be sufficient for 98% of days for ``modest'' drivers (those who average
about 25 miles per day); the optimized EV range for ``average'' drivers
(who average about 43 miles per day), close to 120 miles, would meet
their needs on 97 percent of days. Turrentine et al. studied drivers
who leased MINI E EVs (a conversion of the MINI Cooper) for a
year.\820\ They found that drivers adapted their driving patterns in
response to EV ownership: for instance, they modified where they
shopped and increased their use of regenerative braking in order to
reduce range as a constraint. These findings suggest that, for some
consumers, range may be a limiting factor only occasionally. If those
consumers are willing to consider alternative ways of driving long
distances, such as renting a gasoline vehicle or exchanging vehicles
within the household, then limited range may not be a barrier to
adoption for them. These studies also raise the question whether
analysis of EV use should be based on the driving patterns from
conventional vehicles, because consumers may use EVs differently than
conventional vehicles.
---------------------------------------------------------------------------

    \818\ Pearre, Nathaniel S., Willett Kempton, Randall L.
Guensler, and Vetri V. Elango. ``Electric vehicles: How much range
is required for a day's driving?'' Transportation Research Part C
19(6) (2011): 1171-1184 (Docket EPA-HQ-OAR-2010-0799-0668).
    \819\ Lin, Zhenhong, and David Greene. ``Rethinking FCV/BEV
Vehicle Range: A Consumer Value Trade-off Perspective.'' The 25th
World Battery, Hybrid and Fuel Cell Electric Vehicle Symposium and
Exhibition, Shenzhen, China, Nov. 5-9, 2010 (Docket EPA-HQ-OAR-2010-
0799-0670).
    \820\ Turrentine, Tom, Dahlia Garas, Andy Lentz, and Justin
Woodjack. ``The UC Davis MINI E Consumer Study.'' UC Davis Institute
of Transportation Research Report UCD-ITS-RR-11-05, May 4, 2011
(Docket EPA-HQ-OAR-2010-0799-0671).
---------------------------------------------------------------------------

    EVs themselves are expected to change over time, as battery
technologies and costs develop. In addition, consumer interest in EVs
is likely to change over time, as early adopters share their
experiences. The initial research in the area suggests that consumers
put a high value on increased range, though this value appears to be
changing over time. The research also suggests that some segments of
the driving public may experience little, if any, restriction on their
driving due to range limitations if they were to purchase EVs. At this
time we do not estimate whether the number of people who will choose to
purchase EVs at private-market prices will be more or less than the
number that auto makers are expected to produce to comply with the
standards. As noted above, our projections of technology penetrations
indicate that a very small portion (fewer than 3 percent) of new
vehicles produced in MY 2025 will need to be EVs. For the purposes of
the analysis presented here for this rule, we assume that the consumer
market will be sufficient to absorb the number of EVs expected to be
used for compliance under this rule.
c. Summary
    The Energy Paradox, also known as the efficiency gap, raises the
question, why do private markets not provide energy savings that
engineering technology cost analyses find are cost-effective? Though a
number of hypotheses have been raised to explain the paradox, studies
have not been able at this time to identify the relative importance of
different explanations. As a result, it is not possible at this point
to state with any degree of certainty whether the market for fuel
efficiency is operating efficiently, or whether the market has
failings.
    For conventional vehicles, the key implication is that the there
may be two different estimates of the value of fuel savings. One value
comes from the engineering estimates, based on consumers' expected
driving patterns over the vehicle's lifetime; the other value is what
the consumer factors into the purchase decision when buying a vehicle.
Although economic theory suggests that these two values should be the
same in a well functioning market, if engineering estimates accurately
measure fuel savings that consumers will experience, the available
evidence does not provide support for that theory. The fuel savings
estimates presented here are based on expected consumers' in-use fuel
consumption rather than the value they estimate at the time that they
consider purchasing a vehicle. Though

the cost estimates may not have taken into account some changes that
consumers may not find desirable, those omitted costs would have to be
of very considerable magnitude to have a significant effect on the net
benefits of this rule. The costs imposed on the consumer are measured
by the costs of the technologies needed to comply with the standards.
Because the cost estimates have built into them the costs required to
hold other vehicle attributes constant, then, in principle,
compensating consumers for the increased costs would hold them
harmless, even if they paid no attention to the fuel efficiency of
vehicles when making their purchase decisions.
    For electric vehicles, and perhaps for other advanced-technology
vehicles, other vehicle attributes are not expected to be held
constant. In particular, their ranges and modes of refueling will be
different from those of conventional vehicles. From a social welfare
perspective, the key question is whether the number of consumers who
will want to buy EVs at their private-market prices will exceed the
number that auto makers are expected to produce to comply with the
standards. If too few consumers are willing to buy them at their
private-market prices, then auto makers may have to subsidize their
prices, if they have no other less costly technologies available to
meet the standards. Though current research finds that consumers
typically have a high value for increasing the range of EVs (and thus
would consider a shorter range a cost of an EV), current research also
suggests that some consumers may find ways to adapt to the shorter
range so that it is less constraining. The technologies, prices,
infrastructure, and consumer experiences associated with EVs are all
expected to evolve between now and when the MY 2017-25 standards take
effect. The analysis in this rule assumes that the consumer market is
sufficient to absorb the expected number of EVs without subsidies.
2. Costs Associated With the Vehicle Standards
    In this section, EPA presents our estimate of the costs associated
with the vehicle program. The presentation here summarizes the vehicle
level costs associated with the new technologies expected to be added
to meet the GHG standards, including hardware costs to comply with the
A/C credit program. The analysis summarized here provides our estimate
of incremental costs on a per vehicle basis and on an annual total
basis.
    The presentation here summarizes the outputs of the OMEGA model
that was discussed in some detail in Section III.D of this preamble.
For details behind the analysis such as the OMEGA model inputs and the
estimates of costs associated with individual technologies, the reader
is directed to Chapter 1 of the EPA's final RIA and Chapter 3 of the
Joint TSD. For more detail on the outputs of the OMEGA model and the
overall vehicle program costs summarized here, the reader is directed
to Chapters 3 and 5 of EPA's RIA.
    With respect to the aggregate cost estimations presented here, EPA
notes that there are a number of areas where the results of our
analysis may be conservative and, in general, EPA believes we have
directionally overestimated the costs of compliance with these new
standards, especially in not accounting for the full range of credit
opportunities available to manufacturers. For example, some cost saving
programs are considered in our analysis, such as full car/truck
trading, while others are not, such as the full suite of available off-
cycle credits.
a. New Technology Costs per Vehicle
    To develop technology costs per vehicle, EPA has used the same
methodology as that used in the recent 2012-2016 final rule, the 2010
TAR and the proposal for this rule. Individual technology direct
manufacturing costs have been estimated in a variety of ways--vehicle
and technology tear down, models developed by outside organizations,
and literature review--and indirect costs have been estimated using the
updated and revised indirect cost multiplier (ICM) approach that was
first developed for the 2012-2016 final rule.\821\ All of these
individual technology costs are described in detail in Chapter 3 of the
joint TSD. Also described there are the ICMs used in this rule and the
ways the ICMs have been updated and revised since the 2012-2016 final
rule which results in considerably higher indirect costs in this rule
than estimated in the 2012-2016 final rule. Further, we describe in
detail the adjustments to technology costs to account for manufacturing
learning and the cost reductions that result from that learning. We
note here that learning impacts are applied only to direct
manufacturing costs which differs from the 2012-2016 final rule which
applied learning to both direct and indirect costs. Learning effects in
this final rule are applied exactly as was done in the proposal.
Lastly, we have included costs associated with stranded capital (i.e.,
capital investments that are not fully recaptured by auto makers
because they would be forced to update vehicles on a more rapid
schedule than they may have intended absent this rule). Again, this is
detailed in Chapter 3 of the joint TSD.
---------------------------------------------------------------------------

    \821\ The ICM approach was updated for the proposal and has not
changed for this final rule.
---------------------------------------------------------------------------

    We requested comment on all aspects of our technology cost
analysis--the DMCs themselves, the ICMs, learning effects, etc. We
received a comment from NADA that our ICMs were too low and that we
should use a Retail Price Equivalent (RPE) approach to estimating
indirect costs rather than the ICM approach.\822\ Using the RPE
approach would result in all indirect costs incurred by industry
increasing due to regulatory demands. In contrast, the ICM approach
results in a subset of all indirect costs increasing--the subset of
indirect costs that are tied to changes in regulatory demands. For
example, healthcare costs of currently retired employees would not be
expected to increase due to a new regulation. An RPE approach would
estimate increased healthcare costs for retired employees while an ICM
approach would not. Further, the NADA comment suggested that an RPE
factor of 2x was most appropriate, despite industry filings to the
Security and Exchange Commission (SEC) that support a factor of
1.5x.\823\ EPA disagrees with both of these comments, as discussed in
more detail in Chapter <IP_ADDRESS> of the Joint TSD.
---------------------------------------------------------------------------

    \822\ See NADA (Docket Number EPA-HQ-OAR-2010-0799-9575, at page
4).
    \823\ Rogozhin, Alex, Michael Gallaher, Gloria Helfand, and
Walter McManus, ``Using Indirect Cost Multipliers to Estimate the
Total Cost of Adding New Technology in the Automobile Industry.''
International Journal of Production Economics 124 (2010): 360-368.
---------------------------------------------------------------------------

    We received comments from ICCT that our ICM approach was more
appropriate than an RPE approach, and that our updated method of
applying ICMs to estimate indirect costs was much more appropriate than
our old approach (i.e., delinking indirect costs and learning
effects).\824\
---------------------------------------------------------------------------

    \824\ See ICCT (EPA-HQ-OAR-2009-0472-7156, at page 19).
---------------------------------------------------------------------------

    We did not receive comments on our approach to manufacturer
learning. We did not receive any specific comments suggesting that our
estimates of technology direct manufacturing costs were inappropriately
high or low.
    EPA used the technology costs to build GHG and fuel consumption
reducing packages of technologies for each of 19 different vehicle
types meant to fully represent the range of baseline vehicle
technologies in the marketplace (i.e., number of cylinders, valve train

configuration, vehicle class, etc.). This package building process as
well as the process we use to determine the most cost effective
packages for each of the 19 vehicle types is summarized in Section
III.D.3 of this preamble and is detailed in Chapter 1 of EPA's final
RIA. These packages are then used as inputs to the OMEGA model to
estimate the most cost effective means of compliance with the standards
giving due consideration to the timing required for manufacturers to
implement the needed technologies. That is, we assume that
manufacturers cannot add the full suite of needed technologies in the
first year of implementation. Instead, we expect them to add
technologies to vehicles during the typical 4 to 5 year redesign cycle.
As such, we expect that every vehicle can be redesigned to add
significant levels of new technology every 4 to 5 years. Further, we do
not expect manufacturers to redesign or refresh vehicles at a pace more
rapid than the industry standard four to five year cycle.
    The results, including costs associated with the air conditioning
program and estimates of stranded capital as described in Chapter 3 of
the joint TSD, are shown in Table III-72. Not included in the costs
presented in Table III-72 are costs associated with maintenance. We
discuss maintenance costs in Section III.H.2.b, below.

                                       Table III-72--Industry Average Vehicle Costs Associated With the Standards
                                                                     [2010 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
           Model year               2017      2018      2019      2020      2021      2022      2023      2024      2025      2030      2040      2050
--------------------------------------------------------------------------------------------------------------------------------------------------------
$/car...........................      $206      $374      $510      $634      $767    $1,079    $1,357    $1,622    $1,726    $1,710    $1,710    $1,710
$/truck.........................        57       196       304       415       763     1,186     1,562     1,914     2,059     2,044     2,044     2,044
Combined........................       154       311       438       557       766     1,115     1,425     1,718     1,836     1,818     1,816     1,816
--------------------------------------------------------------------------------------------------------------------------------------------------------

b. Costs of the National Program
i. Technology Costs
    The costs presented here represent the incremental costs for newly
added technology to comply with the program. Together with the
projected increases in car and truck sales, the increases in per-car
and per-truck average costs shown in Table III-72, above result in the
total annual costs presented in Table III-73 below. Note that the costs
presented in Table III-73 do not include the fuel savings that
consumers would experience as a result of driving a vehicle with
improved fuel economy. Those impacts are presented in Section III.H.4.
Similarly, the costs presented in Table III-73 do not include the
maintenance costs that we have estimated in this final rule.
Maintenance costs, presented below, were not included in the proposal.
Note also that the costs presented here represent costs estimated to
occur presuming that the MY 2025 standards would continue in
perpetuity. Any changes to the standards would be considered as part of
a future rulemaking. In other words, the standards would not apply only
to 2017-2025 model year vehicles--they would, in fact, apply to all
2025 and later model year vehicles.

      Table III-73--Undiscounted Annual Technology Costs, & Annual Technology Costs Discounted Back to 2012
                                           [millions of 2010 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                Total annual
                          Calendar year                                Cars            Truck           costs
----------------------------------------------------------------------------------------------------------------
2017............................................................          $2,060            $334          $2,440
2020............................................................           6,530           2,320           8,860
2030............................................................          21,400          12,200          33,700
2040............................................................          24,100          13,300          37,400
2050............................................................          27,100          14,900          42,000
NPV, 3%.........................................................         336,000         186,000         521,000
NPV, 7%.........................................................         149,000          81,900         231,000
----------------------------------------------------------------------------------------------------------------
Annual costs represent undiscounted values; net present values represent annual costs discounted to 2012.

    Looking at these costs by model year gives us the technology costs
as shown in Table III-74.

                            Table III-74--Model Year Lifetime Present Value Technology Costs, Discounted Back to the 1st Year of Each MY at 3% and 7% Discount Rates
                                                                                [Millions of 2010 dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                     NPV at                                                            2017       2018       2019       2020       2021       2022       2023       2024       2025       Sum
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3%.............................................  Car..............................     $2,030     $3,650     $5,020     $6,430     $7,940    $11,400    $14,700    $18,000    $19,600    $88,800
                                                 Truck............................        330      1,100      1,670      2,290      4,280      6,670      8,750     10,700     11,600     47,400
                                                 Fleet............................      2,400      4,780      6,720      8,730     12,200     18,100     23,400     28,700     31,200    136,000
7%.............................................  Car..............................      1,990      3,580      4,930      6,320      7,800     11,200     14,400     17,700     19,300     87,200
                                                 Truck............................        323      1,080      1,640      2,250      4,200      6,540      8,590     10,500     11,400     46,500
                                                 Fleet............................      2,360      4,690      6,590      8,570     12,000     17,700     23,000     28,100     30,600    134,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ii. Maintenance Costs
    New for this final rule is consideration and quantification of
maintenance costs associated with the new technologies added to comply
with the standards. In the proposal, we requested comment on
maintenance and repair costs and whether they might increase or
decrease with the new technologies. We did not receive many comments,
but NADA did comment that the agencies should include maintenance and
repair costs in estimates of total cost of ownership (i.e., in our
payback analyses).\825\ NADA offered their Web site as a place to find
useful information on maintenance and repair costs that might be used
in our final analyses.
---------------------------------------------------------------------------

    \825\ See NADA (EPA-HQ-OAR-2010-0799-9575, p.10).
---------------------------------------------------------------------------

    Here we summarize what we have done for the final rule with respect
to maintenance costs. To make clear, we distinguish maintenance from
repair costs as follows: maintenance costs are those costs that are
required to keep a vehicle properly maintained and, as such, are
usually recommended to occur by auto makers on a regular, periodic
schedule. Examples of maintenance costs are oil and air filter changes,
tire replacements, etc. Repair costs are those costs that are
unexpected and, as such, occur randomly and uniquely for every driver,
if at all. Examples of repair costs would be parts replacement
following an accident, turbocharger replacement following a mechanical
failure, etc.
    In the joint TSD (see Chapter 3.6), we present our estimates for
maintenance cost impacts along with how we derived them. For most
technologies that we expect will be added to comply with the final
standards, we expect no impact on maintenance costs. In other words,
the new technologies have identical maintenance intervals and identical
costs per interval as the technologies they will replace. However, for
a few technologies, we do expect some maintenance costs changes. As
detailed in the Joint TSD, those technologies expected to result in a
change in maintenance costs are low rolling resistance tires levels 1
and 2 since they cost more than traditional tires and must be replaced
at similar intervals, diesel fuel filters since they must be replaced
more frequently and at higher cost than gasoline fuel filters, and
several items for full EVs (oil changes, air filter changes, engine
coolant flushes, spark plug replacements, etc.) since they do not need
to be done on full EVs.
    Using the maintenance costs and intervals presented in the Joint
TSD, we can estimate the annual maintenance cost increases/decreases
for each of these technologies relative to their reference case
gasoline counterparts. Clearly, while in the year 2017 roughly 15-16
million vehicles will be sold, very few of those vehicles will
experience any maintenance costs during their first year despite the
fact that all will have low rolling resistance tires 1 or 2 (the
typical replacement interval for tires is 40,000 miles). As such, the
estimated maintenance costs are comparitively low in the year 2017. As
more compliant vehicles enter the market in subsequent years, the
annual maintenance costs increase as maintenance intervals begin to
result in increasing numbers of vehicles incurring costs. The results
are shown in Table III-75. We provide details of these maintenance
costs in Chapter 5 of our RIA.

    Table III-75--Undiscounted Annual Maintenance Costs, and Annual Maintenance Costs Discounted Back to 2012
                                           [Millions of 2010 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                Total annual
                          Calendar year                                Cars           Trucks           costs
----------------------------------------------------------------------------------------------------------------
2017............................................................             $22             $16             $37
2020............................................................             199             131             330
2030............................................................           1,430             836           2,260
2040............................................................           2,320           1,310           3,630
2050............................................................           2,860           1,680           4,540
NPV, 3%.........................................................          24,900          14,500          39,500
NPV, 7%.........................................................           9,830           5,760          15,600
----------------------------------------------------------------------------------------------------------------
Annual costs represent undiscounted values; net present values represent annual costs discounted to 2012.

    We can also look at the costs on a model year basis by looking at
the net present value of costs and savings over the full lifetime of
each model year of vehicles. The net present value lifetime costs and
savings for each MY 2017-2025 are shown in Table III-76.

                            Table III-76--Model Year Lifetime Present Value Maintenance Costs, Discounted Back to the 1st Year of Each MY at 3% and 7% Discount Rates
                                                                                [2010 dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                    NPV at                                                           2017       2018       2019       2020       2021       2022       2023       2024       2025        Sum
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3%............................................  Car.............................       $222       $406       $600       $819     $1,040     $1,150     $1,250     $1,380     $1,490       $8,360
                                                Truck...........................        153        279        404        534        686        747        810        867        936        5,420
                                                Fleet...........................        375        684      1,000      1,350      1,730      1,890      2,060      2,240      2,430       13,800
7%............................................  Car.............................        172        314        465        634        812        887        977      1,060      1,160        6,480
                                                Truck...........................        118        214        310        411        523        570        620        669        718        4,150
                                                Fleet...........................        290        528        775      1,050      1,330      1,460      1,600      1,730      1,880       10,600
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

iii. Vehicle Program Costs
    Annual costs of the vehicle program are the annual technology costs
shown in Table III-73 and the annual maintenance costs shown in Table
III-75. Those results are shown in Table III-77.

            Table III-77--Undiscounted Annual Program Costs, and Annual Costs Discounted Back to 2012
                                           [Millions of 2010 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                Total annual
                          Calendar year                                Cars           Trucks           costs
----------------------------------------------------------------------------------------------------------------
2017............................................................          $2,080            $350          $2,470
2020............................................................           6,730           2,450           9,190
2030............................................................          22,900          13,100          35,900
2040............................................................          26,400          14,600          41,000
2050............................................................          29,900          16,600          46,500
NPV, 3%.........................................................         361,000         200,000         561,000
NPV, 7%.........................................................         159,000          87,700         247,000
----------------------------------------------------------------------------------------------------------------
Annual costs represent undiscounted values; net present values represent annual costs discounted to 2012.

    Model year lifetime costs of the vehicle program are the lifetime
technology costs shown in Table III-74 and the lifetime maintenance
costs shown in Table III-76. Those results are shown in Table III-78.

                              Table III-78--Model Year Lifetime Present Value Program Costs, Discounted Back to the 1st Year of Each MY at 3% and 7% Discount Rates
                                                                                [Millions of 2010 dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                    NPV at                                                           2017       2018       2019       2020       2021       2022       2023       2024       2025        Sum
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3%............................................  Car.............................     $2,250     $4,050     $5,620     $7,250     $8,990    $12,600    $15,900    $19,400    $21,100      $97,200
                                                Truck...........................        483      1,370      2,070      2,820      4,960      7,410      9,560     11,600     12,500       52,800
                                                Fleet...........................      2,770      5,460      7,720     10,100     14,000     19,900     25,400     30,900     33,600      150,000
7%............................................  Car.............................      2,170      3,890      5,400      6,950      8,610     12,100     15,400     18,700     20,400       93,600
                                                Truck...........................        441      1,290      1,950      2,660      4,720      7,110      9,210     11,200     12,100       50,600
                                                Fleet...........................      2,650      5,220      7,370      9,610     13,300     19,200     24,600     29,900     32,500      144,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3. Cost per Ton of Emissions Reduced
    EPA has calculated the cost per ton of GHG reductions associated
with the GHG standards on a CO2eq basis using the annual
program costs presented above and the emissions reductions described in
Section III.F. These values are presented in Table III-79 for cars,
trucks and the combined fleet. The cost per metric ton of GHG emissions
reductions has been calculated in the years 2020, 2030, 2040, and 2050
using the annual vehicle compliance costs and emission reductions for
each of those years. The value in 2050 represents the long-term cost
per ton of the emissions reduced. EPA has also calculated the cost per
metric ton of GHG emission reductions including the savings associated
with reduced fuel consumption (presented below in Section III.H.4).
This latter calculation does not include the other benefits associated
with this program such as those associated with energy security
benefits as discussed later in Section III. By including the fuel
savings, the cost per ton is generally less than $0 since the estimated
value of fuel savings outweighs the program costs.

                                                Table III-79--Annual Cost per Metric Ton of CO2eq Reduced
                                                                     [2010 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Undiscounted
                                                     Calendar Year     Undiscounted    annual pre-tax    Annual CO2eq        $/ton            $/ton
                                                                       annual costs     Fuel Savings      reduction
                                                    ...............      ($millions)      ($millions)            (mmt)        (w/o fuel         (w/ fuel
                                                                                savings)         savings)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cars..............................................             2020           $6,730           $6,000               21             $316              $34
                                                               2030           22,900           56,700              179              128             -189
                                                               2040           26,400          102,000              300               88             -252
                                                               2050           29,900          138,000              374               80             -289
Trucks............................................             2020            2,450            1,430                6              430              179
                                                               2030           13,100           29,700               92              142             -180
                                                               2040           14,600           53,400              155               94             -251
                                                               2050           16,600           73,700              196               85             -292
Combined..........................................             2020            9,190            7,430               27              340               65
                                                               2030           35,900           86,400              271              132             -186
                                                               2040           41,000          155,000              455               90             -251
                                                               2050           46,500          212,000              569               82             -291
--------------------------------------------------------------------------------------------------------------------------------------------------------

4. Reduction in Fuel Consumption and its Impacts
a. What Are the Projected Changes in Fuel Consumption?
    The CO2 standards will result in significant
improvements in the fuel efficiency of affected vehicles. Drivers of
those vehicles will see corresponding savings associated with reduced
fuel expenditures. EPA has estimated the impacts on fuel consumption
for both the tailpipe CO2 standards and the A/C credit
program. While gasoline consumption would decrease under the GHG
standards, electricity consumption would increase slightly due to the
small penetration of EVs and PHEVs (1-3% for the 2021 and 2025 MYs).
The fuel savings includes both the gasoline consumption reductions and
the electricity consumption increases. Note that the total number of
miles that vehicles are driven each year is different under the control
case than in the reference case due to the ``VMT rebound effect,''
which is discussed in Section III.H.4.c and in Chapter 4 of the joint
TSD. EPA also notes that consumers who drive more than our average
estimates for vehicle miles traveled (VMT) will experience more fuel
savings; consumers who drive less than our average VMT estimates will
experience less fuel savings.
    The expected impacts on fuel consumption are shown in Table III-80.
The gallons reduced and kilowatt hours increased (kWh) as shown in the
tables reflect impacts from the CO2 standards, including the
A/C credit program, and include increased consumption resulting from
the VMT rebound effect.

                 Table III-80--Fuel Consumption Impacts of the Standards and A/C Credit Programs
----------------------------------------------------------------------------------------------------------------
                                                          Petroleum-based
                     Calendar year                            gasoline       Petroleum-based      Electricity
                                                             reference       gasoline reduced      increased
                                                         (million gallons)  (million gallons)  (million kWh) \a\
----------------------------------------------------------------------------------------------------------------
2017...................................................            128,136                197                125
2020...................................................            124,513              2,149              1,242
2030...................................................            129,995             22,986             14,026
2040...................................................            150,053             38,901             24,661
2050...................................................            177,323             48,743             30,943
                                                        --------------------------------------------------------
    Total..............................................          5,464,349            903,298            564,873
----------------------------------------------------------------------------------------------------------------
\a\ Electricity increase by vehicles not by power plants.

b. What are the Fuel Savings to the Consumer?
    Using the fuel consumption estimates presented in Section
III.H.4.a, EPA can calculate the monetized fuel savings associated with
the standards. To do this, we multiply reduced fuel consumption in each
year by the corresponding estimated average fuel price in that year,
using the reference case taken from the AEO 2012 Early Release.\826\
These estimates do not account for the significant uncertainty in
future fuel prices; the monetized fuel savings would be understated if
actual future fuel prices are higher (or overstated if fuel prices are
lower) than estimated. AEO is a standard reference used by NHTSA and
EPA and many other government agencies to estimate the projected price
of fuel. This has been done using both the pre-tax and post-tax
gasoline prices. Since the post-tax gasoline prices are the prices paid
at fuel pumps, the fuel savings calculated using these prices represent
the savings consumers would see. The pre-tax fuel savings are those
savings that society would see. Assuming no change in gasoline tax
rates, the difference between these two columns represents the
reduction in fuel tax revenues that will be received by state and
federal governments--about $85 million in 2017 and $4.7 billion by
2025. These results are shown in Table III-81. Note that in Section
III.H.9, the overall benefits and costs of the rule are presented and,
for that reason, only the pre-tax fuel savings are presented there.
---------------------------------------------------------------------------

    \826\ In the Executive Summary to AEO2012 Early Release, the
Energy Information Administration describes the reference case. They
state that, ``Projections * * * in the Reference case focus on the
factors that shape U.S. energy markets in the long term, under the
assumption that current laws and regulations remain generally
unchanged throughout the projection period. The AEO2012 Reference
case provides the basis for examination and discussion of energy
market trends and serves as a starting point for analysis of
potential changes in U.S. energy policies, rules, or regulations or
potential technology breakthroughs.''

          Table III-81--Undiscounted Annual Fuel Savings, & Annual Fuel Savings Discounted Back to 2012
                                           [Millions of 2010 dollars]
----------------------------------------------------------------------------------------------------------------
                                     Gasoline        Gasoline       Electricity     Total fuel      Total fuel
          Calendar year               savings         savings          costs          savings         savings
                                       (pre-tax)         (taxed)  ..............       (pre-tax)         (taxed)
----------------------------------------------------------------------------------------------------------------
2017............................            $662            $747           $11.5            $651            $735
2020............................           7,540           8,440             114           7,430           8,320
2030............................          87,900          97,000           1,450          86,400          95,500
2040............................         158,000         172,000           2,800         155,000         169,000
2050............................         216,000         233,000           3,800         212,000         229,000
NPV, 3%.........................       1,630,000       1,780,000          28,100       1,600,000       1,750,000
NPV, 7%.........................         617,000         677,000          10,600         607,000         666,000
----------------------------------------------------------------------------------------------------------------
Annual values represent undiscounted values; net present values represent annual costs discounted to 2012.

    As shown in Table III-81, the agencies are projecting that
consumers would realize very large fuel savings as a result of the
standards. As discussed further in the introductory paragraphs of
Section III.H.1, it is a conundrum from an economic perspective that
these large fuel savings have not been provided by automakers and
purchased by consumers. A number of behavioral and market phenomena may
lead to this disparity between the fuel economy that makes financial
sense to consumers and the fuel economy they purchase. Regardless how
consumers make their decisions on how much fuel economy to purchase,
EPA expects that, in the aggregate, they will gain these fuel savings,
which will provide actual money in consumers' pockets.
c. VMT Rebound Effect
    The VMT rebound effect refers to the increase in vehicle use that
results if an increase in fuel efficiency lowers the cost per mile of
driving. Consistent with the proposal, EPA is using an estimate of 10
percent for the VMT rebound effect for this final rule (i.e., we assume
a 10 percent decrease in fuel cost per mile from our standards would
result in a 1 percent increase in VMT).
    As we discussed in the proposed rule, in the MYs 2012-2016
rulemaking, and more fully in Chapter 4 of the Joint TSD, this value
was not derived from a single point estimate or from a particular
study, but instead represents a reasonable compromise between
historical estimates and projected future estimates. This value is
consistent with the VMT rebound estimate for the most recent time
period analyzed in the Small and Van Dender 2007 paper,\827\ and falls
within the range of the larger body of historical work on the VMT
rebound effect.\828\ Recent work by David Greene on the VMT rebound
effect for light-duty vehicles in the U.S. supports the hypothesis that
the rebound effect is decreasing over time,\829\ which could mean that
rebound estimates based on recent time period data may be more reliable
than historical estimates that are based on older time period data. New
work by Hymel, Small, and Van Dender also supports the proposition that
the VMT rebound effect is declining over time, although the Hymel et
al. estimates are higher than the 2007 Small and Van Dender
estimates.\830\ Furthermore, by using an estimate of the future VMT
rebound effect, analysis by Small and Greene show that the rebound
effect could be in the range of 5 percent or lower.\831\
---------------------------------------------------------------------------

    \827\ Small, K. and K. Van Dender, 2007. ``Fuel Efficiency and
Motor Vehicle Travel: The Declining Rebound Effect'', The Energy
Journal, vol. 28, no. 1, pp. 25-51 (Docket EPA-HQ-OAR-2010-0799-
0755).
    \828\ Sorrell, S. and J. Dimitropoulos, 2007. ``UKERC Review of
Evidence for the Rebound Effect, Technical Report 2: Econometric
Studies'', UKERC/WP/TPA/2007/010, UK Energy Research Centre, London,
October (Docket EPA-HQ-OAR-2010-0799).
    \829\ Greene, David, 2012. ``Rebound 2007: Analysis of National
Light-Duty Vehicle Travel Statistics,'' Energy Policy, vol. 41, pp.
14-28. (Docket EPA-HQ-OAR-2010-0799)
    \830\ Hymel, Kent M., Kenneth A. Small, and Kurt Van Dender,
``Induced demand and rebound effects in road transport,''
Transportation Research Part B: Methodological, Volume 44, Issue 10,
December 2010, Pages 1220-1241, ISSN 0191-2615, DOI: 10.1016/
j.trb.2010.02.007. (Docket EPA-HQ-OAR-2010-0799)
    \831\ Report by Kenneth A. Small of University of California at
Irvine to EPA, ``The Rebound Effect from Fuel Efficiency Standards:
Measurement and Projection to 2030'', June 12, 2009 (Docket EPA-HQ-
OAR-2010-0799). See also Greene, 2012.
---------------------------------------------------------------------------

    We received four comments suggesting values both lower and higher
than our proposed value of the VMT rebound effect. The Consumer
Federation of America suggested that we use 5 percent in our national
analysis since it would better reflect the income effect (consumers
having more money in their pockets to spend on driving) and not the
price effect (consumers wanting to drive more because it costs less)
associated with lower driving costs. The International Council for
Clean Transportation (ICCT) suggested we should rely solely on
projected estimates that account for future incomes and fuel prices,
which tend to be lower than 10 percent for the years covered by this
rule. The Defour Group suggested using an estimate of 20 percent or
higher; it commented that it believes there are potential
methodological shortcomings in recent studies and suggested using the
elasticity of demand for gasoline as a basis for estimating the VMT
rebound effect. Finally Plant Oil Powered Diesel Fuel Systems, Inc.
(POP Diesel) cited a recent study in Germany based on household survey
data as evidence that EPA had underestimated the VMT rebound effect.
POP Diesel also suggested that EPA should account for the energy and
GHG emissions impact associated with the so-called ``indirect rebound
effects'' of consumers using their increased disposable income from
fuel savings to purchase goods and services that were produced with
energy or that consume energy. POP Diesel also commented that there is
a potential for consumers to shift to larger, more powerful vehicles
that are less fuel-efficient in response to our standards. POP Diesel
described this as a direct rebound effect; however, since this behavior
does not influence VMT, we would classify it as another type of
indirect effect unrelated to the direct VMT rebound effect.
    Commenters did not provide any persuasive new data or analysis that
justify revising the 10 percent value at this time. We relied on a wide
range of peer-reviewed literature to inform our estimate of the VMT
rebound effect (as discussed above and in Chapter 4 of the Joint TSD),
including recent studies and projected estimates as well as a larger
body of historic literature using both aggregate and household level
data. Most of the literature we reviewed controls for income (since all
sources of income, not just income associated with fuel savings, can
influence VMT) and, therefore, only captures the price effect. We
recognize the merit of projected estimates of the VMT rebound effect
that take into account future incomes, fuel efficiency, and fuel prices
over the period impacted by our rulemaking, particularly since recent
studies have found evidence that the VMT rebound effect is declining
over time. Estimates of the elasticity of demand for gasoline, while a
useful point of comparison, are not appropriate for measuring the VMT
rebound effect because they reflect consumer selection of vehicle fuel
efficiency in addition to VMT.\832\ In response to the comment that we
should consider the rebound effect estimates from a German study, we
focused on U.S.-based studies of the VMT rebound effect to inform our
analysis because driver behavior in the U.S. differs from driver
behavior in other countries (e.g., there is likely to be less elastic
demand for VMT in the U.S. than Germany because of longer driving
distances and fewer transportation alternatives).\833\
---------------------------------------------------------------------------

    \832\ We sought comment in the MYs 2012-2016 rulemaking on using
the elasticity of demand for gasoline to estimate the VMT rebound
effect. We received one comment during that rulemaking, from ICCT,
that this elasticity should not be used to guide the choice of a
value for the VMT rebound effect.
    \833\ Frondel, Manuel and Vance, Colin, 2011. ``Re-Identifying
the Rebound--What About Asymmetry?'', Ruhr Economic Papers
276. (Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------

    We are not aware of any data on potential indirect rebound effects
(distinct from the VMT rebound effect), if any, from this rule
associated with consumer purchase of energy-intensive goods and
services with the disposable income they gain from fuel savings.
Research on indirect rebound effects is nascent and POP Diesel did not
provide analysis in its comments indicating an appropriate method or
value to use to estimate these putative effects from our rule. We
believe it is unreasonable to consider potential indirect rebound
effects, if any, from our rule based on

the commenter's speculative assertions. As to the comment that
consumers may shift to larger, more powerful vehicles that are less
fuel-efficient as a type of indirect rebound response to our standards,
we note that we have explained above that there is persuasive evidence
that the standards do not create an incentive to upsize vehicles and
that the footprint attribute provides incentives to make fuel economy
and greenhouse gas emission improvements across the entire spectrum of
vehicle footprints. See preamble sections III.D.7 (analysis of car and
truck trading) and joint TSD section 2.1. If the comment refers solely
to potential consumer purchasing behavior, we note that predictions of
such behavior are highly uncertain. We recognize that there is a
potential for consumers to shift to larger, more powerful vehicles that
are less fuel-efficient just as there is a potential for consumers to
buy even more fuel-efficient vehicles than we predict in our analysis
\834\; these are potential consumer responses to our standards
(unrelated to the VMT rebound effect) that we plan to monitor (see
Section III.H.1.a for a discussion of the challenge of predicting
consumer vehicle purchase decisions, section II.C and TSD Chapter 2.1
and 2.2. for a discussion of how our rule sets attribute-based
standards that reduce incentives to change the size distribution of
vehicles in the fleet, and section II.B.5 for information on the mid-
term evaluation).
---------------------------------------------------------------------------

    \834\ Comments from the Institute for Policy Integrity suggest
our rule could make fuel-efficient vehicles more popular and that we
have therefore underestimated the benefits of our rule (see their
discussion of ``positionality'' and the ``bandwagon effect'' in EPA-
HQ-OAR-2010-0799-9480-A1, pp. 19-21).
---------------------------------------------------------------------------

    We sought comment on the potential that the VMT rebound effect
could be lower than estimates in the literature if drivers respond more
to changes in fuel prices than fuel efficiency, price rises than
decreases, and price shocks than gradual changes (discussed more fully
in Chapter <IP_ADDRESS> of the Joint TSD), but we did not receive any
comments on these topics. See 76 FR 75126.
    We also sought comment on whether there may be differences in the
way consumers respond to changes in the cost per mile of driving that
result from driving an electric-powered vehicle instead of a
conventional gasoline vehicle. We did not receive any comments on this
topic and therefore continue to assume in this final rule that the VMT
rebound effect will be the same whether a consumer is driving a
conventional gasoline vehicle or a vehicle powered by grid electricity.
    Chapter 4.2.5 of the Joint TSD reviews the relevant literature and
discusses in more depth the reasoning for the VMT rebound value used
here. The VMT rebound effect is also discussed in Section II.E of the
preamble. A summary of comments on the rebound effect and our more
detailed response to those comments is available in section 15 of EPA's
Response to Comments document.
5. Cost of Ownership, Payback Period and Lifetime Savings on New
Vehicle Purchases
    Here we look at the cost of owning a new vehicle complying with the
standards and the payback period--the point at which savings exceed
costs. For example, a new 2025 MY vehicle is estimated to cost roughly
$1,800 more (on average, and relative to the reference case vehicle)
due to the addition of new GHG reducing/fuel economy improving
technology. This new technology will result in lower fuel consumption
and, therefore, savings in fuel expenditures. But how many months or
years would pass before the fuel savings exceed the upfront costs?
    Table III-82 presents our estimate of increased costs associated
with owning a new 2025MY vehicle. The table uses annual miles driven
(vehicle miles traveled, or VMT) and survival rates consistent with the
emission and benefits analyses presented in Chapter 4 of the Joint TSD.
The control case includes fuel savings associated with A/C controls.
Newly included here as opposed to our proposed analysis, are estimated
maintenance costs that owners of these vehicles will likely incur.
Further, this analysis does not include other private impacts, such as
reduced refueling events, or other societal impacts, such as the
potential rebound miles driven or the value of driving those rebound
miles, or noise, congestion and accidents, since the focus is meant to
be on those factors consumers think about most while in the showroom
considering a new car purchase and those factors that result in more or
fewer dollars in their pockets. To estimate the upfront vehicle cost
(i.e., the lifetime increased cost discounted back to purchase), we
have included not only the sales tax on the new car purchase but also
the increased insurance premiums that would result from the more
valuable vehicle. Car/truck fleet weighting is handled as described in
Chapter 1 of the Joint TSD. The present value of the increased vehicle
costs shown in the table are $2,389 at a 3% discount rate and $2,300 at
a 7% discount rate.

                                     Table III-82--Increased Costs on a 2025MY New Vehicle Purchase Via Cash (2010$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Cumulative
                                                             Increased       Increased       Increased         Total        discounted      Cumulative
                    Year of ownership                     purchase costs     insurance      maintenance      increased       increased      discounted
                                                                \a\            costs           costs           costs        costs at 3%      increased
                                                                                \b\         costs at 7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................         -$1,937            -$34            -$14         -$1,984         -$1,984         -$1,984
2.......................................................               0             -33             -13             -46          -2,029          -2,027
3.......................................................               0             -31             -13             -44          -2,070          -2,065
4.......................................................               0             -29             -12             -41          -2,108          -2,099
5.......................................................               0             -28             -12             -39          -2,143          -2,129
6.......................................................               0             -26             -11             -38          -2,175          -2,156
7.......................................................               0             -25             -11             -35          -2,205          -2,179
8.......................................................               0             -23             -10             -33          -2,232          -2,200
                         [darr]                               [darr]          [darr]          [darr]          [darr]          [darr]          [darr]
NPV, 3%.................................................          -1,937            -313            -139          -2,389          -2,389  ..............
NPV, 7%.................................................          -1,937            -254            -109          -2,300  ..............          -2,300
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ [insert necessary notes].

    However, most people purchase a new vehicle using credit rather
than paying cash up front. A common car loan today is a five year, 60
month loan. The national average interest rate for a 4 or 5 year new
car loan was 5.35 percent.\835\ For the credit purchase, the increased
costs would look like that shown in Table III-83.
---------------------------------------------------------------------------

    \835\ ``National Auto Loan Rates for July 21, 2011,'' http://www.bankrate.com/finance/auto/national-auto-loan-rates-for-july-21-2011.aspx, accessed 7/26/11.

                                   Table III-83--Increased Costs on a 2025 MY New Vehicle Purchase Via Credit (2010$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Cumulative      Cumulative
                                                             Increased       Increased       Increased         Total        discounted      discounted
                    Year of ownership                     purchase costs     insurance      maintenance      increased       increased       increased
                                                                \a\            costs           costs           costs        costs at 3%    costs at 7% \
                                                                                \b\             b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................           -$452            -$34            -$14           -$500           -$500           -$500
2.......................................................            -452             -33             -13            -497            -982            -964
3.......................................................            -452             -31             -13            -495          -1,449          -1,397
4.......................................................            -452             -29             -12            -493          -1,900          -1,799
5.......................................................            -452             -28             -12            -491          -2,337          -2,174
6.......................................................               0             -26             -11             -38          -2,369          -2,201
7.......................................................               0             -25             -11             -35          -2,399          -2,224
8.......................................................               0             -23             -10             -33          -2,425          -2,245
                         [darr]                               [darr]          [darr]          [darr]          [darr]          [darr]          [darr]
NPV, 3%.................................................          -2,131            -313            -139          -2,583          -2,583  ..............
NPV, 7%.................................................          -1,982            -254            -109          -2,345  ..............          -2,345
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ This uses the same increased cost as Table III[dash]82 but spreads it out over 5 years assuming a 5 year car loan at 5.35 percent.
\b\ Calculated using AEO 2012 early release reference case fuel prices including taxes.

    The above discussion covers costs, but what about the fuel savings
side. Of course, fuel savings are the same whether a vehicle is
purchased using cash or credit. Table III-84 shows the fuel savings for
a 2025MY vehicle while excluding rebound driving.

                                                 Table III-84--Fuel Savings for a 2025MY Vehicle (2010$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Cumulative      Cumulative
                                                                                discounted      discounted
            Year of ownership               Fuel price     Miles driven   Reference fuel   Control fuel    Fuel savings    fuel savings    fuel savings
                                                                                at 3%           at 7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................           $3.87          16,779          $2,407          $1,702            $705            $695            $682
2.......................................            3.91          16,052           2,325           1,644             681           1,347           1,298
3.......................................            3.94          15,539           2,265           1,601             664           1,964           1,859
4.......................................            3.96          14,902           2,183           1,543             640           2,541           2,365
5.......................................            4.00          14,424           2,134           1,508             626           3,089           2,827
6.......................................            4.04          13,941           2,082           1,471             611           3,608           3,248
7.......................................            3.96          13,106           1,912           1,350             562           4,072           3,610
8.......................................            3.96          11,866           1,739           1,229             510           4,480           3,917
                 [darr]                       [darr]          [darr]          [darr]          [darr]          [darr]          [darr]          [darr]
NPV, 3%.................................  ..............  ..............          25,261          17,859           7,402           7,402  ..............
NPV, 7%.................................  ..............  ..............          19,354          13,680           5,674  ..............           5,674
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Fuel prices include taxes; miles driven exclude rebound miles.

    We can now compare the cumulative discounted costs to the
cumulative discounted fuel savings to determine the point at which
savings begin to exceed costs. This comparison is shown in Table III-85
for the 3% discounting case and in Table III-86 for the 7% discounting
case.

               Table III-85--Payback Period for Cash & Credit Purchases--3% Discount Rate (2010$)
----------------------------------------------------------------------------------------------------------------
                                   Cumulative      Cumulative
                                   discounted      discounted      Cumulative      Cumulative       Cumulative
       Year of ownership            increased       increased      discounted    discounted net   discounted net
                                   costs--cash    costs--credit   fuel savings    savings--cash  savings--credit
                                   purchase\b\     purchase\b\                      purchase         purchase
----------------------------------------------------------------------------------------------------------------
1..............................         -$1,984           -$500            $695         -$1,290             $195
2..............................          -2,029            -982           1,347            -682              365
3..............................          -2,070          -1,449           1,964            -106              515
4..............................          -2,108          -1,900           2,541             433              641
5..............................          -2,143          -2,337           3,089             946              752
6..............................          -2,175          -2,369           3,608           1,433            1,239
7..............................          -2,205          -2,399           4,072           1,867            1,673
8..............................          -2,232          -2,425           4,480           2,249            2,055

             [darr]                  [darr]          [darr]          [darr]          [darr]           [darr]
NPV, 3%........................          -2,389          -2,583           7,402           5,013            4,819
----------------------------------------------------------------------------------------------------------------

               Table III-86--Payback Period for Cash & Credit Purchases--7% Discount Rate (2010$)
----------------------------------------------------------------------------------------------------------------
                                    Cumulative      Cumulative                                      Cumulative
                                    discounted      discounted      Cumulative      Cumulative    discounted net
        Year of ownership            increased       increased      discounted    discounted net     savings--
                                    costs--cash    costs--credit   fuel savings    savings--cash      credit
                                   purchase \b\    purchase \b\                      purchase        purchase
----------------------------------------------------------------------------------------------------------------
1...............................         -$1,984           -$500            $682         -$1,302            $183
2...............................          -2,027            -964           1,298            -729             334
3...............................          -2,065          -1,397           1,859            -206             462
4...............................          -2,099          -1,799           2,365             266             565
5...............................          -2,129          -2,174           2,827             697             653
6...............................          -2,156          -2,201           3,248           1,092           1,047
7...............................          -2,179          -2,224           3,610           1,431           1,386
8...............................          -2,200          -2,245           3,917           1,717           1,672
             [darr]                   [darr]          [darr]          [darr]          [darr]          [darr]
NPV, 7%.........................          -2,300          -2,345           5,674           3,375           3,330
----------------------------------------------------------------------------------------------------------------

    Table III-85 shows that early in the 4th year of ownership (3.2
years), the savings have started to outweigh the costs of the cash
purchase. More interestingly, the savings immediately outweigh the cost
of a credit purchase and, in fact, this is true even in the first month
of ownership when the increased cost on the monthly car loan payment at
$42 and the first month's fuel savings are $59 and, presumably, no
maintenance costs have yet been incurred (none of these values are
shown since the tables present annual values). So, for a new car
purchaser who does not keep the vehicle for the full lifetime, the
increased costs will payback within 4 years. For that rare owner that
keeps the vehicle for its full life, the payback period would be the
point at which the savings outweigh the full lifetime costs which
occurs somewhat later since more costs are being included. For this
case, referring again to Table III-85, we want the point at which the
fuel savings exceed $2,389 or $2,583 for cash and credit purchases,
respectively. Those payback periods would be 3.7 years for the cash
purchase and 4.1 years for the credit purchase. Note that the full
lifetime net savings amount to $5,013 for the cash purchase and $4,819
for the credit purchase. These very large net savings may not be
realized by many individual owners since very few people keep vehicles
for their full lifetime. However, those savings would be realized in
combination by all owners of the vehicle.
    Table III-86 shows the same information using a 7 percent discount
rate. Here, the fuel savings being to outweigh the costs in 3.4 years
for the cash purchase and within the first year for the credit
purchase. For the full lifetime owner, the lifetime payback period
would be 3.9 years for the cash purchase and 4.0 years for the credit
purchase. The full lifetime net savings would be $3,375 for the cash
purchase and $3,330 for the credit purchase.
    Note that throughout this consumer payback discussion, the analysis
reflects the average number of vehicle miles traveled per year. Drivers
who drive more miles than the average would incur fuel-related savings
more quickly and, therefore, the payback would come sooner. Drivers who
drive fewer miles than the average would incur fuel related savings
more slowly and, therefore, the payback would come later.
    Note also that the insurance costs and sales taxes included here in
the cost of ownership analysis have not been included in the benefit-
cost analysis (BCA) because those costs are transfer payments and have
no net impact on the societal costs of interest in a BCA. Likewise, the
fuel savings presented here include taxes since those are the cost
incurred by drivers. However, fuel taxes are not included in the BCA
since, again, they are transfer payments. Lastly, in this cost of
ownership analysis, we have not included rebound miles in determining
maintenance costs or fuel savings, and we have not included other
private benefits/costs such as the value of driving rebound miles or
reduced time spent refueling since we do not believe that consumers
consider such impacts in their daily lives. In the BCA, we always
include rebound miles in estimating maintenance costs and fuel savings,
and we include the other private benefits/costs listed here.
6. CO2 Emission Reduction Benefits
    EPA has assigned a dollar value to reductions in CO2
emissions using global estimates of the social cost of carbon (SCC) in
the primary benefits analysis for this rule. The SCC is an estimate of
the monetized damages associated with an incremental increase in carbon
emissions in a given year. It is intended to include (but is not
limited to) changes in net agricultural productivity, human health,
property damages from increased flood risk, and the value of ecosystem
services due to climate change. The SCC estimates used in this analysis
were developed through an interagency process that included EPA, DOT/
NHTSA, and other executive branch entities, and concluded in February
2010. The interagency group focused on global SCC values because
emissions of CO2 involve a global externality: Greenhouse
gases contribute to damages around the world wherever they are emitted.
Consequently, to address the global nature of the climate change
problem, the SCC must

incorporate the full (global) damages caused by GHG emissions.
Furthermore, climate change occurs over very long time horizons and
represents a problem that the United States cannot solve independently.
We first used these SCC estimates in the benefits analysis for the
2012-2016 light-duty GHG rulemaking; see 75 FR 25520. We have continued
to use these estimates in other rulemaking analyses, including the
heavy-duty GHG rulemaking; see 76 FR 57332. The SCC Technical Support
Document (SCC TSD) provides a complete discussion of the methods used
to develop these SCC estimates.\836\
---------------------------------------------------------------------------

    \836\ Docket ID EPA-HQ-OAR-2010-0799-0737, Technical Support
Document: Social Cost of Carbon for Regulatory Impact Analysis Under
Executive Order 12866, Interagency Working Group on Social Cost of
Carbon, with participation by Council of Economic Advisers, Council
on Environmental Quality, Department of Agriculture, Department of
Commerce, Department of Energy, Department of Transportation,
Environmental Protection Agency, National Economic Council, Office
of Energy and Climate Change, Office of Management and Budget,
Office of Science and Technology Policy, and Department of Treasury
(February 2010). Also available at http://www.epa.gov/oms/climate/regulations/scc-tsd.pdf.
---------------------------------------------------------------------------

    The interagency group selected four SCC values for use in
regulatory analyses, which we have applied in this analysis: $5, $22,
$37, and $68 per metric ton of CO2 emissions in 2010, in
2010 dollars.\837\ The first three values are based on the average SCC
from three integrated assessment models, at discount rates of 5, 3, and
2.5 percent, respectively. SCCs at several discount rates are included
because the literature shows that the SCC is quite sensitive to
assumptions about the discount rate, and because no consensus exists on
the appropriate rate to use in an intergenerational context. The fourth
value is the 95th percentile of the SCC from all three models at a 3
percent discount rate. It is included to represent higher-than-expected
impacts from temperature change further out in the tails of the SCC
distribution. Low probability, high impact events are incorporated into
all of the SCC values through explicit consideration of their effects
in two of the three models as well as the use of a probability density
function for equilibrium climate sensitivity in all three models.
Treating climate sensitivity probabilistically allows the estimation of
SCC at higher temperature outcomes, which lead to higher projections of
damages.
---------------------------------------------------------------------------

    \837\ The SCC estimates were converted from 2008 dollars to 2010
dollars using a GDP price deflator (1.02). (EPA originally updated
the interagency SCC estimates from 2007 to 2008 dollars in the 2012-
2016 light-duty GHG rulemaking using a GDP price deflator of 1.021).
All price deflators were obtained from the Bureau of Economic
Analysis, National Income and Product Accounts Table 1.1.4, Prices
Indexes for Gross Domestic Product.
---------------------------------------------------------------------------

    The SCC increases over time because future emissions are expected
to produce larger incremental damages as physical and economic systems
become more stressed in response to greater climatic change. Note that
the interagency group estimated the growth rate of the SCC directly
using the three integrated assessment models rather than assuming a
constant annual growth rate. This helps to ensure that the estimates
are internally consistent with other modeling assumptions. Table III-87
presents the SCC estimates used in this analysis.
    When attempting to assess the incremental economic impacts of
carbon dioxide emissions, the analyst faces a number of serious
challenges. A recent report from the National Academies of Science
points out that any assessment will suffer from uncertainty,
speculation, and lack of information about (1) future emissions of
greenhouse gases, (2) the effects of past and future emissions on the
climate system, (3) the impact of changes in climate on the physical
and biological environment, and (4) the translation of these
environmental impacts into economic damages.\838\ As a result, any
effort to quantify and monetize the harms associated with climate
change will raise serious questions of science, economics, and ethics
and should be viewed as provisional.
---------------------------------------------------------------------------

    \838\ National Research Council (2009). Hidden Costs of Energy:
Unpriced Consequences of Energy Production and Use. National
Academies Press. See docket ID EPA-HQ-OAR-2010-0799-0738.
---------------------------------------------------------------------------

    The interagency group noted a number of limitations to the SCC
analysis, including the incomplete way in which the integrated
assessment models capture catastrophic and non-catastrophic impacts,
their incomplete treatment of adaptation and technological change,
uncertainty in the extrapolation of damages to high temperatures, and
assumptions regarding risk aversion. The limited amount of research
linking climate impacts to economic damages makes the interagency
modeling exercise even more difficult. As noted in the SCC TSD, the
interagency group hopes that over time researchers and modelers will
work to fill these gaps and that the SCC estimates used for regulatory
analysis by the Federal government will continue to evolve with
improvements in modeling.
    The Environmental Defense Fund (EDF), the Institute for Policy
Integrity (IPI), and the Natural Resources Defense Council (NRDC)
discussed these limitations and stated that EPA should update the SCC
estimates. These commenters provided specific methodological
recommendations that focused on issues such as discount rate selection,
evaluation of catastrophic impacts and non-monetized impacts, and risk
aversion. EPA has considered each of the commenters' recommendations to
update the SCC estimates and to modify the methodology in the context
of this rulemaking. However, EPA has determined that these
recommendations require additional research, review, and public comment
before we can apply them to a rulemaking context. EPA has therefore
continued to use the SCC estimates developed through the 2009-2010
interagency process in this rulemaking, consistent with the proposal.
See the EPA Response to Comments document, Section 18.4.1, for detailed
responses to these recommendations.
    On the other hand, the Institute for Energy Research disagreed with
the use of SCC in general to value GHG benefits, describing it as an
unsupportable metric. EPA disagrees with this comment and notes that
the SCC estimates were developed through an extensive, interagency
process using a defensible set of input assumptions that are grounded
in the existing literature. In this way, key uncertainties and model
differences more transparently and consistently inform the range of SCC
estimates used in the rulemaking process. In addition, these estimates
have been subject to public comment through multiple rulemaking
processes.\839\ See EPA's Response to Comments document for a more
detailed response to this comment.
---------------------------------------------------------------------------

    \839\ For example, see: (1) EPA/DOT Rulemaking to establish
Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate
Average Fuel Economy Standards (75 FR 25324; 5/7/10); (2) Greenhouse
Gas Emissions Standards and Fuel Efficiency Standards for Medium-
and Heavy-Duty Engines and Vehicles (76 FR 57106; 9/15/11); and (3)
Oil and Natural Gas Sector: New Source Performance Standards and
National Emission Standards for Hazardous Air Pollutants Reviews (77
FR 49490; August 16, 2012).
---------------------------------------------------------------------------

    Another limitation of the primary benefits analysis is that it does
not include the valuation of non-CO2 GHG impacts (i.e.,
CH4, N2O, and HFCs). The interagency group did
not directly estimate the social costs of non-CO2 GHG
emissions when it developed the current social cost of CO2
values. One way to approximate the value of marginal non-CO2
GHG emission reductions in the absence of direct model estimates is to
convert the reductions to CO2-equivalents which may then be
valued using the SCC. Conversion to CO2-e is typically done

using the global warming potential (GWP) for the non-CO2
gas. We refer to this as the ``GWP approach.''
    Recognizing that non-CO2 GHG impacts associated with
this rulemaking (net reductions in CH4, N2O, and
HFCs) would provide economic benefits to society, EPA requested comment
on a methodology to value such impacts. The Center for Biological
Diversity, EDF, IPI, and NRDC strongly encouraged EPA to value non-
CO2 GHG impacts associated with this final rule. EDF and
NRDC suggested that EPA use the GWP approach, and EDF also recommended
using direct model estimates and presenting a range of estimates in the
final rule. Aside from the Institute for Energy Research, which
disagreed with use of SCC in general to value GHG impacts, none of the
commenters opposed the valuation of non-CO2 GHG impacts.
    While the GWP approach would provide an approximation of the
monetized value of the non-CO2 GHG reductions anticipated
from this rule, for a variety of reasons it produces estimates that are
less accurate than those obtained from direct model computations (see
RIA Chapter 7.1 for detailed discussion). These reasons include the
differences in atmospheric lifetime of non-CO2 gases
relative to CO2. This is a potentially confounding issue
given that the social cost of GHGs is based on a discounted stream of
damages that are non-linear in temperature. For example, CH4
has an expected adjusted atmospheric lifetime of about 12 years and
associated GWP of 25 (IPCC Fourth Assessment Report (AR4) 100-year GWP
estimate). Gases with a relatively shorter lifetime, such as methane,
have impacts that occur primarily in the near term and thus are not
discounted as heavily as those caused by longer-lived gases, such as
CO2, while the GWP treats additional forcing the same
independent of when it occurs in time. Furthermore, the baseline
temperature change is lower in the near term and therefore the
additional warming from relatively short lived gases will have a lower
marginal impact relative to longer lived gases that have an impact
further out in the future when baseline warming is higher. In addition,
impacts other than temperature change also vary across gases in ways
that are not captured by GWP. For instance, CO2 emissions,
unlike CH4, N2O, or HFCs, will result in
CO2 passive fertilization to plants.
    A limited number of studies in the published literature explore the
implications of using a GWP versus a direct estimation approach to
quantify the benefits of changes in non-CO2 GHG emissions
from a given policy.\840\ One recent working paper (Marten and Newbold,
2011), found that the GWP-weighted benefit estimates for CH4
and N2O are likely to be lower than those that would be
derived using a directly modeled social cost of these gases for a
variety of reasons.\841\ The GWP reflects only the integrated radiative
forcing of a gas over 100 years. In contrast, the directly modeled
social cost differs from the GWP because the differences in timing of
the warming between gases are explicitly modeled, the non-linear
effects of temperature change on economic damages are included, and
rather than treating all impacts over a hundred years equally, the
modeled social cost applies a discount rate but calculates impacts
through the year 2300.
---------------------------------------------------------------------------

    \840\ For example: Hope, C. (2005) ``The climate change benefits
of reducing methane emissions.'' Climatic Change, 68(1-2):21-39. See
also Stephanie Waldhoff, David Anthoff, Steven Rose, and Richard
S.J. Tol (2011). The Marginal Damage Costs of Different Greenhouse
Gases: An Application of FUND. Economics Discussion Papers, No 2011-
43, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2011-43.
    \841\ Marten, A. and S. Newbold. 2011. ``Estimating the Social
Cost of Non-CO2 GHG Emissions: Methane and Nitrous
Oxide.'' NCEE Working Paper Series 11-01. http://yosemite.epa.gov/ee/epa/eed.nsf/WPNumber/2011-01?opendocument.
Accessed May 24, 2012.
---------------------------------------------------------------------------

    In the absence of direct model estimates from the interagency
analysis, EPA has used the GWP approach to estimate the dollar value of
the non-CO2 benefits of this rule in a sensitivity analysis.
Specifically, the EPA converted each non-CO2 GHG
(CH4, N2O, HFC-134a) to CO2
equivalents using the GWP of each gas, then multiplied these
CO2 equivalent emission reductions by the social cost of
carbon developed by the 2009-2010 interagency process. EPA has
presented these estimates for illustrative purposes in a sensitivity
analysis, i.e., the estimates are not included in the total benefit
estimate of this rulemaking. EPA views the GWP approach as an interim
method for analysis until we develop values for non-CO2
GHGs. EPA also recently used this approach to estimate the
CH4 co-benefits in a sensitivity analysis for the New Source
Performance Standards final rule for oil and gas exploration.\842\ The
methane co-benefits were presented for illustrative purposes and
therefore not included in the total benefit estimate for the
rulemaking.
---------------------------------------------------------------------------

    \842\ EPA signed final rule on 4/17/12; publication of the
official version in the Federal Register is forthcoming. For
internet version of final rule, see http://www.epa.gov/airquality/oilandgas/pdfs/20120417finalrule.pdf.
---------------------------------------------------------------------------

    Applying the global SCC estimates, shown in Table III-87, to the
estimated reductions in CO2 emissions under the final
standards, we estimate the dollar value of the CO2-related
benefits for our primary benefits analysis (see EPA's RIA for estimates
in each year). For internal consistency, the annual benefits are
discounted back to net present value terms using the same discount rate
as each SCC estimate (i.e., 5%, 3%, and 2.5%) rather than 3% and
7%.\843\ These estimates are provided in Table III-88.
---------------------------------------------------------------------------

    \843\ It is possible that other benefits or costs of final
regulations unrelated to CO2 emissions will be discounted
at rates that differ from those used to develop the SCC estimates.

                                 Table III-87--Social Cost of CO2, 2017-2050 \a\
                                        [in 2010 dollars per metric ton]
----------------------------------------------------------------------------------------------------------------
                                                                    Discount rate and statistic
                                                 ---------------------------------------------------------------
                      Year                                                                            3% 95th
                                                    5% Average      3% Average     2.5% Average     Percentile
----------------------------------------------------------------------------------------------------------------
2017............................................              $6             $26             $41             $79
2020............................................               7              27              43              84
2030............................................              10              34              52             104
2040............................................              13              41              61             124
2050............................................              16              47              68             142
----------------------------------------------------------------------------------------------------------------
\a\ The SCC values are dollar-year and emissions-year specific.

 Table III-88--Undiscounted Annual Monetized CO2 Benefits of Vehicle Program, Annual CO2 Emission Reductions \a\
                                    and CO2 Benefits Discounted Back to 2012
                                      [Dollar values in millions of 2010$]
----------------------------------------------------------------------------------------------------------------
                                                                             Benefits
                                                 ---------------------------------------------------------------
                                   CO2 emissions                                                       95th
              Year                   reduction     Avg SCC at 5%   Avg SCC at 3%    Avg SCC at    percentile SCC
                                       (MMT)       ($6-$16) \a\    ($26-$47) \a\  2.5% ($41-$68)    at 3% ($79-
                                                                                \a\          $142) \a\
----------------------------------------------------------------------------------------------------------------
2017............................             2.1             $14             $55             $87            $167
2020............................            23.1             164             633           1,000           1,940
2030............................           246.7           2,500           8,410          12,900          25,700
2040............................           417.0           5,510          17,000          25,400          51,800
2050............................           522.4           8,540          24,400          35,400          74,100
    Net Present Value \b\.......  ..............          32,400         170,000         290,000         519,000
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Except for the last row (net present value), the SCC values are dollar-year and emissions-year specific.
\b\ Net present value of reduced CO2 emissions is calculated differently from other benefits. The same discount
  rate used to discount the value of damages from future emissions (SCC at 5, 3, 2.5 percent) is used to
  calculate net present value of SCC for internal consistency. Refer to the SCC TSD for more detail.

    We also apply the GWP approach in a sensitivity analysis to
estimate the benefits associated with reductions of three non-
CO2 GHGs. Estimates are given for illustrative purposes and
represent the CO2-e estimate of CH4,
N2O, and HFC reductions multiplied by the SCC estimates
(``GWP approach''), as described further above. CO2-e is
calculated using the AR4 100-year GWP of each gas: CH4 (25),
N2O (298), and HFC-134a (1,430).\844\ The total net present
value of the annual 2017 through 2050 GHG benefits for this rulemaking
would increase by about $3 billion to $50 billion, depending on
discount rate used for the SCC estimate, or roughly 10 percent if these
non-CO2 estimates were included (an amount which is small in
the context of the total costs and benefits considered in this rule,
and which would not affect any of the decisions regarding the
appropriateness of the standards EPA is adopting here). The estimates
are provided in the table below.
---------------------------------------------------------------------------

    \844\ As in the MY 2012-2016 LD rules and in the MY 2014-2018 MD
and HD rule, the global warming potentials (GWP) used in this
rulemaking are consistent with the 100-year time frame values in the
2007 Intergovernmental Panel on Climate Change (IPCC) Fourth
Assessment Report (AR4). At this time, the 100-year GWP values from
the 1995 IPCC Second Assessment Report (SAR) are used in the
official U.S. GHG inventory submission to the United Nations
Framework Convention on Climate Change (UNFCCC) (per the reporting
requirements under that international convention). The UNFCCC
recently agreed on revisions to the national GHG inventory reporting
requirements, and will begin using the 100-year GWP values from AR4
for inventory submissions in the future. According to the AR4,
CH4 has a 100-year GWP of 25, N2O has a 100-
year GWP of 298, and HFC-134a has a 100-year GWP of 1430.

    Table III-89--Undiscounted Annual Monetized Non-CO2 GHG Benefits of MY 2017-2025 Standards in Annual CO2
                      Equivalents \a\ and CO2 Equivalents Benefits Discounted Back to 2012
                                      [Dollar values in millions of 2010$]
----------------------------------------------------------------------------------------------------------------
                                                                             Benefits
                                    Non-CO2 GHG  ---------------------------------------------------------------
                                     emissions                                                         95th
              Year                reduction (MMT   Avg SCC at 5%   Avg SCC at 3%    Avg SCC at    percentile SCC
                                      CO2-e)       ($6-$16) \a\    ($26-$47) \a\  2.5% ($41-$68)    at 3% ($79-
                                                                                \a\          $142) \a\
----------------------------------------------------------------------------------------------------------------
2017............................            0.28              $2              $7             $12             $22
2020............................            3.92              28             107             170             330
2030............................            24.6             250             838           1,280           2,560
2040............................            38.0             503           1,550           2,310           4,720
2050............................            46.9             767           2,190           3,170           6,650
Net Present Value \b\...........  ..............           3,120          16,300          27,700          49,600
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Except for the last row (net present value), the SCC values are dollar-year and emissions-year specific.
\b\ Net present value of non-CO2 emissions changes is calculated differently from other benefits. The same
  discount rate used to discount the value of damages from future emissions (SCC at 5, 3, 2.5 percent) is used
  to calculate net present value of SCC for internal consistency. Refer to the SCC TSD for more detail.

7. Non-Greenhouse Gas Health and Environmental Impacts
    This section presents EPA's analysis of the criteria pollutant-
related health and environmental impacts that will occur as a result of
the final standards. Light-duty vehicles and fuels are significant
sources of mobile source air pollution such as direct PM,
NOX, SOX, VOCs and air toxics. The impact that
improved fuel economy will have on rebound driving will affect exhaust
and evaporative emissions of these pollutants from vehicles. In
addition, increased fuel savings associated with improved fuel economy
achieved under the standards will affect emissions from upstream
sources (see Section III.G for a complete description of emission
impacts associated with the final standards). Emissions of
NOX (a precursor to ozone formation and secondarily-formed
PM2.5), SOX (a precursor to secondarily-formed
PM2.5), VOCs (a precursor to ozone formation and, to a
lesser degree, secondarily-formed PM2.5) and directly-
emitted

PM2.5 contribute to ambient concentrations of
PM2.5 and ozone. Exposure to ozone and PM2.5 is
linked to adverse human health impacts such as premature deaths as well
as other important public health and environmental effects.
    As many commenters noted, it is important to quantify the health
and environmental impacts associated with the final rule because it
allows us to more accurately assess the net costs and benefits of the
standards. Moreover, co-pollutant impacts tend to accrue in the near
term, while any effects from reduced climate change mostly accrue over
a time frame of several decades or longer.
    This section is split into two sub-sections: the first presents the
PM- and ozone-related health and environmental impacts associated with
the final rule in calendar year (CY) 2030; the second presents the PM-
related dollar-per-ton values used to monetize the PM-related co-
benefits associated with the model year (MY) analysis (i.e., over the
lifetimes of the MY 2017-2025 vehicles) of the final rule.\845\
---------------------------------------------------------------------------

    \845\ EPA typically analyzes rule impacts (emissions, air
quality, costs and benefits) in the year in which they occur; for
this analysis, we selected 2030 as a representative future year. We
refer to this analysis as the ``Calendar Year'' (CY) analysis. EPA
also conducted a separate analysis of the impacts over the model
year lifetimes of the 2017 through 2025 model year vehicles. We
refer to this analysis as the ``Model Year'' (MY) analysis. In
contrast to the CY analysis, the MY lifetime analysis shows the
lifetime impacts of the program on each MY fleet over the course of
its lifetime.
---------------------------------------------------------------------------

    EPA did receive adverse comments regarding the omission of some
non-GHG impacts in the proposal. In that analysis, we used ``dollar-
per-ton'' estimates to monetize the health-related impacts of reduced
exposure to PM2.5. We continue to apply these values in the
MY analysis for the final rule. No ``dollar-per-ton'' method exists for
ozone or toxic air pollutants due to complexity associated with
atmospheric chemistry (for ozone and toxics) and a lack of economic
valuation data/methods (for air toxics). However, we have conducted
full-scale photochemical air quality modeling to estimate the change in
ambient concentrations of ozone, PM2.5 and air toxics for
the CY analysis in 2030 and used these modeling results as the basis
for estimating the human health impacts and their economic value of the
rule in 2030. EPA had neither the time nor resources to conduct such
modeling for the Model Year analysis.
a. Quantified and Monetized Non-GHG Human Health Benefits of the 2030
Calendar Year (CY) Analysis
    This analysis reflects the impact of the final light-duty GHG rule
in 2030 compared to a future-year reference scenario without the rule
in place.
    We estimate that the final rule will lead to a small net reduction
in PM2.5-related health impacts--the reduction in
population-weighted national average PM2.5 exposure results
in a small net reduction in adverse PM-related human health impacts
(the reduction in national population-weighted annual average
PM2.5 is 0.0065 [mu]g/m3).
    The air quality modeling also projects a very small increase in
ozone concentrations in many areas (population-weighted maximum 8-hour
average ozone increases by 0.0009 ppb). While the ozone-related impacts
are very small, the increase in population-weighted national average
ozone exposure results in a very small increase in ozone-related health
impacts.
    We base our analysis of the final rule's impact on human health in
2030 on peer-reviewed studies of air quality and human health
effects.846,847 These methods are described in more detail
in the RIA that accompanies this action. Our benefits methods are also
consistent with recent rulemaking analyses such as the proposed
Portland Cement National Emissions Standards for Hazardous Air
Pollutants (NESHAP) RIA,\848\ the final NO2 NAAQS,\849\ and
the final Category 3 Marine Engine rule,\850\ and the final Cross State
Air Pollution Rule.\851\ To model the ozone and PM air quality impacts
of the final rule, we used the Community Multiscale Air Quality (CMAQ)
model (see Section III.G.4). The modeled ambient air quality data
serves as an input to the Environmental Benefits Mapping and Analysis
Program (BenMAP).\852\ BenMAP is a computer program developed by the
U.S. EPA that integrates a number of the modeling elements used in
previous analyses (e.g., interpolation functions, population
projections, health impact functions, valuation functions, analysis and
pooling methods) to translate modeled air concentration estimates into
health effects incidence estimates and monetized benefits estimates.
---------------------------------------------------------------------------

    \846\ U.S. Environmental Protection Agency. (2006). Final
Regulatory Impact Analysis (RIA) for the Proposed National Ambient
Air Quality Standards for Particulate Matter. Prepared by: Office of
Air and Radiation. Retrieved March, 26, 2009 at http://www.epa.gov/ttn/ecas/ria.html.
    \847\ U.S. Environmental Protection Agency. (2008). Final Ozone
NAAQS Regulatory Impact Analysis. Prepared by: Office of Air and
Radiation, Office of Air Quality Planning and Standards. Retrieved
March, 26, 2009 at http://www.epa.gov/ttn/ecas/ria.html.
    \848\ U.S. Environmental Protection Agency (U.S. EPA). 2009a.
Regulatory Impact Analysis: National Emission Standards for
Hazardous Air Pollutants from the Portland Cement Manufacturing
Industry. Office of Air Quality Planning and Standards, Research
Triangle Park, NC. April. Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/RIAs/portlandcementria_4-20-09.pdf.
Accessed March 15, 2010.
    \849\ U.S. Environmental Protection Agency (U.S. EPA). 2010.
Final NO2 NAAQS Regulatory Impact Analysis (RIA). Office of Air
Quality Planning and Standards, Research Triangle Park, NC. April.
Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/RIAs/FinalNO2RIAfulldocument.pdf. Accessed March 15, 2010.
    \850\ U.S. Environmental Protection Agency. 2009. Regulatory
Impact Analysis: Control of Emissions of Air Pollution from Category
3 Marine Diesel Engines. EPA-420-R-09-019, December 2009. Prepared
by Office of Air and Radiation. http://www.epa.gov/otaq/regs/nonroad/marine/ci/420r09019.pdf. Accessed February 9, 2010.
    \851\ U.S. Environmental Protection Agency. 2011. Regulatory
Impact Analysis for the Federal Implementation Plans to Reduce
Interstate Transport of Fine Particulate Matter and Ozone in 27
States; Correction of SIP Approvals for 22 States. EPA-HQ-OAR-2009-
0491, June 2011. Prepared by Office of Air and Radiation. http://www.epa.gov/airtransport/pdfs/FinalRIA.pdf. Accessed May 16, 2012.
    \852\ Information on BenMAP, including downloads of the
software, can be found at http://www.epa.gov/ttn/ecas/benmodels.html.
---------------------------------------------------------------------------

    The range of total monetized ozone- and PM-related health impacts
is presented in Table III-90. We present total benefits (the sum of
morbidity-related benefits and mortality-related benefits) based on the
PM- and ozone-related premature mortality function used. The benefits
ranges therefore reflect the addition of each estimate of ozone-related
premature mortality (across six selected studies, each with its own row
in Table III-90) to each estimate of PM-related premature mortality
(based on either Pope et al., 2002 or Laden et al., 2006), along with
all morbidity-related benefits. These estimates represent EPA's
preferred approach to characterizing a best estimate of monetized
impacts. As is the nature of Regulatory Impact Analyses (RIAs), the
assumptions and methods used to estimate air quality impacts evolve to
reflect the Agency's most current interpretation of the scientific and
economic literature.

                 Table III-90--Estimated 2030 Monetized PM-and Ozone-Related Health Impacts \a\
   2030 total ozone and PM benefits--PM mortality derived from American Cancer Society analysis and six-cities
                                                  analysis \a\
----------------------------------------------------------------------------------------------------------------
                                                                     Total benefits           Total benefits
  Premature ozone mortality function          Reference           (billions, 2010$, 3%     (billions, 2010$, 7%
                                                                  discount rate) b,c,d     discount rate) b,c,d
----------------------------------------------------------------------------------------------------------------
Multi-city analyses..................  Bell et al., 2004......  Total: $1.0-$2.6.......  Total: $0.92-$2.3.
                                                                PM: $1.1-$2.6..........  PM: $0.95-$2.3.
                                                                Ozone: -$0.006.........  Ozone: -$0.006.
                                       Huang et al., 2005.....  Total: $1.0-$2.6.......  Total: $0.92-$2.3.
                                                                PM: $1.1-$2.6..........  PM: $0.95-$2.3.
                                                                Ozone: -$0.006.........  Ozone: -$0.006.
                                       Schwartz, 2005.........  Total: $1.0-$2.6.......  Total: $0.92-$2.3.
                                                                PM: $1.1-$2.6..........  PM: $0.95-$2.3.
                                                                Ozone: -$0.009.........  Ozone: -$0.009.
Meta-analyses........................  Bell et al., 2005......  Total: $1.0-$2.6.......  Total: $0.92-$2.3.
                                                                PM: $1.1-$2.6..........  PM: $0.95-$2.3.
                                                                Ozone: -$0.019.........  Ozone: -$0.019.
                                       Ito et al., 2005.......  Total: $1.0-$2.6.......  Total: $0.92-$2.3.
                                                                PM: $1.1-$2.6..........  PM: $0.95-$2.3.
                                                                Ozone: -$0.026.........  Ozone: -$0.026.
                                       Levy et al., 2005......  Total: $1.0-$2.6.......  Total: $0.92-$2.3.
                                                                PM: $1.1-$2.6..........  PM: $0.95-$2.3.
                                                                Ozone: -$0.027.........  Ozone: -$0.027.
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Total includes premature mortality-related and morbidity-related ozone and PM2.5 benefits. Range was
  developed by adding the estimate from the ozone premature mortality function to the estimate of PM2.5-related
  premature mortality derived from either the ACS study (Pope et al., 2002) or the Six-Cities study (Laden et
  al., 2006).
\b\ Note that totals presented here do not include a number of unquantified health impact categories. A detailed
  listing of unquantified health and welfare effects is provided in Table III-91.
\c\ Results reflect the use of both a 3 and 7 percent discount rate, as recommended by EPA's Guidelines for
  Preparing Economic Analyses and OMB Circular A-4. Results are rounded to two significant digits for ease of
  presentation and computation.
\d\ Negatives indicate a disbenefit, or an increase in health effect incidence. Monetized impacts are rounded to
  two significant digits. Totals may not sum due to rounding.

    The monetized impacts in Table III-90 include all of the human
health impacts we are able to quantify and monetize at this time.
However, the full complement of human health and welfare effects
associated with PM, ozone and other criteria pollutants remain
unquantified because of current limitations in methods or available
data. We have not quantified a number of known or suspected health
effects linked with ozone, PM and other criteria pollutants for which
appropriate health impact functions are not available or which do not
provide easily interpretable outcomes (e.g., changes in heart rate
variability). Additionally, we are unable to quantify a number of known
welfare effects, including reduced acid and particulate deposition
damage to cultural monuments and other materials, and environmental
benefits due to reductions of impacts of eutrophication in coastal
areas. These are listed in Table III-91. As a result, the health
benefits quantified in this section do not reflect the full range of
possible impacts attributable to the final rule.

                                             Table III-91--Unquantified and Non-Monetized Potential Effects
--------------------------------------------------------------------------------------------------------------------------------------------------------
               Pollutant/effects                                              Effects not included in analysis--changes in:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ozone Health \a\...............................  Chronic respiratory damage.\b\
                                                 Premature aging of the lungs.\b\
                                                 Non-asthma respiratory emergency room visits.
                                                 Exposure to UVb (+/-).\e\
Ozone Welfare..................................  Yields for
                                                    --commercial forests.
                                                    --some fruits and vegetables.
                                                    --non-commercial crops.
                                                 Damage to urban ornamental plants.
                                                 Impacts on recreational demand from damaged forest aesthetics.
                                                 Ecosystem functions.
                                                 Exposure to UVb (+/-).\e\
PM Health \c\..................................  Premature mortality--short term exposures.\d\
                                                 Low birth weight.
                                                 Pulmonary function.
                                                 Chronic respiratory diseases other than chronic bronchitis.
                                                 Non-asthma respiratory emergency room visits.
                                                 Exposure to UVb (+/-)\e\
PM Welfare.....................................  Residential and recreational visibility in non-Class I areas.
                                                 Soiling and materials damage.
                                                 Damage to ecosystem functions.
                                                 Exposure to UVb (+/-)\e\
Nitrogen and Sulfate Deposition Welfare........  Commercial forests due to acidic sulfate and nitrate deposition.
                                                 Commercial freshwater fishing due to acidic deposition.

                                                 Recreation in terrestrial ecosystems due to acidic deposition.
                                                 Existence values for currently healthy ecosystems.
                                                 Commercial fishing, agriculture, and forests due to nitrogen deposition.
                                                 Recreation in estuarine ecosystems due to nitrogen deposition.
                                                 Ecosystem functions.
                                                 Passive fertilization.
CO Health......................................  Behavioral effects.
HC/Toxics Health \f\...........................  Cancer (benzene, 1,3-butadiene, formaldehyde, acetaldehyde)
                                                 Anemia (benzene).
                                                 Disruption of production of blood components (benzene).
                                                 Reduction in the number of blood platelets (benzene).
                                                 Excessive bone marrow formation (benzene).
                                                 Depression of lymphocyte counts (benzene).
                                                 Reproductive and developmental effects (1,3-butadiene).
                                                 Irritation of eyes and mucus membranes (formaldehyde).
                                                 Respiratory irritation (formaldehyde).
                                                 Asthma attacks in asthmatics (formaldehyde).
                                                 Asthma-like symptoms in non-asthmatics (formaldehyde).
                                                 Irritation of the eyes, skin, and respiratory tract (acetaldehyde).
                                                 Upper respiratory tract irritation and congestion (acrolein).
HC/Toxics Welfare..............................  Direct toxic effects to animals.
                                                 Bioaccumulation in the food chain.
                                                 Damage to ecosystem function.
                                                 Odor.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ The public health impact of biological responses such as increased airway responsiveness to stimuli, inflammation in the lung, acute inflammation
  and respiratory cell damage, and increased susceptibility to respiratory infection are likely partially represented by our quantified endpoints.
\b\ The public health impact of effects such as chronic respiratory damage and premature aging of the lungs may be partially represented by quantified
  endpoints such as hospital admissions or premature mortality, but a number of other related health impacts, such as doctor visits and decreased
  athletic performance, remain unquantified.
\c\ In addition to primary economic endpoints, there are a number of biological responses that have been associated with PM health effects including
  morphological changes and altered host defense mechanisms. The public health impact of these biological responses may be partly represented by our
  quantified endpoints.
\d\ While some of the effects of short-term exposures are likely to be captured in the estimates, there may be premature mortality due to short-term
  exposure to PM not captured in the cohort studies used in this analysis. However, the PM mortality results derived from the expert elicitation do take
  into account premature mortality effects of short term exposures.
\e\ May result in benefits or disbenefits.
\f\ Many of the key hydrocarbons related to this rule are also hazardous air pollutants listed in the CAA.

    While there will be impacts associated with air toxic pollutant
emission changes that result from the final rule, we do not attempt to
monetize those impacts. This is primarily because currently available
tools and methods to assess air toxics risk from mobile sources at the
national scale are not adequate for extrapolation to incidence
estimations or benefits assessment. The best suite of tools and methods
currently available for assessment at the national scale are those used
in the National-Scale Air Toxics Assessment (NATA). The EPA Science
Advisory Board specifically commented in their review of the 1996 NATA
that these tools were not yet ready for use in a national-scale
benefits analysis, because they did not consider the full distribution
of exposure and risk, or address sub-chronic health effects.\853\ While
EPA has since improved the tools, there remain critical limitations for
estimating incidence and assessing benefits of reducing mobile source
air toxics. EPA continues to work to address these limitations;
however, we did not have the methods and tools available for national-
scale application in time for the analysis of the final rule.\854\
---------------------------------------------------------------------------

    \853\ Science Advisory Board. 2001. NATA--Evaluating the
National-Scale Air Toxics Assessment for 1996--an SAB Advisory.
http://www.epa.gov/ttn/atw/sab/sabrev.html.
    \854\ In April, 2009, EPA hosted a workshop on estimating the
benefits of reducing hazardous air pollutants. This workshop built
upon the work accomplished in the June 2000 Science Advisory Board/
EPA Workshop on the Benefits of Reductions in Exposure to Hazardous
Air Pollutants, which generated thoughtful discussion on approaches
to estimating human health benefits from reductions in air toxics
exposure, but no consensus was reached on methods that could be
implemented in the near term for a broad selection of air toxics.
Please visit http://epa.gov/air/toxicair/2009workshop.html for more
information about the workshop and its associated materials.
---------------------------------------------------------------------------

    EPA is also unaware of specific information identifying any effects
on listed endangered species from the small fluctuations in pollutant
concentrations associated with this rule (see Section III.G.4).
Furthermore, our current modeling tools are not designed to trace
fluctuations in ambient concentration levels to potential impacts on
particular endangered species.
i. Quantified Human Health Impacts
    Table III-92 and Table III-93 present the annual PM2.5
and ozone health impacts in the 48 contiguous U.S. states associated
with the final rule for 2030. For each endpoint presented in Table III-
92 and Table III-93, we provide both the mean estimate and the 90%
confidence interval.
    Using EPA's preferred estimates, based on the American Cancer
Society (ACS) and Six-Cities studies and no threshold assumption in the
model of mortality, we estimate that the final rule will reduce between
110 and 280 cases of PM2.5-related premature mortality
annually in 2030. For ozone-related premature mortality in 2030, we
estimate a range of between 1 to 3 cases of additional premature
mortality.

         Table III-92--Estimated PM2.5-Related Health Impacts a
------------------------------------------------------------------------
                                     2030 Annual reduction in incidence
          Health effect                       (5th%-95th%ile)
------------------------------------------------------------------------
Premature Mortality--Derived from
 epidemiology literature: \b\
    Adult, age 30+, ACS Cohort     110 (30-190)
     Study (Pope et al., 2002).
    Adult, age 25+, Six-Cities     280 (130-440)
     Study (Laden et al., 2006).
    Infant, age <1 year (Woodruff  0 (0-1)
     et al., 1997).
Chronic bronchitis (adult, age 26  76 (1-150)
 and over).
Non-fatal myocardial infarction    130 (32-230)
 (adult, age 18 and over).
Hospital admissions-respiratory    20 (8-32)
 (all ages) \c\.
Hospital admissions-               50 (33-60)
 cardiovascular (adults, age >18)
 \d\.
Emergency room visits for asthma   72 (34-110)
 (age 18 years and younger).
Acute bronchitis, (children, age   160 (-42-370)
 8-12).
Lower respiratory symptoms         2,100 (770-3,400)
 (children, age 7-14).
Upper respiratory symptoms         1,600 (260-2,900)
 (asthmatic children, age 9-18).
Asthma exacerbation (asthmatic     3,500 (-120-9,700)
 children, age 6-18).
Work loss days...................  14,000 (12,000-16,000)
Minor restricted activity days     81,000 (65,000-96,000)
 (adults age 18-65).
------------------------------------------------------------------------
Notes:
\a\ Incidence is rounded to two significant digits. Estimates represent
  incidence within the 48 contiguous United States.
\b\ PM-related adult mortality based upon the American Cancer Society
  (ACS) Cohort Study (Pope et al., 2002) and the Six-Cities Study (Laden
  et al., 2006). Note that these are two alternative estimates of adult
  mortality and should not be summed. PM-related infant mortality based
  upon a study by Woodruff, Grillo, and Schoendorf, (1997).\855\
\c\ Respiratory hospital admissions for PM include admissions for
  chronic obstructive pulmonary disease (COPD), pneumonia and asthma.
\d\ Cardiovascular hospital admissions for PM include total
  cardiovascular and subcategories for ischemic heart disease,
  dysrhythmias, and heart failure.

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

    \855\ Woodruff, T.J., J. Grillo, and K.C. Schoendorf. 1997.
``The Relationship Between Selected Causes of Postneonatal Infant
Mortality and Particulate Air Pollution in the United States.''
Environmental Health Perspectives 105(6):608-612.

         Table III-93--Estimated Ozone-Related Health Impacts a
------------------------------------------------------------------------
                                     2030 Annual reduction in incidence
          Health effect                       (5th%-95th%ile)
------------------------------------------------------------------------
Premature Mortality, All ages \b\
Multi-City Analyses:
    Bell et al. (2004)--Non-       -1 (-4-3)
     accidental.
    1Huang et al. (2005)--         -1 (-5-4)
     Cardiopulmonary.
    Schwartz (2005)--Non-          -1 (-6-4)
     accidental.
Meta-analyses:
    Bell et al. (2005)--All cause  -2 (-10-6)
    Ito et al. (2005)--Non-        -3 (-11-6)
     accidental.
    Levy et al. (2005)--All        -3 (-10-4)
     causes.
\c\ Hospital admissions--          -6 (-30-15)
 respiratory causes (adult, 65
 and older).
Hospital admissions--respiratory   -3 (-12-6)
 causes (children, under 2).
Emergency room visit for asthma    -1 (-18-15)
 (all ages).
Minor restricted activity days     -930 (-18,000-16,000)
 (adults, age 18-65).
School absence days..............  -850 (-6,700-5,100)
------------------------------------------------------------------------
Notes:
\a\ Negatives indicate a disbenefit, or an increase in health effect
  incidence. Incidence is rounded to two significant digits. Estimates
  represent incidence within the 48 contiguous U.S.
\b\ Estimates of ozone-related premature mortality are based upon
  incidence estimates derived from several alternative studies: Bell et
  al. (2004); Huang et al. (2005); Schwartz (2005); Bell et al. (2005);
  Ito et al. (2005); Levy et al. (2005). The estimates of ozone-related
  premature mortality should therefore not be summed.