.
---------------------------------------------------------------------------

    \161\ 49 U.S.C. 32902(a)(3)(A).
    \162\ 69 FR 38958 (June 29, 2004).
    \163\ 76 FR 57106, 57162-64, (Sept. 15, 2011).
---------------------------------------------------------------------------

    Under an attribute-based standard, every vehicle model has a 
performance target (fuel economy and CO2 emissions for CAFE 
and CO2 emissions standards, respectively), the level of 
which depends on the vehicle's attribute (for this final rule, 
footprint, as discussed below). Each manufacturers' fleet average 
standard is determined by the production-weighted \164\ average (for 
CAFE, harmonic average) of those targets.
---------------------------------------------------------------------------

    \164\ Production for sale in the United States.
---------------------------------------------------------------------------

    The agencies believe that an attribute-based standard is preferable 
to a single-industry-wide average standard in the

[[Page 62687]]

context of CAFE and CO2 standards for several reasons. 
First, if the shape is chosen properly, every manufacturer is more 
likely to be required to continue adding more fuel efficient technology 
each year across their fleet, because the stringency of the compliance 
obligation will depend on the particular product mix of each 
manufacturer. Therefore a maximum feasible attribute-based standard 
will tend to require greater fuel savings and CO2 emissions 
reductions overall than would a maximum feasible flat standard (that 
is, a single mpg or CO2 level applicable to every 
manufacturer).
    Second, depending on the attribute, attribute-based standards 
reduce the incentive for manufacturers to respond to CAFE and 
CO2 standards in ways harmful to safety.\165\ Because each 
vehicle model has its own target (based on the attribute chosen), 
properly fitted attribute-based standards provide little, if any, 
incentive to build smaller vehicles simply to meet a fleet-wide 
average, because the smaller vehicles will be subject to more stringent 
compliance targets.\166\
---------------------------------------------------------------------------

    \165\ The 2002 NAS Report described at length and quantified the 
potential safety problem with average fuel economy standards that 
specify a single numerical requirement for the entire industry. See 
2002 NAS Report at 5, finding 12. Ensuing analyses, including by 
NHTSA, support the fundamental conclusion that standards structured 
to minimize incentives to downsize all but the largest vehicles will 
tend to produce better safety outcomes than flat standards.
    \166\ Assuming that the attribute is related to vehicle size.
---------------------------------------------------------------------------

    Third, attribute-based standards provide a more equitable 
regulatory framework for different vehicle manufacturers.\167\ A single 
industry-wide average standard imposes disproportionate cost burdens 
and compliance difficulties on the manufacturers that need to change 
their product plans to meet the standards, and puts no obligation on 
those manufacturers that have no need to change their plans. As 
discussed above, attribute-based standards help to spread the 
regulatory cost burden for fuel economy more broadly across all of the 
vehicle manufacturers within the industry.
---------------------------------------------------------------------------

    \167\ 2002 NAS Report at 4-5, finding 10.
---------------------------------------------------------------------------

    Fourth, attribute-based standards better respect economic 
conditions and consumer choice as compared to single-value standards. A 
flat, or single value, standard encourages a certain vehicle size fleet 
mix by creating incentives for manufacturers to use vehicle downsizing 
as a compliance strategy. Under a footprint-based standard, 
manufacturers have the incentive to invest in technologies that improve 
the fuel economy of the vehicles they sell rather than shifting their 
product mix, because reducing the size of the vehicle is generally a 
less viable compliance strategy given that smaller vehicles have more 
stringent regulatory targets.
2. What attribute are the agencies adopting, and why?
    As in the MYs 2012-2016 CAFE/GHG rules, and as NHTSA did in the MY 
2011 CAFE rule, NHTSA and EPA are promulgating CAFE and CO2 
standard curves that are based on vehicle footprint, which has an 
observable correlation to fuel economy and emissions. There are several 
policy and technical reasons why NHTSA and EPA believe that footprint 
is the most appropriate attribute on which to base the standards for 
the vehicles covered by this rulemaking, even though some other vehicle 
attributes (notably curb weight) are better correlated to fuel economy 
and emissions.
    First, in the agencies' judgment, from the standpoint of vehicle 
safety, it is important that the CAFE and CO2 standards be 
set in a way that does not encourage manufacturers to respond by 
selling vehicles that are less safe. While NHTSA's research of 
historical crash data also indicates that reductions in vehicle mass 
tend to compromise overall highway safety, reductions in vehicle 
footprint do so to a much greater extent. If footprint-based standards 
are defined in a way that creates a relatively uniform burden for 
compliance for vehicles of all sizes, then footprint-based standards 
should not create incentives for manufacturers to downsize their fleets 
as a strategy for compliance which could compromise societal safety, or 
to upsize their fleets which might reduce the program's fuel savings 
and GHG emission reduction benefits. Footprint-based standards also 
enable manufacturers to apply weight-efficient materials and designs to 
their vehicles while maintaining footprint, as an effective means to 
improve fuel economy and reduce GHG emissions. On the other hand, 
depending on their design, weight-based standards can create 
disincentives for manufacturers to apply weight-efficient materials and 
designs. This is because weight-based standards would become more 
stringent as vehicle mass is reduced. The agencies discuss mass 
reduction and its relation to safety in more detail in Preamble section 
II.G.
    Further, although we recognize that weight is better correlated 
with fuel economy and CO2 emissions than is footprint, we 
continue to believe that there is less risk of ``gaming'' (changing the 
attribute(s) to achieve a more favorable target) by increasing 
footprint under footprint-based standards than by increasing vehicle 
mass under weight-based standards--it is relatively easy for a 
manufacturer to add enough weight to a vehicle to decrease its 
applicable fuel economy target a significant amount, as compared to 
increasing vehicle footprint. We also continue to agree with concerns 
raised in 2008 by some commenters to the MY 2011 CAFE rulemaking that 
there would be greater potential for gaming under multi-attribute 
standards, such as those that also depend on weight, torque, power, 
towing capability, and/or off-road capability. The agencies agree with 
the assessment first presented in NHTSA's MY 2011 CAFE final rule \168\ 
that the possibility of gaming an attribute-based standard is lowest 
with footprint-based standards, as opposed to weight-based or multi-
attribute-based standards. Specifically, standards that incorporate 
weight, torque, power, towing capability, and/or off-road capability in 
addition to footprint would not only be more complex, but by providing 
degrees of freedom with respect to more easily-adjusted attributes, 
they could make it less certain that the future fleet would actually 
achieve the average fuel economy and CO2 reduction levels 
projected by the agencies.\169\ This is not to say that a footprint-
based system will eliminate gaming, or that a footprint-based system 
eliminates the possibility that manufacturers will change vehicles in 
ways that compromise occupant protection. Such risks cannot be 
completely avoided, and in the agencies' judgment, footprint-based 
standards achieved the best balance among affected considerations.
---------------------------------------------------------------------------

    \168\ See 74 FR 14359 (Mar. 30, 2009).
    \169\ However, for heavy-duty pickups and vans not covered by 
today's standards, the agencies determined that use of footprint and 
work factor as attributes for heavy duty pickup and van GHG and fuel 
consumption standards could reasonably avoid excessive risk of 
gaming. See 76 FR 57106, 57161-62 (Sept. 15, 2011).
---------------------------------------------------------------------------

    The agencies recognize that based on economic and consumer demand 
factors that are external to this rule, the distribution of footprints 
in the future may be different (either smaller or larger) than what is 
projected in this rule. The agencies recognize that a recent 
independent analysis, discussed below, suggests that the NPRM form of 
the MY 2014 standards could, under some circumstances posited by the 
authors, induce some increases in vehicle footprint. Underlining the 
potential uncertainty, considering a range of scenarios, the authors 
obtained a wide range of results in their analyses. As discussed in 
later in this section,

[[Page 62688]]

slopes of the linear relationships underlying today's standards are 
within the range of technically reasonable analyses of the 
relationships between fuel consumption and footprint, and the agencies 
continue to expect that there will not be significant shifts in the 
distribution of footprints as a direct consequence of this final rule. 
The agencies also recognize that some attribute-based standards in 
other countries/regions use attributes other than footprint and that 
there could be benefits for some manufacturers if there was greater 
international harmonization of fuel economy and GHG standards for 
light-duty vehicles, but this is largely a question of how stringent 
standards are and how they are tested and enforced. It is entirely 
possible that footprint-based and weight-based systems can coexist 
internationally and not present an undue burden for manufacturers if 
they are carefully crafted. Different countries or regions may find 
different attributes appropriate for basing standards, depending on the 
particular challenges they face--from fuel prices, to family size and 
land use, to safety concerns, to fleet composition and consumer 
preference, to other environmental challenges besides climate change. 
The agencies anticipate working more closely with other countries and 
regions in the future to consider how fuel economy and related GHG 
emissions test procedures and standards might be approached in ways 
that least burden manufacturers while respecting each country's need to 
meet its own particular challenges.
    In the NPRM, the agencies stated that we continue to find that 
footprint is the most appropriate attribute upon which to base the 
proposed standards, but recognizing strong public interest in this 
issue, we sought comment on whether the agencies should consider 
setting standards for the final rule based on another attribute or 
another combination of attributes. The agencies also specifically 
requested that the commenters address the concerns raised in the 
paragraphs above regarding the use of other attributes, and explain how 
standards should be developed using the other attribute(s) in a way 
that contributes more to fuel savings and CO2 reductions 
than the footprint-based standards, without compromising safety.
    The agencies received several comments regarding the attribute(s) 
upon which post-MY 2016 CAFE and GHG standards should be based. The 
National Auto Dealers Association (NADA) \170\ and the Consumer 
Federation of America (CFA) \171\ expressed support for attribute-based 
standards, generally, indicating that such standards accommodate 
consumer preferences, level the playing field between manufacturers, 
and remove the incentive to push consumers into smaller vehicles. Many 
commenters, including automobile manufacturers, NGOs, trade 
associations and parts suppliers (e.g., General Motors,\172\ Ford,\173\ 
American Chemistry Council,\174\ Alliance of Automobile 
Manufacturers,\175\ International Council on Clean Transportation,\176\ 
Insurance Institute for Highway Safety,\177\ Society of the Plastics 
Industry,\178\ Aluminum Association,\179\ Motor and Equipment 
Manufacturers Association,\180\ and others) expressed support for the 
continued use of vehicle footprint as the attribute upon which to base 
CAFE and CO2 standards, citing advantages similar to those 
mentioned by NADA and CFA. Conversely, the Institute for Policy 
Integrity (IPI) at the New York University School of Law questioned 
whether non-attribute-based (flat) or an alternative attribute basis 
would be preferable to footprint-based standards as a means to increase 
benefits, improve safety, reduce ``gaming,'' and/or equitably 
distribute compliance obligations.\181\ IPI argued that, even under 
flat standards, credit trading provisions would serve to level the 
playing field between manufacturers. IPI acknowledged that NHTSA, 
unlike EPA, is required to promulgate attribute-based standards, and 
agreed that a footprint-based system could be at much less risk of 
gaming than a weight-based system. IPI suggested that the agencies 
consider a range of options, including a fuel-based system, and select 
the approach that maximizes net benefits. Ferrari and BMW suggested 
that the agencies consider weight-based standards, citing the closer 
correlation between fuel economy and footprint, and BMW further 
suggested that weight-based standards might facilitate international 
harmonization (i.e., between U.S. standards and related standards in 
other countries).\182\ Porsche commented that the footprint attribute 
is not well suited for manufacturers of high performance vehicles with 
a small footprint.\183\
---------------------------------------------------------------------------

    \170\ NADA, Docket No. NHTSA-2010-0131-0261, at 11.
    \171\ CFA, Docket No. EPA-HQ-OAR-2010-0799-9419 at 810, 44.
    \172\ GM, Docket No. NHTSA-2010-0131-0236, at 2.
    \173\ Ford, Docket No. NHTSA-2010-0131-0235, at 8.
    \174\ ACC, Docket No. EPA-HQ-OAR-2010-0799-9517 at 2.
    \175\ Alliance, Docket No. NHTSA-2010-0131-0262, at 85.
    \176\ ICCT, Docket No. NHTSA-2010-0131-0258, at 48.
    \177\ IIHS, Docket No. NHTSA-2010-0131-0222, at 1.
    \178\ SPI, Docket No. EPA-HQ-OAR-2010-0799-9492 at 4.
    \179\ Aluminum Association, Docket No. NHTSA-2010-0131-0226, at 
1.
    \180\ MEMA, Docket No. EPA-HQ-OAR-2010-0799-9478 at 1.
    \181\ IPI, Docket No. EPA-HQ-OAR-2010-0799-11485 at 13-15.
    \182\ BMW, Docket No. NHTSA-2010-0131-0250, at 3.
    \183\ Porsche, Docket No. EPA-HQ-OAR-2010-0799-9264.
---------------------------------------------------------------------------

    Regarding the comments from IPI, as IPI appears to acknowledge, 
EPCA/EISA expressly requires that CAFE standards be attribute-based and 
defined in terms of mathematical functions. Also, NHTSA has, in fact, 
considered and reconsidered options other than footprint, over the 
course of multiple CAFE rulemakings conducted throughout the past 
decade. When first contemplating attribute-based systems, NHTSA 
considered attributes such as weight, ``shadow'' (overall area), 
footprint, power, torque, and towing capacity. NHTSA also considered 
approaches that would combine two or potentially more than two such 
attributes. To date, every time NHTSA (more recently, with EPA) has 
considered options for light-duty vehicles, the agency has concluded 
that a properly designed footprint-based approach provides the best 
means of achieving the basic policy goals (i.e., by reducing 
disparities between manufacturers' compliance burdens, increasing the 
likelihood of improved fuel economy and reduced GHG emissions across 
the entire spectrum of footprint targets; and by reducing incentives 
for manufacturers to respond to standards by reducing vehicle size in 
ways that could compromise overall highway safety) involved in applying 
an attribute-based standards, and at the same time structuring 
footprint-based standards in a way that furthers the energy and 
environmental policy goals of EPCA and the CAA by not creating 
inappropriate incentives to increase vehicle size in ways that could 
increase fuel consumption and GHG emissions. As to IPI's suggestion to 
use fuel type as an attribute, although neither NHTSA nor EPA have 
presented quantitative analysis of standards that differentiate between 
fuel type, such standards would effectively use fuel type to identify 
different subclasses of vehicles, thus requiring mathematical 
functions--not addressed by IPI's comments--to

[[Page 62689]]

recombine these fuel types into regulated classes. Insofar as EPCA/EISA 
already specifies how different fuel types are to be treated for 
purposes of calculating fuel economy and CAFE levels, and moreover, 
insofar as the EISA revisions to EPCA removed NHTSA's previously-clear 
authority to set separate CAFE standards for different classes of light 
trucks, using fuel type to further differentiate subclasses of vehicles 
could conflict with the intent, and possibly the letter, of NHTSA's 
governing statute. Finally, in the agencies' judgment, while regarding 
IPI's suggestion that the agencies select the attribute-based approach 
that maximizes net benefits may have merit, net benefits are but one of 
many considerations which lead to the setting of the standard. Also, 
such an undertaking would be impracticable at this time, considering 
that the mathematical forms applied under each attribute-based approach 
would also need to be specified, and that the agencies lack methods to 
reliably quantify the relative potential for induced changes in vehicle 
attributes.
    Regarding Ferrari's and BMW's comments, as stated previously, in 
the agencies' judgment, footprint-based standards (a) discourage 
vehicle downsizing that might compromise occupant protection, (b) 
encourage the application of technology, including weight-efficient 
materials (e.g., high-strength steel, aluminum, magnesium, composites, 
etc.), and (c) are less susceptible than standards based on other 
attributes to ``gaming'' that could lead to less-than-projected energy 
and environmental benefits. It is also important to note that there are 
many differences between both the standards and the on-road light-duty 
vehicle fleets in Europe and the United States. The stringency of 
standards, independent of the attribute used, is another factor that 
influences harmonization. While the agencies agree that international 
harmonization of test procedures, calculation methods, and/or standards 
could be a laudable goal, again, harmonization is not simply a function 
of the attribute upon which the standards are based. Given the 
differences in the on-road fleet, in fuel composition and availability, 
in regional consumer preferences for different vehicle characteristics, 
in other vehicle regulations besides for fuel economy/CO2 
emissions, and in the balance of program goals given all of these 
factors in the model years affected, among other things, it would not 
necessarily be expected that the CAFE and GHG emission standards would 
align with standards of other countries. Thus, the agencies continue to 
judge vehicle footprint to be a preferable attribute for the same 
reasons enumerated in the proposal and reiterated above.
    Finally, as explained in section III.B.6 and documented in section 
III.D.6 below, EPA agrees with Porsche that the MY2017 GHG standards, 
and the GHG standards for the immediately succeeding model years, pose 
special challenges of feasibility and (especially) lead time for 
intermediate volume manufacturers, in particular for limited-line 
manufacturers of smaller footprint, high performance passenger cars. It 
is for this reason that EPA has provided additional lead time to these 
manufacturers. NHTSA, however, is providing no such additional lead 
time. As required under EISA/EPCA, manufacturers continue--as since the 
1970s--to have the option of paying civil penalties in lieu of 
achieving compliance with the standards, and NHTSA is uncertain as to 
what authority would allow it to promulgate separate standards for 
different classes of manufacturers, having raised this issue in the 
proposal and having received no legal analysis with suggestions from 
Porsche or other commenters.
3. How have the agencies changed the mathematical functions for the MYs 
2017-2025 standards, and why?
    By requiring NHTSA to set CAFE standards that are attribute-based 
and defined by a mathematical function, NHTSA interprets Congress as 
intending that the post-EISA standards to be data-driven--a 
mathematical function defining the standards, in order to be 
``attribute-based,'' should reflect the observed relationship in the 
data between the attribute chosen and fuel economy.\184\ EPA is also 
setting attribute-based CO2 standards defined by similar 
mathematical functions, for the reasonable technical and policy grounds 
discussed below and in Section II of the preamble to the proposed 
rule,\185\ and which supports a harmonization with the CAFE standards.
---------------------------------------------------------------------------

    \184\ A mathematical function can be defined, of course, that 
has nothing to do with the relationship between fuel economy and the 
chosen attribute--the most basic example is an industry-wide 
standard defined as the mathematical function average required fuel 
economy = X, where X is the single mpg level set by the agency. Yet 
a standard that is simply defined as a mathematical function that is 
not tied to the attribute(s) would not meet the requirement of EISA.
    \185\ See 76 FR 74913 et seq. (Dec. 1, 2011).
---------------------------------------------------------------------------

    The relationship between fuel economy (and GHG emissions) and 
footprint, though directionally clear (i.e., fuel economy tends to 
decrease and CO2 emissions tend to increase with increasing 
footprint), is theoretically vague and quantitatively uncertain; in 
other words, not so precise as to a priori yield only a single possible 
curve.\186\ There is thus a range of legitimate options open to the 
agencies in developing curve shapes. The agencies may of course 
consider statutory objectives in choosing among the many reasonable 
alternatives since the statutes do not dictate a particular 
mathematical function for curve shape. For example, curve shapes that 
might have some theoretical basis could lead to perverse outcomes 
contrary to the intent of the statutes to conserve energy and reduce 
GHG emissions.\187\ Thus, the decision of how to set the target curves 
cannot always be just about most ``clearly'' using a mathematical 
function to define the relationship between fuel economy and the 
attribute; it often has to reflect legitimate policy judgments, where 
the agencies adjust the function that would define the relationship in 
order to achieve environmental goals, reduce petroleum consumption, 
encourage application of fuel-saving technologies, not adversely affect 
highway safety, reduce disparities of manufacturers' compliance burdens 
(increasing the likelihood of improved fuel economy and reduced GHG 
emissions across the entire spectrum of footprint targets), preserve 
consumer choice, etc. This is true both for the decisions that guide 
the mathematical function defining the sloped portion of the target 
curves, and for the separate decisions that guide the agencies' choice 
of ``cutpoints'' (if any) that define the fuel economy/CO2 
levels and footprints at each end of the curves where the curves become 
flat. Data informs these decisions, but how the agencies define and 
interpret the relevant data, and then the choice of methodology for 
fitting a curve to the data, must include a consideration of both 
technical data and policy goals.
---------------------------------------------------------------------------

    \186\ In fact, numerous manufacturers have confidentially shared 
with the agencies what they describe as ``physics based'' curves, 
with each OEM showing significantly different shapes, and footprint 
relationships. The sheer variety of curves shown to the agencies 
further confirm the lack of an underlying principle of ``fundamental 
physics'' driving the relationship between CO2 emission 
or fuel consumption and footprint, and the lack of an underlying 
principle to dictate any outcome of the agencies' establishment of 
footprint-based standards.
    \187\ For example, if the agencies set weight-based standards 
defined by a steep function, the standards might encourage 
manufacturers to keep adding weight to their vehicles to obtain less 
stringent targets.
---------------------------------------------------------------------------

    The next sections examine the policy concerns that the agencies 
considered in developing the target curves that define

[[Page 62690]]

the MYs 2017-2025 CAFE and CO2 standards presented in this 
final rule, and the technical work supporting selection of the curves 
defining those standards.
4. What curves are the agencies promulgating for MYs 2017-2025?
    The mathematical functions for the MYs 2017-2025 curves are 
somewhat changed from the functions for the MYs 2012-2016 curves, in 
response to comments received from stakeholders pre-proposal in order 
to address technical concerns and policy goals that the agencies judge 
more significant in this rulemaking than in the prior one, given their 
respective timeframes, and have retained those same mathematical 
functions for the final rule as supported by commenters. This section 
discusses the methodology the agencies selected as, at this time, best 
addressing those technical concerns and policy goals, given the various 
technical inputs to the agencies' current analyses. Below the agencies 
discuss how the agencies determined the cutpoints and the flat portions 
of the MYs 2017-2025 target curves. We also note that both of these 
sections address only how the curves were fit to fuel consumption and 
CO2 emission values determined using the city and highway 
test procedures, and that in determining respective regulatory 
alternatives, the agencies made further adjustments to the curves to 
account for improvements to mobile air conditioners.
    Thus, recognizing that there are many reasonable statistical 
methods for fitting curves to data points that define vehicles in terms 
of footprint and fuel economy, as in past rules, the agencies added 
equivalent levels of technology to the baseline fleet as a starting 
point for the curve analysis. The agencies continue to believe that 
this is a valid method to adjust for technology differences between 
actual vehicle models in the MY 2008 and MY 2010 fleets. The 
statistical method for fitting that curve, however, was revisited by 
the agencies in this rule. For the NPRM, the agencies chose to fit the 
proposed standard curves using an ordinary least-squares formulation, 
on sales-weighted data, using a fleet that has had technology applied, 
and after adjusting the data for the effects of weight-to-footprint, as 
described below. This represented a departure from the statistical 
approach for fitting the curves in MYs 2012-2016, as explained in the 
next section. The agencies considered a wide variety of reasonable 
statistical methods in order to better understand the range of 
uncertainty regarding the relationship between fuel consumption (the 
inverse of fuel economy), CO2 emission rates, and footprint, 
thereby providing a range within which decisions about standards would 
be potentially supportable. In preparing for analysis supporting 
today's final rule, the agencies updated analytical inputs, including 
by developing two market forecasts (as discussed above in Section II.B 
of the preamble and in Chapter 1 of the joint TSD). Using all of this 
information, the agencies repeated the curve fitting analysis, once for 
each market forecast. The agencies obtained results that were broadly 
similar, albeit not identical, to those supporting the NPRM. Results 
obtained for the NPRM and for today's final rule span similar regions 
in footprint--fuel economy space, areas within which it would be 
technically reasonable to select specific linear relationships upon 
which to base new attribute-based standards. The agencies thus believe 
it is reasonable to finalize the curves as proposed. This updated 
analysis is presented in Chapter 2 of the joint TSD.
a. What concerns were the agencies looking to address that led them to 
change from the approach used for the MYs 2012-2016 curves?
    During the year and a half between when the MYs 2012-2016 final 
rule was issued and when the MYs 2017-2025 NPRM was issued, NHTSA and 
EPA received a number of comments from stakeholders on how curves 
should be fitted to the passenger car and light truck fleets. Some 
limited-line manufacturers have argued that curves should generally be 
flatter in order to avoid discouraging production of small vehicles, 
because steeper curves tend to result in more stringent targets for 
smaller vehicles. Most full-line manufacturers have argued that a 
passenger car curve similar in slope to the MY 2016 passenger car curve 
would be appropriate for future model years, but that the light truck 
curve should be revised to be less difficult for manufacturers selling 
the largest full-size pickup trucks. These manufacturers argued that 
the MY 2016 light truck curve was not ``physics-based,'' and that in 
order for future tightening of standards to be feasible for full-line 
manufacturers, the truck curve for later model years should be steeper 
and extended further (i.e., made less stringent) into the larger 
footprints. The agencies do not agree that the MY 2016 light truck 
curve was somehow deficient in lacking a ``physics basis,'' or that it 
was somehow overly stringent for manufacturers selling large pickups--
manufacturers making these arguments presented no ``physics-based'' 
model to explain how fuel economy should depend on footprint.\188\ The 
same manufacturers indicated that they believed that the light truck 
standard should be somewhat steeper after MY 2016, primarily because, 
after more than ten years of progressive increases in the stringency of 
applicable CAFE standards, large pickups would be less capable of 
achieving further improvements without compromising load carrying and 
towing capacity. The related issue of the stringency of the CAFE and 
GHG standards for light trucks is discussed in sections and III.D and 
IV.F of the preamble to this final rule.
---------------------------------------------------------------------------

    \188\ See footnote 186
---------------------------------------------------------------------------

    In developing the curve shapes for the proposed rule, the agencies 
were aware of the current and prior technical concerns raised by OEMs 
concerning the effects of the stringency on individual manufacturers 
and their ability to meet the standards with available technologies, 
while producing vehicles at a cost that allowed them to recover the 
additional costs of the technologies being applied. Although we 
continued to believe that the methodology for fitting curves for the 
MYs 2012-2016 standards was technically sound, we recognized 
manufacturers' concerns regarding their abilities to comply with a 
similarly shallow curve after MY 2016 given the anticipated mix of 
light trucks in MYs 2017-2025. As in the MYs 2012-2016 rules, the 
agencies considered these concerns in the analysis of potential curve 
shapes. The agencies also considered safety concerns which could be 
raised by curve shapes creating an incentive for vehicle downsizing as 
well the economic losses that could be incurred if curve shapes unduly 
discourage market shifts--including vehicle upsizing--that have vehicle 
buyers value. In addition, the agencies sought to improve the balance 
of compliance burdens among manufacturers, and thereby increase the 
likelihood of improved fuel economy and reduced GHG emissions across 
the entire spectrum of footprint targets. Among the technical concerns 
and resultant policy trade-offs the agencies considered were the 
following:
     Flatter standards (i.e., curves) increase the risk that 
both the weight and size of vehicles will be reduced, potentially 
compromising highway safety.
     Flatter standards potentially impact the utility of 
vehicles by providing an incentive for vehicle downsizing.
     Steeper footprint-based standards may create incentives to 
upsize

[[Page 62691]]

vehicles, thus increasing the possibility that fuel economy and 
greenhouse gas reduction benefits will be less than expected.
     Given the same industry-wide average required fuel economy 
or CO2 level, flatter standards tend to place greater 
compliance burdens on full-line manufacturers.
     Given the same industry-wide average required fuel economy 
or CO2 level, steeper standards tend to place greater 
compliance burdens on limited-line manufacturers (depending of course, 
on which vehicles are being produced).
     If cutpoints are adopted, given the same industry-wide 
average required fuel economy, moving small-vehicle cutpoints to the 
left (i.e., up in terms of fuel economy, down in terms of 
CO2 emissions) discourages the introduction of small 
vehicles, and reduces the incentive to downsize small vehicles in ways 
that could compromise overall highway safety.
     If cutpoints are adopted, given the same industry-wide 
average required fuel economy, moving large-vehicle cutpoints to the 
right (i.e., down in terms of fuel economy, up in terms of 
CO2 emissions) better accommodates the design requirements 
of larger vehicles--especially large pickups--and extends the size 
range over which downsizing is discouraged.
    All of these were policy goals that required weighing and 
consideration. Ultimately, the agencies did not agree that the MY 2017 
target curves for the proposal, on a relative basis, should be made 
significantly flatter than the MY 2016 curve,\189\ as we believed that 
this would undo some of the safety-related incentives and balancing of 
compliance burdens among manufacturers--effects that attribute-based 
standards are intended to provide.
---------------------------------------------------------------------------

    \189\ While ``significantly'' flatter is subjective, the year 
over year change in curve shapes is discussed in greater detail in 
Section II.C.6.a and Chapter 2 of the joint TSD.
---------------------------------------------------------------------------

    Nonetheless, the agencies recognized full-line OEM concerns and 
tentatively concluded that further increases in the stringency of the 
light truck standards would be more feasible if the light truck curve 
was made steeper than the MY 2016 truck curve and the right (large 
footprint) cut-point was extended over time to larger footprints. This 
conclusion was supported by the agencies' technical analyses of 
regulatory alternatives defined using the curves developed in the 
manner described below.
    The Alliance, GM, and the UAW commented in support of the 
reasonableness of the agencies' proposals regarding the shape and slope 
of the curves and how they were developed, although the Alliance stated 
that the weighting and regression analysis used to develop the curves 
for MYs 2022-2025 should be reviewed during the mid-term evaluation 
process.
    Other commenters objected to specific aspects of the agencies' 
approach to developing the curves. ACEEE provided extensive comments, 
arguing generally that agencies appeared to be proposing curve choices 
in response to subjective policy concerns (namely, protecting large 
trucks) rather than on a sound technical basis.\190\ ACEEE recommended 
that the agencies choose ``the most robust technical approach,'' and 
then make policy-driven adjustments to the curves for a limited time as 
necessary, and explain the curves in those terms, revisiting this issue 
for the final rule.\191\
---------------------------------------------------------------------------

    \190\ ACEEE comments, Docket No. EPA-HQ-OAR-2010-0799-9528 at 6.
    \191\ Id.
---------------------------------------------------------------------------

    The agencies reaffirm the reasonable technical and policy basis for 
selecting the truck curve. Three primary drivers form this technical 
basis: (a) The largest trucks have unique equipment and design, as 
described in the Ford comment referenced below in section II.C.4.f; (b) 
the agencies agree with those large truck manufacturers who indicated 
in discussions prior to the proposal that they believed that the light 
truck standard should be somewhat steeper after MY 2016, primarily 
because, after more than ten recent years of progressive increases in 
the stringency of applicable CAFE standards (after nearly ten years 
during which Congress did not allow NHTSA to increase light truck CAFE 
standards), manufacturers of large pickups would have limited options 
to comply with more stringent standards without resorting to 
compromising large truck load carrying and towing capacity; and (c) 
given the relatively few platforms which comprise the majority of the 
sales at the largest truck footprints, the agencies were concerned 
about requiring levels of average light truck performance that might 
lead to overly aggressive technology penetration rates in this 
important segment of the work fleet. Specifically, the agencies were 
concerned at proposal, and remain concerned about issues of lead time 
and cost with regard to manufacturers of these work vehicles. As noted 
later in this chapter, while the largest trucks are a small segment of 
the overall truck fleet, and an even smaller segment of the overall 
fleet, \192\ these changes to the truck slope have been made in order 
to provide a clearer path toward compliance for manufacturers of these 
vehicles, and reduce the potential that new standards would lead these 
manufacturers to choose to downpower, modify the structure, or 
otherwise reduce the utility of these work vehicles.
---------------------------------------------------------------------------

    \192\ The agencies' market forecast used at proposal includes 
about 24 vehicle configurations above 74 square feet with a total 
volume of about 50,000 vehicles or less during any MY in the 2017-
2025 time frame, In the MY2010 based market forecast, there are 14 
vehicle configurations with a total volume of 130,000 vehicles or 
less during any MY in the 2017-2025 time frame. This is a similarly 
small portion of the overall number of vehicle models or vehicle 
sales.
---------------------------------------------------------------------------

    As discussed in the NPRM and in Chapter 2 of the TSD, as well as in 
section III.D and IV.E below, we considered all of the utilized methods 
of normalizing (including not normalizing) fuel economy levels and the 
different methods for fitting functional forms to the footprint and 
fuel economy and CO2 levels, to be technically reasonable 
options. We indicated that, within the range spanned by these 
technically reasonable options, the selection of curves for purposes of 
specifying standards involves consideration of technical concerns and 
policy implications. Having considered the above comments on the 
estimation and selection of curves, we have not changed our judgment 
about the process--that is, that the agencies can make of policy-
informed selection within the range spanned by technically reasonable 
quantitative methods. We disagree with ACEEE's portrayal of this 
involving the ``protection'' of large trucks. We have selected a light 
truck slope that addresses real engineering aspects of large light 
trucks and real fleet aspects of the manufacturers producing these 
trucks, and sought to avoid creating an incentive for such 
manufacturers to reduce the hauling and towing capacity of these 
vehicles, an undesirable loss of utility. Such concerns are applicable 
much more directly to light trucks than to passenger cars. The 
resulting curves are well within the range of curves we have estimated. 
The steeper slope at the right hand of the truck curve recognizes the 
physical differences in these larger vehicles \193\ and the fleet 
differences in

[[Page 62692]]

manufacturers that produce them. Further, we disagree with ACEEE's 
suggestion that the agencies should commit to a particular method for 
selecting curves; as the approaches we have considered demonstrate that 
the range of technically reasonable curve fitting methods spans a wide 
range, indicating uncertainty that could make it unwise to ``lock in'' 
a particular method for all future rulemakings. The agencies plan on 
observing fleet trends in the future to see if there are any unexpected 
shifts in the distribution of technology and utility within the 
footprint range for both cars and trucks.
---------------------------------------------------------------------------

    \193\ As Ford Motor Company detailed, in its public comments, 
``towing capability generally requires increased aerodynamic drag 
caused by a modified frontal area, increased rolling resistance, and 
a heavier frame and suspension to support this additional 
capability.'' Ford further noted that these vehicles further require 
auxiliary transmission oil coolers, upgraded radiators, trailer 
hitch connectors and wiring harness equipment, different steering 
ratios, upgraded rear bumpers and different springs for heavier 
tongue load (for upgraded towing packages), body-on-frame (vs. 
unibody) construction (also known as ladder frame construction) to 
support this capability and an aggressive duty cycle, and lower axle 
ratios for better pulling power/capability.
---------------------------------------------------------------------------

    We note that comments by CBD, ACEEE, NACAA, and an individual, 
Yegor Tarazevich, referenced a 2011 study by Whitefoot and Skerlos, 
``Design incentives to increase vehicle size created from the U.S. 
footprint-based fuel economy standards.'' \194\ This study concluded 
that MY 2014 standards, as proposed, ``create an incentive to increase 
vehicle size except when consumer preference for vehicle size is near 
its lower bound and preference for acceleration is near its upper 
bound.'' \195\ The commenters who cited this study generally did so as 
part of arguments in favor of flatter standards (i.e., curves that are 
flatter across the range of footprints) for MYs 2017-2025. While the 
agencies consider the concept of the Whitefoot and Skerlos analysis to 
have some potential merits, it is also important to note that, among 
other things, the authors assumed different inputs than the agencies 
actually used in the MYs 2012-2016 rule regarding the baseline fleet, 
the cost and efficacy of potential future technologies, and the 
relationship between vehicle footprint and fuel economy.
---------------------------------------------------------------------------

    \194\ Available at Docket No. EPA-HQ-OAR-2010-0799.
    \195\ page 410.
---------------------------------------------------------------------------

    Were the agencies to use the Whitefoot and Skerlos methodology 
(e.g., methods to simulate manufacturers' potential decisions to 
increase vehicle footprint) with the actual inputs to the MYs 2012-2016 
rules, the agencies would likely obtain different findings. Underlining 
the potential uncertainty, the authors obtained a wide range of results 
in their analyses. Insofar as Whitefoot and Skerlos found, for some 
scenarios, that manufacturers might respond to footprint-based 
standards by deliberately increasing vehicle footprint, these findings 
are attributable to a combination of (a) the assumed baseline market 
characteristics, (b) the assumed cost and fuel economy impacts involved 
in increasing vehicle footprint, (c) the footprint-based fuel economy 
targets, and (d) the assumed consumer preference for vehicle size. 
Changes in any of these assumptions could yield different analytic 
results, and potentially result in different technical implications for 
agency action. As the authors note when interpreting their results: 
``Designing footprint-based fuel-economy standards in practice such 
that manufacturers have no incentive to adjust the size of their 
vehicles appears elusive at best and impossible at worst.''
    Regarding the cost impacts of footprint increases, that authors 
make an ad hoc assumption that changes in footprint would incur costs 
linearly, such that a 1% change in footprint would entail a 1% increase 
in production costs. The authors refer to this as a conservative 
assumption, but present no supporting evidence. The agencies have not 
attempted to estimate the engineering cost to increase vehicle 
footprint, but we expect that it would be considerably nonlinear, with 
costs increasing rapidly once increases available through small 
incremental changes--most likely in track width--have been exhausted. 
Moreover, we expect that were a manufacturer to deliberately increase 
footprint in order to ease compliance burdens, it would confine any 
significant changes to coincide with vehicle redesigns, and engaging in 
multiyear planning, would consider how the shifts would impact 
compliance burdens and consumer desirability in ensuing model years. 
With respect to the standards promulgated today, the standards become 
flatter over time, thereby diminishing any ``reward'' for deliberately 
increasing footprint beyond normal market expectations.
    Regarding the fuel economy impacts of footprint increases, the 
authors present a regression analysis based on which increases in 
footprint are estimated to entail increases in weight which are, in 
turn, estimated to entail increases in fuel consumption. However, this 
relationship was not the relationship the agencies used to develop the 
MY 2014 standards the authors examine in that study. Where the target 
function's slope is similar to that of the tendency for fuel 
consumption to increase with footprint, fuel economy should tend to 
decrease approximately in parallel with the fuel economy target, 
thereby obviating the ``benefit'' of deliberate increases in vehicle 
footprint. The agencies' analysis supporting today's final rule 
indicates relatively wide ranges wherein the relationship between fuel 
consumption and footprint may reasonably be specified.
    As part of the mid-term evaluation and future NHTSA rulemaking, the 
agencies plan to further investigate methods to estimate the potential 
that standards might tend to induce changes in the footprint. The 
agencies will also continue to closely monitor trends in footprint (and 
technology penetration) as manufacturers come into compliance with 
increasing levels of the footprint standards.
b. What methodologies and data did the agencies consider in developing 
the MYs 2017-2025 curves?
    In considering how to address the various policy concerns discussed 
in the previous sections, the agencies revisited the data and performed 
a number of analyses using different combinations of the various 
statistical methods, weighting schemes, adjustments to the data and the 
addition of technologies to make the fleets less technologically 
heterogeneous. As discussed above, in the agencies' judgment, there is 
no single ``correct'' way to estimate the relationship between 
CO2 or fuel consumption and footprint--rather, each 
statistical result is based on the underlying assumptions about the 
particular functional form, weightings and error structures embodied in 
the representational approach. These assumptions are the subject of the 
following discussion. This process of performing many analyses using 
combinations of statistical methods generates many possible outcomes, 
each embodying different potentially reasonable combinations of 
assumptions and each thus reflective of the data as viewed through a 
particular lens. The choice of a proposed standard developed by a given 
combination of these statistical methods was consequently a decision 
based upon the agencies' determination of how, given the policy 
objectives for this rulemaking and the agencies' MY 2008-based forecast 
of the market through MY 2025, to appropriately reflect the current 
understanding of the evolution of automotive technology and costs, the 
future prospects for the vehicle market, and thereby establish curves 
(i.e., standards) for cars and light trucks. As discussed below, for 
today's final rule, the agencies used updated information to repeat 
these analyses, found that results were generally similar and spanned a 
similarly wide range, and found that the curves underlying the

[[Page 62693]]

proposed standards were well within this range.
c. What information did the agencies use to estimate a relationship 
between fuel economy, CO2 and footprint?
    For each fleet, the agencies began with the MY 2008-based market 
forecast developed to support the proposal (i.e., the baseline fleet), 
with vehicles' fuel economy levels and technological characteristics at 
MY 2008 levels.\196\ For today's final rule, the agencies made minor 
corrections to this market forecast, and also developed a MY 2010-based 
market forecast. The development, scope, and content of these market 
forecasts are discussed in detail in Chapter 1 of the joint Technical 
Support Document supporting the rulemaking.
---------------------------------------------------------------------------

    \196\ While the agencies jointly conducted this analysis, the 
coefficients ultimately used in the slope setting analysis are from 
the CAFE model.
---------------------------------------------------------------------------

d. What adjustments did the agencies evaluate?
    The agencies believe one possible approach is to fit curves to the 
minimally adjusted data shown above (the approach still includes sales 
mix adjustments, which influence results of sales-weighted 
regressions), much as DOT did when it first began evaluating potential 
attribute-based standards in 2003.\197\ However, the agencies have 
found, as in prior rulemakings, that the data are so widely spread 
(i.e., when graphed, they fall in a loose ``cloud'' rather than tightly 
around an obvious line) that they indicate a relationship between 
footprint and CO2 and fuel consumption that is real but not 
particularly strong. Therefore, as discussed below, the agencies also 
explored possible adjustments that could help to explain and/or reduce 
the ambiguity of this relationship, or could help to support policy 
outcomes the agencies judged to be more desirable.
---------------------------------------------------------------------------

    \197\ 68 FR 74920-74926.
---------------------------------------------------------------------------

i. Adjustment to Reflect Differences in Technology
    As in prior rulemakings, the agencies consider technology 
differences between vehicle models to be a significant factor producing 
uncertainty regarding the relationship between CO2/fuel 
consumption and footprint. Noting that attribute-based standards are 
intended to encourage the application of additional technology to 
improve fuel efficiency and reduce CO2 emissions, the 
agencies, in addition to considering approaches based on the unadjusted 
engineering characteristics of MY 2008 vehicle models, therefore also 
considered approaches in which, as for previous rulemakings, technology 
is added to vehicles for purposes of the curve fitting analysis in 
order to produce fleets that are less varied in technology content.
    The agencies adjusted the baseline fleet for technology by adding 
all technologies considered, except for the most advanced high-BMEP 
(brake mean effective pressure) gasoline engines, diesel engines, ISGs, 
strong HEVs, PHEVs, EVs, and FCVs. The agencies included 15 percent 
mass reduction on all vehicles.\198\
---------------------------------------------------------------------------

    \198\ As described in the preceding paragraph, applying 
technology in this manner helps to reduce the effect of technology 
differences across the vehicle fleet. The particular technologies 
used for the normalization were chosen as a reasonable selection of 
technologies which could potentially be used by manufacturers over 
this time period.
---------------------------------------------------------------------------

ii. Adjustments Reflecting Differences in Performance and ``Density''
    For the reasons discussed above regarding revisiting the shapes of 
the curves, the agencies considered adjustments for other differences 
between vehicle models (i.e., inflating or deflating the fuel economy 
of each vehicle model based on the extent to which one of the vehicle's 
attributes, such as power, is higher or lower than average). 
Previously, NHTSA had rejected such adjustments because they imply that 
a multi-attribute standard may be necessary, and the agencies judged 
most multi-attribute standards to be more subject to gaming than a 
footprint-only standard.199,200 Having considered this issue 
again for purposes of this rulemaking, NHTSA and EPA conclude the need 
to accommodate in the target curves the challenges faced by 
manufacturers of large pickups currently outweighs these prior 
concerns. Therefore, the agencies also evaluated curve fitting 
approaches through which fuel consumption and CO2 levels 
were adjusted with respect to weight-to-footprint alone, and in 
combination with power-to-weight. While the agencies examined these 
adjustments for purposes of fitting curves, the agencies are not 
promulgating a multi-attribute standard; the proposed fuel economy and 
CO2 targets for each vehicle are still functions of 
footprint alone. No adjustment will be used in the compliance process.
---------------------------------------------------------------------------

    \199\ For example, in comments on NHTSA's 2008 NPRM regarding MY 
2011-2015 CAFE standards, Porsche recommended that standards be 
defined in terms of a ``Summed Weighted Attribute'', wherein the 
fuel economy target would be calculated as follows: target = f(SWA), 
where target is the fuel economy target applicable to a given 
vehicle model and SWA = footprint + torque1/1.5 + weight 
1/2.5. (NHTSA-2008-0089-0174.)
    \200\ 74 FR 14359.
---------------------------------------------------------------------------

    For the proposal, the agencies also examined some differences 
between the technology-adjusted car and truck fleets in order to better 
understand the relationship between footprint and CO2/fuel 
consumption in the agencies' MY 2008 based forecast. The agencies 
investigated the relationship between HP/WT and footprint in the 
agencies' MY 2008-based market forecast. On a sales weighted basis, 
cars tend to become proportionally more powerful as they get larger. In 
contrast, there is a minimally positive relationship between HP/WT and 
footprint for light trucks, indicating that light trucks become only 
slightly more powerful as they get larger.
    This analysis, presented in chapter 2.4.1.2 of the joint TSD, 
indicated that vehicle performance (power-to-weight ratio) and 
``density'' (curb weight divided by footprint) are both correlated to 
fuel consumption (and CO2 emission rate), and that these 
vehicle attributes are also both related to vehicle footprint. Based on 
these relationships, the agencies explored adjusting the fuel economy 
and CO2 emission rates of individual vehicle models based on 
deviations from ``expected'' performance or weight/footprint at a given 
footprint; the agencies inflated fuel economy levels of vehicle models 
with higher performance and/or weight/footprint than the average of the 
fleet would indicate at that footprint, and deflated fuel economy 
levels with lower performance and/or weight. While the agencies 
considered this technique for purposes of fitting curves, the agencies 
are not promulgating a multi-attribute standard, as the proposed fuel 
economy and CO2 targets for each vehicle are still functions 
of footprint alone. No adjustment will be used in the compliance 
process.
    For today's final rule, the agencies repeated the above analyses, 
using the corrected MY 2008-based market forecast and, separately, the 
MY 2010-based market forecasts. As discussed in section 2.6 of the 
joint TSD and further detailed in a memorandum available at Docket No. 
NHTSA-2010-0131-0325, doing so produced results similar to the analysis 
used in the proposal.
    The agencies sought comment on the appropriateness of the 
adjustments described in Chapter 2 of the joint TSD, particularly 
regarding whether these adjustments suggest that standards should be 
defined in terms of other attributes in addition to footprint, and 
whether they may encourage changes other than encouraging the 
application of technology to improve fuel economy

[[Page 62694]]

and reduce CO2 emissions. The agencies also sought comment 
regarding whether these adjustments effectively ``lock in'' through MY 
2025 relationships that were observed in MY 2008.
    ACEEE objected to the agencies' adjustments to the truck curves, 
arguing that if the truck slope needs to be adjusted for ``density,'' 
then that suggests that the MY 2008-based market forecast used to build 
up the reference fleet must be ``incorrect and show * * * 
unrealistically low pickup truck fuel consumption, due to the 
overstatement of the benefits of certain technologies.'' \201\ ACEEE 
stated that ``If that is the case, the agencies should revisit the 
adjustments made to generate the reference fleet and remove 
technologies from pickups that are not suited to those trucks,'' which 
``would be a far more satisfactory approach than the speculative and 
non-quantitative approach of adjusting for vehicle density.'' \202\
---------------------------------------------------------------------------

    \201\ ACEEE comments, Docket No. EPA-HQ-OAR-2010-0799-9528 at 3-
4.
    \202\ Id.
---------------------------------------------------------------------------

    ACEEE further stated that ``the fuel consumption trend that the 
density adjustment is meant to correct appears in the unadjusted fleet 
as well as the technology-adjusted fleet of light trucks (TSD Figures 
2-1 and 2-2),'' which they argued is evidence that ``the flattening of 
fuel consumption at higher footprints is not a byproduct of unrealistic 
technology adjustments, but rather a reflection of actual fuel economy 
trends in today's market.'' \203\ ACEEE stated that therefore it did 
not make sense to adjust the fuel consumption of ``low-density'' trucks 
upwards before fitting the curve.\204\ ACEEE pointed out that it would 
appear that trucks' HP-to-weight ratio should be higher than the 
agencies' analysis indicated, and stated that the weight-based EU 
CO2 standard curves are adjusted for HP-to-weight, which 
resulted in flatter curves, and which are intended to avoid 
incentivizing up-weighting.\205\ ACEEE argued that by not choosing this 
approach and by adjusting for density, along with using sales-weighting 
and an OLS method instead of MAD, the proposed curves encourage vehicle 
upsizing.\206\
---------------------------------------------------------------------------

    \203\ Id.
    \204\ Id.
    \205\ Id.
    \206\ Id.
---------------------------------------------------------------------------

    Thus, ACEEE stated, the deviations from the analytical approach 
previously adopted were not justified with data provided in the NPRM, 
and the resulting ``ad hoc adjustments'' to the curve-fitting process 
detracted from the agencies' argument for the proposals. ACEEE further 
commented that increasing the slope of the truck curve would be 
``counter-productive'' from a policy perspective as well, implying that 
challenging light truck standards have helped manufacturers of light 
trucks to recover from the recent downturn in the light vehicle 
market.\207\ The Sierra Club and CBD also opposed increasing the slope 
of the truck curve for MYs 2017 and beyond as compared to the MY 2016 
truck curve, on the basis that it would encourage upsizing and reduce 
fuel economy and CO2 emissions improvements.\208\
---------------------------------------------------------------------------

    \207\ Id. at 6
    \208\ Sierra Club et al. comments, Docket No. EPA-HQ-OAR-2010-
0799-9549 at 6.
---------------------------------------------------------------------------

    Conversely, the UAW strongly supported the agencies' balancing of 
``the challenges of adding fuel-economy improving technologies to the 
largest light trucks with the need to maintain the full functionality 
of these vehicles across a wide range of applications'' \209\ through 
their approach to curve fitting. The Alliance also expressed support 
for the agencies' analyses (including the consideration of different 
weightings), and the selected relationships between the fuel 
consumption and footprint for MYs 2017-2021.\210\ Both ACEEE and the 
Alliance urged the agencies to revisit the estimation and selection of 
curves during the mid-term evaluation, and the agencies plan to do so.
---------------------------------------------------------------------------

    \209\ UAW comments, Docket No. EPA-HQ-OAR-2010-0799-9563, at 2.
    \210\ Alliance comments, Docket No. EPA-HQ-OAR-2010-0799-9487, 
at 86.
---------------------------------------------------------------------------

    In response, the agencies maintain that the adjustments (including 
no adjustments) considered in the NPRM are all reasonable to apply for 
purposes of developing potential fuel economy and GHG target curves, 
and that it is left to policy makers to determine an appropriate 
perspective involved in selecting weights (if any) to be applied, and 
to interpret the consequences of various alternatives. As described 
above and in Chapter 2 of the TSD, the agencies believe that the 
adjustments made to the truck curve are appropriate because work trucks 
provide utility (towing and load-carrying capability) that requires 
more torque and power, more cooling and braking capability, and more 
fuel-carrying capability (i.e., larger fuel tanks) than would be the 
case for other vehicles of similar size and curb weight. Continuing the 
2016 truck curve would disadvantage full-line manufacturers active in 
this portion of the fleet disproportionately to the rest of the trucks. 
The agencies do not include power to weight, density, towing, or 
hauling, as a technology. Neither does the agency consider them as part 
of a multi-attribute standard. Considering these factors, the agencies 
believe that the ``density'' adjustment, as applied to the data 
developed for the NPRM, provided a reasonable basis to develop curves 
for light trucks. Having repeated our analysis using a corrected MY 
2008-based market forecast and, separately, a new MY 2010-based market 
forecast, we obtained results spanning ranges similar to those covered 
by the analysis we performed for the NPRM. See section 2.6 of the Joint 
TSD. In the agencies' judgment, considering the above comments (and 
others), the curves proposed in the NPRM strike a sound balance between 
the legitimate policy considerations discussed in section II.C. 2--the 
interest in discouraging manufacturers from responding to standards by 
reducing vehicle size in ways that might compromise highway safety, the 
interest in more equitably balancing compliance burdens among limited- 
and full-line manufacturers, and the interest in avoiding excessive 
risk that projected energy and environmental benefits might be less 
than expected due to regulation-incented increases in vehicle size.
    Regarding ACEEE's specific comments about the application of these 
adjustments to the light truck fleet, we disagree with the 
characterization of the adjustments as ad hoc. Choosing from among a 
range of legitimate possibilities based on relevant policy and 
technical considerations is not an arbitrary, ad hoc exercise. 
Throughout multiple rulemaking analyses, NHTSA (more recently, with 
EPA) has applied normalization to adjust for differences in 
technologies. Also, while the agencies have previously considered and 
declined to apply normalizations to reflect differences in other 
characteristics, such as power, our judgment that some such 
normalizations could be among the set of technically reasonable 
approaches was not ad hoc, but in fact based on further technical 
analysis and reconsideration. Moreover, that reconsideration occurred 
with respect to passenger cars as well as light trucks. Still, we 
recognize that results of the different methods we have examined depend 
on inputs that are subject to uncertainty; for example, normalization 
to adjust for differences in technology depend on uncertain estimates 
of technology efficacy, and sales-weighted regressions depend on 
uncertain forecasts of future market volumes. Such uncertainties 
support the agencies' strong preference to avoid permanently ``locking 
in'' any particular curve estimation technique.

[[Page 62695]]

e. What statistical methods did the agencies evaluate?
    For the NPRM, the above approaches resulted in three data sets each 
for (a) vehicles without added technology and (b) vehicles with 
technology added to reduce technology differences, any of which may 
provide a reasonable basis for fitting mathematical functions upon 
which to base the slope of the standard curves: (1) Vehicles without 
any further adjustments; (2) vehicles with adjustments reflecting 
differences in ``density'' (weight/footprint); and (3) vehicles with 
adjustments reflecting differences in ``density,'' and adjustments 
reflecting differences in performance (power/weight). Using these data 
sets, the agencies tested a range of regression methodologies, each 
judged to be possibly reasonable for application to at least some of 
these data sets. Beginning with the corrected MY 2008-based market 
forecast and the MY 2010-based market forecast developed for today's 
final rule, the above approaches resulted in six data sets--three for 
each of the two market forecasts.
i. Regression Approach
    In the MYs 2012-2016 final rules, the agencies employed a robust 
regression approach (minimum absolute deviation, or MAD), rather than 
an ordinary least squares (OLS) regression.\211\ MAD is generally 
applied to mitigate the effect of outliers in a dataset, and thus was 
employed in that rulemaking as part of our interest in attempting to 
best represent the underlying technology. NHTSA used OLS in early 
development of attribute-based CAFE standards, but NHTSA (and then 
NHTSA and EPA) subsequently chose MAD instead of OLS for both the MY 
2011 and the MYs 2012-2016 rulemakings. These decisions on regression 
technique were made both because OLS gives additional emphasis to 
outliers \212\ and because the MAD approach helped achieve the 
agencies' policy goals with regard to curve slope in those 
rulemakings.\213\ In the interest of taking a fresh look at appropriate 
regression methodologies as promised in the 2012-2016 light duty 
rulemaking, in developing this rule, the agencies gave full 
consideration to both OLS and MAD. The OLS representation, as 
described, uses squared errors, while MAD employs absolute errors and 
thus weights outliers less.
---------------------------------------------------------------------------

    \211\ See 75 FR 25359.
    \212\ Id. at 25362-63.
    \213\ Id. at 25363.
---------------------------------------------------------------------------

    As noted, one of the reasons stated for choosing MAD over least 
square regression in the MYs 2012-2016 rulemaking was that MAD reduced 
the weight placed on outliers in the data. However, the agencies have 
further considered whether it is appropriate to classify these vehicles 
as outliers. Unlike in traditional datasets, these vehicles' 
performance is not mischaracterized due to errors in their measurement, 
a common reason for outlier classification. Being certification data, 
the chances of large measurement errors should be near zero, 
particularly towards high CO2 or fuel consumption. Thus, 
they can only be outliers in the sense that the vehicle designs are 
unlike those of other vehicles. These outlier vehicles may include 
performance vehicles, vehicles with high ground clearance, 4WD, or boxy 
designs. Given that these are equally legitimate on-road vehicle 
designs, the agencies concluded that it would appropriate to reconsider 
the treatment of these vehicles in the regression techniques.
    Based on these considerations as well as the adjustments discussed 
above, the agencies concluded it was not meaningful to run MAD 
regressions on gpm data that had already been adjusted in the manner 
described above. Normalizing already reduced the variation in the data, 
and brought outliers towards average values. This was the intended 
effect, so the agencies deemed it unnecessary to apply an additional 
remedy to resolve an issue that had already been addressed, but we 
sought comment on the use of robust regression techniques under such 
circumstances. ACEEE stated that either MAD (i.e., one robust 
regression technique) or OLS was ``technically sound,'' \214\ and other 
stakeholders that commented on the agencies' analysis supporting the 
selection of curves did not comment specifically on robust regression 
techniques. On the other hand, ACEEE did suggest that the application 
of multiple layers of normalization may provide tenuous results. For 
this rulemaking, we consider the range of methods we have examined to 
be technically reasonable, and our selected curves fall within those 
ranges. However, all else being equal, we agree that simpler or more 
stable methods are likely preferable to more complex or unstable 
methods, and as mentioned above, we agree with ACEEE and the Alliance 
that revisiting the selection of curves would be appropriate as part of 
the required future NHTSA rulemaking and mid-term evaluation.
---------------------------------------------------------------------------

    \214\ ACEEE comments, Docket No. EPA-HQ-OAR-2010-0799-9528 at 4.
---------------------------------------------------------------------------

ii. Sales Weighting
    Likewise, the agencies reconsidered employing sales-weighting to 
represent the data. As explained below, the decision to sales weight or 
not is ultimately based upon a choice about how to represent the data, 
and not by an underlying statistical concern. Sales weighting is used 
if the decision is made to treat each (mass produced) unit sold as a 
unique physical observation. Doing so thereby changes the extent to 
which different vehicle model types are emphasized as compared to a 
non-sales weighted regression. For example, while total General Motors 
Silverado (332,000) and Ford F-150 (322,000) sales differed by less 
than 10,000 in the MY 2021 market forecast (in the MY 2008-based 
forecast), 62 F-150s models and 38 Silverado models were reported in 
the agencies baselines. Without sales-weighting, the F-150 models, 
because there are more of them, were given 63 percent more weight in 
the regression despite comprising a similar portion of the marketplace 
and a relatively homogenous set of vehicle technologies.
    The agencies did not use sales weighting in the MYs 2012-2016 
rulemaking analysis of the curve shapes. A decision to not perform 
sales weighting reflects judgment that each vehicle model provides an 
equal amount of information concerning the underlying relationship 
between footprint and fuel economy. Sales-weighted regression gives the 
highest sales vehicle model types vastly more emphasis than the lowest-
sales vehicle model types thus driving the regression toward the sales-
weighted fleet norm. For unweighted regression, vehicle sales do not 
matter. The agencies note that the MY 2008-based light truck market 
forecast shows MY 2025 sales of 218,000 units for Toyota's 2WD Sienna, 
and shows 66 model configurations with MY 2025 sales of fewer than 100 
units. Similarly, the agencies' MY 2008-based market forecast shows MY 
2025 sales of 267,000 for the Toyota Prius, and shows 40 model 
configurations with MY2025 sales of fewer than 100 units. Sales-
weighted analysis would give the Toyota Sienna and Prius more than a 
thousand times the consideration of many vehicle model configurations. 
Sales-weighted analysis would, therefore, cause a large number of 
vehicle model configurations to be virtually ignored in the 
regressions.\215\ The MY 2010-based market forecast includes similar 
examples of extreme disparities in production volumes, and therefore, 
degree of influence over sales-

[[Page 62696]]

weighted regression results. Moreover, unlike unweighted approaches, 
sales-weighted approaches are subject to more uncertainties surrounding 
sales volumes. For example, in the MY 2008-based market forecast, 
Chrysler's production volumes are projected to decline significantly 
through MY 2025, in stark contrast to the prediction for that company 
in the MY 2010-based market forecast. Therefore, under a sales-weighted 
approach, Chrysler's vehicle models have considerably less influence on 
regression results for the MY 2008-based fleet than for the MY 2010-
based fleet.
---------------------------------------------------------------------------

    \215\ 75 FR 25362 and n. 64.
---------------------------------------------------------------------------

    However, the agencies did note in the MYs 2012-2016 final rules 
that, ``sales weighted regression would allow the difference between 
other vehicle attributes to be reflected in the analysis, and also 
would reflect consumer demand.'' \216\ In reexamining the sales-
weighting for this analysis, the agencies note that there are low-
volume model types account for many of the passenger car model types 
(50 percent of passenger car model types account for 3.3 percent of 
sales), and it is unclear whether the engineering characteristics of 
these model types should equally determine the standard for the 
remainder of the market. To expand on this point, low volume cars in 
the agencies' MY 2008 and 2010 baseline include specialty vehicles such 
as the Bugatti Veyron, Rolls Royce Phantom, and General Motors Funeral 
Coach Hearse. These vehicle models all represent specific engineering 
designs, and in a regression without sales weighting, they are given 
equal weighting to other vehicles with single models with more 
relevance to the typical vehicle buyer including mass market sedans 
like the Toyota Prius referenced above. Similar disparities exist on 
the truck side, where small manufacturers such as Roush manufacturer 
numerous low sale vehicle models that also represent specific 
engineering designs. Given that the curve fit is ultimately used in 
compliance, and compliance is based on sales-weighted average 
performance, although the agencies are not currently attempting to 
estimate consumer responses to today's standards, sales weighting could 
be a reasonable approach to fitting curves.
---------------------------------------------------------------------------

    \216\ 75 FR 25632/3.
---------------------------------------------------------------------------

    In the interest of taking a fresh look at appropriate methodologies 
as promised in the last final rule, in developing the proposal, the 
agencies gave full consideration to both sales-weighted and unweighted 
regressions.
iii. Analyses Performed
    For the NPRM, we performed regressions describing the relationship 
between a vehicle's CO2/fuel consumption and its footprint, 
in terms of various combinations of factors: Initial (raw) fleets with 
no technology, versus after technology is applied; sales-weighted 
versus non-sales weighted; and with and without two sets of normalizing 
factors applied to the observations. The agencies excluded diesels and 
dedicated AFVs because the agencies anticipate that advanced gasoline-
fueled vehicles are likely to be dominant through MY 2025, based both 
on our own assessment of potential standards (see Sections III.D and 
IV.G below) as well as our discussions with large number of automotive 
companies and suppliers. Supporting today's final rule, we repeated all 
of this analysis twice--once for the corrected MY 2008-based market 
forecast, and once for the MY 2010-based market forecast. Doing so 
produced results generally similar to those documented in the joint TSD 
supporting the NPRM. See section 2.6 of the joint TSD and the docket 
memo.
    Thus, the basic OLS regression on the initial data (with no 
technology applied) and no sales-weighting represents one perspective 
on the relation between footprint and fuel economy. Adding sales 
weighting changes the interpretation to include the influence of sales 
volumes, and thus steps away from representing vehicle technology 
alone. Likewise, MAD is an attempt to reduce the impact of outliers, 
but reducing the impact of outliers might perhaps be less 
representative of technical relationships between the variables, 
although that relationship may change over time in reality. Each 
combination of methods and data reflects a perspective, and the 
regression results simply reflect that perspective in a simple 
quantifiable manner, expressed as the coefficients determining the line 
through the average (for OLS) or the median (for MAD) of the data. It 
is left to policy makers to determine an appropriate perspective and to 
interpret the consequences of the various alternatives.
    We sought comments on the application of the weights as described 
above, and the implications for interpreting the relationship between 
fuel efficiency (or CO2) and footprint. As discussed above, 
ACEEE questioned adjustment of the light truck data. The Alliance, in 
contrast, generally supported the weightings applied by the agencies, 
and the resultant relationships between fuel efficiency and footprint. 
Both ACEEE and the Alliance commented that the agencies should revisit 
the application of weights--and broader aspects of analysis to develop 
mathematical functions--in the future. We note that although ACEEE 
expressed concern regarding the outcomes of the application of the 
weight/footprint adjustment, ACEEE did not indicate that all adjustment 
would be problematic, rather, they endorsed the method of adjusting 
fuel economy data based on differences in vehicle models' levels of 
applied technology. As we have indicated above, considering the policy 
implications, the agencies have selected curves that fall within the 
range spanned by the many methods we have evaluated and consider to be 
technically reasonable. We disagree with ACEEE that we have selected 
curves that are, for light trucks, too steep. However, recognizing 
uncertainties in the estimates underlying our analytical results, and 
recognizing that our analytical results span a range of technically 
reasonable outcomes, we agree with ACEEE and the Alliance that 
revisiting the curve shape would be appropriate as part of the required 
future NHTSA rulemaking and planned mid-term evaluation.
f. What results did the agencies obtain and why were the selected 
curves reasonable?
    For both the NPRM and today's final rule, both agencies analyzed 
the same statistical approaches. For regressions against data including 
technology normalization, NHTSA used the CAFE modeling system, and EPA 
used EPA's OMEGA model. The agencies obtained similar regression 
results, and have based today's joint rule on those obtained by NHTSA. 
Chapter 2 of the joint TSD contains a large set of illustrative figures 
which show the range of curves determined by the possible combinations 
of regression technique, with and without sales weighting, with and 
without the application of technology, and with various adjustments to 
the gpm variable prior to running a regression.
    For the curves presented in the NPRM and finalized today, the 
choice among the alternatives presented in Chapter 2 of the draft Joint 
TSD was to use the OLS formulation, on sales-weighted data developed 
for the NPRM (with some errors not then known to the agencies), using a 
fleet that has had technology applied, and after adjusting the data for 
the effect of weight-to-footprint, as described above. The agencies 
believe that this represented a technically reasonable approach for 
purposes of developing target curves to define the proposed standards, 
and that

[[Page 62697]]

it represented a reasonable trade-off among various considerations 
balancing statistical, technical, and policy matters, which include the 
statistical representativeness of the curves considered and the 
steepness of the curve chosen. The agencies judge the application of 
technology prior to curve fitting to have provided a reasonable means--
one consistent with the rule's objective of encouraging manufacturers 
to add technology in order to increase fuel economy--of reducing 
variation in the data and thereby helping to estimate a relationship 
between fuel consumption/CO2 and footprint.
    Similarly, for the agencies' MY 2008-based market-forecast and the 
agencies' current estimates of future technology effectiveness, the 
inclusion of the weight-to-footprint data adjustment prior to running 
the regression also helped to improve the fit of the curves by reducing 
the variation in the data, and the agencies believe that the benefits 
of this adjustment for the proposed rule likely outweigh the potential 
that resultant curves might somehow encourage reduced load carrying 
capability or vehicle performance (note that we are not suggesting that 
we believe these adjustments will reduce load carrying capability or 
vehicle performance). In addition to reducing the variability, the 
truck curve is also steepened, and the car curve flattened compared to 
curves fitted to sales weighted data that do not include these 
normalizations. The agencies agreed with manufacturers of full-size 
pick-up trucks that in order to maintain towing and hauling utility, 
the engines on pick-up trucks must be more powerful, than their low 
``density'' nature would statistically suggest based on the agencies' 
current MY 2008-based market forecast and the agencies' current 
estimates of the effectiveness of different fuel-saving technologies. 
Therefore, it may be more equitable (i.e., in terms of relative 
compliance challenges faced by different light truck manufacturers) to 
have adjusted the slope of the curve defining fuel economy and 
CO2 targets.
    Several comments were submitted subsequent to the NPRM with regard 
to the non-homogenous nature of the truck fleet, and the ``unique'' 
attributes of pickup trucks. As noted above, Ford described the 
attributes of these vehicles, noting that ``towing capability generally 
requires increased aerodynamic drag caused by a modified frontal area, 
increased rolling resistance, and a heavier frame and suspension to 
support this additional capability.'' \217\ Ford further noted that 
these vehicles further require auxiliary transmission oil coolers, 
upgraded radiators, trailer hitch connectors and wiring harness 
equipment, different steering ratios, upgraded rear bumpers and 
different springs for heavier tongue load (for upgraded towing 
packages), body-on-frame (vs. unibody) construction (also known as 
ladder frame construction) to support this capability and an aggressive 
duty cycle, and lower axle ratios for better pulling power/capability. 
ACEEE, as discussed above, objected to the adjustments to the truck 
curves.
---------------------------------------------------------------------------

    \217\ Ford comments, Docket No. EPA-HQ-OAR-2010-0799-9463 at 5-
6.
---------------------------------------------------------------------------

    In the agencies' judgment, the curves and cutpoints defining the 
light truck standards appropriately account for engineering differences 
between different types of vehicles. For example, the agencies' 
estimates of the applicability, cost, and effectiveness of different 
fuel-saving technologies differentiate between small, medium, and large 
light trucks. While we acknowledge that uncertainties regarding 
technology efficacy affect the outcome of methods including 
normalization to account for differences in technology, the other 
normalizations we have considered are not intended to somehow 
compensate for this uncertainty, but rather to reflect other analytical 
concepts that could be technically reasonable for purposes of 
estimating relationships between footprint and fuel economy. 
Furthermore, we agree with Ford that pickup trucks have distinct 
attributes that warrant consideration of slopes other than the flattest 
within the range spanned by technically reasonable options. We also 
note that, as documented in the joint TSD, even without normalizing 
light truck fuel economy values for any differences (even technology), 
unweighted MAD and OLS yielded slopes close to or steeper than those 
underlying today's light truck standards. We will revisit the 
estimation and selection of these curves as part of NHTSA's future 
rulemaking and the mid-term evaluation.
    As described above, however, other approaches are also technically 
reasonable, and also represent a way of expressing the underlying 
relationships. The agencies revisited the analysis for the final rule, 
having corrected the underlying 2008-based market forecast, having 
developed a MY 2010-based market forecast, having updated estimates of 
technology effectiveness, and having considered relevant public 
comments. In addition, the agencies updated the technology cost 
estimates, which altered the NPRM analysis results, but not the balance 
of the trade-offs being weighed to determine the final curves.
    As discussed above, based in part on the Whitefoot/Skerlos paper 
and its findings regarding the implied potential for vehicle upsizing, 
some commenters, such as NACAA and Center for Biological Diversity, 
considered the slopes for both the car and truck curves to be too 
steep, and ACEEE, Sierra Club, Volkswagen, Toyota, and Honda more 
specifically commented that the truck slope was too steep. On the other 
hand, the UAW, Ford, GM, and Chrysler supported the slope of both the 
car and truck curves. ICCT commented, as they have in prior 
rulemakings, that the car and the truck curve should be identical, and 
UCS commented that the curves should be adjusted to minimize the 
``gap'' in target stringency in the 45 ft\2\ (+/- 3 ft\2\) range to 
avoid giving manufacturers an incentive to classify CUVs as trucks 
rather than as cars.\218\
---------------------------------------------------------------------------

    \218\ UCS comments, Docket No. EPA-HQ-OAR-2010-0799-9567 at 9.
---------------------------------------------------------------------------

    As also discussed above, the agencies continue to believe that the 
slopes for both the car and the truck curves finalized in this 
rulemaking remain appropriate. There is also good reason for the slopes 
of the car and truck curves potentially to be distinct from one 
another--for one, our analysis produces different results for these 
fleets based on their different characteristics, and more importantly 
for NHTSA, EPCA/EISA requires that standards for passenger cars and 
light trucks be established separately. The agencies agree with Ford 
(and others) that the properties of cars and trucks are different. The 
agencies agree with Ford's observation (and illustration) that ``* * * 
cars and trucks have different functional characteristics, even if they 
have the same footprint and nearly the same base curb weights. For 
example, the Ford Edge and the Ford Taurus have the same footprint, but 
vastly different capabilities with respect to cargo space and towing 
capacity. Some of the key features incorporated on the Edge that enable 
the larger tow capability include an engine oil cooler, larger radiator 
and updated cooling fans. This is just one of the many examples that 
show the functional difference between cars and trucks * * *'' \219\ On 
balance, given the agencies' analysis, and all of the issues the 
agencies have taken into account, we believe that the slopes of cars 
and trucks have been

[[Page 62698]]

selected with proper consideration and represent a reasonable and 
appropriate balance of technical and policy factors.
---------------------------------------------------------------------------

    \219\ Ford comment, Docket No. EPA-HQ-OAR-2010-0799-9463 at 5.
---------------------------------------------------------------------------

g. Implications of the slope compared to MY 2016
    The slope has several implications relative to the MY 2016 curves, 
with the majority of changes on the truck curve. For the NPRM, the 
agencies selected a car curve slope similar to that finalized in the 
MYs 2012-2016 final rulemaking (4.7 g/mile-ft\2\ in MY 2016, vs. 4.5 g/
mile-ft\2\ proposed in MY 2017). By contrast, the selected truck curve 
is steeper in MY 2017 than in MY 2016 (4.0 g/mile-ft\2\ in MY 2016 vs. 
4.9 g/mile-ft\2\ in MY 2017). As discussed previously, a steeper slope 
relaxes the stringency of targets for larger vehicles relative to those 
for smaller vehicles, thereby shifting relative compliance burdens 
among manufacturers based on their respective product mix.
5. Once the agencies determined the slope, how did the agencies 
determine the rest of the mathematical function?
    The agencies continue to believe that without a limit at the 
smallest footprints, the function--whether logistic or linear--can 
reach values that would be unfairly burdensome for a manufacturer that 
elects to focus on the market for small vehicles; depending on the 
underlying data, an unconstrained form could result in stringency 
levels that are technologically infeasible and/or economically 
impracticable for those manufacturers that may elect to focus on the 
smallest vehicles. On the other side of the function, without a limit 
at the largest footprints, the function may provide no floor on 
required fuel economy. Also, the safety considerations that support the 
provision of a disincentive for downsizing as a compliance strategy 
apply weakly, if at all, to the very largest vehicles. Limiting the 
function's value for the largest vehicles thus leads to a function with 
an inherent absolute minimum level of performance, while remaining 
consistent with safety considerations.
    Just as for slope, in determining the appropriate footprint and 
fuel economy values for the ``cutpoints,'' the places along the curve 
where the sloped portion becomes flat, the agencies took a fresh look 
for purposes of this rule, taking into account the updated market 
forecast and new assumptions about the availability of technologies. 
The next two sections discuss the agencies' approach to cutpoints for 
the passenger car and light truck curves separately, as the policy 
considerations for each vary somewhat.
a. Cutpoints for Passenger Car Curve
    The passenger car fleet upon which the agencies based the target 
curves proposed for MYs 2017-2025 was derived from MY 2008 data, as 
discussed above. In MY 2008, passenger car footprints ranged from 36.7 
square feet, the Lotus Exige 5, to 69.3 square feet, the Daimler 
Maybach 62. In that fleet, several manufacturers offer small, sporty 
coupes below 41 square feet, such as the BMW Z4 and Mini, Honda S2000, 
Mazda MX-5 Miata, Porsche Carrera and 911, and Volkswagen New Beetle. 
Because such vehicles represent a small portion (less than 10 percent) 
of the passenger car market, yet often have performance, utility, and/
or structural characteristics that could make it technologically 
infeasible and/or economically impracticable for manufacturers focusing 
on such vehicles to achieve the very challenging average requirements 
that could apply in the absence of a constraint, EPA and NHTSA again 
proposed to cut off the sloped portion of the passenger car function at 
41 square feet, consistent with the MYs 2012-2016 rulemaking. The 
agencies recognized that for manufacturers who make small vehicles in 
this size range, putting the cutpoint at 41 square feet creates some 
incentive to downsize (i.e., further reduce the size, and/or increase 
the production of models currently smaller than 41 square feet) to make 
it easier to meet the target. Putting the cutpoint here may also create 
the incentive for manufacturers who do not currently offer such models 
to do so in the future. However, at the same time, the agencies believe 
that there is a limit to the market for cars smaller than 41 square 
feet--most consumers likely have some minimum expectation about 
interior volume, among other things. The agencies thus believe that the 
number of consumers who will want vehicles smaller than 41 square feet 
(regardless of how they are priced) is small, and that the incentive to 
downsize to less than 41 square feet in response to this rule, if 
present, will be at best minimal. On the other hand, the agencies note 
that some manufacturers are introducing mini cars not reflected in the 
agencies MY 2008-based market forecast, such as the Fiat 500, to the 
U.S. market, and that the footprint at which the curve is limited may 
affect the incentive for manufacturers to do so.
    Above 56 square feet, the only passenger car models present in the 
MY 2008 fleet were four luxury vehicles with extremely low sales 
volumes--the Bentley Arnage and three versions of the Rolls Royce 
Phantom. The MY 2010 fleet was similar, with three BMW models, the 
Maybach 57S, the Rolls Royce Ghost, and four versions of the Rolls 
Royce Phantom in this size range. As in the MYs 2012-2016 rulemaking, 
NHTSA and EPA therefore proposed again to cut off the sloped portion of 
the passenger car function at 56 square feet.
    While meeting with manufacturers prior to issuing the proposal, the 
agencies received comments from some manufacturers that, combined with 
slope and overall stringency, using 41 square feet as the footprint at 
which to cap the target for small cars would result in unduly 
challenging targets for small cars. The agencies do not agree. No 
specific vehicle need meet its target (because standards apply to fleet 
average performance), and maintaining a sloped function toward the 
smaller end of the passenger car market is important to discourage 
unsafe downsizing, the agencies thus proposed to again ``cut off'' the 
passenger car curve at 41 square feet, notwithstanding these comments.
    The agencies sought comment on setting cutpoints for the MYs 2017-
2025 passenger car curves at 41 square feet and 56 square feet. IIHS 
expressed some concern regarding the ``breakpoint'' of the fuel economy 
curve at the lower extreme where footprint is the smallest-that is, the 
leveling-off point on the fuel economy curve where the fuel economy 
requirement ceases to increase as footprint decreases.\220\ IIHS stated 
that moving this breakpoint farther to the left so that even smaller 
vehicles have increasing fuel economy targets would reduce the chance 
that manufacturers would downsize the lightest vehicles for further 
fuel economy credits.\221\
---------------------------------------------------------------------------

    \220\ IIHS comments, Docket No. NHTSA-2010-0131-0222, at 1.
    \221\ Id.
---------------------------------------------------------------------------

    The agencies agree with IIHS that moving the 41 square foot 
cutpoint to an even smaller value would additionally discourage 
downsizing of the smallest vehicles--that is, the vehicles for which 
downsizing would be most likely to compromise occupant protection. 
However, in the agencies' judgment, notwithstanding narrow market 
niches for some types vehicles (exemplified by, e.g., the Smart 
Fortwo), consumer preferences are likely to remain such that 
manufacturers will be unlikely to deliberately respond to today's 
standards by downsizing the smallest vehicles. However, the agencies 
will monitor developments in the passenger car market and revisit this 
issue as part of NHTSA's future rulemaking to establish final MYs 2022-
2025

[[Page 62699]]

standards and the concurrent mid-term evaluation process.
b. Cutpoints for Light Truck Curve
    The light truck fleet upon which the agencies based the proposed 
target curves for MYs 2017-2025, like the passenger car fleet, was 
derived from MY 2008 data, as discussed in Section 2.4 above. In MY 
2008, light truck footprints ranged from 41.0 square feet, the Jeep 
Wrangler, to 77.5 square feet, the Toyota Tundra. For consistency with 
the curve for passenger cars, the agencies proposed to cut off the 
sloped portion of the light truck function at the same footprint, 41 
square feet, although we recognized that no light trucks are currently 
offered below 41 square feet. With regard to the upper cutpoint, the 
agencies heard from a number of manufacturers during the discussions 
leading up to the proposal of the MY 2017-2025 standards that the 
location of the cutpoint in the MYs 2012-2016 rules, 66 square feet, 
resulted in challenging targets for the largest light trucks in the 
later years of that rulemaking. See 76 FR 74864-65. Those manufacturers 
requested that the agencies extend the cutpoint to a larger footprint, 
to reduce targets for the largest light trucks which represent a 
significant percentage of those manufacturers light truck sales. At the 
same time, in re-examining the light truck fleet data, the agencies 
concluded that aggregating pickup truck models in the MYs 2012-2016 
rule had led the agencies to underestimate the impact of the different 
pickup truck model configurations above 66 square feet on 
manufacturers' fleet average fuel economy and CO2 levels (as 
discussed immediately below). In disaggregating the pickup truck model 
data, the impact of setting the cutpoint at 66 square feet after model 
year 2016 became clearer to the agencies.
    In the agencies' view, there was legitimate basis for these 
comments. The agencies' MY 2008-based market forecast supporting the 
NPRM included about 24 vehicle configurations above 74 square feet with 
a total volume of about 50,000 vehicles or less during any MY in the 
2017-2025 time frame. While a relatively small portion of the overall 
truck fleet, for some manufacturers, these vehicles are a non-trivial 
portion of sales. As noted above, the very largest light trucks have 
significant load-carrying and towing capabilities that make it 
particularly challenging for manufacturers to add fuel economy-
improving/CO2-reducing technologies in a way that maintains 
the full functionality of those capabilities.
    Considering manufacturer CBI and our estimates of the impact of the 
66 square foot cutpoint for future model years, the agencies determined 
to adopt curves that transition to a different cut point. While noting 
that no specific vehicle need meet its target (because standards apply 
to fleet average performance), we believe that the information provided 
to us by manufacturers and our own analysis supported the gradual 
extension of the cutpoint for large light trucks in the proposal from 
66 square feet in MY 2016 out to a larger footprint square feet before 
MY 2025.
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[GRAPHIC] [TIFF OMITTED] TR15OC12.008


[[Page 62700]]


    The agencies proposed to phase in the higher cutpoint for the truck 
curve in order to avoid any backsliding from the MY 2016 standard. A 
target that is feasible in one model year should never become less 
reasonable in a subsequent model year--manufacturers should have no 
reason to remove fuel economy-improving/CO2-reducing 
technology from a vehicle once it has been applied. Put another way, 
the agencies proposed to not allow ``curve crossing'' from one model 
year to the next. In proposing MYs 2011-2015 CAFE standards and 
promulgating MY 2011 standards, NHTSA proposed and requested comment on 
avoiding curve crossing, as an ``anti-backsliding measure.'' \222\ The 
MY 2016 2-cycle test curves are therefore a floor for the MYs 2017-2025 
curves. For passenger cars, which have minimal change in slope from the 
MY 2012-2016 rulemakings and no change in cut points, there were no 
curve crossing issues in the proposed (or final) standards.
---------------------------------------------------------------------------

    \222\ 74 FR 14370 (Mar. 30, 2009).
---------------------------------------------------------------------------

    The agencies received some comments on the selection of these 
cutpoints. ACEEE commented that the extension of the light truck 
cutpoint upward from 66 square feet to 74 square feet. would reduce 
stringency for large trucks even though there is no safety-related 
reason to discourage downsizing of these trucks.\223\ Sierra Club \224\ 
and Volkswagen commented that moving this cutpoint could encourage 
trucks to get larger and may be detrimental to societal fatalities, and 
the Sierra Club suggested that the agencies could mitigate this risk by 
providing an alternate emissions target for light trucks of 60 square 
feet or more that exceed the sales projected in the rule in the year 
that sales exceed the projection.\225\ ACEEE similarly suggested that 
the agencies include a provision to fix the upper bound for the light 
truck targets at the 66 square foot target once sales of trucks larger 
than that in a given year reach the level of MY 2008 sales, to 
discourage upsizing.\226\ Global Automakers commented that the cutpoint 
for the smallest light trucks should be set at approximately ten 
percent of sales (as for passenger cars) rather than at 41 square 
feet.\227\ Conversely, IIHS commented that, for both passenger cars and 
light trucks, the 41 square foot cutpoint should be moved further to 
the left (i.e., to even smaller footprints), to reduce the incentive 
for manufacturers to downsize the lightest vehicles.\228\
---------------------------------------------------------------------------

    \223\ ACEEE, Docket No. EPA-HQ-OAR-2010-0799-9528 at 4-5.
    \224\ Sierra Club et al., Docket No. EPA-HQ-OAR-2010-0799-9549 
at 6.
    \225\ Sierra Club et al., Docket No. EPA-HQ-OAR-2010-0799-9549 
at 6.
    \226\ ACEEE, Docket No. EPA-HQ-OAR-2010-0799-9528 at 7.
    \227\ Global Automakers, Docket No. NHTSA-2010-0131-0237, at 4.
    \228\ IIHS, Docket No. NHTSA-2010-0131-0222, at 1.
---------------------------------------------------------------------------

    The agencies have considered these comments regarding the cutpoint 
applied to the high footprint end of the target function for light 
trucks, and we judge there to be minimal risk that manufacturers would 
respond to this upward extension of the cutpoint by deliberately 
increasing the size of light trucks that are already at the upper end 
of marketable vehicle sizes. Such vehicles have distinct size, 
maneuverability, fuel consumption, storage, and other characteristics 
as opposed to the currently more popular vehicles between 43 and 48 
square feet, and are likely not suited for all consumers in all usage 
scenarios. Further, larger vehicles typically also have additional 
production costs that make it unlikely that these vehicles will become 
the predominant vehicles in the fleet. Therefore, we remain concerned 
that not to extend this cutpoint to 74 square feet would fail to take 
into adequate consideration the challenges to improving fuel economy 
and CO2 emissions to the levels required by this final rule 
for vehicles with footprints larger than 66 square feet, given their 
increased utility. As noted above, because CAFE and GHG standards are 
based on average performance, manufacturers need not ensure that every 
vehicle model meets its CAFE and GHG targets. Still, the agencies are 
concerned that standards with stringent targets for large trucks would 
unduly burden full-line manufacturers active in the market for full-
size pickups and other large light trucks, as discussed earlier, and 
evidenced by the agencies' estimates of differences between compliance 
burdens faced by OEMs active and not active in the market for full-size 
pickups. While some manufacturers have recently indicated \229\ that 
buyers are currently willing to pay a premium for fuel economy 
improvements, the agencies are concerned that disparities in long-term 
regulatory requirements could lead to future market distortions 
undermining the economic practicability of the standards. Absent an 
upward extension of the cutpoint, such disparities would be even 
greater. For these reasons, the agencies do not expect that gradually 
extending the cutpoint to 74 square feet will create incentives to 
upsize large trucks and, thus, believe there will be no adverse effects 
on societal safety. Therefore, we are promulgating standards that, as 
proposed, gradually extend the cutpoint to 74 square feet We have also 
considered the above comments by Global Automakers and IIHS on the 
cutpoints for the smallest passenger cars and light trucks. In our 
judgment, placing these cutpoints at 41 square feet continues to strike 
an appropriate balance between (a) not discouraging manufacturers from 
introducing new small vehicle models in the U.S. and (b) not 
encouraging manufacturers to downsize small vehicles.
---------------------------------------------------------------------------

    \229\ For example, in its June 11, 2012 edition, Automotive News 
quoted a Ford sales official saying that ``fuel efficiency continues 
to be a top purchaser driver.'' (``More MPG--ASAP'', Automotive 
News, Jun 11, 2012.)
---------------------------------------------------------------------------

    We have considered the Sierra Club and ACEEE suggestion that the 
agencies provide an alternate emissions target for light trucks larger 
than 60 square feet (Sierra Club) or 66 square feet (ACEEE) that exceed 
the sales projected in the rule in the year that sales exceed the 
projection. Doing so would effectively introduce sales volume as a 
second ``attribute''; in our judgment, this would introduce additional 
uncertainty regarding outcomes under the standards, and would not 
clearly be within the scope of notice provided by the NPRM.
6. Once the Agencies Determined the Complete Mathematical Function 
Shape, How Did the Agencies Adjust the Curves To Develop the Proposed 
Standards and Regulatory Alternatives?
    The curves discussed above all reflect the addition of technology 
to individual vehicle models to reduce technology differences between 
vehicle models before fitting curves. This application of technology 
was conducted not to directly determine the proposed standards, but 
rather for purposes of technology adjustments, and set aside 
considerations regarding potential rates of application (i.e., phase-in 
caps), and considerations regarding economic implications of applying 
specific technologies to specific vehicle models. The following 
sections describe further adjustments to the curves discussed above, 
that affected both the shape of the curve, and the location of the 
curve, that helped the agencies determine curves that defined the 
proposed standards.
    The minimum stringency determination was done using the two cycle 
curves. Stringency adjustments for air conditioning and other credits 
were calculated after curves that did not cross were determined in two 
cycle space. The year over year increase in these

[[Page 62701]]

adjustments cause neither the GHG nor CAFE curves (with A/C) to contact 
the 2016 curves when charted.
a. Adjusting for Year Over Year Stringency
    As in the MYs 2012-2016 rules, the agencies developed curves 
defining regulatory alternatives for consideration by ``shifting'' 
these curves. For the MYs 2012-2016 rules, the agencies did so on an 
absolute basis, offsetting the fitted curve by the same value (in gpm 
or g/mi) at all footprints. In developing the proposal for MYs 2017-
2025, the agencies reconsidered the use of this approach, and concluded 
that after MY 2016, curves should be offset on a relative basis--that 
is, by adjusting the entire gpm-based curve (and, equivalently, the 
CO2 curve) by the same percentage rather than the same 
absolute value. The agencies' estimates of the effectiveness of these 
technologies are all expressed in relative terms--that is, each 
technology (with the exception of A/C) is estimated to reduce fuel 
consumption (the inverse of fuel economy) and CO2 emissions 
by a specific percentage of fuel consumption without the technology. It 
is, therefore, more consistent with the agencies' estimates of 
technology effectiveness to develop standards and regulatory 
alternatives by applying a proportional offset to curves expressing 
fuel consumption or emissions as a function of footprint. In addition, 
extended indefinitely (and without other compensating adjustments), an 
absolute offset would eventually (i.e., at very high average 
stringencies) produce negative (gpm or g/mi) targets. Relative offsets 
avoid this potential outcome. Relative offsets do cause curves to 
become, on a fuel consumption and CO2 basis, flatter at 
greater average stringencies; however, as discussed above, this outcome 
remains consistent with the agencies' estimates of technology 
effectiveness. In other words, given a relative decrease in average 
required fuel consumption or CO2 emissions, a curve that is 
flatter by the same relative amount should be equally challenging in 
terms of the potential to achieve compliance through the addition of 
fuel-saving technology.
    On this basis, and considering that the ``flattening'' occurs 
gradually for the regulatory alternatives the agencies have evaluated, 
the agencies tentatively concluded that this approach to offsetting the 
curves to develop year-by-year regulatory alternatives neither re-
creates a situation in which manufacturers are likely to respond to 
standards in ways that compromise highway safety, nor undoes the 
attribute-based standard's more equitable balancing of compliance 
burdens among disparate manufacturers. The agencies invited comment on 
these conclusions, and on any other means that might avoid the 
potential outcomes--in particular, negative fuel consumption and 
CO2 targets--discussed above. As indicated earlier, ACEEE 
\230\ and the Alliance \231\ both expressed support for the application 
of relative adjustments in order to develop year-over-year increases in 
the stringency of fuel consumption and CO2 targets, although 
the Alliance also commented that this approach should be revisited as 
part of the mid-term evaluation. EPCA/EISA requires NHTSA to establish 
the maximum feasible passenger car and light truck standards separately 
in each specific model year--a requirement that is not necessarily 
compatible with any predetermined approach to year-over-year changes in 
stringency. As part of the future NHTSA rulemaking to finalize 
standards for MYs 2022-2025 and the concurrent mid-term evaluation, the 
agencies plan to reexamine potential approaches to developing 
regulatory options for successive model years.
---------------------------------------------------------------------------

    \230\ ACEEE, Docket No. EPA-HQ-OAR-2010-0799-9528 at 6.
    \231\ Alliance, Docket No. NHTSA-2010-0131-0262, at 86.
---------------------------------------------------------------------------

b. Adjusting for Anticipated Improvements to Mobile Air Conditioning 
Systems
    The fuel economy values in the agencies' market forecasts are based 
on the 2-cycle (i.e., city and highway) fuel economy test and 
calculation procedures that do not reflect potential improvements in 
air conditioning system efficiency, refrigerant leakage, or refrigerant 
Global Warming Potential (GWP). Recognizing that there are significant 
and cost effective potential air conditioning system improvements 
available in the rulemaking timeframe (discussed in detail in Chapter 5 
of the draft joint TSD), the agencies are increasing the stringency of 
the target curves based on the agencies' assessment of the capability 
of manufacturers to implement these changes. For the proposed CAFE 
standards and alternatives, an offset was included based on air 
conditioning system efficiency improvements, as these improvements are 
the only improvements that effect vehicle fuel economy. For the 
proposed GHG standards and alternatives, a stringency increase was 
included based on air conditioning system efficiency, leakage and 
refrigerant improvements. As discussed above in Chapter 5 of the joint 
TSD, the air conditioning system improvements affect a vehicle's fuel 
efficiency or CO2 emissions performance as an additive 
stringency increase, as compared to other fuel efficiency improving 
technologies which are multiplicative. Therefore, in adjusting target 
curves for improvements in the air conditioning system performance, the 
agencies adjusted the target curves by additive stringency increases 
(or vertical shifts) in the curves.
    For the GHG target curves, the offset for air conditioning system 
performance is being handled in the same manner as for the MYs 2012-
2016 rules. For the CAFE target curves, NHTSA for the first time is 
accounting for potential improvements in air conditioning system 
performance. Using this methodology, the agencies first use a 
multiplicative stringency adjustment for the sloped portion of the 
curves to reflect the effectiveness on technologies other that air 
conditioning system technologies, creating a series of curve shapes 
that are ``fanned'' based on two-cycle performance. Then the curves 
were offset vertically by the air conditioning improvement by an equal 
amount at every point.
    While the agencies received many comments regarding the provisions 
for determining adjustments to reflect improvements to air 
conditioners, the agencies received no comments regarding how curves 
developed considering 2-cycle fuel economy and CO2 values 
should be adjusted to reflect the inclusion of A/C adjustments in fuel 
economy and CO2 values used to determine compliance with 
corresponding standards. For today's final rule, the agencies have 
maintained the same approach as applied for the NPRM.

D. Joint Vehicle Technology Assumptions

    For the past five years, the agencies have been working together 
closely to follow the development of fuel consumption- and GHG-reducing 
technologies, which continue to evolve rapidly. We based the proposed 
rule on the results of two major joint technology analyses that EPA and 
NHTSA had recently completed--the Technical Support Document to support 
the MYs 2012-2016 final rule and the 2010 Technical Analysis Report 
(which supported the 2010 Notice of Intent and was also done in 
conjunction with CARB). For this final rule, we relied on our joint 
analyses for the proposed rule, as well as new information and 
analyses, including information we

[[Page 62702]]

received during the public comment period.
    In the proposal, we presented our assessments of the costs and 
effectiveness of all the technologies that we believe manufacturers are 
likely to use to meet the requirements of this rule, including the 
latest information on several quickly-changing technologies. The 
proposal included new estimates for hybrid costs based on a peer-
reviewed ANL battery cost model. We also presented in the proposal new 
cost data and analyses relating to several technologies based on a 
study by FEV: an 8-speed automatic transmission replacing a 6-speed 
automatic transmission; an 8-speed dual clutch transmission replacing a 
6-speed dual clutch transmission; a power-split hybrid powertrain with 
an I4 engine replacing a conventional engine powertrain with V6 engine; 
a mild hybrid with stop-start technology and an I4 engine replacing a 
conventional I4 engine; and the Fiat Multi-Air engine technology. Also 
in the proposal, we presented an updated assessment of our estimated 
costs associated with mass reduction.
    As would be expected given that some of our cost estimates were 
developed several years ago, we have also updated all of our base 
direct manufacturing costs to put them in terms of more recent dollars 
(2010 dollars are used in this final rule while 2009 dollars were used 
in the proposal). As proposed, we have also updated our methodology for 
calculating indirect costs associated with new technologies since 
completing both the MYs 2012-2016 final rule and the TAR. We continue 
to use the indirect cost multiplier (ICM) approach used in those 
analyses, but have made important changes to the calculation 
methodology--changes done in response to ongoing staff evaluation and 
public input.
    Since the MYs 2012-2016 rule and TAR, the agencies have updated 
many of the technologies' effectiveness estimates largely based on new 
vehicle simulation work conducted by Ricardo Engineering. This 
simulation work provides the effectiveness estimates for a number of 
the technologies most heavily relied on in the agencies' analysis of 
potential standards for MYs 2017-2025. Additionally for the final rule, 
NHTSA conducted a vehicle simulation project with Argonne National 
Laboratory (ANL), as described in NHTSA's FRIA, that performed 
additional analyses on mild hybrid technologies and advanced 
transmissions to help NHTSA develop effectiveness values better 
tailored for the CAFE model's incremental structure. The effectiveness 
values for the mild hybrid vehicles were applied by both agencies for 
the final rule.\232\ Additionally, NHTSA updated the effectiveness 
values of advanced transmissions coupled with naturally-aspirated 
engines for the final rule.\233\
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    \232\ EPA's lumped parameter model gave similar results as ANL's 
model for three of five vehicle classes, which served as a valuable 
validation to the tool. However EPA used the same ANL effectiveness 
values for mild hybrids to be harmonized with NHTSA's inputs.
    \233\ The Ricardo simulations did not include this technology 
combination, and EPA did not include this combination in their 
packages.
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    The agencies also reviewed the findings and recommendations in the 
updated NAS report ``Assessment of Fuel Economy Technologies for Light-
Duty Vehicles'' that was completed and issued after the MYs 2012-2016 
final rule.\234\ NHTSA's sensitivity analysis examining the impact of 
using some of the NAS cost and effectiveness estimates on the proposed 
standards is presented in NHTSA's final RIA.
---------------------------------------------------------------------------

    \234\ ``Assessment of Fuel Economy Technologies for Light-Duty 
Vehicles'', National Research Council of the National Academies, 
June 2010.
---------------------------------------------------------------------------

    The agencies received comments to the proposal on some of these 
assessments as discussed further below. Also, since the time of the 
proposal, in some cases we have been able to improve on our earlier 
assessments. We note these comments and the improvements made in the 
assessments in the discussion of each technology, below. However, the 
agencies did not receive comments for most of the technical and cost 
assessments presented in the proposal, and the agencies have concluded 
the assessments in the proposal remain valid for this final rule.
    Key changes in the final rule relative to the proposal are the use 
of 2010 dollars rather than 2009 dollars, updates to all battery pack 
and non-battery costs for hybrids, plug-in hybrids and full electric 
vehicles (because an updated version of the Argonne National Labs 
BatPaC model was available which more appropriately included a battery 
discharge safety system in the costs), and the inclusion of a mild 
hybrid technology that was not included in the proposal. NHTSA updated 
the effectiveness values of advanced transmissions coupled with 
naturally-aspirated engines based on ANL's simulation work. We describe 
these changes below and in Chapter 3 of the Joint TSD. We next provide 
a brief summary of the technologies that we considered for this final 
rule; Chapter 3 of the Joint TSD presents our assessments of these 
technologies in much greater detail.
1. What technologies did the agencies consider?
    The agencies conclude that manufacturers can add a variety of 
technologies to each of their vehicle models and/or platforms in order 
to improve the vehicles' fuel economy and GHG performance. In order to 
analyze a variety of regulatory alternative scenarios, it was essential 
to have a thorough understanding of the technologies available to the 
manufacturers. As was the case for the proposal, the analyses we 
performed for this final rule included an assessment of the cost, 
effectiveness, availability, development time, and manufacturability of 
various technologies within the normal redesign and refresh periods of 
a vehicle line (or in the design of a new vehicle). As we describe in 
the Joint TSD, the point in time when we project that a technology can 
be applied affects our estimates of the costs as well as the technology 
penetration rates (``phase-in caps'').
    The agencies considered dozens of vehicle technologies that 
manufacturers could use to improve the fuel economy and reduce 
CO2 emissions of their vehicles during the MYs 2017-2025 
timeframe. Many of the technologies we considered are available today, 
are in production of some vehicles, and could be incorporated into 
vehicles more widely as manufacturers make their product development 
decisions. These are ``near-term'' technologies and are identical or 
very similar to those anticipated in the agencies' analyses of 
compliance strategies for the MYs 2012-2016 final rule. For this 
rulemaking, given its time frame, we also considered other technologies 
that are not currently in production, but that are beyond the initial 
research phase, and are under development and expected to be in 
production in the next 5-10 years. Examples of these technologies are 
downsized and turbocharged engines operating at combustion pressures 
even higher than today's turbocharged engines, and an emerging hybrid 
architecture combined with an 8-speed dual clutch transmission, a 
combination that is not available today. These are technologies that 
the agencies believe that manufacturers can, for the most part, apply 
both to cars and trucks, and that we expect will achieve significant 
improvements in fuel economy and reductions in CO2 emissions 
at reasonable costs in the MYs 2017 to 2025 timeframe. The agencies did 
not consider technologies that are currently in an initial stage of 
research because of the uncertainty involved in the availability and 
feasibility of

[[Page 62703]]

implementing these technologies with significant penetration rates for 
this analysis. The agencies recognize that due to the relatively long 
time frame between the date of this final rule and 2025, it is very 
possible that new and innovative technologies will make their way into 
the fleet, perhaps even in significant numbers, that we have not 
considered in this analysis. We expect to reconsider such technologies 
as part of the mid-term evaluation, as appropriate, and manufacturers 
may be able to use them to generate credits under a number of the 
flexibility and incentive programs provided in this final rule.
    The technologies that we considered can be grouped into four broad 
categories: engine technologies; transmission technologies; vehicle 
technologies (such as mass reduction, tires and aerodynamic 
treatments); and electrification technologies (including hybridization 
and changing to full electric drive).\235\ We discuss the specific 
technologies within each broad group below. The list of technologies 
presented below and in the proposal is nearly identical to that 
presented in both the MYs 2012-2016 final rule and the 2010 TAR, with 
the following new technologies added to the list since the last final 
rule: the P2 hybrid, a newly emerging hybridization technology that was 
also considered in the 2010 TAR; mild hybrid technologies that were not 
included in the proposal; continued improvements in gasoline engines, 
with greater efficiencies and downsizing; continued significant 
efficiency improvements in transmissions; and ongoing levels of 
improvement to some of the seemingly more basic technologies such as 
lower rolling resistance tires and aerodynamic treatments, which are 
among the most cost effective technologies available for reducing fuel 
consumption and GHGs. Not included in the list below are technologies 
specific to air conditioning system improvements and off-cycle 
controls, which are presented in Section II.F of this preamble and in 
Chapter 5 of the Joint TSD.
---------------------------------------------------------------------------

    \235\ NHTSA's analysis considers these technologies in five 
groups rather than four--hybridization is one category, and 
``electrification/accessories'' is another.
---------------------------------------------------------------------------

    Few comments were received specific to these technologies. The 
Alliance emphasized the agencies should examine the progress in the 
development of powertrain improvements as part of the mid-term 
evaluation and determine if researchers are making the kind of 
breakthroughs anticipated by the agencies for technologies like high-
efficiency transmissions. VW cautioned the agencies about the 
uncertainties with high BMEP engines, including the possible costs due 
to increased durability requirements and questioned the potential 
benefit for this type of engine of engine technology. VW commented that 
additional development is necessary to overcome the significant 
obstacles of these types of engines. ICCT emphasized that many of the 
powertrain effectiveness values, derived by Ricardo, were too 
conservative as technology in this area is expected to improve at a 
faster pace during the rulemaking period. As described in the joint 
TSD, the agencies relied on a number of technical sources for this 
engine technology. Additionally as described in the Ricardo report, 
Ricardo was tasked with extrapolating technologies to their expected 
performance and efficiency levels in the 2020-2025 timeframe to account 
for future improvements. The agencies continue to believe that the 
modeling and simulation conducted by Ricardo is robust, as they have 
built prototypes of these engines and used their knowledge to help 
inform the modeling. The agencies will, of course, continue to watch 
the development of this key technology in the future. For transparency 
purposes and full disclosure, it is important to note the ICCT 
partially funded the Ricardo study.
a. Types of Engine Technologies Considered
    Low-friction lubricants including low viscosity and advanced low 
friction lubricant oils are now available with improved performance. If 
manufacturers choose to make use of these lubricants, they may need to 
make engine changes and conduct durability testing to accommodate the 
lubricants. The costs in our analysis consider these engine changes and 
testing requirements. This level of low friction lubricants is expected 
to exceed 85 percent penetration by MY 2017 and reach nearly 100 
percent in MY 2025.\236\
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    \236\ The penetration rates shown in this section are general 
results applicable to either the NHTSA or EPA analysis, to either 
the 2008 based or the 2010 based fleet projection.
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    Reduction of engine friction losses (first level) can be achieved 
through low-tension piston rings, roller cam followers, improved 
material coatings, more optimal thermal management, piston surface 
treatments, and other improvements in the design of engine components 
and subsystems that improve the efficiency of engine operation. This 
level of engine friction reduction is expected to exceed 70 percent 
penetration by MY 2017
    Advanced low friction lubricants and reduction of engine friction 
losses (second level) are new for our analysis for the proposal and 
this final rule. As technologies advance in the coming years, we expect 
that there will be further development in both low friction lubricants 
and engine friction reductions. The agencies grouped the development in 
these two related areas into a single technology and applied them for 
MY 2017 and beyond.
    Cylinder deactivation disables the intake and exhaust valves and 
prevents fuel injection into some cylinders during light-load 
operation. The engine runs temporarily as though it were a smaller 
engine which substantially reduces pumping losses.
    Variable valve timing alters the timing of the intake valves, 
exhaust valves, or both, primarily to reduce pumping losses, increase 
specific power, and control residual gases.
    Discrete variable valve lift increases efficiency by optimizing air 
flow over a broader range of engine operation, which reduces pumping 
losses. This is accomplished by controlled switching between two or 
more cam profile lobe heights.
    Continuous variable valve lift is an electromechanical or electro-
hydraulic system in which valve timing is changed as lift height is 
controlled. This yields a wide range of opportunities for optimizing 
volumetric efficiency and performance, including enabling the engine to 
be valve-throttled.
    Stoichiometric gasoline direct-injection technology injects fuel at 
high pressure directly into the combustion chamber to improve cooling 
of the air/fuel charge as well as combustion quality within the 
cylinder, which allows for higher compression ratios and increased 
thermodynamic efficiency.
    Turbocharging and downsizing increases the available airflow and 
specific power level, allowing a reduced engine size while maintaining 
performance. Engines of this type use gasoline direct injection (GDI) 
and dual cam phasing. This reduces pumping losses at lighter loads in 
comparison to a larger engine. We continue to include an 18 bar brake 
mean effective pressure (BMEP) technology (as in the MYs 2012-2016 
final rule) and are also including both 24 bar BMEP and 27 bar BMEP 
technologies. The 24 bar BMEP technology would use a single-stage, 
variable geometry turbocharger which would provide a higher intake 
boost pressure available across a broader

[[Page 62704]]

range of engine operation than conventional 18 bar BMEP engines. The 27 
bar BMEP technology would require higher boost levels and thus would 
use a two-stage turbocharger, necessitating use of cooled exhaust gas 
recirculation (EGR) as described below. The 18 bar BMEP technology is 
applied with 33 percent engine downsizing, 24 bar BMEP is applied with 
50 percent engine downsizing, and 27 bar BMEP is applied with 56 
percent engine downsizing.
    Cooled exhaust-gas recirculation (EGR) reduces the incidence of 
knocking combustion with additional charge dilution and obviates the 
need for fuel enrichment at high engine power. This allows for higher 
boost pressure and/or compression ratio and further reduction in engine 
displacement and both pumping and friction losses while maintaining 
performance. Engines of this type use GDI and both dual cam phasing and 
discrete variable valve lift. The EGR systems considered in this 
assessment would use a dual-loop system with both high and low pressure 
EGR loops and dual EGR coolers. For the proposal and this final rule, 
cooled EGR is considered to be a technology that can be added to a 24 
bar BMEP engine and is an enabling technology for 27 bar BMEP engines.
    Diesel engines have several characteristics that give superior fuel 
efficiency, including reduced pumping losses due to lack of (or greatly 
reduced) throttling, high pressure direct injection of fuel, a 
combustion cycle that operates at a higher compression ratio, and a 
very lean air/fuel mixture relative to an equivalent-performance 
gasoline engine. This technology requires additional enablers, such as 
a NOX adsorption catalyst system or a urea/ammonia selective 
catalytic reduction system for control of NOX emissions 
during lean (excess air) operation.
b. Types of Transmission Technologies Considered
    Improved automatic transmission controls optimize the shift 
schedule to maximize fuel efficiency under wide ranging conditions and 
minimizes losses associated with torque converter slip through lock-up 
or modulation. This technology is included because it exists in the 
baseline fleets, but its penetration is expected to decrease over time 
as it is replaced by other more efficient technologies.
    Shift optimization is a strategy whereby the engine and/or 
transmission controller(s) emulates a CVT by continuously evaluating 
all possible gear options that would provide the necessary tractive 
power and selecting the best gear ratio that lets the engine run in the 
most efficient operating zone.
    Six-, seven-, and eight-speed automatic transmissions are optimized 
by changing the gear ratio span to enable the engine to operate in a 
more efficient operating range over a broader range of vehicle 
operating conditions. While a six speed transmission application was 
most prevalent for the MYs 2012-2016 final rule, eight speed 
transmissions are expected to be readily available and applied in the 
MYs 2017 through 2025 timeframe.
    Dual clutch or automated shift manual transmissions are similar to 
manual transmissions, but the vehicle controls shifting and launch 
functions. A dual-clutch automated shift manual transmission (DCT) uses 
separate clutches for even-numbered and odd-numbered gears, so the next 
expected gear is pre-selected, which allows for faster and smoother 
shifting. The MYs 2012-2016 final rule limited DCT applications to a 
maximum of 6 speeds. For the proposal and this final rule, we have 
considered both 6-speed and 8-speed DCT transmissions.
    Continuously variable transmission commonly uses V-shaped pulleys 
connected by a metal belt rather than gears to provide ratios for 
operation. Unlike manual and automatic transmissions with fixed 
transmission ratios, continuously variable transmissions can provide 
fully variable and an infinite number of transmission ratios that 
enable the engine to operate in a more efficient operating range over a 
broader range of vehicle operating conditions. The CVT is maintained 
for existing baseline vehicles and not considered for future vehicles 
in this rule due to the availability of more cost effective 
transmission technologies.
    Manual 6-speed transmission offers an additional gear ratio, often 
with a higher overdrive gear ratio, than a 5-speed manual transmission.
    High Efficiency Gearbox (automatic, DCT or manual) represents 
continuous improvement in seals, bearings and clutches; super finishing 
of gearbox parts; and development in the area of lubrication--all aimed 
at reducing frictional and other parasitic load in the system for an 
automatic or DCT type transmission.
c. Types of Vehicle Technologies Considered
    Lower-rolling-resistance tires have characteristics that reduce 
frictional losses associated with the energy dissipated mainly in the 
deformation of the tires under load, thereby improving fuel economy and 
reducing CO2 emissions. For the proposal and final rule, we 
considered two levels of lower rolling resistance tires that reduce 
frictional losses even further. The first level of low rolling 
resistance tires would have 10 percent rolling resistance reduction 
while the 2nd level would have 20 percent rolling resistance reduction 
compared to 2008 baseline vehicle. This second level of development 
marks an advance over low rolling resistance tires considered during 
the MYs 2014-2018 medium- and heavy- duty vehicle greenhouse gas 
emissions and fuel efficiency rulemaking, see 76 FR 57207, 57229.) The 
first level of lower rolling resistance tires is expected to exceed 90 
percent penetration by the 2017.
    Low-drag brakes reduce the sliding friction of disc brake pads on 
rotors when the brakes are not engaged, because the brake pads are 
pulled away from the rotors.
    Front or secondary axle disconnect for four-wheel drive systems 
provides a torque distribution disconnect between front and rear axles 
when torque is not required for the non-driving axle. This results in 
the reduction of associated parasitic energy losses.
    Aerodynamic drag reduction can be achieved via two approaches, 
either reducing the drag coefficients or reducing vehicle frontal area. 
To reduce the drag coefficient, skirts, air dams, underbody covers, and 
more aerodynamic side view mirrors can be applied. In addition to the 
standard aerodynamic treatments, the agencies have included a second 
level of aerodynamic technologies, which could include active grill 
shutters, rear visors, and larger under body panels. We estimate that 
the first level of aerodynamic drag improvement will reduce aerodynamic 
drag by 10 percent relative to the baseline 2008 vehicle while the 
second level would reduce aerodynamic drag by 20 percent relative to 
2008 baseline vehicles. The second level of aerodynamic technologies 
was not considered in the MYs 2012-2016 final rule.
    Mass Reduction can be achieved through either substitution of lower 
density and/or higher strength materials, or changing the design to use 
less material. With design optimization, part consolidation, and 
improved manufacturing processes, these strategies can be applied while 
maintaining the performance attributes of the component, system, or 
vehicle. The agencies applied mass reduction of up to 20 percent 
relative to MY 2008 levels in this final rule compared to only 10 
percent in the MYs 2012-2016 final rule. The agencies also determined 
effectiveness values for hybrid, plug-in

[[Page 62705]]

and electric vehicles based on net mass reduction, or the difference 
between the applied mass reduction (capped at 20 percent) and the added 
mass of electrification components. In assessing compliance strategies 
and in structuring the standards, the agencies only considered levels 
of vehicle mass reduction that, in our estimation, would not adversely 
affect overall fleet safety. An extensive discussion of mass reduction 
technologies and their associated costs is provided in Chapter 3 of the 
Joint TSD, and the discussion on safety is in Section II.G of the 
Preamble.
d. Types of Electrification/Accessory and Hybrid Technologies 
Considered
    Electric power steering (EPS)/Electro-hydraulic power steering 
(EHPS) is an electrically-assisted steering system that has advantages 
over traditional hydraulic power steering because it replaces the 
engine-driven and continuously operated hydraulic pump, thereby 
reducing parasitic losses from the accessory drive. Manufacturers have 
informed the agencies that full EPS systems are being developed for all 
light-duty vehicles, including large trucks. However, lacking data 
about when these transitions will occur, the agencies have applied the 
EHPS technology to large trucks and the EPS technology to all other 
light-duty vehicles.
    Improved accessories (IACC) may include high efficiency alternators 
and electrically driven (i.e., on-demand) water pumps and cooling fans. 
This excludes other electrical accessories such as electric oil pumps 
and electrically driven air conditioner compressors. New for this rule 
is a second level of IACC (IACC2), which consists of the IACC 
technologies with the addition of a mild regeneration strategy and a 
higher efficiency alternator. The first level of IACC improvements is 
expected to be at more than 50 percent penetration by the 2017MY.
    12-volt Stop-Start, sometimes referred to as idle-stop or 12-volt 
micro hybrid, is the most basic hybrid system that facilitates idle-
stop capability. These systems typically incorporate an enhanced 
performance battery and other features such as electric transmission 
and cooling pumps to maintain vehicle systems during idle-stop.
    Higher Voltage Stop-Start/Belt Integrated Starter Generator (BISG) 
sometimes referred to as a mild hybrid, provides idle-stop capability 
and uses a higher voltage battery with increased energy capacity over 
typical automotive batteries. The higher system voltage allows the use 
of a smaller, more powerful electric motor. This system replaces a 
standard alternator with an enhanced power, higher voltage, higher 
efficiency starter-alternator that is belt driven and that can recover 
braking energy while the vehicle slows down (regenerative braking). 
This technology was mentioned but not included in the proposal because 
the agencies had incomplete information at that time. Since the 
proposal, the agencies have obtained better data on the costs and 
effectiveness of this technology (see Chapter 3.4.3 of the joint TSD). 
Therefore, the agencies have revised their technical analysis on both 
the cost and effectiveness and found that the technology is now 
competitive with the others in NHTSA's technology decision trees and 
EPA's technology packages. EPA and NHTSA are providing incentives to 
encourage this and other hybrid technologies on full-size pick-up 
trucks, as described in Section II.F.3.
    Integrated Motor Assist (IMA)/Crank integrated starter generator 
(CISG) provides idle-stop capability and uses a high voltage battery 
with increased energy capacity over typical automotive batteries. The 
higher system voltage allows the use of a smaller, more powerful 
electric motor and reduces the weight of the wiring harness. This 
system replaces a standard alternator with an enhanced power, higher 
voltage and higher efficiency starter-alternator that is crankshaft 
mounted and can recover braking energy while the vehicle slows down 
(regenerative braking). The IMA technology is not included by either 
agency as an enabling technology in the analysis supporting this rule 
because we believe that other technologies provide better cost 
effectiveness, although it is included as a baseline technology because 
it exists in our 2008 and 2010 baseline fleets.
    P2 Hybrid is a newly emerging hybrid technology that uses a 
transmission integrated electric motor placed between the engine and a 
gearbox or CVT, much like the IMA system described above except with a 
wet or dry separation clutch which is used to decouple the motor/
transmission from the engine. In addition, a P2 hybrid would typically 
be equipped with a larger electric machine. Disengaging the clutch 
allows all-electric operation and more efficient brake-energy recovery. 
Engaging the clutch allows efficient coupling of the engine and 
electric motor and, when combined with a DCT transmission, provides 
similar efficiency at lower cost than power-split or 2-mode hybrid 
systems.
    2-Mode Hybrid is a hybrid electric drive system that uses an 
adaptation of a conventional stepped-ratio automatic transmission by 
replacing some of the transmission clutches with two electric motors 
that control the ratio of engine speed to vehicle speed, while clutches 
allow the motors to be bypassed. This improves both the transmission 
torque capacity for heavy-duty applications and reduces fuel 
consumption and CO2 emissions at highway speeds relative to 
other types of hybrid electric drive systems. The 2-mode hybrid 
technology is not included by either agency as an enabling technology 
in the analysis supporting this rule because we believe that other 
technologies provide better cost effectiveness, although it is included 
as a baseline technology because it exists in our 2008 and 2010 
baseline fleets.
    Power-split Hybrid is a hybrid electric drive system that replaces 
the traditional transmission with a single planetary gearset and two 
motor/generators. One motor/generator uses the engine to either charge 
the battery or supply additional power to the drive motor. A second, 
more powerful motor/generator is permanently connected to the vehicle's 
final drive and always turns with the wheels. The planetary gear splits 
engine power between the first motor/generator and the drive motor to 
either charge the battery or supply power to the wheels. The power-
split hybrid technology is not included by either agency as an enabling 
technology in the analysis supporting this rule because we believe that 
other technologies provide better cost effectiveness, although it is 
included as a baseline technology because it exists in our 2008 
baseline fleet.
    Plug-in hybrid electric vehicles (PHEV) are hybrid electric 
vehicles with the means to charge their battery packs from an outside 
source of electricity (usually the electric grid). These vehicles have 
larger battery packs with more energy storage and a greater capability 
to be discharged than other hybrid electric vehicles. They also use a 
control system that allows the battery pack to be substantially 
depleted under electric-only or blended mechanical/electrical operation 
and batteries that can be cycled in charge-sustaining operation at a 
lower state of charge than is typical of other hybrid electric 
vehicles. These vehicles are sometimes referred to as Range Extended 
Electric Vehicles (REEV). In this MYs 2017-2025 analysis, the agencies 
have included PHEVs with several all-electric ranges as potential 
technologies. EPA's analysis includes a 20-mile and 40-mile range 
PHEVs, while NHTSA's analysis only includes a 30-mile PHEV.

[[Page 62706]]

    Electric vehicles (EV) are equipped with all-electric drive and 
with systems powered by energy-optimized batteries charged primarily 
from grid electricity. For this rule, the agencies have included EVs 
with several ranges--75 miles, 100 miles, and 150 miles--as potential 
technologies.
e. Technologies Considered but Deemed ``Not Ready'' in the MYs 2017-
2025 Timeframe
    Fuel cell electric vehicles (FCEVs) utilize a full electric drive 
platform but consume electricity generated by an on-board fuel cell and 
hydrogen fuel. Fuel cells are electro-chemical devices that directly 
convert reactants (hydrogen and oxygen via air) into electricity, with 
the potential of achieving more than twice the efficiency of 
conventional internal combustion engines. Most automakers that 
currently have FCEVs under development use high-pressure gaseous 
hydrogen storage tanks. The high-pressure tanks are similar to those 
used for compressed gas storage in more than 10 million CNG vehicles 
worldwide, except that they are designed to operate at a higher 
pressure (350 bar or 700 bar vs. 250 bar for CNG). While we expect 
there will be some limited introduction of FCEVs into the marketplace 
in the time frame of this rule, we expect the total number of vehicles 
produced with this technology will be relatively small. Thus, the 
agencies did not consider FCEVs in the modeling analysis conducted for 
this rule.
    There are a number of other potential technologies available to 
manufacturers in meeting the 2017-2025 standards that the agencies have 
evaluated but have not considered in our final analyses. These include 
HCCI, ``multi-air'', and camless valve actuation, and other advanced 
engines currently under development.
2. How did the agencies determine the costs of each of these 
technologies?
    As noted in the introduction to this section, most of the direct 
cost estimates for technologies carried over from the MYs 2012-2016 
final rule and subsequently used in this final rule are fundamentally 
unchanged since the MYs 2012-2016 final rule analysis and/or the 2010 
TAR. We say ``fundamentally'' unchanged since the basis of the direct 
manufacturing cost estimates have not changed; however, the costs have 
been updated to more recent dollars, our estimated learning effects 
have resulted in further cost reductions for some technologies, the 
indirect costs are calculated using a modified methodology, and the 
impact of long-term ICMs is now present during the rulemaking 
timeframe. Besides these changes, there are also some other notable 
changes to the costs used in previous analyses. We highlight these 
changes in Section II.D.2.a, below. We highlight the changes to the 
indirect cost methodology and adjustments to more recent dollars in 
Sections II.D.2.b and c. Lastly, we present some updated terminology 
used for our approach to estimating learning effects in an effort to 
eliminate confusion with our past terminology. This is discussed in 
Section II.D.2.d, below.
    New for the final rule relative to the proposal are the use of 2010 
dollars rather than 2009 dollars, updates to all battery pack and non-
battery costs for hybrids, plug-in and full electric vehicles because 
an updated version of the ANL BatPaC model was available and because we 
wanted to include a battery discharge safety system in the costs, and 
the inclusion of a mild hybrid technology that was not included in the 
proposal. We describe these changes below and in Chapter 3 of the Joint 
TSD.
    The agencies note that the technology costs included in this final 
rule take into account those associated with the initial build of the 
vehicle. We received comments on the proposal for this rule suggesting 
that there could be additional maintenance required with some new 
technologies, and that additional maintenance costs could occur as a 
result because ``the technology will be more complicated and time 
consuming for mechanics to repair.'' \237\ For this final rule, the 
agencies have estimated such maintenance costs. The maintenance costs 
are not included as new vehicle costs and are not, therefore, used in 
either agency's modeling work. However, the maintenance costs are 
included when estimating costs to society in each agency's benefit-cost 
analyses. We discuss these maintenance costs briefly in section II.D.5 
below, and in detail in Chapter 3 of the final Joint TSD and in 
sections III and IV of this preamble.
---------------------------------------------------------------------------

    \237\ See NADA (OAR-2009-0472-7182.1, p.10) and Dawn Brooks 
(OAR-2009-0472-3851, pp.1-2).
---------------------------------------------------------------------------

a. Direct Manufacturing Costs (DMC)
    For direct manufacturing costs (DMC) related to turbocharging, 
downsizing, gasoline direct injection, transmissions, as well as non-
battery-related costs on hybrid, plug-in hybrid, and electric vehicles, 
the agencies have relied on costs derived from ``tear-down'' studies 
(see below). For battery-related DMC for HEVs, PHEVs, and EVs, the 
agencies have relied on the BatPaC model developed by Argonne National 
Laboratory for the Department of Energy. For mass reduction DMC, the 
agencies have relied on several studies as described in detail in 
Chapter 3 of the Joint TSD. We discuss each of these briefly here and 
in more detail in the Joint TSD. For the majority of the other 
technologies considered in this rule and described above, and where no 
new data were available, the agencies have relied on the MYs 2012-2016 
final rule and sources described there for estimates of DMC.
i. Costs From Tear-Down Studies
    As a general matter, the agencies believe that the best method to 
derive technology cost estimates is to conduct studies involving tear-
down and analysis of actual vehicle components. A ``tear-down'' 
involves breaking down a technology into its fundamental parts and 
manufacturing processes by completely disassembling actual vehicles and 
vehicle subsystems and precisely determining what is required for its 
production. The result of the tear-down is a ``bill of materials'' for 
each and every part of the relevant vehicle systems. This tear-down 
method of costing technologies is often used by manufacturers to 
benchmark their products against competitive products. Historically, 
vehicle and vehicle component tear-down has not been done on a large 
scale by researchers and regulators due to the expense required for 
such studies. While tear-down studies are highly accurate at costing 
technologies for the year in which the study is intended, their 
accuracy, like that of all cost projections, may diminish over time as 
costs are extrapolated further into the future because of uncertainties 
in predicting commodities (and raw material) prices, labor rates, and 
manufacturing practices. The projected costs may be higher or lower 
than predicted.
    Over the past several years, EPA has contracted with FEV, Inc. and 
its subcontractor Munro & Associates, to conduct tear-down cost studies 
for a number of key technologies evaluated by the agencies in assessing 
the feasibility of future GHG and CAFE standards. The analysis 
methodology included procedures to scale the tear-down results to 
smaller and larger vehicles, and also to different technology 
configurations. EPA documented FEV's methodology in a report published 
as part of the MYs 2012-2016 rulemaking, detailing the costing of the 
first tear-down conducted in this work (1 in the list 
below).\238\

[[Page 62707]]

This report was peer reviewed by experts in the industry, who focused 
especially on the methodology used in the tear-down study, and revised 
by FEV in response to the peer review comments.\239\ EPA documented 
subsequent tear-down studies (2-5 in the list below) 
using the peer reviewed methodology in follow-up FEV reports made 
available in the public docket for the MYs 2012-2016 rulemaking, 
although the results for some of these additional studies were not peer 
reviewed.\240\
---------------------------------------------------------------------------

    \238\ U.S. EPA, ``Light-Duty Technology Cost Analysis Pilot 
Study,'' Contract No. EP-C-07-069, Work Assignment 1-3, December 
2009, EPA-420-R-09-020, Docket EPA-HQ-OAR-2009-0472-11282.
    \239\ FEV pilot study response to peer review document November 
6, 2009, is at EPA-HQ-OAR-2009-0472-11285.
    \240\ U.S. EPA, ``Light-duty Technology Cost Analysis--Report on 
Additional Case Studies,'' EPA-HQ-OAR-2009-0472-11604.
---------------------------------------------------------------------------

    Since then, FEV's work under this contract has continued. 
Additional cost studies have been completed and are available for 
public review.\241\ The most extensive study, performed after the MYs 
2012-2016 final rule, involved whole-vehicle tear-downs of a 2010 Ford 
Fusion power-split hybrid and a conventional 2010 Ford Fusion. (The 
latter served as a baseline vehicle for comparison.) In addition to 
providing power-split HEV costs, the results for individual components 
in these vehicles were subsequently used by FEV/Munro to estimate the 
cost of another hybrid technology, the P2 hybrid, which employs similar 
hardware. This approach to costing P2 hybrids was undertaken because P2 
HEVs were not yet in volume production at the time of hardware 
procurement for tear-down. Finally, an automotive lithium-polymer 
battery was torn down to provide supplemental battery costing 
information to that associated with the NiMH battery in the Fusion. FEV 
has extensively documented this HEV cost work, including the extension 
of results to P2 HEVs, in a new report.\242\ Because of the complexity 
and comprehensive scope of this HEV analysis, EPA commissioned a 
separate peer review focused exclusively on the new tear down costs 
developed for the HEV analysis. Reviewer comments generally supported 
FEV's methodology and results, while including a number of suggestions 
for improvement, many of which were subsequently incorporated into 
FEV's analysis and final report. The peer review comments and responses 
are available in the rulemaking docket.243,244
---------------------------------------------------------------------------

    \241\ FEV, Inc., ``Light-Duty Technology Cost Analysis, Report 
on Additional Transmission, Mild Hybrid, and Valvetrain Technology 
Case Studies'', November 2011.
    \242\ FEV, Inc., ``Light-Duty Technology Cost Analysis, Power-
Split and P2 HEV Case Studies'', EPA-420-R-11-015, November 2011.
    \243\ ICF, ``Peer Review of FEV Inc. Report Light Duty 
Technology Cost Analysis, Power-Split and P2 Hybrid Electric Vehicle 
Case Studies'', EPA-420-R-11-016, November 2011.
    \244\ FEV and EPA, ``FEV Inc. Report `Light Duty Technology Cost 
Analysis, Power-Split and P2 Hybrid Electric Vehicle Case Studies', 
Peer Review Report--Response to Comments Document'', EPA-420-R-11-
017, November 2011.
---------------------------------------------------------------------------

    Over the course of this contract, teardown-based studies have been 
performed thus far on the technologies listed below. These completed 
studies provide a thorough evaluation of the new technologies' costs 
relative to their baseline (or replaced) technologies.
    1. Stoichiometric gasoline direct injection (SGDI) and 
turbocharging with engine downsizing (T-DS) on a DOHC (dual overhead 
cam) I4 engine, replacing a conventional DOHC I4 engine.
    2. SGDI and T-DS on a SOHC (single overhead cam) on a V6 engine, 
replacing a conventional 3-valve/cylinder SOHC V8 engine.
    3. SGDI and T-DS on a DOHC I4 engine, replacing a DOHC V6 engine.
    4. 6-speed automatic transmission (AT), replacing a 5-speed AT.
    5. 6-speed wet dual clutch transmission (DCT) replacing a 6-speed 
AT.
    6. 8-speed AT replacing a 6-speed AT.
    7. 8-speed DCT replacing a 6-speed DCT.
    8. Power-split hybrid (Ford Fusion with I4 engine) compared to a 
conventional vehicle (Ford Fusion with V6). The results from this tear-
down were extended to address P2 hybrids. In addition, costs from 
individual components in this tear-down study were used by the agencies 
in developing cost estimates for PHEVs and EVs.
    9. Mild hybrid with stop-start technology (Saturn Vue with I4 
engine), replacing a conventional I4 engine. New for this final rule, 
the agencies have used portions of this tear-down study in estimating 
mild hybrid costs.
    10. Fiat Multi-Air engine technology. (Although results from this 
cost study are included in the rulemaking docket, they were not used by 
the agencies in this rulemaking's technical analyses because the 
technology is under a very recently awarded patent and we have chosen 
not to base our analyses on its widespread use across the industry in 
the 2017-2025 timeframe.)
    Items 6 through 10 in the list above are new since the MYs 2012-
2016 final rule.
    In addition, FEV and EPA extrapolated the engine downsizing costs 
for the following scenarios that were based on the above study cases:
    1. Downsizing a SOHC 2 valve/cylinder V8 engine to a DOHC V6.
    2. Downsizing a DOHC V8 to a DOHC V6.
    3. Downsizing a SOHC V6 engine to a DOHC 4 cylinder engine.
    4. Downsizing a DOHC 4 cylinder engine to a DOHC 3 cylinder engine.
    The agencies have relied on the findings of FEV for estimating the 
cost of the technologies covered by the tear-down studies.
ii. Costs of HEVs, EVs & PHEVs
    The agencies have also reevaluated the costs for HEVs, PHEVs, and 
EVs since we issued the MYs 2012-2016 final rule and the 2010 TAR. In 
the proposal, we noted that electrified vehicle technologies were 
developing rapidly and the agencies sought to capture results from the 
most recent analysis. Further, we noted that the MYs 2012-2016 rule 
employed a single $/kWh estimate and did not consider the specific 
vehicle and technology application for the battery when we estimated 
the cost of the battery. Specifically, batteries used in HEVs (high 
power density applications) versus EVs (high energy density 
applications) need to be considered appropriately to reflect the design 
differences, the chemical material usage differences, and differences 
in $/kWh as the power to energy ratio of the battery varies for 
different applications.
    To address those issues for the proposal, the agencies did two 
things. First, EPA developed a spreadsheet tool \245\ that the agencies 
used to size the motor and battery based on the different road loads of 
various vehicle classes. Second, the agencies used a battery cost model 
developed by Argonne National Laboratory (ANL) for the Vehicle 
Technologies Program of the Office of Energy Efficiency and Renewable 
Energy (U.S. Department of Energy (DOE)).\246\ The model developed by 
ANL allows users to estimate unique battery pack costs using user 
customized input sets for different hybridization applications, such as 
strong hybrid, PHEV and EV. The DOE has established long term industry 
goals and targets for advanced battery systems as it does for many 
energy efficient technologies. ANL was funded by DOE to provide an 
independent assessment of Li-ion battery costs because of ANL's 
expertise in the field as one of the primary DOE National Laboratories 
responsible for basic and applied battery

[[Page 62708]]

energy storage technologies for future HEV, PHEV and EV applications. 
Since publication of the 2010 TAR, ANL's battery cost model underwent 
peer-review and ANL subsequently updated the model and documentation to 
incorporate suggestions from peer-reviewers, such as including a 
battery management system, a battery disconnect unit, a thermal 
management system, and other changes.\247\
---------------------------------------------------------------------------

    \245\ See ``LDGHG 2017-2025 Cost Development Files,'' CD in 
Docket No. EPA-HQ-OAR-2010-0799.
    \246\ ANL BatPac model Docket number EPA-HQ-OAR-2010-0799.
    \247\ Nelson, P.A., Santini, D.J., Barnes, J. ``Factors 
Determining the Manufacturing Costs of Lithium-Ion Batteries for 
PHEVs,'' 24th World Battery, Hybrid and Fuel Cell Electric Vehicle 
Symposium and Exposition EVS-24, Stavenger, Norway, May 13-16, 2009 
(www.evs24.org).
---------------------------------------------------------------------------

    Subsequent to the proposal for this rule, the agencies requested 
changes to the BatPaC model. These requests were that an option be 
added to select between liquid or air thermal management and that 
adequate surface area and cell spacing be determined accordingly. Also, 
the agencies requested a feature to allow battery packs to be 
configured as subpacks in parallel or modules in parallel, as 
additional options for staying within voltage and cell size limits for 
large packs. ANL added these features in a version of the model 
distributed March 1, 2012. This version of the model is used for the 
battery cost estimates in the final rule.
    The agencies have chosen to use the ANL model as the basis for 
estimating the cost of large-format lithium-ion batteries for this 
assessment for several reasons. The model was developed by scientists 
at ANL who have significant experience in this area. Also, the model 
uses a bill of materials methodology for developing cost estimates. The 
ANL model appropriately considers the vehicle application's power and 
energy requirements, which are two of the fundamental parameters when 
designing a lithium-ion battery for an HEV, PHEV, or EV. The ANL model 
can estimate production costs based on user defined inputs for a range 
of production volumes. The ANL model's cost estimates, while generally 
lower than the estimates we received from the OEMs, are generally 
consistent with the supplier cost estimates that EPA received from 
large-format lithium-ion battery pack manufacturers. This includes data 
the EPA received during on-site visits in the 2008-2011 time frame. 
Finally, the agencies chose to use the ANL model because it has been 
described and presented in the public domain and does not rely upon 
confidential business information (which could not be reviewed by the 
public).
    The potential for future reductions in battery cost and 
improvements in battery performance relative to current batteries will 
play a major role in determining the overall cost and performance of 
future PHEVs and EVs. The U.S. Department of Energy manages major 
battery-related R&D programs and partnerships, and has done so for many 
years, including the ANL model utilized in this report. DOE has 
reviewed the updated BatPaC model and supports its use in this final 
rule.
    As we did in the proposal, we have also estimated the costs 
(hardware and labor) associated with in-home electric vehicle charging 
equipment, which we expect to be necessary for PHEVs and EVs, and their 
installation. New for the final rule are costs associated with an on-
vehicle battery discharge system. These battery discharge systems allow 
the batteries in HEVs, PHEVs and EVs to be discharged safely at the 
site of an accident prior to moving affected vehicles to storage or 
repair facilities. Charging equipment and battery discharge system 
costs are covered in more detail in Chapter 3 of the Joint TSD.
iii. Mass Reduction Costs
    The agencies have revised the costs for mass reduction from the MYs 
2012-2016 rule and the 2010 Technical Assessment Report. For this rule, 
the agencies are relying on a wide assortment of sources from the 
literature as well as data provided from a number of OEMs. Based on 
this review, the agencies have estimated a new cost curve such that the 
costs increase as the levels of mass reduction increase. Both agencies 
have mass reduction feasibility and cost studies that were completed in 
time for the final rule. However the results from these studies were 
not employed in the rulemaking analysis because the peer reviews had 
not been completed and changes to the studies based on the peer reviews 
were not completed. Both have since been completed. For the primary 
analyses, both agencies use the same mass reduction costs as were used 
in the proposal, although they have been updated to 2010 dollars. All 
of these studies are discussed in Chapter 3 of the Joint TSD as well as 
in the respective publications. The use of the new cost results from 
the studies would have made little difference to the final rule cost 
analysis for two reasons:
    (1) The NPRM (+/- 40%) sensitivity analysis conducted by the 
agencies showed little difference in overall costs due to the change in 
mass reduction costs;
    (2) The agencies project even less mass reduction levels in the 
final rule compared to the NPRM based on the use of revised fatality 
coefficients from NHTSA's updated study of the effects on vehicle mass 
and size on highway safety, which is discussed in section II.G of this 
preamble.
b. Indirect Costs (IC)
i. Markup Factors To Estimate Indirect Costs
    As done in the proposal, the agencies have estimated the indirect 
costs by applying indirect cost multipliers (ICM) to direct cost 
estimates. EPA derived ICMs a basis for estimating the impact on 
indirect costs of individual vehicle technology changes that would 
result from regulatory actions. EPA derived separate ICMs for low-, 
medium-, and high-complexity technologies, thus enabling estimates of 
indirect costs that reflect the variation in research, overhead, and 
other indirect costs that can occur among different technologies. The 
agencies also applied ICMs in our MYs 2012-2016 rulemaking.
    Prior to the development of the ICM methodology,\248\ EPA and NHTSA 
both applied a retail price equivalent (RPE) factor to estimate 
indirect costs. RPEs are estimated by dividing the total revenue of a 
manufacturer by the direct manufacturing costs. As such, it includes 
all forms of indirect costs for a manufacturer and assumes that the 
ratio applies equally for all technologies. ICMs are based on RPE 
estimates that are then modified to reflect only those elements of 
indirect costs that would be expected to change in response to a 
regulatory-induced technology change. For example, warranty costs would 
be reflected in both RPE and ICM estimates, while marketing costs might 
only be reflected in an RPE estimate but not an ICM estimate for a 
particular technology, if the new regulatory-induced technology change 
is not one expected to be marketed to consumers. Because ICMs 
calculated by EPA are for individual technologies, many of which are 
small in scale, they often reflect a subset of RPE costs; as a result, 
for low complexity technologies, the RPE is typically higher than the 
ICM. This is not always the case, as ICM estimates for particularly 
complex technologies, specifically hybrid technologies (for

[[Page 62709]]

near term ICMs), and plug-in hybrid battery and full electric vehicle 
technologies (for near term and long term ICMs), reflect higher than 
average indirect costs, with the resulting ICMs for those technologies 
equaling or exceeding the averaged RPE for the industry.
---------------------------------------------------------------------------

    \248\ The ICM methodology was developed by RTI International, 
under contract to EPA. The results of the RTI report were published 
in Alex Rogozhin, Michael Gallaher, Gloria Helfand, and Walter 
McManus, ``Using Indirect Cost Multipliers to Estimate the Total 
Cost of Adding New Technology in the Automobile Industry.'' 
International Journal of Production Economics 124 (2010): 360-368.
---------------------------------------------------------------------------

    There is some level of uncertainty surrounding both the ICM and RPE 
markup factors. The ICM estimates used in this rule group all 
technologies into four broad categories in terms of complexity and 
treat them as if individual technologies within each of the categories 
(``low'', ``medium'', ``high1'' and ``high2'' complexity) will have the 
same ratio of indirect costs to direct costs. This simplification means 
it is likely that the direct cost for some technologies within a 
category will be higher and some lower than the estimate for the 
category in general. More importantly, the ICM estimates have not been 
validated through a direct accounting of actual indirect costs for 
individual technologies. Rather, the ICM estimates were developed using 
adjustment factors developed in two separate occasions: the first, a 
consensus process, was reported in the RTI report; the second, a 
modified Delphi method, was conducted separately and reported in an EPA 
memo.\249\ Both of these processes were carried out by panels composed 
of EPA staff members with previous background in the automobile 
industry; the memberships of the two panels overlapped but were not 
identical.\250\ The panels evaluated each element of the industry's RPE 
estimates and estimated the degree to which those elements would be 
expected to change in proportion to changes in direct manufacturing 
costs. The method used in the RTI report were peer reviewed by three 
industry experts and subsequently by reviewers for the International 
Journal of Production Economics.
---------------------------------------------------------------------------

    \249\ Helfand, Gloria, and Sherwood, Todd. ``Documentation of 
the Development of Indirect Cost Multipliers for Three Automotive 
Technologies.'' Memorandum, Assessment and Standards Division, 
Office of Transportation and Air Quality, U.S. Environmental 
Protection Agency, August 2009.
    \250\ NHTSA staff participated in the development of the process 
for the second, modified Delphi panel, and reviewed the results as 
they were developed, but did not serve on the panel.
---------------------------------------------------------------------------

    RPEs themselves are inherently difficult to estimate because the 
accounting statements of manufacturers do not neatly categorize all 
cost elements as either direct or indirect costs. Hence, each 
researcher developing an RPE estimate must apply a certain amount of 
judgment to the allocation of the costs. Since empirical estimates of 
ICMs are ultimately derived from the same data used to measure RPEs, 
this affects both measures. However, the value of RPE has not been 
measured for specific technologies, or for groups of specific 
technologies. Thus applying a single average RPE to any given 
technology by definition overstates costs for very simple technologies, 
or understates them for advanced technologies.
    In every recent GHG and fuel economy rulemaking proposal, we have 
requested comment on our ICM factors and whether it is most appropriate 
to use ICMs or RPEs. We have generally received little to no comment on 
the issue specifically, other than basic comments that the ICM values 
are too low. In addition, in the June 2010 NAS report, NAS noted that 
the under the initial ICMs, no technology would be assumed to have 
indirect costs as high as the average RPE. NRC found that ``RPE factors 
certainly do vary depending on the complexity of the task of 
integrating a component into a vehicle system, the extent of the 
required changes to other components, the novelty of the technology, 
and other factors. However, until empirical data derived by means of 
rigorous estimation methods are available, the committee prefers to use 
average markup factors.'' \251\ The committee also stated that ``The 
EPA (Rogozhin et al., 2009), however, has taken the first steps in 
attempting to analyze this problem in a way that could lead to a 
practical method of estimating technology-specific markup factors'' 
where ``this problem'' spoke to the issue of estimating technology-
specific markup factors and indirect cost multipliers.\252\
---------------------------------------------------------------------------

    \251\ NRC, Finding 3-2 at page 3-23.
    \252\ NRC at page 3-19.
---------------------------------------------------------------------------

    As EPA has developed its ICM approach to indirect cost estimation, 
the agency has publicly discussed and responded to comment on its 
approach during the MYs 2012-2016 light-duty GHG rule, and also in the 
more recent heavy-duty GHG rule (see 76 FR 57106) and in the 2010 TAR. 
The agency published its work in the Journal of Production Economics 
\253\ and has also published a memorandum furthering the development of 
ICMs.\254\ As thinking has matured, we have adjusted our ICM factors 
such that they are slightly higher and, importantly, we have changed 
the way in which the factors are applied. For the proposal for this 
rule, EPA concluded that ICMs are fully developed for regulatory 
purposes and used these factors in developing the indirect costs 
presented in the proposal.
---------------------------------------------------------------------------

    \253\ Alex Rogozhin, Michael Gallaher, Gloria Helfand, and 
Walter McManus, ``Using Indirect Cost Multipliers to Estimate the 
Total Cost of Adding New Technology in the Automobile Industry.'' 
International Journal of Production Economics 124 (2010): 360-368.
    \254\ Helfand, Gloria, and Sherwood, Todd. ``Documentation of 
the Development of Indirect Cost Multipliers for Three Automotive 
Technologies.'' Memorandum, Assessment and Standards Division, 
Office of Transportation and Air Quality, U.S. Environmental 
Protection Agency, August 2009.
---------------------------------------------------------------------------

    The agencies received comments on the approach used to estimate 
indirect costs in the proposal. One commenter (NADA) argued that the 
ICM approach was not valid and an RPE approach was the only appropriate 
approach.\255\ Further, that commenter argued that the RPE factor 
should be 2.0 times direct costs rather than the 1.5 factor that is 
supported by filings to the Securities and Exchange Commission. Another 
commenter (ICCT) commented positively on the new ICM approach as 
presented in the proposal, but argued that sensitivity analyses 
examining the impact of using an RPE should be deleted from the final 
rule.\256\ Both agencies have conducted thorough analysis of the 
comments received on the RPE versus ICM approach. Regarding NADA's 
concerns about the accuracy of ICMs, although the agencies recognize 
that there is uncertainty regarding the impact of indirect costs on 
vehicle prices, they have retained ICMs for use in the central analysis 
because it offers advantages of focusing cost estimates on only those 
costs impacted by a regulatory imposed change, and it provides a 
disaggregated approach that better differentiates among technologies. 
The agencies disagree with NADA's contention that the correct factor to 
reflect the RPE should be 2.0, and we cite data in Chapter 3 of the 
joint TSD that demonstrates that the overall RPE should average about 
1.5. Regarding ICCTs contention that NHTSA should delete sensitivity 
analyses examining the impact of using an RPE, NHTSA rejects this 
proposal. OMB Circular No. A-94 establishes guidelines for conducting 
benefit-cost analysis of Federal programs and recommends sensitivity 
analyses to address uncertainty and imprecision in both underlying data 
and modeling assumptions. The agencies have addressed uncertainty in 
separate sensitivity analyses, with NHTSA examining uncertainty 
stemming from the shift away from the use of the RPE and EPA examining 
uncertainty around the ICM values. Further analysis of NADA's comments 
is summarized in

[[Page 62710]]

Chapter 3 of the Joint TSD and in Chapter 7 of NHTSA's FRIA and in 
EPA's Response to Comments document. NHTSA's full response to ICCT is 
also presented in chapter 7 of NHTSA's FRIA. For this final rule, each 
agency is using an ICM approach with ICM factors identical to those 
used in the proposal. The impact of using an RPE rather than ICMs to 
calculate indirect costs is examined in sensitivity and uncertainty 
analyses in chapters 7, 10, and 12 of NHTSA's FRIA where NHTSA shows 
that even under the higher cost estimates that result using the RPE, 
the rulemaking is highly cost beneficial. The impact of alternate ICMs 
is examined in Chapter 3 of EPA's RIA.
---------------------------------------------------------------------------

    \255\ NADA, Docket No. NHTSA-2010-0131-0261, at 4.
    \256\ ICCT, Docket No. NHTSA-2010-0131-0258, at 19-20.
---------------------------------------------------------------------------

    Note that our ICM, while identical to those used in the proposal, 
have changed since the MYs 2012-2016 rule. The first change--increased 
ICM factors--was done as a result of further thought among EPA and 
NHTSA that the ICM factors presented in the original RTI report for low 
and medium complexity technologies should no longer be used and that we 
should rely solely on the modified-Delphi values for these complexity 
levels. For that reason, we eliminated the averaging of original RTI 
values with modified-Delphi values and instead are relying solely on 
the modified-Delphi values for low and medium complexity technologies. 
The second change was a re-evaluation by agency staff of the complexity 
classification of each of the technologies that were not directly 
examined in the RTI and modified Delphi studies. As a result, more 
technologies have been classified as medium complexity and fewer as low 
complexity. The third change--the way the factors are applied--resulted 
in the warranty portion of the indirect costs being applied as a 
multiplicative factor (thereby decreasing going forward as direct 
manufacturing costs decrease due to learning), and the remainder of the 
indirect costs being applied as an additive factor (thereby remaining 
constant year-over-year and not being reduced due to learning). This 
third change has a comparatively large impact on the resultant 
technology costs and, we believe, more appropriately estimates costs 
over time. In addition to these changes, a secondary-level change was 
made as part of this ICM recalculation. That change was to revise 
upward the RPE level reported in the original RTI report from an 
original value of 1.46 to 1.5, to reflect the long term average RPE. 
The original RTI study was based on 2008 data. However, an analysis of 
historical RPE data indicates that, although there is year to year 
variation, the average RPE has remained roughly constant at 1.5. ICMs 
are applied to future years' data and, therefore, NHTSA and EPA staffs 
believed that it would be appropriate to base ICMs on the historical 
average rather than a single year's result. Therefore, ICMs were 
adjusted to reflect this average level. These changes to the ICMs since 
the MYs 2012-2016 rule and the methodology are described in greater 
detail in Chapter 3 of the Joint TSD. NHTSA also has further discussion 
of ICMs in Chapter 7 of NHTSA's FRIA.
ii. Stranded Capital
    Because the production of automotive components is capital-
intensive, it is possible for substantial capital investments in 
manufacturing equipment and facilities to become ``stranded'' (where 
their value is lost, or diminished). This would occur when the capital 
is rendered useless (or less useful) by some factor that forces a major 
change in vehicle design, plant operations, or manufacturer's product 
mix, such as a shift in consumer demand for certain vehicle types. It 
can also be caused by new standards that phase in at a rate too rapid 
to accommodate planned replacement or redisposition of existing capital 
to other activities. The lost value of capital equipment is then 
amortized in some way over production of the new technology components.
    It is difficult to quantify accurately any capital stranding 
associated with new technology phase-ins under the standards in this 
final rule because of the iterative dynamic involved--that is, the new 
technology phase-in rate strongly affects the potential for additional 
cost due to stranded capital, but that additional cost in turn affects 
the degree and rate of phase-in for other individual competing 
technologies. In addition, such an analysis is very company-, factory-, 
and manufacturing process-specific, particularly in regard to finding 
alternative uses for equipment and facilities. Nevertheless, in order 
to account for the possibility of stranded capital costs, the agencies 
asked FEV to perform a separate analysis of potential stranded capital 
costs associated with rapid phase-in of technologies due to new 
standards, using data from FEV's primary teardown-based cost 
analyses.\257\
---------------------------------------------------------------------------

    \257\ FEV, Inc., ``Potential Stranded Capital Analysis on EPA 
Light-Duty Technology Cost Analysis'', Contract No. EP-C-07-069 Work 
Assignment 3-3. November 2011.
---------------------------------------------------------------------------

    The assumptions made in FEV's stranded capital analysis with 
potential for major impacts on results are:
     All manufacturing equipment was bought brand new when the 
old technology started production (no carryover of equipment used to 
make the previous components that the old technology itself replaced).
     10-year normal production runs: Manufacturing equipment 
used to make old technology components is straight-line depreciated 
over a 10-year life.
     Factory managers do not optimize capital equipment phase-
outs (that is, they are assumed to routinely repair and replace 
equipment without regard to whether or not it will soon be scrapped due 
to adoption of new vehicle technology).
     Estimated stranded capital is amortized over 5 years of 
annual production at 450,000 units (of the new technology components). 
This annual production is identical to that assumed in FEV's primary 
teardown-based cost analyses. The 5-year recovery period is chosen to 
help ensure a conservative analysis; the actual recovery would of 
course vary greatly with market conditions.
    The stranded capital analysis was performed for three transmission 
technology scenarios, two engine technology scenarios, and one hybrid 
technology scenario. The methodology used by EPA in applying the 
results to the technology costs is described in Chapter 3.8.7 and 
Chapter 5.1 of EPA's RIA. The methodology used by NHTSA in applying the 
results to the technology costs is described in NHTSA's RIA section V.
    In their written comments on the proposal, the Center for 
Biological Diversity and the International Council on Clean 
Transportation argued that the long lead times being provided for the 
phase-in of new standards, stretching out as they do over two complete 
redesign cycles, will virtually eliminate any capital stranding, making 
it inappropriate to carry over what they consider to be a ``relic'' 
from shorter-term rulemakings. As discussed above, it is difficult to 
quantify accurately any capital stranding associated with new 
technology phase-ins, especially given the projected and unprecedented 
deployment of technologies in the rulemaking timeframe. The FEV 
analysis attempted to define the possible stranded capital costs, for a 
select set of technologies, using the above set of assumptions. Since 
the direct manufacturing costs developed by FEV assumed a 10 year 
production life (i.e., capital costs amortized over 10 years) the 
agencies applied the FEV

[[Page 62711]]

derived stranded capital costs whenever technologies were replaced 
prior to being utilized for the full 10 years. The other option would 
be to assume a 5 year product life (i.e., capital costs amortized over 
5 years), which would have increased the direct manufacturing costs. It 
seems only reasonable to account for stranded capital costs in the 
instances where the fleet modeling performed by the agencies replaced 
technologies before the capital costs were fully amortized. The 
agencies did not derive or apply stranded capital costs to all 
technologies only the ones analyzed by FEV. While there is uncertainty 
about the possible stranded capital costs (i.e., understated or 
overstated), their impact would not call into question the overall 
results of our cost analysis or otherwise affect the stringency of the 
standards, since costs of stranded capital are a relatively minor 
component of the total estimated costs of the rules.
c. Cost Adjustment to 2010 Dollars
    This simple change from the earlier analyses and from the proposal 
is to update any costs presented in earlier analyses to 2010 dollars 
using the GDP price deflator as reported by the Bureau of Economic 
Analysis on January 27, 2011. The factors used to update costs from 
2007, 2008 and 2009 dollars to 2010 dollars are shown below.

                            Table II-17--GDP Price Deflators Used in This Final Rule
----------------------------------------------------------------------------------------------------------------
                                                       2007            2008            2009            2010
----------------------------------------------------------------------------------------------------------------
Price Index for Gross Domestic Product..........          106.2           108.6           109.7           111.0
Factor applied to convert to 2010 dollars.......            1.04            1.02            1.01            1.00
----------------------------------------------------------------------------------------------------------------
Source: Bureau of Economic Analysis, Table 1.1.4. Price Indexes for Gross Domestic Product, downloaded 2/9/2012,
  last revised 1/27/2012.

d. Cost Effects Due to Learning
    The agencies have not changed the approach to manufacturer learning 
since the proposal. For many of the technologies considered in this 
rulemaking, the agencies expect that the industry should be able to 
realize reductions in their costs over time as a result of ``learning 
effects,'' that is, the fact that as manufacturers gain experience in 
production, they are able to reduce the cost of production in a variety 
of ways. For this rule, the agencies continue to apply learning effects 
in the same way as we did in both the MYs 2012-2016 final rule and in 
the 2010 TAR. However, in the proposal, we employed some new 
terminology in an effort to eliminate some confusion that existed with 
our old terminology. (This new terminology was described in the recent 
heavy-duty GHG final rule (see 76 FR 57320)). Our old terminology 
suggested we were accounting for two completely different learning 
effects--one based on volume production and the other based on time. 
This was not the case since, in fact, we were actually relying on just 
one learning phenomenon, that being the learning-by-doing phenomenon 
that results from cumulative production volumes.
    As a result, the agencies have also considered the impacts of 
manufacturer learning on the technology cost estimates by reflecting 
the phenomenon of volume-based learning curve cost reductions in our 
modeling using two algorithms depending on where in the learning cycle 
(i.e., on what portion of the learning curve) we consider a technology 
to be--``steep'' portion of the curve for newer technologies and 
``flat'' portion of the curve for more mature technologies. The 
observed phenomenon in the economic literature which supports 
manufacturer learning cost reductions are based on reductions in costs 
as production volumes increase with the highest absolute cost reduction 
occurring with the first doubling of production. The agencies use the 
terminology ``steep'' and ``flat'' portion of the curve to distinguish 
among newer technologies and more mature technologies, respectively, 
and how learning cost reductions are applied in cost analyses.
    Learning impacts have been considered on most but not all of the 
technologies expected to be used because some of the expected 
technologies are already used rather widely in the industry and, 
presumably, quantifiable learning impacts have already occurred. The 
agencies have applied the steep learning algorithm for only a handful 
of technologies considered to be new or emerging technologies such as 
PHEV and EV batteries which are experiencing heavy development and, 
presumably, rapid cost declines in coming years. For most technologies, 
the agencies have considered them to be more established and, hence, 
the agencies have applied the lower flat learning algorithm. For more 
discussion of the learning approach and the technologies to which each 
type of learning has been applied the reader is directed to Chapter 3 
of the Joint TSD. NHTSA has further discussion in Chapter 7 of the 
NHTSA FRIA. Note that, since the agencies had to project how learning 
will occur with new technologies over a long period of time, we request 
comments on the assumptions of learning costs and methodology. In 
particular, we are interested in input on the assumptions for advanced 
27-bar BMEP cooled exhaust gas recirculation (EGR) engines, which are 
currently still in the experimental stage and not expected to be 
available in volume production until 2017. For our analysis, we have 
based estimates of the costs of this engine on current (or soon to be 
current) production technologies (e.g., gasoline direct injection fuel 
systems, engine downsizing, cooled EGR, 18-bar BMEP capable 
turbochargers), and assumed that, since learning (and the associated 
cost reductions) begins in 2012 for them that it also does for the 
similar technologies used in 27-bar BMEP engines.
    The agencies did not receive comments on the issue of manufacturer 
learning.
3. How did the agencies determine the effectiveness of each of these 
technologies?
    For this final rule, EPA has conducted another peer reviewed study 
with the global engineering consulting firm, Ricardo, Inc., adding to 
and refining the results of the 2007 study, consistent with a longer-
term outlook through model years MYs 2017-2025. The 2007 study was a 
detailed, peer reviewed vehicle simulation project to quantify the 
effectiveness of a multitude of technologies for the MYs 2012-2016 rule 
(as well as the 2010 NOI) published in 2008. The extent of the new 
study was vast, including hundreds of thousands of vehicle simulation 
runs. The results were, in turn, employed to calibrate and update EPA's 
lumped parameter model, which is used to quantify the synergies and 
dis-synergies associated with combining technologies together for the 
purposes of generating

[[Page 62712]]

inputs for the agencies respective OMEGA and CAFE modeling.
    Additionally, there were a number of technologies that Ricardo did 
not model explicitly. For these, the agencies relied on a variety of 
sources in the literature. A few of the values are identical to those 
presented in the MYs 2012-2016 final rule, while others were updated 
based on the newer version of the lumped parameter model. More details 
on the Ricardo simulation, lumped parameter model, as well as the 
effectiveness for supplemental technologies are described in Chapter 3 
of the Joint TSD.
    The agencies note that the effectiveness values estimated for the 
technologies considered in the modeling analyses may represent average 
values, and do not reflect the virtually unlimited spectrum of possible 
values that could result from adding the technology to different 
vehicles. For example, while the agencies have estimated an 
effectiveness of 0.6 to 0.8 percent for low-friction lubricants, 
depending on the vehicle class, each vehicle could have a unique 
effectiveness estimate depending on the baseline vehicle's oil 
viscosity rating. Similarly, the reduction in rolling resistance (and 
thus the improvement in fuel economy and the reduction in 
CO2 emissions) due to the application of low rolling 
resistance tires depends not only on the unique characteristics of the 
tires originally on the vehicle, but on the unique characteristics of 
the tires being applied, characteristics that must be balanced between 
fuel efficiency, safety, and performance. Aerodynamic drag reduction is 
much the same--it can improve fuel economy and reduce CO2 
emissions, but it is also highly dependent on vehicle-specific 
functional objectives. For purposes of this rule, NHTSA and EPA believe 
that employing average values for technology effectiveness estimates, 
as adjusted depending on vehicle class, is an appropriate way of 
recognizing the potential variation in the specific benefits that 
individual manufacturers (and individual vehicles) might obtain from 
adding a fuel-saving technology.
    As discussed in the proposal, the U.S. D.O.T. Volpe Center entered 
into a contract with Argonne National Laboratory (ANL) to provide full 
vehicle simulation modeling support for this MYs 2017-2025 rulemaking. 
While modeling was not complete in time for use in the NPRM, the ANL 
results were available for the final rule and were used to define the 
effectiveness of mild hybrids for both agencies, and NHTSA used the 
results to update the effectiveness of advanced transmission 
technologies coupled with naturally-aspirated engines for the CAFE 
analysis, as discussed in the Joint TSD and more fully in NHTSA's RIA. 
This simulation modeling was accomplished using ANL's full vehicle 
simulation tool called ``Autonomie,'' which is the successor to ANL's 
Powertrain System Analysis Toolkit (PSAT) simulation tool, and that 
includes sophisticated models for advanced vehicle technologies. The 
ANL simulation modeling process and results are documented in multiple 
reports and are peer reviewed. Both the ANL reports and peer review 
report can be found in NHTSA's docket.\258\
---------------------------------------------------------------------------

    \258\ Docket No: NHTSA-2010-0131.
---------------------------------------------------------------------------

4. How did the agencies consider real-world limits when defining the 
rate at which technologies can be deployed?
a. Refresh and Redesign Schedules
    During MYs 2017-2025 manufacturers are expected to go through the 
normal automotive business cycle of redesigning and upgrading their 
light-duty vehicle products, and in some cases introducing entirely new 
vehicles not in the market today. The MYs 2017-2025 standards timeframe 
allows manufacturers the time needed to incorporate GHG reduction and 
fuel-saving technologies into their normal business cycle while 
considering the requirements of the MYs 2012-2016 standards. This is 
important because it has the potential to avoid the much higher costs 
that could occur if manufacturers need to add or change technology at 
times other than their scheduled vehicle redesigns. This time period 
also provides manufacturers the opportunity to plan for compliance 
using a multi-year time frame, again consistent with normal business 
practice. Over these 9 model years, and the 5 prior model years that 
make up the MYs 2012-2016 standards, there will be an opportunity for 
manufacturers to evaluate, presumably, every one of their vehicle 
platforms and models and add technology in a cost effective way to 
control GHG emissions and improve fuel economy. This includes all the 
technologies considered here and the redesign of the air conditioner 
systems in ways that will further reduce GHG emissions and improve fuel 
economy.
    Because of the complexities of the automobile manufacturing 
process, manufacturers are generally only able to add new technologies 
to vehicles on a specific schedule; just because a technology exists in 
the marketplace or is made available, does not mean that it is 
immediately available for applications on all of a manufacturer's 
vehicles. In the automobile industry there are two terms that describe 
when technology changes to vehicles occur: redesign and refresh (i.e., 
freshening). Vehicle redesign usually refers to significant changes to 
a vehicle's appearance, shape, dimensions, and powertrain. Redesign is 
traditionally associated with the introduction of ``new'' vehicles into 
the market, often characterized as the ``next generation'' of a 
vehicle, or a new platform. Across the industry, redesign of models 
generally takes place about every 5 years. However, while 5 years is a 
typical design period, there are many instances where redesign cycles 
can be longer or shorter. For example, it has generally been the case 
that pickup trucks and full size vans have longer redesign cycles 
(e.g., 6 to 7 years), while high-volume cars have shorter redesign 
cycles in order to remain competitive in the market. There are many 
other factors that can also affect redesign such as availability of 
capital and engineering resources and the extent of platform and 
component sharing between models, or even manufacturers.
    We have a more detailed discussion in Chapter 3.4 of the joint TSD 
that describes how refresh and redesign cycles play into the modeling 
each agency has done in support of the final standards.
b. Vehicle Phase-In Caps
    GHG-reducing and fuel-saving technologies for vehicle applications 
vary widely in function, cost, effectiveness and availability. Some of 
these attributes, like cost and availability vary from year to year. 
New technologies often take several years to become available across 
the entire market. The agencies use phase-in caps to manage the maximum 
rate that the CAFE and OMEGA models can apply new technologies.
    Phase-in caps are intended to function as a proxy for a number of 
real-world limitations in deploying new technologies in the auto 
industry. These limitations can include but are not limited to, 
engineering resources at the OEM or supplier level, restrictions on 
intellectual property that limit deployment, and/or limitations in 
material or component supply as a market for a new technology develops. 
Without phase-in caps, the models may apply technologies at rates that 
are not representative of what the industry is actually capable of 
producing, which would suggest that more stringent standards might be 
feasible than actually would be.

[[Page 62713]]

    EPA applies the caps on an OEM vehicle platform basis for most 
technologies. For a given technology with a cap of x%, this means that 
x% of a vehicle platform can receive that technology. On a fleet 
average basis, since all vehicle platforms can receive x% of this 
technology, x% of a manufacturer's fleet can also receive that 
technology. EVs and PHEVs are an exception to this rule as the agencies 
limit the availability of these technologies to some subclasses. Unlike 
other technologies, in order to maintain utility, EPA only allows non-
towing vehicle types to be electrified in the OMEGA model. As a result, 
the PHEV and EV cap was applied so that the average manufacturer could 
produce to the cap levels. As would be expected, manufacturers that 
make more non-towing vehicles can have a higher fraction of their fleet 
converted to EVs and PHEVs, while those that make fewer non-towing 
vehicles have a lower potential maximum limit on EV and PHEV 
production.
    NHTSA applies phase-in caps in addition to refresh/redesign cycles 
used in the CAFE model, which constrain the rate of technology 
application at the vehicle level so as to ensure a period of stability 
following any modeled technology applications, Unlike vehicle-level 
cycle settings, phase-in caps, defined on a percent per year basis, 
constrain technology application at the OEM level. As discussed above 
phase-in caps are intended to reflect a manufacturer's overall resource 
capacity available for implementing new technologies (such as 
engineering and development personnel and financial resources) thereby 
ensuring that resource capacity is accounted for in the modeling 
process. At a high level, phase-in caps and refresh/redesign cycles 
work in conjunction with one another to avoid the CAFE modeling process 
out-pacing an OEM's limited pool of available resources during the 
rulemaking time frame, especially in years where many models may be 
scheduled for refresh or redesign. This helps to ensure technological 
feasibility and economic practicability in determining the stringency 
of the standards.
    We have a more detailed discussion of phase-in caps in Chapter 3.4 
of the joint TSD.
5. Maintenance and Repair Costs Associated With New Technologies
    In the proposal, we requested comment on maintenance, repair, and 
other operating-costs and whether these might increase or decrease with 
the new technologies. (See 76 FR 74925) We received comments on this 
topic from NADA. These comments stated that the agencies should include 
maintenance and repair costs in estimates of total cost of ownership 
(i.e., in our payback analyses).\259\ NADA proffered their Web site 
\260\ as a place to find information on operating costs that might be 
used in our final analyses. This Web site tool is meant to help 
consumers quantify the cost of ownership of a new vehicle. The tool 
includes estimates for depreciation, fees, financing, insurance, fuel 
maintenance, opportunity costs and repairs for the first five years of 
ownership. The agencies acknowledge that the tool may be useful for 
consumers; however, there is no information provided on how these 
estimates were determined. Without documentation of the basis for 
estimates, the Web site information is of limited use in this 
rulemaking where the agencies document the source and basis for each 
factual assertion. There are also evident substantive anomalies in the 
Web site information.\261\ For these reasons, the agencies have 
performed an independent analysis to quantify maintenance costs.
---------------------------------------------------------------------------

    \259\ See NADA (EPA-HQ-OAR-2010-0799-0639, p.10).
    \260\ http://www.nadaguides.com/Cars/Cost-to-Own.
    \261\ For example, comparing the 2012 Hyundai Sonata showed the 
same cost for fuel ($11,024) regardless of whether it is a hybrid 
option or not. The HEV fuel economy rating is 35/40 mpg City/Highway 
for the HEV and 2.4L non HEV rating is 24/35. Another example is the 
2012 Ford Fusion SEL: the front wheel drive and the all-wheel drive 
versions have identical fuel cost despite having different fuel 
economies.
---------------------------------------------------------------------------

    For the first time in CAFE and GHG rulemaking, both agencies now 
include maintenance costs in their benefit-cost analyses and in their 
respective payback analyses. This analysis is presented in Chapter 3.6 
of the joint TSD and the maintenance intervals and costs per 
maintenance event used by both agencies are summarized in Table II-18. 
For information on how each agency has folded the maintenance costs 
into their respective final analyses, please refer to each agency's 
respective RIA (Chapter 5 of EPA's RIA, Chapter VIII of NHTSA's FRIA).

                                Table II-18--Maintenance Event Costs & Intervals
                                                 [2010 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                     Cost per       Maintenance
                New technology                           Reference case             maintenance      interval
                                                                                       event          (mile)
----------------------------------------------------------------------------------------------------------------
Low rolling resistance tires level 1..........  Standard tires..................           $6.44          40,000
Low rolling resistance tires level 2..........  Standard tires..................           43.52          40,000
Diesel fuel filter replacement................  Gasoline vehicle................           49.25          20,000
EV oil change.................................  Gasoline vehicle................          -38.67           7,500
EV air filter replacement.....................  Gasoline vehicle................          -28.60          30,000
EV engine coolant replacement.................  Gasoline vehicle................          -59.00         100,000
EV spark plug replacement.....................  Gasoline vehicle................          -83.00         105,000
EV/PHEV battery coolant replacement...........  Gasoline vehicle................          117.00         150,000
EV battery health check.......................  Gasoline vehicle................           38.67          15,000
----------------------------------------------------------------------------------------------------------------
Note: Negative values represent savings due to the EV not needing the maintenance required of the gasoline
  vehicle; EPA applied a battery coolant replacement cost to PHEVs and EVs, while NHTSA applied it to EVs only.

E. Joint Economic and Other Assumptions

    The agencies' analysis of CAFE and GHG standards for the model 
years covered by this final rule rely on a range of forecast 
information, estimates of economic variables, and input parameters. 
This section briefly describes the sources of the agencies' estimates 
of each of these values. These values play a significant role in 
assessing the benefits of both CAFE and GHG standards.
    In reviewing these variables and the agencies' estimates of their 
values for purposes of this final rule, NHTSA and EPA considered 
comments received in

[[Page 62714]]

response to the proposed rule, and also reviewed newly available 
literature. For this final rule, we made several changes to the 
economic assumptions used in our proposed rule, including revised 
technology costs to reflect more recently available data; updated 
values of the cost of owning a vehicle based on new data; updated fuel 
price and transportation demand forecasts that reflect the Annual 
Energy Outlook (AEO) 2012 Early Release; and changes to vehicle miles 
travelled (VMT) schedules, survival rates, and projection methods. The 
final values summarized below are discussed in greater detail in 
Chapter 4 of the joint TSD and elsewhere in the preamble and in the 
agencies' respective RIAs.
     Costs of fuel economy-improving technologies--These inputs 
are discussed in summary form in Section II.D above and in more detail 
in the agencies' respective sections of this preamble, in Chapter 3 of 
the joint TSD, and in the agencies' respective RIAs. The direct 
manufacturing cost estimates for fuel economy improving and GHG 
emissions reducing technologies that are used in this analysis are 
intended to represent manufacturers' direct costs for high-volume 
production of vehicles equipped with these technologies in the year for 
which we state the cost is considered ``valid.'' Technology direct 
manufacturing cost estimates are the same as those used to analyze the 
proposed rule, with the exception of those for hybrid electric 
vehicles, plug-in hybrid electric vehicle (PHEV) and electric vehicle 
(EV) battery costs which have been updated using an updated version of 
Argonne National Laboratory's (ANL's) BatPaC model.\262\ Indirect costs 
are accounted for by applying near-term indirect cost multipliers 
ranging from 1.24 to 1.77 to the estimates of vehicle manufacturers' 
direct costs for producing or acquiring each technology, depending on 
the complexity of the technology and the time frame over which costs 
are estimated. These values are reduced to 1.19 to 1.50 over the long 
run as some aspects of indirect costs decline. As explained at 
proposal, the indirect cost markup factors have been revised from the 
MYs 2012-2016 rulemaking and the Interim Joint TAR to reflect the 
agencies current thinking regarding a number of issues. The final rules 
use the same factors the agencies used at proposal. These factors are 
discussed in detail in Section II.D.2 of this preamble and in Chapter 3 
of the joint TSD, where we also discuss comments received on the 
proposal and our response to them. Details of the agencies' technology 
cost assumptions and how they were derived can be found in Chapter 3 of 
the joint TSD. We did not receive specific comments on our estimated 
technology direct manufacturing costs.
---------------------------------------------------------------------------

    \262\ Technology direct manufacturing cost estimates for most 
technologies are fundamentally unchanged from those used by the 
agencies in the MYs 2012-2016 final rule, the heavy-duty truck rule 
(to the extent relevant), and TAR, although the agencies have 
revised costs for mass reduction, transmissions, and a few other 
technologies from those used in these earlier regulatory actions and 
analyses.
---------------------------------------------------------------------------

     Potential opportunity costs of improved fuel economy--This 
issue addresses the possibility that achieving the fuel economy 
improvements required by alternative CAFE or GHG standards would 
require manufacturers to compromise the performance, carrying capacity, 
safety, or comfort of their vehicle models. If this were the case, the 
resulting sacrifice in the value of these attributes to consumers would 
represent an additional cost of achieving the required improvements, 
and thus of manufacturers' compliance with stricter standards. 
Currently the agencies assume that these vehicle attributes will not 
change as a result of these rules. Section II.C above and Chapter 2 of 
the joint TSD describe how the agencies carefully selected an 
attribute-based standard to minimize manufacturers' incentive to reduce 
vehicle capabilities. While manufacturers may choose to do this for 
other reasons, the agencies continue to believe that the rules 
themselves will not result in such changes. Importantly, EPA and NHTSA 
have sought to include the cost of maintaining these attributes as part 
of the cost and effectiveness estimates for technologies that are 
included in the analysis for this final rule. For example, downsized 
engines are assumed to be turbocharged, so that they provide the same 
performance and utility even though they are smaller, and the costs of 
turbocharging and downsizing are included in the agencies' cost 
estimates.\263\ The two instances where the rules might result in loss 
of vehicle utility, as described in Section III.D.3, III.H.1.b, and 
Section IV.G, involve cases where vehicles are converted to hybrid or 
full electric vehicles (EVs) and some buyers may experience a loss of 
welfare due to the reduced range of driving on a single charge compared 
to the range of an otherwise similar gasoline vehicle. However, in such 
cases, we believe that sufficient options would exist for consumers 
concerned about the possible loss of this utility (e.g., they could 
purchase the non-hybridized version of the vehicle or not buy an EV) 
that the agencies do not attribute a welfare loss for these vehicles 
resulting from the final rules. Though some comments raised concerns 
over consumer acceptance of EVs, other comments expressed optimism that 
consumer interest in EVs would be sufficient for the low levels of 
adoption projected in these rules to be used for compliance with the 
standards. The agencies maintain their assumption that purchasers of 
EVs will not incur welfare losses given that they will have sought out 
vehicles with these properties. Moreover, given the modest levels of EV 
penetration which the agencies project as a compliance strategy for 
manufacturers, the agencies likewise do not project any general loss of 
societal welfare since many other compliance alternatives remain 
available to manufacturers and thus to vehicle purchasers.
---------------------------------------------------------------------------

    \263\ The modeling work underlying the agencies' estimates of 
technology effectiveness build in the need to maintain vehicle 
performance (utility). See chapter 3.2 of the Joint TSD for details 
behind these effectiveness estimates. Our technology costs include 
all costs of implementing the technologies required to achieve these 
effectiveness values while maintaining performance and other 
utility. Thus, the costs of maintaining performance and other 
utility are an inherent element of the agencies' cost estimation 
process. The agencies consequently believe it reasonable to conclude 
that there will be no loss of vehicle utility as a direct result of 
these final rules. The agencies also do not believe that adding 
fuel-saving technology should preclude future improvements in 
performance, safety, or other attributes, though it is possible that 
the costs of these additions may be affected by the presence of 
fuel-saving technology.
---------------------------------------------------------------------------

    Consumer vehicle choice modeling is a method to understand and 
predict what vehicles consumers might buy. In principle these models 
can be used to estimate the effects of these rules on vehicle sales and 
fleet mix. In practice, though, past analyses using such models have 
not produced consistent estimates of how buyers might respond to 
improved fuel economy, and it is difficult to decide whether one data 
source, model specification, or estimation procedure is clearly 
preferable over another. Thus, for these final rules, the agencies 
continue to use forecasts of total industry sales, the share of total 
sales accounted for by passenger cars, and the market shares of 
individual models for all years between 2010 and 2025 that do not vary 
among regulatory alternatives.
    The agencies requested comment on how to estimate explicitly the 
changes in vehicle buyers' choices and welfare from the combination of 
higher prices for new vehicle models, increases in their fuel economy, 
and any accompanying changes in vehicle attributes such as performance, 
passenger- and cargo-carrying capacity, or other dimensions of utility. 
Some

[[Page 62715]]

commenters considered vehicle choice models too uncertain for use in 
this rulemaking, while another requested that we conduct explicit 
consumer vehicle choice modeling (although without providing a 
justification as to which models to use or why any particular modeling 
approach is likely to generate superior estimates). Because the 
agencies have not yet developed sufficient confidence in their vehicle 
choice modeling efforts, we believe it is premature to use them in this 
rulemaking. The agencies have continued to explore the possible use of 
these models, as discussed in Sections III.H.1.a and IV.G.6, below.
     The on-road fuel economy ``gap'' -- Actual fuel economy 
levels achieved by light-duty vehicles in on-road driving fall somewhat 
short of their levels measured under the laboratory test conditions 
used by EPA to establish compliance with CAFE and GHG standards (and 
which is mandated by statute for measuring compliance with CAFE 
passenger car standards) \264\. The modeling approach in this final 
rule is consistent with the proposal, and also follows the MYs 2012-
2016 final rule and the Interim Joint TAR. In calculating benefits of 
the program, the agencies estimate that actual on-road fuel economy 
attained by light-duty models that operate on liquid fuels will be 20 
percent lower than their fuel economy ratings as measured for purposes 
of CAFE fuel economy testing. For example, if the measured CAFE fuel 
economy value of a light truck is 20 mpg, the on-road fuel economy 
actually achieved by a typical driver of that vehicle is expected to be 
16 mpg (20*.80).\265\ Based on manufacturer confidential business 
information, as well as data derived from the 2006 EPA fuel economy 
label rule, the agencies use a 30 percent gap for consumption of wall 
electricity for electric vehicles and plug-in hybrid electric 
vehicles.\266\ The U.S. Coalition for Advanced Diesel Cars suggested 
that the on-road gap used in the proposal was overly conservative at 
20%, and that advanced technology vehicles may have on-road gaps that 
are larger than current vehicles. The agencies recognize the potential 
for future changes in driver behavior or vehicle technology to change 
the on-road gap to be either larger or smaller. The agencies continue 
to use the same estimates of the on-road gap as in the proposed rule 
for estimating fuel savings and other impacts, and will monitor the EPA 
fuel economy database as these future model year vehicles enter the 
fleet.
---------------------------------------------------------------------------

    \264\ 49 U.S.C. 32904(c).
    \265\ U.S. Environmental Protection Agency, Final Technical 
Support Document, Fuel Economy Labeling of Motor Vehicle Revisions 
to Improve Calculation of Fuel Economy Estimates, EPA420-R-06-017, 
December 2006. (Docket No. EPA-HQ-OAR-2010-0799-1125).
    \266\ See 71 FR 77887, and U.S. Environmental Protection Agency, 
Final Technical Support Document, Fuel Economy Labeling of Motor 
Vehicle Revisions to Improve Calculation of Fuel Economy Estimates, 
EPA420-R-06-017, December 2006 for general background on the 
analysis. See also EPA's Response to Comments (EPA-420-R-11-005, 
Docket No. EPA-HQ-OAR-2010-0799-1113) to the 2011 labeling rule, 
page 189, first paragraph, specifically the discussion of the 
derived five cycle equation and the non-linear adjustment with 
increasing MPG.
---------------------------------------------------------------------------

     Fuel prices and the value of saving fuel--Projected future 
fuel prices are a critical input into the preliminary economic analysis 
of alternative standards, because they determine the value of fuel 
savings both to new vehicle buyers and to society, and fuel savings 
account for the majority of the rule's estimated benefits. For these 
rules, the agencies are using the most recent fuel price projections 
from the U.S. Energy Information Administration's (EIA) Annual Energy 
Outlook (AEO) 2012 Early Release reference case. The projections of 
fuel prices reported in EIA's AEO 2012 Early Release extend through 
2035. Fuel prices beyond the time frame of AEO's forecast were 
estimated by applying the average growth rate for the years 2017-2035 
for each year after 2035. This is the same general methodology used by 
the agencies in the analysis for the proposed rule, as well as in the 
MYs 2012-2016 rulemaking, in the heavy duty truck and engine rule (76 
FR 57106), and in the Interim Joint TAR. For example, the AEO 2012 
Early Release projections of gasoline fuel prices (in constant 2010$) 
are $3.63 per gallon in 2017, $3.76 in 2020, and $4.09 in 2035. 
Extrapolating as described above, retail gasoline prices are projected 
to reach $4.57 per gallon in 2050 (measured in constant 2010 dollars). 
Several commenters (Volkwagen, Consumer Federation of America, 
Environmental Defense Fund, Consumer's Union, National Resources 
Defense Council, Union of Concerned Scientists) stated that the EIA AEO 
2011 future fuel price projections used in the proposal were similar to 
current prices, and thus were modest, or lower than expected. The 
agencies note that if a higher fuel prices projection were used, it 
would increase the value of the fuel savings from the rule, while a 
lower fuel price projection would decrease the value of the fuel 
savings from the rule. Another commenter noted the uncertainty 
projecting automotive fuel prices during this extended time period 
(National Auto Dealers' Association). As discussed in Chapter 4 of the 
Joint TSD, while the agencies believe that EIA's AEO reference case 
generally represents a reasonable forecast of future fuel prices for 
use in our analysis of the benefits of this rule, we recognize that 
there is a great deal of uncertainty in future fuel prices. However, 
given that no commenters offered alternative sources for fuel price 
projections, and the agencies have found no better source since the 
NPRM, in this final rulemaking the agencies continue to rely upon EIA 
projections of future gasoline and diesel prices.
     Consumer cost of ownership and payback period--The 
agencies provide, in Sections III.H.3 and IV.G.4, estimates of the 
impacts of these rules on the net costs of owning new vehicles, as well 
as the time period necessary for the fuel savings to outweigh the 
expected increase in prices for the new vehicles (i.e., the payback 
period). These analyses focus specifically on the buyers' perspectives, 
and therefore take into account the effect of the rule on insurance 
premiums, sales tax, and finance charges. From a social perspective, 
these are transfers of money from one group to another, rather than net 
gains or losses, and thus have no net effect on the net benefits of the 
rules. For instance, a sales tax is a cost to a vehicle buyer, but the 
money does not represent economic resources that are consumed; instead, 
it goes to finance state and local government activities, such as 
schools or roads. The role of finance charges is to spread payments 
over time, taking into account the opportunity cost of financing; this 
is just a reversal of the process of discounting, and thus does not 
affect the present value of the vehicle cost. Though the net benefits 
analysis is not affected by these payments, from the buyers' viewpoint, 
these are additional costs. In the NPRM, EPA included these factors in 
its payback period analysis and asked for comment on them; no comments 
were received. The agencies have updated these values for these final 
rules; the details of the estimation of these factors are found in TSD 
Chapter 4.2.13. Though the agencies use these common values for their 
respective cost of ownership and payback period analyses, each agency's 
estimates for the cost of ownership and the payback period differ due 
to somewhat different estimates for vehicle cost increases and fuel 
savings. Some comments encouraged our inclusion of maintenance and 
repair costs in these calculations and the agencies have responded by 
including maintenance costs in that analysis of the final rule.

[[Page 62716]]

The potential effects of the rule on maintenance and repair costs are 
discussed in Sections III.H.2, IV.C.2, and Chapter 3.6 of the Joint 
TSD. When a new vehicle is destroyed in an accident, the higher costs 
of the replacement vehicle are already accounted for in the technology 
costs of new vehicles sold, since some of these are purchased to 
replace vehicles destroyed in accidents.\267\
---------------------------------------------------------------------------

    \267\ The agencies do not have information to estimate the 
effect of the rule on repair costs for vehicles that are damaged but 
not destroyed. Some repairs, such as minor dents, may be unaffected 
by changes in vehicles; others may be more or less expensive. 
Insurance premiums in principle could provide insight into the costs 
of damages associated with more expensive vehicles, but, because 
insurance premiums include costs for destroyed vehicles, which are 
already implicitly covered in the sales estimates, it is not 
possible to separately estimate the costs for repairs from insurance 
data. See Joint TSD Chapter 3.6 for further discussion of this 
issue.
---------------------------------------------------------------------------

     Vehicle sales assumptions--The first step in estimating 
lifetime fuel consumption by vehicles produced during a model year is 
to calculate the number of vehicles that are expected to be produced 
and sold. The agencies relied on the AEO 2011 and AEO 2012 Early 
Release Reference Cases for forecasts of total vehicle sales, while the 
baseline market forecast developed by the agencies (discussed in 
Section II.B and in Chapter 1 of the TSD) divided total projected sales 
into sales of cars and light trucks.
     Vehicle lifetimes and survival rates--As in the analysis 
for the proposed rule (and as in the MYs 2012-2016 final rule and 
Interim Joint TAR), we apply updated values of age-specific survival 
rates for cars and light trucks to the adjusted forecasts of passenger 
car and light truck sales to determine the number of these vehicles 
expected to remain in use during each year of their lifetimes. Since 
the proposal, these values were updated using the same methodology with 
which the original estimates were developed, together with recent 
vehicle registration data obtained from R.L. Polk. No comments were 
received on the vehicle lifetime and survival rates in the proposal.
     Vehicle miles traveled (VMT)--We calculated the total 
number of miles that cars and light trucks produced in each model year 
will be driven during each year of their lifetimes using estimates of 
annual vehicle use by age tabulated from the Federal Highway 
Administration's 2009 National Household Travel Survey (NHTS).\268\ In 
order to insure that the resulting mileage schedules imply reasonable 
estimates of future growth in total car and light truck use, we 
calculated the rate of future growth in annual mileage at each age that 
would be necessary for total car and light truck travel to meet the 
levels projected in the AEO 2012 Early Release Reference Case. The 
growth rate in average annual car and light truck use produced by this 
calculation is approximately 0.6 percent per year, and is applied in 
the agencies' modeling through 2050. We applied this growth rate to the 
mileage figures derived from the 2009 NHTS to estimate annual mileage 
by vehicle age during each year of the expected lifetimes of MY 2017-
2025 vehicles. A generally similar approach to estimating future 
vehicle use was used in the MYs 2012-2016 final rules and Interim Joint 
TAR, but the future growth rates in average vehicle use have been 
revised for this rule. No substantive technical comments were received 
on this approach.
---------------------------------------------------------------------------

    \268\ For a description of the Survey, see http://www.bts.gov/programs/national_household_travel_survey/ (last accessed Sept. 
9, 2011).
---------------------------------------------------------------------------

     Accounting for the fuel economy rebound effect--The fuel 
economy rebound effect refers to the increase in vehicle use (VMT) that 
results if an increase in fuel economy lowers the cost of driving. The 
agencies are continuing to use a 10 percent fuel economy rebound 
effect, consistent with the proposal, in their analyses of fuel savings 
and other benefits from more stringent standards. This value is also 
consistent with that used in the MYs 2012-2016 light-duty vehicle 
rulemaking and the Interim Joint TAR. That is, we assume that a 10 
percent decrease in fuel cost per mile resulting from our standards 
would result in a 1 percent increase in the annual number of miles 
driven at each age over a vehicle's lifetime. We received comments 
recommending values both higher and lower than our proposed value of 10 
percent for the fuel economy rebound effect, as well as comments 
maintaining that there were indirect rebound effects for which the 
agencies should account. The agencies discuss comments on this topic in 
more detail in sections III.H.4 and IV.C.3 of the preamble. The 
agencies do not regard any of these comments as providing new data or 
analysis that justify revising the 10 percent value. In Chapter 4 of 
the joint TSD, we provide a detailed explanation of the basis for our 
fuel economy rebound estimate, including a summary of new literature 
published since the MYs 2012-2016 rulemaking that lends further support 
to the 10 percent rebound estimate. We also refer the reader to 
Chapters X and XII of NHTSA's RIA and Chapter 4 of EPA's RIA for 
sensitivity and uncertainty analyses of alternative fuel economy 
rebound assumptions.
     Benefits from increased vehicle use--The increase in 
vehicle use from the rebound effect results from vehicle buyers' 
decisions to make more frequent trips or travel farther to reach more 
desirable destinations. This additional travel provides benefits to 
drivers and their passengers by improving their access to social and 
economic opportunities away from home. The analysis estimates the 
economic benefits from increased rebound-effect driving as the sum of 
the fuel costs they incur during that additional travel, plus the 
consumer surplus drivers receive from the improved accessibility their 
travel provides. No comments were received on this particular issue. As 
in the analysis for the proposed rule (and as in the MYs 2012-2016 
final rule) we estimate the economic value of this consumer surplus 
using the conventional approximation, which is one half of the product 
of the decline in operating costs per vehicle-mile and the resulting 
increase in the annual number of miles driven.
     Added costs from congestion, accidents, and noise--
Although it provides benefits to drivers as described above, increased 
vehicle use associated with the fuel economy rebound effect also 
contributes to increased traffic congestion, motor vehicle accidents, 
and highway noise. Depending on how the additional travel is 
distributed over the day and where it takes place, additional vehicle 
use can contribute to traffic congestion and delays by increasing the 
number of vehicles using facilities that are already heavily traveled. 
These added delays impose higher costs on drivers and other vehicle 
occupants in the form of increased travel time and operating expenses. 
At the same time, this additional travel also increases costs 
associated with traffic accidents and vehicle noise. No comments were 
received on the specific economic assumptions employed in the proposal. 
The agencies are using the same methodology as used in the analysis for 
the proposed rule, relying on estimates of congestion, accident, and 
noise costs imposed by automobiles and light trucks developed by the 
Federal Highway Administration to estimate these increased external 
costs caused by added driving.\269\ This method is also

[[Page 62717]]

consistent with the MYs 2012-2016 final rules.
---------------------------------------------------------------------------

    \269\ These estimates were developed by FHWA for use in its 1997 
Federal Highway Cost Allocation Study; http://www.fhwa.dot.gov/policy/hcas/final/index.htm (last accessed July 8, 2012).
---------------------------------------------------------------------------

     Petroleum consumption and import externalities--U.S. 
consumption of imported petroleum products imposes costs on the 
domestic economy that are not reflected in the market price for crude 
oil, or in the prices paid by consumers of petroleum products such as 
gasoline (often referred to as ``energy security'' costs). These costs 
include (1) higher prices for petroleum products resulting from the 
effect of increased U.S. demand for imported oil on the world oil price 
(the ``monopsony effect''); (2) the expected costs associated with the 
risk of disruptions to the U.S. economy caused by sudden reductions in 
the supply of imported oil to the U.S. (often referred to as 
``macroeconomic disruption and adjustment costs''); and (3) expenses 
for maintaining a U.S. military presence to secure imported oil 
supplies from unstable regions, and for maintaining the strategic 
petroleum reserve (SPR) to cushion the U.S. economy against the effects 
of oil supply disruptions (i.e., ``military/SPR costs'').\270\ While 
the agencies received a number of comments regarding these energy 
security costs, particularly the treatment of military costs, we 
continue to use the same methodology from the proposal. Further 
discussion of these comments and the agencies' responses can be found 
in Sections III.H.8 and IV.3.
---------------------------------------------------------------------------

    \270\ See, e.g., Bohi, Douglas R. and W. David Montgomery 
(1982). Oil Prices, Energy Security, and Import Policy Washington, 
DC: Resources for the Future, Johns Hopkins University Press; Bohi, 
D. R., and M. A. Toman (1993). ``Energy and Security: Externalities 
and Policies,'' Energy Policy 21:1093-1109; and Toman, M. A. (1993). 
``The Economics of Energy Security: Theory, Evidence, Policy,'' in 
A. V. Kneese and J. L. Sweeney, eds. (1993). Handbook of Natural 
Resource and Energy Economics, Vol. III. Amsterdam: North-Holland, 
pp. 1167-1218.
---------------------------------------------------------------------------

     Monopsony Component--The energy security analysis 
conducted for this rule estimates that the world price of oil will fall 
modestly in response to lower U.S. demand for refined 
fuel.271,272 Although the reduction in the global price of 
crude oil and refined petroleum products due to decreased demand for 
fuel in the U.S. resulting from this rule represents a benefit to the 
U.S. economy, it simultaneously represents an economic loss to sellers 
of crude petroleum and refined products from other countries. 
Recognizing the redistributive nature of this ``monopsony effect'' when 
viewed from a global perspective (which is consistent with the 
agencies' use of a global estimate for the social cost of carbon to 
value reductions in CO2 emissions), the energy security 
benefits estimated to result from this program exclude the value of 
this monopsony effect.
---------------------------------------------------------------------------

    \271\ Leiby, Paul. Oak Ridge National Laboratory. ``Approach to 
Estimating the Oil Import Security Premium for the MY 2017-2025 
Light Duty Vehicle Rule'' 2012, EPA Docket EPA-HQ-OAR-2010-0799-
41789.
    \272\ Note that this change in world oil price is not reflected 
in the AEO fuel price projections described earlier in this section.
---------------------------------------------------------------------------

     Macroeconomic Disruption Component: In contrast to 
monopsony costs, the macroeconomic disruption and adjustment costs that 
arise from sudden reductions in the supply of imported oil to the U.S. 
do not have offsetting impacts outside of the U.S., so we include the 
estimated reduction in their expected value stemming from reduced U.S. 
petroleum imports in our energy security benefits estimated for this 
program.
     Military and SPR Component: We recognize that there may be 
significant (if unquantifiable) benefits in improving national security 
by reducing U.S. oil imports, and public comments supported the 
agencies inclusion of such benefits. Quantification of military 
security benefits is challenging because attribution to particular 
missions or activities is difficult and because it is difficult to 
anticipate the impact of reduced U.S. oil imports on military spending. 
The agencies do not have a robust way to calculate these benefits at 
this time, and thus exclude U.S. military costs from the analysis.
    Similarly, since the size of the SPR, or other factors affecting 
the cost of maintaining the SPR, historically have not varied in 
response to changes in U.S. oil import levels, we exclude changes in 
the cost of maintaining the SPR from the estimates of the energy 
security benefits of the program. The agencies continue to examine 
appropriate methodologies for estimating the impacts on military and 
SPR costs as U.S. oil imports are reduced.
    To summarize, the agencies have included only the macroeconomic 
disruption and adjustment costs portion of potential energy security 
benefits to estimate the monetary value of the total energy security 
benefits of this program. The energy security premium values in this 
final rule have been updated since the proposal to reflect the AEO2012 
Early Release Reference Case projection of future world oil prices. 
Otherwise, the methodology for estimating the energy security benefits 
is consistent with that used in the proposal. Based on an update of an 
earlier peer-reviewed Oak Ridge National Laboratory study that was used 
in support of the both the MYs 2012-2016 light duty vehicle and the MYs 
2014-2018 medium- and heavy-duty vehicle rulemakings, we estimate that 
each gallon of fuel saved will reduce the expected macroeconomic 
disruption and adjustment costs of sudden reductions in the supply of 
imported oil to the U.S. economy by $0.197 (2010$) in 2025. Each gallon 
of fuel saved as a consequence of higher standards is anticipated to 
reduce total U.S. imports of crude oil or refined fuel by 0.95 
gallons.\273\
---------------------------------------------------------------------------

    \273\ Each gallon of fuel saved is assumed to reduce imports of 
refined fuel by 0.5 gallons, and the volume of fuel refined 
domestically by 0.5 gallons. Domestic fuel refining is assumed to 
utilize 90 percent imported crude petroleum and 10 percent 
domestically-produced crude petroleum as feedstocks. Together, these 
assumptions imply that each gallon of fuel saved will reduce imports 
of refined fuel and crude petroleum by 0.50 gallons + 0.50 gallons * 
90 percent = 0.50 gallons + 0.45 gallons = 0.95 gallons.
---------------------------------------------------------------------------

     Air pollutant emissions--
     Impacts on criteria air pollutant emissions--Criteria air 
pollutants emitted by vehicles, during fuel production and 
distribution, and during electricity generation include carbon monoxide 
(CO), hydrocarbon compounds (usually referred to as ``volatile organic 
compounds,'' or VOC), nitrogen oxides (NOX), fine 
particulate matter (PM2.5), and sulfur oxides 
(SOX). Although reductions in domestic fuel refining and 
distribution that result from lower fuel consumption will reduce U.S. 
emissions of these pollutants, additional vehicle use associated with 
the rebound effect, and additional electricity generation to power 
PHEVs and EVs will increase emissions. Thus the net effect of more 
stringent GHG and fuel economy standards on emissions of each criteria 
pollutant depends on the relative magnitudes of reduced emissions from 
fuel refining and distribution, and increases in emissions resulting 
from added vehicle use. The agencies' analysis assumes that the per-
mile criteria pollutant emission rates for cars and light trucks 
produced during the model years affected by the rule will remain 
constant at the levels resulting from EPA's Tier 2 light duty vehicle 
emissions standards. The agencies' approach to estimating criteria air 
pollutant emissions is consistent with the method used in the proposal 
and in the MYs 2012-2016 final rule (where the agencies received no 
significant adverse comments), although the agencies employ a more 
recent version of the EPA's MOVES (Motor Vehicle Emissions Simulator) 
model, as well as new estimates of the emission rates from electricity 
generation. No comments were received on the use of the MOVES model. 
The agencies analyses of

[[Page 62718]]

emissions from electric power plants are discussed in EPA RIA chapter 
4, NHTSA RIA chapter VIII and NHTSA's EIS.
     Economic value of reductions in criteria pollutant 
emissions--To evaluate benefits from reducing emissions of criteria 
pollutants over the lifetimes of MY 2017-2025 vehicles, EPA and NHTSA 
estimate the economic value of the human health impacts associated with 
reducing population exposure to PM2.5 using a ``dollar-per-
ton'' method. These PM2.5-related dollar-per-ton estimates 
provide the total monetized impacts to human health (the sum of changes 
in the incidence of premature mortality and morbidity) that result from 
eliminating or adding one ton of directly emitted PM2.5, or 
one ton of PM2.5 precursor (such as NOX, 
SOX, and VOCs, which are emitted as gases but form 
PM2.5 as a result of atmospheric reactions), from a 
specified source. These unit values remain unchanged from the proposal. 
Note that the agencies' joint analysis of criteria air pollutant 
impacts over the model year lifetimes of 2017-2025 vehicles includes no 
estimates of the direct health or other impacts associated with 
emissions of criteria pollutants other than PM2.5 (as 
distinguished from their indirect effects as precursors to 
PM2.5). The agencies did receive comments arguing that the 
agencies should have included these impacts in their analyses, however, 
no ``dollar-per-ton'' method exists for ozone or toxic air pollutants 
due to complexity associated with atmospheric chemistry (for ozone and 
toxics) and a lack of economic valuation data and methods (for air 
toxics).
    For the final rule, however, EPA and NHTSA also conducted full 
scale, photochemical air quality modeling to estimate the change in 
ambient concentrations of ozone, PM2.5 and air toxics (i.e., 
hazardous air pollutants listed in section 112(b) of the Clean Air Act) 
for the year 2030, and used these results as the basis for estimating 
the human health impacts and their economic value of the rule in 2030. 
However, the agencies have not conducted such modeling over the 
complete life spans of the vehicle model years subject to this 
rulemaking, due to timing and resource limitations. Section III.H.7 
below and Appendix E of NHTSA's Final EIS present these impact 
estimates.
     Impacts on greenhouse gas (GHG) emissions--NHTSA estimates 
reductions in emissions of carbon dioxide (CO2) from 
passenger car and light truck use by multiplying the estimated 
reduction in consumption of fuel (gasoline and diesel) by the quantity 
or mass of CO2 emissions released per gallon of fuel 
consumed. EPA directly calculates reductions in total CO2 
emissions from the projected reductions in CO2 emissions by 
each vehicle subject to these rules.\274\ Both agencies also calculate 
the impact on CO2 emissions that occur during fuel 
production and distribution resulting from lower fuel consumption, as 
well as the emission impacts due to changes in electricity production. 
Although CO2 emissions account for nearly 95 percent of 
total GHG emissions that result from fuel combustion during vehicle 
use, emissions of other GHGs are potentially significant as well 
because of their higher ``potency'' as GHGs than that of CO2 
itself. EPA and NHTSA therefore also estimate the changes in emissions 
of non-CO2 GHGs that occur during fuel production, 
electricity use, and vehicle use due to their respective 
standards.\275\ The agencies approach to estimating GHG emissions is 
consistent with the method used at proposal (and in the MYs 2012-2016 
final rule and the Interim Joint TAR). No comments were received on the 
method for calculating impacts on greenhouse gas emissions, although 
several commenters discussed the emission factors used for electricity 
generation. These comments are discussed in section III.C and IV.X.
---------------------------------------------------------------------------

    \274\ The weighted average CO2 content of 
certification gasoline is estimated to be 8,887 grams per gallon, 
while that of diesel fuel is estimated to be approximately 10,180 
grams per gallon.
    \275\ There is, however, an exception. NHTSA does not and cannot 
claim benefit from reductions in downstream emissions of HFCs 
because they do not relate to fuel economy, while EPA does because 
all GHGs are relevant for purposes of EPA's Clean Air Act standards.
---------------------------------------------------------------------------

     Economic value of reductions in CO2 emissions--
EPA and NHTSA assigned a dollar value to reductions in CO2 
emissions, consistent with the proposal, using recent estimates of the 
``social cost of carbon'' (SCC) developed by a federal interagency 
group that included representatives from both agencies and reported the 
results of its work in February 2010. As that group's report observed, 
``The SCC is an estimate of the monetized damages associated with an 
incremental increase in carbon emissions in a given year. It is 
intended to include (but is not limited to) changes in net agricultural 
productivity, human health, property damages from increased flood risk, 
and the value of ecosystem services due to climate change.'' \276\ 
Published estimates of the SCC, as well as those developed by the 
interagency group, vary widely as a result of uncertainties about 
future economic growth, climate sensitivity to GHG emissions, 
procedures used to model the economic impacts of climate change, and 
the choice of discount rates.\277\ The SCC Technical Support Document 
(SCC TSD) provides a complete discussion of the methods used by the 
federal interagency group to develop its SCC estimates. Several 
commenters expressed support for using SCC to value reductions in 
CO2 emissions and provided detailed recommendations directed 
at improving the estimates. One commenter disagreed with the use of 
SCC. However, as discussed in III.H.6 and IV.C.3 of the preamble, the 
SCC estimates were developed using a reasonable set of input 
assumptions that are supported by published literature. As noted in the 
SCC TSD, the U.S. government intends to revise these estimates over 
time, if appropriate, taking into account new research findings that 
were not available in 2010.
---------------------------------------------------------------------------

    \276\ SCC TSD, see page 2. Docket ID EPA-HQ-OAR-2010-0799-0737, 
Technical Support Document: Social Cost of Carbon for Regulatory 
Impact Analysis Under Executive Order 12866, Interagency Working 
Group on Social Cost of Carbon, with participation by Council of 
Economic Advisers, Council on Environmental Quality, Department of 
Agriculture, Department of Commerce, Department of Energy, 
Department of Transportation, Environmental Protection Agency, 
National Economic Council, Office of Energy and Climate Change, 
Office of Management and Budget, Office of Science and Technology 
Policy, and Department of Treasury (February 2010). Also available 
at http://epa.gov/otaq/climate/regulations.htm.
    \277\ SCC TSD, see pages 6-7.
---------------------------------------------------------------------------

    Several commenters also recommended presenting monetized estimates 
of the benefits of reductions in non-CO2 GHG emissions 
(i.e., methane, nitrous oxides, and hydrofluorocarbons) expected to 
result from the final rule. Although the agencies are not basing their 
primary analyses on this suggested approach, they have conducted 
sensitivity analyses of the final rule's monetized non-CO2 
GHG impacts in preamble section III.H.6 and Chapter X of NHTSA's FRIA. 
Preamble sections III.H.6 and IV.C.3 also provide a more detailed 
discussion about the response to comments on SCC.
     The value of changes in driving range--By reducing the 
frequency with which drivers typically refuel their vehicles and by 
extending the upper limit of the range they can travel before requiring 
refueling, improving fuel efficiency provides additional benefits to 
vehicle owners. The primary benefits from reducing the required 
frequency of refueling are the value of time saved by drivers and other 
vehicle occupants, as well as the value of the minor savings in fuel 
that would have been consumed during refueling trips that are no longer

[[Page 62719]]

required. Using recent data on vehicle owners' refueling patterns 
gathered from a survey conducted by the National Automotive Sampling 
System (NASS), NHTSA was able to more accurately estimate the 
characteristics of refueling trips. NASS data provided NHTSA with the 
ability to estimate the average time required for a refueling trip, the 
average time and distance drivers typically travel out of their way to 
reach fueling stations, the average number of adult vehicle occupants 
during refueling trips, the average quantity of fuel purchased, and the 
distribution of reasons given by drivers for refueling. From these 
estimates, NHTSA constructed a revised set of assumptions to update 
those used in the MYs 2012-2016 FRM for calculating refueling-related 
benefits. The MYs 2012-2016 FRM discussed NHTSA's intent to utilize the 
NASS data on refueling trip characteristics in future rulemakings. 
While the NASS data improve the precision of the inputs used in the 
analysis of benefits resulting from less frequent refueling, the 
framework of the analysis remains essentially the same as in the MYs 
2012-2016 final rule. Note that this topic and associated benefits were 
not covered in the Interim Joint TAR. No comments were received on the 
refueling analysis presented in the NPRM. Detailed discussion and 
examples of the agencies' approaches are provided in Chapter VIII of 
NHTSA's FRIA and Chapter 7 of EPA's RIA.
     Discounting future benefits and costs--Discounting future 
fuel savings and other benefits is intended to account for the 
reduction in their value to society when they are deferred until some 
future date, rather than received immediately.\278\ The discount rate 
expresses the percent decline in the value of these future fuel-savings 
and other benefits--as viewed from today's perspective--for each year 
they are deferred into the future. In evaluating the non-climate 
related benefits of the final standards, the agencies have employed 
discount rates of both 3 percent and 7 percent, consistent with the 
proposal. One commenter (UCS) agreed with the agencies' use of 3 and 7 
percent discount rates, while another (API) stated that the Energy 
Information Administration (EIA) uses a 15 percent ``consumer-relevant 
discount rate when evaluating the economic cost-effectiveness of new 
vehicle efficiency technology,'' which it noted would affect the 
agencies' assumptions of benefits if employed. The agencies have 
continued to employ the 3 and 7 percent discount rate values for the 
final rule analysis, as discussed further below in section IV.C.3 and 
in Chapter 4 of the Joint TSD.
---------------------------------------------------------------------------

    \278\ Because all costs associated with improving vehicles' fuel 
economy and reducing CO2 emissions are assumed to be 
incurred at the time they are produced, these costs are already 
expressed in their present values as of each model year affected by 
the rule, and require discounting only for the purpose of expressing 
them as present values as of a common year (2012 for the Calendar 
Year analysis; the first year of production for each MY vehicle--
2017 through 2025--for the Model Year analysis).
---------------------------------------------------------------------------

    For the reader's reference, Table II-19 and Table II-20 below 
summarize the values used by both agencies to calculate the impacts of 
the final standards. The values presented in these tables are summaries 
of the inputs used for the models; specific values used in the 
agencies' respective analyses may be aggregated, expanded, or have 
other relevant adjustments. See the Joint TSD, Chapter 4, and each 
agency's respective RIA for details.
    A wide range of estimates is available for many of the primary 
inputs that are used in the agencies' CAFE and GHG emissions models. 
The agencies recognize that each of these values has some degree of 
uncertainty, which the agencies further discuss in the Joint TSD. The 
agencies tested the sensitivity of their estimates of costs and 
benefits to a range of assumptions about each of these inputs, and 
found that the magnitude of these variations would not have changed the 
final standards. For example, NHTSA conducted separate sensitivity 
analyses for, among other things, discount rates, fuel prices, the 
social cost of carbon, the fuel economy rebound effect, consumers' 
valuation of fuel economy benefits, battery costs, mass reduction 
costs, energy security costs, and the indirect cost markup factor. This 
list is similar in scope to the list that was examined in the proposal, 
but includes post-warranty repair costs and transmission shift 
optimizer effectiveness as well. NHTSA's sensitivity analyses are 
contained in Chapter X of NHTSA's RIA.
    Similarly, EPA conducted sensitivity analyses on discount rates, 
the social cost of carbon, the rebound effect, battery costs, mass 
reduction costs, the indirect cost markup factor and on the cost 
learning curves used in this analysis. These analyses are found in 
Chapters 3, 4, and 7 of the EPA RIA. In addition, NHTSA performed a 
probabilistic uncertainty analysis examining simultaneous variation in 
the major model inputs including technology costs, technology benefits, 
fuel prices, the rebound effect, and military security costs. This 
information is provided in Chapter XII of NHTSA's RIA.

     Table II-19--Economic Values for Benefits Computations (2010$)
------------------------------------------------------------------------
        Rebound effect                            10%
------------------------------------------------------------------------
``Gap'' between test and on-   20%.
 road MPG for liquid-fueled
 vehicles.
``Gap'' between test and on-   30%.
 road electricity consumption
 for electric and plug-in
 hybrid electric vehicles.
Annual growth in average       0.6.
 vehicle use.
------------------------------------------------------------------------
                 Fuel Prices (2017-50 average, $/gallon)
------------------------------------------------------------------------
Retail gasoline price........  $4.13.
Pre-tax gasoline price.......  3.78.
------------------------------------------------------------------------
         Economic Benefits from Reducing Oil Imports ($/gallon)
------------------------------------------------------------------------
``Monopsony'' Component......  $ 0.0.0.
Macroeconomic Disruption        0.197 in 2025.
 Component.
Military/SPR Component.......   0.00.
    Total Economic Costs ($/    0.197 in 2025.
     gallon).
------------------------------------------------------------------------
       Emission Damage Costs (2020, $/short ton, 3% discount rate)
------------------------------------------------------------------------
Carbon monoxide..............  $ 0.

[[Page 62720]]

 
Nitrogen oxides (NOX)--         5,600.
 vehicle use.
Nitrogen oxides (NOX)--fuel     5,400.
 production and distribution.
Particulate matter (PM2.5)--    310,000.
 vehicle use.
Particulate matter (PM2.5)--    250,000.
 fuel production and
 distribution.
Sulfur dioxide (SO2).........   33,000.
Annual CO2 Damage Cost (per    Variable, depending on discount rate and
 metric ton).                   year (see Table II-20 for 2017
                                estimate).
------------------------------------------------------------------------
     External Costs from Additional Automobile Use ($/vehicle-mile)
------------------------------------------------------------------------
Congestion...................  $ 0.056.
Accidents....................   0.024.
Noise........................   0.001.
                              ------------------------------------------
    Total External Costs.....  $ 0.081.
------------------------------------------------------------------------
     External Costs from Additional Light Truck Use ($/vehicle-mile)
------------------------------------------------------------------------
Congestion...................  $0.050.
Accidents....................  0.027.
Noise........................  0.001.
                              ------------------------------------------
    Total External Costs.....  0.078.
Discount Rates Applied to      3%, 7%.
 Future Benefits.
------------------------------------------------------------------------


                          Table II-20--Social Cost of CO2 ($/metric ton), 2017 (2010$)
----------------------------------------------------------------------------------------------------------------
                  Discount rate                         5%              3%             2.5%             3%
----------------------------------------------------------------------------------------------------------------
Source of Estimate..............................             Mean of Estimated Values                       95th
                                                                                                      percentile
                                                                                                       estimate.
----------------------------------------------------------------------------------------------------------------
2017 Estimate...................................              $6             $26             $41            $79.
----------------------------------------------------------------------------------------------------------------

F. CO2 Credits and Fuel Consumption Improvement Values for Air 
Conditioning Efficiency, Off-Cycle Reductions, and Full-Size Pickup 
Trucks

    For the MYs 2012-2016 rule, EPA provided an option for 
manufacturers to generate credits for complying with GHG standards by 
incorporating efficiency-improving vehicle technologies that would 
reduce CO2 and fuel consumption from air conditioning (A/C) 
operation. EPA also provided another credit generating option for 
vehicle operation that is not captured by the Federal Test Procedure 
(FTP) and Highway Fuel Economy Test (HFET), also collectively known as 
the ``two-cycle'' test procedure. EPA referred to these credits as 
``off-cycle credits.'' See 76 FR 74937, 74998, 75020.
    EPA proposed to continue these credit mechanisms in the MYs 2017-
2025 GHG program, and is finalizing these proposals in this notice. EPA 
also proposed that certain of the A/C credits and the off-cycle credits 
be included under the CAFE program. See id. and 76 FR 74995-998. For 
this rule, under EPA's EPCA authority, EPA is allowing manufacturers to 
generate fuel consumption improvement values for purposes of CAFE 
compliance based on the use of A/C efficiency and the other off-cycle 
technologies. These fuel consumption improvement values will not apply 
to compliance with the CAFE program for MYs 2012-2016. Also, reductions 
in direct A/C emissions resulting from leakage of HFCs from air 
conditioning systems, which are generally unrelated to fuel consumption 
reductions, will not apply to compliance with the CAFE program. Thus, 
as discussed below, credits for refrigerant leakage emission reductions 
will continue to apply only to the EPA GHG program.
    The agencies expect that, because of the significant credits and 
fuel consumption improvement values available for improvements to the 
efficiency of A/C systems (up to 5.0 g/mi for cars and 7.2 g/mi for 
trucks which is equivalent to a fuel consumption improvement value of 
0.000563 gal/mi for cars and 0.000810 gal/mi for trucks), manufacturers 
will take technological steps to maximize these benefits. Since we 
project that all manufacturers will adopt these A/C improvements to 
their maximum extent, EPA has adjusted the stringency of the two-cycle 
tailpipe CO2 standards in order to account for this 
projected widespread penetration of A/C credits (as described more 
fully in Section III.C),\279\ and NHTSA has also accounted for expected 
A/C efficiency improvements in determining the maximum feasible CAFE 
standards. The agencies discuss these CO2 credits and fuel 
consumption improvement values below and in more detail in Chapter 5 of 
the Joint TSD. We also discuss below how other (non-A/C) off-cycle 
improvements in CO2 and fuel consumption may be eligible to 
apply towards compliance with the GHG and CAFE standards; however, with 
two exceptions (for the two-cycle benefits of stop-start and active 
aerodynamic improvements--technologies which EPA expects manufacturers 
to adopt widely and whose benefits can be reliably quantified), these 
off-cycle improvements are not incorporated in the stringency of the 
standards Finally, EPA discusses in Section III.C below the

[[Page 62721]]

GHG A/C leakage credits that are exclusive to the GHG standards.
---------------------------------------------------------------------------

    \279\ Similarly, the MYs 2012-2016 GHG standards reflect direct 
and indirect A/C improvements. See 75 FR 25371, May 7, 2010.
---------------------------------------------------------------------------

    EPA, in coordination with NHTSA, is also introducing for MYs 2017-
2025 a new incentive for certain advanced technologies used in full-
sized pickup trucks. Under its EPCA authority for CAFE and under its 
CAA authority for GHGs, EPA is establishing GHG credits and fuel 
economy improvement values for manufacturers that hybridize a 
significant quantity of their full size pickup trucks, or that use 
other technologies that significantly reduce CO2 emissions 
and fuel consumption from these full-sized pickup trucks.
    We discuss each of these types of credits and incentives, in detail 
below and throughout Chapter 5 of the Joint TSD. We also discuss and 
respond to the key comments throughout this section.
1. Air Conditioning Efficiency Credits and Fuel Consumption Improvement 
Values
    After detailed consideration of the comments and other available 
information, the agencies are finalizing a program of A/C efficiency 
credits and fuel consumption improvement values. Although the agencies 
are making some minor changes for the final rule, as described below, 
we are finalizing the program establishing efficiency credits and fuel 
consumption improvement values largely in its proposed form. 
Specifically, efficiency credits will continue to be calculated from a 
technology ``menu'' once manufacturers qualify for eligibility to 
generate A/C efficiency credits through specified A/C CO2 
emissions testing.
    The efficiency credits and fuel consumption improvement values in 
this rule reflect an understanding of the relationships between A/C 
technologies and CO2 emissions and fuel consumption that is 
improved from the MYs 2012-2016 rulemaking. Much of this understanding 
results from the use of a new vehicle simulation tool that EPA has 
developed and that the agencies used for the proposal and for this 
final rulemaking. EPA designed this model to simulate, in an integrated 
way, the dynamic behavior of the several key systems that affect 
vehicle efficiency: The engine, electrical, transmission, and vehicle 
systems. The simulation model is supported by data from a wide range of 
sources, and no comments were received raising concerns about the model 
or its use in this rule. Chapter 2 of the EPA Regulatory Impact 
Analysis discusses the development of this model in more detail.
    The agencies have identified several technologies related to 
improvements in A/C efficiency. Most of these technologies already 
exist on current vehicles, but manufacturers can improve the energy 
efficiency of the technology designs and operation. For example, most 
of the additional air conditioning related load on an engine is due to 
the compressor, which pumps the refrigerant around the system loop. The 
less the compressor operates, the less load the compressor places on 
the engine, resulting in less fuel consumption and CO2 
emissions. Thus, optimizing compressor operation to align with cabin 
demand by using more sophisticated sensors and control strategies is 
one path to improving the overall efficiency of the A/C system. See 
generally section 5.1.3 of Joint TSD Chapter 5.
    A broad range of stakeholders submitted general comments expressing 
support for the overall proposed program for A/C efficiency credits and 
fuel consumption improvement values as an appropriate method of 
encouraging efficiency-improving technologies. One commenter, Center 
for Biological Diversity, stated that ``[t]echnology that will be 
available during the rulemaking period and can be incorporated in an 
economically feasible manner should be built into the standard and not 
merely used as an `incentive'.'' In fact, all of these A/C improvements 
(for both indirect and direct A/C improvements) are reflected in the 
standard stringency.\280\ See section II.C.7.b above. Moreover, we have 
every expectation that manufacturers will use most if not all of these 
technologies--precisely because of their ready availability and 
relatively low cost.
---------------------------------------------------------------------------

    \280\ As explained in section I.B above, one reason the CAFE and 
GHG standards are not the same in miles-per-gallon space is that 
direct leakage A/C improvements are reflected in the GHG standards.
---------------------------------------------------------------------------

    Automaker and auto supplier commenters broadly supported the 
agencies' assessments of likely A/C efficiency-improving technologies 
and the credit values assigned to them. Several commenters suggested 
relatively minor changes in these assessments. One commenter, ICCT, 
suggested an approach that would attempt to vary A/C efficiency credits 
based on the degree to which other off-cycle improvements--specifically 
solar load reductions--may have independently reduced the demand for A/
C cooling. ICCT's suggestion was to address what the commenter viewed 
as a potential for `double-counting.' EPA agrees with the observation 
that A/C efficiency improvements and solar load improvements are 
related technically. However, we believe that the added complexity of 
scaling the established credit values for A/C technologies according to 
solar load improvements would not be warranted, given relatively small 
change in the overall credit values that would likely result. We are 
thus finalizing separate treatment of A/C efficiency and other off-
cycle improvements, as proposed. (We summarize and discuss comments on 
A/C efficiency test procedures below.)
    As described in Chapter 5.1.3.2 of the Joint TSD, EPA calculated 
the total eligible A/C efficiency credits from an analysis of the 
average impact of air conditioning on tailpipe CO2 
emissions. This methodology differs from the one used for the MYs 2012-
2016 rule, though it does give similar values. In the MYs 2012-2016 
rule, the total impact of A/C on tailpipe emissions was estimated to be 
3.9% of total GHG emissions, or approximately 14.3 g/mi. Largely based 
on an SAE feasibility study,\281\ EPA assumed that 40% of those 
emissions could be reduced through advanced technologies and controls. 
Thus, EPA calculated a maximum credit of 5.7 g/mi (for both cars and 
trucks) from efficiency improvements. EPA also assumed that there would 
be 85% penetration of these technologies when setting the standard, and 
consequently made the standard more stringent by 5.0 g/mi. For the MYs 
2017-2025 proposal, EPA recalculated the A/C tailpipe impact using its 
vehicle simulation tool. Based on these simulations, it was determined 
that trucks should have a higher impact than cars, and the total 
emissions due to A/C was calculated to be 11.9g/mi for cars and 17.1 g/
mi for trucks. In the proposal, the feasible level of control was 
increased slightly from the MYs 2012-2016 final rule to 42% (within the 
uncertainty bounds of the studies cited). Thus the maximum credit 
became 5.0 for cars and 7.2 for trucks, and the proposed stringency of 
the standards reflected these new levels as the penetrations increased 
from 85% in MY 2016 to 100% in MY 2017 (for car) and 2019 (for truck). 
Volkswagen commented that the change in split in the maximum car/truck 
efficiency credit from the previous rule changed the context for their 
compliance plans for cars. The agencies understand that a slightly 
lower maximum credit level could have a modest effect on compliance 
plans. We note that the level of stringency for cars due to A/C has not 
changed from the value we used

[[Page 62722]]

for MY 2016, as this was assumed to be 5.0 g/mi in the previous rule as 
well as in the more recent proposal. We also believe that it is 
appropriate that the program evolve as our understanding of the 
inventory of in-use GHG emission inventories improves--as is the case 
in this instance. Having said this, the levels of the credits did not 
change significantly for cars and thus should not significantly affect 
A/C related GHG credit and fuel consumption improvement value 
calculations. We are therefore, finalizing the 5.0 and 7.2 g/mi maximum 
credits for cars and trucks respectively as proposed. This represents 
an improvement in current A/C related CO2 and fuel 
consumption of 42% (again, as proposed) and the agencies are using this 
level of improvement to represent the maximum efficiency credit 
available to a manufacturer. This degree of improvement is reflected in 
the stringency of the final standards.
---------------------------------------------------------------------------

    \281\ Society of Automotive Engineers, ``IMAC Team 2--Improved 
Efficiency, Final Report,'' April 2006 (EPA Docket  EPA-HQ-
OAR-2010-0799).
---------------------------------------------------------------------------

    Specific components and control strategies that are available to 
manufacturers to reduce the air conditioning load on the engine are 
listed in Table II-21 below and are discussed in more detail in Chapter 
5 of the joint TSD.
a. A/C Idle Test
    Demonstrating the degree of efficiency improvement that a 
manufacturer's air conditioning systems achieve--thus quantifying the 
appropriate GHG credit and CAFE fuel consumption improvement value that 
the manufacturer is eligible for--would ideally involve a performance 
test. That is, manufacturers would use a test that would directly 
measure CO2 (and thus allow calculation of fuel consumption) 
before and after the incorporation of the improved technologies. A 
performance test would be preferable to a predetermined menu value 
because it could--potentially--provide a more accurate assessment of 
the efficiency improvements of differently designed A/C systems. 
Progress toward such a test (or tests) continues. As mentioned in the 
introduction to this section, the primary vehicle emissions and fuel 
consumption test, the Federal Test Procedure (FTP) or ``two-cycle'' 
test, does not require or simulate air conditioning usage through the 
test cycle. The existing SC03 test, which is used for developing the 
fuel economy and environment label values, is designed to identify any 
effect that the air conditioning system has on other emissions when it 
is operating under extreme temperature and solar conditions, but that 
test is not designed to measure the relatively small differences in 
tailpipe CO2 due to different A/C efficiency technologies.
    At the time of the final rule for the MYs 2012-2016 GHG program, 
EPA concluded that a practical, performance-based test procedure 
capable of quantifying efficiency credits was not yet available. 
Instead, EPA adopted a specialized new procedure for the more limited 
purpose of demonstrating that the design improvements for which a 
manufacturer was earning credits produced actual efficiency 
improvements. That is, passing the test was a precondition to 
generating A/C efficiency credits, but the test was not used in 
measuring the amount of those credits. See 76 FR 74938. EPA's test is 
fairly simple, performed while the vehicle is at idle, and thus named 
the A/C Idle Test, or just Idle Test. Beginning with the 2014 model 
year, manufacturers are required to achieve a certain CO2 
level on the Idle Test in order to then be able to use the technology-
based lookup table (``menu'') and thus quantify the appropriate number 
of GHG efficiency credits that the vehicle can generate. See 75 FR 
25427-31.
    In meetings since the MYs 2012-2016 final rule was published and 
during the public comment period for this rule, several manufacturers 
provided data that raise questions about the ability of the Idle Test 
to completely fulfill its intended purpose. Especially for smaller, 
lower-powered vehicles, the data show that it can be difficult to 
achieve a degree of test-to-test repeatability that manufacturers 
believe is necessary in order to comply with the Idle Test requirement 
and generate credits. Similarly, manufacturers and others have stated 
that the Idle Test does not accurately or sufficiently capture the 
improvements from many of the technologies listed in the menu. While 
two commenters (Hyundai and Kia) supported retaining the Idle Test for 
the purpose of generating A/C credits, most commenters strongly opposed 
any use of the Idle Test. In some cases, although they recommended that 
EPA abandon the Idle Test, several manufacturers suggested changes to 
the test if it is to remain as a part of the program. Specifically, 
these manufacturers supported the EPA proposals to scale the Idle Test 
results by engine size and to broaden the ambient temperature and 
humidity specifications for the Idle Test.
    EPA noted many of these concerns in the preamble to the proposed 
rule, and proposed certain changes to the A/C Idle Test as a result. 
See 76 FR 74938. EPA also notes that the Idle Test was never meant to 
directly quantify the credits generated and we acknowledge that it is 
inadequate to that task. The Idle Test was meant simply to set a 
threshold in order to access the menu to generate credits (and in some 
cases to adjust the menu values for partial credit). EPA also discussed 
that it had developed a more rigorous (albeit more complicated and 
expensive to perform) test--the AC17 test--which includes the SC03 
driving cycle, the fuel economy highway cycle, a preconditioning cycle, 
and a solar peak period. EPA proposed that the AC17 test would be 
mandatory in MYs 2017 and following model years, but that the AC Idle 
Test would continue to be used in MYs 2014-2016 (with the AC17 test 
used as a report-only alternative in those earlier model years).\282\ 
Under the proposal, the AC17 test (unlike the AC Idle Test) would be 
used in fixing the amount of available credit. Specifically, if the 
AC17 test result, compared to a baseline AC17 test of a previous model 
year vehicle without the improved technology, equaled or surpassed the 
amount of menu credit, the manufacturer would receive the full menu 
credit amount. If the AC17 test result was less than the menu value, 
the manufacturer would receive the amount of credit corresponding to 
the AC17 test result.\283\
---------------------------------------------------------------------------

    \282\ 76 FR 74940.
    \283\ 76 FR 74940.
---------------------------------------------------------------------------

    Since proposal, EPA has continued to carefully evaluate the 
concerns and suggestions relating to the Idle Test. The agency 
recognizes that there are technical shortcomings as well as advantages 
to this relatively simple and inexpensive test. EPA has concluded that, 
given that a more sophisticated A/C is now available, the most 
appropriate course is to maintain the availability of the AC Idle Test 
through MY 2016, but to also allow manufacturers the option of using 
the AC17 test to demonstrate that A/C components are indeed functioning 
effectively. This use of the AC17 test as an alternative to the Idle 
Test will be allowed, commencing with MY 2014. Thus, for MYs 2014, 
2015, and 2016, manufacturers will be able to generate A/C efficiency 
credits from the technology menu by performing and reporting results 
from the AC17 test in lieu of passing the Idle Test. During these model 
years, the level of credit and fuel consumption improvement value 
manufacturers can generate from the menu will be based on the design of 
the A/C system. In MYs 2017-2019, eligibility for AC efficiency credits 
will be determined solely by performing and reporting AC17 test 
results. During this time, the process for determining the

[[Page 62723]]

level of credit and fuel consumption improvement value will be the same 
as during MYs 2014, 2015, and 2016. Finally, starting in MY 2020, AC17 
test results will be used both to determine eligibility for AC 
efficiency credits and to play a role in determining the amount of the 
credit, as proposed. In order to determine the amount of credit or fuel 
consumption improvement value after MY 2020, an A to B comparison will 
be required. The credit and fuel consumption improvement menu will 
continue to be used. Because of the general technical support for the 
AC17 test, and in light of several important clarifications and changes 
that EPA is implementing to minimize the AC17 testing burden on 
manufacturers, EPA believes that most if not all manufacturers wishing 
to generate efficiency credits will choose to perform the AC17 test. 
Specifically, EPA is modifying the proposed AC17 test procedure to 
reduce the number of vehicles requiring testing, so that many fewer 
vehicles will need to be tested on the AC17 than on the Idle Test. 
Further discussion of the AC17 test appears below in this section of 
the preamble and in Chapter 5.1.3.6 of the Joint TSD.
    However, EPA is continuing to allow the Idle Test as a testing 
option through MY 2016. In addition, EPA is finalizing the 
modifications that we proposed to the Idle Test, making the threshold 
for access to the menu a function of engine displacement an option 
instead of the flat threshold, as well as adjusting the temperature and 
humidity specifications in the AC Idle Test. We are also finalizing the 
proposed modification that would allow a partial credit if the Idle 
Test performance is better than typical performance, based on historic 
EPA results from Idle Testing. Chapter 5.1.3.5 of the Joint TSD further 
describes the adjustments that EPA is making to the Idle Test for MYs 
2014-2016.
b. AC17 Test
    As mentioned above, EPA, working in a joint collaboration with 
manufacturers (through USCAR) and CARB, has made significant progress 
in developing a more robust A/C-related emissions test. As noted above, 
the AC17 test is a four-part performance test, which combines the 
existing SC03 driving cycle, the fuel economy highway cycle, as well as 
a pre-conditioning cycle and a solar soak period. As proposed, and as 
discussed below, EPA will allow manufacturers choosing to generate 
efficiency credits to report the results of the AC17 test in lieu of 
the Idle Test requirements for MYs 2014-2016, and will require them to 
use the AC17 test after MY 2016. Until MY 2019, as for MYs 2014-2016, 
manufacturers will need to report the results from AC17 testing, but 
not to achieve a specific CO2 emissions reduction in order 
to access the menu. However, beginning with MY 2020, they will need to 
compare the test results to those of a baseline vehicle to demonstrate 
a measureable improvement in A/C CO2 emissions and fuel 
consumption as a precondition to generating AC efficiency credits from 
the A/C credit and fuel consumption improvement menu; in the event that 
the improvement is less than the menu value, the amount of credit would 
be determined by the AC17 test result.
    EPA is making several technical and programmatic changes to the 
proposed AC17 test to minimize the number of vehicles that 
manufacturers will need to test, and to further streamline each test in 
order to minimize the testing burden. Since the appropriateness of the 
AC17 test for actually quantifying absolute A/C efficiency improvements 
(as opposed to demonstrating a relative improvement) is still being 
evaluated, manufacturers wishing to generate A/C efficiency credits 
will continue to use the technology menu to quantify the amount of 
CO2 credits and fuel consumption improvement values for 
compliance with the GHG and CAFE programs. A number of commenters, 
including the Alliance, Ford, The Global Automakers, and others 
suggested that further work with the industry on the test should occur 
before implementing its use. However, we believe that the general 
robustness of the test, combined with the technical and programmatic 
improvements that EPA is incorporating in this final rule (as discussed 
below), and the de facto phase-in of the test in MYs 2014-2016 as well 
as MYs 2017-2019, support our decision to implement the test.
i. AC17 Technical Issues
    Commenters universally agreed that in most technical respects the 
AC17 test represents an improvement over the Idle Test. A few 
commenters suggested specific technical changes, which EPA has 
considered. Several auto industry commenters suggested that the 
proposed temperature and humidity tolerances of the test cell 
conditions may result in voided tests, due to the difficulty they see 
in maintaining these conditions throughout a 4-hour test interval. 
However, as discussed in more detail in Chapter 5 of the joint TSD, we 
are allowing manufacturers to utilize a 30-second moving average for 
the test chamber temperature; we have concluded that these tolerances 
are achievable with this revision, and that widening these tolerances 
would negatively affect the accuracy and repeatability of the test. As 
a result, we are finalizing the tolerances as originally proposed. 
Also, one commenter (Enhanced Protective Glass Automotive Association 
or EPGAA) suggested that for manual A/C systems, the A/C temperature 
control settings for the test be based on actual cabin temperatures 
rather than on the duration of lapsed time of the test, as proposed. 
EPA does not disagree in theory with the purpose of such a change--to 
attempt to better align the control requirements for a manual A/C 
system with those for an automatic system. However, the effect on test 
results of the slightly different control requirements is not large, 
and we believe that it would be impractical for the technician/driver 
to monitor cabin temperature and adjust the system accordingly during 
the test. We are therefore finalizing the automatic and manual A/C 
system control requirements as proposed.
    In several cases, commenters suggested other technical changes to 
the AC17 test that EPA agrees will make performance of the test more 
efficient, with no appreciable effect on test accuracy. The relatively 
minor technical changes that we are finalizing include provisions 
relating to: the points during the test when cell solar lamps are 
turned on; establishing a specification for test cell wind speed; and a 
simplification of the placement requirements for ambient temperature 
sensors in the passenger cabin. See joint TSD section 5.1.3.5 
explaining these changes more fully.
    Overall, EPA has concluded that the AC17 test as proposed, with the 
improvements described above, is a technically robust method for 
demonstrating differences in A/C system efficiency as manufacturers 
progressively apply new efficiency-improving technologies.
ii. AC17 Program Issues
    Beyond technical issues related to the AC17 test itself, many 
commenters expressed concerns about several related program issues--
i.e., how the agency proposed to use the test as a part of determining 
eligibility for A/C efficiency credits. First, many manufacturers and 
their trade associations stated that some characteristics of the AC17 
test unnecessarily add to the burden on manufacturers of performing 
each individual test. For example, the roughly 4-hour duration of the 
AC17 test limits the number of tests that can be performed in a given 
facility over a period of time. Also, the test requires the use of 
relatively costly SC03 test

[[Page 62724]]

chambers, and manufacturers say that they have, or have access to, only 
a limited number of these chambers.
    Most of these concerns, however, are direct results of necessary 
design characteristics of the test. Specifically, the impacts on 
vehicle efficiency of improved A/C technologies are relatively small 
compared to total vehicle CO2 emissions and fuel 
consumption. Similarly, the relative contributions of various A/C-
related components, systems, and controls can be difficult to isolate 
from one another. For these reasons, the joint government and industry 
collaborators designed the test to accurately and repeatably measure 
small differences in the efficiency of the entire vehicle related to A/
C operation. The result has been that the AC17 test takes a fairly long 
time to perform (about 4 hours) and requires the special climate-
controlled capability of an SC03 chamber, as well as relatively tight 
test parameters.
    As discussed above, EPA believes that the AC17 represents a major 
step toward the eventual goal of performance-based testing that could 
be used to directly quantify the very significant A/C efficiency 
credits and fuel consumption improvement values that are available to 
eligible manufacturers under this program. In this context, EPA 
believes that the characteristics of the AC17 test identified by the 
manufacturers in their comments generally tend to be inherent aspects 
needed for a robust test, and in most respects we are finalizing the 
requirements for the use of the AC17 as proposed.
    In addition to concerns about the effort required to perform each 
AC17 test, manufacturers also commented on what they understood as a 
requirement to run an unreasonable number of tests in order to qualify 
for efficiency credits and improvement values. On the other hand, ICCT 
commented that they believe that given the frequent changes in A/C 
technology, one or two tests per year for a manufacturer is too few, 
and that ``each significantly changed model should be tested.'' In 
response to these concerns, EPA has taken several steps in this final 
rule to clarify how a manufacturer will be able to use the AC17 to 
demonstrate the effectiveness of its different A/C systems and 
technologies while minimizing the number of tests that it will need to 
perform. In general, EPA believes that it is appropriate to limit the 
number of vehicles a manufacturer must test in any given model year to 
no more than one vehicle from each platform that generates credits (and 
CAFE improvement values) during each model year. For the purpose of the 
AC17 test and generating efficiency credits, EPA will use a definition 
for ``platform'' that allows a manufacturer to include several 
generally similar vehicle models in a single ``platform'' and to 
generate credits (or improvement values) for all of the vehicles with 
that platform based on a limited number of AC17 tests, as described 
below. This definition is slightly modified from the proposed 
definition, primarily by making clear that manufacturers need not 
necessarily associate vehicles that have different powertrains with 
different platforms for A/C credit purposes. The modified definition 
follows:
    ``Platform'' means a segment of an automobile manufacturer's 
vehicle fleet in which the vehicles have a degree of commonality in 
construction (primarily in terms of body and chassis design). Platform 
does not consider the model name, brand, marketing division, or level 
of decor or opulence, and is not generally distinguished by such 
characteristics as powertrain, roof line, or number of doors, seats, or 
windows. A platform may include vehicles from various fuel economy 
classes, including both light-duty vehicles and light-duty trucks/
medium-duty passenger vehicles.
    At the same time, EPA believes that if only a limited number of 
vehicles in a platform are to be tested on the AC17 in any given model 
year, it is important that vehicles in that platform with substantially 
different air conditioning designs be included in that testing over 
time. Thus, manufacturers with vehicles in a platform that are 
generating credits will need to choose a different vehicle model each 
year for AC17 testing. Testing will begin with the model that is 
expected to have highest sales. In the following model year, the 
manufacturer will choose the model in that platform representing the 
next-highest expected sales not already tested, and so on. This process 
will continue either until all vehicles in that platform that are 
generating credits have been tested (in which case the previous test 
data can be carried over) or until the platform experiences a major 
redesign (at which point the AC17 testing process will start over.) We 
believe that by clarifying the definition of ``platform'' and more 
clearly limiting testing to one test per platform per year, we have 
addressed the manufacturers' concerns about unreasonable test burdens.
    Finally, in order to further minimize the number of tests that will 
be required for A/C efficiency credit purposes, instead of requiring 
replicate testing in all cases, EPA will allow a manufacturer to submit 
data from as few as one AC17 test for each instance in which testing is 
required. A manufacturer concerned about the variability of its testing 
program may at its option choose to perform additional replicate tests 
and use of the AC17 test in MYs 2014-2016 is for reporting only) 
because the data from these initial years will form the basis on which 
future credits are measured as described below, and a more robust 
confirmation of test-to-test consistency may be in their interest.
    As mentioned above, for MYs 2019 and earlier (including optional 
AC17 testing prior to MY 2017), AC17 testing will only require 
reporting of results (and system characteristics) for manufacturers to 
be eligible to generate credits and improvement values from the 
technology menu. Beginning in MY 2020, manufacturers will also need to 
use AC17 testing to demonstrate that the A/C efficiency-improving 
technologies or systems on which the desired credits are based are 
indeed reducing CO2 emissions and fuel consumption. EPA 
proposed to have the manufacturer identify an appropriate comparison 
``baseline'' vehicle that did not incorporate the new technology, and 
generate CO2 emissions data on both vehicles. The 
manufacturer would be eligible for credits and fuel consumption 
improvement values to the extent that the test results showed an 
improvement over the earlier version of the vehicle without the 
improved technology. If the test result with the new technology 
demonstrated an emission reduction that is greater than or equal to the 
menu-based credit potential of those technologies, the manufacturer 
would generate the appropriate credit based on the menu. However, if 
the test result did not demonstrate the full menu-based potential of 
the technology, partial credit could still be earned, in proportion to 
how far away the result was from the expected menu-based credit amount.
    In their comments, auto manufacturers raised concerns about the 
potential difficulty of identifying and testing an acceptable baseline 
vehicle. EPA has considered these comments, and continues to believe 
that identifying and testing a baseline vehicle will not be overly 
burdensome in most cases. However, we agree that establishing an 
appropriate baseline vehicle can be difficult in some cases, including 
when the manufacturer has made major technological improvements to the 
vehicle, beyond the A/C technology improvements in question. Some 
manufacturers recommended that because of this difficulty and the other 
issues discussed above, the AC17 test should only be used in a 
``research'' role to validate credit values on the credit

[[Page 62725]]

menu, rather than in a regulatory compliance role. However, EPA 
believes that with the adjustments in its use described below, the AC17 
can appropriately serve as a part of the GHG and CAFE compliance 
programs. One such adjustment is to allow the manufacturer to compare 
vehicles from different ``generations'' of design (i.e., from earlier 
major design cycles), which expands the universe of potentially 
appropriate comparative baseline vehicles. Further, if cases arise 
where no appropriate baseline comparison vehicles are available, 
manufacturers will instead be able to submit an engineering analysis 
that describes why a comparison to a baseline vehicle is neither 
available nor appropriate, and also justifies the generating of credits 
and improvement values, in lieu of a baseline vehicle test result. EPA 
would evaluate these submissions as part of the vehicle certification 
process. EPA discusses such an engineering analysis in Chapter 5 
(Section 5.5.2.8) of the Joint TSD. Other than these adjustments, this 
final rule adopts the AC17 testing of certification vehicles and 
comparative baseline vehicles beginning in MY 2020, as proposed. Thus, 
starting in MY 2020, the AC17 test will be used not only to establish 
eligibility for generating credits, but will also play a role in 
determining the amount of the credit.
    EPA discusses the revised AC17 test in more detail in Chapter 5 
(section 5.1.3.8) of the joint TSD, including a graphical flow-chart 
designed to illustrate how the AC17 test will be used at various points 
during the implementation of the GHG (and from MY 2017 on, CAFE) 
programs.
    c. Technology ``Menu'' for Quantifying A/C Efficiency Credits and 
Fuel Consumption Improvement Values
    EPA believes that more testing and development will be necessary 
before the AC17 test could be used to measure absolute CO2 
and fuel consumption performance with sufficient accuracy to completely 
replace the technology menu as the method for quantifying efficiency 
credits and fuel consumption improvement values. As EPA did in the MYs 
2012-2016 rule, the agencies have used a design-based ``menu'' approach 
for the actual quantification of efficiency credits (upon which fuel 
consumption improvement values are also based) for this final rule. The 
menu established today is very similar to that of the earlier rule, 
both in terms of the technologies included in the lookup table and the 
effectiveness values assigned to each technology. As in the earlier 
rule, the agencies assign an appropriate amount of CO2 
credit to each efficiency-improving air conditioning technology that 
the manufacturer incorporates into a vehicle model. The sum of these 
values for all of the technologies used on a vehicle will be the amount 
of CO2 credit generated by that vehicle, up to a maximum of 
5.0 g/mi for cars and 7.2 g/mi for trucks. As stated above, these 
maximum values are equivalent to fuel consumption improvement values of 
0.000563 gallons/mi for cars and 0.000810 gallons/mi for trucks. (If 
amendments to the menu values are made in the future, EPA will consult 
with NHTSA on the amount of fuel consumption improvement value 
manufacturers may factor into their CAFE calculations.)
    Several comments addressed the technology menu and its use. The 
Alliance of Automobile Manufacturers said that they believe that 
projected A/C CO2 emissions--and thus the maximum potential 
reductions against which credits can be generated--are actually higher 
than EPA had projected. We have reassessed this issue since the MYs 
2012-2017 rulemaking, including the question of how much time vehicles 
spend in a ``compressor on'' mode, and on balance we continue to 
believe that our projected A/C CO2 emissions values--and 
thus the potential credits from the technology menu--are appropriate. 
We discuss the development of the maximum efficiency credit values in 
more detail in Chapter 5 (section 5.5.2.1) of the Joint TSD.
    Honeywell recognized that a performance-based test procedure for 
quantifying credits is not yet available, but asked EPA to be open to 
using such a test if one is developed. EPA agrees, and we are making 
clear that the off-cycle technology provisions discussed in the next 
section can be applied to A/C technologies if all criteria are met. We 
will also continue to monitor the quality of A/C efficiency testing 
procedures as they develop and consider specific revisions to the AC17 
as appropriate. Finally, ICCT proposed accounting for any efficiency 
impact of alternative refrigerants in quantifying efficiency credits. 
However, because the effect on efficiency of the most likely future 
alternative refrigerant, HFO-1234yf, is only minimal when the A/C 
system design is optimized for its use, we are finalizing the 
technology menu with no adjustments for the use of alternative 
refrigerants. Here too, however, EPA will monitor the development and 
use of alternative refrigerants and any data on their impact on A/C 
efficiency, and consider adjustments in the future as appropriate.
    Table II-21 presents the A/C efficiency credits and estimated CAFE 
fuel consumption improvement values being finalized in this rule for 
each of the efficiency-improving air conditioning technologies. We 
provide more detail on the agencies' development of the A/C efficiency 
credits and CAFE fuel consumption improvement values in Chapter 5 of 
the Joint TSD. In addition, that Chapter 5 presents very specific 
definitions of each of the technologies in the table below, definitions 
intended to ensure that the A/C technologies used by manufacturers 
correspond with the technologies we used to derive the credits and fuel 
consumption improvement values.

                   Table II-21--A/C Efficiency Credits and Fuel Consumption Improvement Values
----------------------------------------------------------------------------------------------------------------
                                     Estimated
                                  reduction in A/                                     Car A/C        Truck A/C
                                       C CO2          Car A/C        Truck A/C      efficiency      efficiency
     Technology description        emissions and    efficiency      efficiency         fuel            fuel
                                       fuel        credit (g/mi    credit (g/mi     consumption     consumption
                                    consumption        CO2)            CO2)         improvement     improvement
                                     (percent)                                      (gallon/mi)     (gallon/mi)
----------------------------------------------------------------------------------------------------------------
Reduced reheat, with externally-              30             1.5             2.2        0.000169        0.000248
 controlled, variable-
 displacement compressor........
Reduced reheat, with externally-              20             1.0             1.4        0.000113        0.000158
 controlled, fixed-displacement
 or pneumatic variable
 displacement compressor........

[[Page 62726]]

 
Default to recirculated air with              30             1.5             2.2        0.000169        0.000248
 closed-loop control of the air
 supply (sensor feedback to
 control interior air quality)
 whenever the outside ambient
 temperature is 75 [deg]F or
 higher (although deviations
 from this temperature are
 allowed based on additional
 analysis)......................
Default to recirculated air with              20             1.0             1.4        0.000113        0.000158
 open-loop control of the air
 supply (no sensor feedback)
 whenever the outside ambient
 temperature is 75 [deg]F or
 higher (although deviations
 from this temperature are
 allowed if accompanied by an
 engineering analysis)..........
Blower motor controls that limit              15             0.8             1.1        0.000090        0.000124
 wasted electrical energy (e.g.
 pulse width modulated power
 controller)....................
Internal heat exchanger (or                   20             1.0             1.4        0.000113        0.000158
 suction line heat exchanger)...
Improved evaporators and                      20             1.0             1.4        0.000113        0.000158
 condensers (with engineering
 analysis on each component
 indicating a COP improvement
 greater than 10%, when compared
 to previous design)............
Oil Separator (internal or                    10             0.5             0.7        0.000056        0.000079
 external to compressor)........
----------------------------------------------------------------------------------------------------------------

    For the CAFE program, EPA will determine fleet average fuel 
consumption improvement values in a manner consistent with the way 
fleet average CO2 credits will be determined. EPA will 
convert the metric tons of CO2 credits for air conditioning 
(as well as for other off-cycle technologies and for full size pick-up 
trucks) into fleet-wide fuel consumption improvement values, consistent 
with the way EPA would convert the improvements in CO2 
performance to metric tons of credits. Section III.C discusses this 
methodology in more detail. There will be separate improvement values 
for each type of credit, calculated separately for cars and for trucks. 
These improvement values are subtracted from the manufacturer's two-
cycle-based fleet fuel consumption value to yield a final new fleet 
fuel consumption value, which would be inverted to determine a final 
fleet fuel CAFE value.
2. Off-Cycle CO2 Credits
    Although EPA employs a five-cycle test methodology to evaluate fuel 
economy for fuel economy labeling purposes, EPA uses the established 
two-cycle (city, highway or correspondingly FTP, HFET) test methodology 
for GHG and CAFE compliance.\284\ EPA recognizes that there are 
technologies that provide real-world GHG benefits to consumers, but 
that the benefit of some of these technologies is not represented on 
the two-cycle test. For MYs 2012-2016, EPA provided an option for 
manufacturers to generate adjustments (credits) for employing new and 
innovative technologies that achieve CO2 reductions which 
are not reflected on current 2-cycle test procedures if, after 
application to EPA, EPA determined that the credits were technically 
appropriate.
---------------------------------------------------------------------------

    \284\ As noted earlier, use of the two-cycle test is mandated by 
statute for passenger car CAFE standards.
---------------------------------------------------------------------------

    During meetings with vehicle manufacturers prior to the proposal of 
the MY 2017-2025 standards, manufacturers raised concerns that the 
approval process in the MYs 2012-2016 rule for generating off-cycle 
credits was complicated and did not provide sufficient certainty on the 
amount of credits that might be approved. Commenters also maintained 
that it is impractical to measure small incremental improvements on top 
of a large tailpipe measurement, similar to comments received related 
to quantifying air conditioner efficiency improvements. These same 
manufacturers believed that such a process could stifle innovation and 
fuel efficient technologies from penetrating into the vehicle fleet.
    In the MYs 2017-2025 proposal, EPA, in coordination with NHTSA, 
proposed to extend the off-cycle credit program to MY 2017 and later, 
and to apply the off-cycle credits and equivalent fuel consumption 
improvement values to both the CAFE and GHG programs.\285\ The proposal 
to extend the off-cycle credits program to CAFE was a change from the 
MYs 2012-2016 final rule where EPA provided the off-cycle credits only 
for the GHG program. In addition, in response to the concerns noted 
above, EPA proposed to substantially streamline the off-cycle credit 
program process by establishing means of obtaining credits without 
having to prove case-by-case that such credits are justified. 
Specifically, EPA proposed a menu with a number of technologies that 
the agency believed would show real-world CO2 and fuel 
consumption benefits not measured, or not fully measured, by the two-
cycle test procedures, which benefits could be reasonably quantified by 
the agencies at this time. For each of the preapproved technologies in 
the menu, EPA proposed a quantified default value that would be 
available without additional testing. Manufacturers would thus have to 
demonstrate that they were in fact using the menu technology but would 
not have to do testing to quantify the technology's effects unless they 
wished to receive a credit larger than the default value. This list is 
conceptually similar to the menu-driven approach just described for A/C 
efficiency credits.
---------------------------------------------------------------------------

    \285\ 76 FR 74941-944.
---------------------------------------------------------------------------

    The proposed default values for these off-cycle credits were 
largely determined from research, analysis, and simulations, rather 
than from full vehicle testing, which would have been both cost and 
time prohibitive. EPA believed that these predefined estimates were 
somewhat conservative to avoid the potential for windfall credits.\286\ 
If

[[Page 62727]]

manufacturers believe their specific off-cycle technology achieves 
larger improvement, they could apply for greater credits and fuel 
consumption improvement values with supporting data using the case-by-
case demonstration approach. For technologies not listed on the menu, 
EPA proposed to continue the case-by-case demonstration approach from 
the MYs 2012-2016 rule but with important modifications to streamline 
the decision-making process. Comments to the proposal (addressed at the 
end of this preamble section) were largely supportive. In the final 
rule, EPA is continuing the off-cycle credit program established in the 
MYs 2012-2016 rule (but with some significant procedural changes), as 
proposed. EPA is also finalizing a list of pre-approved technologies 
and credit values. The pre-defined list, with credit values and CAFE 
fuel consumption improvement values, is shown in Table II-21 below. 
Fuel consumption improvement values under the CAFE program based on 
off-cycle technology would be equivalent to the off-cycle credit 
allowed by EPA under the GHG program, and these amounts would be 
determined using the same procedures and test methods for use in EPA's 
GHG program, as proposed.
---------------------------------------------------------------------------

    \286\ While many of the assumptions made for the analysis were 
``conservative'', others were ``central''. For example, in some 
cases an average vehicle was selected on which the analysis was 
conducted. In this case, a smaller vehicle may presumably be 
deserving of fewer credits whereas a larger vehicle may be deserving 
of more. Where the estimates are central, it would obviously be 
inappropriate for the Agencies to grant greater credit for the 
larger vehicles since this value is already balanced by the smaller 
vehicles in the fleet. The agency will take these matters into 
consideration when applications are submitted to modify credits on 
the menu.
---------------------------------------------------------------------------

    In the NPRM, EPA proposed capping the amount of credits a 
manufacturer may generate using the defined technology list to 10 g/
mile per year on a combined car and truck fleet-wide average basis. EPA 
also proposed to require minimum penetration rates for several of the 
listed technologies as a condition for generating credit from the list 
as a way to further encourage their significant adoption by MY 2017 and 
later. Based on comments and consideration on the amount of data that 
are available, we are finalizing the cap of 10 g/mile per year on a 
combined car and truck fleet-wide average basis. The fleetwide cap is 
being finalized because the default credit values are based on limited 
data, and also because EPA recognizes that some uncertainty is 
introduced when credits are provided based on a general assessment of 
off-cycle performance as opposed to testing on the individual vehicle 
models. However, we are not finalizing the minimum penetration rates 
applicable to certain technologies, primarily based the agencies' 
agreement with commenters stating that penetration caps might stifle 
the introduction of fuel economy and GHG improving technologies 
particularly in cases where manufacturers would normally introduce the 
technologies because manufacturing capacities are limited or low 
initial volume reduces risk if consumer acceptance is uncertain. 
Allowing credits for lower production volumes may encourage 
manufacturers to introduce more off-cycle technologies and then over 
several years increase production volumes thereby bringing more of 
these technologies into the mainstream. These program details are 
discussed in further in Section III.C.5.b.i.
    For the final rule analysis, the agencies have developed estimates 
for the cost and effectiveness of two off-cycle technologies, active 
aerodynamics and stop-start. The agencies assumed that these two 
technologies are available to manufacturers for compliance with the 
standards, similar to all of the other fuel economy improving 
technologies that the analysis assumes are available. EPA and NHTSA's 
modeling and other final rule analyses use the 2-cycle effectiveness 
values for these technologies and include the additional off-cycle 
adjustment that reflects the real world effectiveness of the 
technologies. Therefore, NHTSA has included the assessment of these two 
off-cycle technologies in the assessment of maximum feasible standards 
for this final rulemaking. Including these technologies that are on the 
pre-defined menu recognizes that these technologies have a higher 
degree of effectiveness in the real-world than reflected in 2-cycle 
testing. EPA likewise considered the 2-cycle benefits of these 
technologies in determining the stringency of the final standards. The 
agencies note that they did not consider the availability of other off-
cycle technologies in their modeling analyses for the proposal or for 
the final rule. There are two reasons for this. First, the agencies 
have virtually no data on the cost, development time necessary, 
manufacturability, etc. of these other technologies. The agencies thus 
cannot project the degree of emissions reduction and fuel economy 
improvements properly attributable to these technologies within the MYs 
2017-2025 timeframe. Second, the agencies have no data on what the 
penetration rates for these technologies would be during the rule 
timeframe, even assuming their feasibility. See 76 FR 74944 (agencies 
need information on ``effectiveness, cost, and availability'' before 
considering inclusion of off-cycle technology benefits in determining 
the standards).
    This section provides an overview of the pre-defined technology 
list being finalized and the key comments the agencies received 
regarding the technologies on the list and the proposed credit values. 
Provisions regarding how the pre-defined list fits into the overall 
off-cycle credit program are discussed in section III.C.5, including 
the MY 2014 start date for using the list, the 10 g/mile credit cap for 
the list, and the proposed penetration thresholds for listed 
technologies. In addition, a detailed discussion of the comments the 
agencies received regarding the technical details of individual 
technologies and how the credit values were derived is provided in 
Chapter 5 of the joint TSD.
    In the proposal, the agencies requested comments on all aspects of 
the off-cycle credit menu technologies and derivations. EPA and NHTSA 
received many comments and, in addition, several stakeholders including 
Denso, Enhanced Protective Glass Automotive Association (EPGAA), ICCT 
and Honda, requested meetings and met with the agencies. Overall, there 
was general support for the menu based approach and the technologies 
included in the proposed list, but there were also suggestions to re-
evaluate the definition of some of the technologies included in the 
menu, the calculation and/or test methods for determining the credits 
values, and recommendations to periodically re-evaluate the menu as 
technologies emerge or become pervasive.
    For most of the listed technologies, the agencies proposed single 
fixed credit values and for other technologies a step-function (e.g., x 
amount of credit for y amount of reduction or savings).\287\ The 
agencies received comments requesting a scalable calculation method for 
some technologies rather than the proposed fixed value or step-function 
approach. Some commenters requested that the credits for active 
aerodynamics, high efficiency exterior lighting, waste heat recovery 
(proposed as ``engine heat recovery'' but revised based on comments to 
the proposal) and solar panels (proposed as ``solar roof panels'' but 
also revised based on comments) be scalable (variable based on system 
capability) rather than an ``all-or-

[[Page 62728]]

nothing'' single value approach proposed.\288\ The agencies agree with 
the commenters and are allowing scaling of these credits. In some 
cases, this created issues with the simplified methodology for 
determining the default values used for the proposal. Therefore, the 
proposed methodology required revision in order to calculate the 
default values for the technologies with scalable credits. The revised 
calculation methodology for each scalable technology is discussed in 
detail in Chapter 5 of the TSD. Notably, the calculation method for the 
solar panel credit has been changed, to provide scalability of the 
credit and a better estimate the benefits of solar panels for HEVs, 
PHEVs, and EVs.
---------------------------------------------------------------------------

    \287\ In the Proposal (76 FR 74943/1), we described the engine 
heat recovery and solar roof panel credits as `scalable', however 
this was an error. The engine heat recovery did allow 0.7g/mi credit 
per 100W generated step-function, however the solar panels were not 
scalable. In actuality, glazing was the only continuously scalable 
credit on the proposed off-cycle menu.
    \288\ For example, in the proposal, a manufacturer had to 
install high efficiency lighting on all systems in order to get the 
1.1 g/mi credit.
---------------------------------------------------------------------------

    Although we are allowing scaling of the credits, we are not 
accepting a request or granting credit for any level of credit less 
than 0.05 g/mi CO2. We are requiring reporting 
CO2 values to the nearest tenth and, therefore, anything 
below 0.05 g/mi of CO2 would be rounded down to zero. 
Therefore, for any credit requested as part of the off-cycle credit 
program (e.g., scalable or fixed; via the pre-defined technology list 
or alternate method approval process), only credit values equal to 0.05 
g/mi or greater will be accepted and approved.
    In addition to supporting the off-cycle credit program in the MYs 
2017-2025 program, comments received from the National Resources 
Defense Council (NRDC) and ICCT urged the agencies to ensure that off-
cycle credits are verifiable via actual testing or reflect real-world 
in-use data from a statistically representative fleet. These comments 
also expressed concern that some of the proposed menu technologies 
would not achieve appreciably greater reductions than measured over the 
2-cycle tests, that the off-cycle credit process had not fully assured 
that there would be component and/or system durability and had not 
accounted for in-use degradation. These commenters' ultimate concern is 
that the off-cycle credit flexibility could create windfall credits or 
avoid cost-effective 2-cycle improvements.
    The agencies believe that the off-cycle credit program, as proposed 
and finalized, legitimately accounts for real-world emission reductions 
and fuel consumption improvements not measured, or not fully measured, 
under the two-cycle test methodologies. The off-cycle technologies on 
the defined list have been assessed by the agencies using the best 
available data and information at the time of this action to 
appropriately assign default credit values. The agencies conducted 
extensive reviews of the proposed credit values and technologies and, 
based on comments (such as those from ICCT) and analysis, did adjust 
some credit values and technology descriptions. In addition, the 
comments from the Alliance of Automobile Manufacturers provided data 
that aligned with and supported some of the estimated credit default 
values (discussed in greater detail in Chapter 5 of the joint TSD). As 
with the proposal and further refinement in these final rules, the 
agencies have structured the off-cycle credit program extension for MYs 
2017-2025 to employ conservative calculation methodologies and 
estimates for the credit values on the defined technology list. In 
addition, the agencies will continue, as proposed, to apply a 10 g/mi 
cap to the total amount of available off-cycle credits to help address 
issues of uncertainty and potential windfalls. Based on review of the 
technologies and credits provided for those technologies, the cap 
balances the goal of providing a streamlined pathway for the 
introduction of off-cycle technologies while controlling potential 
environmental risk from the uncertainty inherent with the estimated 
level of credits being provided. Manufacturers would need to use 
several listed technologies across a very large portion of their fleet 
before they would reach the cap. Based on manufacturer comments 
regarding the proposed sales thresholds, discussed below, the agencies 
are not anticipating widespread adoption of these technologies, at 
least not in the early years of the program. Also, the cap is not an 
absolute limitation because manufacturers have the option of submitting 
data and applying for credits which would not be subject to the 10 g/
mile credit limit as discussed in III.C.5. Therefore, we are confident 
in the underlying analysis and default values for the identified off-
cycle credit technologies, and are finalizing the defined list of off-
cycle credit technologies, and associated default values, with minimal 
changes in this final rule as discussed below.
    For off-cycle technologies not on the pre-defined technology list, 
or to obtain a credit greater than the default value for a menu pre-
defined technology, a manufacturer would be required to demonstrate the 
benefits of the technology via 5-cycle testing or via an alternate 
methodology that would be subject to a public review and comment 
process. Further, a manufacturer must certify the in-use durability of 
the technology for the full useful life of the vehicle for any 
technologies submitted for off-cycle credit application to ensure 
enforceability of the credits granted.
    The agencies proposed an additive approach where manufacturers 
could add the credit values for all of the listed technologies employed 
on a vehicle model (up to the 10 g/mile cap, as discussed in III.C.5). 
The agencies received comments from ICCT recommending a multiplicative 
approach where the credit values for each technology on the list is 
determined by taking the total amount of available credits for off-
cycle technologies and distributing it based on each technology's 
percent contribution to the overall off-cycle benefit (e.g., percent 
benefit of technology A, B, * * * n x total available credit equals the 
off-cycle credit for technology A, B, * * * n).
    EPA understands ICCT's recommendation, as this is similar how to 
the calculation methods employed in the EPA Lumped Parameter Model 
combine the effectiveness of some technologies when the interaction of 
differing technologies does not yield the combined absolute fuel 
consumption improvement for each technology, but rather the actual 
effectiveness is a fractional value of each technology's effectiveness 
(often described as ``synergies''). The agencies carefully evaluated 
these comments and, as stated previously, held a meeting with ICCT at 
their request to discuss the comments fully.\289\ Overall, the agencies 
believe the recommended multiplicative approach is inherently difficult 
since the fractional contribution of each technology to the overall 
off-cycle benefit must be determined, and then the combined synergistic 
effectiveness would also require accurate and robust determination. 
This would require extensive iterative testing to determine the 
synergistic affects for every possible combination of off-cycle 
technology included on each vehicle. In addition, this would be highly 
dependent on the base design of the vehicle and, therefore, would need 
to be determined for each unique vehicle content combination.
---------------------------------------------------------------------------

    \289\ The ICCT also submitted a number of additional detailed 
comments on the credit magnitude of certain off-cycle technologies 
which are discussed in Chapter 5 of the Joint TSD.
---------------------------------------------------------------------------

    The agencies agree there may be synergistic (or non-synergistic) 
affects, but believe the combination of employing conservative credit 
value estimates and a 10 g/mi cap to the total amount of available off-
cycle credits

[[Page 62729]]

will achieve nearly the same overall effect of limiting the additive 
effect of multiple off-cycle technologies to a vehicle. Therefore, we 
are finalizing the calculation approach as defined in this final rule.
    As discussed above, the agencies are allowing scaling of the credit 
values in lieu of fixed values based on the comments received for the 
following technologies on the menu: high efficiency exterior lighting, 
waste heat recovery, solar panels and active aerodynamics. In the case 
of waste heat recovery and active aerodynamics, this did not change the 
numerical credit values we proposed. For waste heat recovery, 0.7 g/mi 
CO2 per 100 watts serves as the basis for scaling the 
credit. For active aerodynamics, we used the value of 0.6 g/mi for cars 
and 1.0 g/mi for trucks based on a 3% aerodynamic drag improvement from 
the table of values in the NPRM TSD. The comments simply asked to use 
this entire range of values rather than just using the credit values 
corresponding to 3% aerodynamic drag improvement. These scaling factors 
were calculated using both the Ricardo simulation results (described in 
Chapter 3 of the TSD) and the EPA full vehicle simulation tool 
(described in Chapter 2 of the EPA's RIA).
    In contrast, for high efficiency exterior lighting and solar 
panels, this required a revision in the methodology to allow for proper 
scaling. For high efficiency exterior lighting, the comments also 
requested credit allowance for high efficiency lighting on individual 
lighting elements rather than on all lighting elements. In the NPRM, 
our methodology assumed a package approach where each lighting element 
was weighted based on contribution to the overall electrical load 
savings, and then this was scaled by our base load reduction estimate 
for 5-cycle testing (e.g., 3.2 g/mile per 100 watts saved; see TSD 
5.2.2). Using this package approach, it is difficult to de-couple the 
grams per mile CO2 contribution of individual lighting 
elements. Therefore, we revised our approach by accounting for the gram 
per mile CO2 credit for each individual high efficiency 
lighting element separately.
    The agencies are finalizing the pre-defined technology list for 
off-cycle credits fundamentally as proposed with the exception of six 
technologies, primarily in response to the comments received: engine 
idle start-stop, electric heater circulation pump, high efficiency 
exterior lighting, solar panels, and active transmission and active 
engine warm-up.
    First, the pre-defined credit values for engine idle start-stop are 
revised in response to comments questioning some vehicle operation and 
VMT assumptions and some methods for calculating the pre-defined credit 
values. More details on these changes can be found in Chapter 5 of the 
Joint TSD.
    Second, the proposed stand-alone credit for an electric heater 
circulation pump is incorporated into the pre-defined credit for engine 
stop-start, thus aligning with the integrated nature of these two 
technologies. As the agencies re-evaluated the pre-defined credit 
values for engine idle start-stop, we recognized that a substantive 
amount of the off-cycle benefit attributed to engine stop-start would 
not be achievable in cold temperature conditions (e.g., temperatures 
below 40 deg F) without a technology that performs a similar function 
to the electric heater circulation pump as defined in the NPRM. The 
agencies believe that a mechanism allowing heat transfer to continue, 
even after the engine has shut-off, is necessary in order to maintain 
basic comfort in the cabin especially in colder ambient temperatures. 
This could occur, for example, when a vehicle is stopped at a multiple 
lane intersection controlling high traffic volumes. This technology can 
be an electric heater circulation pump, or some other cabin heat 
exchanger. Without this technology, the engine would need to continue 
operating and, therefore, circulating warm engine coolant through the 
HVAC system to continue providing heat to the cabin. Therefore, two 
credit values are being finalized for stop-start systems: a higher 
value (similar to the credits proposed) for systems with an electric 
heater circulation pump and a lesser value for stop-start systems 
without a pump or heat transfer mechanism.
    Third, the agencies have revised the proposed pre-defined credit 
values for high-efficiency exterior lighting after evaluation of the 
numerous industry data provided via comments. The fundamental impetus 
for the revisions resulted from the research study cited as a basis for 
many pre-defined values as described in Chapter 5 of the TSD. When 
reviewing the additional data, the agencies concluded the initially 
referenced research study (Schoettle, et al.\290\) provided current 
draw values for high-efficiency low beam lighting that were too high 
when compared to traditional incandescent lighting, resulting in a 
reduced projected benefit. Data from the automakers showed a much lower 
power demand for high-efficiency low beam lighting and, consequently, a 
much larger benefit than projected in the draft TSD.\291\ Therefore, 
the agencies increased the overall amount of credit for high-efficiency 
exterior lighting on the menu to reflect the additional analysis based 
on the data received via comment.
---------------------------------------------------------------------------

    \290\ Schoettle, B., et al., ``LEDS and Power Consumption of 
Exterior Automotive Lighting: Implications for Gasoline and Electric 
Vehicles,'' University of Michigan Transportation Research 
Institute, October, 2008.
    \291\ Alliance, Docket No. NHTSA-2010-0131-0262, page 27 of 93; 
Appendix 2, page 2 of 19.
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    Fourth, as discussed above, the need for scaling the credit value 
resulted in a new methodology for solar panels, and, consequently, 
adjusted credit values. For the NPRM, we assumed a fixed solar panel 
power output and scaled this according to our base load estimate (e.g., 
3.2 g/mile per 100 watts saved; see TSD 5.2.2). However, the rated 
solar panel power output depends on several factors including the size 
and efficiency of the panel, and the energy that the panel is able to 
capture and convert to useful power. Therefore, these factors need to 
be considered when scaling, and our new methodology takes these factors 
into account. The agencies also accounted for the possibility of 
combining solar panels for both energy storage and active ventilation 
in the scaling algorithm.
    Finally, we discuss active transmission and active engine warm-up 
together (although they are listed separately) since the methodology 
for them is the same. Chrysler commented that there should be separate 
car and truck credits for active transmission and active engine warm-
up, as formulated for other advanced load reduction technologies (e.g., 
engine idle start-stop, electric heater circulation pump). In the NPRM, 
we used the credit value corresponding to a mid-size car to arrive at 
1.8 g/mi. After considering these comments, we re-analyzed (using the 
Ricardo data) the credit values for active transmission and active 
engine warm-up using expanded vehicle classes on a sales-weighted 
basis. As a result, there was a clear disparity between the credit 
values for active transmission and active engine warm-up on cars and 
trucks. Accordingly, we now have separate car (1.5 g/mi) and truck (3.2 
g/mi) active transmission and active engine warm-up credits.
    There were no other changes to the off-cycle credit defined 
technology list other than the expansion or clarification of 
definitions for certain technologies as discussed in Chapter 5 of the 
TSD. Many commenters advocated for the inclusion of additional 
technologies on the off-cycle credit defined technology

[[Page 62730]]

list. Some commenters suggested that technologies should be added such 
as high efficiency alternators (Alliance, Denso, VW, Porsche, Ford), 
electric cooling fans (Bosch), HVAC eco-modes, transmission cooler 
bypass valves (Ford), navigation systems (Garmin), separate credits for 
congestion mitigation/crash avoidance systems (Daimler), engine block 
heaters (Honda), and an ``integral'' approach utilizing a combination 
of technologies (Global Automakers).
    Some commenters were opposed to adding any technologies to the menu 
(CBD) and others suggested some of the proposed values should be re-
evaluated (ICCT) or that the values should be based on real test data, 
not simulation modeling (NRDC).
    After reviewing and considering the comments, in general, we did 
not see evidence at this time to add any of these technologies to the 
pre-defined technology list. In many cases, there are no consistent, 
established methods or supporting data to determine the appropriate 
level of credit. Consequently, there is no reasonable basis or 
verifiable method for the agencies to substantiate or refute the 
performance claims used to support a request for pre-assigned, default 
credit values for such technologies, particularly for systems requiring 
driver intervention or action.
    Therefore, we are not adding any of these technologies we were 
asked to consider to the pre-defined technology list. In the case of 
crash avoidance technologies, we are prohibiting off-cycle credits for 
these technologies under any circumstances. In the case of the other 
technologies for consideration, we are allowing manufacturers to use 
the alternate demonstration methods for technologies not on the pre-
defined technology list menu as discussed in Section III.C. (see 
``Demonstration not based on 5-cycle testing'') to request credit. We 
respond below to the comments urging the agencies to add further 
technologies to the pre-defined list. Additional responses are found in 
TSD Chapter 5 and Section 7 of EPA's Response to Comment Document.
    In addition, there were substantial comments regarding allowing 
credits for glazing. Specifically, the comments expressed concerns 
about incentivizing the use of metallic glazing which may impact 
signals emanating from within the passenger compartment and the desire 
for a separate credit for polycarbonate (PC) glazing. This is discussed 
below as well.
a. High Efficiency Alternators
    Several commenters from the automobile industry associations, 
individual manufacturers, and suppliers urged the agencies to include 
high efficiency alternators on the off-cycle defined technology list.
    The Alliance of Automobile Manufacturers stated that the test 
cycles are performed with the accessories off but that ``actual real 
world driving has average higher loads due to accessory use.'' They 
cited GM testing comparing three different alternators on four vehicles 
with efficiencies ranging from 61% to 70% using the Verband der 
Automobilindustrie (VDA; the trade association representing German 
automobile manufacturers) test procedure that demonstrated a savings of 
1.0 grams per mile CO2 on average for an alternator with an 
efficiency of 68% VDA. Volkswagen and Porsche supported the comments 
from the Alliance of Automobile Manufacturers, however Porsche felt 
that a default credit of 1.6 grams per mile CO2 was possible 
based on their independent analysis. The Global Automakers echoed the 
comments above regarding real-world versus test cycle accessory usage 
but did not supply supporting data.
    Two suppliers, Bosch and Denso, also supported adding high 
efficiency alternators to the defined technology list. Bosch cited 
testing on a General Motors 2.4 liter 4 cylinder gasoline engine with 
an increased alternator efficiency from 65%, the level of efficiency 
assumed in the NPRM, to 75% showed the potential for an increase of 
0.7% in fuel economy by increasing alternator efficiency by 10%. Bosch 
also stated that increases in efficiency up to 82% are possible using 
existing and new technologies. Denso used performed a similar analysis 
by simulating an increase in alternator efficiency of 10% (65% to 75%). 
Using our NPRM values for CO2 emissions reductions of 3.0 
grams per mile CO2 on the 2-cycle and 3.7 grams per mile 
CO2 on the 5-cycle tests, they calculated a potential credit 
of 2.8 grams per mile CO2.
    In response, we agree that high efficiency alternators have the 
potential to reduce electrical load, resulting in lower fuel 
consumption and CO2 emissions. However, the problem with 
including this technology on the defined technology list is assigning 
an appropriate default credit value due to the lack of supporting data 
across a range of vehicle categories and range of implementation 
strategies.
    First, we appreciate commenters submitting data but we would need 
to have similar data from the range of available vehicle categories. 
With the exception of the data from the Alliance of Automobile 
Manufacturers that included a Cadillac SRX with, most recently, a 3.6 
liter V6 engine, most of the data is from smaller displacement 
vehicles. Therefore, the range of data would need to be expanded to the 
mid-size and large car, and large truck to even begin to develop a 
default credit value.
    Second, similar to high efficiency exterior lighting, the type of 
and number of electrical accessories on the vehicle may cause 
significant variability in the base electrical load and, consequently, 
the level of reduction and associated benefit of high efficiency 
alternator technology. However, unlike high efficiency exterior 
lighting with a limited amount of components, the vehicle components 
and accessories that affect high efficiency alternator load are 
seemingly unlimited. As the information from Denso suggests, there are 
some typical standard components but the list of standard versus 
optional components changes depending on manufacturer, nameplate and 
trim level (e.g., optional accessories on a lower trim level vehicle 
may be standard on a upper/luxury trim level vehicle). This makes it 
difficult to develop a default value given this level of variability.
    Third, high efficiency alternators present the opportunity for 
manufacturers to add vehicle content that does not contribute to 
reducing fuel consumption or CO2 emissions. Due to the extra 
electrical capacity resulting from using the high efficiency 
alternator, other content (e.g., seat heaters/coolers, cup holder 
cooler/warmers, higher amplification sound system) can be added that 
may increase consumer value, however, that consumer value is unrelated 
to reducing fuel consumption or CO2 emissions. This 
potential for electrical load ``backsliding'' can counteract the 
benefits of a high efficiency alternator, and can also potentially 
affect mass reduction depending on the mass of the added content.
    A good example of a beneficial use of additional electrical load is 
the synergy between solar panels and active cabin ventilation. The 
solar panel can be used to power active cabin ventilation system motors 
but the amount of power produced by the panel may exceed the motor 
power requirements. Moreover, the active cabin ventilation system is 
only effective for the hot/sunny summer portion of the year. Rather 
than directing this excess power to other

[[Page 62731]]

non-fuel consumption related content (or wasting it), we are 
incentivizing manufacturers to use this excess power for battery 
charging to drive the wheels, and thus displace fuel and CO2 
emissions.
    However, unlike a solar panel, the high efficiency alternator 
supplies power to many vehicle features, and the EPA does not wish to 
directly regulate the electrical usage on vehicles in order to prevent 
``load backsliding''. This load backsliding could convert a fuel 
efficient technology into one that is detrimental to CO2 
emissions reductions and fuel economy improvements. Because of this 
uncertainty the agencies are not adding high efficiency alternators to 
the defined technology list. However, manufacturers may request credits 
for high-efficiency alternators using the case-by-case procedures for 
technologies not on the defined technology list. There are two general 
issues, at a minimum, which a manufacturer would need to consider and 
address in such a request. First, the manufacturer would need to 
consider the level of alternator efficiency improvement. As stated by 
the Alliance of Automobile Manufacturers, current alternator 
efficiencies are in the range of ``60% to 64%, with high efficiency 
models having ratings above 68% VDA.'' Therefore, any request for high 
efficiency alternator credit should significantly exceed current 
alternator technology efficiency. The 68% VDA number stated by the 
Alliance of Automobile Manufacturers seems to be an appropriate 
starting point given current technology although EPA would make a 
specific determination as to the amount of needed improvement when 
evaluating a specific off-cycle credit application, and so is not 
making any final determination here. Second, manufacturers should 
ensure proper accounting of vehicle components and accessories and 
associated loads. A good example of this is Table 1 in the comments 
from Denso that identifies the content loads and their occurrence on 
the 2-cycle test versus real world. The manufacturer may need to 
perform this type of comparison on an annual basis so that there is a 
clear assessment of load content adjustments over time to minimize 
electrical load ``backsliding'' (i.e., adding more content due to the 
availability of additional load capacity) as discussed above.
b. Transmission Oil Cooler Bypass Valve
    The transmission oil cooler is used on vehicles to cool the 
transmission fluid under heavy loads, especially by large trucks during 
towing or large payload operations. As stated by the Alliance, one of 
the drawbacks is that this system operates continuously even under 
conditions where faster warm-up, such as cold conditions, would be 
beneficial. Therefore, the Alliance comments suggested that we add 
bypass valves for transmission oil coolers to the pre-defined 
technology list since ``a bypass valve for the transmission oil cooler 
allows the oil flow to be controlled to provide maximum fuel economy 
under a wide variety of operating conditions.'' They suggested a credit 
of 0.3 g/mi CO2 based on General Motors (GM) engineering 
development and that this credit could be additive with active 
transmission warm up strategy.
    The reason we are not including this technology on the pre-defined 
technology list is lack of available data and multiple methodologies 
for implementation that make determining an appropriate credit value 
difficult. As stated by the Alliance, ``bypass valves are not currently 
commonly used with transmission oil coolers.'' As a result, there is 
very limited data on the performance of such systems other than the 
engineering data cited by the Alliance. Also, the bypass valve could be 
implemented passively (e.g., viscosity based), actively (e.g., valve 
controllers based on temperature or viscosity), or by some other smart 
design. Consequently, depending on the implementation method, the 
credit value may not correspond effectively to the level of 
performance.
    However, this technology can be demonstrated using 5-cycle or 
alternate demonstration methods. Therefore, we recommend that 
manufacturers seeking credit for this technology separately or in 
conjunction with active transmission warm-up credits explore this 
approach.
c. Electronic Thermostat
    Porsche stated in their comments that there is ``potential GHG 
benefit for electronic thermostat * * * in configurations which do not 
include an electric water pump.'' In lieu of a traditional mechanical 
water pump, an electric water pump facilitates engine coolant flow 
without the penalty of using an energy-sapping belt driven system. 
However, for systems that use a mechanical water pump, an electronic 
thermostat could be used in lieu of an electric water pump to optimally 
control the flow of coolant (e.g., close off coolant flow to the 
radiator when the engine is cold). Porsche requested that the agencies 
allow credit for this technology irrespective of the other cooling 
system specifics (e.g., mechanical or electric water pump).
    This technology is not on the pre-defined technology list, nor does 
this appear to be the intent of Porsche's comments. As such, the 
electronic thermostat can be demonstrated using 5-cycle or alternate 
demonstration methods. Therefore, we agree with Porsche and, if a 
benefit for the electronic thermostat regardless of the type of water 
pump used can be demonstrated, the electronic thermostat would be 
eligible under the procedures for evaluating technologies not on the 
pre-defined technology list.
d. Other Vehicle Relays
    Honda requested that we consider allowing credit for other 
electrical relays on the vehicle such as those used for power windows, 
wiper motors, power tailgate, defroster, and seat heaters. However, 
Honda states that they are unsure of how to measure the impact 
suggesting that lifetime usage data might be a basis to support the 
credit granted.
    In response, we feel that granting credits for other vehicle relays 
is best considered using the demonstration methods for evaluating 
technologies not on the predefined technology list.
    The confounding issue, as Honda points out in their comments, is 
how to quantify the benefit and, further, how to directly relate this 
benefit to fuel consumption savings. The complexity of identifying 
single and multiple relay impact is a daunting task and must be 
considered when pursuing this path. Further, the use of lifetime usage 
data only captures activity but does not couple this activity with a 
gram-per-mile CO2 benefit, thus falling short of 
demonstrating direct savings. Therefore, although the granting of 
credit is possible, these issues, and any others, would need to be 
addressed before credit is granted for other vehicle relays.
e. Brushless Motor Technology for Engine Cooling Fans
    The comments from Bosch advocated for adding brushless motor 
technology for engine cooling fans to the pre-defined technology list. 
In their comments, Bosch stated that the current baseline technology is 
series-parallel brushed motors requiring 149 watts to operate. By 
switching to a brushless engine cooling fan motor, the wattage 
requirement is reduced to 68 watts for a savings of 87 watts, according 
to Bosch. Bosch reduced this number further to 81.2 watts since they 
considered a range of series-parallel brushed motors with varying 
wattage values. Based on this savings and Bosch's assumption that 
reducing electrical load by 30 watts saves 0.1 mile per gallon, Bosch 
projected a fuel

[[Page 62732]]

savings of 0.27 miles per gallon. Using our load reduction assumption 
of reducing 100 watts saves 0.7 gram per mile of CO2, this 
equates to a credit of 0.56 gram per mile of CO2.
    After consideration of Bosch's comments and the data provided 
showing potential benefits, it is not clear from the data provided if 
this would be the actual benefit once this technology is implemented. 
Absent real-world vehicle data, it is difficult to determine what the 
baseline and, consequently, the resulting benefit would be. In 
addition, it is likely that some or all of the benefit of brushless 
motor technology for engine cooling fans is captured on the 2-cycle 
test procedures.
    Consequently, we are not adding brushless motor technology for 
engine cooling fans to the pre-defined technology list due to 
insufficient data on real-world, power requirements, activity profiles, 
and test data demonstrating the 2-cycle versus 5-cycle benefits. These 
factors prevent us from determining a default credit value necessary 
for addition to the off-cycle technology menu. A manufacturer that 
believes its engine cooling fan brushless motor merits credit can 
request it using the demonstration methods for technologies not on the 
predefined technology list.
f. Integral Fuel Saving Technologies and Advanced Combustion Concepts
    The Global Automakers and Ford Motor Company encouraged the 
agencies to consider granting credit for integral fuel saving 
technologies and advanced combustion concepts (e.g., camless engines, 
variable compression ratio engines, micro air/hydraulic launch assist 
devices, advanced transmissions) using demonstration methods for 
technologies that are not on the predefined technology list. Both 
parties took issue with our statements in the NPRM Preamble (see 76 FR 
75024):

``EPA proposes that technologies integral or inherent to the basic 
vehicle design including engine, transmission, mass reduction, passive 
aerodynamic design, and base tires would not be eligible for credits. 
EPA believes that it would be difficult to clearly establish an 
appropriate A/B test (with and without technologies) for technologies 
so integral to the basic vehicle design. EPA proposes to limit the off-
cycle program to technologies that can be clearly identified as add-on 
technologies conducive to A/B testing.''

    These commenters urged EPA to allow demonstration of benefits using 
some alternative testing or analytical method, or to provide an 
opportunity to perform some type of demonstration, for integral fuel 
saving technologies and advance combustion concepts.
    In response, since these methods are integral to basic vehicle 
design, there are fundamental issues as to whether they would ever 
warrant off-cycle credits. Being integral, there is no need to provide 
an incentive for their use, and (more important), these technologies 
would be incorporated regardless. Granting credits would be a windfall. 
As we stated in the NPRM Preamble (see 76 FR 75024), these technologies 
are included in the base vehicle design to meet the standard and it is 
consequently inappropriate for these types of technologies to receive 
off-cycle credits. EPA (in coordination with NHTSA) will continue to 
track the progress of these technologies and attempt to collect data on 
their effectiveness and use.
g. Congestion Avoidance Devices, Other Interactive, Driver-Based 
Technologies and Driver-Selectable Features
    As mentioned above, many commenters advocated for the inclusion of 
additional technologies on the off-cycle credit defined technology list 
such as congestion avoidance, interactive/driver-based technologies, 
which provide information to the driver that the driver may use to 
alter his/her driving route or technique, and driver-selectable 
technologies, which cause the vehicle to operate in a different manner.
    Daimler commented that the agencies should provide ``congestion 
mitigation credits based on crash avoidance technologies,'' because 
crash avoidance technologies can potentially reduce traffic congestion 
associated with motor vehicle collisions and thus, ``similar to off-
cycle technologies,'' provide ``significant CO2 and fuel 
consumption benefits.'' \292\ Daimler argued that doing so was within 
both agencies' authority, referring to the authority under which the 
agencies had proposed off-cycle credits.\293\ Daimler provided a menu 
of suggested congestion reduction credit values of 1.0 g/CO2 
per mile for its ``Primary Longitudinal Assistance Package'' (comprised 
of forward collision warning plus adaptive brake assist) and an 
additional 0.5 g/CO2 per mile for its ``Advanced 
Longitudinal Assistance Package'' (the primary package plus autonomous 
emergency braking and adaptive cruise control), based on calculations 
using figures from its own analysis of the effectiveness of these 
technologies and from a German insurance institute,\294\ along with 
values for other congestion mitigation technologies such as driver 
attention monitoring and adaptive forward lighting.\295\
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    \292\ Daimler, EPA Docket  EPA-HQ-OAR-2010-0799-9483, 
at 10.
    \293\ Id. at 11, 17.
    \294\ Id. at 13-14.
    \295\ Id. at 14-16.
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    In addition to requesting that the agencies create a new category 
of credits, the comment further addressed means of evaluating and 
approving applications for such credits. Daimler suggested that NHTSA 
require manufacturers to submit data ``specific to [their] product 
offerings showing that [their] technology is effective in reducing 
vehicle collisions,'' and that ``NHTSA may approve the application and 
determine the amount of the credit'' and determine whether the 
technology is ``robust and effective in terms of crash avoidance and 
the consequent fuel savings.'' \296\ Daimler suggested that NHTSA's 
review process for such information could be considerably less 
stringent than that for ``regulation to mandate new technology and/or 
to link technology directly to fatalities or injuries,'' because 
fatalities and injuries would not be at issue for congestion mitigation 
credits.\297\ Instead, Daimler stated that ``technologies [should be] 
appropriate if they can reasonably be shown to avoid accidents, and 
thereby reduce congestion and its associated fuel consumption and 
CO2 emissions.'' \298\
---------------------------------------------------------------------------

    \296\ Id. at 15.
    \297\ Id.
    \298\ Id.
---------------------------------------------------------------------------

    The agencies agree that there is a clear nexus between congestion 
mitigation and fuel/CO2 savings for the entire on-road 
fleet. It is less clear, however, whether there is a calculable 
relationship between congestion mitigation and fuel/CO2 
savings directly attributable to individual vehicles produced by a 
manufacturer, or even to a manufacturer's fleet of vehicles. Daimler 
argued that emissions of 6.0 gCO2/mi could be averted if all 
accidents were avoided. However, even assuming such a result were 
achievable, Daimler agreed that attributing those fuel consumption/
CO2 benefits from reduced traffic congestion to specific 
individual technologies on specific vehicles would be difficult.
    NHTSA has extensive familiarity with the safety technologies 
usually associated with crash avoidance, having required some (most 
notably, electronic stability control) as standard equipment on all 
newly manufactured light vehicles, and being deeply engaged in research 
on others, including the

[[Page 62733]]

braking technologies mentioned in Daimler's comment. When NHTSA's 
research indicates sufficient maturity of a crash avoidance technology, 
the agency may either promote its use through its New Car Assessment 
Program (NCAP) or mandate its use by issuing a Federal Motor Vehicle 
Safety Standard (FMVSS) requiring the technology on all or some 
categories of new vehicles.
    Under the NCAP program, NHTSA tests new vehicles to determine how 
well they protect drivers and passengers during a crash, and how well 
they resist rollovers. These vehicles are then rated using a 5-star 
safety rating system. Five stars indicate the highest safety rating; 
one star, the lowest. In addition, NHTSA began in model year 2011 
identifying on its Web site, www.SaferCar.gov, new vehicles equipped 
with any of three recommended advanced crash avoidance technologies 
that meet the agency's established requirements. These technologies, 
Electronic Stability Control, Forward Collision Warning, and Lane 
Departure Warning, can help drivers avoid crashes.
    Additional technologies may be added to the NCAP list of crash 
avoidance technologies when there is sufficient information and 
analysis to confirm their safety value. NHTSA, for example, is 
carefully analyzing advanced braking systems of the type discussed in 
Daimler's comments and could decide in the near future that they are 
ripe for inclusion in NCAP. Alternatively, NHTSA may conclude that such 
technologies are sufficiently developed, their safety benefits 
sufficiently clear, and relevant test procedures sufficiently defined 
that they should be the subject of a mandatory safety standard. NHTSA 
could not render a determination on such a request without thoroughly 
testing the technology as applied in that specific model and developing 
a specialized benefits analysis. The agency's higher priority would 
clearly have to be analyzing the technologies it found to offer great 
safety promise on a broader basis and developing standardized tests for 
those technologies. Therefore the agencies believe that evaluation of 
crash avoidance technologies is better addressed under NHTSA's vehicle 
safety authority than under a case-by-case off-cycle credit process.
    Furthermore, the A/C efficiency, off-cycle, and pickup truck credit 
provisions being finalized by the agencies are premised on the 
installation of specific technologies that directly reduce the fuel 
consumption and CO2 emissions of the specific vehicles in 
which they are installed. For all of these credits, the amount of GHG 
emission reduction and fuel economy improvement attributable to the 
technology being credited can be reliably determined, and those 
improvements can be directly attributed to the improved fuel economy 
performance of the vehicle on which the technology is installed. Thus, 
for a technology to be ``counted'' under the credit provisions, it must 
make direct improvements to the performance of the specific vehicle to 
which it is applied. The agencies have never considered indirect 
improvements \299\ for the fleet as a whole, and did not discuss that 
possibility in the proposal. The agencies believe that there is a very 
significant distinction between technologies providing direct and 
reliably quantifiable improvements to fuel economy and GHG emission 
reductions, and technologies which provide those improvements by 
indirect means, where the improvement is not reliably quantifiable, and 
may be speculative (or in many instances, non-existent), or may provide 
benefit to other vehicles on the road more than for themselves. As the 
agencies have reiterated, and many commenters have likewise maintained, 
credits should be available only for technologies providing real-world 
improvements, the improvements must be verifiable, and the process by 
which credits are granted and implemented must be transparent.
---------------------------------------------------------------------------

    \299\ i.e. improvements that improve the fuel economy or GHG 
emissions of other vehicles on the road.
---------------------------------------------------------------------------

    None of these factors would be satisfied for credits for these 
types of indirect technologies used for crash avoidance systems, 
safety-critical systems, or other technologies that may reduce the 
frequency of vehicle crashes. The agencies are consequently not 
providing off-cycle credits potentially attributable to crash avoidance 
systems, safety-critical systems, or technologies that may reduce the 
frequency of vehicle crashes. . Therefore, the agencies are not 
providing off-cycle credits for technologies and systems including, but 
not limited to, Electronic Stability Control, Tire Pressure Monitoring 
System, Forward Collision Warning, Lane Departure Warning and/or 
Intervention, Collision Imminent Braking, Dynamic Brake Support, 
Adaptive Lighting, Blind Spot Detection, Adaptive Cruise Control, Curve 
Speed Warning, Fatigue Warning, systems that reduce driver distraction, 
and any other technologies that may reduce the likelihood of crashes.
    Thus, manufacturers will not receive credits or fuel economy 
improvement adjustments for installing these technologies. If a 
manufacturer has an off-cycle technology that is not included on this 
list and brings it to the agencies for assessment, NHTSA will determine 
whether it is ineligible for a credit or adjustment by reason of the 
agency's judgment that it is related to crash avoidance systems, is 
related to motor vehicle safety within the meaning of the National 
Traffic and Motor Vehicle Safety act, as amended, or may otherwise 
reduce the possibility and or frequency of vehicle crashes.
    The agencies believe that the advancement of crash avoidance 
systems specifically is best left to NHTSA's exercise of its vehicle 
safety authority. NHTSA looks forward to working with manufacturers and 
other interested parties on creating opportunities to encourage the 
general introduction of these technologies in the context of the NCAP 
program and possible safety standards. To that end, the agency would 
welcome relevant data and analysis from interested parties.
    The agencies also received comments related to other technologies 
that may reduce CO2 emissions and fuel consumption by 
reducing traffic congestion or that provide information to the driver 
with which the driver may change his or her driving technique or the 
route driven (more direct route or traffic avoidance \300\). All 
commenters addressing these issues acknowledged the difficulty of 
quantifying benefits associated with congestion mitigation and driver-
selectable technologies.\301\ Commenters generally noted that the off-
cycle credit provisions in the MYs 2012-2016 GHG rule, and the off-
cycle credit provisions proposed in this rulemaking did not appear to 
cover technologies such as in-dash GPS navigation systems, driver 
coaching and feedback systems (such as ``eco modes''), vehicle 
maintenance alerts and reminders, and ``other automatic and driver-
initiated location content-

[[Page 62734]]

based technologies that have been shown to reduce fuel consumption.'' 
\302\ These commenters requested the opportunity to work with the 
agencies at developing such procedures.\303\ With regard to EPA's 
request for comment on whether the regulatory text should clarify how 
EPA treats driver-selectable modes,\304\ the Alliance stated that it 
believed there was no need to clarify regulatory text, but that EPA 
should simply update or refine informal guidance as necessary to 
address issues as they develop.\305\ MEMA stated that there was 
``precedent for providing CAFE credits based on a projected usage 
factor of a fuel saving device,'' citing EPA letters regarding the 
impact of a shift indicator light on fuel economy.\306\
---------------------------------------------------------------------------

    \300\ Agencies distinguish between congestion mitigation and 
congestion avoidance. Congestion mitigation affects the fuel economy 
and GHG emissions mainly of other vehicles on the road, whereas 
congestion avoidance affects the fuel economy mainly of the single 
vehicle with the technology.
    \301\ Alliance, Docket No. NHTSA-2010-0131-0262, at 11 (stating 
that it did not seem like there is sufficient information at this 
time to define specific credit opportunities); Ford, Docket No. 
NHTSA-2010-0131-0235, at 16 (stating that ``quantifying the benefit 
is an acknowledged challenge''); MEMA, Docket No. NHTSA-2010-0131-
[fill in], at 9 (stating that the benefits from these technologies 
``cannot be quantified literally* * *'').
    \302\ See, e.g., MEMA at 9; Ford at 16; Garmin, Docket No. 
NHTSA-2010-0131-0245, at 2-3 (requesting an alternate way for 
manufacturers to prove the real-world fuel economy and 
CO2 benefits of in-dash GPS navigation systems (with or 
without traffic avoidance) to the agencies besides the ways laid out 
in the off-cycle credit approval provisions at 40 CFR 86.1866-
12(d)(2) and (d)(3)).
    \303\ Alliance at 11, Ford at 16, MEMA at 9.
    \304\ See 76 FR 75025.
    \305\ Id. at 90.
    \306\ MEMA at 9.
---------------------------------------------------------------------------

    At proposal, EPA addressed the possibility of evaluating 
applications for off-cycle credits for technologies involving driver 
interaction, indicating that ``driver interactive technologies face the 
highest demonstration hurdle because manufacturers would need to 
provide actual real-world usage data on driver response rates.'' 76 FR 
75025. The agencies still believe it to be highly unlikely that off-
cycle credits could be justified for these non-safety technologies. 
This issue is addressed in detail in section III.C.5.ii below. These 
technologies do not improve the fuel efficiency of the vehicle under 
any given operating condition, but rather provide information the 
driver may use to change the driving cycle over which the vehicle 
overrates which, in turn, may improve the real-world fuel economy 
(miles driven per gallon consumed)/CO2 emissions (per mile 
driven) compared to what the fuel economy and CO2 emissions 
per mile would have been had the driver not used the information or if 
the technology was not on the vehicle. The agencies believe, for 
example, there would be a number of specific challenges to quantifying 
the effect on fuel economy and CO2 emissions per mile driven 
of GPS/real time traffic navigation systems. First, given that the 
systems available today are available through subscription services, 
the manufacturer would need to prove that the vehicle operators will 
pay for such a service for the useful life of the vehicle or the 
manufacturer would have to provide the service at no cost to vehicle 
operators over the useful life of the vehicle. Second, there would need 
to be an extensive data collection program to show that drivers were 
using the system and that they were taking alternate routes that 
actually improved fuel economy. It would be necessary to determine the 
level of fuel economy improvement as well as to show evidence that this 
level of improvement would be expected to be achieved by vehicle 
operators over the useful life of the vehicle. In addition, it would be 
necessary to show the sampling is representative, the effects are 
statistically significant, and the results are reproducible. Third, the 
real time traffic information must be proven to be accurate and 
assurances provided that the level of accuracy would be maintained over 
the useful life of the vehicle. Inaccurate information might lead to 
poorer fuel economy. Fourth, anecdotal information indicates that 
navigations systems are most often used to direct the driver using the 
shortest temporal path. The agencies believe that only rarely would a 
driver choose the route that achieves the highest fuel economy over one 
that takes the least time--especially if the time savings would be 
significant. In addition, other factors may need to be demonstrated, 
such as the effect of these technologies in differing geographical 
regions with various road and traffic patterns and the effect of these 
technologies during different parts of the day (e.g., rush hour vs. 
mid-day). It is for these reasons that the agencies believe that 
meeting the burden of proof for these class of technologies will be 
extremely difficult. Other ``driver interactive'' off-cycle 
technologies will present similar challenges. These may include, but 
are not limited to, in-dash GPS navigation systems, driver coaching and 
feedback systems such as ``eco modes,'' fuel economy performance 
displays and indicators, or haptic devices such as, for example, 
throttle pedal feedback systems, vehicle maintenance alerts and 
reminders, and other automatic or driver-initiated location content-
based technologies that may improve fuel economy.
    Finally, the agencies requested comments on the treatment of driver 
selectable technologies as stated in 76 FR 75089: ``EPA is requesting 
comments on whether there is a need to clarify in the regulations how 
EPA treats driver selectable modes (such as multi-mode transmissions 
and other user-selectable buttons or switches) that may impact fuel 
economy and GHG emissions.'' If we did not receive comments to the 
contrary, we also stated that ``EPA would apply the same approach to 
testing for compliance with the in-use CO2 standard, so 
testing for the CO2 fleet average and testing for compliance 
with the in-use CO2 standard would be consistent.''
    The current EPA policy on select-shift transmissions (SSTs) and 
multimode transmissions (MMT), and shift indicator lights (SILs) is 
under Manufacturer Guidance Letter CISD-09-19 (December 3, 2009) and 
supersedes several previous letters on both of these topics. For, SSTs 
and MMTs, the manufacturer must determine the predominant mode (e.g., 
75% of the drivers will have at least 90% of vehicle shift operation 
performed in one mode, and, on average, 75% of vehicle shift operation 
is performed in that mode), using default criteria in the guidance 
letter or a driver survey. If the worst-case mode is determined to be 
the predominant mode, the manufacturer must test in this mode and use 
the results with no benefit from the driver-selectable technology 
reflected in the fuel economy values. If the best-case mode is 
determined to be the predominant mode, the manufacturer may test in 
this mode and use the results with the full benefit of the driver-
selectable technology reflected in the fuel economy values. If the 
predominant mode is not discernible, the manufacturer must test in all 
modes and harmonically average the results (Note: in most cases, there 
are only two modes so this becomes a 50/50 average between best- and 
worst-case modes). Based on the EPA decision process under CISD-09-19, 
both the label and CAFE/GHG could reflect 0, 50, or 100% of the benefit 
of a driver-selectable device. However, when calculating CAFE, only the 
2-cycle test results (e.g., Federal Test Procedure (FTP) and Highway 
Fuel Economy test (HWFET)) are used. Thus, the higher fuel economy 
results would only affect the 2-cycle testing values for CAFE purposes. 
For SILs, the manufacturer must perform an instrumented vehicle survey 
on a prototype vehicle to determine the appropriate shift schedule to 
optimize fuel economy. Previous guidance for SILs contained the option 
for A-B testing with and without the SIL. This has been eliminated in 
the latest guidance, allowing only an instrumented vehicle survey as 
the basis for determining SIL related fuel economy improvements. 
However, for purposes of determining CAFE compliance reporting values, 
the 2-cycle test results (e.g., Federal Test Procedure

[[Page 62735]]

(FTP) and Highway Fuel Economy test (HWFET)) are used to align 
statutory provisions allowing for these two test cycles when 
determining program compliance. Therefore, only fuel economy 
improvement values identified on during the FTP and HWFET test cycles 
would be applicable to the CAFE program.
    In response to EPA's request for comment on whether the regulatory 
text should clarify how EPA treats driver-selectable modes, the 
Alliance stated that it believed there was no need to clarify 
regulatory text, but that EPA should simply update or refine informal 
guidance as necessary to address issues as they develop.\307\ MEMA 
stated that there was ``precedent for providing CAFE credits based on a 
projected usage factor of a fuel saving device,'' citing EPA letters 
regarding the impact of a shift indicator light on fuel economy.\308\ 
Finally, the Alliance provided data from General Motors on their HVAC 
Eco-Mode button based on On-Star data from in-use vehicles (n=3,500; 
50.3% of the drivers use the system 90% of the time or greater, 57.4% 
use it 50% of the time or greater, and 34% never use it). Based on the 
data supplied, they anticipate a benefit of 1.8 g/mi and, with 50% of 
the people using the HVAC Eco-Mode, a credit of 0.9 g/mi is warranted 
(i.e., 1.8 x 0.5).
---------------------------------------------------------------------------

    \307\ Id. at 90.
    \308\ MEMA at 9.
---------------------------------------------------------------------------

    On the comments from the Alliance that there is no need to clarify 
regulatory text and the informal guidance should be updated or refined 
as necessary, we agree that the current regulations and the latest 
guidance letter, CISD-09-19, appropriately supersedes previous guidance 
letters and addresses select-shift transmissions (SSTs) and multimode 
transmissions, and shift indicator lights (SILs). Therefore, we will 
not attempt to clarify the regulatory text and we will continue to 
update our guidance as necessary.
    Regarding the comment from MEMA that there is ``precedent for 
providing CAFE credits based on a projected usage factor of a fuel 
saving device,'' citing EPA letters regarding the impact of a shift 
indicator light on fuel economy, the manufacturer guidance letters 
referenced by MEMA (CD-82-10 (LD) and CD-83-10(LD)) have been 
superseded by CISD-09-19. Thus, the procedures in CISD-09-19 would be 
the applicable guidance for comparison. As previously mentioned, CISD-
09-19 requires the manufacturer to 1) determine the potential benefit 
of a driver selectable feature and 2) discern the predominant mode in-
use. This process is very similar and consistent with the process we 
proposed for demonstrating technologies not on the defined technology 
list. Therefore, we agree with MEMA that there is a precedent within 
our current policy to consider the influence of driver-selectable 
features on test cycle results.
    For the comments from the Alliance on the HVAC Eco-Mode \309\, as 
discussed above, the existing policy in CISD-09-19 requires using 
instrumented vehicle survey data to determine the predominant mode and 
test the vehicle in this mode to determine the fuel economy benefits. 
This is very similar to the process we are using for alternate method 
demonstrations under the off-cycle credit program. Therefore, this 
further supports our previous assertion for addressing driver-
selectable technologies under our alternate method demonstration 
process.
---------------------------------------------------------------------------

    \309\ Alliance, Docket No. NHTSA-2010-0131-0262, page 38 of 93; 
Appendix 2, page 13 of 19.
---------------------------------------------------------------------------

    However, we want to emphasize that although we acknowledge the 
similarities between the procedures under the existing policy in CISD-
09-19 and the procedures used in the off-cycle program, our discussion 
of driver-selectable devices is completely limited to their potential 
impact on off-cycle credits. The procedures used to conduct FTP and 
HFET testing for the purpose of determining CAFE and GHG values for a 
model type are not at issue here. Following our request for comments on 
how we handle these devices when testing on the FTP and HFET, comments 
suggested no changes to existing guidance are needed. We agree and will 
continue to handle these devices on a case-by-case basis consistent 
with the existing policy in CISD-09-19. In addition, the existing 
guidance and FTP/HFET testing policy in CISD-09-19 is not applicable in 
the context of the off-cycle program since driver-selectable 
technologies will always require the need for estimates of real-world 
customer usage to receive off-cycle credit. Therefore, in summary we 
believe that there is a precedent set by the existing policy in CISD-
09-19 to determine a usage in-use but that the existing policy in CISD-
09-19 has no bearing on the credit determinations in the off-cycle 
program, and the converse (i.e., the off-cycle credit program affecting 
existing policy in CISD-09-19). Specifically, the section entitled 
``Alternative Methods for Determination of Usage Rates'' in CISD-09-19 
that allows an instrumented vehicle survey or on-board data collection 
are most consistent with the procedures for the off-cycle program as 
discussed in III.C.5.iii. and 40 CFR Sec.  86.1869-12(c).
    In the context of the off-cycle program, the test values applicable 
to a vehicle's fuel economy label value are mostly independent from 
those generated for the CAFE compliance; where the 2-cycle results for 
compliance and the combination of all 5-cycle test results are used for 
the fuel economy label. However, as indicated with other technologies 
included in the finalized pre-defined technology menu, fuel economy 
improvements are reflected in the 2-cycle test result values used for 
CAFE compliance revealing the need to account for the improved 2-cycle 
test results when considering off-cycle credits for driver-selectable 
technologies. Therefore, if a manufacturer is requesting off-cycle 
credit but has previously used the improved fuel economy test results 
under the existing policy in CISD-09-19 for a driver-selectable 
technology, the manufacturer must use the 2-cycle results determined 
under CISD-09-19 for both the A and B values of the FTP and HWFET A-B 
tests to determine the potential benefit of the driver selectable 
technology when requesting off-cycle credit. This approach effectively 
negates the 2-cycle results and benefits, and which is consistent with 
the treatment for the other off-cycle technologies where credit is not 
granted for improvements reflected on current 2-cycle test procedures.
    Accordingly, we are allowing driver-selectable technologies to be 
eligible for credit in the off-cycle credit program using procedures 
and processes demonstrating technologies not on the defined technology 
list using alternative methods and the public process. Under these 
provisions, the manufacturer must determine the benefit of the driver-
selectable technology using approved methodologies and a usage factor 
for the technology using an instrumented vehicle survey, and applying 
this factor to the measured benefit to estimate and request credit. As 
discussed above, if a manufacturer has previously received some fuel 
economy improvement as a result of the decision process under CISD-09-
19, the manufacturer must use the 2-cycle results from that decision 
process as the A and B values for the 2-cycle A-B tests to estimate the 
off-cycle credit. Consequently, if a manufacturer uses 5-cycle testing 
to demonstrate the benefit of a driver selectable technology, the 
manufacturer must use the previously determined 2-cycle test values for 
the FTP and HWFET A-B tests, which effectively only captures the 
benefit from the remaining three cycles of 5-cycle testing (i.e., US06,

[[Page 62736]]

SC03, Cold FTP). The usage factor would then be applied to these 5-
cycle results (or any other approved methodology for non-5-cycle test 
methodologies). For driver-selectable technologies, the manufacturers 
must adhere to all criteria and requirements as discussed below in 
III.C.5.iii. and 40 CFR Sec.  86.1869-12(b) and (c).
    While we are allowing credit for driver-selectable and driver 
interactive technologies (including congestion avoidance), the agencies 
believe that applicants would face formidable burdens of showing that 
improvements over baseline are legitimate, reliably quantifiable, 
certain, and transparently demonstrable as described above. As 
identified in CISD-09-19, there will need to be an extensive data 
collection program to show that drivers are using the technology and to 
generate a reliable usage factor, if this has not previously been 
established. In addition, the usage factor applied to the benefit from 
the driver-selectable technology will tend to lower the amount of 
credit unless a manufacturer can demonstrate 100% usage of a driver-
selectable technology. Therefore, depending on the level of benefit, 
the amount of resulting credit could be minimal compared the effort to 
generate the necessary, supporting data, and manufacturers should 
consider this before undertaking this process.
    In summary, the agencies are not adding driver-selectable or 
driver-interactive features to the defined technology list. However, 
driver-selectable and driver-interactive features are eligible for off-
cycle credits using procedures and processes for demonstrating 
technologies not on the defined technology list under the off-cycle 
program as discussed above.
h. Credit for Glass and Glazing Technologies: Concerns With Metallic 
Glazing and Request for Separate Polycarbonate Glazing Credit
    Multiple comments were received with concerns regarding the use of 
metallic glazing from the Crime Victims Unit of California (CVUC), 
California State Sheriffs, Garmin, Honda and TechAmerica. Many 
commenters raised concerns the credit for glazing may unintentionally 
create incentives to use metallic films or small metallic particles to 
achieve reduced vehicle solar heat loading and access the off-cycle 
credit. The commenters indicated this type of metallic glazing can 
potentially interfere with signals for global positioning systems 
(GPS), cell phones, cellular signal based prisoner tracking systems, 
emergency and/or electronic 911 (E911) calls or other signals emanating 
from within or being transmitted to a vehicle's passenger compartment/
cabin. In addition, some commenters cited this concern as the reason 
that the California Air Resources Board (CARB) removed their mandate 
for metallic glazing from the ``Cool Cars'' Regulation in California.
    To address these concerns, the agencies met with the Enhanced 
Protective Glass Automotive Association (EPGAA), which represents 
automotive glass manufacturers and suppliers. The meeting included 
representatives from the automotive glass suppliers Pittsburgh Glass 
Works LLC (PGW), Guardian Industries, and Asahi Glass Company (AGC) to 
discuss the potential concerns with metallic glazing, signal 
interference and/or radio frequency (RF) attenuation (details of this 
meeting are available in EPA docket  EPA-HQ-OAR-2010-0799-
41752 and docket NHTSA-2010-0131). At this meeting, EPGAA provided data 
to the agencies that showed: In general, any glazing material can 
create signal interference and RF attenuation, and depending on the 
situation, RF attenuation and signal interference can occur without the 
presence of metallic glazing material; there was no statistically-
significant increase in signal interference and RF attenuation when 
metallic glazing was used. Furthermore, many vehicles in production 
today are designed with metallic solar control deletion areas or zones 
around the window edges and/or defined areas in either the front 
windshield of rear backlight to minimize signal interference and RF 
attenuation. Following the meeting, EPGAA representatives provided a 
list of vehicles currently utilizing metallic glazing demonstrating to 
the agencies that this technology is currently in-use without 
significant signal interference/RF attenuation issues being raised. 
EPGAA representatives indicated the technology is especially prevalent 
in Europe and with no significant consumer complaints.
    In addition, the agencies received comments from the California Air 
Resources Board (CARB) in response to the specific comments submitted 
to the proposal regarding the California Cool Cars Regulation 
indicating the program was withdrawn as a result of the metallic solar 
glazing concerns (see EPA docket EPA-HQ-OAR-2010-0799). CARB 
stated the mandate for metallic glazing in the Cool Cars Regulation was 
withdrawn was primarily related to the timing of when the concerns 
regarding metallic glazing were raised in relation to the proposed 
mandate's targeted finalization than to substantive concerns. CARB also 
clarified that they were not requiring a specific type of glazing and 
that a performance-based approach ultimately adopted in the Advanced 
Clean Cars Regulation accomplished the same objectives as proposed 
under the Cool Cars Regulation without the need for a mandate. In 
addition, CARB performed testing of signal interference and RF 
attenuation by CARB (see test results in EPA docket  EPA-HQ-
OAR-2010-0799-41752) echoing the findings of the automotive glass 
industry that there is ``[n]o effect of reflective glazing observed on 
monitoring ankle bracelets or cell phones'' and that any ``[e]ffects on 
GPS navigation devices [are] completely mitigated by use of [the] 
deletion window'' placing either the device or the external antennae in 
this area''. CARB urged EPA to finalize the proposed credit values for 
glass and glazing as proposed. Finally, CARB issued a formal memorandum 
\310\ confirming the timing related reasons for withdrawing the Cool 
Cars mandate and its test results regarding signal interference and RF 
attenuation, and urging the agencies to finalize the proposed credit 
values for glass and glazing as proposed.
---------------------------------------------------------------------------

    \310\ CARB memorandum available at EPA docket EPA-HQ-
OAR-2010-0799 and NHTSA docket NHTSA-2010-0131.
---------------------------------------------------------------------------

    Based on this information, the agencies are finalizing the proposed 
credit values and calculation procedures for solar control glazing. EPA 
and NHTSA note further the off-cycle credit is performance-based and 
not a mandate for vehicle manufacturers. Manufacturers have options to 
choose from a variety of glazing technologies that meet their desired 
performance for rejecting vehicle cabin solar loading. We reiterate 
that the rule is technology neutral and that none of these potential 
glazing technologies are foreclosed. Second, we did not see evidence 
contravening the information that the automotive glass industry and 
CARB presented showing that there would not be significant adverse 
effects on signal interference and RF attenuation by any of the 
recognized glazing technologies. However, to address the concerns of 
other commenters, we will emphasize to manufacturers that they should 
evaluate the potential for signal interference and RF attenuation when 
requesting the solar control glazing credit to ensure that their 
designs do not cause any interference.
i. Summary of Off-Cycle Credit Values
    As proposed, EPA is finalizing that a CAFE improvement value for 
off-cycle improvements be determined at the fleet

[[Page 62737]]

level by converting the CO2 credits determined under the EPA 
program (in metric tons of CO2) for each fleet (car and 
truck) to a fleet fuel consumption improvement value. This improvement 
value would then be used to adjust the fleet's CAFE level upward. See 
the regulations at 40 CFR 600.510-12. Note that although the table 
below presents fuel consumption values equivalent to a given 
CO2 credit value, these consumption values are presented for 
informational purposes and are not meant to imply that these values 
will be used to determine the fuel economy for individual vehicles.
    Finally, the agencies proposed that the pre-approved menu list of 
off-cycle technologies and default credit values would be predicated on 
a certain minimum percentage of technology penetration in a 
manufacturer's domestic fleet. 76 FR 75381. Commenters persuasively 
argued that such a requirement would discourage introduction and 
utilization of beneficial off-cycle technologies. They pointed out that 
new technologies are often introduced on limited model lines or 
platforms both to gauge consumer acceptance and to gain additional 
experience with the technology before more widespread introduction. 
Requiring levels of technology penetration such as the 10 percent 
proposed for many of the menu technologies could thus create a negative 
rather than positive incentive to deploy off-cycle technologies. The 
agencies agree, and note further that having an aggressive penetration 
rate requirement also raises issues of sufficiency of lead time in the 
early years of the program. The agencies are therefore not adopting 
minimum penetration requirements as a prerequisite to claim default 
credits from the preapproved technology menu.
    Table II-22 shows the list of off-cycle technologies and credits 
and equivalent fuel consumption improvement values for cars and trucks 
that the agencies are finalizing in today's action. The credits and 
fuel consumption improvement values for active aerodynamics, high-
efficiency exterior lighting, waste heat recovery and solar roof panels 
are scalable, depending on the amount of respective improvement these 
systems can generate for the vehicle. The Solar/Thermal control 
technologies are varied and are limited to a total of 3.0 and 4.3 g/mi 
(car and truck respectively) The various pre-defined solar/thermal 
control technologies eligible for off-cycle credit are shown in Table 
II-22 below.

 Table II-22--Off-Cycle Technologies and Credits and Equivalent Fuel Consumption Improvement Values for Cars and
                                                  Light Trucks
----------------------------------------------------------------------------------------------------------------
                                                       Adjustments for cars           Adjustments for trucks
                   Technology                    ---------------------------------------------------------------
                                                       g/mi         gallons/mi         g/mi          gallons/mi
----------------------------------------------------------------------------------------------------------------
+ High Efficiency Exterior Lights* (at 100 watt              1.0        0.000113             1.0        0.000113
 savings).......................................
+ Waste Heat Recovery (at 100W).................             0.7        0.000079             0.7        0.000079
+ Solar Panels (based on a 75 watt solar
 panel)**;
    Battery Charging Only.......................             3.3        0.000372             3.3        0.000372
    Active Cabin Ventilation and Battery                     2.5        0.000282             2.5        0.000282
     Charging...................................
+ Active Aerodynamic Improvements (for a 3%                  0.6        0.000068             1.0        0.000113
 aerodynamic drag or Cd reduction)..............
Engine Idle Start-Stop;
    w/ heater circulation system #..............             2.5        0.000282             4.4        0.000496
    w/o heater circulation system...............             1.5        0.000169             2.9        0.000327
Active Transmission Warm-Up.....................             1.5        0.000169             3.2        0.000361
Active Engine Warm-up...........................             1.5        0.000169             3.2        0.000361
Solar/Thermal Control...........................       Up to 3.0        0.000338       Up to 4.3       0.000484
----------------------------------------------------------------------------------------------------------------
* High efficiency exterior lighting credit is scalable based on lighting components selected from high
  efficiency exterior lighting list (see Joint TSD Section 5.2.3, Table 5-21).
** Solar Panel credit is scalable based on solar panel rated power, (see Joint TSD Section 5.2.4). This credit
  can be combined with active cabin ventilation credits.
# In order to receive the maximum engine idle start stop, the heater circulation system must be calibrated to
  keep the engine off for 1 minute or more when the external ambient temperature is 30 deg F and when cabin heat
  is demanded (see Joint TSD Section 5.2.8.1).
+ This credit is scalable; however, only a minimum credit of 0.05 g/mi CO[ihel2] can be granted.


    Table II-23--Off-Cycle Technologies and Credits for Solar/Thermal
             Control Technologies for Cars and Light Trucks
------------------------------------------------------------------------
                                            Credit (g CO2/mi)
  Thermal control technology   -----------------------------------------
                                        Car                 Truck
------------------------------------------------------------------------
Glass or Glazing..............  Up to 2.9..........  Up to 3.9
Active Seat Ventilation.......  1.0................  1.3
Solar Reflective Paint........  0.4................  0.5
Passive Cabin Ventilation.....  1.7................  2.3
Active Cabin Ventilation*.....  2.1................  2.8
------------------------------------------------------------------------
* Active cabin ventilation has potential synergies with solar panels as
  described in Chapter 5.2 of the joint TSD.

j. Vehicle Simulation Tool
    Chapter 2 of EPA's RIA provides a detailed description of the 
vehicle simulation tool that EPA had developed and has used for the 
final rule. This tool is capable of simulating a wide range of 
conventional and advanced engine, transmission, and vehicle 
technologies over various driving cycles. It evaluates technology 
package effectiveness while taking into account synergy (and dis-
synergy) effects among vehicle components and estimates GHG emissions 
for various combinations of

[[Page 62738]]

technologies. For the MYs 2017 to 2025 GHG rule, this simulation tool 
was used to assist estimating the amount of GHG credits for improved A/
C systems and off-cycle technologies. EPA sought public comment on this 
approach of using the tool for generating some of the credits. The 
agency received no specific comment on the model itself or on the 
documentation of the model. However, based on the comments described in 
the previous section (particularly on allowing scalable credits on off-
cycle technologies), EPA modified and fine-tuned the vehicle simulation 
tool in order to properly capture the amount of scalable GHG reductions 
provided by off-cycle technologies. More specifically, based on the 
comments from the Auto Alliance, EPA used the simulation tool to 
generate scalable credits for the active aerodynamic technology. For 
this final rule, EPA utilized the simulation tool in order to quantify 
the (scalable) credits for Active Aerodynamics, High Efficiency 
Exterior Lights, Solar Panel, and Waste Heat Recovery \311\ more 
accurately. The details of this analysis are presented in Chapter 5.2 
of the Joint TSD.
---------------------------------------------------------------------------

    \311\ This technology was termed `engine heat recovery' at 
proposal.
---------------------------------------------------------------------------

    There are other technologies that would result in additional GHG 
reduction benefits that cannot be fully captured on the combined FTP/
Highway cycle test. These technologies typically reduce engine loads by 
utilizing advanced engine controls, and they range from enabling the 
vehicle to turn off the engine at idle, to reducing cabin temperature 
and thus A/C compressor loading when the vehicle is restarted. Examples 
include Engine Start-Stop, Electric Heater Circulation Pump, Active 
Engine/Transmission Warm-Up, and Solar Control. For these types of 
technologies, the overall GHG reduction largely depends on the control 
and calibration strategies of individual manufacturers and vehicle 
types. EPA utilized the simulation tool to estimate the default credit 
values for the engine start-stop technology. Details of the analysis 
are provided in the chapter 5.2.8.1 of Joint TSD. However, the current 
vehicle simulation tool does not have the capability to properly 
simulate the vehicle behaviors that depend on thermal conditions of the 
vehicle and its surroundings, such as Active Engine/Transmission Warm-
Up and Solar Control. Therefore, the vehicle simulation cannot provide 
full benefits of these technologies on the GHG reductions. For this 
reason, the agency did not use the simulation tool to generate the 
default GHG credits for these technologies, though future versions of 
the model may be more capable of quantifying the efficacy of these off-
cycle technologies as well. As described in Chapter 5 of the Joint TSD, 
the Active Engine/Transmission Warm-up credits were estimated using the 
results from the Ricardo vehicle simulation results.
    In summary, for the MYs 2017 to 2025 GHG final rule, EPA used the 
simulation tool to quantify the amount of GHG emissions reduced by 
improvements in A/C systems and to determine the default credit values 
for some of the off-cycle technologies such as active aerodynamics, 
electrical load reduction, and engine start-stop. Details of the 
analysis and values of these scalable credits are described in Chapter 
5 of Joint TSD. This simulation tool will not be officially used for 
credit compliance purposes (as proposed) because EPA has already made 
several of the credits scalable for the purposes of this final rule. 
However, EPA may use the tool as part of the case-by-case of off-cycle 
credit determination process. EPA encourages manufacturers to use this 
simulation tool in order to estimate the credits values of their off-
cycle technologies.
3. Advanced Technology Incentives for Full-Size Pickup Trucks
    The agencies recognize that the standards for MYs 2017-2025 will be 
challenging for large vehicles, including full-size pickup trucks that 
are often used for commercial purposes and have generally higher 
payload and towing capabilities than other light-duty vehicles. Section 
II.C and Chapter 2 of the joint TSD describe the adjustments made to 
the slope of the truck curve compared to the MYs 2012-2016 rule, 
reflecting these considerations. Sections III.B and IV.E describe the 
progression of the stringency of the truck standards. Large pick-up 
trucks represent are a significant portion of the overall light-duty 
vehicle fleet and generally have higher levels of fuel consumption and 
GHG emissions than most other light-duty vehicles. Improvements in the 
fuel economy and GHG emissions of these vehicles can have significant 
impact on overall light-duty fleet fuel use and GHG emissions. The 
agencies believe that offering incentives in the earlier years of this 
program that encourage the deployment of technologies that can 
significantly improve the efficiency of these vehicles and that also 
will foster production of those technologies at levels that will help 
achieve economies of scale, will promote greater fuel savings overall 
and make these technologies more cost effective and available in the 
later model years of this rulemaking to assist in compliance with the 
standards.
    The agencies are therefore finalizing the proposed approach to 
encourage penetration of these technologies both through the standards 
themselves, but also through various provisions providing regulatory 
incentives for advanced technology use in full-size pick-up trucks. The 
agencies' goal is to incentivize the penetration into the marketplace 
of ``game changing'' technologies for these pickups, including the 
marketing of hybrids. For that reason, EPA, in coordination with NHTSA, 
proposed and is adopting provisions for credits and corresponding 
equivalent fuel consumption improvement values for manufacturers that 
hybridize a significant number of their full-size pickup trucks, or use 
other technologies that significantly reduce CO2 emissions 
and fuel consumption.\312\
---------------------------------------------------------------------------

    \312\ Note that EPA's calculation methodology in 40 CFR 600.510-
12 does not use vehicle-specific fuel consumption adjustments to 
determine the CAFE increase due to the various incentives allowed 
under the program. Instead, EPA will convert the total 
CO2 credits due to each incentive program from metric 
tons of CO2 to a fleetwide CAFE improvement value. The 
fuel consumption values are presented here to show the relationship 
between CO2 and fuel consumption improvements.
---------------------------------------------------------------------------

    Most of the commenters on this issue supported the large truck 
credit concept. Some OEM commenters argued that it should be extended 
to other vehicles such as SUVs and minivans. ICCT, Volkswagen, and CBD 
opposed adopting the proposed incentive, arguing that this vehicle 
segment is not especially challenged by the proposed standards, that 
hybrid systems would readily transfer to it from other vehicle classes, 
and that the credit essentially amounts to an economic advantage for 
manufacturers of large trucks. CBD also commented that this credit 
should be eliminated, since they believe hybrid technology should be 
forced by aggressive standards rather than encouraged through 
regulatory incentives. Other environmental group commenters also 
expressed concern about the real-world impacts of offering this credit, 
and suggested various ways to tailor it to ensure that fuel savings and 
emissions reductions associated with it are genuine.
    We believe that extending the large truck credit to other light-
duty trucks such as SUVs and minivans would greatly expand, and 
therefore dilute, the intended credit focus. The agencies do not 
believe that providing such incentives for hybridization in these 
additional categories is necessary, or that the performance levels 
required of

[[Page 62739]]

non-hybrid technologies eligible for credits are of such stringency 
that extending credits to all or most light-duty trucks would amount to 
anything more than a de facto lowering of overall program stringency. 
Although commenters rightly pointed out that some of these non-truck 
vehicles do have substantial towing capacity, most are not used as 
towing vehicles, in contrast to full-size pickup trucks that often 
serve as work vehicles. Moreover, the smaller footprint trucks fall on 
the lower part of the truck curve, which have a higher rate of 
improvement (in stringency) than the larger trucks, thus making them 
more comparable to cars in terms of technology access and effectiveness 
(as well as not having access to these credits).
    Arguments made by commenters for not adopting the large truck 
technology credit are not convincing. Although there may not be 
inherent reasons for a lack of hybrid technology migration to large 
trucks, it is clear that this migration has nevertheless been slow to 
materialize for practical/economic reasons, including in-use duty 
cycles and customer expectations. These issues still need to be 
addressed by the designers of large pickups to successfully introduce 
these technologies in these trucks, and we believe that assistance in 
the form of a focused, well-defined incentive program is warranted. See 
section III.D.6 and 7 for further discussion of EPA's justification for 
this credit program in the context of the stringency of the truck 
standards.
    Volkswagen commented that any HEV or performance-based credits 
generated by large trucks should not be transferable to other vehicle 
segments, arguing that if compliance for the large truck segment is 
really as challenging as predicted, there should be no excess of 
credits to transfer anyway. This may be the case, but we do not agree 
that it argues for restricting the use of large pickup truck credits. 
We think the sizeable technology hurdle involved and the limited model 
years in which credits are available preclude the potential for credit 
windfalls. Furthermore, neither the size of the large truck market nor 
the size of the per-vehicle credit are so substantial that they could 
lead to a large pool of credits capable of skewing the competition in 
the lighter vehicle market. As described in Section III.D of this 
preamble, EPA will continue to monitor the net level of credit 
transfers from cars to trucks and vice versa in the MYs 2017-2025 
timeframe.
    As proposed, the agencies are defining a full-size pickup truck 
based on minimum bed size and hauling capability, as detailed in 
86.1866-12(e) of the regulations being adopted. This definition is 
meant to ensure that the larger pickup trucks, which provide 
significant utility with respect to bed access and payload and towing 
capacities, are captured by the definition, while smaller pickup trucks 
with more limited capacities are not covered. A full-size pickup truck 
is defined as meeting requirements (1) and (2) below, as well as either 
requirement (3) or (4) below. A more detailed discussion can be found 
in section III.C.3.
    (1) Bed Width--The vehicle must have an open cargo box with a 
minimum width between the wheelhouses of 48 inches. And--
    (2) Bed Length--The length of the open cargo box must be at least 
60 inches. And--
    (3) Towing Capability--the gross combined weight rating (GCWR) 
minus the gross vehicle weight rating (GVWR) must be at least 5,000 
pounds. Or--
    (4) Payload Capability--the GVWR minus the curb weight (as defined 
in 40 CFR 86.1803) must be at least 1,700 pounds.
    EPA sought comment on extending these credits to smaller pickup 
trucks, specifically to those with narrower beds, down to 42 inches, 
but still with towing capability comparable to large trucks. This 
request for comment produced mixed reactions among truck manufacturers, 
and some argued that EPA should go further and drop the bed size limit 
entirely. ICCT and CBD strongly opposed any extension of credits, 
arguing that adopting the 42'' bed width criterion would allow 
virtually all pickup trucks to qualify, thereby distorting technology 
requirements and reducing the benefits of the rule. None of the 
commenters argued convincingly in favor of the extension and so we are 
adopting the 48'' minimum requirement as proposed. Chrysler commented 
that the proposed payload and towing capability minimums are too 
restrictive, making a sizeable number of Ram 1500 configurations 
ineligible to earn credits. However, the company provided no sales 
information to enable the agencies to reassess this issue. Moreover, 
the agencies did not premise the proposed incentive on every full-size 
truck configuration being eligible. Manufacturers typically offer a 
variety of truck options to suit varied customer needs in the work and 
recreational truck markets, and the fact that one manufacturer (or 
more) markets to applications lacking the towing and payload demands of 
the core group of vehicles in this segment does not, in the agencies' 
view, justify a revision of the hauling requirements that were a 
fundamental consideration in establishing the credit.
    The agencies also sought comment on the definitions of mild and 
strong hybrids based on energy capture on braking (brake regeneration). 
Minor modifications to these definitions were made based on these 
comments as well as new testing performed by the EPA. Due to the 
detailed nature of these comments, these responses and the description 
of the testing are included in section 5.3.3 of the Joint TSD.
    The program requirements and incentive amounts differ somewhat for 
mild and strong HEV pickup trucks. As proposed, mild HEVs will be 
eligible for a per-vehicle credit of 10 g/mi (equivalent to 0.0011 
gallon/mile for a gasoline-fueled truck) during MYs 2017-2021. 
Eligibility also requires that the technology be used on a minimum 
percentage of a company's full size pickups, beginning with at least 
20% of a company's full-size pickup production in 2017 and ramping up 
to at least 80% in MY 2021. These minimum percentages are lower in MYs 
2017 and 2018 than proposed (20% and 30%, respectively, compared to the 
proposed 30% and 40%), based on our assessment of the comments arguing 
reasonably that the proposed percentages were too demanding, especially 
in the initial model years when there is the least lead time. Strong 
HEV pickup trucks will be eligible for a 20 g/mi CO2 credit 
(0.0023 gallon/mile) during MYs 2017-2025 if the technology is used on 
at least 10% of the company's full-size pickups. The technology 
penetration thresholds and their basis, as well as comments received on 
our proposal for them, are discussed in more detail in section III.C 
below. Because of their importance in assigning credit amounts, EPA is 
adopting explicit regulatory definitions for mild and strong HEVs. 
These definitions and the relevant comments we received are discussed 
in section III.C.3 and in section 5.3.3 of the Joint TSD.
    Because there are other, non-HEV, advanced technologies that can 
provide significant reductions in pickup truck GHG emissions and fuel 
consumption (e.g., hydraulic hybrid), EPA is also adopting the 
proposed, more generalized, credit provisions for full-size pickup 
trucks that achieve emissions levels significantly below their 
applicable CO2 targets. This performance-based credit will 
be 10 g/mi CO2 (equivalent to 0.0011 gal/mi for the CAFE 
program) or 20 g/mi CO2 (0.0023 gal/mi) for full-size 
pickups achieving 15 or 20%, respectively,

[[Page 62740]]

better CO2 than their footprint-based targets in a given 
model year. The basis for our choice of the 15 and 20% over-compliance 
targets is explained in Section 5.3.4 of the Joint TSD.
    These performance-based credits have no specific technology or 
design requirements; automakers can use any technology or set of 
technologies as long as the vehicle's CO2 performance is at 
least 15 or 20% below its footprint-based target. However, a vehicle 
cannot receive both HEV and performance-based credits. Because the 
footprint target curve has been adjusted to account for A/C-related 
credits, the CO2 level to be compared with the target will 
also include any A/C-related credits generated by the vehicles.
    The 10 g/mi performance-based credit will be available for MYs 2017 
to 2021. In recognition of the nature of automotive redesign sequence, 
a vehicle model meeting the requirements in a model year will receive 
the credit in subsequent model years through MY 2021, unless its 
CO2 level increases or its production drops below the 
penetration threshold described below, even if the year-by-year 
reduction in standards levels causes the vehicle to fall short of the 
15% over-compliance threshold. The 10 g/mi credit is not available 
after MY 2021 because the post-2021 standards quickly overtake designs 
that were originally 15% over-compliant, making the awarding of credits 
to them inappropriate. The 20 g/mi CO2 performance-based 
credit will be available for a maximum of five consecutive model years 
within the 2017 to 2025 model year period, provided the vehicle model's 
CO2 level does not increase from the level determined in its 
first qualifying model year, and subject to the penetration requirement 
described below. A qualifying vehicle model that subsequently undergoes 
a major redesign can requalify for the credit for an additional period 
starting in the redesign model year, not to exceed five model years and 
not to extend beyond MY 2025.
    As with the HEV incentives, eligibility for the performance-based 
credit and fuel consumption improvement value requires that the 
technology be used on a minimum percentage of a manufacturer's full-
size pickup trucks. That minimum percentage for the 10 g/mi 
CO2 credit (0.0011 gal/mi) is 15% in MY 2017, with a ramp up 
to 40% in MY 2021. The minimum percentage for the 20 g/mi credit 
(0.0023 gal/mi) is 10% in each year over the model years 2017-2025. The 
technology penetration thresholds and their basis, as well as comments 
received on our proposal for them, are discussed in more detail in 
section III.C.
    ICCT opposed allowing vehicle models that earn performance-based 
credits in one year to continue receiving them in subsequent years as 
the increasingly more stringent standards progressively diminish the 
vehicle's performance margin compared to the standard. We view the 
incentive over the longer term, as a multi-year package, intending it 
to encourage investment in lasting technology shifts. The fact that it 
is somewhat easier to exceed performance by 15 or 20% in the earlier 
years, when the bar is set lower, and, once earned, to retain that 
benefit for a fixed number of years (provided sales remain strong), 
works to focus the credit as intended--on incentivizing the 
introduction of new technology as early in the program as possible.

G. Safety Considerations in Establishing CAFE/GHG Standards

1. Why do the Agencies consider safety?
    The primary goals of CAFE and GHG standards are to reduce fuel 
consumption and GHG emissions from the on-road light-duty vehicle 
fleet, but in addition to these intended effects, the agencies also 
consider the potential of the standards to affect vehicle safety.\313\ 
As a safety agency, NHTSA has long considered the potential for adverse 
safety consequences when establishing CAFE standards,\314\ and under 
the CAA, EPA considers factors related to public health and human 
welfare, including safety, in regulating emissions of air pollutants 
from mobile sources.\315\ Safety trade-offs associated with fuel 
economy increases have occurred in the past, particularly before NHTSA 
CAFE standards were attribute-based,\316\ and the agencies must be 
mindful of the possibility of future ones. These past safety trade-offs 
may have occurred because manufacturers chose at the time, partly in 
response to CAFE standards, to build smaller and lighter vehicles, 
rather than adding more expensive fuel-saving technologies while 
maintaining vehicle size and safety, and the smaller and lighter 
vehicles did not fare as well in crashes as larger and heavier 
vehicles. Historically, as shown in FARS data analyzed by NHTSA, the 
safest cars generally have been heavy and large, while the cars with 
the highest fatal-crash rates have been light and small. The question, 
then, is whether past is necessarily prologue when it comes to 
potential changes in vehicle size (both footprint and ``overhang'') and 
mass in response to the more stringent future CAFE and GHG standards. 
Manufacturers have stated that they will reduce vehicle mass as one of 
the cost-effective means of increasing fuel economy and reducing 
CO2 emissions in order to meet the standards, and the 
agencies have incorporated this expectation into our modeling analysis 
supporting the standards. Because the agencies discern a historical 
relationship between vehicle mass, size, and safety, it is reasonable 
to assume that these relationships will continue in the future. The 
agencies are encouraged by comments to the NPRM from the Alliance of 
Automotive Manufacturers reflecting a commitment to safety stating 
that, while improving the fuel efficiency of the vehicles, the vehicle 
manufacturers are ``mindful that such improvements must be implemented 
in a manner that does not compromise the rate of safety improvement 
that has been achieved to date.'' The question of whether vehicle 
design can mitigate the adverse effects of mass reduction is discussed 
below.
---------------------------------------------------------------------------

    \313\ In this rulemaking document, ``vehicle safety'' is defined 
as societal fatality rates per vehicle miles traveled (VMT), which 
include fatalities to occupants of all the vehicles involved in the 
collisions, plus any pedestrians.
    \314\ This practice is recognized approvingly in case law. As 
the United States Court of Appeals for the D.C. Circuit stated in 
upholding NHTSA's exercise of judgment in setting the 1987-1989 
passenger car standards, ``NHTSA has always examined the safety 
consequences of the CAFE standards in its overall consideration of 
relevant factors since its earliest rulemaking under the CAFE 
program.'' Competitive Enterprise Institute v. NHTSA (``CEI I''), 
901 F.2d 107, 120 at n. 11 (D.C. Cir. 1990).
    \315\ As noted in Section I.D above, EPA has considered the 
safety of vehicular pollution control technologies from the 
inception of its Title II regulatory programs. See also NRDC v. EPA, 
655 F. 2d 318, 332 n. 31 (D.C. Cir. 1981). (EPA may consider safety 
in developing standards under section 202(a) and did so 
appropriately in the given instance).
    \316\ National Research Council, ``Effectiveness and Impact of 
Corporate Average Fuel Economy (CAFE) Standards,'' National Academy 
Press, Washington, DC (2002), Finding 2, p. 3, Available at http://www.nap.edu/openbook.php?isbn=0309076013 (last accessed Aug. 2, 
2012).
---------------------------------------------------------------------------

    Manufacturers are less likely than they were in the past to reduce 
vehicle footprint in order to reduce mass for increased fuel economy. 
The primary mechanism in this rulemaking for mitigating the potential 
negative effects on safety is the application of footprint-based 
standards, which create a disincentive for manufacturers to produce 
smaller-footprint vehicles (see Section II.C.1 above). This is because, 
as footprint decreases, the corresponding fuel economy/GHG emission 
target becomes more stringent. We also believe that the shape of the 
footprint curves themselves is approximately ``footprint-

[[Page 62741]]

neutral,'' that is, that it should neither encourage manufacturers to 
increase the footprint of their fleets, nor to decrease it. Upsizing 
footprint is also discouraged through the curve ``cut-off'' at larger 
footprints.\317\ However, the footprint-based standards do not 
discourage downsizing the portions of a vehicle in front of the front 
axle and to the rear of the rear axle, or of other areas of the vehicle 
outside the wheels. The crush space provided by those portions of a 
vehicle can make important contributions to managing crash energy. 
Additionally, simply because footprint-based standards minimize 
incentive to downsize vehicles does not mean that some manufacturers 
will not downsize if doing so makes it easier for them to meet the 
overall CAFE/GHG standard in a cost-efficient manner, as for example if 
the smaller vehicles are so much lighter (or de-contented) that they 
exceed their targets by much greater amounts. On balance, however, we 
believe the target curves and the incentives they provide generally 
will not encourage down-sizing (or up-sizing) in terms of footprint 
reductions (or increases).\318\ Consequently, all of our analyses are 
based on the assumption that this rulemaking, in and of itself, will 
not result in any differences in the sales weighted distribution of 
vehicle sizes.
---------------------------------------------------------------------------

    \317\ The agencies recognize that at the other end of the curve, 
manufacturers who make small cars and trucks below 41 square feet 
(the small footprint cut-off point) have some incentive to downsize 
their vehicles to make it easier to meet the constant target. That 
cut-off may also create some incentive for manufacturers who do not 
currently offer models that size to do so in the future. However, at 
the same time, the agencies believe that there is a limit to the 
market for cars and trucks smaller than 41 square feet: most 
consumers likely have some minimum expectation about interior 
volume, for example, among other things. Additionally, vehicles in 
this segment are the lowest price point for the light-duty 
automotive market, with several models in the $10,000-$15,000 range. 
Manufacturers who find themselves incentivized by the cut-off will 
also find themselves adding technology to the lowest price segment 
vehicles, which could make it challenging to retain the price 
advantage. Because of these two reasons, the agencies believe that 
the incentive to increase the sales of vehicles smaller than 41 
square feet due to this rulemaking, if any, is small. See Section 
II.C.1 above and Chapter 1 of the Joint TSD for more information on 
the agencies' choice of ``cut-off'' points for the footprint-based 
target curves.
    \318\ This statement makes no prediction of how consumer choices 
of vehicle size will change in the future, independent of this 
proposal.
---------------------------------------------------------------------------

    Given that we expect manufacturers to reduce vehicle mass in 
response to the final rule, and do not expect manufacturers to reduce 
vehicle footprint in response to the final rule, the agencies must 
attempt to predict the safety effects, if any, of the final rule based 
on the best information currently available. This section explained why 
the agencies consider safety; the following section discusses how the 
agencies consider safety.
2. How do the Agencies consider safety?
    Assessing the effects of vehicle mass reduction and size on 
societal safety is a complex issue. One part of estimating potential 
safety effects involves trying to understand better the relationship 
between mass and vehicle design. The extent of mass reduction that 
manufacturers may be considering to meet more stringent fuel economy 
and GHG standards may raise different safety concerns from what the 
industry has previously faced. The principal difference between the 
heavier vehicles, especially truck-based LTVs, and the lighter 
vehicles, especially passenger cars, is that mass reduction has a 
different effect in collisions with another car or LTV. When two 
vehicles of unequal mass collide, the change in velocity (delta V) is 
higher in the lighter vehicle, similar to the mass ratio proportion. As 
a result of the higher change in velocity, the fatality risk may also 
increase. Removing more mass from the heavier vehicle than in the 
lighter vehicle by amounts that bring the mass ratio closer to 1.0 
reduces the delta V in the lighter vehicle, possibly resulting in a net 
societal benefit. This was reinforced by comments to the proposal from 
Volvo which stated ``Everything else being equal, several of the 
studies presented indicate a significant increase, up to a factor ten, 
in the fatality risk for the occupants in the lighter vehicle for a 
two-to-one weight ratio between the colliding vehicles in a head-on 
crash.''\319\
---------------------------------------------------------------------------

    \319\ Docket No. NHTSA-2010-0131-0243; Section: Safety 
Consideration.
---------------------------------------------------------------------------

    Another complexity is that if a vehicle is made lighter, 
adjustments must be made to the vehicle's structure such that it will 
be able to manage the energy in a crash while limiting intrusion into 
the occupant compartment. To maintain an acceptable occupant 
compartment deceleration, the effective front-end stiffness has to be 
managed such that the crash pulse does not increase as lighter yet 
stiffer materials are utilized. If the energy is not well managed, the 
occupants may have to ``ride down'' a more severe crash pulse, putting 
more burdens on the restraint systems to protect the occupants. There 
may be technological and physical limitations to how much the restraint 
system may mitigate these effects.
    The agencies must attempt to estimate now, based on the best 
information currently available to us for analyzing these CAFE and GHG 
standards, how the assumed levels of mass reduction without additional 
changes (i.e. footprint, performance, functionality) might affect the 
safety of vehicles, and how lighter vehicles might affect the safety of 
drivers and passengers in the entire on-road fleet. The agencies seek 
to ensure that the standards are designed to encourage manufacturers to 
pursue a path toward compliance that is both cost-effective and safe.
    To estimate the possible safety effects of the MY 2017-2025 
standards, then, the agencies have undertaken research that approaches 
this question from several angles. First, we are using a statistical 
approach to study the effect of vehicle mass reduction on safety 
historically, as discussed in greater detail in section C below. 
Statistical analysis is performed using the most recent historical 
crash data available, and is considered as the agencies' best estimate 
of potential mass-safety effects. The agencies recognize that negative 
safety effects estimated based on the historical relationships could 
potentially be tempered with safety technology advances in the future, 
and may not represent the current or future fleet. Second, we are using 
an engineering approach to investigate what amount of mass reduction is 
affordable and feasible while maintaining vehicle safety and 
functionality such as durability, drivability, NVH, and acceleration 
performance. Third, we are also studying the new challenges these 
lighter vehicles might bring to vehicle safety and potential 
countermeasures available to manage those challenges effectively. 
Comments to the proposal from the Alliance of Automakers supported 
NHTSA's approach of using both engineering and statistical analyses to 
assess the effects of the standards on safety, stating ``The Alliance 
supports NHTSA's intention to examine safety from the perspective of 
both the historical field crash data and the engineering analysis of 
potential future Advanced Materials Concept vehicles. NHTSA's planned 
analysis rightly looks backward and forward.'' \320\ DRI furnished 
alternative statistical analyses in which the significant fatality 
increase seen for mass reduction in cars weighing less than 3,106 
pounds in Kahane's analysis tapers off to a non-significant or near-
zero level. Other commenters (including ICCT, Center for Biological 
Diversity (CBD), Consumers Union, NRDC, and the Aluminum Association), 
in contrast, stated that

[[Page 62742]]

mass reduction can be implemented safely and there should be no safety 
impacts associated with the CAFE/GHG standards. Some commenters argued 
that safety of future vehicles will be solely a function of vehicle 
design and not of weight or size, while others argued that better 
material usage, better design, and stronger materials will improve 
vehicle safety if vehicle size is maintained. More specifically, 
comments from ICCT stated that reducing vehicle weight through the use 
of strong lightweight materials, while maintaining size can reduce 
intrusion, as the redesigned vehicle can reduce crash forces with 
equivalent crush space. ICCT further stated that ``this also supports 
that size-based standards that encourage the use of lightweight 
materials should reduce intrusion and, hence, fatalities.'' \321\ The 
American Iron and Steel Institute indicated that steel structures are 
particularly effective in absorbing energy during a collision over the 
engineered crush space (or crumple zone), and further indicated that 
new advanced high-strength steel technology has already demonstrated 
its ability to reduce mass and maintain or improve test crashworthiness 
performance all within the same vehicle footprint, although 
acknowledging that these comments did not necessarily reflect crash 
performance with vehicles of different sizes and masses.
---------------------------------------------------------------------------

    \320\ Alliance comments, Docket No. NHTSA-2010-0131, at pg 5.
    \321\ ICCT comments, Docket No. EPA-HQ-OAR-2010-0799, Document 
ID: 9512, at pg 13.
---------------------------------------------------------------------------

    The agencies have looked closely at these issues, and we believe 
that our approach of using both statistical analyses of historical data 
to assess societal safety effects, and design studies to assess the 
ability of individual designs to comply with the FMVSS and perform well 
on NCAP and IIHS tests responds to these concerns.
    The sections below discuss more specifically the state of the 
research on the mass-safety relationship, and how the agencies have 
integrated that research into our assessment of the safety effects of 
the MY 2017-2025 CAFE and GHG standards.
3. What is the current state of the research on statistical analysis of 
historical crash data?
a. Background
    Researchers have been using statistical analysis to examine the 
relationship of vehicle mass and safety in historical crash data for 
many years, and continue to refine their techniques over time. In the 
MY 2012-2016 final rule, the agencies stated that we would conduct 
further study and research into the interaction of mass, size and 
safety to assist future rulemakings, and start to work collaboratively 
by developing an interagency working group between NHTSA, EPA, DOE, and 
CARB to evaluate all aspects of mass, size and safety. The team would 
seek to coordinate government supported studies and independent 
research, to the greatest extent possible, to help ensure the work is 
complementary to previous and ongoing research and to guide further 
research in this area.
    The agencies also identified three specific areas to direct 
research in preparation for future CAFE/GHG rulemaking in regards to 
statistical analysis of historical data.
    First, NHTSA would contract with an independent institution to 
review the statistical methods that NHTSA and DRI have used to analyze 
historical data related to mass, size and safety, and to provide 
recommendations on whether the existing methods or other methods should 
be used for future statistical analysis of historical data. This study 
would include a consideration of potential near multicollinearity in 
the historical data and how best to address it in a regression 
analysis. The 2010 NHTSA report was also peer reviewed by two other 
experts in the safety field--Charles Farmer (Insurance Institute for 
Highway Safety) and Anders Lie (Swedish Transport Administration).\322\
---------------------------------------------------------------------------

    \322\ All three of the peer reviews are available in Docket No. 
NHTSA-2010-0152. You can access the docket at http://www.regulations.gov/#!home by typing `NHTSA-2010-0152' where it says 
``enter keyword or ID'' and then clicking on ``Search.''
---------------------------------------------------------------------------

    Second, NHTSA and EPA, in consultation with DOE, would update the 
MY 1991-1999 database on which the safety analyses in the NPRM and 
final rule are based with newer vehicle data, and create a common 
database that could be made publicly available to help address concerns 
that differences in data were leading to different results in 
statistical analyses by different researchers.
    And third, in order to assess if the design of recent model year 
vehicles that incorporate various mass reduction methods affect the 
relationships among vehicle mass, size and safety, the agencies sought 
to identify vehicles that are using material substitution and smart 
design, and to try to assess if there is sufficient crash data 
involving those vehicles for statistical analysis. If sufficient data 
exists, statistical analysis would be conducted to compare the 
relationship among mass, size and safety of these smart design vehicles 
to vehicles of similar size and mass with more traditional designs.
    Significant progress has been made on these tasks since the MY 
2012-2016 final rule: The independent review of recent and updated 
statistical analyses of the relationship between vehicle mass, size, 
and crash fatality rates has been completed. NHTSA contracted with the 
University of Michigan Transportation Research Institute (UMTRI) to 
conduct this review, and the UMTRI team led by Paul Green evaluated 
over 20 papers, including studies done by NHTSA's Charles Kahane, Tom 
Wenzel of the U.S. Department of Energy's Lawrence Berkeley National 
Laboratory, Dynamic Research, Inc., and others. UMTRI's basic findings 
will be discussed below. Some commenters in recent CAFE rulemakings, 
including some vehicle manufacturers, suggested that the designs and 
materials of more recent model year vehicles may have weakened the 
historical statistical relationships between mass, size, and safety. 
The agencies agree that the statistical analysis would be improved by 
using an updated database that reflects more recent safety 
technologies, vehicle designs and materials, and reflects changes in 
the overall vehicle fleet, and an updated database was created and 
employed for assessing safety effects in this final rule. The agencies 
also believe, as UMTRI also found, that different statistical analyses 
may have produced different results because they each used slightly 
different datasets for their analyses. In order to try to mitigate this 
issue and to support the current rulemaking, NHTSA has created a 
common, updated database for statistical analysis that consists of 
crash data of model years 2000-2007 vehicles in calendar years 2002-
2008, as compared to the database used in prior NHTSA analyses which 
was based on model years 1991-1999 vehicles in calendar years 1995-
2000. The new database is the most up-to-date possible, given the 
processing lead time for crash data and the need for enough crash cases 
to permit statistically meaningful analyses. NHTSA made the preliminary 
version of the new database, which was the basis for NHTSA's 2011 
report, available to the public in May 2011, and an updated version in 
April 2012,\323\ enabling other researchers to analyze the same data 
and hopefully minimizing discrepancies in the results that would have 
been due to inconsistencies across databases.\324\ The agencies 
recognize, however, that the updated database may not represent the 
future fleet, because vehicles have continued and will

[[Page 62743]]

continue to change. NHTSA published a preliminary report with the NPRM 
in November 2011, which has subsequently been revised based on peer 
review comments. The final report is being published concurrently with 
this rulemaking.\325\
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    \323\ The new databases are available at ftp://ftp.nhtsa.dot.gov/CAFE/.
    \324\ 75 FR 25324 (May 7, 2010); the discussion of planned 
statistical analyses is on pp. 25395-25396.
    \325\ The final report can be found in Docket No. NHTSA-2010-
0131.
---------------------------------------------------------------------------

    The agencies are aware that several studies have been initiated 
using the 2011 version or the 2012 version of NHTSA's newly established 
safety database. In addition to new Kahane studies, which are discussed 
in section II.G.3.d, other on-going studies include two by Wenzel at 
Lawrence Berkeley National Laboratory (LBNL) under contract with the 
U.S. DOE, and one by Dynamic Research, Inc. (DRI) contracted by the 
International Council on Clean Transportation (ICCT). These studies 
take somewhat different approaches to examine the statistical 
relationship between fatality risk, vehicle mass and size. In addition 
to a detailed assessment of the NHTSA 2011 report, Wenzel considers the 
effect of mass and footprint reduction on casualty risk per crash, 
using data from thirteen states. Casualty risk includes both fatalities 
and serious or incapacitating injuries. Both LBNL studies were peer 
reviewed and subsequently revised and updated. DRI used models that 
separate the effect of mass reduction on two components of fatality 
risk, crash avoidance and crashworthiness. The LBNL and DRI studies are 
available in the docket for this final rule.\326\ The database is 
available for download to the public from NHTSA's Web site.
---------------------------------------------------------------------------

    \326\ Wenzel, T. (2011a). Assessment of NHTSA's Report 
``Relationships Between Fatality Risk, Mass, and Footprint in Model 
Year 2000-2007 Passenger Cars and LTVs--Draft Final Report.'' 
(Docket No. NHTSA-2010-0152-0026). Berkeley, CA: Lawrence Berkeley 
National Laboratory; Wenzel, T. (2011b). An Analysis of the 
Relationship between Casualty Risk Per Crash and Vehicle Mass and 
Footprint for Model Year 2000-2007 Light-Duty Vehicles--Draft Final 
Report.'' (Docket No. NHTSA-2010-0152-0028). Berkeley, CA: Lawrence 
Berkeley National Laboratory; Wenzel, T. (2012a). Assessment of 
NHTSA's Report ``Relationships Between Fatality Risk, Mass, and 
Footprint in Model Year 2000-2007 Passenger Cars and LTVs--Final 
Report.'' (To appear in Docket No. NHTSA-2010-0152). Berkeley, CA: 
Lawrence Berkeley National Laboratory; Wenzel, T. (2012b). An 
Analysis of the Relationship between Casualty Risk Per Crash and 
Vehicle Mass and Footprint for Model Year 2000-2007 Light-Duty 
Vehicles--Final Report.'' (To appear in Docket No. NHTSA-2010-0152). 
Berkeley, CA: Lawrence Berkeley National Laboratory; Van Auken, 
R.M., and Zellner, J. W. (2012a). Updated Analysis of the Effects of 
Passenger Vehicle Size and Weight on Safety, Phase I. Report No. 
DRI-TR-11-01. (Docket No. NHTSA-2010-0152-0030). Torrance, CA: 
Dynamic Research, Inc.; Van Auken, R.M., and Zellner, J. W. (2012b). 
Updated Analysis of the Effects of Passenger Vehicle Size and Weight 
on Safety, Phase II; Preliminary Analysis Based on 2002 to 2008 
Calendar Year Data for 2000 to 2007 Model Year Light Passenger 
Vehicles to Induced-Exposure and Vehicle Size Variables. Report No. 
DRI-TR-12-01, Vols. 1-3. (Docket No. NHTSA-2010-0152-0032). 
Torrance, CA: Dynamic Research, Inc.; Van Auken, R.M., and Zellner, 
J. W. (2012c). Updated Analysis of the Effects of Passenger Vehicle 
Size and Weight on Safety, Phase II; Preliminary Analysis Based on 
2002 to 2008 Calendar Year Data for 2000 to 2007 Model Year Light 
Passenger Vehicles to Induced-Exposure and Vehicle Size Variables. 
Report No. DRI-TR-12-01, Vols. 4-5. (Docket No. NHTSA-2010-0152-
0033). Torrance, CA: Dynamic Research, Inc.; Van Auken, R.M., and 
Zellner, J. W. (2012d). Updated Analysis of the Effects of Passenger 
Vehicle Size and Weight on Safety; Sensitivity of the Estimates for 
2002 to 2008 Calendar Year Data for 2000 to 2007 Model Year Light 
Passenger Vehicles to Induced-Exposure and Vehicle Size Variables. 
Report No. DRI-TR-12-03. (Docket No. NHTSA-2010-0152-0034). 
Torrance, CA: Dynamic Research, Inc.
---------------------------------------------------------------------------

    Finally, EPA and NHTSA with DOT's Volpe Center, part of DOT's 
Research and Innovative Technology Administration, attempted to 
investigate the implications of ``Smart Design,'' by identifying and 
describing the types of ``Smart Design'' and methods for using ``Smart 
Design'' to result in vehicle mass reduction, selecting analytical 
pairs of vehicles, and using the appropriate crash database to analyze 
vehicle crash data. The analysis identified several one-vehicle and 
two-vehicle crash datasets with the potential to shed light on the 
issue, but the available data for specific crash scenarios was 
insufficient to produce consistent results that could be used to 
support conclusions regarding historical performance of ``smart 
designs.'' This study is also available in the docket for this final 
rule.\327\
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    \327\ Brewer, John. An Assessment of the Implications of ``Smart 
Design'' on Motor Vehicle Safety. 2011. Docket No. NHTSA-2010-0131.
---------------------------------------------------------------------------

    Undertaking these tasks has helped the agencies come closer to 
resolving some of the ongoing debates in statistical analysis research 
of historical crash data. We intend to apply these conclusions going 
forward in the midterm review and future rulemakings, and we believe 
that the public discussion of the issues will be facilitated by the 
research conducted. The following sections discuss the findings from 
these studies and others in greater detail, to present a more nuanced 
picture of the current state of the statistical research.
b. NHTSA Workshop on Vehicle Mass, Size and Safety
    On February 25, 2011, NHTSA hosted a workshop on mass reduction, 
vehicle size, and fleet safety at the Headquarters of the U.S. 
Department of Transportation in Washington, DC.\328\ The purpose of the 
workshop was to provide the agencies with a broad understanding of 
current research in the field and provide stakeholders and the public 
with an opportunity to weigh in on this issue. NHTSA also created a 
public docket to receive comments from interested parties that were 
unable to attend.
---------------------------------------------------------------------------

    \328\ A video recording, transcript, and the presentations from 
the NHTSA workshop on mass reduction, vehicle size and fleet safety 
is available at http://www.nhtsa.gov/fuel-economy (look for ``NHTSA 
Workshop on Vehicle Mass-Size-Safety on Feb. 25.'')
---------------------------------------------------------------------------

    The speakers included Charles Kahane of NHTSA, Tom Wenzel of 
Lawrence Berkeley National Laboratory, R. Michael Van Auken of Dynamic 
Research Inc. (DRI), Jeya Padmanaban of JP Research, Inc., Adrian Lund 
of the Insurance Institute for Highway Safety, Paul Green of the 
University of Michigan Transportation Research Institute (UMTRI), 
Stephen Summers of NHTSA, Gregg Peterson of Lotus Engineering, Koichi 
Kamiji of Honda, John German of the International Council on Clean 
Transportation (ICCT), Scott Schmidt of the Alliance of Automobile 
Manufacturers, Guy Nusholtz of Chrysler, and Frank Field of the 
Massachusetts Institute of Technology.
    The wide participation in the workshop allowed the agencies to hear 
from a broad range of experts and stakeholders. The contributions were 
particularly relevant to the agencies' analysis of the effects of mass 
reduction for this final rule. The presentations were divided into two 
sessions that addressed the two expansive sets of issues: statistical 
evidence of the roles of mass and size on safety, and engineering 
realities regarding structural crashworthiness, occupant injury and 
advanced vehicle design.
    The first session focused on previous and ongoing statistical 
studies of crash data that attempt to identify the relative recent 
historical effects of vehicle mass and size on fleet safety. There was 
consensus that there is a complicated relationship with many 
confounding influences in the data. Wenzel summarized a recent study he 
conducted comparing four types of risk (fatality or casualty risk, per 
vehicle registration-years or per crash) using police-reported crash 
data from five states. This study was updated and finalized in March of 
2012.\329\ He showed that the trends in risk for various classes of 
vehicles--e.g., non-sports car passenger cars, vans, SUVs,

[[Page 62744]]

crossover utility vehicles (CUV), pickups--were similar regardless of 
what risk was being measured (fatality or casualty) or what exposure 
metric was used (e.g., registration years, police-reported crashes, 
etc.). In general, most trends showed that societal risk tends to 
decrease as car or CUV size increases, while societal risk tends to 
increase as pickup or SUV size increases.
---------------------------------------------------------------------------

    \329\ Wenzel, T.P. (2012). Analysis of Casualty Risk per Police-
Reported Crash for Model Year 2000 to 2004 Vehicles, Using Crash 
Data from Five States, March 2012, LBNL-4897E, available at: http://energy.lbl.gov/ea/teepa/pdf/lbnl-4897e.pdf (last accessed Jun. 18, 
2012).
---------------------------------------------------------------------------

    Although Wenzel's analysis was focused on differences in the four 
types of risk on the relative risk by vehicle type, he cautioned that, 
when analyzing casualty risk per crash, analysts should control for 
driver age and gender, crash location (urban vs. rural), and the state 
in which the crash occurred (to account for crash reporting biases).
    Several participants pointed out that analyses must also control 
for individual technologies with significant safety effects (e.g., 
Electronic Stability Control, airbags). It was not always conclusive 
whether a specialty vehicle group (e.g., sports cars, two-door cars, 
early crossover SUVs) were outliers that confound the trend or unique 
datasets that isolate specific vehicle characteristics. Unfortunately, 
specialty vehicle groups are usually adopted by specific driver groups, 
often with outlying vehicle usage or driver behavior patterns. Green, 
who conducted an independent review of 18 previous statistical 
analyses, suggested that evaluating residuals will give an indication 
of whether or not a data subset can be legitimately removed without 
inappropriately affecting the analytical results.
    It was recognized that the physics of a two-vehicle crash require 
that the lighter vehicle experience a greater change in velocity, 
which, all else being equal, often leads to disproportionately more 
injury risk. Lund noted persistent historical trends that, in any time 
period, occupants of the smallest and lightest vehicles had, on 
average, fatality rates approximately twice those of occupants of the 
largest and heaviest vehicles, but also predicted that ``the sky will 
not fall'' as the fleet downsizes, insofar as we will not see an 
increase in absolute injury risk because smaller cars will become 
increasingly protective of their occupants. Padmanaban also noted in 
her research of the historical trends that mass ratio and vehicle 
stiffness are significant predictors with mass ratio consistently the 
dominant parameter when correlating harm. Reducing the mass of any 
vehicle may have competing societal effects as it increases the injury 
risk in the lightened vehicle and decreases them in the partner 
vehicle.
    The separation of key parameters was also discussed as a challenge 
to the analyses, as vehicle size has historically been highly 
correlated with vehicle mass. Presenters had varying approaches for 
dealing with the potential multicollinearity between these two 
variables. Van Auken of DRI stated that there was disagreement on what 
value of Variance Inflation Factor (VIF, a measure of 
multicollinearity) that would call results into question, and suggested 
that a large value of VIF for curb weight might imply ``perhaps the 
effect of weight is too small in comparison to other factors.'' Green, 
of UMTRI, stated that highly correlated variables may not be 
appropriate for use in a predictive model and that ``match[ing] on 
footprint'' (i.e., conducting multiple analyses for data subsets with 
similar footprint values) may be the most effective way to resolve the 
issue.
    There was no consensus on whether smaller, lighter vehicles 
maneuver better, and thus avoid more crashes, than larger, heavier 
vehicles. German noted that lighter vehicles should have improved 
handling and braking characteristics and ``may be more likely to avoid 
collisions.'' Lund presented crash involvement data that implied that, 
among vehicles of similar function and use rates, crash risk does not 
go down for more ``nimble'' vehicles. Several presenters noted the 
difficulties of projecting past data into the future as new 
technologies will be used that were not available when the data were 
collected. The advances in technology through the decades have 
dramatically improved safety for all weight and size classes. A video 
of IIHS's 50th anniversary crash test of a 1959 Chevrolet Bel Air and 
2009 Chevrolet Malibu graphically demonstrated that stark differences 
in design and technology can possibly mask the discrete mass effects, 
while videos of compatibility crash tests between smaller, lighter 
vehicles and contemporary larger, heavier vehicles graphically showed 
the significance of vehicle mass and size.
    Kahane presented results from his 2010 report \330\ that found that 
a scenario which took some mass out of heavier vehicles but little or 
no mass out of the lightest vehicles did not impact safety in absolute 
terms. Kahane noted that if the analyses were able to consider the mass 
of both vehicles in a two-vehicle crash, the results may be more 
indicative of future crashes. There is apparent consistency with other 
presentations (e.g., Padmanaban, Nusholtz) that reducing the overall 
ranges of masses and mass ratios seems to reduce overall societal harm. 
That is, the effect of mass reduction exclusively does not appear to be 
a ``zero sum game'' in which any increase in harm to occupants of the 
lightened vehicle is precisely offset by a decrease in harm to the 
occupants of the partner vehicle. If the mass of the heavier vehicle is 
reduced by a larger percentage than that of its lighter crash partner, 
the changes in velocity from the collision are more nearly equal and 
the injuries suffered in the lighter vehicle are likely to be reduced 
more than the injuries in the heavier vehicle are increased. 
Alternatively, a fixed absolute mass reduction (say, 100 pounds) in all 
vehicles could increase societal harm whereas a fixed percentage mass 
reduction is more likely to be neutral.
---------------------------------------------------------------------------

    \330\ Kahane, C. J. (2010). ``Relationships Between Fatality 
Risk, Mass, and Footprint in Model Year 1991-1999 and Other 
Passenger Cars and LTVs,'' Final Regulatory Impact Analysis: 
Corporate Average Fuel Economy for MY 2012-MY 2016 Passenger Cars 
and Light Trucks. Washington, DC: National Highway Traffic Safety 
Administration, pp. 464-542, available at http://www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/CAFE_2012-2016_FRIA_04012010.pdf.
---------------------------------------------------------------------------

    Padmanaban described a series of studies conducted in recent years. 
She included numerous vehicle parameters including bumper height and 
several measures of vehicle size and stiffness and also commented on 
previous analyses that using weight and wheelbase together in a 
logistic regression model distorts the estimates, resulting in high 
variance inflation factors with wrong signs and magnitudes in the 
results. Her results consistently showed that the ratio between the 
masses of two vehicles involved in a two-vehicle crash was a more 
important parameter than variables describing vehicle geometry or 
stiffness. Her ultimate conclusion was that removing mass (e.g., 100 
lbs.) from all passenger cars would cause an overall increase in 
fatalities in truck-to-car crashes while removing the same amount from 
light trucks would cause an overall decrease in fatalities.
c. Report by Green et al., UMTRI--``Independent Review: Statistical 
Analyses of Relationship Between Vehicle Curb Weight, Track Width, 
Wheelbase and Fatality Rates,'' April 2011
    As explained above, NHTSA contracted with the University of 
Michigan Transportation Research Institute (UMTRI) to conduct an 
independent review \331\ of a set of

[[Page 62745]]

statistical analyses of relationships between vehicle curb weight, the 
footprint variables (track width, wheelbase) and fatality rates from 
vehicle crashes. The purpose of this review was to examine analysis 
methods, data sources, and assumptions of the statistical studies, with 
the objective of identifying the reasons for any differences in 
results. Another objective was to examine the suitability of the 
various methods for estimating the fatality risks of future vehicles.
---------------------------------------------------------------------------

    \331\ The review is independent in the sense that it was 
conducted by an outside third party without any interest in the 
reported outcome.
---------------------------------------------------------------------------

    UMTRI reviewed a set of papers, reports, and manuscripts provided 
by NHTSA (listed in Appendix A of UMTRI's report, which is available in 
the docket to this rulemaking) that examined the statistical 
relationships between fatality or casualty rates and vehicle properties 
such as curb weight, track width, wheelbase and other variables.
    It is difficult to summarize a study of that length and complexity 
for purposes of this discussion, but fundamentally, the UMTRI team 
concluded the following:
     Differences in data may have complicated comparisons of 
earlier analyses, but if the methodology is robust, and the methods 
were applied in a similar way, small changes in data should not lead to 
different conclusions. The main conclusions and findings should be 
reproducible. The database created by Kahane appears to be an 
impressive collection of files from appropriate sources and the best 
ones available for answering the research questions considered in this 
study.
     In statistical analysis simpler models generally lead to 
improved inference, assuming the data and model assumptions are 
appropriate. In that regard, the disaggregate logistic regression model 
used by NHTSA in the 2003 report \332\ seems to be the most appropriate 
model, and valid for the analysis in the context that it was used: 
finding general associations between fatality risk and mass--and the 
general directions of the reported associations are correct.
---------------------------------------------------------------------------

    \332\ Kahane, C. J. (2003). Vehicle Weight, Fatality Risk and 
Crash Compatibility of Model Year 1991-99 Passenger Cars and Light 
Trucks, NHTSA Technical Report. DOT HS 809 662. Washington, DC: 
National Highway Traffic Safety Administration, http://www-nrd.nhtsa.dot.gov/Pubs/809662.PDF.
---------------------------------------------------------------------------

     The two-stage logistic regression model in combination 
with the two-step aggregate regression used by DRI seems to be more 
complicated than is necessary based on the data being analyzed, and 
summing regression coefficients from two separate models to arrive at 
conclusions about the effects of reductions in weight or size on 
fatality risk seems to add unneeded complexity to the problem.
     One of the biggest issues regarding the various 
statistical analyses is the historical correlation between curb weight, 
wheelbase, and track width. Including three variables that are highly 
correlated in the same model can have adverse effects on the fit of the 
model, especially with respect to the parameter estimates, as discussed 
by Kahane. UMTRI makes no conclusions about multicollinearity, other 
than to say that inferences made in the presence of multicollinearity 
should be judged with great caution. At the NHTSA workshop on size, 
safety and mass, Paul Green suggested that a matched analysis, in which 
regressions are run on the relationship between mass reduction and risk 
separately for vehicles of similar footprint, could be undertaken to 
reduce the effect of multicollinearity between vehicle mass and size. 
Kahane has combined wheelbase and track width into one variable 
(footprint) to compare with curb weight. NHTSA believes that the 2012 
Kahane analysis has done all it can to lessen concerns about 
multicollinearity, but a concern still exists.

 In considering other studies provided by NHTSA for evaluation 
by the UMTRI team:
     Papers by Wenzel, and Wenzel and Ross, addressing 
associations between fatality risk per vehicle registration-year, 
weight, and size by vehicle model contribute to understanding some of 
the relationships between risk, weight, and size. However, least 
squares linear regression models, without modification, are not 
exposure-based risk models and inferences drawn from these models tend 
to be weak since they do not account for additional differences in 
vehicles, drivers, or crash conditions that could explain the variance 
in risk by vehicle model.
     A 2009 J.P. Research paper focused on the difficulties 
associated with separating out the contributions of weight and size 
variables when analyzing fatality risk properly recognized the problem 
arising from multicollinearity and included a clear explanation of why 
societal fatality risk in two-vehicle crashes is expected to increase 
with increasing mass ratio. UMTRI concluded that the increases in 
fatality risk associated with a 100-pound reduction in weight allowing 
footprint to vary with weight as estimated by Kahane and JP Research, 
are broadly more convincing than the 6.7 percent reduction in fatality 
risk associated with mass reduction while holding footprint constant, 
as reported by DRI.
     A paper by Nusholtz et al. focused on the question of 
whether vehicle size can reasonably be the dominant vehicle factor for 
fatality risk, and finding that changing the mean mass of the vehicle 
population (leaving variability unchanged) has a stronger influence on 
fatality risk than corresponding (feasible) changes in mean vehicle 
dimensions, concluded unequivocally that reducing vehicle mass while 
maintaining constant vehicle dimensions will increase fatality risk. 
UMTRI concluded that if one accepts the methodology, this conclusion is 
robust against realistic changes that may be made in the force vs. 
deflection characteristics of the impacting vehicles.
     Two papers by Robertson, one a commentary paper and the 
other a peer-reviewed journal article, were reviewed. The commentary 
paper did not fit separate models according to crash type, and included 
passenger cars, vans, and SUVs in the same model. UMTRI concluded that 
some of the claims in the commentary paper appear to be overstated, and 
intermediate results and more documentation would help the reader 
determine if these claims are valid. The second paper focused largely 
on the effects of electronic stability control (ESC), but generally 
followed on from the first paper except that fuel economy is used as a 
surrogate for curb weight.
    The UMTRI study provided a number of useful suggestions that Kahane 
considered in updating his 2011 analysis, and that have been 
incorporated into the safety effects estimates for the current 
rulemaking.
d. Two Reports by Dr. Charles Kahane, NHTSA titled ``Relationships 
Between Fatality Risk, Mass, and Footprint in Model Year 2000-2007 
Passenger Cars and LTVs'': Preliminary Report, November 2011 and Final 
Report, August 2012
    The relationship between a vehicle's mass, size, and fatality risk 
is complex, and varies in different types of crashes. NHTSA, along with 
others, has been examining this relationship for over a decade. The 
safety chapter of NHTSA's April 2010 final regulatory impact analysis 
(FRIA) of CAFE standards for

[[Page 62746]]

MYs 2012-2016 passenger cars and light trucks included a statistical 
analysis of relationships between fatality risk, mass, and footprint in 
MY 1991-1999 passenger cars and LTVs (light trucks and vans), based on 
calendar year (CY) 1995-2000 crash and vehicle-registration data.\333\ 
The 2010 analysis used the same data as the 2003 analysis, but included 
vehicle mass and footprint in the same regression model.
---------------------------------------------------------------------------

    \333\ Kahane (2010).
---------------------------------------------------------------------------

    The principal findings of NHTSA's 2010 analysis were that mass 
reduction in lighter cars, even while holding footprint constant, would 
significantly increase societal fatality risk, whereas mass reduction 
in the heavier LTVs would significantly reduce net societal fatality 
risk, because it would reduce the fatality risk of occupants in lighter 
vehicles which collide with the heavier LTVs. NHTSA concluded that, as 
a result, any reasonable combination of mass reductions while holding 
footprint constant in MYs 2012-2016 vehicles--concentrated, at least to 
some extent, in the heavier LTVs and limited in the lighter cars--would 
likely be approximately safety-neutral; it would not significantly 
increase fatalities and might well decrease them.
    NHTSA's 2010 report partially agreed and partially disagreed with 
analyses published during 2003-2005 by Dynamic Research, Inc. (DRI). 
NHTSA and DRI both found a significant protective effect for footprint, 
and that reducing mass and footprint together (downsizing) on smaller 
vehicles was harmful. DRI's analyses estimated a significant overall 
reduction in fatalities from mass reduction in all light-duty vehicles 
if wheelbase and track width were maintained, whereas NHTSA's report 
showed overall fatality reductions only in the heavier LTVs, and 
benefits only in some types of crashes for other vehicle types. Much of 
NHTSA's 2010 report, as well as recent work by DRI, involved 
sensitivity tests on the databases and models, which generated a range 
of estimates somewhere between the initial DRI and NHTSA results.\334\
---------------------------------------------------------------------------

    \334\ Van Auken, R. M., and Zellner, J. W. (2003). A Further 
Assessment of the Effects of Vehicle Weight and Size Parameters on 
Fatality Risk in Model Year 1985-98 Passenger Cars and 1986-97 Light 
Trucks. Report No. DRI-TR-03-01. Torrance, CA: Dynamic Research, 
Inc.; Van Auken, R. M., and Zellner, J. W. (2005a). An Assessment of 
the Effects of Vehicle Weight and Size on Fatality Risk in 1985 to 
1998 Model Year Passenger Cars and 1985 to 1997 Model Year Light 
Trucks and Vans. Paper No. 2005-01-1354. Warrendale, PA: Society of 
Automotive Engineers; Van Auken, R. M., and Zellner, J. W. (2005b). 
Supplemental Results on the Independent Effects of Curb Weight, 
Wheelbase, and Track on Fatality Risk in 1985-1998 Model Year 
Passenger Cars and 1986-97 Model Year LTVs. Report No. DRI-TR-05-01. 
Torrance, CA: Dynamic Research, Inc.; Van Auken, R.M., and Zellner, 
J. W. (2011).2012a). Updated Analysis of the Effects of Passenger 
Vehicle Size and Weight on Safety, Phase I. Report No. DRI-TR-11-01. 
(Docket No. NHTSA-2010-0152-0030). Torrance, CA: Dynamic Research, 
Inc.
---------------------------------------------------------------------------

    In April 2010, NHTSA, working closely with EPA and the Department 
of Energy (DOE), commenced a new statistical analysis of the 
relationships between fatality rates, mass and footprint, updating the 
crash and exposure databases to the latest available model years, 
refining the methodology in response to peer reviews of the 2010 report 
and taking into account changes in vehicle technologies. The previous 
databases of MYs 1991-1999 vehicles in CYs 1995-2000 crashes had become 
outdated as new safety technologies, vehicle designs and materials were 
introduced. The new databases are comprised of MYs 2000-2007 vehicles 
in CY 2002-2008 crashes with the most up-to-date possible data, given 
the processing lead time for crash data and the need for enough crash 
cases to permit statistically meaningful analyses. NHTSA made the first 
version of the new databases available to the public in May 2011 and an 
updated version in April 2012,\335\ enabling other researchers to 
analyze the same data and hopefully minimizing discrepancies in the 
results due to inconsistencies across the data used.\336\
---------------------------------------------------------------------------

    \335\ http://www.nhtsa.gov/fuel-economy.
    \336\ 75 FR 25324 (May 7, 2010); the discussion of planned 
statistical analyses is on pp. 25395-25396.
---------------------------------------------------------------------------

    One way to estimate these effects is the use of statistical 
analyses of societal fatality rates per vehicle miles traveled (VMT), 
by vehicles' mass and footprint, for the current on-road vehicle fleet. 
The basic analytical method used for the 2011-2012 NHTSA reports is the 
same as in NHTSA's 2010 report: cross-sectional analyses of the effect 
of mass and footprint reductions on the societal fatality rate per 
billion vehicle miles of travel (VMT), while controlling for driver age 
and gender, vehicle type, vehicle safety features, crash times and 
locations, and other factors. Separate logistic regression models are 
run for three types of vehicles and nine types of crashes. Societal 
fatality rates include occupants of all vehicles in the crash, as well 
as non-occupants, such as pedestrians and cyclists. NHTSA's 2011-2012 
reports\337\ analyze MYs 2000-2007 cars and LTVs in CYs 2002-2008 
crashes. Fatality rates were derived from FARS data, 13 State crash 
files, and registration and mileage data from R.L. Polk.
---------------------------------------------------------------------------

    \337\ Kahane, C. J. (2011). ``Relationships Between Fatality 
Risk, Mass, and Footprint in Model Year 2000-2007 Passenger Cars and 
LTVs--Preliminary Report,'' is available in the NHTSA docket, NHTSA-
2010-0152 as item no. 0023. Kahane, C. J. (2012). ``Relationships 
Between Fatality Risk, Mass, and Footprint in Model Year 2000-2007 
Passenger Cars and LTVs--Final Report,'' is also in that docket. You 
can access the docket at http://www.regulations.gov/#!home by typing 
``NHTSA-2010-0152'' where it says ``enter keyword or ID'' and then 
clicking on ``Search.''
---------------------------------------------------------------------------

    The most noticeable change in MYs 2000-2007 vehicles from MYs 1991-
1999 has been the increase in crossover utility vehicles (CUV), which 
are SUVs of unibody construction, sometimes built upon a platform 
shared with passenger cars. CUVs have blurred the distinction between 
cars and trucks. The new analyses treat CUVs and minivans as a separate 
vehicle class, because they differ in some respects from pickup-truck-
based LTVs and in other respects from passenger cars. In the 2010 
report, the many different types of LTVs were combined into a single 
analysis. NHTSA believes that this may have made the analyses too 
complex and might have contributed to some of the uncertainty in the 
results.
    The new database has more accurate VMT estimates than NHTSA's 
earlier databases, derived from a file of odometer readings by make, 
model, and model year recently developed by R.L. Polk and purchased by 
NHTSA.\338\ For the 2011-2012 reports, the relative distribution of 
crash types has been changed to reflect the projected distribution of 
crashes during the period from 2017 to 2025, based on the estimated 
effectiveness of electronic stability control (ESC) in reducing the 
number of fatalities in rollover crashes and crashes with a stationary 
object. The annual target population of fatalities or the annual 
fatality distribution baseline \339\ was not decreased in the period 
between 2017 and 2025 for the safety statistics analysis, but is taken 
into account later in the Volpe model analysis, since all light-duty 
vehicles manufactured on or after September 1, 2011 are required to be 
equipped with ESC.\340\
---------------------------------------------------------------------------

    \338\ In the 1991-1999 data base, VMT was estimated only by 
vehicle class, based on NASS CDS data.
    \339\ MY 2004-2007 vehicles with fatal crashes occurred in CY 
2004-2008 are selected as the annual fatality distribution baseline 
in the Kahane analysis.
    \340\ In the Volpe model, NHTSA assumed that the safety trend 
would result in 12.6 percent reduction between 2007 and 2020 due to 
the combination of ESC, new safety standard, and behavior changes 
anticipated.
---------------------------------------------------------------------------

    For the 2011-2012 reports, vehicles are now grouped into five 
classes rather than four: passenger cars (including both 2-door and 4-
door cars) are split in half by median weight; CUVs and minivans; and 
truck-based LTVs, which

[[Page 62747]]

are also split in half by median weight of the model year 2000-2007 
vehicles. Table II-24 presents the 2011 preliminary report's estimated 
percent increase in U.S. societal fatality risk per ten billion VMT for 
each 100-pound reduction in vehicle mass, while holding footprint 
constant, for each of the five classes of vehicles.

 Table II-24--Results of 2011 NHTSA Preliminary Report: Fatality Increase (%) per 100-Pound Mass Reduction While
                                           Holding Footprint Constant
----------------------------------------------------------------------------------------------------------------
                                                     Fatality increase (%) per 100-pound mass reduction while
                                                                    holding footprint constant
           MY 2000-2007  CY 2002-2008           ----------------------------------------------------------------
                                                   Point estimate               95% confidence bounds
----------------------------------------------------------------------------------------------------------------
Cars < 3,106 pounds............................               1.44  +.29 to +2.59
Cars >= 3,106 pounds...........................                .47  -.58 to +1.52
CUVs and minivans..............................               -.46  -1.75 to +.83
Truck-based LTVs < 4,594 pounds................                .52  -.43 to +1.46
Truck-based LTVs >= 4,594 pounds...............               -.39  -1.06 to +.27
----------------------------------------------------------------------------------------------------------------

    Charles Farmer, Paul E. Green, and Anders Lie, who reviewed NHTSA's 
2010 report, again peer-reviewed the 2011 preliminary report.\341\ In 
preparing its 2012 final report, NHTSA also took into account Wenzel's 
assessment of the preliminary report and its peer reviews, DRI's 
analyses published early in 2012, and public comments such as those by 
ICCT.\342\ These comments prompted supplementary analyses, especially 
sensitivity tests, discussed below. However, the basic analysis of the 
2012 final report is almost unchanged from the 2011 preliminary report, 
differing only in the addition of some crash data that became available 
in the interim and a minor change in the formula for estimating annual 
VMT. Table II-25 presents the 2012 final report's estimated percent 
increase in U.S. societal fatality risk per ten billion VMT for each 
100-pound reduction in vehicle mass, while holding footprint constant, 
for each of the five classes of vehicles.
---------------------------------------------------------------------------

    \341\ Items 0035 (Lie), 0036 (Farmer) and 0037 (Green) in Docket 
No. NHTSA-2010-0152.
    \342\ Item 0258 in Docket No. NHTSA-2010-0131.

    Table II-25--Results of 2012 NHTSA Final Report: Fatality Increase (%) per 100-Pound Mass Reduction While
                                           Holding Footprint Constant
----------------------------------------------------------------------------------------------------------------
                                                     Fatality increase (%) per 100-pound mass reduction While
                                                                    holding footprint constant
           MY 2000-2007 CY 2002-2008            ----------------------------------------------------------------
                                                   Point estimate               95% confidence bounds
----------------------------------------------------------------------------------------------------------------
Cars < 3,106 pounds............................               1.56  +.39 to +2.73
Cars >= 3,106 pounds...........................                .51  -.59 to +1.60
CUVs and minivans..............................               -.37  -1.55 to +.81
Truck-based LTVs < 4,594 pounds................                .52  -.45 to +1.48
Truck-based LTVs >= 4,594 pounds...............               -.34  -.97 to +.30
----------------------------------------------------------------------------------------------------------------

    Only the 1.56 percent risk increase in the lighter-than-average 
cars is statistically significant. There are nonsignificant increases 
in the heavier-than-average cars and the lighter-than-average truck-
based LTVs, and non-significant societal benefits for mass reduction in 
CUVs, minivans, and the heavier-than-average truck-based LTVs. The 
report concludes that judicious combinations of mass reductions that 
maintain footprint and are proportionately higher in the heavier 
vehicles are likely to be safety-neutral--i.e., they are unlikely to 
have a societal effect large enough to be detected by statistical 
analyses of crash data. The primarily non-significant results are not 
due to a paucity of data, but because the societal effect of mass 
reduction while maintaining footprint, if any, is small.
    MY 2000-2007 vehicles of all types are heavier and larger than 
their MY 1991-1999 counterparts. The average mass of passenger cars 
increased by 5 percent from 2000 to 2007 and the average mass of pickup 
trucks increased by 19 percent. Other types of vehicles became heavier, 
on the average, by amounts within this range. There are several reasons 
for these increases: During this time, some of the lighter make-models 
were discontinued; many models were redesigned to be heavier and 
larger; and consumers more often selected stretched versions such as 
crew cabs in their new-vehicle purchases.
    It is interesting to compare the new results to NHTSA's 2010 
analysis of MY 1991-1999 vehicles in CY 1995-2000, especially the new 
point estimate to the ``actual regression result scenario'' in the 2010 
report:

  Table II-26--2010 Report: MY 1991-1999, CY 1995-2000 Fatality Increase (%) per 100-Pound Mass Reduction While
                                           Holding Footprint Constant
----------------------------------------------------------------------------------------------------------------
                                          Actual regression
                                           result scenario      Upper-estimate scenario  Lower-estimate scenario
----------------------------------------------------------------------------------------------------------------
Cars < 2,950 pounds..................                     2.21                     2.21                     1.02

[[Page 62748]]

 
Cars >= 2,950 pounds.................                     0.90                     0.90                     0.44
LTVs < 3,870 pounds..................                     0.17                     0.55                     0.41
LTVs >= 3,870 pounds.................                    -1.90                    -0.62                    -0.73
----------------------------------------------------------------------------------------------------------------


  Table II-27--Fatality Increase (%) per 100-Pound Mass Reduction While
                       Holding Footprint Constant
------------------------------------------------------------------------
                                                     NHTSA       NHTSA
                                                    (2010)      (2012)
                                                   (percent)   (percent)
------------------------------------------------------------------------
Lighter cars....................................        2.21        1.56
Heavier cars....................................        0.90        0.51
Lighter LTVs....................................       0.17*        0.52
Heavier LTVs....................................      -1.90*       -0.34
CUV/minivan.....................................  ..........       -0.37
------------------------------------------------------------------------
* Includes CUV/minivan

    The new results are directionally similar to the 2010 results: 
Fatality increase in the lighter cars, safety benefit in the heavier 
LTVs. But the effects may have become weaker at both ends. (NHTSA does 
not consider this conclusion to be definitive because of the relatively 
wide confidence bounds of the estimates.) The fatality increase in the 
lighter cars tapered off from 2.21 percent to 1.56 percent while the 
societal fatality-reduction benefit of mass reduction in the heaviest 
LTVs diminished from 1.90 percent to 0.34 percent and is no longer 
statistically significant.
    The agencies believe that the changes may be due to a combination 
of the characteristics of newer vehicles and revisions to the analysis. 
NHTSA believes, above all, that several light, small car models with 
poor safety performance were discontinued by 2000 or during MYs 2000-
2007. Also, the tendency of light, small vehicles to be driven in a 
manner that results in high crash rates is not as strong as it used to 
be.\343\ Both agencies believe that at the other end of the weight/size 
spectrum, blocker beams and other voluntary compatibility improvements 
in LTVs, as well as compatibility-related self-protection improvements 
to cars, have made the heavier LTVs less aggressive in collisions with 
lighter vehicles (although the effect of mass disparity remains). This 
report's analysis of CUVs and minivans as a separate class of vehicles 
may have relieved some inaccuracies in the 2010 regression results for 
LTVs. Interestingly, the new actual-regression results are quite close 
to the previous report's ``lower-estimate scenario,'' which was an 
attempt to adjust for supposed inaccuracies in some regressions and for 
a seemingly excessive trend toward higher crash rates in smaller and 
lighter cars.
---------------------------------------------------------------------------

    \343\ Kahane (2012), pp. 30-36.
---------------------------------------------------------------------------

    The principal difference between the heavier vehicles, especially 
truck-based LTVs, and the lighter vehicles, especially passenger cars, 
is that mass reduction has a different effect depending on whether the 
crash partner is another car or LTV (34 percent of fatalities occurred 
in crashes involving two light-duty vehicles, and another 6 percent 
occurred in crashes involving a light-duty vehicle and a heavy-duty 
vehicle) When two vehicles of unequal mass collide, the delta V is 
higher in the lighter vehicle, in the same proportion as the mass 
ratio. As a result, the fatality risk is also higher. Removing some 
mass from the heavy vehicle reduces delta V in the lighter vehicle, 
where fatality risk is higher, resulting in a large benefit, offset by 
a small penalty because delta V increases in the heavy vehicle, where 
fatality risk is low--adding up to a net societal benefit. Removing 
some mass from the lighter vehicle results in a large penalty offset by 
a small benefit--adding up to net harm. These considerations drive the 
overall result: Fatality increase in the lighter cars, reduction in the 
heavier LTVs, and little effect in the intermediate groups. However, in 
some types of crashes, especially first-event rollovers and impacts 
with fixed objects (which, combined, accounted for 23 percent of 
fatalities), mass reduction is usually not harmful and often 
beneficial, because the lighter vehicles respond more quickly to 
braking and steering. Offsetting this beneficial, is the continuing 
historical tendency of lighter and smaller vehicles to be driven less 
well--although it continues to be unknown why that is so, and to what 
extent, if any, the lightness or smallness of the vehicle contributes 
to people driving it less safely.\344\
---------------------------------------------------------------------------

    \344\ Ibid., pp. 27-30.
---------------------------------------------------------------------------

    The estimates in Table II-25 of the model are formulated for each 
100-pound reduction in mass; in other words, if risk increases by 1 
percent for 100 pounds reduction in mass, it would increase by 2 
percent for a 200-pound reduction, and 3 percent for a 300-pound 
reduction (more exactly, 2.01 percent and 3.03 percent, because the 
effects work like compound interest). Confidence bounds around the 
point estimates will grow wider by the same proportions.
    The regression results are best suited to predict the effect of a 
small change in mass, leaving all other factors, including footprint, 
the same. With each additional change from the current environment, the 
model may become somewhat less accurate and it is difficult to assess 
the sensitivity to additional mass reduction greater than 100 pounds. 
The agencies recognize that the light-duty vehicle fleet in the MYs 
2017-2025 timeframe will be different from the MYs 2000-2007 fleet 
analyzed for this study. Nevertheless, one consideration provides some 
basis for confidence in applying the regression results to estimate the 
effects of mass reductions larger than 100 pounds or over longer time 
periods. This is NHTSA's fourth evaluation of the effects of mass 
reduction and/or downsizing, comprising databases ranging from MYs 1985 
to 2007. The results of the four studies are not identical, but they 
have been consistent up to a point. During this time period, many makes 
and models have increased substantially in mass, sometimes as much as 
30-40 percent.\345\ If the statistical analysis has, over the past 
years, been able to accommodate mass increases of this magnitude, 
perhaps it will also succeed in modeling the effects of mass reductions 
on the order of 10-20 percent, if they occur in the future.
---------------------------------------------------------------------------

    \345\ For example, one of the most popular models of small 4-
door sedans increased in curb weight from 1,939 pounds in MY 1985 to 
2,766 pounds in MY 2007, a 43 percent increase. A high-sales mid-
size sedan grew from 2,385 to 3,354 pounds (41%); a best-selling 
pickup truck from 3,390 to 4,742 pounds (40%) in the basic model 
with 2-door cab and rear-wheel drive; and a popular minivan from 
2,940 to 3,862 pounds (31%).
---------------------------------------------------------------------------

    NHTSA's 2011 preliminary report acknowledged another source of 
uncertainty, namely that the baseline statistical model can be varied 
by choosing different control variables or redefining the vehicle 
classes or crash types, for example. Alternative models produce 
different point estimates.

[[Page 62749]]

NHTSA believed it was premature to address that in the preliminary 
report. ``The potential for variation will perhaps be better understood 
after the public and other agencies have had an opportunity to work 
with the new database.'' \346\ Indeed, the principal comments on the 
2011 preliminary report were suggestions or demonstrations of other 
ways to analyze NHTSA's database, especially by Farmer and Green in 
their peer reviews, Van Auken (DRI) in his most recent analyses, and 
Wenzel in his assessment of NHTSA's report. The analyses and findings 
of Wenzel's and Van Auken's reports are summarized in Sections 
II.G.3.e, II.G.3.f, and II.G.3.g, below. These reports, among other 
analyses, define and run specific alternative regression models to 
analyze NHTSA's 2011 or 2012 databases.\347\
---------------------------------------------------------------------------

    \346\ Kahane (2011), p. 81.
    \347\ Wenzel (2012a), Van Auken and Zellner (2012b, 2012c, 
2012d).
---------------------------------------------------------------------------

    From these suggestions and demonstrations, NHTSA garnered 11 more 
or less plausible alternative techniques that could be construed as 
sensitivity tests of the baseline model.\348\ The models use NHTSA's 
databases and regression-analysis approach, but differ from the 
baseline model in one or more terms or assumptions. All of them try to 
control for fundamentally the same driver, vehicle, and crash factors, 
but differ in how they define these factors or how much detail or 
emphasis they provide for some of them. NHTSA applied the 11 techniques 
to the latest databases to generate alternative estimates of the 
societal effect of 100-pound mass reductions in the five classes of 
vehicles. The range of estimates produced by the sensitivity tests 
gives an idea of the uncertainty inherent in the formulation of the 
models, subject to the caveat that these 11 tests are, of course, not 
an exhaustive list of conceivable alternatives. Below are the baseline 
and alternative results, ordered from the lowest to the highest 
estimated increase in societal risk for cars weighing less than 3,106 
pounds:
---------------------------------------------------------------------------

    \348\ See Kahane (2012), pp. 14-16 and 109-128 for a further 
discussion of the alternative models and the rationales behind them.

   Table II-28--Societal Fatality Increase (%) per 100-Pound Mass Reduction While Holding Footprint * Constant
----------------------------------------------------------------------------------------------------------------
                                                                      CUVs &       LTVs [dagger]   LTVs [dagger]
                                   Cars < 3,106    Cars >= 3,106     minivans         < 4,594        >= 4,594
----------------------------------------------------------------------------------------------------------------
Baseline estimate...............            1.56             .51           - .37             .52           - .34
95% confidence bounds (sampling
 error):
    Lower.......................             .39           - .59          - 1.55           - .45           - .97
    Upper.......................            2.73            1.60             .81            1.48             .30
----------------------------------------------------------------------------------------------------------------
                                              11 Alternative Models
----------------------------------------------------------------------------------------------------------------
1. Track width/wheelbase w.                  .25           - .89           - .13           - .09           - .97
 stopped veh data...............
2. With stopped -vehicle State               .97           - .62           - .33             .35           - .80
 data...........................
3. By track width & wheelbase...             .97             .24           - .24           - .07           - .58
4. W/O CY control variables.....            1.53             .43             .04            1.20             .30
5. CUVs/minivans weighted by                1.56             .51             .53             .52           - .35
 2010 sales.....................
6. W/O non - significant control            1.64             .68           - .46             .35           - .54
 variables......................
7. Incl. muscle/police/AWD cars/            1.81             .49           - .37             .49           - .76
 big vans.......................
8. Control for vehicle                      1.91             .75            1.64             .68           - .13
 manufacturer...................
9. Control for veh manufacturer/            2.07            1.82            1.31             .66           - .13
 nameplate......................
10. Limited to drivers with                 2.32            1.06           - .19             .86           - .58
 BAC=0..........................
11. Limited to good drivers                 3.00            1.62            -.00            1.09           - .30
 [Dagger].......................
----------------------------------------------------------------------------------------------------------------
* While holding track width and wheelbase constant in alternative model nos. 1 and 3.
[dagger] Excluding CUVs and minivans.
[Dagger] Blood alcohol content = 0, no drugs, valid license, at most 1 crash and 1 violation during the past 3
  years.

    For example, in cars weighing less than 3,106 pounds, the baseline 
estimate associates 100minus;pound mass reduction, while holding 
footprint constant, with a 1.56 percent increase in societal fatality 
risk. The corresponding estimates for the 11 sensitivity tests range 
from a 0.25 to a 3.00 percent increase. The sensitivity tests 
illustrate both the fragility and the robustness of the baseline 
estimate. On the one hand, the variation among the alternative 
estimates is quite large relative to the baseline estimate: In the 
preceding example of cars < 3,106 pounds, from almost zero to almost 
double the baseline. In fact, the difference in estimates is a 
reflection of the small statistical effect that mass reduction has on 
societal risk, relative to other factors. Thus, sensitivity tests which 
vary vehicle, driver, and crash factors can appreciably change the 
estimate of the effect of mass reduction on societal risk in relative 
terms.
    On the other hand, the variations are not all that large in 
absolute terms. The ranges of the alternative estimates, at least these 
alternatives, are about as wide as the sampling-error confidence bounds 
for the baseline estimates. As a general rule, in the alternative 
models, as in the baseline models, mass reduction tends to be 
relatively more harmful in the lighter vehicles, and more beneficial in 
the heavier vehicles. Thus, in all models, the estimated effect of mass 
reduction is a societal fatality increase (not necessarily a 
statistically significant increase) for cars < 3,106 pounds, and in all 
models except one, a societal fatality reduction for LTVs >= 4,594 
pounds. None of these models suggest mass reduction in small cars would 
be beneficial. All suggest mass reduction in heavy LTVs would be 
beneficial or, at least, close to neutral. In general, any judicious 
combination of mass reductions that maintain footprint and are 
proportionately higher in the heavier vehicles is unlikely to have a 
societal effect large enough to be detected by statistical analyses of 
crash data. NHTSA has conducted a sensitivity analysis to estimate the 
fatality impact of the alternative models using the coefficients for 
these 11 test

[[Page 62750]]

cases. The results for these sensitivity runs can be found in Table IX-
6 of NHTSA's FRIA.
    Four additional comments on NHTSA's 2011 report are addressed in 
the 2012 report. ICCT noted that DRI's latest analyses are two-stage 
analyses that subdivide the effect of mass reduction into a fatalities-
per-crash component (called ``effect on crashworthiness'') and a 
crashes-per-VMT component (called ``effect on crash avoidance''). ICCT 
believes it counterintuitive that DRI's two-stage analysis using the 
same independent variables as NHTSA's basic model shows mass reduction 
harms ``crash avoidance''; thus, ICCT prefers DRI's alternative models 
(using different independent variables) that do not show mass reduction 
harming crash avoidance. NHTSA's response is that DRI's estimates of 
separate fatalities-per-crash and crashes-per-VMT components appear to 
be valid, but, in NHTSA's opinion, these components do not necessarily 
correspond to the intuitive concepts of ``crashworthiness'' and ``crash 
avoidance.'' Specifically, the fatalities-per-crash component is 
affected not only by the crashworthiness of the vehicles, but also by 
how severe their crashes are: a crash-avoidance issue. Farmer 
recommended that, in the analyses of crashes between two light 
vehicles, NHTSA estimate the effect of mass reduction in the case 
vehicle separately for the occupants of that vehicle and for the 
occupants of the other vehicle. The analysis shows that mass reduction 
consistently and substantially increases risk for the vehicle's own 
occupants and substantially lowers it for the occupants of the partner 
vehicle. Several commenters suggested that NHTSA consider logistic 
ridge regression as a tool for addressing multicollinearity; NHTSA was 
unable to acquire software for logistic ridge regression now, but will 
attempt to acquire it for future analyses. Lie requested--and NHTSA 
added--a comparison of the estimated safety effects of mass reduction 
to the effects of safety technologies and the differences in risk 
between vehicles with good and poor test ratings.
e. Report by Tom Wenzel, LBNL, ``An Assessment of NHTSA's Report 
`Relationships Between Fatality Risk, Mass, and Footprint in Model Year 
2000-2007 Passenger Cars and LTVs' '', 2011
    DOE contracted with Tom Wenzel of Lawrence Berkeley National 
Laboratory to conduct an assessment of NHTSA's updated 2011 study of 
the effect of mass and footprint reductions on U.S. fatality risk per 
vehicle miles traveled (LBNL Phase 1 report), and to provide an 
analysis of the effect of mass and footprint reduction on casualty risk 
per police-reported crash, using independent data from thirteen states 
(LBNL Phase 2 report). Both reports have been reviewed by NHTSA, EPA, 
and DOE staff, as well as by a panel of reviewers.\349\ The final 
versions of the reports reflect responses to comments made in the 
formal review process, as well as changes made to the VMT weights 
developed by NHTSA for the final rule, and inclusion of 2008 data for 
six states that were not available for the analyses in the draft final 
versions included in the NPRM docket.
---------------------------------------------------------------------------

    \349\ EPA sponsored the peer review of the LBNL Phase 1 and 2 
Reports.
---------------------------------------------------------------------------

    The LBNL Phase 1 report replicates Kahane's analysis for NHTSA, 
using the same data and methods, and in many cases using the same SAS 
programs, in order to confirm NHTSA's results. The LBNL report confirms 
NHTSA's 2012 finding that mass reduction is associated with a 
statistically significant 1.55% increase in fatality risk per vehicle 
miles travelled (VMT) for cars weighing less than 3,106 pounds; for 
other vehicle types, mass reduction is associated with a smaller 
increase, or even a small decrease, in risk. Wenzel tested the 
sensitivity of these estimates to changes in the measure of risk and 
the control variables and data used in the regression models. Wenzel 
also concluded that there is a wide range in fatality risk by vehicle 
model for models that have comparable mass or footprint, even after 
accounting for differences in drivers' age and gender, safety features 
installed, and crash times and locations. This section summarizes the 
results of the Wenzel assessment of the most recent NHTSA analysis.
    The LBNL Phase 1 report notes that many of the control variables 
NHTSA includes in its logistic regressions are statistically 
significant, and have a much larger estimated effect on fatality risk 
than vehicle mass. For example, installing torso side airbags, 
electronic stability control, or an automated braking system in a car 
is estimated to reduce fatality risk by about 10%; cars driven by men 
are estimated to have a 40% higher fatality risk than cars driven by 
women; and cars driven at night, on rural roads, or on roads with a 
speed limit higher than 55 mph are estimated to have a fatality risk 
over 100 times higher than cars driven during the daytime on low-speed 
non-rural roads. While the estimated effect of mass reduction may 
result in a statistically-significant increase in risk in certain 
cases, the increase is small and is overwhelmed by other known vehicle, 
driver, and crash factors.
    NHTSA notes these findings are additional evidence that estimating 
the effect of mass reduction is a complex statistical problem, given 
the presence of other factors that have large effects. The findings do 
not propose future technologies that could neutralize the potentially 
deleterious effects of mass reduction. Indeed, the preceding examples 
are limited to technologies emerging in the 2002-2008 timeframe of the 
crash database but that will be in all model year 2017-2025 vehicles 
(side airbags, electronic stability control) or factors that are simply 
unchangeable circumstances in the crash environment outside the control 
of CAFE or other vehicle regulations (for example, that about half of 
the drivers are males and that much driving is at night or on rural 
roads).
    Sensitivity tests: LBNL tested the sensitivity of the NHTSA 
estimates of the relationship between vehicle weight and risk using 19 
different regression analyses that changed the measure of risk, the 
control variables used, or the data used in the regression models.

Table II-29--Societal Fatality Increase (%) per 100-Pound Mass Reduction While Holding Footprint * Constant From
                                                  Wenzel Study
----------------------------------------------------------------------------------------------------------------
                                                                                                   LTVS[dagger]
                                   Cars  < 3,106  Cars  >= 3,106      CUVS &       LTVS[dagger]      >= 4,594
                                                                     minivans         < 4,594
----------------------------------------------------------------------------------------------------------------
Baseline estimate...............            1.55            0.51           -0.38            0.52           -0.34
----------------------------------------------------------------------------------------------------------------

[[Page 62751]]

 
                                              19 Alternative Models
----------------------------------------------------------------------------------------------------------------
1. Weighted by current                      1.27            0.37           -0.70            0.42           -0.36
 distribution of fatalities.....
2. Single regression model for              1.26            0.35           -0.74            0.41           -0.42
 all crash types................
3. Excluding footprint (allowing            2.74            1.95            0.60            0.47           -0.39
 footprint to vary with mass)...
4. Fatal crashes per VMT........            1.95            0.89           -0.47            0.54           -0.42
5. Fatalities per induced                  -0.22           -1.45           -0.84           -1.13           -0.76
 exposure crash.................
6. Fatalities per registered                0.93            2.40           -0.40           -0.09           -0.76
 vehicle-year...................
7. Accounting for vehicle                   1.90            0.75            1.62            0.59           -0.11
 manufacturer...................
8. Accounting for vehicle                   2.04            1.80            1.28            0.57           -0.11
 manufacturer plus five luxury
 brands.........................
9. Accounting for initial                   1.42            0.84           -0.92            0.45           -0.52
 vehicle purchase price.........
10. Excluding CY variables......            1.52            0.43            0.03            1.20            0.30
11. Excluding crashes with                  1.88            0.88           -0.16            0.78           -0.35
 alcohol/drugs..................
12. Excluding crashes with                  2.32            1.19           -0.01            1.01           -0.11
 alcohol/drugs or bad drivers...
13. Accounting for median                   1.20            0.16           -0.44            0.68           -0.30
 household income...............
14. Including sports, squad, AWD            1.79            0.49           -0.38            0.49           -0.77
 cars and fullsize vans.........
15. Stopped instead of non-                 0.97           -0.63           -0.33            0.35           -0.80
 culpable vehicles for induced
 exposure.......................
16. Including track width and               0.95            0.24           -0.25           -0.07           -0.58
 wheelbase instead of footprint.
17. Using stopped vehicles and              0.26           -0.90           -0.14           -0.10           -0.97
 track width/wheelbase..........
18. Reweighting CUVs and                    1.55            0.51            0.55            0.52           -0.34
 minivans by 2010 sales.........
19. Excluding non-significant               1.63            0.69           -0.46            0.35           -0.54
 control variables..............
----------------------------------------------------------------------------------------------------------------
* While holding track width and wheelbase constant in alternative model nos. 1 and 3.
[dagger] Excluding CUVs and minivans.

    For all five vehicle types, the range in estimates from the 
nineteen alternative models spanned zero, with the individual estimated 
effects of a 100-pound mass reduction in Table II-28 ranging from a 
1.45 percent fatality reduction (cars >= 3,106 pounds, alternative 5) 
up to an increase in risk of 2.74 percent (cars < 3,106 pounds, 
alternative 3). Nevertheless, for cars weighing less than 3,106 pounds, 
only one of the 19 alternative regressions estimated a reduction rather 
than an increase in U.S. fatality risk: Alternative 5, where risk was 
defined as fatalities per induced exposure crash (rather than 
fatalities per VMT). Whereas for LTVs >= 4,594 pounds, only one of the 
19 alternatives estimated an increase in fatality risk, namely the 
model without CY variables (alternative 10).
    NHTSA notes that all of these models suggest mass reduction in 
small cars would be harmful or, at best, close to neutral; all suggest 
mass reduction in heavy LTVs would be beneficial or, at worst, close to 
neutral. The range on these 19 sensitivity tests is similar to the 
range in the 11 tests included in the Kahane write-up.
    Multicollinearity issues (from LBNL study): Using two or more 
variables that are strongly correlated in the same regression model 
(referred to as multicollinearity) can lead to inaccurate results. 
However, the correlation between vehicle mass and footprint may not be 
strong enough to cause serious concern. The Pearson correlation 
coefficient r between vehicle mass and footprint ranges from 0.90 for 
four-door sedans and SUVs, to just under 0.50 for minivans. The 
variance inflation factor (VIF) is a more formal measure of 
multicollinearity of variables included in a regression model. Allison 
\350\ ``begins to get concerned'' with VIF values greater than 2.5, 
while Menard \351\ suggests that a VIF greater than 5 is a ``cause for 
concern'', while a VIF greater than 10 ``almost certainly indicates a 
serious collinearity problem''; however, O'Brien \352\ suggests that 
``values of VIF of 10, 20, 40 or even higher do not, by themselves, 
discount the results of regression analyses.'' When both weight and 
footprint are included in the regression models, the VIF associated 
with weight exceeds 5 for four-door cars, small pickups, SUVs, and 
CUVs, and exceeds 2.5 for two-door cars and large pickups; the VIF 
associated with weight is only 2.1 for minivans. NHTSA included several 
analyses to address possible effects of the near-multicollinearity 
between mass and footprint.
---------------------------------------------------------------------------

    \350\ Allison, P.D.. Logistic Regression Using SAS, Theory and 
Application. SAS Institute Inc., Cary NC, 1999.
    \351\ Menard, S. Applied Logistic Regression Analysis, Second 
Edition. Sage Publications, Thousand Oaks, CA 2002.
    \352\ O'Brien, R.M. ``A Caution Regarding Rules of Thumb for 
Variance Inflation Factors,'' Quality and Quantity, (41) 673-690, 
2007.
---------------------------------------------------------------------------

    First, NHTSA ran a sensitivity case where footprint is not held 
constant, but rather allowed to vary as mass varies (i.e., NHTSA ran a 
regression model which includes mass but not footprint.\353\ If the 
multicollinearity was so great that including both variables in the 
same model gave misleading results, removing footprint from the model 
would give much different results than keeping it in the model. NHTSA's 
sensitivity test estimates that when footprint is allowed to vary with 
mass, the effect of mass reduction on risk increases from 1.55% to 
2.74% for cars weighing less than 3,106 pounds, from a non-significant 
0.51% to a statistically-significant 1.95% for cars weighing more than 
3,106 pounds, and from a non-significant 0.38% decrease to a 
statistically-significant 0.60% increase in risk for CUVs and minivans; 
however, the effect of mass reduction on light trucks is unchanged.
---------------------------------------------------------------------------

    \353\ Kahane (2012), pp. 93-94.
---------------------------------------------------------------------------

    Second, NHTSA conducted a stratification analysis of the effect of 
mass reduction on risk by dividing vehicles into deciles based on their 
footprint, and running a separate regression model for each vehicle and 
crash type, for each footprint decile (3 vehicle types times 9 crash 
types times

[[Page 62752]]

10 deciles equals 270 regressions).\354\ This analysis estimates the 
effect of mass reduction on risk separately for vehicles with similar 
footprint. The analysis indicates that reducing vehicle mass does not 
consistently increase risk across all footprint deciles for any 
combination of vehicle type and crash type. Risk increases with 
decreasing mass in a majority of footprint deciles for 12 of the 27 
crash and vehicle combinations, but few of these increases are 
statistically significant. On the other hand, risk decreases with 
decreasing mass in a majority of footprint deciles for 5 of the 27 
crash and vehicle combinations; in some cases these risk reductions are 
large and statistically significant.\355\ If reducing vehicle mass 
while maintaining footprint inherently leads to an increase in risk, 
the coefficients on mass reduction should be more consistently 
positive, and with a larger R\2\, across the 27 vehicle/crash 
combinations, than shown in the analysis. These findings are consistent 
with the conclusion of the basic regression analyses; namely, that the 
effect of mass reduction while holding footprint constant, if any, is 
small.
---------------------------------------------------------------------------

    \354\ Ibid., pp. 73-78.
    \355\ And in 10 of the 27 crash and vehicle combinations, risk 
increased in 5 deciles and decreased in 5 deciles with decreasing 
vehicle mass.
---------------------------------------------------------------------------

    One limitation of using logistic regression to estimate the effect 
of mass reduction on risk is that a standard statistic to measure the 
extent to which the variables in the model explain the range in risk, 
equivalent to the R\2\ statistic in a linear regression model, does not 
exist. (SAS does generate a pseudo-R\2\ value for logistic regression 
models; in almost all of the NHTSA regression models this value is less 
than 0.10). For this reason LBNL conducted an analysis of risk versus 
mass by vehicle model. LBNL used the results of the NHTSA logistic 
regression model to predict the number of fatalities expected after 
accounting for all vehicle, driver, and crash variables included in the 
NHTSA regression model except for vehicle weight and footprint. LBNL 
then plotted expected fatality risk per VMT by vehicle model against 
the mass of each model, and analyzed the change in risk as mass 
increases, as well as how much of the change in risk was explained by 
all of the variables included in the model.
    The analysis indicates that, after accounting for all the control 
variables except vehicle mass and footprint, risk does decrease as mass 
increases; however, risk and mass are not strongly correlated, with the 
R\2\ ranging from 0.32 for CUVs to less than 0.13 for all other vehicle 
types (as shown in Figure II-2). This means that, on average, risk 
decreases as mass increases, but the variation in risk among individual 
vehicle models is stronger than the trend in risk from light to heavy 
vehicles. For full-size (i.e. \3/4\- and 1-ton) pickups, societal risk 
increases as mass increases, with an R\2\ of 0.45; this is consistent 
with NHTSA's basic regression results for light trucks weighing more 
than 4,594 pounds, with societal risk decreasing as mass decreases. 
LBNL also examined the relationship between vehicle mass and residual 
risk, that is, the remaining unexplained risk after accounting for all 
other vehicle, driver and crash variables, and found similarly poor 
correlations. This implies that the remaining factors not included in 
the regression model that account for the observed range in risk by 
vehicle model also are not correlated with mass. (LBNL found similar 
results when the analysis compared risk to vehicle footprint.)
    Figure II-2 indicates that some vehicles on the road today have the 
same, or lower, fatality risk than models that weigh substantially 
more, and are substantially larger in terms of footprint. After 
accounting for differences in driver age and gender, safety features 
installed, and crash times and locations, there are numerous examples 
of different models with similar weight and footprint yet widely 
varying fatality risk. The variation of fatality risk among individual 
models may reflect differences in vehicle design, differences in the 
drivers who choose such vehicles (beyond what can be explained by 
demographic variables such as age and gender), and statistical 
variation of fatality rates based on limited data for individual 
models.
    The figure shows that when the data are aggregated at the make-
model level, the combination of differences in vehicle design, vehicle 
selection, and statistical variations has more influence than mass on 
fatality rates. The figure perhaps also suggests that, to the extent 
these variations in fatality rates are due to differences in vehicle 
design rather than vehicle selection or statistical variations, there 
is potential for lowering fatality rates through improved vehicle 
design. This is consistent with NHTSA's opinion that some of the 
changes in its regression results between the 2003 study and the 2011 
study are due to the redesign or removal of certain smaller and lighter 
models of poor design.

[[Page 62753]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.009

f. Report by Tom Wenzel, LBNL, ``An Analysis of the Relationship 
Between Casualty Risk per Crash and Vehicle Mass and Footprint for 
Model Year 2000-2007 Light-Duty Vehicles'', 2012 (LBNL Phase 2 Report)
    LBNL compared the logistic regression results of NHTSA's analysis 
of U.S. fatality risk per VMT, replicated in the LBNL Phase 1 report, 
with an independent analysis of 13-state fatality risk and casualty 
risk per crash (LBNL Phase 2 report). The LBNL Phase 2 analysis differs 
from the NHTSA analysis in two respects: first, it analyzes risk per 
crash, using data on all police-reported crashes from thirteen states, 
rather than risk per estimated VMT; and second, it analyzes casualty 
(fatality plus serious injury) risk, as opposed to just fatality risk. 
There are several good reasons to investigate the effect of mass and 
footprint reduction on casualty risk per crash. First, risk per VMT 
includes two components that influence whether a person is killed or 
seriously injured in a crash: how well a vehicle can be (based on its 
handling, acceleration, and braking capabilities), or actually is, 
driven to avoid being involved in a serious crash (crash avoidance), 
and, once a serious crash has occurred, how well a vehicle protects its 
occupants from fatality or serious injury (crashworthiness) as well as 
the occupants of any crash partner (compatibility). By encompassing 
both of these aspects of vehicle design, risk per VMT gives a complete 
picture of how vehicle design can promote, or reduce, road user safety. 
On the other hand, risk per crash isolates the second of these two 
safety effects, crashworthiness/compatibility, by examining the 
relationship between mass or footprint and how well a vehicle protects 
its occupants and others once a crash occurs.
    Second, estimating risk on a per crash basis only requires using 
data on police-reported crashes from states, and does not require 
combining them with data from other sources, such as vehicle 
registration data and VMT information, as in NHTSA's 2012 analysis. 
Only 16 states currently record the vehicle identification number of 
vehicles involved in police-reported crashes, which is necessary to 
determine vehicle characteristics, and only 13 states also report the 
posted speed limit of the roadway on which the crash occurred. Given 
the limited number of fatality cases in 13 States, extending the 
analysis to casualties (fatalities plus serious/incapacitating 
injuries; i.e., level ``K'' and ``A'' injuries in police reports, a 
substantially larger number of cases than fatalities alone) reduces the 
statistical uncertainty of the results. Finally, a serious 
incapacitating injury can be just as traumatic to the victim and his or 
her family, and costly from an economic perspective, as a fatality. 
Limiting the analysis to the risk of fatality, which is a relatively 
rare event, ignores the effect vehicle design may have on reducing the 
large number of incapacitating injuries that occur each year on the 
nation's roadways. All risks in the report are societal risk, including 
fatalities and serious injuries in the case vehicle and any crash 
partners, and include not only driver but passenger casualties as well 
as non-occupant casualties such as pedestrians.
    NHTSA notes that casualty severity is identified by public safety 
officers at the crash scene prior to examination by medical 
professionals, and therefore reported casualty severity will inherently 
have a degree of subjectivity.\356\
---------------------------------------------------------------------------

    \356\ NHTSA notes that police-reported ``A'' injuries do not 
necessarily correspond to life-threatening or seriously disabling 
injuries as defined by medical professionals. In 2000-2008 CDS data, 
59% of the injuries that were coded ``A'' injuries were in fact 
medically minor (AIS 0-1), while 39% of serious (AIS 3) and 27% of 
life-threatening (AIS 4-5) injuries are not coded ``A.'' NHTSA does 
not include serious casualties in its analysis of the effects of 
vehicle mass and size on societal safety because of these 
inaccuracies.

---------------------------------------------------------------------------

[[Page 62754]]

    The LBNL Phase 2 report estimates that mass reduction increases 
crash frequency (columns B and E) in all five vehicle types, with 
larger estimated increases in lighter-than-average cars and light-duty 
trucks. As a result, mass reduction is estimated to have a more 
beneficial effect on casualty risk per crash (column F) than on 
casualty risk per VMT (column G), and on fatality risk per crash 
(column C) than on fatality risk per VMT (column D). Mass reduction is 
associated with decreases in casualty risk per crash (column F) in all 
vehicles except cars weighing less than 3,106 pounds; in two of the 
four cases these estimated reductions are statistically significant, 
albeit small. For cars and light trucks, lower mass is associated with 
a more beneficial effect on fatality risk per crash (column C) than on 
casualty risk per crash (column F); for CUVs/minivans we estimate the 
opposite: lower mass is associated with a more beneficial effect on 
casualty risk than fatality risk per crash.

 Table II-30--Estimated Effect of Mass or Footprint Reduction on two Components of 13-State Fatality and Casualty Risk per VMT: Crash Frequency (Crashes
                                               per VMT) and Crashworthiness/Compatibility (Risk per Crash)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 A. NHTSA
                                                                   U.S.     B. 13-state  C. 13-state  D. 13-state  E. 13-state  F. 13-state  G. 13-state
              Variable                   Case vehicle type      fatalities  crashes per   fatalities   fatalities  crashes per   casualties   casualties
                                                                 per VMT        VMT       per crash     per VMT        VMT       per crash     per VMT
                                                                (percent)    (percent)    (percent)    (percent)    (percent)    (percent)    (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mass Reduction......................  Cars < 3106 lbs........       1.55 *         2.00        -0.54         1.42         2.00         0.09         1.86
                                      Cars > 3106 lbs........         0.51         1.50        -2.39        -1.07         1.50        -0.77         0.73
                                      LTs < 4594 lbs.........         0.52         1.44        -1.61        -0.13         1.44        -0.11         1.55
                                      LTs > 4594 lbs.........        -0.34         0.94        -1.25        -0.34         0.94        -0.62        -0.04
                                      CUV/minivan............        -0.38         0.95         0.98         1.60         0.95        -0.16         0.10
Footprint Reduction.................  Cars...................         1.87         0.64         0.92         2.11         0.64         0.23         1.54
                                      LTs....................        -0.07         1.04         0.48         1.64         1.04        -0.25         0.94
                                      CUV/minivan............         1.72        -0.55        -1.67        -1.24        -0.55         0.56         1.54
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on NHTSA's estimation of uncertainty using a jack-knife method, only mass reduction in cars less than 3,106 pounds has a statistically
  significant effect on U.S. fatality risk.
Estimates that are statistically significant at the 95% level are shown in italics.

    It is unclear why lower vehicle mass is associated with higher 
crash frequency, but lower risk per crash, in the regression models. It 
is possible that including variables that more accurately account for 
important differences among vehicles and driver behavior would reverse 
this relationship. For example, adding vehicle purchase price as a 
control variable reduces the estimated increase in crash frequency as 
vehicle mass decreases, for all five vehicle types; in the case of cars 
weighing more than 3,106 pounds, controlling for purchase price even 
reverses the sign of the relationship: mass reduction is estimated to 
slightly decrease crash frequency.\357\ It also appears that, in model 
year 2000-2007 vehicles, the effect of mass reduction on casualties per 
crash is simply very small, if any (estimated effects in Table II-30, 
column F are under 1% per 100-pound reduction in all five vehicle 
groups).
---------------------------------------------------------------------------

    \357\ Wenzel (2012b), pp. 59-60, especially Figure 4-10.
---------------------------------------------------------------------------

    The association of mass reduction with 13-state casualty risk per 
VMT (column G) is quite consistent with that NHTSA estimated for U.S. 
fatality risk per VMT in its 2012 report (column A), although LBNL 
estimated the effects on casualty risk to be more detrimental than the 
effects on fatality risk, for all vehicle types. In contrast with 
NHTSA's estimates of U.S. fatality risk per VMT (column A), mass 
reduction is estimated to reduce casualty risk per crash (column F) for 
four of the five vehicle types, with two of these four reductions 
estimated to be statistically significant. Mass reduction is associated 
with a small but insignificant increase in casualty risk per crash for 
cars weighing less than 3,106 pounds.
    As in the LBNL Phase 1 study, replicating NHTSA methodology, many 
of the control variables included in the logistic regressions are 
statistically significant, and have a large effect on fatality or 
casualty risk per crash, in some cases one to two orders of magnitude 
larger than those estimated for mass or footprint reduction. However, 
the estimated effect of these variables on risk per crash is not as 
large as their estimated effect on fatality risk per VMT. LBNL 
concludes that the estimated effect of mass reduction on casualty risk 
per crash is small and is overwhelmed by other known vehicle, driver, 
and crash factors.
    NHTSA notes that to estimate the effect of mass reduction on safety 
requires careful examination of how to model the covariant effects of 
vehicle, driver, and crash factors.
    LBNL states that regarding the control variables, there are several 
results that, at first glance, would not be expected: side airbags in 
light trucks and CUVs/minivans are estimated to reduce crash frequency; 
ESC and ABS, crash avoidance technologies, are estimated to reduce risk 
once a crash has occurred; and AWD and brand new vehicles are estimated 
to increase risk once a crash has occurred. In addition, male drivers 
are estimated to have essentially no effect on crash frequency, but are 
associated with a statistically significant increase in fatality risk 
once a crash occurs. And driving at night, on high-speed or rural 
roads, are associated with higher increases in risk per crash than on 
crash frequency. A possible explanation for these unexpected results is 
that important control variables are not being included in the 
regression models. For example, crashes involving male drivers, in 
vehicles equipped with AWD, or that occur at night on rural or high-
speed roads, may not be more frequent but rather more severe than other 
crashes, and thus lead to greater fatality or casualty risk. And 
drivers who select vehicles with certain safety features may tend to 
drive more carefully, resulting in vehicle safety features designed to 
improve

[[Page 62755]]

crashworthiness or compatibility, such as side airbags, being also 
associated with lower crash frequency.
    As with NHTSA's analysis of fatality risk per VMT, lower mass is 
not consistently associated with increased casualty risk per crash 
across all footprint deciles for any combination of vehicle type and 
crash type. Lower mass is associated with increased casualty risk per 
crash in a majority of footprint deciles for 9 of the 27 crash and 
vehicle combinations, but few of these increases are statistically 
significant. On the other hand, lower mass is associated with decreased 
risk in a majority of footprint deciles for 12 of the 27 crash and 
vehicle combinations.
    The correlation between mass and the casualty risk per crash by 
vehicle model is very low, after accounting for all of the control 
variables in the logistic regression model except for vehicle mass and 
footprint. Furthermore, when casualty rates are aggregated at the make-
model level, there is no significant correlation between the residual, 
unexplained risk and vehicle weight. Even after accounting for many 
vehicle, driver, and crash factors, the variation in casualty risk per 
crash by vehicle model is quite large and unrelated to vehicle weight. 
That parallels the LBNL Phase 1 report, which found similar variation 
in fatality rates per VMT at the make-model level. The variations among 
individual models may reflect differences in vehicle design, 
differences in the drivers who choose such vehicles, and statistical 
variation due to the limited data for individual models. To the extent 
the variations are due to differences in vehicle design rather than 
vehicle selection or statistical variations, there is potential for 
lowering fatality or casualty rates through improved vehicle design. To 
the extent that the variations are due to differences in what drivers 
choose what vehicles, it is possible that including variables that 
account for these factors in the regression models would change the 
estimated relationship between mass or footprint and risk.
    NHTSA notes that the statistical variation due to the limited data 
for individual models is an additional source of uncertainty inherent 
in the technique of aggregating the data by make and model, a technique 
whose primary goal is not the estimation of the effect of mass 
reduction on safety.
g. Reports by Van Auken & Zellner, DRI--``Updated Analysis of the 
Effects of Passenger Vehicle Size and Weight on Safety,'' 2012
    The International Council on Clean Transportation (ICCT), the 
Energy Foundation, and American Honda Motor Co. contracted Mike Van 
Auken and John Zellner of Dynamic Research Institute (DRI) to conduct a 
study to update the analysis of the effects of passenger vehicle size 
and weight on safety, based on the newly released NHTSA 2011 database. 
As noted earlier, DRI reports its study in three parts: Phase I,\358\ 
II,\359\ and Supplement.\360\ This study was not complete in time for 
the NPRM, but was finished in time to be submitted to the docket as 
part of ICCT's public comments. The study has not yet been peer 
reviewed.
---------------------------------------------------------------------------

    \358\ Van Auken and Zellner (2012a).
    \359\ Van Auken and Zellner (2012b), Van Auken and Zellner 
(2012c).
    \360\ Van Auken and Zellner (2012d).
---------------------------------------------------------------------------

    Phase I, which analyzed CY 1995-2000 fatalities in MY 1991-1999 
vehicles to replicate the NHTSA 2003 and 2010 studies, has already been 
discussed and responded to above. The purpose of Phase II was to extend 
and refined the analytical methods used by DRI in the Phase I of this 
program to the more recent model year and calendar year data used in 
the Kahane (2011) analysis, in order to confirm the Kahane (2011) 
results and to estimate the effects of vehicle weight and size 
reduction on fatalities per 100 reported crash involvements and 
reported crash involvements per VMT (which DRI calls, respectively, 
``effect on crashworthiness/crash compatibility'' and ``effect on crash 
avoidance'').
    The Phase II study was accomplished by updating the regression 
analysis tools to use the newer databases for 2000 through 2007 model 
year light passenger vehicles in the 2002 through 2008 calendar years. 
The fatal and induced exposure databases were compiled by NHTSA from 
the U.S. DOT FARS database and accident data files from 13 U.S. States. 
In addition, police reported accident data files were obtained from 10 
states. These 10 states were a subset of the 13 induced-exposure data 
states which NHTSA used. Data for the other three states were not 
available to non-government researchers at the time of this analysis.
    The main results of the DRI Phase II analyses are as follows:
     The DRI one-stage analysis was able to reproduce NHTSA's 
baseline results very closely. However, in these analyses, DRI, like 
NHTSA, defines the induced-exposure cases to be the non-culpable 
vehicles involved in two-vehicle crashes. Later, in its supplemental 
report, DRI considers limiting the induced-exposure cases to stopped 
vehicles.
     The DRI two-stage analysis was able to replicate the DRI 
and NHTSA one stage results.
     The DRI Phase II two-stage results, which used more recent 
data were directionally similar to the DRI Phase I two-stage results. 
They showed an increase in reported crash involvements per VMT for 
lighter and smaller vehicles, but reductions of fatalities per 100 
reported crash involvements. The DRI results for crash avoidance are 
also similar to those of Wenzel Phase 2 (2011b).
     The two-stage results for passenger cars weighing less 
than 3,106 pounds indicated that the increase in fatalities attributed 
to mass reduction was due to an increase in the number of crashes per 
exposure, more than offsetting a reduction in the number of fatalities 
per crash. The underlying reasons for these offsetting effects are 
unknown at this time, but could involve driver, vehicle, environment or 
accident factors that have not been controlled for in the current 
analyses. These results are similar to those obtained in Wenzel Phase 2 
(2011b).
    The overall results from DRI Phase II indicated very close 
agreement between the DRI and NHTSA one-stage results using the same 
methods and data. The results also indicate that the DRI one-stage and 
two-stage results are similar but have some differences due to the 
number of stages in the regression analysis. It may be possible to 
reduce these differences in the future by updating the state accident 
data for the 2008 calendar year, and adding ``internal control 
variables.''
    The DRI Supplemental report discusses in further detail two 
previous key assumptions that were used in the Kahane (2011), Wenzel 
(2011b), and DRI (2012b) reports, and describes two alternative 
assumptions. The previous key assumptions were that the effects of 
vehicle weight and size can be best modeled by curb weight and 
footprint; and that the crash exposure is best represented by non-
culpable vehicle induced-exposure data. The alternative assumptions are 
that the weight and size can be best modeled by curb weight, wheelbase, 
and track width; and that the crash exposure is best represented by 
stopped-vehicle induced-exposure data (because non-culpable vehicle 
data may underrepresent vehicles and drivers that are better at 
avoiding crashes, even if they would have been non-culpable in those 
crashes). Some of the potential advantages and disadvantages of the 
previous assumptions and these alternative assumptions are described in 
the DRI supplemental report.

[[Page 62756]]

    The results in the DRI Supplemental report indicate a range of 
estimates for the effects of a 100 pound curb mass reduction based on 
the type of induced-exposure data that is used and the candidate 
vehicle weight and size model. These results indicate:
     The estimated effects of mass reduction on fatalities are 
not statistically significant for any vehicle category, if the 
wheelbase and track model is used with the non-culpable vehicle 
induced-exposure data. (This assumes the width of confidence bounds is 
similar to those seen in the Kahane (2011) analyses.)
     The estimated effects of mass reduction on fatalities 
either result in a statistically significant decrease in fatalities 
(for truck-based LTVs weighing 4,594 lbs or more), or are not 
statistically significant (for all other vehicle categories), if the 
stopped-vehicle induced-exposure data is used (irrespective of the two 
candidate size models, e.g., the footprint model, or the wheelbase and 
track width model).
     The estimated effect of curb mass reduction for passenger 
cars weighing less than 3,106 pounds is a statistically significant 
increase in fatalities (when compared to the jackknife based confidence 
intervals) only if the curb weight and footprint model is used with the 
non-culpable vehicle induced-exposure data.
     All other estimated effects of mass reduction on 
fatalities are not statistically significant when compared to the 
jackknife based confidence intervals.
    In addition, the variance inflation factors are approximately the 
same when modeling the independent effects of curb weight, wheelbase 
and track width as when modeling curb weight and footprint, which 
suggests there is no adverse effect for modeling with track width and 
wheelbase in the context of potential overparameterization and 
excessive multicollinearity. In addition, wheelbase and track width 
would be expected to have separate, different, physics-based effects on 
vehicle crash avoidance and crashworthiness/compatibility, which 
effects are confounded when they are combined into a single variable, 
footprint.
    DRI further recommended that the final version of the Kahane (2011) 
report include models based on curb weight, wheelbase and track width; 
and also include results based on non-culpable stopped-vehicle induced-
exposure data as well as non-culpable vehicle induced-exposure. DRI 
concludes that the latter could be addressed by averaging the estimates 
from both the stopped-vehicle induce-exposure and the non-culpable 
vehicle induced-exposure, and incorporate the range of estimates into 
the reported uncertainty in the results (i.e., confidence intervals).
    DRI also recommended that NHTSA provide the following additional 
variables in the current publicly available induced-exposure dataset so 
that other researchers can reproduce the sensitivity to the induced-
exposure definition:
     An additional variable indicating whether each induced-
exposure vehicle was moving or stopped at the time of the initial 
impact. This variable could then be used to derive a non-culpable 
stopped-vehicle induced-exposure dataset from the non-culpable vehicle 
induced-exposure dataset.
     Add accident case identifiers to the induced-exposure 
dataset that are suitable for linking to the original state accident 
data files, but do not otherwise disclose any private information. This 
would assist researchers with access to the original accident data in 
better understanding the induced-exposure data.
    As noted in the preceding discussion of the Kahane (2012) and 
Wenzel (2012a) reports, NHTSA and LBNL have added models based on track 
width and wheelbase and/or stopped-vehicle induced exposure to the 
report. Table II-28 (test nos. 1, 2, and 3) and Table II-29 (tests nos. 
15, 16, and 17) show results for those models. NHTSA has also made 
available to the public an induced-exposure database limited to stopped 
vehicles.
h. DOT Summary and Response to Recent Statistical Studies
    The preceding sections reviewed three groups of reports issued in 
2012 that estimated the effect of mass reduction on societal fatality 
or casualty risk, based on statistical analyses of crash and exposure 
data for model year 2000-2007 vehicles: NHTSA/Kahane's report and LBNL/
Wenzel's Phase 1 report analyze fatality rates per VMT. DRI/Van Auken's 
reports likewise estimate the overall effect of mass reduction on 
fatalities per VMT, but they also provide separate sub-estimates of the 
effect on fatalities per 100 reported crash involvements and on 
reported crash involvements per VMT (which Van Auken calls ``effect on 
crashworthiness/compatibility'' and ``effect on crash avoidance''). 
Wenzel's Phase 2 report analyzes casualty rates per VMT, including sub-
estimates of the effects on casualties per 100 crash involvements and 
crashes per VMT. ``Casualties'' include fatalities and the highest 
police-reported level of nonfatal injury (usually called level ``A'').
    For the final regulatory analysis, like the preliminary analysis, 
NHTSA and EPA rely on the coefficients in the NHTSA/Kahane study for 
estimating the potential safety effects of the CAFE and GHG standards 
for MYs 2017-2025. NHTSA takes this opportunity to summarize and 
compare the reports and also explain why we continue to rely on the 
results of our own study in projecting safety effects.
    The important common feature of these 2012 reports is that they all 
support the same principal conclusions--in NHTSA's words:
     The societal effect of mass reduction while maintaining 
footprint, if any, is small.\361\
---------------------------------------------------------------------------

    \361\ Kahane (2012), p. 1.
---------------------------------------------------------------------------

     Any judicious combination of mass reductions that maintain 
footprint and are proportionately higher in the heavier vehicles is 
[likely to be safety-neutral--i.e., it is] unlikely to have a societal 
effect large enough to be detected by statistical analyses of crash 
data.\362\
---------------------------------------------------------------------------

    \362\ Ibid., p. 16.
---------------------------------------------------------------------------

    This greatly contrasts with the disagreement in 2004-2005, based on 
earlier fatality databases, when DRI estimated a decrease of 1,518 
fatalities per 100-pound mass reduction in all vehicles while 
maintaining wheelbase and track width \363\ while NHTSA estimated a 
1,118-fatality increase for downsizing all vehicles by 100 pounds (with 
commensurate reductions in wheelbase and track width).\364\ In 
comparison, the estimates from 11 sensitivity tests using the current 
database only range from a 211-fatality reduction to an increase of 
486, only 25 percent of the earlier range, and basically down to the 
level of statistical uncertainty typically inherent in this type of 
analysis.\365\ NHTSA believes two or possibly three conditions may have 
contributed to the extensive convergence of the results. One is the 
extensive dialogue and cooperation among researchers, including the 
agreement to use NHTSA's database and discussions that led to 
consistent definitions of control variables or shared analysis 
techniques. The second is the real change in the new-vehicle fleet and 
perhaps also in driving patterns over the

[[Page 62757]]

past decade, which appears to have attenuated some of the stronger 
effects of mass reduction and footprint reduction. A third possible 
factor is that multicollinearity may somehow have become less of an 
issue with the new database and with the new technique of treating CUVs 
and minivans as a separate class of vehicles.
---------------------------------------------------------------------------

    \363\ Van Auken and Zellner (2005b), sum of 836 for passenger 
cars (Table 2, p. 27) and 682 for LTVs (Table 5, p. 36).
    \364\ Kahane, C.J. (2003), Vehicle Weight, Fatality Risk and 
Crash Compatibility of Model Year 1991-99 Passenger Cars and Light 
Trucks, NHTSA Technical Report. DOT HS 809 662. Washington, DC: 
National Highway Traffic Safety Administration, http://www-nrd.nhtsa.dot.gov/Pubs/809662.PDF. sum of 71 and 234 on p. ix, 216 
and 597 on p. xi.
    \365\ Kahane (2012), p. 113, scenario 3 in Table 4-2.
---------------------------------------------------------------------------

    Even though the studies now agree more than they disagree, there 
are still qualitative differences among the results. The baseline NHTSA 
findings indicate a statistically significant fatality increase for 
mass reduction in cars weighing less than 3,106 pounds. The NHTSA 
results do not encourage mass reduction in the lightest cars, at least 
for the foreseeable future, as long as so many heavy cars and LTVs 
remain on the road. But DRI's two analyses substituting track width and 
wheelbase for footprint or stopped-vehicle induced exposure for non-
culpable vehicles each reduce the estimate fatality-increasing effect 
of mass reduction in lighter-than-average cars to a statistically non-
significant level, while the simultaneous application of both 
techniques reduces the effect close to zero.
    DRI suggests that track width and wheelbase have more intuitive 
relationships with crash and fatality risk than footprint and do not 
aggravate multicollinearity issues, as evidenced by variance inflation 
factors; and that stopped-vehicle induced-exposure data may be 
preferable because non-culpable vehicle data may underrepresent 
vehicles and drivers that are good at avoiding crashes. NHTSA finds 
DRI's argument plausible and has now included both techniques among the 
sensitivity tests in its 2012 report. But these sensitivity tests have 
not replaced NHTSA's baseline analysis. In the regressions for cars and 
LTVs, wheelbase often did not have the expected relationships with risk 
and added little information (In the regressions for CUVs and minivans, 
it was track width that had little relationship with risk). Limiting 
the induced-exposure data to stopped vehicles is a technique that 
earlier peer reviewers criticized, eliminates 75 percent of the 
induced-exposure cases (even more on high-speed roads), and may 
underrepresent older drivers. Furthermore, Table II-28 shows that some 
of the other sensitivity tests increase the fatality-increasing effect 
of mass reduction in light cars to about the same extent that these 
techniques diminish it. On the whole, NHTSA does not now see adequate 
justification for mass reduction in light cars, but additional analysis 
may be considered as the vehicle fleet changes.\366\
---------------------------------------------------------------------------

    \366\ Ibid., pp. 115-119.
---------------------------------------------------------------------------

    Another analysis strategy of DRI and also of Wenzel's Phase 2 
report is to obtain separate estimates of the effect of mass reduction 
on fatalities [or casualties] per reported crash and reported crashes 
per VMT, as well as the composite estimate of its effect on fatalities 
per VMT. Van Auken and Wenzel both call the first estimate the ``effect 
on crashworthiness/compatibility'' and the second, the ``effect on 
crash avoidance.'' NHTSA believes the separate estimates are 
computationally valid, but these names are inaccurate characterizations 
that can lead to misunderstandings. For example, ICCT argues that the 
relationship between mass reduction and crash avoidance observed in the 
DRI and LBNL Phase 2 studies (i.e., that crash frequency increases as 
mass decreases) is counterintuitive.\367\ NHTSA believes the metric of 
fatalities per reported crash takes into account not just 
crashworthiness but also certain important aspects of crash avoidance, 
namely the severity of a crash. In addition, it could be influenced by 
how often crashes are reported or not reported, which varies greatly 
from State to State and depending on local circumstances. As Wenzel 
notes, these analyses produced unexpected results, such as a reduction 
in crash frequency with side air bags, or an increase in fatalities per 
crash when the driver is male (when, in fact, males are less vulnerable 
than females, given the same physical insult \368\) or when it is 
nighttime. The fatality rates are higher for male drivers and at night 
because the crashes are more severe, not primarily because of 
crashworthiness issues. By the same token, the effect of mass reduction 
on fatalities or casualties per crash need not be purely an effect on 
``crashworthiness and compatibility'' but may also comprise some 
aspects of crash avoidance.
---------------------------------------------------------------------------

    \367\ Docket No. NHTSA-2010-0131-0258, p. 10.
    \368\ Evans, L. (1991). Traffic Safety and the Driver. New York: 
Van Nostrand Reinhold, pp. 22-28.
---------------------------------------------------------------------------

    Wenzel's Phase 1 and Phase 2 reports show that when fatality or 
casualty rates are aggregated at the make-model level, differences 
between the models ``overwhelm'' the effect of mass. Likewise, in the 
basic regression analyses, the effects of many control variables are 
much stronger than the effect of mass. NHTSA does not dispute the 
validity of these analyses or disagree with the findings, but they must 
not be misinterpreted. Specifically, it would be wrong to conclude that 
the effect of mass reduction should not be estimated at all because 
other ambient effects are considerably stronger. Researchers must often 
measure a weak effect in the presence of strong effects--for example: 
Studying the light from faraway galaxies despite the presence of much 
stronger light from nearby stars; evaluating a dietary additive based 
on a sample of test subjects who vary greatly in age, weight, and 
eating habits. Furthermore, the technique of aggregating the rates by 
make-model, while useful for graphically depicting the effect of mass 
relative to other factors, is no substitute for regression analyses on 
the full database in terms of directly estimating the effects of mass 
reduction on safety; at best, the analysis aggregated by make-model can 
indirectly generate less precise estimates of these effects. NHTSA 
believes the sensitivity tests in Table II-28 and Table II-29 are 
useful for addressing the effects of other factors, since most of these 
tests consist of alternative ways to quantify those factors. The tests 
showed two consistent trends: almost all (18 of Wenzel's 19 and all 11 
of Kahane's) estimated a fatality increase for mass reduction in cars 
weighing less than 3,106 pounds and almost all (18 of Wenzel's and 10 
of Kahane's) estimated a societal benefit if mass is reduced in the 
LTVs weighing 4,594 pounds or more.
    Wenzel's Phase 2 report on casualty risk introduces one more source 
of data-driven uncertainty. To achieve adequate sample size, it must 
rely on the injury data in State crash files, specifically the highest 
reported level of nonfatal injury, usually called level ``A.'' But the 
coding of injury in police-reported crash databases is usually not 
based on medical records. ``A'' injuries do not necessarily correspond 
to life-threatening or seriously disabling injuries as defined by 
medical professionals. In 2000-2008 National Automotive Sampling System 
data, 59% of ``A'' injuries were in fact medically minor (levels 0 or 1 
on the Abbreviated Injury Scale, based on subsequently retrieved 
medical records), while 39% of the serious (AIS 3) and 27% of life-
threatening (AIS 4-5) injuries were not coded ``A.'' Despite this, 
Wenzel's composite results for casualties per VMT show about the same 
effects for mass reduction as Kahane's analyses of fatalities per VMT--
e.g., in the lighter cars, the estimated effect of a 100-pound mass 
reduction is slightly more detrimental for casualties per VMT (1.86% 
increase\369\) than for fatalities

[[Page 62758]]

(1.56% increase \370\). NHTSA concurs with analyzing casualties per 
VMT, but, given that so many of the ``A'' injuries are minor while 
quite a few disabling injuries are not ``A,'' does not believe the 
results are as critical as the fatality analyses.
---------------------------------------------------------------------------

    \369\ Wenzel (2012b), p. v, Table ES.1, column G.
    \370\ Kahane (2012), p. 12.
---------------------------------------------------------------------------

    i. Based on this information, what do the Agencies consider to be 
the current state of statistical research on vehicle mass and safety?
    The agencies believe that statistical analysis of historical crash 
data continues to be an informative and important tool in assessing the 
potential safety impacts of the proposed standards. The effect of mass 
reduction while maintaining footprint is a complicated topic and there 
are open questions whether future vehicle designs will reduce the 
historical correlation between weight and size. It is important to note 
that while the updated database represents more current vehicles with 
technologies more representative of vehicles on the road today, that 
database cannot fully represent what vehicles will be on the road in 
the MYs 2017-2025 timeframe. The vehicles manufactured in the 2000-2007 
timeframe were not subject to footprint-based fuel economy standards. 
As explained earlier, the agencies expect that the attribute-based 
standards will likely facilitate the design of vehicles such that 
manufacturers may reduce mass while maintaining footprint. Therefore, 
it is possible that the analysis for MYs 2000-2007 vehicles may not be 
fully representative of the vehicles that will be on the road in 2017 
and beyond.
    We recognize that statistical analysis of historical crash data may 
not be the only way to think about the future relationship between 
vehicle mass and safety. However, we recognize that other assessment 
methods are also subject to uncertainties, which makes statistical 
analysis of historical data an important starting point if employed 
mindfully and recognized for how it can be useful and what its 
limitations may be.
    NHTSA funded an independent review of statistical studies and held 
a mass-safety workshop in February 2011 in order to help the agencies 
sort through the ongoing debates over how statistical analysis of the 
historical relationship between mass and safety should be interpreted. 
Previously, the agencies have assumed that differences in results were 
due in part to inconsistent databases. By creating the updated common 
database and making it publicly available, we are hopeful that this 
aspect of the problem has been resolved. Moreover, the independent 
review of 18 statistical reports by UMTRI suggested that differences in 
data were probably less significant than the agencies may have thought. 
UMTRI stated that statistical analyses of historical crash data should 
be examined more closely for potential multicollinearity issues that 
exist in some of the current analyses. The agencies will continue to 
monitor issues with multicollinearity in our analyses, and hope that 
outside researchers will do the same. And finally, based on the 
findings of the independent review, the agencies continue to be 
confident that Kahane's analysis is one of the best for the purpose of 
analyzing potential safety effects of future CAFE and GHG standards. 
UMTRI concluded that Kahane's approach is valid, and Kahane has 
continued and refined that approach for the current analysis. The NHTSA 
2012 statistical fatality report finds directionally similar but fewer 
statistically significant relationships between vehicle mass, size, and 
footprint, as discussed above. Based on these findings, the agencies 
believe that in the future, fatalities due to mass reduction will be 
best reduced if mass reduction is concentrated in the heaviest 
vehicles. NHTSA considers part of the reason that more recent 
historical data shows a dampened effect in the relationship between 
mass reduction and safety is that all vehicles, including traditionally 
lighter ones, grew heavier during that timeframe (2000s). As lighter 
vehicles might become more prevalent in the fleet again over the next 
decade, it is possible that the trend could strengthen again. On the 
other hand, extensive use of new lightweight materials and optimized 
vehicle design may weaken the relationship. As the Alliance mentioned 
in its comments noted above, future updated analyses will be necessary 
to determine how the effect of mass reduction on safety changes over 
time.
    Both agencies agree that there are several identifiable safety 
trends already in place or expected to occur in the foreseeable future 
that are not accounted for in the study, since they were not in effect 
at the time that the vehicles in question were manufactured. For 
example, there are two important new safety standards that have already 
been issued and have been phasing in after MY 2008. FMVSS No. 126 (49 
CFR Sec.  571.126) requires electronic stability control in all new 
vehicles by MY 2012, and the upgrade to FMVSS No. 214 (Side Impact 
Protection, 49 CFR Sec.  571.214) will likely result in all new 
vehicles being equipped with head-curtain air bags by MY 2014. 
Additionally, based on historical trends, we anticipate continued 
improvements in driver (and passenger) behavior, such as higher safety 
belt use rates. All of these may tend to reduce the absolute number of 
fatalities. Moreover, as crash avoidance technology improves, future 
statistical analysis of historical data may be complicated by a lower 
number of crashes. In summary, the agencies have relied on the 
coefficients in the Kahane 2012 study for estimating the potential 
safety effects of the CAFE and GHG standards for MYs 2017-2025, based 
on our assumptions regarding the amount of mass reduction that could be 
used to meet the standards in a cost-effective way without adversely 
affecting safety. Section II.G.5.a below discusses the methodology used 
by the agencies in more detail. While the results of the safety effects 
analysis are less statistically significant than the results in the MYs 
2012-2016 final rule, the agencies still believe that any statistically 
significant results warrant careful consideration of the assumptions 
about appropriate levels of mass reduction, and have acted accordingly 
in developing the final standards.
4. How do the Agencies think technological solutions might affect the 
safety estimates indicated by the statistical analysis?
    As mass reduction becomes a more important technology option for 
manufacturers in meeting future CAFE and GHG standards, manufacturers 
will invest more and more resources in developing increasingly 
lightweight vehicle designs that meet their needs for manufacturability 
and the public's need for vehicles that are also safe, useful, 
affordable, and enjoyable to drive. There are many different ways to 
reduce mass, as discussed in Chapter 3 of this TSD and in Sections II, 
III, and IV of the preamble, and a considerable amount of information 
is available today on lightweight vehicle designs currently in 
production and that may be able to be put into production in the 
rulemaking timeframe. Discussion of lightweight material designs from 
NHTSA's workshop is presented below.
    Besides ``lightweighting'' technologies themselves, though, there 
are a number of considerations when attempting to evaluate how future 
technological developments might affect the safety estimates indicated 
by the historical statistical analysis. As discussed in the first part 
of this section, for example, careful changes in design and/or 
materials used might mitigate some of the potential increased risk from 
mass reduction for vehicle self-protection,

[[Page 62759]]

through improved distribution of crash pulse energy, etc. At the same 
time, these lightweighting techniques can sometimes lead to other 
problems, such as increased crash forces on vehicle occupants that have 
to be mitigated, or greater aggressivity against other vehicles in 
crashes. Manufacturers may develop new and better restraints--air bags, 
seat belts, etc.--to protect occupants in lighter vehicles in crashes, 
but NHTSA's current safety standards for restraint systems are designed 
based on the current fleet, not the yet-unknown future fleet. The 
agency will need to monitor trends in the crash data to see whether 
changes to the safety standards (or new safety standards) become 
advisable. Manufacturers are also increasingly investigating a variety 
of crash avoidance technologies--ABS, electronic stability control 
(ESC), lane departure warnings, vehicle-to-vehicle (V2V) 
communications--that, as they become more prevalent in the fleet, are 
expected to reduce the number of overall crashes, and thus crash 
fatalities. Until these technologies are present in the fleet in 
greater numbers, however, it will be difficult to assess whether they 
can mitigate the observed relationship between vehicle mass and safety 
in the historical data.
    Along with the California Air Resources Board (CARB), the agencies 
have completed several technical/engineering projects described below 
to estimate the maximum potential for advanced materials and improved 
designs to reduce mass in the MY 2017-2021 timeframe, while continuing 
to meet safety regulations and maintain functionality and affordability 
of vehicles. Another NHTSA-sponsored study will estimate the effects of 
these design changes on overall fleet safety. The detailed discussions 
about these studies can be found in the Joint TSD section 3.3.5.5.
    A. NHTSA awarded a contract in December 2010 to Electricore, with 
EDAG and George Washington University (GWU) as subcontractors, to study 
the maximum feasible amount of mass reduction of a mid-size car--
specifically, a Honda Accord--while maintaining the functionality of 
the baseline vehicle. The project team was charged to maximize the 
amount of mass reduction with the technologies that are considered 
feasible for 200,000 units per year production volume during the time 
frame of this rulemaking while maintaining the retail price in parity 
(within 10% variation) with the baseline vehicle. When 
selecting materials, technologies and manufacturing processes, the 
Electricore/EDAG/GWU team utilized, to the extent possible, only those 
materials, technologies and design which are currently used or planned 
to be introduced in the near term (MY 2012-2015) on low-volume 
production vehicles. This approach, commonly used in the automotive 
industry, is employed by the team to make sure that the technologies 
used in the study will be feasible for mass production for the time 
frame of this rulemaking. The Electricore/EDAG/GWU team took a ``clean 
sheet of paper'' approach and adopted collaborative design, engineering 
and CAE process with built-in feedback loops to incorporate results and 
outcomes from each of the design steps into the overall vehicle design 
and analysis. The team tore down and benchmarked 2011 Honda Accord and 
then undertook a series of baseline design selections, new material 
selections, new technology selections and overall vehicle design 
optimization. Vehicle performance, safety simulation and cost analyses 
were run in parallel to the design and engineering effort to help 
ensure that the design decisions are made in-line with the established 
project constrains.
    While the project team worked within the constraint of maintaining 
the baseline Honda Accord's exterior size and shape, the body structure 
was first redesigned using topology optimization with six load cases, 
including bending stiffness, torsion stiffness, IIHS frontal impact, 
IIHS side impact, FMVSS pole impact, FMVSS rear impact and FMVSS roof 
crush cases. The load paths from topology optimization were analyzed 
and interpreted by technical experts and the results were then fed into 
low fidelity 3G (Gauge, Grade and Geometry) optimization programs to 
further optimize for material properties, material thicknesses and 
cross-sectional shapes while trying to achieve the maximum amount of 
mass reduction. The project team carefully reviewed the optimization 
results and built detailed CAD/CAE models for the body structure, 
closures, bumpers, suspension, and instrumentation panel. The vehicle 
designs were also carefully reviewed to ensure that they can be 
manufactured at high volume production rates,
    Multiple materials were used for this study. The body structure was 
redesigned using a significant amount of high strength steel. The 
closures and suspension were designed using a significant amount of 
aluminum. Magnesium was used for the instrument panel cross-car beam. A 
limited amount of composite material was used for the seat structure.
    Safety performance of the light-weighted design was compared to the 
safety rating of the baseline MY2011 Honda Accord for seven consumer 
information and federal safety crash tests using LS-DYNA.\371\ These 
seven tests are the NCAP frontal test, NCAP lateral MDB test, NCAP 
lateral pole test, IIHS roof crush, IIHS lateral MDB, IIHS front offset 
test, and FMVSS No. 301 rear impact tests. These crash simulation 
analyses did not include use of a dummy model. Therefore only the crash 
pulse and intrusion were compared with the baseline vehicle test 
results. The vehicle achieved equivalent safety performance in all 
seven self-protection tests comparing to MY 2011 Honda Accord with no 
damage to the fuel tank. Vehicle handling is evaluated using MSC/ADAMS 
\372\ modeling on five maneuvers, fish-hook test, double lane change 
maneuver, pothole test, 0.7G constant radius turn test and 0.8G forward 
braking test. The results from the fish-hook test show that the light-
weighted vehicle can achieve a five-star rating for rollover, same as 
baseline vehicle. The double lane change maneuver tests show that the 
chosen suspension geometry and vehicle parameter of the light-weighted 
design are within acceptable range for safe high speed maneuvers.
---------------------------------------------------------------------------

    \371\ LS-DYNA is a software developed by Livermore Software 
Technologies Corporation used widely by industry and researchers to 
perform highly non-linear transient finite element analysis.
    \372\ MSC/ADAMS: Macneal-Schwendler Corporation/Automatic 
Dynamic Analysis of Mechanical Systems.
---------------------------------------------------------------------------

    Overall the complete light weight vehicle achieved a total weight 
savings of 22 percent (332kg) relative to the baseline vehicle (1480 
kg). The study has been peer reviewed by three technical experts from 
the industry, academia and a DOE national lab. The project team 
addressed the peer review comments in the report and also composed a 
response to peer review comment document. The final report, CAE model 
and cost model are published in docket NHTSA-2010-0131 and can also be 
found on NHTSA's Web site.\373\ The peer review comments with responses 
to peer review comments can also be found at the same docket and Web 
site.
---------------------------------------------------------------------------

    \373\ Final report, CAE model and cost model for NHTSA's light 
weighting study can be found at NHTSA's Web site: http://www.nhtsa.gov/fuel-economy.
---------------------------------------------------------------------------

    B. EPA, along with ICCT, funded a contract with FEV, with 
subcontractors EDAG (CAE modeling) and Munro & Associates, Inc. 
(component technology research) to study the feasibility, safety and 
cost of 20% mass reduction on a 2017-2020 production ready mid-size

[[Page 62760]]

CUV (crossover utility vehicle) specifically, a Toyota Venza while 
trying to achieve the same or lower cost. The EPA report is entitled 
``Light-Duty Vehicle Mass-Reduction and Cost Analysis--Midsize 
Crossover Utility Vehicle''. \374\ This study is a Phase 2 study of the 
low development design in the 2010 Lotus Engineering study ``An 
Assessment of Mass Reduction Opportunities for a 2017-2020 Model Year 
Vehicle Program'',\375\ herein described as ``Phase 1''.
---------------------------------------------------------------------------

    \374\ FEV, ``Light-Duty Vehicle Mass-Reduction and Cost 
Analysis--Midsize Crossover Utility Vehicle''. July 2012, EPA 
Docket: EPA-HQ-OAR-2010-0799.
    \375\ Systems Research and Application Corporation, ``Peer 
Review of Demonstrating the Safety and Crashworthiness of a 2020 
Model-Year, Mass-Reduced Crossover Vehicle (Lotus Phase 2 Report)'', 
February 2012, EPA docket: EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------

    The original 2009/2010 Phase 1 effort by Lotus Engineering was 
funded by Energy Foundation and ICCT to generate a technical paper 
which would identify potential mass reduction opportunities for a 
selected vehicle representing the crossover utility segment, a 2009 
Toyota Venza. Lotus examined mass reduction for two scenarios--a low 
development (20% MR and 2017 production with technology readiness of 
2014) and high development (40% MR and 2020 production with technology 
readiness of 2017). Lotus disassembled a 2009 Toyota Venza and created 
a bill of materials (BOM) with all components. Lotus then investigated 
emerging/current technologies and opportunities for mass reduction. The 
report included the BOM for full vehicle, systems, sub-systems and 
components as well as recommendations for next steps. The potential 
mass reduction for the low development design includes material changes 
to portions of the body in white (underfloor and body, roof, body side, 
etc.), seats, console, trim, brakes, etc. The Phase 1 project achieved 
19% (without the powertrain), 246 kg, at 99% of original cost at full 
phase-in after peer review comments taken into 
consideration.376,377 This was calculated to be -$0.45/kg 
utilizing information from Lotus.
---------------------------------------------------------------------------

    \376\ The original powertrain was changed to a hybrid 
configuration.
    \377\ Cost estimates were given in percentages--no actual cost 
analysis was presented for it was outside the scope of the study, 
though costs were estimated by the agency based on the report.
---------------------------------------------------------------------------

    The peer reviewed Lotus Phase 1 study created a good foundation for 
the next step of analyses of CAE modeling for safety evaluations and 
in-depth costing (these steps were not within the scope of the Phase 1 
study) as noted by the peer reviewer recommendations.\378\
---------------------------------------------------------------------------

    \378\ RTI International,``Peer Review of Lotus Engineering 
Vehicle Mass Reduction Study'' EPA-HQ-OAR-2010-0799-0710, November 
2010.
---------------------------------------------------------------------------

    Similar to Lotus Phase 1 study, the EPA Phase 2 study begins with 
vehicle tear down and BOM development. FEV and its subcontractors tore 
down a MY 2010 Toyota Venza in order to create a BOM as well as 
understand the production methods for each component. Approximately 140 
coupons from the BIW were analyzed in order to understand the full 
material composition of the baseline vehicle. A baseline CAE model was 
created based on the findings of the vehicle teardown and analysis. The 
model's results for static bending, static torsion, and modal frequency 
simulations (NVH) were obtained and compared to actual results from a 
Toyota Venza vehicle. After confirming that the results were within 
acceptable limits, this model was then modified to create light-
weighted vehicle models. EDAG reviewed the Lotus Phase 1 low 
development BIW ideas and found redesign was needed to achieve the full 
set of acceptable NVH characteristics. EDAG utilized a commercially 
available computerized optimization tool called HEEDS MDO to build the 
optimization model. The model consisted of 484 design variables, 7 load 
cases (2 NVH + 5 crash), and 1 cost evaluation. The outcome of EDAG's 
lightweight design optimization included the optimized vehicle assembly 
and incorporated the following while maintaining the original BIW 
design: Optimized gauge and material grades for body structure parts, 
laser welded assembly at shock towers, rocker, roof rail, and rear 
structure subassemblies, aluminum material for front bumper, hood, and 
tailgate parts, TRBs on B-pillar, A-pillar, roof rail, and seat cross 
member parts, design change on front rail side members. EDAG achieved 
13% mass reduction in the BIW including closure. If aluminum doors were 
included then an additional decrease of 28 kg could be achieved for a 
total of 18% mass reduction from the body structure. All other systems 
within the vehicle were examined for mass reduction, including the 
powertrain (engine, transmission, fuel tank, exhaust, etc.). FEV and 
Munro incorporated the Lotus Phase 1 low development concepts into 
their own idea matrix. Each component and sub-system chosen for mass 
reduction was scaled to the dimensions of the baseline vehicle, trying 
to maximize the amount of mass reduction with cost effective 
technologies and techniques that are considered feasible and 
manufacturable in high volumes in MY2017. FEV included a full 
discussion of the chosen mass reduction options for each component and 
subsystem.
    Safety performance of the baseline and light-weighted designs 
(Lotus Phase 1 low development and the final EPA Phase 2 design) were 
evaluated by EDAG through their constructed detailed CAD/CAE vehicle 
models. Five federal safety crash tests were performed, including FMVSS 
flat frontal crash, side impact, rear impact and roof crush (using IIHS 
resistance requirements) as well as Euro NCAP/IIHS offset frontal 
crash. Criteria including the crash pulse, intrusion and visual crash 
information were evaluated to compare the results of the light weighted 
models to the results of the baseline model. The light weighted vehicle 
achieved equivalent safety performance in all tests to the baseline 
model with no damage to the fuel tank. In addition, CAE was used to 
evaluate the BIW vibration modes in torsion, lateral bending, rear end 
match boxing, and rear end vertical bending, and also to evaluate the 
BIW stiffness in bending and torsion.
    The Phase 2 study 2010 Toyota Venza light weight vehicle achieved, 
with powertrain, a total weight savings of 18 percent (312 kg) relative 
to the baseline vehicle (1710 kg) at -$0.43/kg, and the cost figure is 
near zero at 20 percent. The study report and models have been peer 
reviewed by four technical experts from a material association, 
academia, DOE, and a National Laboratory. The peer review comments for 
this study were generally complimentary, and concurred with the ideas 
and methodology of the study. A few of the comments required further 
investigation, which were completed for the final report. The project 
team addressed the peer review comments in the report and also composed 
a response to peer review comment document. Changes to the BIW CAE 
models resulted in minimal differences. The final report is published 
in EPA's docket EPA-HQ-OAR-2010-0799 and the CAE LS DYNA model files 
and overview cost model files are found on EPA's Web site http://www.epa.gov/otaq/climate/publications.htm#vehicletechnologies. The peer 
review comments with responses to peer review comments can also be 
found at the same docket and Web site.
    C. The California Air Resources Board (CARB) funded a study with 
Lotus Engineering to further develop the high development design from 
Lotus' 2010 Toyota Venza work (``Phase 1''). The CARB-sponsored Lotus 
``Phase 2'' study

[[Page 62761]]

provides the updated design, crash simulation results, detailed 
costing, and analysis of the manufacturing feasibility of the BIW and 
closures. Based on the safety validation work, Lotus strengthened the 
design with a more aluminum-intensive BIW (with less magnesium). In 
addition to the increased use of advanced materials, the new design by 
Lotus included a number of instances in which multiple parts were 
integrated, resulting in a reduction in the number of manufactured 
parts in the lightweight BIW. The Phase 2 study reports that the number 
of parts in the BIW was reduced from 419 to 169. The BIW was analyzed 
for torsional stiffness and crash test safety with Computer-Aided 
Engineering (CAE). The new design's torsional stiffness was 32.9 kNm/
deg, which is higher than the baseline vehicle and comparable to more 
performance-oriented models. The research supported the conclusion that 
the lightweight vehicle design could pass standard FMVSS 208 frontal 
impact, FMVSS 210 seatbelt anchorages, FMVSS child restraint anchorage, 
FMVSS 214 side impact and side pole, FMVSS 216 roof crush (with 3xcurb 
weight), FMVSS 301 rear impact, IIHS low speed front, and IIHS low 
speed rear. Crash tests simulated in CAE showed results that were 
listed as acceptable for all crash tests analyzed. No comparisons or 
conclusions were made if the vehicle performed better or worse than the 
baseline Venza. For FMVSS 208 frontal impact, Lotus based its CAE crash 
test analyses on vehicle crash acceleration data rather than occupant 
injury as is done in the actual vehicle crash. The report from the 
study stated that accelerations were within acceptable levels compared 
to current production vehicle acceleration results and it should be 
possible to tune the occupant restraint system to handle the specific 
acceleration pulses of the Phase 2 high development vehicle. FMVSS 210 
seatbelt anchorages is concerned with seatbelt retention and certain 
dimensional constraints for the relationship between the seatbelts and 
the seats. Overall both the front and rear seatbelt anchorages met the 
requirements specified in the standard. FMVSS 214 side impact show the 
energy is effectively managed. Since dummy injury criteria was not used 
in the CAE modeling, a maximum intrusion tolerance level of 300 mm was 
instituted which is the typical distance between the door panel and 
most outboard seating positions. For example, the Phase 2 design was 
measured at 115mm for the crabbed barrier test. The side pole test 
resulted in 120 mm intrusion for the 5th percentile female and 
intrusion was measured at 190 mm for the 50th percentile male. The 
report stated FMVSS 216 roof crush simulation shows the Phase 2 high 
development vehicle will meet roof crush performance requirements under 
the specified load case of 3 times the vehicle weight. For the FMVSS 
rear impact, results show plastic strain in the fuel tank/system 
components to be less than 3.5%, which is less than the 10% strain 
allowed in the test. The pressure change in the fuel tank is less than 
2% so risk of tank splitting is minimal. The IIHS low speed front and 
rear show no body structural issues, however styling adjustments should 
be made to improve the rear bumper low speed performance.
    The Lotus design achieved a 37% (141 kg) mass reduction in the body 
structure, a 38% (484kg) mass reduction in the vehicle excluding the 
powertrain, and a 32% (537 kg) mass reduction in the entire vehicle 
including the powertrain. The report was peer reviewed by a cross 
section of experts and the comments were addressed by Lotus in the peer 
review documents. The comments requiring modification were incorporated 
into the final document. The documents can be found on EPA's Web site 
http://www.epa.gov/otaq/climate/publications.htm#vehicletechnologies.
    D. NHTSA has contracted with GWU to build a fleet simulation model 
to study the impact and relationship of light-weighted vehicle design 
with injuries and fatalities. This study will also include an 
evaluation of potential countermeasures to reduce any safety concerns 
associated with lightweight vehicles in the second phase. NHTSA has 
included three light-weighted vehicle designs in this study: the one 
from Electricore/EDAG/GWU mentioned above, one from Lotus Engineering 
funded by California Air Resource Board for the second phase of the 
study, evaluating mass reduction levels around 35 percent of total 
vehicle mass, and one funded by EPA and the International Council on 
Clean Transportation (ICCT). In addition to the lightweight vehicle 
models, these projects also created CAE models of the baseline 
vehicles. To estimate the fleet safety implications of light-weighting, 
CAE crash simulation modeling was conducted to generate crash pulse and 
intrusion data for the baseline and three light-weighted vehicles when 
they crash with objects (barriers and poles) and with four other 
vehicle models (Chevy Silverado, Ford Taurus, Toyota Yaris and Ford 
Explorer) that represent a range of current vehicles. The simulated 
acceleration and intrusion data were used as inputs to MADYMO occupant 
models to estimate driver injury. The crashes were conducted at a range 
of speeds and the occupant injury risks were combined based on the 
frequency of the crash occurring in real world data. The change in 
driver injury risk between the baseline and light-weighed vehicles will 
provide insight into the safety performance these light-weighting 
design concepts. This is a large and ambitious project involves several 
stages over several years. NHTSA and GWU have completed the first stage 
of this study. The frontal crash simulation part of the study is being 
finished and will be peer reviewed. The report for this study will be 
available in NHTSA-2010-0131. Information for this study can also be 
found at NHTSA's Web site.\379\
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    \379\ Web site for fleet study can be found at http://www.nhtsa.gov/fuel-economy.
---------------------------------------------------------------------------

    The countermeasures section of the study is expected to be finished 
in early 2013. This phase of the study is expected to provide 
information about the relationship of light-weighted vehicle design 
with injuries and fatalities and to provide the capability to evaluate 
the potential countermeasures to safety concerns associated with light-
weighted vehicles. NHTSA plans to include the following items in future 
phases of the study to help better understanding the impact of mass 
reduction on safety.
     Light-weighted concept vehicle to light-weighted concept 
vehicle crash simulation;
     Additional crash configurations, such as side impact, 
oblique and rear impact tests;
     Risk analysis for elderly and vulnerable occupants;
     Safety of light-weighted concept vehicles for different 
size occupants.
     Partner vehicle protection in crashes with other light-
weighted concept vehicles;
    While this study is expected to provide information about the 
relationship of light-weighted vehicle design with injuries and 
fatalities and to provide meaningful information to NHTSA on potential 
countermeasures to reduce any safety concerns associated with 
lightweight vehicles, because this study cannot incorporate all of the 
variations in vehicle crashes that occur in the real world, it is 
expected to provide trend information on the effect of potential future 
designs on highway safety, but is not expected to provide information 
that can be used to modify the coefficients derived by Kahane that 
relate mass reduction to highway crash fatalities. Because the 
coefficients from

[[Page 62762]]

the Kahane study are used in the agencies' assessment of the amount of 
mass reduction that may be implemented with a neutral effect on highway 
safety, the fact that the fleet simulation modeling study is not 
complete does not affect the agencies' assessment of the amount of mass 
reduction that may be implemented with a neutral effect on safety.
    Global Automakers commented that lightweighting strategies ``should 
be based on real world experience and in reliance upon laboratory test 
data.'' \380\ The agencies continue to believe that reasonable 
conclusions regarding the safety implication of mass reduction can be 
drawn from CAE simulations. As ICCT stated in their comments, CAE 
simulations are powerful tools that have improved rapidly over the 
years in terms of their ability to optimize vehicle designs and predict 
material and vehicle behavior in real life. Use of these highly 
sophisticated CAE tools has become standard industry practice in 
helping to verify and validate designs before real parts and vehicles 
are built. As the Alliance stated, however, CAE capabilities for 
conventional materials, such as steel and aluminum, are more mature 
than those of advanced materials, such as magnesium and composites. 
Steel and aluminum are the major materials used in some of the studies, 
such as EPA's and NHTSA's light-weighting studies that determined that 
a baseline vehicle's mass could be reduced by approximately 20 percent 
while maintaining safety comparable to the baseline vehicle.
---------------------------------------------------------------------------

    \380\ Global Automakers comments, Docket No. NHTSA-2010-0131, at 
pg 3.
---------------------------------------------------------------------------

    Thus, even though CAE tools are used heavily, the agencies 
acknowledge the concerns the Alliance raised in its comments about CAE 
capabilities for some potential advanced materials for crashworthiness, 
and have been mindful of this issue in developing our studies. NHTSA's 
study took a similar approach in vehicle body structure design as the 
FutureSteelVehicle, but with less aggressive material usage (e.g., 
using thicker gauges of steel). Only those materials, technologies and 
design which are currently used or planned to be introduced in the near 
term (MY 2012-2015) on low-volume production vehicles are used in 
NHTSA's concept design. This approach is employed by the team to make 
sure that the technologies used in the study will be feasible for mass 
production for the time frame of this rulemaking. Even though NHTSA's 
study is not directly based on laboratory testing of the light-weighted 
design as Global Automaker suggested, the materials, designs and 
approaches used in the study are currently employed in mass production 
vehicles, which gives NHTSA confidence that results from its study are 
practical and feasible in the rulemaking timeframe. EPA's study used a 
similar approach. It includes a baseline model which was run through 
crash simulations and the results were comparable to physical crash 
data of the vehicle in the same tests. For the light weighted design, 
the BIW was maintained while various components were lightened through 
incorporation of high strength steels whose properties reflect those 
materials commonly used today. The light weighted CAE model crash 
results were then compared to those from the baseline CAE model crash 
results. The model run results from the light weighted vehicle had 
equal or better performance on intrusion, acceleration, etc. The 
materials, designs and approaches used in the study are currently 
employed in mass production vehicles, which gives EPA confidence that 
results from its study are practical, feasible and reasonable in the 
rulemaking timeframe.
a. NHTSA Workshop on Vehicle Mass, Size and Safety
    As stated above in section C.2, on February 25, 2011, NHTSA hosted 
a workshop on mass reduction, vehicle size, and fleet safety at the 
headquarters of the U.S. Department of Transportation in Washington, 
DC. The purpose of the workshop was to provide the agencies with a 
broad understanding of current research in the field and provide 
stakeholders and the public with an opportunity to weigh in on this 
issue. The agencies also created a public docket to receive comments 
from interested parties that were unable to attend. The presentations 
were divided into two sessions that addressed the two expansive sets of 
issues. The first session explored statistical evidence of the roles of 
mass and size on safety, and is summarized in section C.2. The second 
session explored the engineering realities of structural 
crashworthiness, occupant injury and advanced vehicle design, and is 
summarized here. The speakers in the second session included Stephen 
Summers of NHTSA, Gregg Peterson of Lotus Engineering, Koichi Kamiji of 
Honda, John German of the International Council on Clean Transportation 
(ICCT), Scott Schmidt of the Alliance of Automobile Manufacturers, Guy 
Nusholtz of Chrysler, and Frank Field of the Massachusetts Institute of 
Technology.
    The second session explored what degree of mass reduction and 
occupant protection are feasible from technical, economic, and 
manufacturing perspectives. Field emphasized that technical feasibility 
alone does not constitute feasibility in the context of vehicle mass 
reduction. Sufficient material production capacity and viable 
manufacturing processes are essential to economic feasibility. Both 
Kamiji and German noted that both good materials and good designs will 
be necessary to reduce fatalities. For example, German cited the 
examples of hexagonally structured aluminum columns, such as used in 
the Honda Insight, that can improve crash absorption at lower mass, and 
of high-strength steel components that can both reduce weight and 
improve safety. Kamiji made the point that widespread mass reduction 
will reduce the kinetic energy of all crashes which should produce some 
beneficial effect.
    Summers described NHTSA's plans for a model to estimate fleet wide 
safety effects based on an array of vehicle-to-vehicle computational 
crash simulations of current and anticipated vehicle designs. In 
particular, three computational models of lightweight vehicles are 
under development. They are based on current vehicles that have been 
modified or redesigned to substantially reduce mass. The most ambitious 
was the ``high development'' derivative of a Toyota Venza developed by 
Lotus Engineering and discussed by Mr. Peterson. The Lotus light-
weighted Venza structure contains about 75% aluminum, 12% magnesium, 8% 
steel, and 5% advanced composites. Peterson expressed confidence that 
the design had the potential to meet federal safety standards. Nusholtz 
emphasized that computational crash simulations involving more advanced 
materials were less reliable than those involving traditional metals 
such as aluminum and steel.
    Nusholtz presented a revised data-based fleet safety model in which 
important vehicle parameters were modeled based on trends from current 
NCAP crash tests. For example, crash pulses and potential intrusion for 
a particular size vehicle were based on existing distributions. Average 
occupant deceleration was used to estimate injury risk. Through a range 
of simulations of modified vehicle fleets, he was able to estimate the 
net effects of various design strategies for lighter weight vehicles, 
such as various scaling approaches for vehicle stiffness or intrusion. 
The approaches were selected based on engineering requirements for 
modified vehicles. Transition from the current fleet was considered. He 
concluded that protocols resulting in safer transitions

[[Page 62763]]

(e.g., removing more mass from heavier vehicles with appropriate 
stiffness scaling according to a \3/2\ power law) were not generally 
consistent with those that provide the greatest reduction in GHG 
production: i.e., that the most