changes in congestion and noise costs are not offset by corresponding
changes in the benefits drivers experience by making more frequent
trips or traveling to more distant destinations.
    While largely external to individual drivers, congestion costs are
limited to road users as a whole; since road users include a
significant fraction of the U.S. population, however, we treat changes
in congestion costs as part of this rule's broader economic impacts on
society instead of as a private cost to those whose choices impose it.
Costs resulting from road and highway noise are even more widely
dispersed, because they are borne partly by surrounding residents,
pedestrians, and other non-road users, and for this reason are also
considered as a cost to the society as a whole.
    To estimate the economic costs associated with changes in
congestion and noise caused by differences in miles driven for the
proposal, NHTSA updated FHWA's 1997 Highway Cost Allocation Study's
estimates of marginal congestion costs to reflect changes in three
factors that affect them: The time delays caused by the contribution of
additional travel to congestion, increases in typical vehicle
occupancy, and the hourly value of each occupant's time. The agency
assumed that delay per additional mile driven by cars and light trucks
has increased in proportion to growth in annual vehicle travel per
lane-mile of road and highway capacity in urban areas (where virtually
all congestion occurs) since the date of the original FHWA study. Noise
costs per additional mile driven were assumed to remain constant at
their levels originally estimated by the FHWA study. Both congestion
and noise costs were also updated to reflect changes in the economy-
wide price level since their original publication and make them
comparable to other economic values used in this analysis. The agency
previously relied on this study in its 2010 (75 FR 25324, May 7, 2010),
2011 (76 FR 57106, Sept. 15, 2011), and 2012 (77 FR 62624, Oct. 15,
2012) final rules, and, like the estimates used in the proposal, a
revised version for the 2020 final rule (85 FR 24174, April 30, 2020).
Updating the individual underlying components for congestion costs in
this analysis improves their currency and internal consistency with the
rest of the analysis.
    Some commenters objected to the agency's use of increases in
vehicle volumes per mile of roadway to approximate the change in the
incremental contribution to congestion and delays caused by additional
car and light truck use. For example, CARB argued the revised values
led the analysis to overestimate congestion costs. CARB claimed that
the miscalculation arises from the scaling of vehicles per lane
``because (1) it compares a figure for passenger cars to a figure for
light-duty vehicles that includes sport-utility vehicles and vans, and
(2) it is limited to interstate highways instead of all roads.'' \659\
CARB further argued that the revised numbers do not account for changes
in average speeds and improved road designs. California Attorney
General et al. concurred with CARB's comment and suggested using the
1997 estimates updated only for inflation.\660\
---------------------------------------------------------------------------

    \659\ CARB, Attachment 2, NHTSA-2021-0053-1521, at 13.
    \660\ California Attorney General et al., Detailed Comments,
NHTSA-2021-0053-1499, at 32.
---------------------------------------------------------------------------

    The agency disagrees with CARB's argument for several reasons.
First, the agency's scaling of vehicle-miles per lane-mile uses figures
that include all vehicle classes rather than those for light-duty
vehicles alone. SUVs had only begun to enter the fleet in 1997; since
then, they have increasingly substituted for passenger cars, and travel
by both cars and SUVs is included in the figures that the agency
compares for 1997 and more recent years.\661\ Today's SUVs are used
interchangeably with passenger cars, and it is more than reasonable to
assume that an additional SUV mile will produce the same marginal
increase in congestion costs as an additional passenger car mile.
---------------------------------------------------------------------------

    \661\ See, e.g., Tom Voelk, Rise of S.U.V.s: Leaving Cars in
Their Dust, With No Signs of Slowing, N.Y. Times, May 21, 2020,
available at https://www.nytimes.com/2020/05/21/business/suv-sales-best-sellers.html.
---------------------------------------------------------------------------

    Second, the original 1997 FHWA estimate of congestion costs and the
scaling that NHTSA used to update it both apply to all roads and
highways, and this comparison is consistent with the approach NHTSA has
taken across the last 5 rulemakings. Third, the comment did not explain
the expected direction of changes in speed or provide support for the
commenter's claim that better road design has mitigated the effect of
increased traffic volumes on travel speeds. Further, the commenter's
claims are difficult to reconcile: If we assume that better roads
enable higher speeds despite increased traffic volumes, more frequent
(and possibly more severe) crashes would result, and

incidents are an important contributor to congestion.\662\
---------------------------------------------------------------------------

    \662\ See, e.g., https://safety.fhwa.dot.gov/speedmgt/ref_mats/fhwasa1304/Resources3/08%20-%20The%20Relation%20Between%20Speed%20and%20Crashes.pdf. The agency
also notes that if the average speed has increased, then our safety
costs would require adjustment as well.
---------------------------------------------------------------------------

    In response to these comments, the agency also analyzed changes in
estimates of congestion delays reported by the Texas Transportation
Institute (TTI), which are widely cited, use well-documented methods,
and offer the only available measure of long-term trends in the
economic costs of traffic congestion and delays.\663\ TTI's estimates
of congestion delays are derived using well-established patterns of
travel throughout the day and relationships between vehicle travel
volumes and travel speeds for major roads and highways, and more
recently on highly detailed measures of actual hourly travel speeds and
vehicle volumes. The agency's calculations using TTI's detailed
historical database show that from 1997 (the date of the original FHWA
study) through 2017 (the end year used in the agency's update), person-
hours of delay per vehicle-mile traveled increased 57 percent in the
Nation's 100 largest urban areas and 52 percent in all (nearly 500)
U.S. urban areas. More suggestively, incremental hours of delay per
additional vehicle-mile traveled--a more direct measure of the impact
of additional travel on congestion delays and one more comparable to
that reported in the 1997 FHWA study--grew by 86 percent in the largest
areas and by 131 percent in all U.S. urban areas over that same period.
These calculations suggest that the 58 percent increase in person-hours
of delay per additional vehicle-mile of travel reflected in the
agency's updated estimate of incremental congestion costs is
reasonable, so the agency has elected to retain its earlier estimate.
---------------------------------------------------------------------------

    \663\ For an overview and links to detailed reports and
documentation, see https://mobility.tamu.edu/umr/.
---------------------------------------------------------------------------

(2) Fuel Tax Revenue
    As discussed previously in III.G.1.b)(1), a significant fraction of
the fuel savings experienced by consumers includes avoided fuel taxes,
which average nearly $0.50 per gallon when Federal, state, and local
excise and sales taxes levied on gasoline are included. Fuel taxes are
treated as a transfer within the agency's analysis, which includes an
offsetting loss in revenue to government agencies as a cost of raising
CAFE standards, and thus do not affect net benefits from this rule; the
agency reports this offsetting loss to illustrate the potential impact
on government agencies that rely on fuel tax revenue to support the
activities they fund.\664\
---------------------------------------------------------------------------

    \664\ See OMB Circular A-4 for more information on transfer
payments, and how they should be accounted for in regulatory
analysis.
---------------------------------------------------------------------------

    CFA erroneously commented that lost gasoline taxes were improperly
included--for the first time--as a cost of the rule.\665\ Not only have
both EPA and NHTSA previously reported changes in gasoline tax payments
by consumers and in revenues to government agencies, but NHTSA's
proposal explains in multiple places that gasoline taxes are considered
a transfer--a cost to governments and an identical benefit to consumers
that has already been accounted for in reported fuel savings--and has
no impact on net benefits. In contrast, Walter Kreucher commented that
billions in gasoline tax revenue would be lost if we finalized stricter
standards.\666\ As indicated above, however, any reduction in tax
revenue received by governments that levy taxes on fuel is exactly
offset by lower fuel tax payments by consumers, so from an economy-wide
standpoint reductions in gasoline tax revenues are simply a transfer of
economic resources and has no effect on net benefits.
---------------------------------------------------------------------------

    \665\ CFA, Docket No. NHTSA-2021-0053-1535, at 5.
    \666\ Walt Kreucher, Docket No. NHTSA-2021-0053-0013, at 14.
---------------------------------------------------------------------------

(b) Benefits
(1) Reduced Climate Damages
    Extracting and transporting crude petroleum, refining it to produce
transportation fuels, and distributing fuel all generate additional
emissions of GHGs and criteria air pollutants beyond those from cars'
and light trucks' use of fuel. By reducing the volume of petroleum-
based fuel produced and consumed, adopting higher CAFE standards will
thus mitigate global climate-related economic damages caused by
accumulation of GHGs in the atmosphere, as well as the more immediate
and localized health damages caused by exposure to criteria pollutants.
Because they fall broadly on the U.S. population--and globally, in the
case of climate damages--reducing them represents an external benefit
from requiring higher fuel economy. The following subsections discuss
the values used to estimate the economic consequences associated with
climate damages and the discount rates applied to those benefits.
(a) Valuation of the Social Cost of Greenhouse Gases
    In the proposal, NHTSA estimated the global social benefits from
the reductions in emissions of CO2, CH4, and
N2O expected to result from this rule using the SC-GHG
estimates presented in ``Technical Support Document: Social Cost of
Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive
Order 13990'' (``February 2021 TSD''). These SC-GHG estimates are
interim global values developed pursuant to E.O. 13990 for use in
benefit-cost analysis.
    The SC-GHG estimates used in our analysis were developed over many
years, using a transparent process, peer-reviewed methodologies, and
input from the public. Specifically, in 2009, an interagency working
group (IWG) that included experts from the DOT and other executive
branch agencies and offices was established to support agencies in
using the most comprehensive available science and to promote
consistency in the SC-GHG values used across agencies. The IWG
published SCC estimates in 2010 that were developed using three peer-
reviewed Integrated Assessment Models relating CO2 and other
GHG emissions to climate change and its potential economic impacts, and
updated these estimates in 2013 using new versions of each IAM. In
August 2016, the IWG published estimates of the social cost of methane
(SC-CH4) and nitrous oxide (SC-N2O) using
methodologies consistent with the underlying the SCC estimates. E.O.
13990 (issued on January 20, 2021) re-established an IWG, and directed
it to publish interim SC-GHG values for CO2, CH4,
and N2O within thirty days. Furthermore, the E.O. tasked the
IWG with updating the methodologies used in calculating these SC-GHG
values. The E.O. instructed the IWG to utilize ``the best available
economics and science,'' and incorporate principles of ``climate risk,
environmental justice, and intergenerational equity.'' \667\ The E.O.
also instructed the IWG to take into account the recommendations from
the NAS committee convened on this topic published in 2017.\668\ The
February 2021 TSD provides a complete discussion of the IWG's initial
review conducted under E.O. 13990, and

NHTSA incorporates that discussion by reference into this preamble.
---------------------------------------------------------------------------

    \667\ Executive Order on Protecting Public Health and the
Environment and Restoring Science to Tackle the Climate Crisis.
(2021). Available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/executive-order-protecting-public-health-and-environment-and-restoring-science-to-tackle-climate-crisis/.
    \668\ National Academy of Sciences (NAS). (2017). Valuing
Climate Damage: Updating Estimation of the Social Cost of Carbon
Dioxide. Available at https://www.nap.edu/catalog/24651/valuing-climate-damages-updating-estimation-of-the-social-cost-of.
---------------------------------------------------------------------------

    NHTSA is using the IWG's interim values, published in February 2021
in a technical support document, for this CAFE analysis.\669\ As a
member of the IWG, DOT has thoroughly reviewed the inputs and
methodological choices for these estimates, and DOT affirms that, in
its expert judgment, the Interim Estimates reflect the best available
science and economics and are the most appropriate values to use in the
analysis of this rule. This use of the IWG estimates is the same
approach as that taken in DOT regulatory analyses between 2009 and
2016, and is consistent with the proposal.
---------------------------------------------------------------------------

    \669\ Interagency Working Group on Social Cost of Greenhouse
Gases, United States Government. (2021). Technical Support Document:
Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates
under Executive Order 13990, available at https://www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf.
---------------------------------------------------------------------------

    NHTSA indicated in the NPRM that if the Interagency Working Group
issued revised estimates of climate damages in time for NHTSA to
evaluate whether to incorporate them into this final rule, NHTSA would
consider using them. The IWG has not issued revised estimates.
    The following section provides further discussion of the discount
rates that NHTSA uses in its regulatory analysis. For a full discussion
of the agency's quantification of GHGs, see TSD Chapter 6.2.1 and the
FRIA.
(b) Discount Rates for Climate Related Benefits
    A standard function of regulatory analysis is to evaluate tradeoffs
between impacts that occur at different points in time. Many Federal
regulations involve costly upfront investments that generate future
benefits in the form of reductions in health, safety, or environmental
damages. To evaluate these tradeoffs, the analysis must account for the
social rate of time preference--the broadly observed social preference
for benefits that occur sooner versus those that occur further in the
future.\670\ This is accomplished by discounting impacts that occur
further in the future more than impacts that occur sooner.
---------------------------------------------------------------------------

    \670\ This preference is observed in many market transactions,
including by savers that expect a return on their investments in
stocks, bonds, and other equities; firms that expect positive rates
of return on major capital investments; and banks that demand
positive interest rates in lending markets.
---------------------------------------------------------------------------

    OMB Circular A-4 affirmed the appropriateness of accounting for the
social rate of time preference in regulatory analyses and recommended
discount rates of 3 and 7 percent for doing so. The recommended 3
percent discount rate was chosen to represent the ``consumption rate of
interest'' approach, which discounts future costs and benefits to their
present values using the rate at which consumers appear to make
tradeoffs between current consumption and equal consumption
opportunities deferred to the future. OMB Circular A-4 reports an
inflation-adjusted or ``real'' rate of return on 10-year Treasury notes
of 3.1 percent between 1973 and its 2003 publication date and
interprets this as approximating the rate at which society is
indifferent between consumption today and in the future.
    The 7 percent rate reflects the opportunity cost of capital
approach to discounting, where the discount rate approximates the
forgone return on private investment if the regulation were to divert
resources from capital formation.\671\ OMB Circular A-4 cites pre-tax
rates of return on capital as part of its selection of the 7 percent
rate.\672\ The IWG rejected the use of the opportunity cost of capital
approach to discounting reductions in climate-related damages,
concluding that the ``consumption rate of interest is the correct
discounting concept to use when future damages from elevated
temperatures are estimated in consumption-equivalent units as is done
in the IAMs used to estimate the SC-GHG (National Academies 2017).''
\673\ In fact, Circular A-4 indicates that discounting at the
consumption rate of interest is the ``analytically preferred method''
when effects are presented in consumption-equivalent units.\674\ DOT
concurs that in light of Circular A-4's guidance on discount rates
spanning displacement of investments and/or consumption, and given the
considerations that climate damages are modeled in consumption
equivalent units and intergenerational equity, the use of consumption
based discount rates is superior for estimating SC-GHG.
---------------------------------------------------------------------------

    \671\ As the IWG explained, use of the 7 percent opportunity
cost of capital approach in fact ``at best creat[es] a lower bound
on the estimate of net benefits that would only be met in an extreme
case where regulatory costs fully displace investment.'' Interagency
Working Group on Social Cost of Greenhouse Gases, United States
Government, Technical Support Document: Social Cost of Carbon,
Methane, and Nitrous Oxide, Interim Estimates under Executive Order
13990, February 2021. NHTSA agrees and observes that this rule does
not represent such an ``extreme case.'' NHTSA's analysis assumes
that most of the rule's costs and benefits, including technology
costs passed through to consumers, will affect consumption choices.
The focus on consumption rates is therefore especially appropriate.
    \672\ OMB Circular A-4.
    \673\ Interagency Working Group on Social Cost of Greenhouse
Gases, United States Government, Technical Support Document: Social
Cost of Carbon, Methane, and Nitrous Oxide, Interim Estimates under
Executive Order 13990, February 2021.
    \674\ OMB, Circular A-4. See also Declaration of Dominic J.
Mancini. Submitted in Support of Defendants' Motion for a Stay
Pending Appeal, Louisiana v. Biden, Case No. 2:21-cv-01074-JDC-KK
(W.D. La., filed Feb. 19, 2022) (confirming the appropriateness of
this approach to discounting).
---------------------------------------------------------------------------

    As the IWG states, ``GHG emissions are stock pollutants, where
damages are associated with what has accumulated in the atmosphere over
time, and they are long lived such that subsequent damages resulting
from emissions today occur over many decades or centuries depending on
the specific greenhouse gas under consideration.'' \675\ OMB Circular
A-4 states that impacts occurring over such intergenerational time
horizons require special treatment:
---------------------------------------------------------------------------

    \675\ Ibid.

    Special ethical considerations arise when comparing benefits and
costs across generations. Although most people demonstrate time
preference in their own consumption behavior, it may not be
appropriate for society to demonstrate a similar preference when
deciding between the well-being of current and future generations.
Future citizens who are affected by such choices cannot take part in
making them, and today's society must act with some consideration of
their interest.\676\
---------------------------------------------------------------------------

    \676\ OMB Circular A-4.

    Furthermore, NHTSA notes that in 2015, OMB--along with the rest of
the IWG--articulated that ``Circular A-4 is a living document, which
may be updated as appropriate to reflect new developments and
unforeseen issues,'' and that ``the use of 7 percent is not considered
appropriate for intergenerational discounting. There is wide support
for this view in the academic literature, and it is recognized in
Circular A-4 itself.'' \677\ Following this statement from OMB, and in
light of the need to weigh welfare to current and future generations,
it would be inappropriate to apply an opportunity cost of capital rate
to estimate SC-GHG.
---------------------------------------------------------------------------

    \677\ Interagency Working Group on the Social Cost of Carbon,
United States Government, Response to Comments: Social Cost of
Carbon for Regulatory Impact Analysis under Executive Order 12866,
July 2015. Note that OMB, as a co-chair of the IWG, published the
request for comments.
---------------------------------------------------------------------------

    In addition to the ethical considerations, Circular A-4 also
identifies uncertainty in long-run interest rates as another reason why
it is appropriate to use lower rates to discount intergenerational
impacts, since recognizing such uncertainty causes the appropriate
discount rate to decline gradually over progressively longer time
horizons. Circular A-4 also acknowledges the difficulty in estimating
appropriate discount rates for

``intergenerational'' time horizons, noting that ``[p]rivate market
rates provide a reliable reference for determining how society values
time within a generation, but for extremely long time periods no
comparable private rates exist.'' \678\ The social costs of distant
future climate damages--and by implication, the value of reducing them
by lowering emissions of GHGs--are highly sensitive to the discount
rate, and the present value of reducing future climate damages grows at
an increasing rate as the discount rate used in the analysis declines.
This ``non-linearity'' means that even if uncertainty about the exact
value of the long-run interest rate is equally distributed between
values above and below the 3 percent consumption rate of interest, the
probability-weighted (or ``expected'') present value of a unit
reduction in climate damages will be higher than the value calculated
using a 3 percent discount rate. The effect of such uncertainty about
the correct discount rate can be accounted for by using a lower
``certainty-equivalent'' rate to discount distant future damages,
defined as the rate that produces the expected present value of a
reduction in future damages implied by the distribution of possible
discount rates around what is believed to be the most likely single
value.
---------------------------------------------------------------------------

    \678\ Ibid.
---------------------------------------------------------------------------

    The IWG identifies ``a plausible range of certainty-equivalent
constant consumption discount rates: 2.5, 3, and 5 percent per year,''
each intended to reflect the effect of uncertainty surrounding
alternative estimates of the correct discount rate. The IWG's
justification for its selection of these rates is summarized in this
excerpt from its 2021 guidance:

    The 3 percent value was included as consistent with estimates
provided in OMB's Circular A-4 (OMB 2003) guidance for the
consumption rate of interest. . . . The upper value of 5 percent was
included to represent the possibility that climate-related damages
are positively correlated with market returns, which would imply a
certainty equivalent value higher than the consumption rate of
interest. The low value, 2.5 percent, was included to incorporate
the concern that interest rates are highly uncertain over time. It
represents the average certainty-equivalent rate using the mean-
reverting and random walk approaches from Newell and Pizer (2003)
starting at a discount rate of 3 percent. Using this approach, the
certainty equivalent is about 2.2 percent using the random walk
model and 2.8 percent using the mean reverting approach. Without
giving preference to a particular model, the average of the two
rates is 2.5 percent. Additionally, a rate below the consumption
rate of interest would also be justified if the return to
investments in climate mitigation are negatively correlated with the
overall market rate of return. Use of this lower value was also
deemed responsive to certain judgments based on the prescriptive or
normative approach for selecting a discount rate and to related
ethical objections that have been raised about rates of 3 percent or
higher.

    Because the certainty-equivalent discount rate will lie
progressively farther below the best estimate of the current rate as
the time horizon when future impacts occur is extended, the IWG's
recent guidance also suggests that it may be appropriate to use a
discount rate that declines over time to account for interest rate
uncertainty, as has been recommended by NAS and EPA's Science Advisory
Board.\679\ The IWG noted that it will consider these recommendations
and the relevant academic literature on declining rates in developing
its final guidance on the social cost of greenhouse gases.
---------------------------------------------------------------------------

    \679\ Interagency Working Group on Social Cost of Greenhouse
Gases, United States Government, Technical Support Document: Social
Cost of Carbon, Methane, and Nitrous Oxide, Interim Estimates under
Executive Order 13990, February 2021.
---------------------------------------------------------------------------

    The IWG 2021 interim guidance also presented new evidence on the
consumption-based discount rate suggesting that a rate lower than 3
percent may be appropriate. For example, the IWG replicated OMB
Circular A-4's original 2003 methodology for estimating the consumption
rate using the average return on 10-year Treasury notes over the last
30 years and found a discount rate close to 2 percent. They also
presented rates over a longer time horizon, finding an average rate of
2.3 percent from 1962 to the present. Finally, they summarized results
from surveys of experts on the topic and found a ``surprising degree of
consensus'' for using a 2 percent consumption rate of interest to
discount future climate-related impacts.\680\
---------------------------------------------------------------------------

    \680\ Ibid.
---------------------------------------------------------------------------

    NHTSA notes that the primary analysis of the NPRM estimated
benefits from reducing emissions of CO2 and other GHGs using
per-ton values of reducing their emissions that incorporated a 2.5
percent discount rate for distant future climate damages, while it
discounted costs and non-climate related benefits using a 3 percent
rate. NHTSA also presented cost and benefits estimates in the primary
analysis that reflected unit values of reducing GHG emissions
constructed using a 3 percent discount rate for reductions in climate-
related damages, while discounting costs and non-climate related
benefits at 7 percent. NHTSA believed at the time this approach
represented an appropriate treatment of the intergenerational issues
presented by emissions that result in climate-related damages over a
very-long time horizon, and was within scope of the IWG's Technical
Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide
that recommends discounting future climate damages at rates of 2.5, 3,
and 5 percent.\681\
---------------------------------------------------------------------------

    \681\ Interagency Working Group on Social Cost of Greenhouse
Gases, United States Government, Technical Support Document: Social
Cost of Carbon, Methane, and Nitrous Oxide, Interim Estimates under
Executive Order 13990, February 2021.
---------------------------------------------------------------------------

    In addition, NHTSA emphasized the importance and value of
considering the benefits calculated using all four SC-GHG estimates for
each of three greenhouse gases. NHTSA included the social costs of
CO2, CH4, and N2O calculated using the
four different estimates recommended in the February 2021 TSD (model
average at 2.5 percent, 3 percent, and 5 percent discount rates; 95th
percentile at 3 percent discount rate) in the FRIA.
    The IWG TSD does not address the question of how agencies should
combine its estimates of benefits from reducing GHG emissions that
reflect these alternative discount rates with the discount rates for
nearer-term benefits and costs prescribed in OMB Circular A-4. However,
the February 2021 TSD identifies 2.5 percent as the ``average
certainty-equivalent rate using the mean-reverting and random walk
approaches from Newell and Pizer (2003) starting at a discount rate of
3 percent.'' \682\ As such, NHTSA believed using a 2.5 percent discount
rate for climate-related damages was consistent with the IWG TSD.
---------------------------------------------------------------------------

    \682\ Ibid.
---------------------------------------------------------------------------

    As indicated above, NHTSA's PRIA presented cost and benefit
estimates using a 2.5 percent discount rate for reductions in climate-
related damages and 3 percent for non-climate related impacts. NHTSA
also presented cost and benefits estimates using a 3 percent discount
rate for reductions in climate-related damages alongside estimates of
non-climate related impacts discounted at 7 percent. This latter
pairing of a 3 percent rate for discounting benefits from reducing
climate-related damages with a 7 percent discount rate for non-climate
related impacts is consistent with NHTSA's past practice.\683\ However,
NHTSA's pairing in the PRIA of 2.5 percent for climate-related damage
reductions with 3 percent for non-climate related impacts was novel.
---------------------------------------------------------------------------

    \683\ See, e.g., the 2012 and 2020 final CAFE rules.

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

    In this final rule, NHTSA has not selected a primary discount rate
for the social cost of greenhouse gases and instead presents non-GHG
related impacts of the final rule discounted at 3 and 7 percent
alongside estimates of the social cost of greenhouse gases reflecting
each of the three discount rates presented by the IWG. This approach
was selected because, as NHTSA pointed out in the NPRM, the IWG does
not specify which of the discount rates it recommends should be
considered the agency's primary estimate. The agency's analysis showing
our primary non-GHG impacts at 3 and 7 percent alongside climate-
related benefits discounted at each rate recommended by the IWG may be
found in FRIA Chapter 6.5.6. For the sake of simplicity, most tables
throughout this analysis pair both the 3 percent and the 7 percent
discount rates with the social costs of greenhouse gases discounted at
a 3 percent rate. To calculate the present value of climate benefits,
we also use the same discount rate as the rate used to discount the
value of damages from future GHG emissions, for internal
consistency.\684\ We believe that this approach provides policymakers
with a range of costs and benefits associated with the rule using a
reasonable range of discounting approaches and associated climate
benefits, as well as the 95th percentile value that illustrates the
potential for climate change to cause damages that are much higher than
the ``best guess'' damage estimates. This approach is also consistent
with the options outlined by NAS's 2017 recommendations on how SC-GHG
estimates can ``be combined in RIAs with other cost and benefits
estimates that may use different discount rates.'' NAS reviewed
``several options,'' including ``presenting all discount rate
combinations of other costs and benefits with [SC-GHG] estimates.''
---------------------------------------------------------------------------

    \684\ This approach follows the same approach that the IWG's
February 2021 TSD recommended ``to ensure internal consistency--
i.e., future damages from climate change using the SC-GHG at 2.5
percent should be discounted to the base year of the analysis using
the same 2.5 percent rate.''
---------------------------------------------------------------------------

(c) Comments and Responses About the Agency's Choice of Social Cost of
Carbon Estimates and Discount Rates
    California Attorney General et al. commented that the 3 percent
discount rate was too high, referencing the discussion in the IWG's
interim guidance showing rates on 10-year Treasury notes hovering
around 2 percent over the last 30 years. Our Children's Trust commented
that the use of any discount rate on reductions in future climate
damages is unconstitutional because it treats them ``as less valuable
or not equal under the eyes of the law when it comes to life, liberty,
personal security and a climate system that sustains human life, among
other unalienable rights.'' AFPM argued that we should discount the
benefit of reduced climate-related costs at the same rate as is used to
discount other costs and benefits.\685\
---------------------------------------------------------------------------

    \685\ AFPM, NHTSA-2021-0053-1530, at 19-21.
---------------------------------------------------------------------------

    As noted above, NHTSA presented and considered a range of discount
rates, including 2.5 percent and 5 percent. The above discussion also
explained why it is important to adjust the discounting approach in the
context of intergenerational effects and uncertainty about long-run
interest rates. NHTSA disagrees, however, with the argument that the
use of discounting where there are intergenerational effects is a
violation of the Constitution. The impacts on future generations are
reflected in the estimates used in this analysis.
    IPI et al. commented in general support of the agency's approach to
estimating SC-GHG. They argued that the agency should acknowledge that
the IWG's estimates are appropriate but may underestimate the effects
of climate change,\686\ and that the transparent and rigorous
methodology employed by IWG was based on the available science which
adds credibility to their estimates.\687\ Their comment continued by
arguing that the agency should continue to use a global estimate of
SCC-GHG because doing so is supported by science and a domestic
estimate would understate U.S. extraterritorial interests, damages such
as security threats and transboundary damages that spillover into the
U.S., and harm U.S. citizens and assets that are extraterritorial.\688\
Finally, IPI et al. commented that the agency's approach to discounting
climate-related benefits was appropriate, but argued that the agency
should consider aligning with EPA's methodology of reporting climate
benefits at 3 percent for the majority of the tables and include a
sensitivity analysis at a 2 percent discount rate.\689\ Many of the
points raised by IPI et al. are aligned with the agency's approach in
both the proposal and final rule.
---------------------------------------------------------------------------

    \686\ IPI et al., Docket No. NHTSA-2021-0053-1547, at 4-7.
    \687\ Id. at 31-41.
    \688\ Id. at 7-14.
    \689\ Id. at 14-31.
---------------------------------------------------------------------------

    Competitive Enterprise Institute recommended against the agency's
use of the Interagency Working Group's Interim Estimates of the social
cost of carbon. CEI argued that the degree of global warming mitigation
projected by NHTSA is too small to generate climate benefits valued at
the scale valued by NHTSA using the IWG Interim Estimates. CEI also
argued that the 7 percent discount rate is the appropriate discount
rate for climate damage reduction benefits and that using a lower rate
would justify mitigation projects with a lower rate of return than
could be found in private markets. CEI's rationale was that investing
in higher rate of return projects today would pass along more wealth to
future generations, making them better able to overcome the adversity
posed by potential climate change. They argued that the SC-GHG is
highly sensitive to the time horizon of the analysis and that the SC-
GHG drops significantly if the time horizon for estimating climate
damages is shortened from 300 years to 150 years, and suggested that
the outer years of the 300-year time-horizon were speculative. CEI also
argued that the IWG uses an outdated equilibrium climate sensitivity
distribution and that more recent studies present distributions with
lower modal and central values. They argued that CO2
emissions have important benefits to agriculture and plant growth
through carbon fertilization, which increases internal plant water use
efficiency. Finally, they argued that the IWG's assumptions regarding
human adaptation mitigating the costs of climate change and projected
baseline carbon emissions were unduly pessimistic.
    Estimating the social costs of future climate damages caused by
emissions of greenhouse gases, or SC-GHG, requires analysts to make a
number of projections that necessarily involve uncertainty--for
example, about the likely future pattern of global emissions of GHGs--
and to model multifaceted scientific phenomena, including the effect of
cumulative emissions and atmospheric concentrations of GHGs on climate
measures including global surface temperatures and precipitation
patterns. Each of these entail critical judgements about complex
scientific and modeling questions. Doing so requires specialized
technical expertise, accumulated experience, and expert judgment, and
highly trained, experienced, and informed analysts can reasonably
differ in their judgements.
    CEI's comments raise questions about the IWG's selection of the
specific assumptions and parameter values it used to produce the
estimates of the social costs of various GHGs that NHTSA relies on in
this regulatory analysis, and contends that using alternative
assumptions and values would reduce the IWG's recommended

values significantly. However, the agency notes that the IWG's
membership includes experts in climate science, estimation of climate-
related damages, and economic valuation of those impacts, and that
these members applied their collective expertise to review and evaluate
available empirical evidence and alternative projections of important
measures affecting the magnitude and cost of such damages. The agency
also notes that the IWG members employed a collaborative, consensus-
based process to arrive at their collective judgements about the most
reliable assumptions and parameter values. In addition, the IWG uses
its consensus assumptions and estimates in conjunction with three
different widely recognized, peer-reviewed models of climate economic
impacts, and its recommended values represent a synthesis of the costs
each one estimates on the basis of that common set of inputs. Finally,
DOT uses its own judgment in applying the estimates in this analysis.
    Thus, the agency believes that the SC-GHG estimates developed by
the IWG have two important advantages over other available estimates:
First, they are the product of consensus estimates of the critical
inputs necessary to estimate damage costs for GHGs; and second, they
synthesize the results of multiple estimation methods represented in
different widely regarded models. As a consequence, NHTSA views the
IWG's recommended values as the most reliable among those that were
available for it to use in its analysis. While the agency acknowledges
that--as CEI notes--selecting certain input assumptions and parameter
estimates different from those the IWG chose could reduce those values,
it also agrees with the IWG that equally and perhaps more plausible
assumptions and parameter values would have resulted in estimated SC-
GHG values that were far higher than those the group ultimately
recommended. Furthermore, due to omitted damage categories, NHTSA
concurs with the IWG that its estimates are likely conservative
underestimates. Unlike the IWG's work, we feel that CEI, Children's
Trust, and the other commenters did not address the inherent
uncertainty in estimating the SC-GHG. Specifically, we note that any
alternative model that attempts to project the costs of GHGs over the
coming decades--and centuries--will be subject to the same uncertainty
and criticisms raised by commenters. Commenters essentially ask NHTSA
to replace this working group's expertise in favor of specific
alternative perspectives presented outside of the full context of the
IWG's significantly technical and multifaceted assessments.
Furthermore, these alternative estimates are reliant on the commenters'
specific set of assumptions of the future being correct.\690\ The IWG's
analysis considered the possibility that its assumptions were either
too conservative or extreme, and based its guidance on a robust review
of potential outcomes.
---------------------------------------------------------------------------

    \690\ For example, CEI argued that the IWG estimates ``err[ed]
on the side of alarm and regulatory ambition.'' However, if CEI is
being overly optimistic about how mankind can deal with a changing
climate or the possibility that carbon may have some benefits on
agriculture, IWG's estimate could be an accurate--or even
underestimate--of the SC-GHG.
---------------------------------------------------------------------------

    CEI commented that the probability distribution function the IWG
uses to simulate the equilibrium climate sensitivity is outdated and
that more recent empirical work suggests the distribution should have a
lower central tendency. However, CEI's comment overlooked the seminal
work published in 2021 by the Intergovernmental Panel on Climate Change
(IPCC)--an organization of expert scientists with 195 members chartered
by the United Nation and the World Meteorological Organization that
reviews the scientific work of thousands of contributors all over the
world and provides a comprehensive summary ``about what is known about
the drivers of climate change, its impacts and future risks, and how
adaptation and mitigation can reduce those risks.'' \691\ This work was
subjected to a transparent review by experts and governments all around
the world to ``ensure an objective and complete assessment and to
reflect a diverse range of views and expertise.'' \692\ The IPCC's most
recent report states that ``[i]mproved knowledge of climate processes,
paleoclimate evidence and the response of the climate system to
increasing radiative forcing gives a best estimate of equilibrium
climate sensitivity of 3 degrees Celsius.'' \693\ This is the same
value the IWG's probability distribution function uses as the median
estimate of equilibrium climate sensitivity. While the IWG may choose
to revisit the distribution it uses for simulating the equilibrium
climate sensitivity in a future forthcoming update, it is clear that
the distribution used for the interim values is reasonable and
scientifically defensible.
---------------------------------------------------------------------------

    \691\ Intergovernmental Panel on Climate Change website, https://www.ipcc.ch/about/.
    \692\ Ibid.
    \693\ IPCC, 2021: Summary for Policymakers. In: Climate Change
2021: The Physical Science Basis. Contribution of Working Group I to
the Sixth Assessment Report of the Intergovernmental Panel on
Climate Change [Masson-Delmotte, V., P. Zhai, A. Pirani, S.L.
Connors, C. P[eacute]an, S. Berger, N. Caud, Y. Chen, L. Goldfarb,
M. I. Gomis, M. Huang, K. Leitzell, E. Lonnoy, J.B.R. Matthews, T.K.
Maycock, T. Waterfield, O. Yelek[ccedil]i, R. Yu and B. Zhou
(eds.)]. Cambridge University Press. In Press. SPM-13.
---------------------------------------------------------------------------

    CEI also commented that we should use an SC-GHG in our main
analysis that only reflects damages to the United States. As an initial
matter, such an estimate would undermine the many rationales for a
global estimate articulated by the IWG, which emphasizes the value of a
global analysis to sufficiently and comprehensively estimate climate
damages. NHTSA believes that continued reliance on the IWG's
recommendations in this respect remains appropriate for all of the
reasons outlined above, which underscore the reasonableness of the
IWG's consensus-based approach.
    However, even beyond the recommendations of the IWG, NHTSA agrees
with the IWG that climate change is a global problem and that the
global SC-GHG values are appropriate for this analysis. Emitting
greenhouse gases creates a global externality, in that GHG emitted in
one country mix uniformly with other gases in the atmosphere and the
consequences of the resulting increased concentration of GHG are felt
all over the world.
    The effects of climate change are global and affect the United
States through many different pathways. These include through
destabilization that affects our national security, economic impacts
due to interlinked global economies, in danger and risk to U.S.
military assets abroad, harm to soldiers stationed outside the United
States, increased migration to the United States due to climate events
like drought, the provision of disaster aid in response to disasters
caused by climate change, interruptions to supply chains from extreme
weather events, and in many other ways. Given methodological
challenges, it has not yet been possible to derive a robust social cost
estimate that isolates impacts to the United States and its inhabitants
and, in many respects, such an estimate represents an artificial
distinction that fails to account for the comingling of interests
throughout the world. The models used both for the Interim Estimates
and for the 2020 rule's SC-GHG value do not organize all of the
relevant economic and welfare impacts by country, and as such, it is
not possible to develop robust estimates of U.S.-specific damages. As
the Government Accountability Office concluded in a June 2020 report
examining the SC-GHG values used in the 2020 rule, the models ``were
not

premised or calibrated to provide estimates of the social cost of
carbon based on domestic damages.'' \694\ Further, the report noted
that NAS found that country-specific social costs of carbon estimates
were ``limited by existing methodologies, which focus primarily on
global estimates and do not model all relevant interactions among
regions.'' \695\ It is also important to note that the 2020 rule's SC-
GHG values were never peer reviewed, and when their use in a specific
regulatory action was challenged, a Federal court determined that use
of a U.S.-only value had been ``soundly rejected by economists as
improper and unsupported by science,'' and that the values themselves
omitted key U.S.-specific damages including to supply chains, U.S.
assets and companies, and geopolitical security. California v.
Bernhardt, 472 F.Supp.3d 573, 613-14 (N.D. Cal. 2020).
---------------------------------------------------------------------------

    \694\ GAO, Social Cost of Carbon: Identifying a Federal Entity
to Address the National Academies' Recommendations Could Strengthen
Regulatory Analysis, GAO-20-254 (June 2020) at 29.
    \695\ Id. at 26.
---------------------------------------------------------------------------

    Furthermore, the United States cannot address the domestic
consequences of climate change for the United States by itself.
Instead, we need other nations to take action to reduce their own
domestic emissions and to consider the benefits of their emission
reductions to the United States. In order to ensure other nations take
similar actions to reduce GHG emissions, the United States is actively
involved in developing and implementing international commitments to
secure reductions in GHG emissions. If the United States fails to
consider the benefits (and harms) of its actions to other countries,
our bargaining position is significantly weakened. It is hard to argue
that a large emitter like China, for example, should consider the
global consequences of its actions--including to the United States--if
the United States fails to do so. As a result, the United States may
fail to secure sufficient emission reduction commitments from its
counterpart s to reduce adverse consequences from climate change that
will affect the United States if it were to use U.S.-specific values
for the SC-GHG. A wide range of scientific and economic experts have
emphasized the issue of reciprocity as support for considering global
damages of GHG emissions. Using a global estimate of damages in U.S.
analyses of regulatory actions allows the United States to continue to
actively encourage other nations, including emerging major economies,
to take significant steps to reduce emissions. The only way to achieve
an efficient allocation of resources for emissions reduction on a
global basis--and so benefit the United States and its citizens--is for
all countries to base their policies on global estimates of damages.
    Further, in practice, data and modeling limitations naturally
restrain the ability of estimates of SC-GHG to include all of the
important physical, ecological, and economic impacts of climate change,
such that the estimates are a partial accounting of climate change
impacts and will therefore tend to be underestimates of the marginal
benefits of abatement. As an empirical matter, the development of a
U.S.-specific SC-GHG is greatly complicated by the relatively few
region- or country-specific estimates of the SC-GHG in the literature.
    Importantly, due to methodological constraints, NHTSA is not aware
of a robust analysis that isolates damages to the United States. Due to
these constraints, the SC-GHG value used in the 2020 final rule is an
underestimate of damages to the United States, and as such is
inappropriately low for purposes of informing the current analysis.
However, NHTSA explored an analysis incorporating a U.S.-specific
social cost of carbon as promoted by commenters such as CEI in order to
comply with a preliminary injunction issued by the United States
District Court for the Western District of Louisiana on February 11,
2022, that enjoined NHTSA from, among other activities, ``[a]dopting,
employing, treating as binding, or relying upon any [SC-GHG] estimates
based on global effects,'' as well as from ``adopting, employing,
treating as binding, or relying upon the work product of the [IWG].''
\696\ When NHTSA considered that analysis, the agency determined that
the selected standards continue to remain maximum feasible.
---------------------------------------------------------------------------

    \696\ Louisiana v. Biden, Order, No. 2:21-CV-01074, ECF No. 99
(W.D. La. Feb. 11, 2022). That injunction was subsequently stayed.
Louisiana v. Biden, Order, No. 22-30087, Doc. No.<PHONE_NUMBER>1 (5th
Cir. Mar. 16, 2022).
---------------------------------------------------------------------------

    Even with the underestimate of climate benefits, the analysis still
contained numerous quantitative indicia that the new standards remained
appropriate. For instance, fuel savings for the preferred alternative
still exceeded the price increase due to the rule by $290.\697\
Likewise, a calendar year accounting using a 3 percent discount rate
still revealed a net benefit for the preferred alternative of $28.1
billion. Moreover, these figures--like any cost-benefit analysis
results in a CAFE rulemaking--offered only one informative data point
in addition to the host of considerations that NHTSA must balance by
statute when determining maximum feasible standards. Even taking the
severely reduced climate benefit estimates into account, the overall
balance of other significant qualitative and quantitative
considerations and factors support the selection of the preferred
alternative, as described at length throughout this final rule.
Accordingly, even the limited perspective of impacts urged by
commenters such as CEI would not alter the standards necessitated in
this rulemaking.
---------------------------------------------------------------------------

    \697\ This final rule is estimated to increase the price of
model year 2029 vehicles by $1,087 and save consumer $1,387.
---------------------------------------------------------------------------

    NHTSA believes that the three issues raised by CEI and specifically
addressed in this section on the IWG's interim values--regarding the
use of opportunity cost of capital discounting, the use of global
values for the social costs of greenhouse gases, and the probability
distribution function of equilibrium climate sensitivity--are
representative of their comments overall in that they choose to
highlight areas of uncertainty and dynamics that would tend to reduce
the social cost of carbon. In each case, CEI has chosen to ignore
sources of uncertainty and dynamics that may increase the social cost
of carbon and asserts scientific authority only where the cited papers
or dynamics would tend to reduce it.
    Contrary to the position put forward by Children's Trust that it is
unlawful to discount the estimated costs of SC-GHG, we also believe
that discounting the SC-GHG estimate to develop a present value of the
benefits of reducing GHG emissions is consistent with the law, and that
the discounting approach used by the IWG is reasonable. Unsurprisingly,
when the cost-benefit analysis is the predominant basis for an agency's
decision, courts have previously reviewed and affirmed rules that
discount climate-related costs.\698\ Courts have likewise advised
agencies to approach cost-benefit analyses with impartiality, to ensure
that important factors are captured in the analysis, including climate
benefits,\699\ and to ensure that the decision rests ``on a
consideration of the relevant factors.'' \700\ NHTSA has followed these
principles here.
---------------------------------------------------------------------------

    \698\ See, e.g., E.P.A. v. EME Homer City Generation, L.P., 572
U.S. 489 (2015).
    \699\ CBD v. NHTSA, 538 F.3d 1172, 1197 (9th Cir. 2008).
    \700\ State Farm, 463 U.S. 29, 43 (1983) (internal quotation
marks omitted).
---------------------------------------------------------------------------

    For these reasons, NHTSA believes that the Interim Estimates
employed in

this analysis and the results they produce are the most reliable
estimates of what are inherently uncertain values it could have
selected, and that the range of values used to examine the sensitivity
of its results adequately incorporate the range of uncertainty
surrounding the values used in its central analysis.
(2) Reduced Health Damages
    The CAFE Model estimates monetized health effects associated with
emissions from three criteria pollutants: NOX,
SOX, and PM2.5. As discussed in Section III.F
above, although other criteria pollutants are currently regulated, we
only calculate impacts from these three pollutants since they are known
to be emitted regularly from mobile sources, have the most adverse
effects to human health, and are based on EPA papers that estimate the
benefits per ton of reducing these pollutants.
    CBD et al. stated that NHTSA improved the monetization of
PM2.5 attributable to fuel economy standards (discussed
further below); however, the commenters also argued that NHTSA should
monetize benefits from reductions in ozone and air toxics.\701\
---------------------------------------------------------------------------

    \701\ CBD et al., Docket No. NHTSA-2021-0053-1572, at 5.
---------------------------------------------------------------------------

    As we discussed in the proposal, other pollutants, especially those
that are precursors to ozone, are difficult to model due to the
complexity of their formation in the atmosphere, and EPA does not
calculate benefit-per-ton estimates for these. We will continue to
explore this concept for future analyses. Chapter 5.4 of the TSD
includes a section on uncertainty related to monetizing health impacts.
The Final SEIS also includes a section describing the health effects of
ozone and air toxics (see Section <IP_ADDRESS>).
    The CAFE Model computes the monetized impacts associated with
health damages from each pollutant by multiplying monetized health
impact per ton values by the total tons of these pollutants, which are
emitted from both upstream and tailpipe sources. Chapter 5 of the TSD
accompanying this final rule includes a detailed description of the
emission factors that inform the CAFE Model's calculation of the total
tons of each pollutant associated with upstream and tailpipe emissions.
    These monetized health impacts per ton values are closely related
to the health incidence per ton values described above in Section III.F
and in detail in Chapter 5.4 of the TSD. We use the same EPA sources
that provide health incidence values to determine which monetized
health impacts per ton values to use as inputs in the CAFE Model. Like
the estimates associated with health incidences per ton of criteria
pollutant emissions, we use multiple EPA papers and conversations with
EPA staff to appropriately account for monetized damages for each
pollutant associated with the source sectors included in the CAFE
Model, based on which papers contain the most up-to-date data
corresponding to the relevant source sectors.\702\ The various emission
source sectors included in the EPA papers do not always correspond
exactly to the emission source categories used in the CAFE Model.\703\
In those cases, we map multiple EPA sectors to a single CAFE source
category and compute a weighted average of the health impact per ton
values.
---------------------------------------------------------------------------

    \702\ Environmental Protection Agency (EPA). 2018. Estimating
the Benefit per Ton of Reducing PM2.5 Precursors from 17
Sectors. https://www.epa.gov/sites/production/files/2018-02/documents/sourceapportionmentbpttsd_2018.pdf; Wolfe et al. 2019.
Monetized health benefits attributable to mobile source emissions
reductions across the United States in 2025. https://pubmed.ncbi.nlm.nih.gov/30296769/; Fann et al. 2018. Assessing Human
Health PM2.5 and Ozone Impacts from U.S. Oil and Natural
Gas Sector Emissions in 2025. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6718951/.
    \703\ The CAFE Model's emission source sectors follow a similar
structure to the inputs from GREET. See Chapter 5.2 of the TSD
accompanying this notice for further information.
---------------------------------------------------------------------------

    CBD et al. stated that the estimates of the benefits of
PM2.5 reductions were improved by the addition of the Wolfe
et al. paper to the sources used by NHTSA.\704\ We agree, and continue
to use these sources in the final rulemaking analysis as they allow us
to map sectors to categories that are more expansive and specific than
the original 2018 source.
---------------------------------------------------------------------------

    \704\ CBD et al., at 5.
---------------------------------------------------------------------------

    EPA uses the value of a statistical life (VSL) to estimate
premature mortality impacts, and a combination of willingness to pay
estimates and costs of treating the health impact for estimating the
morbidity impacts.\705\ EPA's 2018 TSD, ``Estimating the Benefit per
Ton of Reducing PM2.5 Precursors from 17 Sectors,'' \706\
(referred to here as the 2018 EPA source apportionment TSD) contains a
more detailed account of how health incidences are monetized. It is
important to note that the EPA sources cited frequently refer to these
monetized health impacts per ton as ``benefits per ton,'' since they
describe these estimates in terms of emissions avoided. In the CAFE
Model input structure, these are generally referred to as monetized
health impacts or damage costs associated with pollutants emitted, not
avoided, unless the context states otherwise.
---------------------------------------------------------------------------

    \705\ Although EPA and DOT's VSL values differ, DOT staff
determined that using EPA's VSL was appropriate here, since it was
already included in these monetized health impact values, which were
best suited for the purposes of the CAFE Model.
    \706\ See Environmental Protection Agency (EPA). 2018.
Estimating the Benefit per Ton of Reducing PM2.5
Precursors from 17 Sectors. https://www.epa.gov/sites/production/files/2018-02/documents/sourceapportionmentbpttsd_2018.pdf.
---------------------------------------------------------------------------

    The Competitive Enterprise Institute questioned the use of the
specific EPA studies that inform the BPT values that NHTSA uses, namely
the Six Cities Study.\707\ We report only one BPT estimate in this
final rule, based on the Krewski et al. study, to be consistent with
EPA in their final GHG rule. We consulted with EPA staff at the Office
of Air Quality Planning and Standards (OAQPS) on the most appropriate
benefit per ton values to use for the various upstream and tailpipe
emission categories. EPA bases its benefits analyses on peer-reviewed
studies of air quality and health effects and peer-reviewed studies of
the monetary values of public health and welfare improvements. Very
recently, EPA updated its approach to estimating the benefits of
changes in PM2.5 and ozone.708 709 These updates
were based on information drawn from the recent 2019 PM2.5
and 2020 Ozone Integrated Science Assessments (ISAs), which were
reviewed by the Clean Air Science Advisory Committee (CASAC) and the
public.710 711 EPA has not updated its mobile source BPT
estimates to reflect these updates in time for this analysis. Instead,
based on the recommendation of EPA staff, we use the same
PM2.5 BPT estimates that we used in the NPRM to ensure
consistency between the values corresponding to different source
sectors. The BPT estimates used are based on the review of the 2009 PM
ISA \712\ and 2012 PM ISA Provisional

Assessment \713\ and include a mortality risk estimate derived from the
Krewski et al. (2009) \714\ analysis of the American Cancer Society
(ACS) cohort and nonfatal illnesses consistent with benefits analyses
performed for the analysis of the final Tier 3 Vehicle Rule,\715\ the
final 2012 PM NAAQS Revision,\716\ and the final 2017-2025 Light-duty
Vehicle GHG Rule.\717\ We expect this lag in updating our BPT estimates
to have only a minimal impact on total PM benefits, since the
underlying mortality risk estimate based on the Krewski study is
identical to an updated PM2.5 morality risk estimate derived
from an expanded analysis of the same ACS cohort. We are aware of EPA's
work to update its mobile source BPT estimates to reflect these recent
updates for use in future rulemaking analyses, and will work further
with EPA in future rulemakings to update and synchronize approaches to
BPT estimates.
---------------------------------------------------------------------------

    \707\ Competitive Enterprise Institute, Docket No. NHTSA-2021-
0053-1546, at 3.
    \708\ U.S. Environmental Protection Agency (U.S. EPA). 2021a.
Regulatory Impact Analysis for the Final Revised Cross-State Air
Pollution Rule (CSAPR) Update for the 2008 Ozone NAAQS. EPA-452/R-
21-002. March.
    \709\ U.S. Environmental Protection Agency (U.S. EPA). 2021b.
Estimating PM2.5- and Ozone-Attributable Health Benefits.
Technical Support Document (TSD) for the Final Revised Cross-State
Air Pollution Rule Update for the 2008 Ozone Season NAAQS. EPA-HQ-
OAR-2020-0272. March.
    \710\ U.S. Environmental Protection Agency (U.S. EPA). 2019a.
Integrated Science Assessment (ISA) for Particulate Matter (Final
Report, 2019). U.S. Environmental Protection Agency, Washington, DC,
EPA/600/R-19/188, 2019.
    \711\ U.S. Environmental Protection Agency (U.S. EPA). 2019a.
Integrated Science Assessment (ISA) for Ozone and Related
Photochemical Oxidants (Final Report). U.S. Environmental Protection
Agency, Washington, DC, EPA/600/R-20/012, 2020.
    \712\ U.S. Environmental Protection Agency (U.S. EPA). 2009.
Integrated Science Assessment for Particulate Matter (Final Report).
EPA-600-R-08-139F. National Center for Environmental Assessment--RTP
Division, Research Triangle Park, NC. December. Available at: http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=216546.
    \713\ U.S. Environmental Protection Agency (U.S. EPA). 2012.
Provisional Assessment of Recent Studies on Health Effect of
Particulate Matter Exposure. EPA/600/R-12/056F. National Center for
Environmental Assessment--RTP Division, Research Triangle Park, NC.
December. Available at: https://cfpub.epa.gov/ncea/isa/recordisplay.cfm?deid=247132.
    \714\ Krewski D., M. Jerrett, R.T. Burnett, R. Ma, E. Hughes, Y.
Shi, et al. 2009. Extended Follow-Up and Spatial Analysis of the
American Cancer Society Study Linking Particulate Air Pollution and
Mortality. HEI Research Report, 140, Health Effects Institute,
Boston, MA.
    \715\ U.S. Environmental Protection Agency (2014). Control of
Air Pollution from Motor Vehicles: Tier 3 Motor Vehicle Emission and
Fuel Standards Final Rule: Regulatory Impact Analysis, Assessment
and Standards Division, Office of Transportation and Air Quality,
EPA-420-R-14-005, March 2014. Available on the internet: http://www3.epa.gov/otaq/documents/tier3/420r14005.pdf.
    \716\ U.S. Environmental Protection Agency. (2012). Regulatory
Impact Analysis for the Final Revisions to the National Ambient Air
Quality Standards for Particulate Matter, Health and Environmental
Impacts Division, Office of Air Quality Planning and Standards, EPA-
452-R-12-005, December 2012. Available on the internet: http://www3.epa.gov/ttnecas1/regdata/RIAs/finalria.pdf.
    \717\ U.S. Environmental Protection Agency (U.S. EPA). (2012).
Regulatory Impact Analysis: Final Rulemaking for 2017-2025 Light-
Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average
Fuel Economy.
---------------------------------------------------------------------------

    Auto Innovators also suggested additional sensitivity analysis of
BPT inputs, citing the EPA Science Advisory Board's ``recommended
sensitivity analyses of alternative values of the dose-response
function, differential toxicity by type of particle, and spatially-
dependent VSL values.'' \718\ We include other BPT values in one health
effects sensitivity case described in Chapter 7 of the FRIA. Further
sensitivity cases were not deemed necessary for the purposes of this
analysis, since criteria pollutant health impacts make up a very small
portion of overall benefits.
---------------------------------------------------------------------------

    \718\ Auto Innovators, Docket No. NHTSA-2021-0053-1492, at 92.
---------------------------------------------------------------------------

    Our Children's Trust objected to using discount rates when
monetizing health benefits, stating that ``to apply a discount rate to
monetized health impacts is also completely inappropriate and unlawful
and discriminates against children.'' \719\ The health impacts of
exposure to criteria pollutants occur well after exposure to air
pollution (i.e., the impacts have long ``latency periods''), and
therefore it is appropriate to reflect some difference in timing
(through discounting) in the monetized values.
---------------------------------------------------------------------------

    \719\ Our Children's Trust, Docket No. NHTSA-2021-0053-1587, at
3.
---------------------------------------------------------------------------

    We disagree with Our Children's Trust's assertion that applying a
discount rate to health benefits is illegal. Our Children's Trust did
not provide any specific laws that we were allegedly violating, nor are
we aware of any such law. Guidance from OMB Circular A-4 recommends
using discount rates of 3 and 7 percent in benefit-cost analyses and
has been used for regulatory analyses for decades, including in the
evaluation of regulations with health impacts similar to those of this
final rule.
    However, OMB Circular A-4 also acknowledges the ethical
considerations involved in analyzing impacts occurring over
intergenerational time horizons:

Special ethical considerations arise when comparing benefits and
costs across generations. Although most people demonstrate time
preference in their own consumption behavior, it may not be
appropriate for society to demonstrate a similar preference when
deciding between the well-being of current and future generations.
Future citizens who are affected by such choices cannot take part in
making them, and today's society must act with some consideration of
their interest.\720\
---------------------------------------------------------------------------

    \720\ OMB Circular A-4.

Factoring in competing social interests presents additional
difficulties in weighing these ethical considerations. As of this time,
we include health benefits at the 3 percent as well as 7 percent
discount rate and will consider the question of lower discount rates
for health benefits in future analyses.
    The CAFE Model health impacts inputs are based partially on the
structure of the 2018 EPA source apportionment TSD, which reports
benefits per ton values for the years 2020, 2025, and 2030. For the
years in between the source years used in the input structure, the CAFE
Model applies values from the closest source year. For instance, the
model applies 2020 monetized health impact per ton values for calendar
years 2020-2022 and applies 2025 values for calendar years 2023-2027.
For some of the monetized health damage values, in order to match the
structure of other impacts costs, we developed proxies for 7 percent
discounted values for specific source sectors by using the ratio
between a comparable sector's 3 and 7 percent discounted values. In
addition, we used implicit price deflators from the Bureau of Economic
Analysis (BEA) to convert different monetized estimates to 2018
dollars, to be consistent with the rest of the CAFE Model inputs.
    This process is described in more detail in Chapter 6.2.2 of the
TSD accompanying this final rule. In addition, the CAFE Model
documentation contains more details of the model's computation of
monetized health impacts. All resulting emissions damage costs for
criteria pollutants are located in the Criteria Emissions Cost
worksheet of the Parameters file.
(3) Reduction in Petroleum Market Externalities
    By amending existing standards, this action will reduce domestic
consumption of gasoline, producing a corresponding decrease in the
Nation's demand for crude petroleum, a commodity that is traded
actively in a worldwide market. U.S. consumption and imports of
petroleum products have three potential effects on the domestic economy
that are often referred to collectively as ``energy security
externalities.'' Increases in their magnitude are sometimes cited as
possible social costs of increased U.S. demand for petroleum, and
analogously, any reduction in their value in response to lower U.S.
consumption or imports of petroleum represent potential economic
benefits.
    First, the U.S. accounts for a sufficiently large (although
declining) share of global petroleum demand such that changes in
domestic consumption of petroleum products can affect global petroleum
prices. Any increase in global petroleum prices that results from
higher U.S. gasoline demand will cause a transfer of revenue from
consumers of petroleum to oil suppliers worldwide, because consumers
throughout the world are ultimately subject to the higher global price
that results. Although this transfer is simply a shift of resources
that produces no change in global economic welfare, the financial

drain it produces on the U.S. economy is sometimes cited as an external
cost of increased U.S. petroleum consumption because consumers of
petroleum products are unlikely to consider it. Similarly, a decline in
U.S. consumption of petroleum-derived transportation fuel will reduce
global petroleum demand and exert some downward pressure on worldwide
prices. Although the resulting savings to worldwide consumers of
petroleum products is again a transfer--this time from oil producers to
consumers--it may reduce the financial drain on the U.S. economy caused
by domestic oil production and imports.
    As the U.S. approaches self-sufficiency in petroleum production
(the Nation became a net exporter of petroleum in 2020), any effect of
reduced domestic demand on global petroleum prices increasingly results
in a transfer from U.S. petroleum producers to domestic consumers of
refined products.\721\ Thus not only does it leave net U.S. welfare
unaffected, it also ceases even to be a financial burden on the U.S.
economy. In fact, as the U.S. becomes a larger net petroleum exporter,
any transfer from global consumers to petroleum producers would become
a financial benefit to the U.S. economy, although uncertainty in the
Nation's long-term import-export balance makes it difficult to project
precisely how these effects might change in response to increased
consumption.
---------------------------------------------------------------------------

    \721\ See https://www.eia.gov/energyexplained/oil-and-petroleum-products/imports-and-exports.php (accessed March 17, 2022).
---------------------------------------------------------------------------

    Higher U.S. petroleum consumption also increases domestic
consumers' exposure to oil price shocks and by doing so impose
potential costs on all U.S. petroleum users (including those outside
the light duty vehicle sector, whose consumption would be unaffected by
this final rule) from possible interruptions in the global supply of
petroleum or rapid fluctuations in global oil prices. These potential
costs arise from petroleum users' need to pay more for oil-based
products, to switch energy sources, or adjust production methods
rapidly in response to reduced supplies or higher prices, which they
cannot recover once supplies are restored or prices return to pre-
disruption levels, and from losses in economic output while supplies
are disrupted. Because users of petroleum products are unlikely to
consider the effect of their increased purchases on the risk of these
effects, their probability-weighted (or ``expected'') economic value is
often cited as an external cost of increased U.S. consumption of
petroleum products. Conversely, reducing domestic consumption of
refined products reduces exposure to supply disruptions or rapid price
changes and petroleum users' costs for adjusting rapidly to them, which
will reduce the external economic costs associated with domestic
petroleum consumption. When U.S. oil consumption is linked to the
globalized and tightly interconnected oil market, as it is now, the
only means of reducing the exposure of U.S. consumers to global oil
shocks is to reduce their consumption. Thus the reduction in oil
consumption driven by fuel economy standards creates an energy security
benefit.
    This benefit is the original purpose behind the CAFE standards. Oil
prices are inherently volatile, in part because geopolitical risk
affects prices. International conflicts, sanctions, civil conflicts
targeting oil production infrastructure, pandemic-related economic
upheaval, and cartels have all had dramatic and sudden effects on oil
prices in recent years. U.S. net exporter status does not insulate U.S.
drivers from higher gas prices, because those prices are currently
largely determined by oil prices set in the globally integrated market.
Given these dynamics, the effective policies to protect consumers from
oil price spikes are those that reduce the oil-intensity of the
economy, including fuel economy standards.
    Finally, some analysts argue that domestic demand for imported
petroleum may also influence U.S. military spending. Because the
increased cost of military activities would not be reflected in the
prices drivers pay at the gas pump, increased military spending to
secure oil imports is often represented as a third category of external
costs form increased U.S. petroleum consumption. NHTSA has received
extensive comments to past actions on this topic.
    Each of these three factors would be expected to decrease--albeit
by a limited magnitude--as a consequence of decreasing U.S. petroleum
consumption resulting from more stringent CAFE standards. TSD Chapter
6.2.4 provides a comprehensive explanation of the agency's analysis of
these three impacts and explains how it values potential economic
benefits from reducing each one. The agency's proposed rule also
presented this same explanation and drew numerous comments, most
asserting that the value the agency attached to reducing the expected
economic costs of oil supply disruptions and price volatility was too
low.
    As one illustration of the comments that the agency received on
this issue, the Applied Economics Clinic (AEC) argued on behalf of the
California Attorney General and the CARB that the expert assessment of
the likelihood of petroleum supply disruptions underlying the agency's
estimate of macroeconomic disruption costs estimated disruption
probabilities that were far too low to be consistent with recent
experience, causing the agency's cost estimate to be unrealistically
low. AEC also noted that NHTSA's estimates were presented as a single
value without acknowledging the range of uncertainty customarily
estimated to surround it, and that other estimates reported in the same
source on which NHTSA relies for its disruption costs are significantly
higher. AEC argued that the agency should return to using the estimates
of disruption probabilities and expected costs from Oak Ridge National
Laboratories (ORNL) that it had relied on in previous analyses, whose
central value it estimated at more than twice the figure the agency
used to analyze its proposed rule. However, the agency notes that both
ORNL's estimates of supply disruption costs and the alternative
estimates presented in the source NHTSA relies on use exactly the same
type of expert elicitation of the probabilities and magnitudes of
disruptions used in the study from which NHTSA's cost estimates were
derived, and also reflect less up to date assumptions about other
factors such as petroleum prices and global petroleum supply
elasticities that affect its cost estimates. For these reasons, the
agency's analysis of this final rule continues to rely on its earlier
estimates.
    In addition, AEC argues that net financial transfers between U.S.
suppliers and consumers of petroleum products are unlikely to be zero
in any single year because of year-to-year variation in U.S. gross
imports and exports of petroleum, and that the agency's analysis should
explicitly account for forecast variation in these volumes. The agency
notes that this would force it to rely on inherently uncertain
forecasts of U.S. and global petroleum production and demand, and in
any case, would be unlikely to produce a significantly different
outcome from the analysis presented here because AEC's assumption
depends primarily on the Nation's net imports over the entire period it
spans. Discounting of net transfers projected to occur in distant
future years would also reduce their present values, particularly or
distant future years.
    Finally, AEC also argues that even if net dollar-valued revenue
transfers

between U.S. consumers and suppliers are zero, their net welfare
impacts will not necessarily be neutral and should be accounted for.
The agency notes that while this assertion is correct, accounting for
the true welfare rather than the financial consequences of revenue
transfers would require detailed information on the income
distributions of U.S. consumers of petroleum products and of equity
holders (and other investors) in domestically based oil companies, as
well as estimates of the marginal utility of income and its variation
over the income spectrum. This level of detail is well beyond the scope
of the agency's analyses of other, much more significant economic
impacts of this final rule, and employing it would complicate the
analysis and its interpretation enormously without a commensurate
improvement in its usefulness to decision-makers or the public.
    In the proposal, the agency reviewed its previous assumption that
90 percent of any reduction in domestic petroleum refining to produce
gasoline that results from the proposal would reduce U.S. petroleum
imports, with the remaining 10 percent reducing domestic production.
The California Attorney General requested that we revisit this
assumption, asserting that only a small portion of U.S. gasoline demand
is supplied by foreign-refined oils today. The agency neglected to make
this change in the analysis supporting the proposal, and has refrained
from revising the analysis for the final rule. While we believe that
there remains a strong case to assume that any reduction in refining of
crude petroleum to produce gasoline would reduce U.S. oil imports,
rather than changing U.S. petroleum output, we are going to continue to
evaluate assumption given the concerns raised by the California
Attorney General. In the interim, we will continue to assume that 90
percent of any reduction in domestic petroleum refining to produce
gasoline that results from the proposal would reduce U.S. petroleum
imports, with the remaining 10 percent reducing domestic production. We
conducted a sensitivity analysis to scope the difference between the
two assumptions and observed that the difference in estimated total and
net benefits is less than 0.1 percent when viewed from either the model
year or calendar year perspective and discounted at either 3 or 7
percent.\722\
---------------------------------------------------------------------------

    \722\ See FRIA Chapter 7.
---------------------------------------------------------------------------

(4) Changes in Labor
    As vehicle prices rise, we expect consumers to purchase fewer
vehicles than they would have at lower prices. If manufacturers produce
fewer vehicles as a consequence of lower demand, manufacturers may need
less labor to produce their fleet and dealers may need less labor to
sell the vehicles. Conversely, as manufacturers add equipment to each
new vehicle, the industry will require labor resources to develop,
sell, and produce additional fuel-saving technologies.\723\ We also
account for the possibility that new standards could shift the relative
shares of passenger cars and light trucks in the overall fleet. Since
the production of different vehicles involves different amounts of
labor, this shift impacts the quantity of estimated labor.
---------------------------------------------------------------------------

    \723\ For the purposes of this analysis, DOT assumes a linear
relationship between labor and production volumes.
---------------------------------------------------------------------------

    The analysis considers the direct labor effects that the CAFE
standards have across the automotive sector. The facets include (1)
dealership labor related to new light-duty vehicle unit sales; (2)
assembly labor for vehicles, engines, and transmissions related to new
vehicle unit sales; and (3) labor related to mandated additional fuel
savings technologies, accounting for new vehicle unit sales. The labor
utilization analysis is intentionally narrow in its focus and does not
represent an attempt to quantify the overall labor or economic effects
of this rulemaking because adjacent employment factors and consumer
spending factors for other goods and services are uncertain and
difficult to predict. We do not consider how direct labor changes may
affect the macro economy and potentially change employment in adjacent
industries. For instance, we do not consider possible labor changes in
vehicle maintenance and repair, nor changes in labor at retail gas
stations. We also do not consider possible labor changes due to raw
material production, such as production of aluminum, steel, copper, and
lithium, nor does the agency consider possible labor impacts due to
changes in production of oil and gas, ethanol, and electricity.
    Auto Innovators recommended NHTSA consider the geographic
differences in employment losses and gains in its labor analysis and
present additional results based on such regional differences. Auto
Innovators pointed out that the impacts of BEVs on U.S. employment,
specifically in gasoline engine and transmission plants and supply
chains, as well as in the petroleum and biofuels sector, may differ
based on region. They also noted that the employment impacts of BEV
production elsewhere should be studied.\724\ As discussed above,
NHTSA's labor utilization analysis is intentionally narrow in focus and
all effects are reported at a national level. While we appreciate the
benefits of identifying how employment may shift between geographic
areas as different suites of technologies are employed, identifying
where to deploy resources and trainings within the Nation is outside
the scope of this rulemaking. We may consider expanding the scope of
the labor utilization analysis or reporting subnational results in
future rulemaking analyses.
---------------------------------------------------------------------------

    \724\ Auto Innovators, at 122.
---------------------------------------------------------------------------

    All labor effects are estimated and reported at a national level,
in person-years, assuming 2,000 hours of labor per person-year.\725\
These labor hours are not converted into monetized values because we
assume that the labor costs are included into a new vehicle's
purchasing price. The analysis estimates labor effects from the
forecasted CAFE Model technology costs and from review of automotive
labor for the MY 2020 fleet. The agency uses information about the
locations of vehicle assembly, engine assembly, and transmission
assembly, and the percent of U.S. content of vehicles collected from
American Automotive Labeling Act (AALA) submissions for each vehicle in
the reference fleet.\726\ The analysis assumes the portion of parts
that are made in the U.S. will remain constant for each vehicle as
manufacturers add fuel-savings technologies. This should not be
misconstrued as a prediction that the percentage of U.S.-made parts--
and by extension U.S. labor--will remain constant, but rather that the
agency does not have a clear basis to project where future productions
may shift. The analysis also uses data from the 2016 National
Automotive Dealers Association (NADA) annual report to derive
dealership labor estimates. We considered using data from NADA's 2020
report but concluded that 2020 was too affected by COVID-19 to be an
appropriate basis to project future dealership labor values.
---------------------------------------------------------------------------

    \725\ The agencies recognize a few local production facilities
may contribute meaningfully to local economies, but the analysis
reports only on national effects.
    \726\ 49 CFR part 583.
---------------------------------------------------------------------------

    In sum, the analysis shows that the increased labor from production
of new technologies used to meet the Preferred Alternative will
outweigh any decreases attributable to the change in new vehicle sales.
For a full description of the process the agency uses to estimate labor
impacts, see TSD Chapter 6.2.5.

3. Costs and Benefits not Quantified
    In addition to the costs and benefits described above, Table III-37
and Table III-38 each include two line-items without values. The first
is maintenance and repair costs. Many of the technologies manufacturers
apply to vehicles to meet CAFE standards are sophisticated and costly.
The technology costs capture only the initial or ``upfront'' costs to
incorporate this equipment into new vehicles; however, if the equipment
is costlier to maintain or repair--which is likely either because the
materials used to produce the equipment are more expensive or the
equipment is significantly more complex than less fuel efficient
alternatives and requires more time and labor--then consumers will also
experience increased costs throughout the lifetime of the vehicle to
keep it operational. The agency does not calculate the additional cost
of repair and maintenance currently because it lacks a basis for
estimating the incremental change attributable to the standards. NHTSA
sought comment on how to estimate these costs from the public but did
not receive any suggestions.
    The second item is the potential tradeoff with other vehicle
attributes that could create an opportunity cost for some consumers. In
addition to fuel economy, potential buyers of new cars and light trucks
value other features such as their seating and cargo-carrying capacity,
ride comfort, safety, and performance. Changing some of these other
features, however, can sometimes affect vehicles' fuel economy, so
manufacturers will carefully consider any tradeoffs among them when
deciding how to comply with stricter CAFE standards. Currently the
analysis assumes that these vehicle attributes will not change as a
result of these rules,\727\ but in practice manufacturers may make
practical design changes to meet the standards and minimize their
compliance costs.
---------------------------------------------------------------------------

    \727\ See TSD Chapter 2.4.5.
---------------------------------------------------------------------------

    If manufacturers do so, they may lower compliance costs relative to
those estimated here,\728\ but the change to other attributes could in
theory involve an opportunity cost to consumers who value specific
attributes, if those consumers cannot purchase a vehicle with those
attributes. Similarly, if manufacturers could use the same technology
to either improve efficiency or improve performance relative to current
attributes, and choose to use the technology only to improve
efficiency, the consumer may not experience the performance
enhancement. Of course, unless automakers reach an absolute technology
limit, which has not been observed, and unless there is a technical or
engineering constraint that makes it impossible or much more expensive
to add additional performance features after increasing fuel economy,
they can still improve other vehicle attributes while improving fuel
economy--as is always the case, those improvements would come at a
cost, but that cost would be borne only by consumers who value the
attribute improvement more than its cost. Because fuel efficiency
improvements can save consumers money on net by reducing fuel
expenditures, assuming consumers are completely financing their vehicle
purchases, the fuel economy improvements can only reduce a consumer's
``budget'' for other vehicle attributes to the extent that the monthly
car payment increases due to the improvements by more than the fuel
savings the technologies deliver.
---------------------------------------------------------------------------

    \728\ See Kate S. Whitefoot et al., Compliance by Design:
Influence of Acceleration Trade-Offs on CO2 Emissions and
Costs of Fuel Economy and Greenhouse Gas Regulations, 51 Env't Sci.
& Tech. 10,307 (2018); Gloria Helfand & Reid Dorsey-Palmateer, The
Energy Efficiency Gap in EPA's Benefit-Cost Analysis of Vehicle
Greenhouse Gas Regulations: A Case Study, 6 J. Benefit Cost Analysis
432 (2015).
---------------------------------------------------------------------------

    The agency has previously attempted to model the potential
opportunity cost associated with changes in other vehicle attributes in
sensitivity analyses. In those other rulemakings, the agency
acknowledged that it is extremely difficult to quantify the potential
changes to other vehicle attributes. To accurately do so requires
extensive projections about which and how much of other attributes will
be altered and a detailed accounting of how much value consumers
assigned to those attributes. The agency modeled the opportunity cost
associated with changes in other vehicle attributes using published
empirical estimates of tradeoffs between higher fuel economy and
improvements to other attributes, together with estimates of the values
buyers attach to those attributes. The agency does not believe this is
an appropriate methodology since there is considerable uncertainty in
the literature about how much fuel economy consumers are willing to pay
for and how consumers value other vehicle attributes. We note, for
example, a recent EPA-commissioned study that ``found very little
useful consensus'' regarding ``estimates of the values of various
vehicle attributes,'' which ultimately were ``of little use for
informing policy decisions.'' \729\
---------------------------------------------------------------------------

    \729\ EPA, Consumer Willingness to Pay for Vehicle Attributes:
What is the Current State of Knowledge? (2018).
---------------------------------------------------------------------------

    As noted above, an analysis of opportunity costs optimally would
need to assess compliance with these standards while allowing
manufacturers to adjust vehicle attributes. This requires detailed
information about how much different consumers value various vehicle
attributes, which is not currently available. Such an analysis could
show lower compliance costs for the standards, but could identify any
opportunity costs where consumers value other vehicle attributes that
are not incorporated into the vehicle they purchase.
    Still, there is some evidence that consumers are myopic with
respect to future savings well beyond any attribute tradeoff.
Gillingham et al. (2021) use an error in fuel efficiency marketing and
subsequent change in the market equilibrium price for the vehicles in
question to assess the willingness to pay for fuel efficiency and find
that consumers are only willing to pay $0.16-0.39 per discounted value
of a dollar of fuel savings. The intriguing feature of this study is
that it uses identical cars made by Hyundia and Kia, which means the
features of the car with and without the reported fuel savings are
identical and the discount paid for future fuel saving cannot be
attributed to an omitted feature. Therefore, the undervaluation
observed in this study is not due to consumers valuing other vehicle
attributes more than fuel economy. The findings of this paper are
consistent with consumers displaying myopia--a term they use to
``describe a range of behavioral phenomena that could cause
undervaluation.''
    In comments to the NPRM, IPI provided extensive comments on this
topic. IPI cited the 2019 EPA Automotive Trends Report as showing that
horsepower and fuel economy have both steadily improved since 2008, and
cited EPA's finding in the Midterm Evaluation that simultaneous
improvements in fuel economy and other vehicle attributes likely
indicates that any historical trade-off between the two is far less
likely to be present in the context of advanced vehicle engines. IPI
also stated that many technologies that improve fuel economy also
improve other vehicle attributes, and those benefits would offset any
opportunity costs. Further, IPI stated that:

Economic research has long recognized the various implicit subsidies
and externalities

imposed on society by vehicles. These include: Accidents, road
congestion, road and parking construction and maintenance costs, the
space used for parking, and pollution. Drivers with higher
horsepower vehicles are much more likely to speed--by 10 miles per
hour or more--increasing the risk of accidents, damages, and
fatalities. Vehicles with features that allow faster acceleration
also cause a greater number of and more consequential accidents.
Vehicles with internal combustion engines are more dangerous than
those with electric engines due to the latter's additional crumple
space. Heavier vehicles also increase the cost of road maintenance
and repair. Vehicles with greater acceleration also may be driven in
ways that consume more fuel and so emit more pollution. And as
discussed below, certain status features like horsepower impose
negative positional externalities on other drivers.\730\
---------------------------------------------------------------------------

    \730\ IPI, Docket No. NHTSA-2021-0053-1579-A1, at 22.

    IPI further states that these negative externalities associated
with other vehicle attributes would also offset opportunity costs
associated with reduced deployment of these attributes where valued by
consumers.
    CFA commented that the agency should include a $.90 macroeconomic
stimulus for every dollar of net reduction in driving expenses.\731\
CFA did not provide any details or support for their claim, nor did it
describe how to handle factors like up-front costs. We find CFA's
argument without support.
---------------------------------------------------------------------------

    \731\ CFA, Docket No. NHTSA-2021-0053-1535, at 5.
---------------------------------------------------------------------------

    A number of commenters argued that the agency should include the
ancillary costs of electric vehicles, such as building additional
charging stations,\732\ improving the grid,\733\ and potential tax
credits given to individuals that purchase electric vehicles.\734\ As
noted elsewhere in this rule and within many of the same comments, many
of these issues are already being addressed by government at the
Federal and state-level. Counting those costs here would be duplicative
to include those costs in this rulemaking.
---------------------------------------------------------------------------

    \732\ See, e.g., NATSO and SIGMA, NHTSA-2021-0053-1570, at 10.
    \733\ Walter Kreucher, NHTSA-2021-0053-0013, at 14.
    \734\ Id. At 14.
---------------------------------------------------------------------------

H. Simulating Safety Effects of Regulatory Alternatives

    The primary objective of CAFE standards is to achieve maximum
feasible fuel economy, thereby reducing fuel consumption. In setting
standards to achieve this intended effect, the potential of the
standards to affect vehicle safety is also considered. As a safety
agency, we have long considered the potential for adverse safety
consequences when establishing CAFE standards.
    This safety analysis includes the comprehensive measure of safety
impacts from three factors:

    1. Changes in Vehicle Mass. Similar to previous analyses, we
calculate the safety impact of changes in vehicle mass made to
reduce fuel consumption and comply with the standards. Statistical
analysis of historical crash data indicates reducing mass in heavier
vehicles generally improves safety, while reducing mass in lighter
vehicles generally reduces safety. Our crash simulation modeling of
vehicle design concepts for reducing mass revealed similar effects.
These observations align with the role of mass disparity in crashes;
when vehicles of different masses collide, the smaller vehicle will
experience a larger change in velocity (and, by extension, force),
which increases the risk to its occupants. As discussed below, in
our analysis, any effect of changes in mass on vehicle safety was
not sufficiently precisely estimated to distinguish it from zero
statistically.
    2. Impacts of Vehicle Prices on Fleet Turnover. Vehicles have
become safer over time through a combination of new safety
regulations and voluntary safety improvements. We expect this trend
to continue as emerging technologies, such as advanced driver
assistance systems, are incorporated into new vehicles. Safety
improvements will likely continue regardless of changes to CAFE
standards. As discussed in Section III.E.2, technologies added to
comply with fuel economy standards have an impact on vehicle prices,
therefore slowing the acquisition of newer vehicles and retirement
of older ones. The delay in fleet turnover caused by the effect of
new vehicle prices affects safety by slowing the penetration of new
safety technologies into the fleet.
    The standards also influence the composition of the light-duty
fleet. As the safety provided by light trucks, SUVs and passenger
cars responds differently to technology that manufacturers employ to
meet the standards--particularly mass reduction--fleets with
different compositions of body styles will have varying numbers of
fatalities, so changing the share of each type of light-duty vehicle
in the projected future fleet impacts safety outcomes.
    3. Increased driving because of better fuel economy. The
``rebound effect'' predicts consumers will drive more when the cost
of driving declines. More stringent standards reduce vehicle
operating costs, and in response, some consumers may choose to drive
more. Additional driving increases exposure to risks associated with
motor vehicle travel, and this added exposure translates into higher
fatalities and injuries.

    The contributions of the three factors described above generate the
differences in safety outcomes among regulatory alternatives.\735\ Our
analysis makes extensive efforts to allocate the differences in safety
outcomes between the three factors. Fatalities expected during future
years under each alternative are projected by deriving a fleet-wide
fatality rate (fatalities per vehicle mile of travel) that incorporates
the effects of differences in each of the three factors from baseline
conditions and multiplying it by that alternative's expected VMT.
Fatalities are converted into a societal cost by multiplying fatalities
with the DOT-recommended value of a statistical life (VSL) supplemented
by economic impacts that are external to VSL measurements. Traffic
injuries and property damage are also modeled directly using the same
process and valued using costs that are specific to each injury
severity level.
---------------------------------------------------------------------------

    \735\ The terms safety performance and safety outcome are
related but represent different concepts. When we use the term
safety performance, we are discussing the intrinsic safety of a
vehicle based on its design and features, while safety outcome is
used to describe whether a vehicle has been involved in an accident
and the severity of the accident. While safety performance
influences safety outcomes, other factors such as environmental and
behavioral characteristics also play a significant role.
---------------------------------------------------------------------------

    All three factors influence predicted fatalities, but only two of
them--changes in vehicle mass and in the composition of the light-duty
fleet in response to changes in vehicle prices--impose increased risks
on drivers and passengers that are not compensated for by accompanying
benefits. In contrast, increased driving associated with the rebound
effect is a consumer choice that reveals the benefit of additional
travel. Consumers who choose to drive more have apparently concluded
that the utility of additional driving exceeds the additional costs for
doing so, including the crash risk that they perceive additional
driving involves. As discussed in Chapter 7 of the accompanying TSD,
the benefits of rebound driving are accounted for by offsetting a
portion of the added safety costs.
    We categorize safety outcome through three measures of light-duty
vehicle safety: Fatalities to occupants occurring in crashes, serious
injuries sustained by occupants, and the number of vehicles involved in
crashes that cause property damage but no injuries. Counts of
fatalities to occupants of automobiles and light trucks are obtained
from the Fatal Accident Reporting System (FARS). Estimates of the
number of serious injuries to drivers and passengers of light-duty
vehicles are tabulated from the General Estimates System (GES), an
annual sampling of motor vehicle crashes occurring throughout the U.S.
Weights for different types of crashes were used to expand the samples
of each type to

estimates of the total number of crashes occurring during each year.
Finally, estimates of the number of automobiles and light trucks
involved in property damage-only (PDO) crashes each year were also
developed using GES.
1. Changes in Vehicle Mass
    Similar to previous analyses, we calculate the safety impact of
changes in vehicle mass made to reduce fuel consumption and comply with
the standards. While reduction in mass should have a beneficial safety
effect overall by reducing average fleet mass, a statistical analysis
of historical crash data indicates that reducing mass in heavier
vehicles generally improves safety, while reducing mass in lighter
vehicles generally reduces safety. Our crash simulation modeling of
vehicle design concepts for reducing mass revealed similar effects.
These observations align with the role of mass disparity in crashes:
When vehicles of different masses collide, the smaller vehicle will
experience a larger change in velocity (and, by extension, force),
which increases the risk to its occupants. As discussed below, while
NHTSA's current analysis did not find a statistically significant
relationship between mass and safety, it did find results that are
directionally consistent with previous NHTSA and other studies,
illustrating a common pattern across all studies is that changes in
mass disparity are associated with changes in motor vehicle safety:
Increased disparity increases fatality risk, while decreased disparity
decreases risk. The historical relationship may be changing, however,
and merits ongoing study, which NHTSA is pursuing.
2. Mass Reduction Impacts
    Vehicle mass reduction can be one of the more cost-effective means
of improving fuel economy, particularly for makes and models not
already built with much high-strength steel or aluminum closures or
low-mass components. Manufacturers have stated that they will continue
to reduce vehicle mass to meet more stringent standards, and therefore,
this expectation is incorporated into the modeling analysis supporting
the standards. Safety trade-offs associated with mass-reduction have
occurred in the past, particularly before CAFE standards were
attribute-based; past safety trade-offs may have occurred because
manufacturers chose at the time, in response to CAFE standards, to
build smaller and lighter vehicles. In cases where fuel economy
improvements were achieved through reductions in vehicle size and mass,
the smaller, lighter vehicles did not fare as well in crashes as
larger, heavier vehicles, on average. We now, however, use attribute-
based standards, in part to reduce or eliminate the incentive to
downsize vehicles to comply with CAFE standards, but we must continue
to be mindful of the possibility of related safety trade-offs.
    For this final rule, we employed the modeling technique developed
in the 2016 Puckett and Kindelberger report to analyze the updated
crash and exposure data by examining the cross sections of the societal
fatality rate per billion vehicle miles of travel (VMT) by mass and
footprint, while controlling for driver age, gender, and other factors,
in separate logistic regressions for five vehicle groups and nine crash
types.\736\ We utilized the relationships between weight and safety
from this analysis, expressed as percentage increases in fatalities per
100-pound weight reduction (which is how mass reduction is applied in
the technology analysis; see Section III.D.4, to examine the weight
impacts applied in this CAFE analysis. The effects of mass reduction on
safety were estimated relative to (incremental to) the regulatory
baseline in the CAFE analysis, across all vehicles for MY 2021 and
beyond.
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    \736\ Puckett, S.M. and Kindelberger, J.C. (2016, June).
Relationships between Fatality Risk, Mass, and Footprint in Model
Year 2003-2010 Passenger Cars and LTVs--Preliminary Report. (Docket
No. 2016-0068). Washington, DC: National Highway Traffic Safety
Administration.
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    In computing the impact of changes in mass on safety, we are faced
with competing challenges. Research has consistently shown that mass
reduction affects ``lighter'' and ``heavier'' vehicles differently
across crash types. The 2016 Puckett and Kindelberger report found mass
reduction concentrated among the heaviest vehicles is likely to have a
beneficial effect on overall societal fatalities, while mass reduction
concentrated among the lightest vehicles is likely to have a
detrimental effect on fatalities. This represents a relationship
between the dispersion of mass across vehicles in the fleet and
societal fatalities: Decreasing dispersion is associated with a
decrease in fatalities. Mass reduction in heavier vehicles is more
beneficial to the occupants of lighter vehicles than it is harmful to
the occupants of the heavier vehicles. Mass reduction in lighter
vehicles is more harmful to the occupants of lighter vehicles than it
is beneficial to the occupants of the heavier vehicles.
    To accurately capture the differing effect on lighter and heavier
vehicles, we split vehicles into lighter and heavier vehicle
classifications in the analysis. However, this poses a challenge of
producing statistically meaningful results. There are limited relevant
crash data to use for the analysis. Each partition of the data reduces
the number of observations per vehicle classification and crash type,
and thus reduces the statistical robustness of the results. The
methodology we employed was designed to balance these competing forces
as an optimal trade-off to accurately capture the impact of mass-
reduction across vehicle curb weights and crash types while preserving
the potential to identify robust estimates.
    The boundary between ``lighter'' and ``heavier'' cars is 3,201
pounds (which is the median mass of MY 2004-2011 cars in fatal crashes
in CY 2006-2012, up from 3,106 pounds for MY 2000-2007 cars in CY 2002-
2008 in the 2012 NHTSA safety database, and up from 3,197 pounds for MY
2003-2010 cars in CY 2005-2011 in the 2016 NHTSA safety database).
Likewise, for truck-based LTVs, curb weight is a two-piece linear
variable with the boundary at 5,014 pounds (again, the MY 2004-2011
median, higher than the median of 4,594 pounds for MY 2000-2007 LTVs in
CY 2002-2008 and the median of 4,947 pounds for MY 2003-2010 LTVs in CY
2005-2011). CUVs and minivans are grouped together in a single group
covering all curb weights of those vehicles; as a result, curb weight
is formulated as a simple linear variable for CUVs and minivans.
Historically, CUVs and minivans have accounted for a relatively small
share of new-vehicle sales over the range of the data, resulting in
fewer crash data available than for cars or truck-based LTVs. In sum,
vehicles are distributed into five groups by class and curb weights:
Passenger cars <3,201 pounds; passenger cars 3,201 pounds or greater;
truck-based LTVs <5,014 pounds; truck-based LTVs 5,014 pounds or
greater; and all CUVs and minivans.
    Table III-39 presents the 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
vehicle classes.

[GRAPHIC] [TIFF OMITTED] TR02MY22.107

    Techniques developed in the 2011 (preliminary) and 2012 (final)
Kahane reports have been retained to test statistical significance and
to estimate 95 percent confidence bounds (sampling error) for mass
effects and to estimate the combined annual effect of removing 100
pounds of mass from every vehicle (or of removing different amounts of
mass from the various classes of vehicles), while holding footprint
constant. Confidence bounds estimate only the sampling error internal
to the data used in the specific analysis that generated the point
estimate. Point estimates are also sensitive to the modification of
components of the analysis, as discussed at the end of this section.
However, this degree of uncertainty is methodological in nature rather
than statistical.
    None of the estimated effects has 95-percent confidence bounds that
exclude zero, and thus are not statistically significant at the 95-
percent confidence level. We have evaluated these results and provided
them for the purposes of transparency. Sensitivity analyses have
confirmed that the exclusion of these statistically insignificant
results would not affect our policy determination, because the net
effects of mass reduction on safety costs are small relative to
predominant estimated benefit and cost impacts. Among the estimated
effects, the most important effects of mass reduction are, as expected,
concentrated among the lightest and heaviest vehicles. Societal
fatality risk is estimated to: (1) Increase by 1.2 percent if mass is
reduced by 100 pounds in the lighter cars; and (2) decrease by 0.61
percent if mass is reduced by 100 pounds in the heavier truck-based
LTVs. These estimates align with the predominant view regarding the
relationship between mass disparity in the vehicle fleet and societal
fatalities: All else being equal, making the heaviest vehicles lighter
(i.e., reducing mass disparity in the fleet) will reduce societal
fatalities, while making the lightest vehicles lighter (i.e.,
increasing mass disparity) will increase societal fatalities. IPI
commented that we ``should give additional weight to externalities such
as pedestrian fatalities and the impact of increased weight
distribution between vehicles.'' \737\ Pedestrian fatalities are
weighted within the above analysis directly proportional to their
frequency among all societal fatalities involving light-duty vehicles.
Any change to the weighting of pedestrian fatalities would thus involve
valuing the societal cost of a pedestrian fatality as being worth a
different amount from other fatalities involving light-duty vehicle
crashes. IPI did not provide a basis to support their proposal to value
fatalities based on occupancy status differently. We are confident that
the current (and historical) specification of relationships among
vehicle curb weights and societal fatality risk represents the role of
mass disparity in societal fatality risk appropriately, by scaling
societal fatality risk as a positive function of mass disparity through
the intuitive coefficients for the lightest and heaviest vehicles (and
through muted coefficients for vehicles with mass closer to the
median).
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    \737\ IPI, Docket No. NHTSA-2021-0053-1579, at 3, 22.
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    The ACC commented that groups including NAS/NASEM have noted that
future improvements in vehicle design could weaken the relationship
between mass disparity and societal fatality rates over time.\738\ We
acknowledge this view, and remain confident that our approach is the
best available representation of the relationship between mass
disparity and societal fatality rates subject to the data available for
analysis, and note again that in our analysis, any effect of changes in
mass on vehicle safety was not sufficiently precisely estimated to
distinguish it from zero at all standard confidence levels used in the
scientific literature.
---------------------------------------------------------------------------

    \738\ ACC, Docket No. NHTSA-2021-0053-1564-A1, at 7.
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    Multiple commenters proposed that, due to the limited statistical
significance of the estimates, it would be more appropriate to assume
that changes in vehicle mass in response to CAFE standards will have no
effect on societal fatalities.\739\ NHTSA's current analysis did not
find a statistically significant relationship between mass and safety.
This may reflect the effects of a decreased sample size (the current
study was based on 32 percent fewer fatal cases than the Kahane 2012
study), as well as possible mitigating effects from newer safety
technologies or vehicle designs. While not finding statistical
significance, NHTSA's current study did find results that are
directionally consistent with previous NHTSA studies and a fleet
simulation study by George Washington University.\740\ The common
pattern across all studies is that changes in mass disparity are
associated with changes in motor vehicle safety: Increased disparity
increases fatality risk, while decreased disparity decreases risk. The
agency will

continue to conduct research on the effects of mass disparity on
vehicle safety in an effort to identify the impacts of evolving vehicle
fleets.
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    \739\ IPI, at 30-1; Consumer Reports, Docket No. NHTSA-2021-
0053-1576, Appendix 9, at 17-8; CARB, Docket No. NHTSA-2021-0053-
1537, Appendix 11, at 269; CBD et al., Docket No. NHTSA-2021-0053-
1572, Appendix 2, at 20; CBD et al., Appendix 1, at 4.
    \740\ In response to questions of whether designs and materials
of more recent model year vehicles may have weakened the historical
statistical relationship between mass, size, and safety, NHTSA
updated its public database for statistical analysis consisting of
crash data. The database incorporates the full range of real-world
crash types. NHTSA also sponsored a study conducted by George
Washington University to develop a fleet simulation model and study
the impact and relationship of light-weighted vehicle design with
crash injuries and fatalities. That study is discussed in detail in
Chapter 7.1.5 of the TSD. The study focused on vehicles from MY 2001
to MY 2011, as discussed in the TSD, and found results that are
directionally consistent with NHTSA's statistical analyses of
vehicle mass and fatality risk.
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    We have assessed whether the inclusion of these results would
affect the overall analysis. Because the impacts are very small, we
concluded that it does not have a significant effect on the analysis or
any effect on the choice of standards. Given this conclusion, we
maintain that it is reasonable for the analysis to use the best
available estimates of the impacts of mass reduction that results from
changes in mass disparities on crash fatalities, even if the estimates
are not statistically significant at the 95-percent confidence level.
The estimated statistical significance is limited, but the results
offer some evidence that the relevant point estimates are meaningfully
different from zero (e.g., approximately five to six times more likely
to be non-zero than zero). They are also consistent with a time series
of estimates that represent a relationship that is consistent with
predominant views regarding mass disparity. We believe it would be
inappropriate to ignore these data or to use values of zero for the
rulemaking analysis. Specifically, negative point estimates for heavier
LTVs and positive point estimates for lighter passenger cars have been
found consistently across prior rulemakings. Smaller estimates
corresponding to vehicles near the median of the fleet curb weight
distribution are likely to be less informative due to both statistical
(i.e., small coefficients are less likely to be statistically
significant for a given level of sampling error) and physical (i.e., a
given change in mass will have a smaller effect on societal fatalities
for vehicles near the median mass) concerns.
    An additional factor supporting continuing to quantify the safety
impacts related to changes in mass is the sensitivity analysis
including passenger cars with AWD summarized below; when including cars
with AWD, the estimated coefficients are likewise consistent with
previous NHTSA analyses and have statistical significance near the 95-
percent confidence level. Chapter 5 of the FRIA discusses four
sensitivity analyses that were presented for public comment in the
NPRM. We did not identify any comments on the alternative approaches;
in turn, we will defer the decision whether to incorporate the results
into the CAFE Model to subsequent rulemakings. The relevant alternative
with respect to statistical significance centers on aligning passenger
cars with the rest of the sample by including cars that are equipped
with AWD. In previous analyses, passenger cars with AWD were excluded
from the analysis because they represented a sufficiently low share of
the vehicle fleet that statistical relationships between AWD status and
societal fatality risk were highly prone to being conflated with other
factors associated with AWD status (e.g., location, luxury vehicle
status). However, the share of AWD passenger cars in the fleet has
grown. Approximately one-quarter of the passenger cars in the database
have AWD, compared to an approximately five-percent share in the MY
2000-2007 database. Furthermore, all other vehicle types in the
analysis include AWD as an explanatory variable. Thus, we find
expanding the sample size to include a considerable portion of the
real-world fleet (i.e., passenger cars with AWD) to be a meaningful
consideration.
    Including passenger cars with AWD in the analysis has little effect
on the point estimate for lighter passenger cars (increase in societal
fatality rates of approximately 1.1 percent per 100-pound mass
reduction, versus 1.2 percent in the central analysis). However, this
revision has a strong effect on the point estimate for heavier
passenger cars (increase in societal fatality rates of between 0.84 and
0.89 percent per 100-pound mass reduction, versus 0.42 percent in the
central analysis). This result supports a hypothesis that, after taking
AWD status into account, mass reduction in heavier passenger cars is a
more important driver of societal fatality rates than previously
estimated. Although this result could be spurious, estimated 95-percent
confidence bounds (from -0.57 to 2.80 percent for lighter passenger
cars, and from -0.14 to 1.82 percent for heavier passenger cars for the
CYs evaluated in the sensitivity analysis) indicate that accounting for
AWD status reduces uncertainty in the point estimate.
    A more detailed description of the mass-safety analysis can be
found in Chapter 7 of the accompanying TSD.
3. Sales/Scrappage Impacts
    The sales and scrappage responses to higher vehicle prices
discussed in Section III.E.2 have important safety consequences and
influence safety through the same basic mechanism, fleet turnover. In
the case of the scrappage response, delaying fleet turnover keeps
drivers in older vehicles which tend to be less safe than newer
vehicles.\741\ Similarly, the sales response slows the rate at which
newer vehicles, and their associated safety improvements, enter the on-
road population. The sales response also influences the mix of vehicles
on the road--with more stringent CAFE standards leading to a higher
share of light trucks sold in the new vehicle market, assuming all else
is equal. This occurs because there is diminishing value to marginal
improvements in fuel economy (there are fewer gallons to be saved), and
as the difference in consumption between light trucks and passenger
cars diminishes, the other attributes of the trucks will likely lead to
increases in their market share--especially under lower gas prices.
Light trucks have higher rates of fatal crashes when interacting with
passenger cars and, as earlier discussed, different directional
responses to mass reduction technology based on the existing mass and
body style of the vehicle.
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    \741\ See Passenger Vehicle Occupant Injury Severity by Vehicle
Age and Model Year in Fatal Crashes, Traffic Safety Facts Research
Note, DOT-HS-812-528, National Highway Traffic Safety
Administration, April 2018, and The Relationship Between Passenger
Vehicle Occupant Injury Outcomes and Vehicle Age or Model Year in
Police-Reported Crashes, Traffic Safety Facts Research Note, DOT-HS-
812-937, National Highway Traffic Safety Administration, March,
2020.
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    Any effects on fleet turnover (either from delayed vehicle
retirement or deferred sales of new vehicles) will affect the
distribution of both ages and model years present in the on-road fleet.
Because each of these vintages carries with it inherent rates of fatal
crashes, and newer vintages are generally safer than older ones,