Table IV-93--NHTSA Estimated Present Value of Net Benefits ($b) Under Augural Standards Using 7 Percent Discount Rate--MYs 2022-2025 (and Total Through
                                                                        MY 2025)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  27-...............  30-...............  33-...............  37-...............  215-
                                 2010...............  30................  34................  37................  41................  236
Light trucks...................  2008...............  23-...............  25-...............  27-...............  30-...............  162-
                                 2010...............  19................  22................  25................  28................  136
Combined.......................  2008...............  51-...............  55-...............  60-...............  67-...............  377-
                                 2010...............  49................  56................  62................  69................  372
--------------------------------------------------------------------------------------------------------------------------------------------------------

    NHTSA's estimates of economic benefits from establishing higher
CAFE standards are subject to considerable uncertainty. Most important,
the agency's estimates of the fuel savings likely to result from
adopting higher CAFE standards depend critically on the accuracy of the
estimated fuel economy levels that will be achieved under both the
baseline scenario, which assumes that manufacturers will continue to
comply with the MY 2016 CAFE standards, and under alternative increases
in the standards that apply to MYs 2017-25 passenger cars and light
trucks. Specifically, if the agency has underestimated the fuel economy
levels that manufacturers would have achieved under the baseline
scenario--or is too optimistic about the fuel economy levels that
manufacturers will actually achieve under the standards--its estimates
of fuel savings and the resulting economic benefits attributable to
this rule will be too large.
    Another major source of potential overestimation in the agency's
estimates of benefits from requiring higher fuel economy stems from its
reliance on the Reference Case fuel price forecasts reported in AEO
2012, Early Release. Although NHTSA believes that these forecasts are
the most reliable that are available, they are nevertheless
significantly higher than the fuel price projections reported in most
previous editions of EIA's Annual Energy Outlook, and reflect
projections of world oil prices that are well above forecasts issued by
other firms and government agencies. If the future fuel prices
projected in AEO 2012 prove to be too high, the agency's estimates of
the value of future fuel savings--the major component of benefits from
this rule--will also be too high.
    However, it is also possible that NHTSA's estimates of economic
benefits from establishing higher CAFE standards underestimate the true
economic benefits of the fuel savings the standards would produce. If
the AEO 2012 Early Release projections of fuel prices prove to be too
low, for example, NHTSA will have underestimated the value of fuel
savings that will result from adopting higher CAFE standards for MY
2017-25. As another example, the agency's estimate of benefits from
reducing the threat of economic damages from disruptions in the supply
of imported petroleum to the U.S. applies to calendar year 2020. If the
magnitude of this estimate would be expected to grow after 2015 in
response to increases in U.S. petroleum imports, growth in the level of
U.S. economic activity, or increases in the likelihood of disruptions
in the supply of imported petroleum, the agency may have underestimated
the benefits from the reduction in petroleum imports expected to result
from adopting higher CAFE standards.
    NHTSA's benefit estimates could also be too low because they
exclude or understate the economic value of certain potentially
significant categories of benefits from reducing fuel consumption. As
one example, EPA's estimates of the economic value of reduced damages
to human health resulting from lower exposure to criteria air
pollutants includes only the effects of reducing population exposure to
PM2.5 emissions. Although this is likely to be the most
significant component of health benefits from reduced emissions of
criteria air pollutants, it excludes the value of reduced damages to
human health and other impacts resulting from lower emissions and
reduced population exposure to other criteria air pollutants, including
ozone and nitrous oxide (N2O), as well as to airborne
toxics. EPA's estimates exclude these benefits because no reliable
dollar-per-ton estimates of the health impacts of criteria pollutants
other than PM2.5 or of the health impacts of airborne toxics
were available to use in developing estimates of these benefits.
    Similarly, the agency's estimate of the value of reduced climate-
related economic damages from lower emissions of GHGs excludes many
sources of potential benefits from reducing the pace and extent of
global climate change.\1289\ For example, none of the three models used
to value climate-related economic damages includes those resulting from
ocean acidification or loss of species and wildlife. The models also
may not adequately capture certain other impacts, including potentially
abrupt changes in climate associated with thresholds that govern
climate system responses, interregional interactions such as global
security impacts of extreme warming, or limited near-term
substitutability between damage to natural systems and increased
consumption. Including monetized estimates of benefits from reducing
the extent of climate change and these associated impacts would
increase the

agency's estimates of benefits from adopting higher CAFE standards.
---------------------------------------------------------------------------

    \1289\ Social Cost of Carbon for Regulatory Impact Analysis
Under Executive Order 12866, Interagency Working Group on Social
Cost of Carbon, United States Government, February 2010. Available
in Docket No. NHTSA-2009-0059.
---------------------------------------------------------------------------

    The following tables present itemized costs and benefits for the
combined passenger car and light truck fleets for each model year
affected by the standards and for all model years combined, using both
discount rates prescribed by OMB regulatory guidance. Tables IV-94 and
IV-95 report technology outlays, each separate component of benefits
(including costs associated with additional driving due to the rebound
effect, labeled ``dis-benefits''), the total value of benefits, and net
benefits using the 3 percent discount rate. (Numbers in parentheses
represent negative values.)

 Table IV-94--NHTSA Estimated Present Value of Net Benefits ($b) Under Final Standards Using 3 Percent Discount
                                               Rate--MYs 2017-2021
----------------------------------------------------------------------------------------------------------------
                                  MY
                               Baseline     Earlier      2017        2018        2019        2020        2021
----------------------------------------------------------------------------------------------------------------
Technology costs............  2008......  4.0-......  2.8-......  5.4-......  8.4-......  12.8-.....  16.5-
                              2010......  8.7.......  4.4.......  5.8.......  8.4.......  11.9......  14.9
Additional cost of            2008......  0.0-......  0.0-......  0.3-......  0.7-......  1.0-......  1.3-
 maintaining more advanced
 vehicles.
                              2010......  0.0.......  0.0.......  0.0.......  0.4.......  0.8.......  1.0
Savings in lifetime fuel      2008......  15.8-.....  10.7-.....  21.7-.....  35.0-.....  49.6-.....  63.3-
 expenditures.
                              2010......  23.3......  12.2......  18.7......  33.4......  46.0......  59.6
Consumer surplus from         2008......  1.6-......  1.0-......  2.0-......  3.2-......  4.6-......  5.7-
 additional driving.
                              2010......  2.3.......  1.2.......  1.8.......  3.1.......  4.2.......  5.5
Value of savings in           2008......  0.7-......  0.4-......  0.8-......  1.2-......  1.6-......  2.0-
 refueling time.
                              2010......  0.9.......  0.4.......  0.6.......  1.1.......  1.3.......  1.7
Reduction in petroleum        2008......  0.9-......  0.6-......  1.2-......  1.9-......  2.7-......  3.4-
 market externalities.
                              2010......  1.3.......  0.7.......  1.0.......  1.8.......  2.4.......  3.1
Reduction in climate-related  2008......  1.5-......  1.0-......  2.1-......  3.4-......  4.9-......  6.3-
 damages from lower CO2
 emissions.
                              2010......  2.2.......  1.2.......  1.8.......  3.3.......  4.6.......  6.0
Value of reduced highway      2008......  (0.1)-....  0.0-......  0.0-......  0.0-......  0.0-......  0.0-
 fatalities from changes in
 vehicle mass.
                              2010......  0.0.......  0.0.......  0.0.......  -0.1......  0.0.......  0.1
----------------------------------------------------------------------------------------------------------------
                Reduction in health damage costs from lower emissions of criteria air pollutants
----------------------------------------------------------------------------------------------------------------
CO..........................  2008......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.0.......  0.0
VOC.........................  2008......  0.0-......  0.0-......  0.0-......  0.0-......  0.1-......  0.1-
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.1.......  0.1
NOX.........................  2008......  0.0-......  0.0-......  0.1-......  0.1-......  0.1-......  0.1-
                              2010......  0.1.......  0.0.......  0.0.......  0.1.......  0.1.......  0.1
PM..........................  2008......  0.2-......  0.2-......  0.3-......  0.5-......  0.8-......  1.0-
                              2010......  0.4.......  0.2.......  0.3.......  0.5.......  0.7.......  0.9
SOX.........................  2008......  0.2-......  0.1-......  0.3-......  0.5-......  0.6-......  0.8-
                              2010......  0.3.......  0.2.......  0.2.......  0.4.......  0.6.......  0.8
----------------------------------------------------------------------------------------------------------------
                                       Dis-benefits from increased driving
----------------------------------------------------------------------------------------------------------------
Congestion costs............  2008......  0.7-......  0.4-......  0.9-......  1.4-......  1.9-......  2.4-
                              2010......  1.0.......  0.5.......  0.8.......  1.3.......  1.8.......  2.3
Noise costs.................  2008......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.0.......  0.0
Crash costs.................  2008......  0.3-......  0.2-......  0.4-......  0.6-......  0.9-......  1.1-
                              2010......  0.5.......  0.2.......  0.4.......  0.6.......  0.8.......  1.1
Total benefits..............  2008......  21.1-.....  14.1-.....  28.5-.....  45.9-.....  65.0-.....  82.8-
                              2010......  30.8......  16........  24.5......  43.6......  60........  77.9
Net benefits................  2008......  15.9-.....  10.6-.....  21.4-.....  34.7-.....  48.3-.....  61.4-
                              2010......  20.6......  10.8......  17.6......  32.5......  44.6......  58.5
----------------------------------------------------------------------------------------------------------------

Table IV-95--NHTSA Estimated Present Value of Net Benefits ($b) Under Augural Standards Using 3 Percent Discount
                                    Rate--MYs 2022-2025 and Total for All MYs
----------------------------------------------------------------------------------------------------------------
                                 MY Baseline      2022          2023          2024          2025        Total
----------------------------------------------------------------------------------------------------------------
Technology costs..............  2008........  18.5-.......  20.2-.......  24.9-.......  26.8-......  140.3-
                                2010........  16.1........  18.1........  21.7........  23.3.......  133.7
Additional cost of maintaining  2008........  1.5-........  1.6-........  1.7-........  1.8-.......  10.0-
 more advanced vehicles.
                                2010........  1.2.........  1.6.........  1.9.........  2.1........  9.0
Savings in lifetime fuel        2008........  70.5-.......  76.9-.......  86.5-.......  94.9-......  524.9-
 expenditures.
                                2010........  66.0........  75.1........  85.1........  93.6.......  512.9
Consumer surplus from           2008........  6.4-........  7.0-........  7.8-........  8.5-.......  47.8-
 additional driving.
                                2010........  6.1.........  7.0.........  7.8.........  8.6........  47.5
Value of savings in refueling   2008........  2.3-........  2.5-........  2.8-........  3.1-.......  17.3-
 time.
                                2010........  1.9.........  2.2.........  2.5.........  2.7........  15.5
Reduction in petroleum market   2008........  3.7-........  4.0-........  4.5-........  4.9-.......  27.7-
 externalities.
                                2010........  3.4.........  3.9.........  4.4.........  4.7........  26.7
Reduction in climate-related    2008........  7.2-........  7.9-........  8.9-........  9.9-.......  53.2-
 damages from lower CO2
 emissions.

                                2010........  6.7.........  7.8.........  8.9.........  9.9........  52.2
Value of reduced highway        2008........  0.0-........  0.0-........  0.1-........  0.2-.......  0.3-
 fatalities from changes in
 vehicle mass.
                                2010........  0.1.........  0.1.........  0.1.........  0.2........  0.4
----------------------------------------------------------------------------------------------------------------
                Reduction in health damage costs from lower emissions of criteria air pollutants
----------------------------------------------------------------------------------------------------------------
CO............................  2008........  0.0-........  0.0-........  0.0-........  0.0-.......  0.0-
                                2010........  0.0.........  0.0.........  0.0.........  0.0........  0.0
VOC...........................  2008........  0.1-........  0.1-........  0.1-........  0.1-.......  0.7-
                                2010........  0.1.........  0.1.........  0.1.........  0.1........  0.6
NOX...........................  2008........  0.2-........  0.2-........  0.2-........  0.2-.......  1.2-
                                2010........  0.2.........  0.2.........  0.2.........  0.2........  1.2
PM............................  2008........  1.1-........  1.2-........  1.3-........  1.4-.......  8.0-
                                2010........  1.0.........  1.1.........  1.3.........  1.4........  7.7
SOX...........................  2008........  0.9-........  1.0-........  0.9-........  0.9-.......  6.2-
                                2010........  0.9.........  1.0.........  1.0.........  1.1........  6.5
----------------------------------------------------------------------------------------------------------------
                                       Dis-benefits from increased driving
----------------------------------------------------------------------------------------------------------------
Congestion costs..............  2008........  2.7-........  3.0-........  3.3-........  3.7-.......  20.3-
                                2010........  2.6.........  2.9.........  3.3.........  3.6........  20.2
Noise costs...................  2008........  0.1-........  0.1-........  0.1-........  0.1-.......  0.4-
                                2010........  0.0.........  0.1.........  0.1.........  0.1........  0.4
Crash costs...................  2008........  1.3-........  1.4-........  1.6-........  1.7-.......  9.6-
                                2010........  1.2.........  1.4.........  1.6.........  1.7........  9.4
Total benefits................  2008........  92.3-.......  100.7-......  113.1-......  124.2-.....  687.5-
                                2010........  86.4........  98.3........  111.3.......  122.5......  671.4
Net benefits..................  2008........  68.2-.......  74.5-.......  81.6-.......  90.2-......  507.0-
                                2010........  65.2........  74.2........  82.8........  91.7.......  498.0
----------------------------------------------------------------------------------------------------------------

    Similarly, Tables IV-96 and IV-97 below report technology outlays,
the individual components of benefits (including ``dis-benefits''
resulting from additional driving) and their total and net benefits
using the 7 percent discount rate. (Again, numbers in parentheses
represent negative values.)

 Table IV-96--NHTSA Estimated Present Value of Net Benefits ($b) Under Final Standards Using 7 Percent Discount
                                               Rate--MYs 2017-2021
----------------------------------------------------------------------------------------------------------------
                                  MY
                               Baseline     Earlier      2017        2018        2019        2020        2021
----------------------------------------------------------------------------------------------------------------
Technology costs............  2008......  4.0-......  2.8-......  5.4-......  8.4-......  12.8-.....  16.5-
                              2010......  8.7.......  4.4.......  5.8.......  8.4.......  11.9......  14.9
Additional cost of            2008......  0.0-......  0.0-......  0.3-......  0.7-......  1.0-......  1.3-
 maintaining more advanced
 vehicles.
                              2010......  0.0.......  0.0.......  0.0.......  0.4.......  0.8.......  1.0
Savings in lifetime fuel      2008......  12.4-.....  8.4-......  16.9-.....  27.3-.....  38.7-.....  49.3-
 expenditures.
                              2010......  18.3......  9.5.......  14.6......  26.1......  35.9......  46.5
Consumer surplus from         2008......  1.3-......  0.8-......  1.6-......  2.5-......  3.6-......  4.5-
 additional driving.
                              2010......  1.8.......  0.9.......  1.4.......  2.4.......  3.3.......  4.3
Value of savings in           2008......  0.5-......  0.3-......  0.6-......  0.9-......  1.3-......  1.6-
 refueling time.
                              2010......  0.7.......  0.4.......  0.5.......  0.8.......  1.1.......  1.4
Reduction in petroleum        2008......  0.7-......  0.5-......  0.9-......  1.5-......  2.1-......  2.6-
 market externalities.
                              2010......  1.0.......  0.5.......  0.8.......  1.4.......  1.9.......  2.5
Reduction in climate-related  2008......  1.5-......  1.0-......  2.1-......  3.4-......  4.9-......  6.3-
 damages from lower CO2
 emissions.
                              2010......  2.2.......  1.2.......  1.8.......  3.3.......  4.6.......  6.0
Value of reduced highway      2008......  -0.1-.....  0.0-......  0.0-......  0.0-......  0.0-......  0.0-
 fatalities from changes in
 vehicle mass.
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.0.......  0.1
----------------------------------------------------------------------------------------------------------------
                Reduction in health damage costs from lower emissions of criteria air pollutants
----------------------------------------------------------------------------------------------------------------
CO..........................  2008......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.0.......  0.0
VOC.........................  2008......  0.0-......  0.0-......  0.0-......  0.0-......  0.1-......  0.1-
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.0.......  0.1
NOX.........................  2008......  0.0-......  0.0-......  0.0-......  0.1-......  0.1-......  0.1-
                              2010......  0.1.......  0.0.......  0.0.......  0.1.......  0.1.......  0.1
PM..........................  2008......  0.2-......  0.1-......  0.3-......  0.4-......  0.6-......  0.8-
                              2010......  0.3.......  0.1.......  0.2.......  0.4.......  0.6.......  0.7
SOX.........................  2008......  0.2-......  0.1-......  0.2-......  0.4-......  0.5-......  0.6-

                              2010......  0.3.......  0.1.......  0.2.......  0.3.......  0.5.......  0.6
----------------------------------------------------------------------------------------------------------------
                                       Dis-benefits from increased driving
----------------------------------------------------------------------------------------------------------------
Congestion costs............  2008......  0.6-......  0.3-......  0.7-......  1.1-......  1.5-......  1.9-
                              2010......  (0.8).....  0.4.......  0.6.......  1.1.......  1.4.......  1.8
Noise costs.................  2008......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.0.......  0.0
Crash costs.................  2008......  0.2-......  0.2-......  0.3-......  0.5-......  0.7-......  0.9-
                              2010......  0.4.......  0.2.......  0.3.......  0.5.......  0.7.......  0.9
Total benefits..............  2008......  16.8-.....  11.2-.....  22.7-.....  36.6-.....  51.9-.....  66.0-
                              2010......  24.7......  12.8......  19.6......  34.8......  47.9......  62.2
Net benefits................  2008......  11.9-.....  7.9-......  16.1-.....  26.1-.....  36.0-.....  45.8-
                              2010......  14.7......  7.8.......  12.9......  24.2......  33.3......  43.8
----------------------------------------------------------------------------------------------------------------

 Table IV-97--NHTSA Estimated Present Value of Net Benefits ($b) Under Augural Standards Using 7 Percent Discount Rate--MYs 2022-2025 and Total for All
                                                                           MYs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Technology costs...............  2008...............  18.5-.............  20.2-.............  24.9-.............  26.8-.............  140.3-
                                 2010...............  16.1..............  18.1..............  21.7..............  23.3..............  133.7
Additional cost of maintaining   2008...............  1.5-..............  1.6-..............  1.7-..............  1.8-..............  10.0-
 more advanced vehicles.
                                 2010...............  1.2...............  1.6...............  1.9...............  2.1...............  9.0
Savings in lifetime fuel         2008...............  55.0-.............  60.0-.............  67.4-.............  74.0-.............  409.5-
 expenditures.
                                 2010...............  51.5..............  58.6..............  66.3..............  72.9..............  400.3
Consumer surplus from            2008...............  5.0-..............  5.4-..............  6.1-..............  6.6-..............  37.3-
 additional driving.
                                 2010...............  4.8...............  5.4...............  6.1...............  6.7...............  37.1
Value of savings in refueling    2008...............  1.8-..............  2.0-..............  2.2-..............  2.4-..............  13.6-
 time.
                                 2010...............  1.5...............  1.7...............  2.0...............  2.2...............  12.2
Reduction in petroleum market    2008...............  2.9-..............  3.2-..............  3.6-..............  3.9-..............  21.9-
 externalities.
                                 2010...............  2.7...............  3.1...............  3.4...............  3.7...............  21.1
Reduction in climate-related     2008...............  7.2-..............  7.9-..............  8.9-..............  9.9-..............  53.2-
 damages from lower CO2
 emissions.
                                 2010...............  6.7...............  7.8...............  8.9...............  9.9...............  52.2
Value of reduced highway         2008...............  0.0-..............  0.0-..............  0.1-..............  0.2-..............  0.2-
 fatalities from changes in
 vehicle mass.
                                 2010...............  0.1...............  0.0...............  0.1...............  0.2...............  0.3
Reduction in health damage
 costs from lower emissions of
 criteria air pollutants.
CO.............................  2008...............  0.0-..............  0.0-..............  0.0-..............  0.0-..............  0.0-
                                 2010...............  0.0...............  0.0...............  0.0...............  0.0...............  0.0
VOC............................  2008...............  0.1-..............  0.1-..............  0.1-..............  0.1-..............  0.5-
                                 2010...............  0.1...............  0.1...............  0.1...............  0.1...............  0.5
NOX............................  2008...............  0.1-..............  0.1-..............  0.2-..............  0.2-..............  1.0-
                                 2010...............  0.1...............  0.1...............  0.2...............  0.2...............  1.0
PM.............................  2008...............  0.9-..............  0.9-..............  1.0-..............  1.1-..............  6.4-
                                 2010...............  0.8...............  0.9...............  1.0...............  1.1...............  6.2
SOX............................  2008...............  0.7-..............  0.8-..............  0.7-..............  0.7-..............  4.9-
                                 2010...............  0.7...............  0.8...............  0.8...............  0.9...............  5.1
Dis-benefits from increased
 driving:.
Congestion costs...............  2008...............  2.1-..............  2.3-..............  2.6-..............  2.9-..............  16.0-
                                 2010...............  2.0...............  2.3...............  2.6...............  2.9...............  15.9
Noise costs....................  2008...............  0.0-..............  0.0-..............  0.0-..............  0.1-..............  0.3-
                                 2010...............  0.0...............  0.0...............  0.0...............  0.1...............  0.3
Crash costs....................  2008...............  1.0-..............  1.1-..............  1.2-..............  1.4-..............  7.5-
                                 2010...............  1.0...............  1.1...............  1.2...............  1.3...............  7.4
Total benefits.................  2008...............  73.6-.............  80.4-.............  90.3-.............  99.1-.............  548.6-
                                 2010...............  69................  78.4..............  88.8..............  97.8..............  536
Net benefits...................  2008...............  50.8-.............  55.5-.............  60.2-.............  66.7-.............  376.9-
                                 2010...............  48.9..............  55.7..............  61.9..............  68.6..............  371.8
--------------------------------------------------------------------------------------------------------------------------------------------------------

    These benefit and cost estimates do not reflect the availability
and use of certain flexibility mechanisms, such as compliance credits
and credit trading, because EPCA prohibits NHTSA from considering the
effects of those mechanisms in setting CAFE standards. However, the
agency notes that, in reality, manufacturers are likely to rely

to some extent on flexibility mechanisms and would thereby reduce the
cost of complying with the standards to a meaningful extent.
    As discussed in the FRIA, NHTSA has performed an analysis to
estimate costs and benefits taking into account EPCA's provisions
regarding EVs, PHEVs produced before MY 2020, FFV credits, and other
CAFE credit provisions. Accounting for these provisions indicates that
achieved fuel economies would be 1.4-2.1 mpg lower than when these
provisions are not considered:

                          Table IV-98--NHTSA Estimated Average Achieved Fuel Economy (mpg) Under Final Standards--MYs 2017-2021
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  39.5-.............  41.5-.............  43.8-.............  46.3-.............  47.9-
                                 2010...............  39.4-.............  41.1-.............  43.3-.............  45.1-.............  47.1-
Light trucks...................  2008...............  29.3-.............  30.3-.............  31.9-.............  33.3-.............  35.2-
                                 2010...............  28.8-.............  29.3-.............  31.3-.............  32.8-.............  34.9-
Combined.......................  2008...............  35.0-.............  36.6-.............  38.7-.............  40.8-.............  42.6-
                                 2010...............  34.8-.............  36.0-.............  38.2-.............  39.9-.............  42.0-
--------------------------------------------------------------------------------------------------------------------------------------------------------

                         Table IV-99--NHTSA Estimated Average Achieved Fuel Economy (mpg) Under Augural Standards--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars....................  2008..................  49.3-.................  50.0-.................  51.5-................  52.9-
                                    2010..................  48.1..................  49.6..................  51.3.................  52.1
Light trucks......................  2008..................  36.1-.................  36.8-.................  37.9-................  39.0-
                                    2010..................  35.5..................  36.5..................  37.4.................  37.6
Combined..........................  2008..................  43.8-.................  44.6-.................  46.0-................  47.4-
                                    2010..................  42.9..................  44.2..................  45.6.................  46.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As a result, NHTSA estimates that, when EPCA AFV and credit
provisions are taken into account, fuel savings will total about 170
billion gallons, as compared to the 180-184 billion gallons estimated
when these flexibilities are not considered:

                                                 Table IV-100--NHTSA Estimated Fuel Saved (Billion Gallons) Under Final Standards--MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  6-...................  3-...................  5-...................  8-...................  10-.................  12-
                                   2010.................  6....................  4....................  5....................  8....................  10..................  12
Light trucks.....................  2008.................  1-...................  1-...................  2-...................  4-...................  6-..................  8-
                                   2010.................  2....................  1....................  2....................  4....................  6...................  8
Combined.........................  2008.................  6-...................  4-...................  7-...................  12-..................  16-.................  20-
                                   2010.................  8....................  5....................  7....................  12...................  15..................  20
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                            Table IV-101--NHTSA Estimated Fuel Saved (Billion Gallons) Under Augural Standards--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  14-...............  15-...............  17-...............  19-...............  107-
                                 2010...............  13................  15................  17................  18................  108
Light trucks...................  2008...............  9-................  10-...............  11-...............  12-...............  63-
                                 2010...............  8.................  9.................  10................  11................  62
Combined.......................  2008...............  23-...............  25-...............  28-...............  31-...............  170-
                                 2010...............  22................  24................  28................  29................  169
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The agency similarly estimates CO2 emissions reductions
will total 1,832-1,843 million metric tons (mmt), as compared to the
1,953-1,987 mmt estimated when these EPCA provisions are not
considered:\1290\
---------------------------------------------------------------------------

    \1290\ Differences in the application of diesel engines and
plug-in hybrid electric vehicles lead to differences in the
percentage changes in fuel consumption and carbon dioxide emissions
between the with- and without-credit cases.

                                            Table IV-102--NHTSA Estimated Avoided Carbon Dioxide Emissions (mmt) Under Final Standards--MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  60-..................  32-..................  55-..................  82-..................  112-................  131-
                                   2010.................  66...................  39...................  56...................  85...................  105.................  130
Light trucks.....................  2008.................  8-...................  10-..................  24-..................  44-..................  64-.................  86-
                                   2010.................  22...................  13...................  18...................  46...................  60..................  82
Combined.........................  2008.................  68-..................  43-..................  79-..................  126-.................  176-................  217-
                                   2010.................  89...................  52...................  73...................  131..................  166.................  213
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                       Table IV-103--NHTSA Estimated Avoided Carbon Dioxide Emissions (mmt) under Augural Standards--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  149-..............  161-..............  181-..............  197-..............  1,158-
                                 2010...............  144...............  163...............  185...............  197...............  1,171
Light trucks...................  2008...............  98-...............  105-..............  116-..............  128-..............  684-
                                 2010...............  91................  102...............  112...............  115...............  662
Combined.......................  2008...............  247-..............  266-..............  297-..............  325-..............  1,843-
                                 2010...............  234...............  265...............  298...............  312...............  1,832
--------------------------------------------------------------------------------------------------------------------------------------------------------

    This analysis further indicates that significant reductions in
outlays for additional technology will result when EPCA's AFV and
credit provisions are taken into account. Tables IV-104 and IV-105
below show that, total technology costs are estimated to decline to
about $120 billion as a result of manufacturers' use of these
provisions, as compared to the $134-140 billion estimated when
excluding these flexibilities:

                                          Table IV-104--NHTSA Estimated Incremental Technology Outlays ($ Billion) Under Final Standards--MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  3-...................  2-...................  4-...................  6-...................  8-..................  11-
                                   2010.................  5....................  3....................  4....................  6....................  8...................  9
Light trucks.....................  2008.................  0-...................  1-...................  1-...................  2-...................  3-..................  4-
                                   2010.................  2....................  1....................  1....................  2....................  3...................  5
Combined.........................  2008.................  4-...................  2-...................  5-...................  7-...................  11-.................  14-
                                   2010.................  6....................  4....................  5....................  8....................  11..................  14
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                     Table IV-105--NHTSA Estimated Incremental Technology Outlays ($ Billion) Under Augural Standards--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  12-...............  13-...............  16-...............  17-...............  92-
                                 2010...............  10................  11................  14................  14................  85
Light trucks...................  2008...............  4-................  5-................  5-................  6-................  30-
                                 2010...............  5.................  5.................  6.................  6.................  35
Combined.......................  2008...............  16-...............  18-...............  21-...............  23-...............  121-
                                 2010...............  15................  17................  20................  20................  120
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Because NHTSA's analysis indicated that these EPCA provisions will
modestly reduce fuel savings and related benefits, the agency's
estimate of the present value of total benefits is $629-639 billion
when discounted at a 3 percent annual rate, as Tables IV-106 and IV-107
below report. This estimate of total benefits is lower than the $671-
688 billion reported previously for the analysis that excluded these
provisions:

                            Table IV-106--NHTSA Estimated Present Value of Benefits ($ Billion) Under Final Standards Using a 3 Percent Discount Rate-- MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  19.7-................  10.8-................  18.7-................  27.8-................  38.4-...............  45.2-
                                   2010.................  21.8.................  12.9.................  18.7.................  28.9.................  36..................  44.9
Light trucks.....................  2008.................  2.7-.................  3.4-.................  8.0-.................  14.8-................  21.5-...............  29.2-
                                   2010.................  7.2..................  4.4..................  5.9..................  15...................  19.9................  27.6
Combined.........................  2008.................  22.4-................  14.2-................  26.6-................  42.5-................  59.8-...............  74.4-
                                   2010.................  29...................  17.3.................  24.6.................  43.8.................  55.8................  72.4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

       Table IV-107--NHTSA Estimated Present Value of Benefits ($ Billion) Under Augural Standards Using a 3 Percent Discount Rate-- MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  51.9-.............  56.8-.............  64.4-.............  71.1-.............  404.8-
                                 2010...............  49.9..............  57................  65.4..............  70.2..............  405.6
Light trucks...................  2008...............  33.4-.............  36.0-.............  40.3-.............  44.8-.............  234.2-
                                 2010...............  30.6..............  34.7..............  38.7..............  40.2..............  224.1
Combined.......................  2008...............  85.2-.............  92.7-.............  104.6-............  115.9-............  638.5-
                                 2010...............  80.3..............  91.6..............  104...............  110.2.............  629.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Similarly, NHTSA estimates that the present value of total benefits
will decline modestly from its previous estimate when future fuel
savings and other benefits are discounted at the higher 7 percent rate.
Tables IV-108 and IV-109 report that the present value of benefits from
requiring higher fuel economy for MY 2017-25 cars and light trucks will
total $502-510 billion when discounted using a 7 percent rate, as
compared to the previous $536-549 billion estimate of total benefits
when FFV credits were not permitted:

                            Table IV-108--NHTSA Estimated Present Value of Benefits ($ Billion) Under Final Standards Using a 7 Percent Discount Rate-- MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  15.8-................  8.7-.................  15.0-................  22.3-................  30.8-...............  36.2-
                                   2010.................  17.4.................  10.3.................  15...................  23.1.................  28.8................  36
Light trucks.....................  2008.................  2.1-.................  2.7-.................  6.3-.................  11.8-................  17.1-...............  23.2-
                                   2010.................  5.7..................  3.5..................  4.7..................  11.9.................  15.8................  21.9
Combined.........................  2008.................  17.9-................  11.4-................  21.3-................  34.0-................  47.8-...............  59.4-
                                   2010.................  23.2.................  13.8.................  19.6.................  35...................  44.6................  57.8
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

       Table IV-109--NHTSA Estimated Present Value of Benefits ($ Billion) Under Augural Standards Using a 7 Percent Discount Rate--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  41.6-.............  45.5-.............  51.6-.............  57.0-.............  324.3-
                                 2010...............  40................  45.7..............  52.5..............  56.2..............  325
Light trucks...................  2008...............  26.5-.............  28.6-.............  32.0-.............  35.5-.............  185.7-
                                 2010...............  24.3..............  27.5..............  30.7..............  31.8..............  177.7
Combined.......................  2008...............  68.0-.............  74.0-.............  83.5-.............  92.5-.............  509.7-
                                 2010...............  64.1..............  73.1..............  83................  88................  502.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Although the discounted present value of total benefits will be
modestly lower when EPCA AFV and credit provisions are taken into
account, the agency estimates that these provisions will reduce net
benefits by a smaller proportion. As Tables IV-110 and IV-111 show, the
agency estimates that these will reduce net benefits from the CAFE
standards to $475-483 billion from the previously-reported estimate of
$498-507 billion without those credits.

                          Table IV-110--NHTSA Estimated Present Value of Net Benefits ($ Billion) Under Final Standards Using a 3 Percent Discount Rate--MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  15 -.................  8 -..................  14 -.................  20 -.................  28 -................  32 -
                                   2010.................  16...................  9....................  14...................  21...................  26..................  33
Light trucks.....................  2008.................  2 -..................  3 -..................  7 -..................  12 -.................  18 -................  24 -
                                   2010.................  5....................  3....................  5....................  12...................  16..................  22
Combined.........................  2008.................  18 -.................  11 -.................  21 -.................  33 -.................  45 -................  56 -
                                   2010.................  21...................  13...................  18...................  33...................  42..................  55
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

     Table IV-111--NHTSA Estimated Present Value of Net Benefits ($ Billion) Under Augural Standards Using a 3 Percent Discount Rate--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  37 -..............  40 -..............  45 -..............  50 -..............  289 -
                                 2010...............  36................  42................  47................  51................  296
Light trucks...................  2008...............  28 -..............  30 -..............  34 -..............  37 -..............  194 -
                                 2010...............  24................  28................  31................  33................  179
Combined.......................  2008...............  64 -..............  70 -..............  79 -..............  87 -..............  483 -
                                 2010...............  61................  70................  78................  84................  475
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Similarly, Tables IV-112 and IV-113 below show that NHTSA estimates
manufacturers' use of EPCA AFV and credit provisions will reduce net
benefits from requiring higher fuel economy for MY 2017-25 cars and
light trucks--to $356-362 billion--if a 7 percent discount rate is
applied to future benefits. This estimate is approximately 4% less than
the previously-reported $372-377 billion estimate of net benefits
without the availability of EPCA AFV and credit provisions using that
same discount rate.

                          Table IV-112--NHTSA Estimated Present Value of Net Benefits ($ Billion) Under Final Standards Using a 7 Percent Discount Rate--MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  12-..................  6-...................  11-..................  15-..................  20-.................  24-
                                   2010.................  12...................  7....................  10...................  16...................  20..................  24
Light trucks.....................  2008.................  2-...................  2-...................  5-...................  9-...................  14-.................  19-
                                   2010.................  4....................  2....................  3....................  9....................  12..................  16
Combined.........................  2008.................  13-..................  8-...................  16-..................  25-..................  34-.................  42-
                                   2010.................  16...................  9....................  13...................  25...................  32..................  41
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

     Table IV-113--NHTSA Estimated Present Value of Net Benefits ($ Billion) Under Augural Standards Using a 7 Percent Discount Rate--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  27-...............  30-...............  33-...............  36-...............  214-
                                 2010...............  27................  31................  35................  38................  221
Light trucks...................  2008...............  21-...............  23-...............  26-...............  28-...............  148-
                                 2010...............  18................  21................  23................  25................  135
Combined.......................  2008...............  48-...............  52-...............  59-...............  65-...............  362-
                                 2010...............  46................  52................  59................  63................  356
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For this final rule, NHTSA has included an analysis that accounts
for the cumulative costs and benefits of the final fuel economy
standards that affect MY 2011-2021 vehicles and the augural standards
that affect MY 2022-2025 vehicles. This analysis enables the agency to
assess the cumulative effects of previously adopted CAFE standards for
MY 2011 and MY 2012-2016, as well as the final standards for MY 2017-
2021 and augural standards for MY 2022-2025 that this final rule
presents. The table below shows the total fuel savings, reductions in
carbon dioxide emissions, and social costs and benefits resulting from
the sequence of CAFE standards established for MYs 2011-21, as well as
program totals with the inclusion of the augural standards for MY 2022-
2025. Each of these impacts is measured against a baseline that assumes
the CAFE standards for MY 2010 would have been extended to

apply to MYs 2011-25 if the agency had not developed standards for
those model years.
    As is the case elsewhere in this preamble, the table below
represents the estimated impact of the CAFE rules based on required
fuel economy levels, excluding consideration of credit banking,
transfers and trading, dedicated alternative fuel vehicles, and dual
fuel vehicles operating on alternative fuels, as required under EPCA/
EISA. The technology costs reported in the table represent the costs of
technologies used by manufacturers to increase fuel economy to the
levels required by the higher standards. (These cost estimates are the
same whether we use a 3 percent or 7 percent discount rate to discount
future benefits or costs, because they occur at the time the vehicle is
purchased, so no discounting is involved.) The discounted social costs
include the technology costs associated with the sequence of standards,
as well monetized social costs associated with any increases in traffic
congestion, noise, accidents and fatalities that occur in response to
the increases in fuel economy resulting from compliance with the
standards.
    Instead of using the estimated impacts from previous regulatory
analyses accompanying the standards for MY 2011 and MYs 2012-16, the
costs and benefits provided in this analysis are estimated using the
current version of the CAFE model. Thus, they are based on the agency's
most up-to-date estimates of the costs of technologies that are
available to improve fuel economy. All costs from previous years are
adjusted to 2010 dollars using the implicit price deflator for gross
domestic product (GDP).
    Table IV-114 illustrates that the combined effects of the
previously established CAFE standards for MY 2011 and MY 2012-2016,
together with the final CAFE standards for MY 2017-2021 and augural
CAFE standards for MY 2022-2025 presented in this final rule, would be
to save 450-520 billion gallons of fuel, reduce CO2
emissions by 4.9-5.7 billion metric tons, and provide net economic
benefits in excess of $1 trillion.

               Table IV-114--NHTSA Summary of Estimated Impacts From All Final and Augural Standards for MY 2011-2025 Light Duty Vehicles
                                                     [Compared to Continuation of MY 2010 Standards]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          2011-2016                            2011-2021                           2011-2025
                               MY baseline -------------------------------------------------------------------------------------------------------------
                                                 PC           LT       Combined       PC          LT       Combined       PC          LT       Combined
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fuel saved (b gallons).......  2008.......  59-........  41-........  100-......  176-......  118-......  294-......  313-......  208-......  520-
                               2010.......  42.........  33.........  75........  144.......  102.......  246.......  266.......  183.......  449
Oil saved (billion barrels)..  2008.......  1.4-.......  1.0-.......  2.4-......  4.2-......  2.8-......  7.0-......  7.5-......  5.0-......  12.4-
                               2010.......  1.0........  0.8........  1.8.......  3.4.......  2.4.......  5.9.......  6.3.......  4.4.......  10.7
Retail fuel savings,           2008.......  177-.......  121-.......  298-......  541-......  358-......  899-......  980-......  642-......  1,622-
 discounted at 3% ($B).        2010.......  126........  96.........  222.......  444.......  305.......  749.......  835.......  562.......  1,397
CO2 saved (mmt)..............  2008.......  645-.......  447-.......  1,092-....  1,914-....  1,286-....  3,200-....  3,399-....  2,260-....  5,659-
                               2010.......  458........  353........  811.......  1,568.....  1,095.....  2,663.....  2,894.....  1,979.....  4,873
Discounted social benefits,    2008.......  212-.......  144-.......  355-......  648-......  426-......  1,072-....  1,176-....  765-......  1,939-
 3% ($B).                      2010.......  149........  114........  263.......  527.......  362.......  889.......  996.......  668.......  1,662
Technology costs ($B)........  2008.......  33-........  20-........  53-.......  106-......  57-.......  163-......  204-......  99-.......  303-
                               2010.......  27.........  18.........  44........  92........  56........  147.......  172.......  98........  270
Discounted social costs, 3%    2008.......  44-........  26-........  70-.......  233-......  140-......  372-......  393-......  236-......  627-
 ($B).                         2010.......  34.........  23.........  57........  187.......  123.......  309.......  318.......  207.......  522
Discounted net benefits, 3%..  2008.......  168-.......  118-.......  285-......  415-......  286-......  700-......  783-......  529-......  1,312-
                               2010.......  115........  91.........  206.......  340.......  239.......  580.......  678.......  461.......  1,140
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The agency performed a number of sensitivity analyses to examine
important assumptions. All sensitivity analyses were based on the
``standard setting'' output of the CAFE model, and are based solely
upon the 2010 baseline fleet. We examine sensitivity with respect to
the following economic parameters:

 The price of gasoline: The main analysis uses the Reference
Case AEO 2012 Early Release estimate for the price of gasoline. As the
AEO 2012 Early Release does not contain Low and High Price Cases,
ranges derived from the Low and High Price Cases from the AEO 2011 were
utilized in conjunction with the Reference Case AEO 2012 Early Release
to study the effect of the Low and High Price Cases on the model
results.
 The rebound effect: The main analysis uses a rebound effect of
10 percent to project increased miles traveled as the cost per mile
driven decreases. In the sensitivity analysis, we examine the effect of
using a 5, 15, or 20 percent rebound effect instead.
 The value of CO2 benefits: The main analysis uses
$22 per ton discounted at a 3 percent discount rate to quantify the
benefits of reducing CO2 emissions and $0.199 per gallon to
quantify the benefits of reducing fuel consumption. In the sensitivity
analysis, we examine the following values and discount rates applied
only to the social cost of carbon to value carbon benefits, considering
valuations of approximately $5, $36, and $68 per ton, at discount rates
of 5 percent (model average), 2.5 percent (model average) and 3 percent
(95th percentile), respectively, with regard to the benefits of
reducing CO2 emissions.\1291\ These are the 2010 values,
which increase over time. These values can be translated into cents per
gallon by multiplying by 0.0089,\1292\ giving the following values:
---------------------------------------------------------------------------

    \1291\ The low, high, and very high valuations of $5, $36, and
$67 are rounded for brevity. While the model uses the unrounded
values, the use of unrounded values is not intended to imply that
the chosen values are precisely accurate to the nearest cent;
rather, they are average levels resulting from the many published
studies on the topic.
    \1292\ The molecular weight of Carbon (C) is 12, the molecular
weight of Oxygen (O) is 16, thus the molecular weight of
CO2 is 44. 1 gallon of gas weighs 2,819 grams, of that
2,433 grams are carbon. One ton of CO2/One ton of C (44/
12)* 2433grams C/gallon *1 ton/1000kg * 1 kg/1000g = (44 *
2433*1*1)/(12*1*1000 * 1000) = 0.0089. Thus, one ton of
CO2*0.0089 = 1 gallon of gasoline.
---------------------------------------------------------------------------

    [cir] ($4.91 per ton CO2) x 0.0089 = $0.044 per gallon
discounted at 5%
    [cir] ($22.22 per ton CO2) x 0.0089 = $0.198 per gallon
discounted at 3%

(used in the main analysis)
    [cir] ($36.49 per ton CO2) x 0.0089 = $0.325 per gallon
discounted at 2.5%
    [cir] And a 95th percentile estimate of
    [cir] ($67.55 per ton CO2) x 0.0089 = $0.601 per gallon
discounted at 3%
 Global Warming Potential (non-CO2 GHG benefits):
The main analysis does not monetize benefits associated with the
reduction of non-CO2 GHGs (methane, nitrous oxide, HFC-
134a). This sensitivity analysis uses a GWP approach to convert non-
CO2 gases to CO2-equivalence to monetize these
benefits using the same methods with which the benefits of
CO2 reductions are valued.
 Military security: The main analysis does not assign a value
to the military security benefits of reducing fuel consumption. In the
sensitivity analysis, we examine the impact of using a value of 12
cents per gallon instead.
 Consumer Benefit: The main analysis assumes there is no loss
in value to consumers resulting from vehicles that have an increase in
price and higher fuel economy. This sensitivity analysis assumes that
there is a 25, or 50 percent loss in value to consumers--equivalent to
the assumption that consumers will only value the calculated benefits
they will achieve at 75, or 50 percent, respectively, of the main
analysis estimates.
 Post-warranty repair costs: The main analysis includes repair
costs during the warranty period; post-warranty repair costs are
addressed in a sensitivity analysis. The warranty period is assumed to
be 5 years for the powertrain and 3 years for the rest of the vehicle.
This sensitivity analysis scales the frequency of repair by vehicle
survival rates, assumes that per-vehicle repair costs during the post-
warranty period are the same as in the in-warranty period, and that
repair costs are proportional to incremental direct costs (therefore
vehicles with additional components will have increased repair costs).
 Battery cost: The agency conducted a sensitivity analysis of
battery costs for HEV, PHEV and EV technologies. The ranges for battery
costs are based on the recommendations from the technical experts in
the field of battery energy storage technologies at Department of
Energy (DOE) and Argonne National Laboratory (ANL). These ranges of
battery costs are developed using the Battery Performance and Cost
(BatPaC) model developed by ANL and funded by DOE.\1293\ The values for
these ranges are shown in Table IV-115 and are calculated with 95%
confidence interval after analyzing the confidence bound using the
BatPaC model.
---------------------------------------------------------------------------

    \1293\ Section <IP_ADDRESS> in TSD Chapter 3 has detailed
descriptions of the history of the BatPac model and how the agencies
used the BatPac model in this analysis.
---------------------------------------------------------------------------

    In the NPRM central analysis, EPA developed direct manufacturing
costs (DMC) for battery systems using ANL's BatPaC model. For this
sensitivity analysis, NHTSA scaled these central battery system costs
by the percentages shown in Table IV-115, per guidance from DOE and ANL
experts on reasonable ranges for these costs.

Table IV-115--NHTSA Suggested Confidence Bounds as a Percentage of the Calculated Point Estimate for a Graphite-
                             Based Li-ion Battery Using the Default Inputs in BatPac
----------------------------------------------------------------------------------------------------------------
                                                                                Confidence interval
                  Battery type                                 Cathodes              ---------------------------
                                                                                Lower (%)     Upper (%)
----------------------------------------------------------------------------------------------------------------
HEV.............................................  LMO, LFP, NCA, NMC................          -10            10
PHEV, EV........................................  NMC, NCA..........................          -10            20
PHEV, EV........................................  LMO, LFP..........................          -20            35
----------------------------------------------------------------------------------------------------------------

    Figures IV-4 to IV-8 show these battery system DMCs in terms of $/
kW for HEV and $/kWh for 20-mile range PHEV (PHEV20), 40-mile range
PHEV (PHEV40), 75-mile range EV (EV75), 100-mile range EV (EV100) and
150-mile range EV (EV150). We note that battery system cost varies with
vehicle subclasses and driving range. Smaller batteries tend to be
relatively more expensive per kWh because the cost for the battery
management system, disconnect units and baseline thermal management
system is the same from vehicle to vehicle for each type of
electrification system, such as HEV, PHEV and EV (but varies between
different electrification systems) and this cost is spread over fewer
kWh for smaller vehicle. For example, the battery system cost for EVs
ranges from $221/kWh for subcompact cars for EV75, to $160/kWh for
large trucks for EV150 in MY 2021. Note: the agencies do not apply PHEV
or EV technology to large MPVs/minivans or large trucks; however, the
estimated costs of such a system are shown here for completeness.

[GRAPHIC] [TIFF OMITTED] TR15OC12.033

[GRAPHIC] [TIFF OMITTED] TR15OC12.034

[GRAPHIC] [TIFF OMITTED] TR15OC12.035

    For the reader's reference, this sensitivity was conducted using
what the agency refers to as ``standard setting'' analytical runs, in
which the agency restricts the operation of the model consistent with
statutory requirements related to how the agency may determine maximum
feasible CAFE standards (for example, the standard setting runs do not
include EVs, because NHTSA may not consider the fuel economy of EVs
when setting maximum feasible CAFE standards, nor do they consider
PHEVs prior to MY 2020, for the same reason), as compared to the
``real-world'' analysis, in which the agency attempts to model how
manufacturers might respond to the standards (and regulatory
alternatives) taking account of all available technologies and
compliance flexibilities. NHTSA used the ``standard setting'' runs for
this sensitivity analysis to show the regulatory impact of the battery
cost. In the ``standard setting'' runs, NHTSA included 30-mile range
PHEV (PHEV30) only after MY 2019 to represent all PHEVs, the cost of
which is the average cost of PHEV20 and PHEV40. NHTSA did not apply any
EVs in this analysis.
     Mass reduction cost: Due to the wide range of mass
reduction cost as stated in TSD Chapter 3, a sensitivity analysis was
performed examining the impact of the cost of vehicle mass reduction to
the total technology cost. The direct manufacturing cost (DMC) for mass
reduction is represented as a linear function between the unit DMC
versus percent of mass reduction as shown in Figure IV-10. The slope of
this line used for NPRM central analysis is $4.36 (2010$) per pound per
percent of mass reduction. The slope of the line is varied
40% as the upper and lower bound for this sensitivity study. The values
for the range of mass reduction cost are shown in Table IV-116.

                     Table IV-116--NHTSA Bounds for Mass Reduction Direct Manufacturing Cost
                                                     [2010$]
----------------------------------------------------------------------------------------------------------------
                                                                                Example unit      Example total
                                                              Slope of mass        direct            direct
                     Sensitivity bound                       reduction line   manufacture cost  manufacture cost
                                                              [$/(lb-%MR)]       \1\ [$/lb]        \2\ [$/lb]
----------------------------------------------------------------------------------------------------------------
Lower Bound...............................................             $2.61             $0.39              $235
NPRM Central Analysis.....................................              4.36              0.65               392
Upper Bound...............................................              6.10              0.92               549
----------------------------------------------------------------------------------------------------------------
Notes
\1\ Example is based on 15% mass reduction.
Unit direct manufacturing cost [$/lb] = Slope x Percent of Mass Reduction.
\2\ Example is based on 15% mass reduction for a 4000-lb vehicle.
Total direct manufacturing cost $[] = Unit Direct Manufacturing Cost x Amount of Mass Reduction.

[GRAPHIC] [TIFF OMITTED] TR15OC12.036

     Market-driven response: The baseline for the central
analysis is based on the MY 2016 CAFE standards and assumes that
manufacturers will make no changes in the fuel economy from that level
through MY 2025. A sensitivity analysis was performed to simulate
potential increases in fuel economy over the compliance level required
if MY 2016 standards were to remain in place. The assumption is that
the market would drive manufacturers to put technologies into their
vehicles that they believe consumers would value and be willing to pay
for. Using parameter values consistent with the central analysis, the
agency simulated a market-driven response baseline by applying a
payback period of one year for purposes of calculating the value of
future fuel savings when simulating whether manufacturers would apply
additional technology to an already CAFE-compliant fleet. In other
words we assumed that manufacturers that were above their MY 2016 CAFE
level would compare the cost to consumers to the fuel savings in the
first year of operation and decide to voluntarily apply those
technologies to their vehicles when benefits for the first year
exceeded costs for the consumer. For a manufacturer's fleet that that
has not yet achieved compliance with CAFE standards, the agency
continued to apply a five-year payback period. In other words, for this
sensitivity analysis the agency assumed that manufacturers that have
not yet met CAFE standards for future model years will apply technology
as if buyers were willing to pay for the technologies as long as the
fuel savings throughout the first five years of vehicle ownership
exceeded their costs. Once having complied with those standards,
however, manufacturers are assumed to consider making further
improvements in fuel economy as if buyers were only willing to pay for
fuel savings to be realized during the first year of vehicle ownership.
The `market-drive response' analysis assumes manufacturers will
overcomply if additional technology is sufficiently cost effective.
Because this assumption has a greater impact under the baseline
standards, its application reduces the incremental costs, effects, and
benefits attributable to the new standards. This does not mean costs,
effects, and benefits would actually be smaller with a market-driven
response; rather it means costs, effects, and benefits would be at
least as great, but would be partially attributable not to the new
standards, but instead to the market.
     Transmission shift optimization technology disabled: As
part of the simulation work for the final rule, ANL attempted to
replicate the shift optimizer technology but was not able to identify
any significant fuel consumption reductions. For this reason a
sensitivity case analysis was conducted with the transmission shift
optimizer technology disabled.
    Varying each of the above 10 parameters in isolation results in a
variety of economic scenarios. These are listed in Table IV-117 below
along with the preferred alternative.

                                                Table IV-117--List of NHTSA Economic Sensitivity Analyses
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Military
                    Name                                      Fuel price                  Discount  rate      Rebound         SCC ($)        security
                                                                                (%)         effect (%)                     ([cent]/gal)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reference...................................  Reference.................................               3              10              22               0
High Fuel Price.............................  High......................................               3              10              22               0
Low Fuel Price..............................  Low.......................................               3              10              22               0
5% Rebound Effect...........................  Reference.................................               3               5              22               0
15% Rebound Effect..........................  Reference.................................               3              15              22               0
20% Rebound Effect..........................  Reference.................................               3              20              22               0
12[cent]/gal Military Security Value........  Reference.................................               3              10              22              12
$5/ton CO2 Value............................  Reference.................................               3              10               5               0
$36/ton CO2 Value...........................  Reference.................................               3              10              36               0
$68/ton CO2 Value...........................  Reference.................................               3              10              68               0
Global Warming Potential....................  Reference.................................               3              10              22               0
50% Consumer Benefit........................  Reference.................................               3              10              22               0
75% Consumer Benefit........................  Reference.................................               3              10              22               0
Post-Warranty Repair Costs..................  Reference.................................               3              10              22               0
Low Battery Cost............................  Reference.................................               3              10              22               0
High Battery Cost...........................  Reference.................................               3              10              22               0
Low Cost Mass Reduction.....................  Reference.................................               3              10              22               0
High Cost Mass Reduction....................  Reference.................................               3              10              22               0
Market-Driven Response......................  Reference.................................               3              10              22               0
No Shift Optimization.......................  Reference.................................               3              10              22               0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The basic results of these sensitivity analyses are contained in
Chapter X of the FRIA, but several selected findings are as follows:
     Varying the economic assumptions has almost no impact on
achieved mpg. The mass reduction cost sensitivities, battery cost
reduction sensitivities, market-based baseline sensitivity, and no
shift optimization sensitivity cases are the only instances in which
achieved mpg differs from the reference case of the Preferred
Alternative. None of these alter the outcome by more than 0.3 mpg for
either fleet.
     Varying the economic assumptions has, at most, a small
impact on per-vehicle costs, with only the no shift optimization
variation affecting the per-vehicle cost by more than 10 percent from
the central analysis level. Similarly, fuel saved and CO2
emissions reductions vary only slightly across the sensitivity cases,
where the only substantial impact results from the market-driven
baseline sensitivity in which voluntary overcompliance reduces the
number of gallons of fuel saved as well as the quantity of
CO2 emissions by just under 28 percent.
     The category most affected by variations in the economic
parameters considered in these sensitivity analyses is net benefits.
The sensitivity analyses examining the AEO low and high fuel price
scenarios demonstrate the potential to negatively impact net benefits
by up to 38 percent or to increase them by about 32 percent relative to
those of the Preferred Alternative. Other large impacts on net benefits
occurred with the $68/ton CO2 valuation, in which net
benefits increased by nearly 22 percent, the market-driven baseline,
which reduces net benefits by close to 32 percent, and (as expected)
the 50 and 75 percent consumer fuel savings valuation cases, which
decrease net benefits by approximately 52 and 26 percent, respectively.
     Even if consumers value the benefits achieved at 50% of
the main analysis assumptions, total benefits still exceed costs, with
net benefits greater than $135 billion.
    Regarding the lower fuel savings and CO2 emissions
reductions predicted by the sensitivity analysis as fuel price
increases, which initially may seem counterintuitive, we note that
there are some counterbalancing factors occurring. As fuel price
increases, people will drive less and so fuel savings and
CO2 emissions reductions may decrease.
    The agency performed two additional sensitivity analyses presented
in Tables IV-118 through IV-120. First, the agency analyzed the impact
that having a retail price equivalent (RPE) factor of 1.5 for all
technologies would have on the various alternatives instead of using
the indirect cost methodology (ICM). The ICM methodology results in an
overall markup factor of 1.2 to 1.25 compared to the RPE markup factor
from variable cost of 1.5. Next, the agency conducted a separate
sensitivity analysis using values that were derived from the 2011 NAS
report.\2\ This analysis used an RPE markup factor of 1.5 for non-
electrification technologies, which is consistent with the NAS
estimation for technologies manufactured by suppliers, and a RPE markup
factor of 1.33 for electrification technologies (HEV, PHEV and EV);
three types of learning which include no learning for mature
technologies, 1.25 percent annual learning for evolutionary
technologies, and 2.5 percent annual learning for revolutionary
technologies; technology cost estimates for 52 percent (33 out of 63)
technologies; and technology effectiveness estimates for 56 percent (35
out of 63) of technologies. Cost learning was applied to technology
costs in a manner similar to how cost learning is applied in the
central analysis for many technologies which have base costs which are
applicable to recent or near-term future model years. As noted above,
the cost learning factors used for the sensitivity case are different
than the values used in the central analysis. For the other inputs in
the sensitivity case, where the NAS study has inconsistent information
or lacks projections, NHTSA used the same input values that were used
in the central analysis.

    Table IV-118--NHTSA Estimated Achieved MPG Level, MY 2025, Comparing Different Cost Mark-Up Methodologies
                                               [3% Discount rate]
----------------------------------------------------------------------------------------------------------------
                                                               ICM Method        RPE Method
                                                             (main analysis    (main analysis      Difference
                                                                 costs)            costs)             (mpg)
----------------------------------------------------------------------------------------------------------------
                                                 Passenger cars
----------------------------------------------------------------------------------------------------------------
Preferred Alternative.....................................             54.07             53.92              0.16
Max Net Benefits..........................................             56.52             56.42              0.10
----------------------------------------------------------------------------------------------------------------
                                                  Light trucks
----------------------------------------------------------------------------------------------------------------
Preferred Alternative.....................................             39.29             39.14              0.15
Max Net Benefits..........................................             43.66             43.56              0.10
----------------------------------------------------------------------------------------------------------------

Table IV-119--NHTSA Estimated Achieved MPG Level, MY 2025, Comparing ICM Method With Main Analysis Costs vs. NAS
                                                      Costs
                                               [3% Discount rate]
----------------------------------------------------------------------------------------------------------------
                                                               ICM Method
                                                             (main analysis   ICM Method  (NAS     Difference
                                                                 costs)        Cost estimates)        (mpg)
----------------------------------------------------------------------------------------------------------------
                                                 Passenger Cars
----------------------------------------------------------------------------------------------------------------
Preferred Alternative.....................................             54.07             52.78              1.29
Max Net Benefits..........................................             56.52             55.32              1.20
----------------------------------------------------------------------------------------------------------------
                                                  Light trucks
----------------------------------------------------------------------------------------------------------------
Preferred Alternative.....................................             39.29             37.71              1.58
Max Net Benefits..........................................             43.66             43.27              0.39
----------------------------------------------------------------------------------------------------------------

                                    Table IV-120--NHTSA Sensitivity Analyses
         [Estimated Achieved mpg, per-vehicle cost, net benefits, fuel saved, and CO2 emissions reduced]
----------------------------------------------------------------------------------------------------------------
                                                    Average MY     MY 2017-2025
                                                     2025 per-     net benefits,   MY 2017-2025    MY 2017-2025
   Cost method and set of cost        MY 2025         vehicle     discounted 3%,  fuel saved, in   CO2 Emissions
            estimates              Achieved mpg     technology    in millions of    millions of     reduced, in
                                                       cost              $            gallons           mmT
----------------------------------------------------------------------------------------------------------------
                                 Passenger Cars
----------------------------------------------------------------------------------------------------------------
ICM w/Main Analysis Costs.......           54.07          $1,578        $293,062         109,852           2,384
RPE w/Main Analysis Costs.......           53.92           1,943         273,307         107,200           2,325
ICM w/NAS Costs.................           52.78           2,103         242,912         100,496           2,155
----------------------------------------------------------------------------------------------------------------
                                  Light trucks
----------------------------------------------------------------------------------------------------------------
ICM w/Main Analysis Costs.......           39.29           1,226         175,793          61,984           1,333
RPE w/Main Analysis Costs.......           39.14           1,491         181,243          65,083           1,397
ICM w/NAS Costs.................           37.71           1,375         154,597          56,337           1,217
----------------------------------------------------------------------------------------------------------------

    For today's rulemaking analysis, as for the NPRM, the agency has
also performed a sensitivity analysis where manufacturers are allowed
to voluntarily apply more technology than would be required to comply
with CAFE standards for each model year. Manufacturers are assumed to
do so as long as applying each additional technology would increase
vehicle production costs (including markup) by less than it would
reduce buyers' fuel costs during the first year they own the vehicle.
This analysis makes use of the ``voluntary overcompliance'' simulation
capability DOT has recently added to its CAFE model. This capability,
which is discussed further above in section IV.C.4.c and in the CAFE
model documentation, is a logical extension of the model's simulation
of some manufacturers' decisions to respond to EPCA by paying civil
penalties once additional technology becomes economically unattractive.
It attempts to simulate manufacturers' responses to buyers' demands for
higher fuel economy levels than prevailing CAFE standards would require
when fuel costs are sufficiently high, and technologies that
manufacturers have not yet fully utilized are available to improve fuel
economy at relatively low costs.
    NHTSA introduced this analysis for the NPRM because some
stakeholders commenting on the recently-promulgated standards for
medium- and heavy-duty vehicles had indicated that it would be
unrealistic for the agency to

assume that in the absence of new regulations, technology and fuel
economy would not improve at all in the future. In other words, these
stakeholders argued that market forces are likely to result in some
fuel economy improvements over time, as potential vehicle buyers and
manufacturers respond to changes in fuel prices and in the availability
and costs of technologies to increase fuel economy. NHTSA agreed that,
in principle, its analysis should estimate a potential that
manufacturers will apply technology as if buyers place some value on
fuel economy improvements. Considering uncertainties discussed below
regarding the degree to which manufacturers will do so, the agency
judged it appropriate to conduct its central rulemaking analysis
without attempting to simulate these effects. Nonetheless, the agency
considered voluntary overcompliance sufficiently plausible to warrant
corresponding sensitivity analysis.
    In the NPRM, NHTSA invited comment on this sensitivity analysis, in
particular regarding the reasonableness of the assumption that
manufacturers might consider further fuel economy improvements,
depending on technology costs and fuel prices; the reasonableness of
the agency's approach (comparing technology costs to the present value
of fuel savings over some payback period) to simulating such decisions;
and what payback period (or periods) would most likely to reflect
manufacturers' decisions regarding technology application through
MY2025.
    Several environmental organizations submitted comments on NHTSA's
analysis. The Center for Biological Diversity (CBD) commented that the
agency's baseline ``suggests a much lower fuel efficiency increase
driven solely by market forces than actual experience demonstrates
occurs.'' \1294\ The Natural Resources Defense Council (NRDC) commented
that manufacturers might add more technology than required by
standards, but that such decisions are too uncertain to be included in
NHTSA's baseline projection. The Environmental Defense Fund (EDF)
commented that, given relatively stable future fuel prices, and given
provisions allowing credit transfers between manufacturers,
manufacturers will not likely overcomply with MY2016 standards, on
average, after MY2016. The American Council for an Energy-Efficient
Economy (ACEEE) commented that the historical record contains little
evidence of sustained fuel economy increases absent sustained increases
in fuel economy standards. ACEEE also commented that an alternative
``non-flat'' baseline would reduce NHTSA's estimates of the benefits
(and costs) of the new standards, the net effect being a reduction in
the cost-effectiveness of the standards, because the most cost-
effective technologies are the ones that will appear in the alternative
baseline scenario, leaving the more expensive technologies for the rule
to bring into the market.
---------------------------------------------------------------------------

    \1294\ CBD, p. 6.
---------------------------------------------------------------------------

    In addition, several stakeholders on the ``payback period'' NHTSA
should apply in its analysis. EDF indicated that any payback period
shorter than five years would not accurately reflect the current and
forecasted buying trends of consumers. The Sierra Club also submitted
comments suggesting a five-year payback period. Volkswagen commented
that buyers' preferences will suggest payback periods of less than four
years. The International Council on Clean Transportation (ICCT)
commented that analysis in 2010 by David Greene supported an average
payback period of three years.\1295\ NADA commented that analysis based
on a payback period oversimplifies the calculation of consumer
benefits, but did not comment on the payback period as basis to
estimate the potential that manufacturers might add technology beyond
that required by regulation.
---------------------------------------------------------------------------

    \1295\ Greene, David 2010. ``Uncertainty, loss aversion, and
markets for energy efficiency'', Energy Economics.
---------------------------------------------------------------------------

    NHTSA recognizes the uncertainty inherent in forecasting whether
and to what extent the average fuel economy level of light-duty
vehicles will continue to increase beyond the level necessary to meet
regulatory standards. However, because market forces could
independently result in changes to the future light-duty vehicle fleet
even in the absence of agency action, to the extent they can be
estimated, those changes should be incorporated into the baseline. As a
result, today's final rule continues to present impacts in terms of two
sets of analyses: one assuming that the average fleetwide fuel economy
for light-duty vehicles will not exceed the minimum level necessary to
comply with CAFE standards, and one assuming continued improvement in
average fleetwide fuel economy for light-duty vehicles due to higher
market demand for fuel-efficient vehicles.
    From a market-driven perspective, there is considerable historical
evidence that manufacturers have an economic incentive to improve the
fuel economy of their fleets beyond the level of the CAFE standards
when they are able to do so. Although there was an historical period of
stagnation in average fuel economy starting in the 1990s, when
manufacturers allocated efficiency improvements to weight and power, it
was accompanied by a prolonged period of historically low gasoline
prices, where real prices remained below $1.50 per gallon for nearly 15
years. Even during that period, passenger car fuel economy exceeded
CAFE standards every year and light-truck fuel economy exceeded
standards in most years. This trend supports the proposition that
consumers have historically recognized the benefits that accrue from
operating vehicles with greater fuel efficiency even in an environment
of low fuel prices.
    In recent years, overcompliance with standards has increased,
likely in response to higher fuel prices, with the market shifting
toward more fuel-efficient models and toward passenger cars rather than
trucks, even in the absence of regulatory pressure. This suggests that,
at the fuel prices that have been prevalent in recent years, consumers
are placing a greater value on fuel economy than the longer term
historical average. Consumers appear to be recognizing the value of
purchases based not only on initial costs but also on the total cost of
owning and operating a vehicle over its lifetime. The fuel economy of
the combined car and light-truck fleet has increased since 2005, with
the largest increase in 2009. NHTSA also expects the new fuel economy
labels will increase awareness of the consumer savings that result from
purchasing a vehicle with higher fuel economy and will impact consumer
demand for more fuel-efficient vehicles. NHTSA discusses how consumers
value fuel savings in Chapter VIII of the FRIA accompanying today's
notice.
    Consumer demand for fuel-efficient vehicles is expected to continue
in the future. Increasing uncertainty about future fuel prices and
growing concern for the energy security and environmental impacts of
petroleum use are likely to have an increasing impact on the vehicle
market. In response, a number of manufacturers have announced plans to
introduce technology beyond what is necessary to meet the MY 2016
standards. This evidence aligns with the AEO 2012 Early Release, which
shows continued fuel economy improvements in the Reference Case through
2035 in the absence of the MY 2017-2025 standards.
    NHTSA performed today's analysis by simulating potential
overcompliance under the no-action alternative, the

preferred alternative, and other regulatory alternatives. In doing so,
the agency used all the same parameter values as in the agency's
central analysis, but applied a payback period of one year for purposes
of calculating the value of future fuel savings when simulating whether
a manufacturer would apply additional technology to an already CAFE-
compliant fleet. For technologies applied to a manufacturer's fleet
that has not yet achieved compliance with CAFE standards, the agency
continued to apply a five-year payback period.
    In other words, for this sensitivity analysis the agency assumed
that manufacturers that have not yet met CAFE standards for future
model years will apply technology as if buyers were willing to pay for
fuel savings throughout the first five years of vehicle ownership. Once
having complied with those standards, however, manufacturers are
assumed to consider making further improvements in fuel economy as if
buyers were only willing to pay for fuel savings to be realized during
the first year of vehicle ownership. This reflects the agency's
assumptions for this sensitivity analysis, that (1) civil penalties,
though legally available, carry a stigma that manufacturers will strive
to avoid, and that (2) having achieved compliance with CAFE standards,
manufacturers will avoid competitive risks entailed in charging higher
prices for vehicles that offer additional fuel economy, rather than
offering additional performance or utility.
    Since CAFE standards were first introduced, some manufacturers have
consistently exceeded those standards, and the industry as a whole has
consistently overcomplied with both the passenger car and light truck
standards. Although the combined average fuel economy of cars and light
trucks declined in some years, this resulted from buyers shifting their
purchases from passenger cars to light trucks, not from undercompliance
with either standard. Even with those declines, the industry still
overcomplied with both passenger car and light truck standards. In
recent years, between MYs 1999 and 2009, fuel economy overcompliance
has been increasing on average for both the passenger car and the light
truck fleets. NHTSA considers it impossible to say with certainty why
past fuel economy levels have followed their observed path. If the
agency could say with certainty how fuel economy would have changed in
the absence of CAFE standards, it might be able to answer this
question; however, NHTSA regards this ``counterfactual'' case as simply
unknowable.
    NHTSA has, however, considered other relevant indications regarding
manufacturers' potential future decisions. Published research regarding
how vehicle buyers have previously viewed fuel economy suggests that
they have only a weak quantitative understanding of the relationship
between fuel economy and future fuel outlays, and that potential buyers
value fuel economy improvements by less than theoretical present-value
calculations of lifetime fuel savings would suggest. These findings are
generally consistent with manufacturers' confidential and, in some
cases, public statements. Manufacturers have tended to communicate not
that buyers absolutely ``don't care'' about fuel economy, but that
buyers have, in the past, not been willing to pay the full cost of most
fuel economy improvements. Manufacturers have also tended to indicate
that sustained high fuel prices would provide a powerful incentive for
increased fuel economy; this implies that manufacturers believe buyers
are willing to pay for some fuel economy increases, but that buyers'
willingness to do so depends on their expectations for future fuel
prices. In their confidential statements to the agency, manufacturers
have also tended to indicate that in their past product planning
processes, they have assumed buyers would only be willing to pay for
technologies that ``break even'' within a relatively short time--
generally the first two to four years of vehicle ownership.
    NHTSA considers it not only feasible but appropriate to simulate
such effects by calculating the present value of fuel savings over some
``payback period.'' The agency also believes it is appropriate to
assume that specific improvements in fuel economy will be implemented
voluntarily if manufacturers' costs for adding the technology necessary
to implement them to specific models would be lower than potential
buyers' willingness to pay for the resulting fuel savings. This
approach takes fuel costs directly into account, and is therefore
responsive to manufacturers' statements regarding the role that fuel
prices play in influencing buyers' demands and manufacturers' planning
processes. Under this approach, a short payback period can be employed
if manufacturers are expected to act as if buyers place little value on
fuel economy. Conversely, a longer payback period can be used if
manufacturers are expected to act as if buyers will place comparatively
greater value on fuel economy.
    NHTSA cannot be certain to what extent vehicle buyers will, in the
future, be willing to pay for fuel economy improvements, or to what
extent manufacturers would, in the future, voluntarily apply more
technology than needed to comply with fuel economy standards. The
agency is similarly hopeful that future vehicle buyers will be more
willing to pay for fuel economy improvements than has historically been
the case. In meetings preceding today's standards, two manufacturers
stated they expected fuel economy to increase two percent to three
percent per year after MY 2016, absent more stringent regulations. And
in August 2010, one manufacturer stated its combined fleet would
achieve 50 mpg by MY 2025, supporting that at a minimum some
manufacturers believe that exceeding fuel economy standards will
provide them a competitive advantage. The agency is hopeful that future
vehicle buyers will be better-informed than has historically been the
case, in part because recently-promulgated requirements regarding
vehicle labels will provide clearer information regarding fuel economy
and the dollar value of resulting fuel savings. The agency is similarly
hopeful that future vehicle buyers will be more willing to pay for fuel
economy improvements than past buyers. In meetings preceding today's
standards, many manufacturers indicated significant shifts in their
product plans--shifts consistent with expectations that compared to
past buyers, future buyers will ``care more'' about fuel economy.
    Nevertheless, considering the uncertainties mentioned above, NHTSA
continues to consider it appropriate to conduct its central rulemaking
analysis in a manner that ignores the possibility that in the future,
manufacturers will voluntarily apply more technology than the minimum
necessary to comply with CAFE standards. Also, in conducting its
sensitivity analysis to simulate voluntary overcompliance with the
standards, the agency has applied the conservative assumption that when
considering whether to employ ``extra'' technology, manufacturers will
act as if buyers' value the resulting savings in fuel costs only during
their first year of ownership (i.e., as if a 1-year payback period
applies).
    Results of the agency's analysis simulating this potential for
voluntary overcompliance are summarized below. Compared to results from
the agencies' central analysis presented above, differences are
greatest for the baseline scenario (i.e., the No-Action Alternative),
under which CAFE

standards remain unchanged after MY 2016. These results also suggest,
as the agency would expect, that because increasingly stringent
standards require progressively more technology than the market will
demand, the likelihood of voluntary overcompliance will decline with
increasing stringency. Achieved fuel economy levels under baseline
standards are as follows:

                        Table IV-121--NHTSA Estimated Average Achieved Fuel Economy (mpg) Under Baseline Standards--MYs 2017-2021
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  39.0-.............  39.5-.............  40.0-.............  40.2-.............  40.5-
                                 2010...............  38.6-.............  39.1-.............  39.4-.............  39.8-.............  40.3-
Light trucks...................  2008...............  30.4-.............  31.0-.............  31.7-.............  32.0-.............  32.3-
                                 2010...............  29.4-.............  29.6-.............  30.4-.............  31.0-.............  31.5-
Combined.......................  2008...............  35.3-.............  35.9-.............  36.6-.............  36.9-.............  37.2-
                                 2010...............  34.7-.............  35.1-.............  35.7-.............  36.2-.............  36.8-
--------------------------------------------------------------------------------------------------------------------------------------------------------

                        Table IV-122--NHTSA Estimated Average Achieved Fuel Economy (mpg) Under Baseline Standards--MYs 2022-2025
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars....................  2008..................  40.8-.................  40.9-.................  41.0-................  41.1-
                                    2010..................  40.5..................  40.6..................  40.7.................  40.9
Light trucks......................  2008..................  32.5-.................  32.7-.................  32.9-................  33.1-
                                    2010..................  31.8..................  32.0..................  32.2.................  32.4
Combined..........................  2008..................  37.5-.................  37.7-.................  37.9-................  38.1-
                                    2010..................  37.0..................  37.2..................  37.4.................  37.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

    With no change in standards after MY 2016, while combined average
fuel economy is the same in MY 2017 both with and without simulated
voluntary overcompliance, differences grow over time, reaching nearly 3
mpg by MY 2025. In other words, without simulating voluntary
overcompliance, the agency estimated that combined average achieved
fuel economy would reach 34.7-35.4 mpg in MY 2025, whereas the agency
estimates that it would reach 37.6-38.1 mpg in that year if voluntary
overcompliance occurred.
    In contrast, the effect on achieved fuel economy levels of allowing
voluntary overcompliance with the standards was minimal. Allowing
manufacturers to overcomply with the standards for MY 2025 led to
combined average achieved fuel economy levels approximately equal to
levels of values obtained without simulating voluntary overcompliance:

                         Table IV-123--NHTSA Estimated Average Achieved Fuel Economy (mpg) Under Final Standards--MYs 2017-2021
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  40.8-.............  43.0-.............  45.1-.............  47.2-.............  48.9-
                                 2010...............  40.5-.............  42.2-.............  44.3-.............  46.4-.............  48.6-
Light trucks...................  2008...............  30.9-.............  32.0-.............  33.9-.............  35.3-.............  36.7-
                                 2010...............  29.9-.............  30.5-.............  32.2-.............  33.6-.............  35.6-
Combined.......................  2008...............  36.5-.............  38.3-.............  40.4-.............  42.2-.............  43.9-
                                 2010...............  36.0-.............  37.1-.............  39.1-.............  41.0-.............  43.2-
--------------------------------------------------------------------------------------------------------------------------------------------------------

                        Table IV-124--NHTSA Estimated Average Achieved Fuel Economy (mpg) Under Augural Standards--MYs 2022-2025
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars....................  2008..................  50.2-.................  51.2-.................  53.1-................  54.3-
                                    2010..................  49.6..................  51.1..................  53.0.................  54.4
Light trucks......................  2008..................  37.6-.................  38.3-.................  39.4-................  40.2-
                                    2010..................  36.3..................  37.5..................  38.4.................  39.3
Combined..........................  2008..................  45.0-.................  46.0-.................  47.6-................  48.7-
                                    2010..................  44.1..................  45.5..................  47.0.................  48.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As a result, NHTSA estimates that, when the potential for voluntary
overcompliance is taken into account, fuel savings attributable to more
stringent standards will total 131-133 billion gallons, as compared to
the 180-184 billion gallons estimated when potential voluntary
overcompliance is not taken into account:

                                                 Table IV-125--NHTSA Estimated Fuel Saved (Billion Gallons) Under Final Standards--MYs 2017-2021
                                                                              [Including voluntary overcompliance]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  4-...................  3-...................  5-...................  7-...................  9-..................  10-
                                   2010.................  5....................  3....................  4....................  7....................  8...................  10
Light trucks.....................  2008.................  0-...................  1-...................  1-...................  3-...................  4-..................  5-
                                   2010.................  1....................  1....................  1....................  2....................  3...................  5
Combined.........................  2008.................  5-...................  3-...................  6-...................  9-...................  13-.................  16-
                                   2010.................  6....................  4....................  5....................  9....................  12..................  15
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                            Table IV-126--NHTSA Estimated Fuel Saved (Billion Gallons) Under Augural Standards--MYs 2022-2025
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  11-...............  13-...............  15-...............  16-...............  92-
                                 2010...............  11................  13................  15................  16................  92
Light trucks...................  2008...............  6-................  6-................  7-................  8-................  41-
                                 2010...............  5.................  6.................  7.................  7.................  39
Combined.......................  2008...............  17-...............  19-...............  22-...............  24-...............  133-
                                 2010...............  16................  19................  21................  23................  131
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The agency is not projecting, however, that fuel consumption will
be greater when voluntary overcompliance is taken into account. Rather,
under today's final and augural standards, the agency's analysis shows
lower fuel consumption (by 0.7-1.1 percent less over the useful lives