gear change, and so expects to feel the resulting torque interruption.
With an AMT, in contrast, a control system initiates the shift, which
is unexpected and can be disconcerting to the driver. Comments from
Ford in response to the NPRM indicated that the acceptability of this
torque interruption among U.S. drivers is poor, although Ford also
commented that DCTs do not have the risk of customer acceptance that
AMTs do. BorgWarner, a DCT supplier, echoed these comments. DCTs do not
display the torque interrupt characteristic due to their use of two
clutch mechanisms which allow for uninterrupted power transmission. To
assist with launch of a DCT equipped vehicle, the first gear ratio can
be deepened to gain back some of the performance advantage an automatic
transmission possesses due to the torque converter's torque
multiplication factor.
    There are two types of DCT systems, wet clutch and dry clutch,
which are used for different types of vehicles. Wet clutch DCTs offer a
higher torque capacity that comes from the use of a hydraulic system
that cools the clutches, but that are less efficient than the dry
clutch type due to the losses associated with hydraulic pumping.
Additionally, wet DCTs have a higher cost due to the additional
hydraulic hardware required. Wet clutch DCT systems have been available
in the U.S. market on imported products since 2005, and Chrysler has
publicly stated that it will have a DCT transmission in its 2010 model
year vehicle line-up.\200\
---------------------------------------------------------------------------

    \200\ Chrysler blog, ``Dual-Clutch Transmissions Explained''
(released October 3, 2007) available at http://blog.chryslerllc.com/
blog.do?p=entry&id=113, last accessed September 18, 2008.
---------------------------------------------------------------------------

    Consistent with manufacturers' confidential comments and based on
its own analysis, NHTSA determined that dry clutch DCTs are applicable
to smaller front wheel drive cars, due to their lower vehicle weight
and torque production, and wet clutch DCTs are more applicable to
higher torque applications with higher power requirements. Therefore
lower cost, higher efficiency dry clutch DCTs are specified for the
Subcompact and Compact Car vehicle classes, while all other classes
required wet clutch DCTs.
    In the NPRM, NHTSA estimated that the incremental cost for DCTs was
$141, independent of vehicle class, which was the midpoint of the
NESCCAF estimates and within the range provided confidential
manufacturer data. CARB commented that NHTSA had incorrectly cited the
cost of AMTs from the NESCCAF study in the NPRM, stating that AMTs had
been determined to be cost neutral (zero cost) relative to baseline
transmission, as opposed to a $0-$240 cost justification. Confidential
manufacturer data suggest additional DCT costs from $80 to $740, with
dry clutch DCT costs being approximately $100 less due to reduced
hydraulic system content. The 2008 Martec study also reported variable
costs for AMTs.
    In the NPRM, NHTSA cited the NESCCAF study as projecting that AMTs
could incrementally reduce fuel consumption by 5 to 8 percent and
confidential manufacturer data projected that AMTs could incrementally
reduce fuel consumption by 2 to 5 percent. On the basis of these
estimates, NHTSA concluded in the NPRM that AMTs could incrementally
reduce fuel consumption by 4.5 to 7.5 percent. Confidential
manufacturer data received in response to the NPRM suggest a benefit of
2 to 12 percent for DCTs over a 6-speed planetary automatic, and one
confidential manufacturer estimates a benefit of 1 to 2 percent for a
dry clutch DCT over a wet clutch DCT. The 2008 EPA Staff Technical
Report also indicates a benefit of 9.5 to 14.5 percent for a DCT (wet
or dry was not specified) over a 4-speed planetary automatic
transmission.
    For the final rule, NHTSA estimated a 5.5 to 9.5 percent
improvement in fuel consumption over a baseline 4/5-speed automatic
transmission for a wet clutch DCT, which was assumed for all vehicle
subclasses except Subcompact and Compact Car. This results in an
incremental effectiveness estimate of 2.7 to 4.1 percent over the NAUTO
technology. For Subcompact and Compact Cars, which were assumed to use
a dry clutch DCT, NHTSA estimated an 8 to 13 percent fuel consumption
improvement over a baseline 4/5-speed automatic transmission, which
equates

to a 5.5 to 7.5 percent incremental improvement over the NAUTO
technology.
    The 2008 Martec report was utilized to develop the cost estimates
for the final rule; it estimated an RPE cost of $450 for a dry clutch
DCT, and $600 for a wet clutch DCT, both relative to a baseline 4/5-
speed. In the transmission decision tree for the final rule, this
yielded a dry clutch DCT incremental cost estimate of $68 for the
Subcompact and Compact Cars relative to the NAUTO technology. For
Midsize, Large Car and Minivan classes the wet clutch DCT incremental
cost over NAUTO is $218, which reflects the lower, 6-speed only cost of
the NAUTO technology applied to these vehicles. The average incremental
cost for wet DCT for the four Performance classes and the Small,
Midsize and Larger truck is $61, which is lower than the other vehicle
subclasses due to the higher cost NAUTO technology (up to 8-speeds)
that the DCTAM technology supersedes.
    NHTSA relied upon confidential manufacturer product plans showing
DCT production will be readily available and at high volume by 2011.
Therefore volume-based learning is not applicable, and since this is a
mature and stable technology, time-based learning is applied. As
production facility conversion or construction may be required to
facilitate required capacity, NHTSA limited the production phase-in
caps in MY 2011 to 20 percent. As with other transmission technologies,
application was allowed at redesign only due to the vehicle changes
required to adapt a new type transmission.
(iv) Continuously Variable Transmission (CVT)
    A continuously variable transmission (CVT) is unique in that it
does not use gears to provide ratios for operation. Most CVTs use
either a belt or chain on a system of two pulleys (the less common
toroidal CVTs replace belts and pulleys with discs and rollers) that
progressively vary the ratio, thus permitting an infinite number of
effective gear ratios between a maximum and minimum value, and often a
wider range of ratios than conventional automatic transmissions. This
enables even finer optimization of the transmission ratio under
different operating conditions and, therefore, some reduction of engine
pumping and friction losses. In theory, the CVT has the ability to be
the most fuel-efficient kind of transmission due to the infinite
ability to optimize the ratio and operate the engine at its most
efficient point. However, this effectiveness is reduced by the
significant internal losses from high-pressure, high-flow-rate
hydraulic pump, churning, friction loss, and bearing losses required to
generate the high forces needed for traction.\201\
---------------------------------------------------------------------------

    \201\ ``Transmission and Driveline--Major contributors to FUEL
efficiency, safety, fun to drive and brand differentiation'', Car
Training Institute Symposium, May 6-7, 2008--Plenary Speech, Robert
Lee, Vice President, Mircea Gradu, Director Transmission and
Driveline, Chrysler LLC, USA. Available from the Car Training
Institute, for contact information see http://www.car-training-
institute.com/cti_en/html/kontakt.html (last accessed Nov. 9,
2008).
---------------------------------------------------------------------------

    Some U.S. car manufacturers have abandoned CVT applications because
they failed to deliver fuel economy improvements over automatic
transmissions. GM abandoned the use of CVT before 2006.\202\ Ford
offered a CVT in the Five Hundred and Freestyle from MYs 2005-2007 and
discontinued it thereafter. However, Chrysler offers CVTs in the Dodge
Caliber, the Jeep Compass, and the Jeep Patriot. Nissan was using CVTs
in many vehicles, but appears to be restricting the use of this
technology to passenger cars only.
---------------------------------------------------------------------------

    \202\ See http://car-reviews.automobile.com/news/general-motors-
to-kill-continually-variable-transmission/166/ (last accessed Oct.
23, 2008).
---------------------------------------------------------------------------

    In the NPRM, NHTSA estimated a CVT effectiveness of approximately 6
percent over a 4-speed automatic, which was above the NESCCAF value but
in the range of NAS. For costs, NHTSA concluded in the NPRM that the
adjusted costs presented in the 2002 NESCCAF study represent the best
available estimates, and thus estimated that CVTs could incrementally
reduce fuel consumption by 3.5 percent when compared to a conventional
5-speed automatic transmission (which cost an incremental $76-$167), a
technology which is considered a baseline transmission option on the
final rule decision tree, at an incremental cost of $100 to $139. After
reviewing confidential manufacturer data and the Martec report, for the
final rule NHTSA is now estimating the incremental cost of CVTs to be
$300 for all vehicle subclasses, except for large performance cars,
midsize light trucks and large light trucks for which the technology is
incompatible.
    Confidential manufacturer data in response to the NPRM suggested
that the incremental effectiveness estimate from CVTs may be 2 to 8
percent over 4-speed planetary transmissions in simulation (however one
commenter reported a zero percent improvement in dynamometer testing)
at a cost of $140 to $800. Considering the NPRM conclusion and
confidential data together with independent review, NHTSA has estimated
the fuel consumption effectiveness for CVTs at 2.2 to 4.5 percent over
a 4/5-speed automatic transmission, which translates into a 0.7 to 2.0
incremental effectiveness improvement over the IATC technology. NHTSA
estimated the CVT incremental cost to be $300 for the final rule,
noting that the NPRM costs were incremental to a 5-speed technology
that is no longer represented in the decision tree, hence the higher
final rule cost.\203\
---------------------------------------------------------------------------

    \203\ Since the decision trees are configured differently, the
net cost to CVT in the NPRM included 5-speed automatic transmission
technology costs that are not applied in the final rule.
---------------------------------------------------------------------------

    CVTs are currently available, but due to their limited torque-
carrying capability, they are not applied to Performance Large cars and
Midsize and Large trucks. There is limited production capability for
CVTs, so the phase-in cap for MY 2011 is limited to 5 percent to
account for new plants and tooling to be prepared. CVTs can be
introduced at product redesign intervals only based on confidential
manufacturer data and consistent with the NPRM approach (since it
requires vehicle attribute prove-out, test and certification prior to
introduction). Confidential manufacturer data indicates that CVTs will
be at high volumes by 2011, and this is a mature and stable technology,
therefore NHTSA applied time-based learning factors.
(v) 6-Speed Manual Transmissions (6MAN)
    Manual transmissions are entirely dependent upon driver input to
change gear ratio: the driver selects when to perform the shift and
which gear ratio to select. This is the most efficient transfer of
energy of all transmission layouts, because it has the lowest internal
gear losses, with a minimal hydraulic system, and the driver provides
the energy to actuate the clutch. From a systems viewpoint, however,
vehicles with manual transmissions have the drawback that the driver
may not always select the optimum gear ratio for fuel economy.
Nonetheless, increasing the number of available ratios in a manual
transmission can improve fuel economy by allowing the driver to select
a ratio that optimizes engine operation more often. Typically, this is
achieved through adding overdrive ratios to reduce engine speed at
cruising velocities (which saves fuel through reduced pumping losses)
and pushing the torque required of the engine towards the optimum
level. However, if the gear ratio steps are not properly designed, this
may require the driver to

change gears more often in city driving resulting in customer
dissatisfaction. Additionally, if gear ratios are selected to achieve
improved launch performance instead of to improve fuel economy, then no
fuel saving effectiveness is realized.
    NHTSA recognizes that while the manual transmission is very
efficient, its effect on fuel consumption relies heavily upon driver
input. In driving environments where little shifting is required, the
manual transmission is the most efficient because it has the lowest
internal losses of all transmissions. However, the manual transmission
may have lower fuel efficiency on a drive cycle when drivers shift at
non-optimum points.
    In the NPRM, NHTSA estimated that a 6-speed manual transmission
could incrementally reduce fuel consumption by 0.5 percent when
compared to a 5-speed manual transmission, at an incremental cost of
$107. Confidential manufacturer data received in response to the NPRM
suggests that manual transmissions could incrementally reduce fuel
consumption by 0 to 1 percent over a base 5-speed manual transmission
at an incremental cost of $40 to $900. Most confidential comments
suggested that the incremental cost was within the lower quartile of
the full range, thus $225 (the lower quartile upper-bound) was
multiplied by the 1.5 RPE markup factor for a total of $338. Therefore,
the final rule states that the incremental fuel consumption
effectiveness for a 6-speed manual transmission over a 5-speed manual
transmission is 0.5 percent at a RPE cost of $338.
    This technology is applicable to all vehicle classes considered and
can be introduced at product redesign intervals, consistent with the
NPRM and other final rule transmission technologies. Six-speed manuals
are already in production at stable and mature high volumes so time-
based learning is applied with a 33 percent phase-in rate for MY 2011.
(d) Hybrid and Electrification/Accessory Technologies
(i) Overview
    A hybrid describes a vehicle that combines two or more sources of
energy, where one is a consumable energy source (like gasoline) and one
is rechargeable (during operation, or by another energy source).
Hybrids reduce fuel consumption through three major mechanisms: (1) By
turning off the engine when it is not needed, such as when the vehicle
is coasting or when stopped; (2) by recapturing lost braking energy and
storing it for later use; and by (3) optimizing the operation of the
internal combustion engine to operate at or near its most efficient
point more of the time. A fourth mechanism to reduce fuel consumption,
available only to plug-in hybrids, is by substituting the fuel energy
with energy from another source, such as the electric grid.
    Engine start/stop is the most basic of hybrid functions, and as the
name suggests, the engine is shut off when the vehicle is not moving or
when it is coasting, and restarted when needed. This saves the fuel
that would normally be utilized to spin the engine when it is not
needed. Regenerative braking is another hybrid function which allows
some of the vehicle's kinetic energy to be recovered and later reused,
as opposed to being wasted as heat in the brakes. The reused energy
displaces some of the fuel that would normally be used to drive the
vehicle, and thus results in reduced fuel consumption. Operating the
engine at its most efficient operating region more of the time is made
possible by adding electric motor power to the engine's power so that
the engine has a degree of independence from the power required to
drive the vehicle. Fuel consumption is reduced by more efficient engine
operation, the degree of which depends heavily on the amount of power
the electric motor can provide. Hybrid vehicles with large electric
motors and battery packs can take this to an extreme and drive the
wheels with electric power only and the engine consuming no fuel. Plug-
in hybrid vehicles can substitute fuel energy with electrical energy,
further reducing the fuel consumption.\204\
---------------------------------------------------------------------------

    \204\ Substituting fuel energy with electrical energy may not
actually save total overall energy used, when considering the
inefficiencies of creating the electricity at a power plant and
storing it in a battery pack, but it does enable use of other
primary energy sources, and reduces the vehicle's fuel consumption.
Plug-in hybrids are also receiving increasing attention because of
their ability to use ``clean energy'' from the electric grid, such
as that solar or wind, which can reduce the overall greenhouse gas
output.
---------------------------------------------------------------------------

    Hybrid vehicles utilize some combination of the above mechanisms to
reduce fuel consumption. The effectiveness of a hybrid, and generally
the complexity and cost, depends on the utilization of the above
mechanisms and how aggressively they are pursued.
    In addition to the purely hybrid technologies, which decrease the
proportion of propulsion energy coming from the fuel by increasing the
proportion of that energy coming from electricity, there are other
steps that can be taken to improve the efficiency of auxiliary
functions (e.g., power-assisted steering or air-conditioning) which
also reduce fuel consumption. These steps, together with the hybrid
technologies, are collectively referred to as ``vehicle
electrification'' because they generally use electricity instead of
engine power. Three ``electrification'' technologies are considered in
this analysis along with the hybrid technologies: Electrical power
steering (EPS), improved accessories (IACC), and high voltage or
improved efficiency alternator (HVIA).
(ii) Hybrid System Sizing and Cost Estimating Methodology
    Estimates of cost and effectiveness for hybrid and related
electrical technologies have been adjusted from those described in the
NPRM to address commenters' concerns that NHTSA considered technologies
not likely to be adopted by automakers (e.g., 42V electrical systems)
or did not scale the costs for likely technologies across the range of
vehicle subclasses considered. To address these concerns, the portfolio
of vehicle electrification technologies has been refined based on
commenter data as described below in the individual hybrid technologies
sections. Ricardo and NHTSA have also developed a ``ground-up'' hybrid
technology cost estimating methodology and, where possible, validated
it to confidential manufacturer data. The hybrid technology cost method
accounts for variation in component sizing across both the hybrid type
and the vehicle platform. The method utilizes four pieces of data: (1)
Key component sizes for a midsize car by hybrid system type; (2)
normalized costs for each key component; (3) component scaling factors
that are applied to each vehicle subclass by hybrid system type; and
(4) vehicle characteristics for the subclasses which are used as the
basis for the scaling factors.
    Component sizes were estimated for a midsize car using publicly
available vehicle specification data and commenter data for each type
of hybrid system as shown in Table IV-10.

[GRAPHIC] [TIFF OMITTED] TR30MR09.034

    In developing Table IV-10, NHTSA made several assumptions:
    (1) Hybrid controls hardware varies with the level of functionality
offered by the hybrid technology. Assumed hybrid controls complexity
for a 12V micro hybrid (MHEV) was 25 percent of a strong hybrid
controls system and the complexity for an Integrated Starter Generator
(ISG) was 50 percent. These ratios were estimates based on the
directional need for increased functionality as system complexity
increases.
    (2) In the time frame considered, Li-ion battery packs will have
limited market penetration, with a majority of hybrid vehicles using
NiMH batteries. One estimate from Anderman indicates that Li-ion market
penetration will achieve 35 percent by 2015.\205\ For the purposes of
this analysis, it was assumed that mild and strong hybrids will use
NiMH batteries and plug-in hybrids will use Li-ion batteries.
---------------------------------------------------------------------------

    \205\ Anderman, Advanced Automotive Battery Conference, May
2008. Proceedings available for purchase at http://
www.advancedautobat.com/Proceedings/index.html (last accessed
October 17, 2008).
---------------------------------------------------------------------------

    (3) The plug-in hybrid battery pack was sized for a mid-sized car
by assuming: the vehicle has a 20 mile all electric range and consumes
an average of 300 W-hr per mile; the battery pack can be discharged
down to 50 percent depth of discharge; and the capacity of a new
battery pack is 20 percent greater than at end of life (i.e., range on
a new battery pack is 24 miles).
    (4) All hybrid systems included a DC/DC converter which was sized
to accommodate vehicle electrical loads appropriate for increased
vehicle electrification in the time frame considered.
    (5) High voltage wiring scaled with hybrid vehicle functionality
and could be represented as a fraction of strong hybrid wiring. These
ratios were estimates based on the directional need for increased
functionality as system complexity increases.
    (6) All hybrid systems included a supplemental heater to provide
vehicle heating when the engine is stopped, however, only stronger
hybrids included electric air conditioning to enable engine stop/start
when vehicle air conditioning was requested by the operator.
    In the hybrid technology cost methodology developed for cost-
scaling purposes, several strong hybrid systems replaced a conventional
transmission with a hybrid-specific transmission, resulting in a cost
offset for the removal of a portion of the clutches and gear sets
within the transmission. The transmission cost in Table IV-11 below
expresses hybrid transmission costs as a percentage of traditional
automatic transmission cost, as described in the 2008 Martec Report, at
$850. The method assumed that the mechanical aspect of a power-split
transmission with a reduced number of gear sets and clutches resulted
in a cost savings of 50 percent of a conventional transmission with
torque converter. For a 2-mode hybrid, the mechanical aspects of the
transmission are similar in complexity to a conventional transmission
with a torque converter, thus no mechanical cost savings was
appropriate. The plug-in hybrid assumed a highly simplified
transmission for electric motor drive, thus 25 percent of the base
vehicle transmission cost was applied.
    Estimates for the cost basis of each key component are shown in
Table IV-11 below along with the sources of those estimates. The cost
basis estimates assume fully learned, high-volume (greater than 1.2
million units per annum) production. The costs shown are variable costs
that are not RPE adjusted.

[GRAPHIC] [TIFF OMITTED] TR30MR09.035

    Component scaling factors were determined based on vehicle
characteristics for each type of hybrid system as shown in Table IV-12
below.

[GRAPHIC] [TIFF OMITTED] TR30MR09.036

    NHTSA's CAFE database was used to define the average vehicle
characteristics for each vehicle subclass as shown in Table IV-13
below, and these attributes were used as the basis of the scaling
factors.
[GRAPHIC] [TIFF OMITTED] TR30MR09.037

    Table IV-14 shows the costs for the different types of hybrid
systems on a midsize vehicle. The individual component costs were
scaled from the normalized costs shown in Table IV-11 according to the
component size shown in Table IV-10 and adjusted to a low volume cost
by backing out volume-

based learning reductions.\206\ These component costs were summed to
get the total low volume cost for each hybrid type, and a 1.5 RPE
adjustment was applied. The ISG technology replaces the MHEV technology
on the Electrification/Accessory technology decision tree, therefore
the MHEV technology costs must be subtracted to reflect true costs
($2,898-$707 = $2,191 in this example).
---------------------------------------------------------------------------

    \206\ High volume costs are multiplied by a factor of 1.56,
which represents two cycles of 20 percent reverse learning, to
determine the appropriate low volume, or unlearned costs.
---------------------------------------------------------------------------

    Wherever possible, the results of the hybrid technology cost method
were compared with values as previously described in the NPRM and the
results generally matched prior estimates. Additionally, the results
from the hybrid technology cost method were validated with public
literature and confidential manufactures test data as allowed. Elements
of the 2008 Martec report identified cost data and a detailed bill of
materials for several comparable hybrid technologies (Micro-hybrid
systems and Full Hybrid systems), and the hybrid technology cost model
agreed well with this data. The scalable bill of material based
methodology described above was determined to offer the best solution
for estimating component sizes and costs across a range of hybrid
systems and vehicle platforms and the validation of these cost outputs
with other data sources suggests that this approach is a reasonable
approach.
[GRAPHIC] [TIFF OMITTED] TR30MR09.038

(iii) Electrical Power Steering (EPS)
    Electrical Power Steering (EPS) is advantageous over conventional
hydraulic power-assisted steering in that it only draws power when the
vehicle is being steered, which is typically a small percentage of the
time a vehicle is operating. In fact, on the EPA test cycle no steering
is done, so the CAFE fuel consumption effectiveness comes about by
eliminating the losses from driving the hydraulic steering pump at
engine speed. EPS systems use either an electric motor driving a
hydraulic pump (this is a subset of EPS systems known as electro-
hydraulic power steering) or an electric motor directly assisting in
turning the steering column. EPS is seen as an enabler for all vehicle
hybridization technologies, since it provides power steering when the
engine is off. This was a primary consideration in placing EPS at the
top of the Electrification/Accessory decision tree.
    In the NPRM, NHTSA estimated the fuel consumption effectiveness for
EPS at 1.5 to 2 percent at an incremental cost of $118 to $197,
believing confidential manufacturer data most accurate. In response to
the NPRM Sierra Research suggested EPS and high efficiency alternators
combined is worth 1 to 1.8 percent on the CAFE test cycle,\207\ and
confidential manufacturer data indicated a 0.7 to 2.9 percent fuel
consumption reduction. The cost range from confidential manufacturer
data was $70 to $300. Sierra estimated EPS for cars at $82 and $150 for
trucks.\208\ A market study by Frost & Sullivan

indicated the cost of an EPS system at roughly $65 more than a
conventional hydraulic (HPS) system.\209\ Because there is a wide range
in the effectiveness for EPS depending on the vehicle size, NHTSA has
increased the range from the NPRM to incorporate the lower ranges
suggested by most manufacturers and estimates the fuel consumption
effectiveness for EPS at 1 to 2 percent for the purpose of the final
rule. The incremental costs are also estimated on range below the
Sierra value for cars but above the Frost & Sullivan estimate at a
piece cost range of $70 to $80 and included a 1.5 RPE uplift to $105 to
$120 for the final rule.
---------------------------------------------------------------------------

    \207\ Docket No. NHTSA-2008-0089-0179.1, Attachment 2, at 53.
    \208\ Docket No. NHTSA-2008-0089-0179.1, Attachment 2, at 59.
    \209\ Cost for EPS quoted at 48 Euros, at $1.35 per Euro
exchange rate (Oct. 7, 2008) equates to $65, from Frost & Sullivan,
Feb. 9, 2006 ``Japanese Steering System Market Moves Into High
Gear,'' http://www.theautochannel.com/news/2006/02/09/210036.html
(last accessed Nov. 2, 2008).
---------------------------------------------------------------------------

    EPS is currently in volume production in small to mid-sized
vehicles with a standard 12V electrical system; however, heavier
vehicles may require a higher voltage system, which adds cost and
complexity. The Chevy Tahoe Hybrid, for example, uses a higher voltage
EPS system. For purposes of the final rule, NHTSA has applied EPS to
all vehicle subclasses except for Large trucks.
    In the NPRM, NHTSA assumed a 25 percent phase in rate of EPS
technologies. For the purposes of the final rule, EPS phase-in caps
were limited to 10 percent in MY 2011 to address confidential
manufacturer concerns over lead time. In the NPRM, NHTSA assumed a
volume-based learning effect for EPS. For the final rule, however,
NHTSA applied time-based learning for EPS since NHTSA's analysis
indicated that this technology would be in high-volume use at the
beginning of its first year of availability. NHTSA also assumed in the
NPRM that EPS could be applied during refresh model years, which was
consistent with information provided in confidential product plans,
therefore for the purpose of the final rule, NHTSA again applied EPS at
refresh timing.
(iv) Improved Accessories (IACC)
    Improved accessories (IACC) was defined in the NPRM as improvements
in accessories such as the alternator, coolant and oil pumps that are
traditionally driven by the engine. Improving the efficiency or
outright electrification of these accessories would provide opportunity
to reduce the accessory loads on the engine. However, as the oil pump
provides lubrication to the engine's sliding surfaces such as bearings
pistons, and camshafts and oil flow is always required when the engine
is spinning, and it is only supplied when the engine is spinning, there
is no efficiency to be gained by electrifying the oil pump.\210\
---------------------------------------------------------------------------

    \210\ Oil pump electrification comes with an additional
potential technical and financial risk (to warranty and consumer),
in that significant engine damage can occur should the system fail
to provide engine lubrication, even on a momentary basis.
---------------------------------------------------------------------------

    Electrical air conditioning (EAC) could reduce fuel consumption by
allowing the engine to be shut off when it is not needed to drive the
vehicle. For this reason EAC is often used on hybrid vehicles. In
highway driving, however, there is little opportunity to shut the
engine off; furthermore, EAC is less efficient when the engine is
running because it requires mechanical energy from the engine to be
converted to electrical energy and then back again to mechanical. Since
air conditioning is not required on the EPA city or highway test
cycles, there is no CAFE fuel consumption effectiveness from EAC.
Therefore, EAC does not improve accessory efficiency apart from the
hybrid technologies. For the purposes of the final rule, IACC refers
strictly to improved engine cooling, since electrical lubrication and
air conditioning are not effective stand-alone fuel saving technologies
and improved alternator is considered as a separate technology given
its importance to vehicle electrification.
    Improved engine cooling, or intelligent cooling, can save fuel
through two mechanisms: By reducing engine friction as the engine warms
up faster; and by operating an electric coolant pump at a lower speed
than the engine would (i.e., independent of engine speed). Intelligent
cooling can be applied to vehicles that do not typically carry heavy
payloads. Larger vehicles with towing capacity present a challenge for
electrical intelligent cooling systems, as these vehicles have high
cooling fan loads. Therefore, NHTSA did not apply IACC to the Large
Truck and SUV class.
    In the NPRM, NHTSA estimated the fuel consumption effectiveness for
improved accessories at 1 to 2 percent at an incremental cost of $124
to $166 based on the 2002 NAS Report and confidential manufacturer
data. Confidential manufacturer data received in response to the NPRM
and Sierra Research both suggested a range for fuel consumption
effectiveness from 0.5 to 2 percent. A comment from MEMA suggested that
improved thermal control of the engine could produce between 4 and 8
percent fuel economy improvement; \211\ however, NHTSA's independent
review of intelligent cooling suggests this estimate is high and
concurs with the estimates from NAS. Independent review found the cost
for IACC at low volumes, assuming the base vehicle already has an
electric fan, to be $180 to $220. These costs were adjusted to account
for volume-based learning and then marked up to account for the 1.5 RPE
factor. For the purposes of the final rule, NHTSA retained the fuel
consumption effectiveness at 1 to 2 percent and estimated the
incremental costs to be $173 to $211.
---------------------------------------------------------------------------

    \211\ Docket No. NHTSA-2008-0089-0193.1.
---------------------------------------------------------------------------

    MEMA also suggested that NHTSA consider solar glass technology to
reduce cabin thermal loading; however, air conditioning technologies
were not considered as part of this technology.
    In the NPRM, NHTSA proposed a 25 percent phase-in cap for Improved
Accessories. To address manufacturer concerns over lead time in the
early years, the IACC phase-in cap was limited to 10 percent for MY
2011 for the final rule. In the NPRM, NHTSA assumed for improved
accessories a volume-based learning curve. For the final rule, however,
NHTSA applied time-based learning for IACC since NHTSA's analysis
indicated that this technology would be in high-volume use at the
beginning of its first year of availability. NHTSA assumed in the NPRM
that improved accessories could be applied during any model year. For
the purpose of the final rule, NHTSA applied intelligent cooling at
refresh model years due to the significant changes required to the
vehicle cooling system that necessitate recertification testing.
(v) 12V Micro Hybrid (MHEV)
    12V Micro-Hybrid (MHEV) systems are the most basic of hybrid
systems and offer mainly idle-stop capability. Their low cost and easy
adaptability to existing powertrains and platforms can make them
attractive for some applications. The conventional belt-driven
alternator is replaced with a belt-driven, enhanced power starter-
alternator and a redesigned front-end accessory drive system that
facilitates bi-directional torque application. Also, during idle-stop,
some functions such as power steering and automatic transmission
hydraulic pressure are lost with conventional arrangements; so electric
power steering and an auxiliary transmission pump are needed. These
components are similar to those that would be used in other hybrid
designs. Also included in this technology is the Smart Starter Motor.
This system is comprised of an enhanced starter motor, along with some
electronic control that

monitors the accelerator, brake, clutch positions, and the battery
voltage as well as low-noise gears to provide fast and quiet engine
starts. Despite its extended capabilities, the starter is compact and
thus relatively easy to integrate in the vehicle.
    12V micro hybrid was added to the technology list to address
concerns from CARB and Delphi that the hybrid classifications used in
the NPRM did not adequately represent these technologies.\212\
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    \212\ Docket Nos. NHTSA-2008-0089-0173 and -0144.1,
respectively.
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    The effectiveness estimates by NHTSA for this technology are based
on confidential manufacturer data and independent source data. For the
vehicles equipped with (baseline) inline 4, those with smaller
displacements, the effectiveness is between 1 and 2.9 percent, and for
those equipped with V-6 or V-8, the effectiveness is between 3.4 and 4
percent. The 1 to 2.9 percent incremental fuel consumption savings
applies to the Sub-Compact Car, Performance Sub-Compact Car, Compact
Car, Midsized Car, and Small Truck/SUV variants. The 3.4 to 4 percent
incremental fuel consumption applies to the remaining classes with the
exception of Large Truck/SUV where MHEV is not applied due to payload
and towing requirements for this class.
    Confidential manufacturer comments submitted in response to the
NPRM indicated a $200 to $1000 cost for the MHEV. The 12V micro-hybrid
does not have a high voltage battery, and thus does not have a high-
voltage wire cost. The 12V micro-hybrid system for the midsize vehicle
has a 3kW electric motor. This agrees well with two commercially
available systems used on smaller engines.\213\ The value used for the
DC/DC converter represents the cost for a 12V power conditioning
circuit to allow uninterrupted power to the radio and a limited number
of other accessories when the engine starter is engaged. The sizing for
the rest of the components is shown in Table IV-9.
---------------------------------------------------------------------------

    \213\ Citroen uses a 2kW system for a 1.4L diesel engine, and
Valeo has a 1.6kW system applicable for engines up to 2L in
displacement. The midsize vehicle class has an average engine size
of 2.9L, and thus a 3kW starter is appropriate.
---------------------------------------------------------------------------

    The MHEV technology, which will be available from the 2011 model
year, is projected to be in high volume use at the beginning of its
first year of availability according to NHTSA's analysis, therefore
volume based learning reductions (two cycles at 20 percent) were
applied to ``learn'' the hybrid method costs and time based learning
factors were applied throughout the remaining years. For the final
rule, NHTSA established incremental costs ranging from $372 to $549
with the highest cost applying to the Performance Large Car class.
    The 12V micro hybrid technology is applicable across all the
vehicle segments except for the Large Truck/SUV class. Although this
technology was not specifically stated in the NPRM, a phase-in cap of 3
percent for MY 2011 was assumed for hybrid technologies. For the final
rule, this figure was retained since it is generally supportable within
the industry as expressed at the SAE HEV Symposium in San Diego in Feb
2008.
    The NPRM proposed that all of the hybrid technologies could be
introduced during the redesign model year only. This view is consistent
with manufacturer's views, therefore, for this rule making, NHTSA has
assumed that 12V micro hybrids can only be introduced at the redesign
model years.
(vi) High Voltage/Improved Alternator (HVIA)
    In the NPRM, a 42V accessory technology was identified in the
decision tree for Other Technologies. Several confidential manufacturer
comments received by NHTSA related to 42V technology, and indicated
that the effectiveness of 42V system were not realized when electrical
conversion efficiencies were considered, and the cost of transitioning
the industry from a 12V to 42V system made the technology unreasonable
for deployment in the emerging technology time frame. As a result of
these comments, NHTSA revised the technology from 42V technology to
High Voltage/Improved Alternator (HVIA).
    The ``High Voltage/Improved Efficiency Alternator'' technology
block represents technologies associated with increased alternator
efficiency. As most alternators in production vehicles today are
optimized for cost and the process for increasing the efficiency of an
alternator is well understood by the industry, this technology is
applicable to all vehicle subclasses except Midsize and Large Truck and
SUV where it is not considered applicable due to the high utility of
these classes.
    The NPRM identified fuel economy effectiveness that were based on
42V accessory systems, and are not directly applicable for this current
technology definition. Confidential manufacturer data indicates that a
midsized car with an improved efficiency alternator provided 0.2 to 0.9
percent fuel consumption effectiveness over the CAFE drive cycles, and
a pickup truck provided 0.6 percent fuel consumption effectiveness over
the same cycles. As this technology can be applied over a range of
vehicles, NHTSA believes the fuel consumption effectiveness for larger
vehicles will be biased downward. For purposes of this final rule,
NHTSA estimates the fuel consumption effectiveness for High Voltage/
Improved Efficiency Alternator'' technology at 0.2 to 0.9 percent.
    The NPRM identified several sources for high voltage/improved
efficiency alternators incremental costs, but focused this technology
on 42V systems, thus making some of these references not representative
of the current technology description. The NPRM ``Engine accessory
improvement'' technology discussion, however, did quote the NESCCAF
study that indicated a $56 cost for a high efficiency generator. An
independent confidential study estimated that the incremental cost
increase for a high efficiency generator at high volume was similar to
the NESCCAF quoted cost, thus NHTSA concludes that the NESCCAF study
cost of $56 is still a representative cost for this technology. At a
1.5 RPE value, this cost equates to $84.
    As the definition of the technology has been revised from the NPRM,
phase-in rates identified in the NPRM are not applicable. NHTSA
believes the High voltage/Improved Efficiency Alternator technology
represents an adjustment to the alternator manufacturing industry
infrastructure, so for purposes of this final rule, phase-in caps for
this technology were estimated at 10 percent for MY 2011.
    Also, as the definition of the technology has been revised from the
NPRM, learning curve assumptions from the NPRM are not applicable. The
high voltage/improved alternator technology costs were based on high
volume estimates, thus, for purposes of the final rule, NHTSA assumed
time-based learning (3 percent YOY) for High Voltage Systems/Improved
Alternator technology. For purposes of the final rule, NHTSA assumed
the technology can be introduced during refresh or redesign model
changes only.
(vii) Integrated Starter Generator (ISG)
    The next hybrid technology that is considered is the Integrated
Starter Generator (ISG) technology. There are 2 types of integrated
starter generator hybrids that are considered: the belt mounted type
and the crank mounted type.
    A Belt Mounted Integrated Starter Generator (BISG) system is
similar to a micro-hybrid system, except that here it is defined as a
system with a 110 to 144V battery pack which thus can

perform some regenerative braking, whereas the 12V micro-hybrid system
cannot. The larger electric machine and battery enables additional
hybrid functions of regenerative braking and a very limited degree of
operating the engine independently of vehicle load. While having a
larger electric machine and more battery capacity than a MHEV, this
system has a smaller electric machine than stronger hybrid systems
because of the limited torque capacity of the belt driven design.
    BISG systems replace the conventional belt-driven alternator with a
belt-driven, enhanced power starter-alternator and a redesigned front-
end accessory drive system that facilitates bi-directional torque
application utilizing a common electric machine. Also, during idle-
stop, some functions such as power steering and automatic transmission
hydraulic pressure are lost with conventional arrangements; so electric
power steering and an auxiliary transmission pump need to be added.
These components are similar to those that would be used in other
hybrid designs.
    A Crank Mounted Integrated Starter Generator (CISG) hybrid system,
also called an Integrated Motor Assist (IMA) system, utilizes a thin
axial electric motor (100-144V) bolted to the engine's crankshaft. The
electric machine acts as both a motor for helping to launch the vehicle
and a generator for recovering energy while slowing down. It also acts
as the starter for the engine and is a higher efficiency generator. An
example of this type of a system is found in the Honda Civic Hybrid.
For purposes of the final rule, NHTSA assumed the electric machine is
rigidly fixed to the engine crankshaft, thus making electric-only drive
not practical.\214\
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    \214\ A clutch between the engine and the electric motor would
enable pure electric drive, but the Porsche Cayenne is the only
example of such a system that is planned in the rulemaking time
frame. Because of limited expected volumes of this type of system,
and in the interest of reducing complexity, that variant is not
included here.
---------------------------------------------------------------------------

    The fuel consumption effectiveness of the ISG systems are greater
than those of micro-hybrids, because they are able to perform the
additional hybrid function of regenerative braking and able to utilize
the engine more efficiently because some transient power demands from
the driver can be separated from the engine operation. Their transient
performance can be better as well, because the larger electric machine
can provide torque boost. The ISG systems are more expensive than the
micro hybrids, but have lower cost than the strong hybrids described
below because the electrical component sizes (batteries, electric
machines, power electronics, etc.) are sized in between the micro-
hybrid and the strong hybrid components. The engineering effort
required to adapt conventional powertrains to these configurations is
also in between that required for micro-hybrid and strong hybrid
configurations. Packaging is a greater concern due to the fact that the
engine-motor-transmission assembly is physically longer, and the
battery pack, high voltage cabling and power electronics are larger.
    The hybrid decision tree was modified to address several
manufacturer comments and comments from CARB and Delphi asking for more
appropriate separation of hybrid technology classifications (i.e., 12V
versus higher voltage Integrated Starter Generators, etc.). The
inclusion of the ISG technology in the final rule is in response to
these comments and those from subject matter experts.
    The NPRM had proposed a fuel consumption savings of between 5 and
10 percent for ISG systems, and between 3.5 and 8.5 percent for the
Honda IMA system, both of which fall in the ISG category described
above. Confidential manufacturer comments submitted in response to the
NPRM indicated an incremental 3.8 to 7.4 percent fuel consumption
effectiveness and a $1,500 to $2,400 cost as compared to the baseline
vehicle.
    The incremental fuel consumption savings for the Compact Car
variant for ISG over a 12V Micro-hybrid with start/stop was calculated
using published data and confidential manufacturer data, while
published Honda Civic Hybrid data was used to calculate the fuel
consumption gains due to the hybrid system. For the final rule, gains
for the other technologies also included on this vehicle were
subtracted out to give an incremental effectiveness of 5.7 to 6.5
percent for ISG. Data for these individual gains was taken from
confidential manufacturer data. The 5.7 to 6.5 percent incremental fuel
consumption savings was carried over from the Compact Car to all other
vehicle subclasses. A 2 percent incremental effectiveness was
subtracted from the Performance subclasses to allow for the improved
baseline performance
    The NPRM proposed a cost of $1,636 to $2,274 for these systems. For
the final rule, NHTSA determined the cost for the ISG system using
system sizing data for different available ISG hybrids. The 2006 Honda
Civic has a Crank Mounted ISG and uses a 0.87 kW-hr battery pack. In
light of the potential growth of vehicle electrification, a 1 kW-hr
pack size was chosen for both the belt and crank mounted ISG systems.
The crank mounted ISG was sized as 11kW continuous (15kW peak). This is
an average of the 10kW system on the 2003 Honda Civic and the 12kW
system on the 2005 Honda Accord. The 2006 Civic has a 15kW system. The
belt mounted ISG has a slightly smaller electric machine (7.5kW
continuous and 10kW peak) due to power transmission limitations of the
belt.
    For the final rule, the hybrid technology cost method projected
costs ranging from $2,475 to $3,290 for the Sub-Compact car class
through the Midsize Truck classes as compared to the conventional
baseline vehicle and the incremental costs of $1,713 to $2,457 were
calculated by backing out the prior hybrid technology costs. The ISG
technology is projected to be in low volume use at the beginning of the
rulemaking period therefore low volume costs are used and volume-based
learning factors are applied.
    Integrated starter generator systems are applicable to all vehicle
subclasses except Large Truck. In the NPRM, a phase-in cap of 3 percent
was assumed for both the ``ISG with idle off'' and ``IMA''
technologies. For the final rule, NHTSA has retained the phase-in cap
of 3 percent for MY 2011. These values are generally supportable within
the industry as expressed at the SAE HEV Symposium in San Diego in
February 2008.
    The NPRM proposed that all of the hybrid technologies could be
introduced during the redesign model year only. This view is consistent
with manufacturer's views as well, because all of the hybrid
technologies under consideration require redesign of the powertrain
(ranging from engine accessory drive to transmission redesign) and
vehicle redesign to package the hybrid components (from high voltage
cabling to the addition of large battery packs). Given this, for
purposes of the final rule, they can only be introduced in redesign
model years.
(viii) Power Split Hybrid
    The Power Split hybrid (PSHEV) is described as a full or a strong
hybrid since it has the ability to move the vehicle on electric power
only. It replaces the vehicle's transmission with a single planetary
gear and a motor/generator. A second, more powerful motor/generator is
directly connected to the vehicle's final drive. The planetary gear
splits the engine's torque between the first motor/generator and the
final drive. The first motor/generator uses power from the engine to
either charge the battery or supply power to the wheels. The speed of
the first motor/

[[Continued on page 14295]]

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[[pp. 14295-14344]] Average Fuel Economy Standards Passenger Cars and Light Trucks
Model Year 2011

[[Continued from page 14294]]

generator determines the relative speed of the engine to the wheels. In
this way, the planetary gear allows the engine to operate independently
of vehicle speed, much like a CVT. The Toyota Prius and the Ford Hybrid
Escape are two examples of power split hybrid vehicles.
    In addition to providing the functions of idle engine stop and
subsequent restart, regenerative braking, this hybrid system allows for
pure EV operation. The two motor/generators are bigger and more
powerful than those in an ISG hybrid, allowing the engine to be run in
efficient operating zones more often. For these reasons, the power
split system provides very good fuel consumption in city driving.
During highway cycles, the hybrid functions of regenerative braking,
engine start/stop and optimal engine operation cannot be applied as
often as in city driving, and so the effectiveness in fuel consumption
are less. Additionally, it is less efficient at highway speeds due to
the fact that the first motor/generator must be spinning at a
relatively high speed and therefore incurs losses.
    The battery pack for PSHEV is assumed to be 300V NiMH for the time
period considered in this rulemaking, as is used in current PSHEV
systems today. Their reliability is proven (having been in hybrids for
over 10 years) and their cost is lower than Li Ion, so it is likely
that the battery technology used in HEVs will continue to be NiMH for
the near future for hybrids that do not require high energy storage
capability like a plug-in hybrid does.
    The Power Split hybrid also reduces the cost of the transmission,
replacing a conventional multi-speed unit with a single planetary gear.
The electric components are bigger than those in an ISG configuration
so the costs are correspondingly higher.
    However, the Power Split system is not planned for use on full-size
trucks and SUVs due to its limited ability to efficiently provide the
torque needed by these vehicles. The drive torque is limited to the
first motor/generator's capacity to resist the torque of the engine. It
is anticipated that Large Trucks would use the 2-mode hybrid system.
    In the NPRM, a phase-in rate of 3 percent was assumed for the power
split technology. Although this system has been engineered for some
vehicles by a couple of manufacturers, the required engineering
resources both at OEMs and Tier 1 suppliers are high and most
importantly, require long product development lead times. Thus NHTSA
believes it would be extremely difficult for manufacturers to implement
in levels greater than that of the submitted product plans for MY 2011.
For the final rule, NHTSA limited the volumes of power split hybrids to
zero percent in MY 2011. Power split hybrid cost and effectiveness
estimates will not be discussed here, given that the technology is not
applied in MY 2011 beyond product plan levels in NHTSA's analysis, and
NHTSA will consider them further in its future rulemaking actions.
    The NPRM proposed that all of the hybrid technologies could be
introduced during the redesign model year only, consistent with
manufacturer's views. Given this, for this final rule NHTSA has
retained the redesign application timing.
(ix) 2-Mode Hybrid
    The 2-mode hybrid (2MHEV) is another strong hybrid system that has
all-electric drive capability. The 2MHEV uses an adaptation of a
conventional stepped-ratio automatic transmission by replacing some of
the transmission clutches with two electric motors, which makes the
transmission act like a CVT. Like the Power Split hybrid, these motors
control the ratio of engine speed to vehicle speed. But unlike the
Power Split system, clutches allow the motors to be bypassed, which
improves both the transmission's torque capacity and efficiency for
improved fuel economy at highway speeds. This type of system is used in
the Chevy Tahoe Hybrid.
    In addition to providing the hybrid functions of engine stop and
subsequent restart and regenerative braking, the 2MHEV allows for pure
EV operation. The two motor/generators are bigger and more powerful
than those in an ISG hybrid, allowing the engine to be run in efficient
operating zones more often. For these reasons, the 2-mode system also
provides very good fuel economy in city driving. The primary motor/
generator is comparable in size to that in the PSHEV system, but the
secondary motor/generator is larger. The 2-mode system cost is greater
than that for the power split system due to the additional transmission
complexity and secondary motor sizing.
    The battery pack for 2MHEV is assumed to be 300V NiMH for the time
period considered in this rulemaking, as is used in current 2MHEV
systems today. Their reliability is proven (having been in hybrids for
over 10 years) and their cost is lower than Li Ion, so it is likely
that the batteries will continue to be NiMH for the near future for
hybrids that do not require high energy storage capability like a plug-
in hybrid does.
    Given the relatively large size of the 2 mode powertrain, this
technology was assumed to be applicable to the Small through Large
Truck/SUV classes. In the NPRM, a phase-in rate of 3 percent was
assumed for 2 mode hybrids. The 2-modes have recently been introduced
in the marketplace on a few vehicle platforms. The engineering
resources that are needed both at the OEMs and Tier 1s to develop this
across many more platforms are considerable, as discussed above for
power split hybrids. For purposes of the final rule, the phase-in rate
has been set to zero percent in MY 2011. 2 mode hybrid cost and
effectiveness estimates will not be discussed here, given that the
technology is not applied in MY 2011 beyond product plan levels in
NHTSA's analysis, and NHTSA will consider them further in its future
rulemaking actions.
    The NPRM proposed that all of the hybrid technologies could be
introduced during the redesign model year only, consistent with
manufacturer's views. Given this, for this final rule NHTSA has
retained the redesign application timing.
(x) Plug-In Hybrid
    Plug-In Hybrid Electric Vehicles (PHEV) are very similar to other
strong hybrid electric vehicles, but with significant functional
differences. The key distinguishing feature is the ability to charge
the battery pack from an outside source of electricity (usually the
electric grid). A PHEV would have a larger battery pack with greater
energy capacity, and an ability to be discharged further (referred to
as ``depth of discharge'').\215\ No major manufacturer currently has a
PHEV in production, although both GM and Toyota have publicly announced
that they will launch plug-in hybrids in limited volumes by 2010.
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    \215\ NHTSA notes that the fuel consumption effectiveness of
PHEVs is heavily dependent on the all-electric range, and hence the
battery capacity. However, the fuel consumption effectiveness from a
PHEV is currently difficult to quantify objectively because there is
no standardized fuel economy test procedure yet for a PHEV.
---------------------------------------------------------------------------

    PHEVs offer a significant opportunity to displace petroleum-derived
fuels with electricity from the electrical grid. The reduction in
petroleum use depends on the electric-drive range capability and the
vehicle usage (i.e., trip distance between recharging, ambient
temperature, etc.). PHEVs can have a wide variation in the All Electric
Range (AER) that they offer. Some PHEVs are of the ``blended'' type
where the engine is on during most of the vehicle operation, but the
proportion of electric energy that is used to propel the vehicle is
significantly higher than that used in a PSHEV or 2MHEV.

    PHEVs were not projected to be in volume use in the NPRM, but due
to confidential manufacturer product plans, PHEVs do, in fact, appear
in limited volumes in the final rule analysis, and therefore low
volume, unlearned costs are assumed. However, the manufacturer-stated
production volumes of PHEVs are very low, so the phase-in cap for MY
2011 is zero--given the considerable engineering hurdles, the low
availability of Li-Ion batteries in the MY 2011 time frame and the
reasons discussed above for power split and 2 mode hybrids, NHTSA did
not believe that PHEVs could be applied to more MY 2011 vehicles beyond
what was indicated in the product plans. Additionally, plug-in hybrid
cost and effectiveness estimates will not be discussed here, given that
the technology is not applied in MY 2011 beyond product plan levels in
NHTSA's analysis, and NHTSA will consider them further in its future
rulemaking actions. The NPRM proposed that all of the hybrid
technologies could be introduced during the redesign model year only,
consistent with manufacturer's views. Given this, for this final rule
NHTSA has allowed application of PHEVs in redesign model years only.
(e) Vehicle Technologies
(i) Material Substitution (MS1, MS2, MS5)
    The term ``material substitution'' encompasses a variety of
techniques with a variety of costs and lead times. These techniques may
include using lighter-weight and/or higher-strength materials,
redesigning components, and size matching of components. Lighter-weight
materials involve using lower-density materials in vehicle components,
such as replacing steel parts with aluminum or plastic. The use of
higher-strength materials involves the substitution of one material for
another that possesses higher strength and less weight. An example
would be using high strength alloy steel versus cold rolled steel.
Component redesign is an ongoing process to reduce costs and/or weight
of components, while improving performance and reliability. The
Aluminum Association commented that lightweight structures are a
significant enabler for the new powertrain technologies. Smaller and
less expensive powertrains are required and the combination of reduced
power and weight reduction positively reinforce and result in optimal
fuel economy performance. An example would be a subsystem replacing
multiple components and mounting hardware.
    However, the cost of reducing weight is difficult to determine and
depends upon the methods used. For example, a change in design that
reduces weight on a new model may or may not save money. On the other
hand, material substitution can result in an increase in price per
application of the technology if more expensive materials are used. As
discussed further below in Section VIII, for purposes of this final
rule, NHTSA has considered only vehicles weighing greater than 5,000
lbs (curb weight) for weight reduction through materials substitution.
A typical BOM for Material Substitution would include primarily
substitution of high strength steels for heavier steels or other
structural, materials on a vehicle. This BOM was established for each
class but was not adjusted for each class due to the fact that the
vehicle technology of Material Substitution is already scaled by it
being based on percent of curb weight at or over 5,000 lbs.
    In the NPRM, NHTSA estimated fuel economy effectiveness of a 2
percent incremental reduction in fuel consumption per each 3 percent
reduction in vehicle weight. Nissan commented that NHTSA's modeling of
material substitution application was overly optimistic, but did not
elaborate further. Confidential manufacturer comments in response to
the NPRM did not provide standardized effectiveness estimates, but
ranged from 3.3 to 3.9 percent mpg improvement for a 10 percent
reduction in mass, to 0.20 to 0.75 percent per 1 percent weight
reduction, to 1 percent reduction on the FTP city cycle per 100 lbs
reduced, with a maximum possible weight reduction of 5 percent.
    Bearing in mind that NHTSA only assumes material substitution for
vehicles at or above 5,000 lbs curb weight and based on manufacturer
comments which together suggest an incremental improvement in fuel
consumption of approximately 0.60 percent to 0.9 percent per 3 percent
reduction in material weight, NHTSA has estimated an incremental
improvement in fuel consumption of 1 percent (corresponding to a 3
percent reduction in vehicle weight, or roughly 0.35 percent fuel
consumption per 1 percent reduction in vehicle weight). This estimate
is consistent with the majority of the manufacturer comments.
    As for costs, in the NPRM NHTSA estimated incremental costs of
$0.75 to $1.25 per pound reduced through material substitution. The
costs for material substitution were not clearly commented on in the
confidential manufacturer responses. Confidential manufacturer
estimates ranged from $50 to $511 for 1 percent reduction, although in
most cases the cost estimates were not for the entire range of
substitution (1-5 percent) and did not provide any additional
clarification on how they specifically applied to the material
substitution technology. Consequently, for purposes of the final rule
NHTSA retained the existing NPRM cost estimates with adjustments to
2007 dollar levels resulting in an incremental $1 to $2 per pound of
substituted material, which applies to the MS1 and MS2 technology, and
$2 to $4 per pound for the MS5 technology. Costs for material
substitution are not adjusted by vehicle subclass, as the technology
costs are based on a percentage of the vehicle weight (per pound) and
limited to Medium and Large Truck/SUV Van subclasses above 5,000 lbs
curb weight.
    The agency notes that comments from the Alliance and the Aluminum
Association associated engine downsizing with weight reduction/material
substitution and quoted effectiveness for this action as well. NHTSA
considers engine downsizing separately from typical material
substitution efforts, and consequently did not include those cost and
fuel economy effectiveness for this technology.
    In the NPRM, NHTSA assumed a 17 percent phase-in rate for material
substitution. NHTSA received only one confidential manufacturer comment
regarding material substitution phase-in percentage, suggesting 17 to
30 percent, but the agency notes that it generally received comments
suggesting a non-linear phase-in rate for this technology, that would
start at a rate lower than the current NPRM value and increase over
time. In response to these comments, NHTSA revised the MY 2011 phase-in
percentage to 5 percent to account for lead time limitations.
    For material substitution technologies, neither volume-based cost
reductions nor time-based cost reductions are applied. This technology
does not employ a particular list of components to employ credible cost
reduction.
    In the NPRM, NHTSA assumed that material substitution (1 percent)
could be applied during a redesign model year only. For this final
rule, based on confidential manufacturer comments, NHTSA estimated that
material substitution (1 percent) could be applied during either a
refresh or a redesign model year, due to minimal design changes with
minimal component or vehicle-level testing required. However, NHTSA
retained the assumption that material substitution (2 percent and 5
percent) could be applied

during redesign model year only, as in the NPRM, because the agency
neither received comments to contradict this assumption nor found other
data to substantiate a change. The technology title was changed from
Material Substitution (3 percent) to Material Substitution (5 percent)
to more accurately represent the cumulative amount for the technology.
(ii) Low Drag Brakes (LDB)
    Low drag brakes reduce the sliding friction of disc brake pads on
rotors when the brakes are not engaged because the brake pads are
pulled away from the rotating rotor. A typical BOM for Low Drag Brakes
would typically include changes in brake caliper speed by changing the
brake control system, springs, etc. on a vehicles brake system. This
BOM was established for each class and was not adjusted for each class
due to the fact that the vehicle technology BOM would not change by
class across vehicle classes. Confidential manufacturer comments in
response to the NPRM indicated that most passenger cars have already
adopted this technology, but that ladder frame trucks have not yet
adopted this technology. Consequently, in the final rule this
technology was assumed to be applicable only to the Large Performance
Passenger Car and Medium and Large Truck classes.
    In the NPRM, NHTSA assumed an incremental improvement in fuel
consumption of 1 to 2 percent for low drag brakes. Confidential
manufacturer comments submitted in response to the NPRM indicated an
effective range of 0.5-1.0 percent for this technology and this range
was applied in the final rule. As for costs, NHTSA assumed in the NPRM
incremental costs of $85 to $90 for the addition of low drag brakes.
For the final rule, NHTSA took the average and adjusted it to 2007
dollars to establish an $89 final rule cost.
    The NPRM assumed an annual average phase-in rate for low drag
brakes of 25 percent. For the final rule, the MY 2011 phase-in cap is
20 percent. No learning curve was applied in the NPRM, but for the
final rule, low drag brakes were considered a high volume, mature and
stable technology, and thus time-based learning was applied. Low drag
brakes are assumed in the final rule to be applicable at refresh cycle
only.
(iii) Low Rolling Resistance Tires (ROLL)
    Tire rolling resistance is the frictional loss associated mainly
with the energy dissipated in the deformation of the tires under load--
and thus, influence fuel economy. Other tire design characteristics
(e.g., materials, construction, and tread design) influence durability,
traction control (both wet and dry grip), vehicle handling, and ride
comfort in addition to rolling resistance. A typical low rolling
resistance tires BOM would include: tire inflation pressure, material
change, and constructions with less hysteresis, geometry changes (e.g.,
reduced aspect ratios), reduction in sidewall and tread deflection,
potential spring and shock tuning. Low rolling resistance tires are
applicable to all classes of vehicles, except for ladder frame light
trucks and performance vehicles. NHTSA assumed that this technology
should not be applied to vehicles in the Large truck class due to the
increased traction and handling requirements for off-road and braking
performance at payload and towing limits which cannot be met with low
resistance tire designs. Likewise, this technology was not applied to
vehicles in the Performance Car classes due to increased traction
requirements for braking and handling which cannot be met with low roll
resistance tire designs. Confidential manufacturer comments received
regarding applicability of this technology to particular vehicle
classes confirmed NHTSA's assumption.
    In the NPRM, NHTSA assumed an incremental reduction in fuel
consumption of 1 to 2 percent for application of low rolling resistance
tires. Confidential manufacturer comments varied widely and addressed
the conflicting objectives of increasing safety by increasing rolling
resistance for better tire traction, and improving fuel economy with
lower rolling resistance tires that provide reduced traction.
Confidential manufacturer comments suggested fuel consumption
effectiveness of negative impact to a positive 0.1 percent per year
over the next five years from 2008, while other confidential
manufacturer comments indicate that the percentage effectiveness of low
rolling resistance tires would increase each year, although it would
apply differently for performance classes. Confidential manufacturer
comments also indicated that some manufacturers have already applied
this technology and consequently would receive no further effectiveness
from this technology. The 2002 NAS Report indicated that an assumed 10
percent rolling resistance reduction would provide an increase in fuel
economy of 1 to 2 percent. NHTSA believes the NAS effectiveness is
still valid and used 1 to 2 percent incremental reduction in fuel
consumption for application of low rolling resistance tires in the
final rule.
    NHTSA estimated the incremental cost of four low rolling resistance
tires to be $6 per vehicle in the NPRM, independent of vehicle class,
although not applicable to large trucks. NHTSA received few specific
comments on the costs of applying low rolling resistance tires however
confidential manufacturer comments that were received provided widely
ranging and higher costs. NHTSA increased the range from the NPRM cost
estimates to $6 to $9 per vehicle in the final rule.
    In the NPRM, NHTSA assumed an annual phase-in rate of 25 percent
for low rolling resistance tires. Confidential manufacturer comments on
the phase-in rate for low rolling resistance tires varied, with some
suggesting that many vehicle classes already had high phase-in rates
planned or accomplished. As discussed above, the comments also
suggested a non-linear phase-in plan over the 5-year period.
Confidential manufacturer data was in the 25-30 percent range. Based on
confidential manufacturer comments received and NHTSA's analysis, the
final rule includes a phase-in cap for low rolling resistance tires
with a phase-in rate of 20 percent for MY 2011.
    For low rolling resistant tire technology, neither volume-based
cost reductions nor time-based cost reductions are applied. This
technology is presumed to be significantly dependent on commodity raw
material prices and to be priced independent of particular design or
manufacturing savings.
    In the NPRM, NHTSA assumed that low rolling resistance tires could
be applied during any model year. However, based on confidential
manufacturer comments NHTSA recognizes that there are some vehicle
attribute impacts which may result from application of low rolling
resistance tires, such as changes to vehicle dynamics and braking.
Vehicle validation testing for safety and vehicle attribute prove-out
is not usually planned for every model year, so NHTSA assumed that this
technology can be applied during a redesign or refresh model year for
purposes of the final rule.
(iv) Front or Secondary Axle Disconnect for Four-Wheel Drive Systems
(SAX)
    To provide shift-on-the-fly capabilities, reduce wear and tear on
secondary axles, and improve performance and fuel economy, many part-
time four-wheel drive (4WD) systems use some type of axle disconnect.
Axle disconnects are

typically used on 4WD vehicles with two-wheel drive (2WD) operating
modes. When shifting from 2WD to 4WD ``on the fly'' (while moving), the
front axle disconnect couples the front driveshaft to the front
differential side gear only when the transfer case's synchronizing
mechanism has spun the front driveshaft, transfer case chain or gear
set and differential carrier up to the same speed as the rear
driveshaft. 4WD systems that have axle disconnect typically do not have
either manual- or automatic-locking hubs. For example, to isolate the
front wheels from the rest of the front driveline, front axle
disconnects use a sliding sleeve to connect or disconnect an axle shaft
from the front differential side gear. The effectiveness to fuel
efficiency is created by reducing inertial, chain, bearing and gear
losses (parasitic losses).
    Full time 4WD or all-wheel-drive (AWD) systems used for on-road
performance and safety do not use axle disconnect systems due to the
need for instantaneous activation of torque to wheels, and the agency
is not aware of any manufacturer or suppliers who are developing a
system to allow secondary axle disconnect suitable for use on AWD
systems at this time. Secondary axle disconnect technology is primarily
found on solid axle 4WD systems and not on the transaxle and/or
independent axle systems typically found in AWD vehicles; thus, the
application of this technology to AWD systems has not been considered
for purposes of this rulemaking. The technology will be evaluated in
future rulemakings.
    Vehicle technology BOM information was not adjusted by vehicle
classes due to the fact that the vehicle technology is limited to
transfer case and front axle design changes. Scaling of components
might be impacted but the components themselves will be the same. This
is consistent with NHTSA's assumptions in the NPRM, and is supported by
comments from confidential supplier and manufacturers. Secondary Axle
Disconnect BOM typically involves a transfer case which includes
electronic solenoid with clutch system to disconnect front drive and
using axle mounted vacuum or electric disconnect that still allows
driveshaft rotation without connection to wheel ends.
    In the NPRM, NHTSA employed ``unibody'' and ``ladder frame'' terms
to differentiate application of this technology, and had suggested
``unibody'' AWD systems could apply this same technology. In actuality,
most 4WD vehicles are ``ladder frame'' technology and AWD are
``unibody'' designs (which for the reasons stated above will not be
considered for this technology). Ladder frame technology is typically
associated with greater payload, towing, and off-road capability,
whereas unibody designs are typically used in smaller, usually front-
wheel drive vehicles, and are typically not associated with higher
payload, towing, and off-road use. For the final rule, NHTSA removed
these vehicle design criteria since it is not a requirement to
incorporate axle disconnect technology, only a historical design point
and vehicle manufacturers should not be limited to a specific vehicle
or chassis configuration to apply this technology. Therefore, this
technology is applicable to 4WD vehicles in all vehicle classes
(independent of chassis or frame design).
    In the NPRM, NHTSA estimated an incremental reduction in fuel
consumption of 1 to 1.5 percent for axle disconnect. Confidential
manufacturer comments suggested an incremental effectiveness of 1 to
1.5 percent. Supported by this confidential manufacturer data, NHTSA
maintained an incremental effectiveness of 1 to 1.5 percent for axle
disconnect for the final rule.
    As for costs, the NPRM estimated the incremental cost for adding
axle disconnect technology at $114 for 4WD systems and the $676
estimate was for the AWD systems which are not applied in the final
rule. NHTSA received no specific comments on costs for this technology
and found no additional sources to support a change from this value for
the 4WD value of $114, so for purposes of the final rule, NHTSA revised
the $114 figure to 2007 dollars to establish a $117 final rule cost.
    In the NPRM, NHTSA assumed a phase-in cap of 17 percent for
secondary axle disconnect for each model year covered by the
rulemaking. No specific comments were received regarding the phase-in
rate for this technology, but as discussed above, manufacturers
generally argued for a non-linear phase-in plan over the 5-year period
covered by the rulemaking. Based on general comments received and
NHTSA's analysis, the final rule includes a phase-in rate for secondary
axle disconnect of 17 percent in MY 2011.
    In the NPRM, NHTSA assumed a volume-based learning curve factor of
20 percent for secondary axle disconnect. For the final rule, secondary
axle disconnect learning was established as time-based due to
confidential manufacturer data demonstrating that this is a mature
technology, such that additional volumes will provide no additional
advantage for incorporation by manufacturers.
    In the NPRM, NHTSA assumed that secondary axle disconnect could be
applied to a vehicle either during refresh or redesign model years.
NHTSA received no comments and found no sources to disagree with this
assumption, and since testing to validate the functional requirements
and vehicle attribute prove-out testing is usually not planned for
every model year, NHTSA has retained this assumption for the final
rule.
(v) Aerodynamic Drag Reduction (AERO)
    Several factors affect a vehicle's aerodynamic drag and the
resulting power required to move it through the air. While these values
change with air density and the square and cube of vehicle speed,
respectively, the overall drag effect is determined by the product of
its frontal area and drag coefficient. Reductions in these quantities
can therefore reduce fuel consumption. While frontal areas tend to be
relatively similar within a vehicle class (mostly due to market-
competitive size requirements), significant variations in drag
coefficient can be observed. Significant fleet aerodynamic drag
reductions may require incorporation into a manufacturer's new model
phase-in schedules depending on the mix of vehicle classes distributed
across the manufacturer's lineup. However, shorter-term aerodynamic
reductions, with less of a fuel economy effectiveness, may be achieved
through the use of revised exterior components (typically at a model
refresh in mid-cycle) and add-on devices that are in general
circulation today. The latter list would include revised front and rear
fascias, modified front air dams and rear valances, addition of rear
deck lips and underbody panels, and more efficient exterior mirrors.
    Vehicle technology BOM information was not adjusted by vehicle
classes due to the fact that Aero Drag Reductions are already scaled
based on percent overall vehicle coefficient of drag CdA. Aero Drag
Reduction BOM could include (but would not be limited to) the following
components or subsystems: Underbody covers, front lower air dams,
overall front fascia changes, headlights, hood, fenders, grill,
windshield angle, A-Pillar angle, door seal gaps, roof (which would
both be high impact and very high cost), side view mirrors, door
handles (low impact), ride height, rear deck lip, wheels, wheel covers,
and optimizing the cooling flow path.
    In the NPRM, NHTSA estimated an incremental aerodynamic drag
reduction of 20 percent for cars, and 10 percent for trucks.
Confidential

manufacturer comments received indicated that the 20 percent reduction
for cars in the NPRM may have been overly optimistic, as significant
changes in aero drag have already been applied to those vehicle
classes. However, confidential manufacturer comments agreed with the 10
percent aerodynamic drag reduction for trucks, since there are still
significant opportunities to improve aero drag in trucks designed for
truck-related utility. The Sierra Research study submitted by the
Alliance concluded that a 10 percent incremental aerodynamic drag
reduction for mid-size cars gives a 1.5 percent improvement in vehicle
fuel economy. Thus, for purposes of the final rule, NHTSA has estimated
that a fleet average of 10 percent total aerodynamic drag reduction is
attainable (with a caveat for ``high-performance'' vehicles described
below), which equates to incremental reductions in fuel consumption of
2 percent and 3 percent for cars and trucks, respectively. These
numbers are in agreement with publicly-available technical literature
\216\ and are supported by confidential manufacturer information.
Performance car classes are excluded from this technology improvement
because they have largely applied this technology already.
---------------------------------------------------------------------------

    \216\ Sue Elliott-Sink, ``Improving Aerodynamics to Boost Fuel
Economy,'' May 2, 2006. Available at http://www.edmunds.com/advice/
fueleconomy/articles/106954/article.html (last accessed Oct. 5,
2008).
---------------------------------------------------------------------------

    As for costs, in the NPRM NHTSA assumed an incremental cost of $0
to $75 for aero drag reduction on both cars and trucks. After reviewing
the 2008 Martec Report, however, NHTSA concluded that a lower-bound
cost of $0 was not supportable. NHTSA replaced the lower-bound cost
with $40 (non-RPE) based on the assumptions that the underbody cover
and acoustic covers described in the Martec report approximates the
cost for one large underbody cover as might be required for minimal
aero drag reduction actions.\217\ The upper limit was determined by
updating the NPRM upper cost to 2007 dollars and applying an RPE uplift
thereby establishing the incremental cost, independent of vehicle
class, to range from $60 to $116 (RPE) for the final rule
---------------------------------------------------------------------------

    \217\ 2008 Martec Report, at 25. NHTSA also assumed that the
cost of fuel pulsation dampening technology noted in the Martec
report grouped with the underbody cover and acoustic covers does not
significantly impact the $40 cost as fuel pulsation dampening
technology is very low in cost relative to the other actions.
Therefore NHTSA did not modify the $40 estimate.
---------------------------------------------------------------------------

    In the NPRM, NHTSA assumed a 17 percent phase-in rate for aero drag
reduction for each model year covered by the rulemaking. No specific
comments were received regarding the phase-in rate for this technology,
but as discussed above, manufacturers generally argued for a non-linear
phase-in plan over a 5-year period. Based on comments received and
NHTSA's analysis, the final rule includes a phase-in rate for aero drag
reduction of 17 percent for MY 2011. Neither volume-based cost
reductions nor time-based cost reductions are applied. In the NPRM,
NHTSA assumed that aero drag reduction could be applied in either a
refresh or a redesign model year and that assumption has been retained
for the final rule.
(f) Technologies Considered But Not Included in the Final Rule Analysis
    Although discussed and considered as potentially viable in the
NPRM, NHTSA has determined that three technologies will be unavailable
in the time frame considered. These technologies have been identified
as either pre-emerging or not technologically feasible. Pre-emerging
technologies are those that are still in the research phase at this
time, and which are not expected to be under development for production
vehicles for several years. In another case, the technology depends on
a fuel that is not readily available. Thus, for the reasons discussed
below, these technologies were not considered in NHTSA's analysis for
the final rule. The technologies are camless valve actuation (CVA),
lean burn gasoline direct injection (LBDI), homogeneous charge
compression ignition (HCCI), and electric assist turbocharging.
Although not applied in this rulemaking, NHTSA will continue to monitor
the industry and system suppliers for progress on these technologies,
and should they become available, consider them for use in any future
rulemaking activity.
(i) Camless Valve Actuation
    Camless valve actuation relies on electromechanical actuators
instead of camshafts to open and close the cylinder valves. When
electromechanical actuators are used to replace cams and coupled with
sensors and microprocessor controls, valve timing and lift can be
optimized over all conditions. An engine valvetrain that operates
independently of any mechanical means provides the ultimate in
flexibility for intake and exhaust timing and lift optimization. With
it comes infinite valve overlap variability, the rapid response
required to change between operating modes (such as HCCI and GDI),
intake valve throttling, cylinder deactivation, and elimination of the
camshafts (reduced friction). This level of control can enable even
further incremental reductions in fuel consumption.
    As noted in the NPRM, this technology has been under research for
many decades and although some progress is being made, NHTSA has found
no evidence to support that the technology can be successfully
implemented, costed, or have defined fuel consumption effectiveness at
this time.
(ii) Lean-Burn Gasoline Direct Injection Technology
    One way to improve an engine's thermodynamic efficiency
dramatically is by operating at a lean air-fuel mixture (excess air).
Fuel system improvements, changes in combustion chamber design and
repositioning of the injectors have allowed for better air/fuel mixing
and combustion efficiency. There is currently a shift from wall-guided
injection to spray guided injection, which improves injection precision
and targeting towards the spark plug, increasing lean combustion
stability. Combined with advances in NOX after-treatment,
lean-burn GDI engines may eventually be a possibility in North America.
    However, as noted in the NPRM, a key technical requirement for
lean-burn GDI engines to meet EPA's Tier 2 NOX emissions
levels is the availability of low-sulfur gasoline, which is projected
to be unavailable during the time frame considered. Therefore the
technology was not applied in the final rule
(iii) Homogeneous Charge Compression Ignition
    Homogeneous charge compression ignition (HCCI), also referred to as
controlled auto ignition (CAI), is an alternate engine operating mode
that does not rely on a spark event to initiate combustion. The
principles are more closely aligned with a diesel combustion cycle, in
which the compressed charge exceeds a temperature and pressure
necessary for spontaneous ignition. The resulting burn is much shorter
in duration with higher thermal efficiency. Shorter combustion times
and higher EGR tolerance permit very high compression ratios (which
also increase thermodynamic efficiency), and additionally, pumping
losses are reduced because the engine can run unthrottled.
    NHTSA noted in the NPRM that several manufacturers had made public
statements about the viability of incorporating HCCI into production
vehicles over the next 10 years. Upon

further review of confidential product plan information, and reviewing
comments received in response to the NPRM, NHTSA has determined the
technology will not be available within the time frame considered.
Consequently, the technology was not applied in the final rule.
(iv) Electric Assist Turbocharging
    The Alliance commented that global development of electric assist
turbocharging has not demonstrated the fuel efficiency effectiveness of
a 12V EAT up to 2kW power levels since the 2004 NESCCAF study, and
stated that it saw remote probability of its application over the next
decade.\218\ While hybrid vehicles lower the incremental hardware
requirements for higher-voltage, higher-power EAT systems, NHTSA
believes that significant development work is required to demonstrate
effective systems and that implementation in significant volumes will
not occur in the time frame considered. Thus, this technology was not
included on the decision trees.
---------------------------------------------------------------------------

    \218\ NHTSA-2008-0089-0169.1, at 41.
---------------------------------------------------------------------------

E. Cost and Effectiveness Tables

    The tables representing the Volpe model input files for incremental
technology costs by vehicle subclass are presented below. The tables
have been divided into passenger cars, performance passenger cars, and
light trucks to make them easier to read.
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[GRAPHIC] [TIFF OMITTED] TR30MR09.040

[GRAPHIC] [TIFF OMITTED] TR30MR09.041

    The tables representing the Volpe model input files for incremental
technology effectiveness values by vehicle subclass are presented
below. The tables have been divided into passenger cars, performance
passenger cars, and light trucks to make them easier to read.

[GRAPHIC] [TIFF OMITTED] TR30MR09.042

[GRAPHIC] [TIFF OMITTED] TR30MR09.005

[GRAPHIC] [TIFF OMITTED] TR30MR09.043

BILLING CODE 4910-59-C
    The tables representing the Volpe model input files for approximate
net (accumulated) technology costs by vehicle subclass are presented
below. The tables have been divided into passenger cars, performance
passenger cars, and light trucks to make them easier to read.

[GRAPHIC] [TIFF OMITTED] TR30MR09.044

    The tables representing the Volpe model input files for approximate
net (accumulated) technology effectiveness values by vehicle subclass
are presented below. The tables have been divided into passenger cars,
performance passenger cars, and light trucks to make them easier to
read.

[GRAPHIC] [TIFF OMITTED] TR30MR09.045

[GRAPHIC] [TIFF OMITTED] TR30MR09.046

V. Economic Assumptions Used in NHTSA's Analysis

A. Introduction: How NHTSA Uses the Economic Assumptions in Its
Analysis

    NHTSA's analysis of alternative CAFE standards for model year 2011
passenger cars and light trucks relies on a range of market
information, estimates of the cost and effectiveness of technologies to
increase fuel economy, forecasts of critical economic variables, and
estimates of the values of important behavioral parameters. This
section describes the sources NHTSA has relied upon to obtain this
information, as well as how the agency developed the specific parameter
values used in the analysis. Like the product plan information it
obtains from vehicle manufacturers, these economic variables,
forecasts, and parameter values play important roles in determining the
level of CAFE standards, although some variables have larger impacts on
the final standards than others.
    As discussed above, the Volpe model uses the estimates of the costs
and effectiveness of individual technologies to simulate the
improvements that manufacturers could elect to make to the fuel economy
of their individual vehicle models in order to comply with higher CAFE
standards at the lowest cost, and to estimate each manufacturer's total
costs for meeting new standards. To calculate the reductions in fuel
use over the lifetime of each car and light truck model from the
resulting increases in fuel economy, the model then combines those
increases with estimates of the fraction of cars and light trucks that
remain in service at different ages, the number of miles they are
driven at each age, and the size of the fuel economy rebound effect.
Forecasts of future fuel prices are then applied to these fuel savings
to estimate their economic value during each year the vehicles affected
by the higher CAFE standards are projected to remain in service. The
Volpe model also uses estimates of the fractions of fuel

savings that will reduce U.S. imports of crude petroleum and refined
fuel to estimate the reduction in economic externalities that result
from U.S. imports.
    Using emission rates per mile driven by different types of vehicles
or per gallon of fuel consumed, together with estimates of emissions
that occur within the U.S. in the process of refining and distributing
fuel, the Volpe model calculates changes in emissions of regulated (or
criteria) air pollutants and carbon dioxide (CO2), the main
greenhouse gas emitted during fuel production and vehicle use. These
are combined with estimates of the economic damages to human health and
property caused by regulated air pollutants, and by projected future
changes in the global climate resulting from increases in
CO2 emissions, to estimate the benefits from the resulting
reductions in emissions. Finally, the model calculates benefits to
vehicle owners from having to refuel less frequently based on the
estimated values of vehicle occupants' time, the decline in vehicle
operating costs due to lower fuel consumption, and the increase in
mobility afforded by added rebound-effect driving.
    As the following discussion makes clear, the costs and
effectiveness of fuel economy technologies, forecasts of future
gasoline prices, and the discount rate applied to future benefits have
the largest influence over the level of the standards. In contrast,
estimates of the value of economic externalities generated by U.S.
petroleum imports, the fuel economy rebound effect, the gap between
test and on-road fuel economy, and the economic values of reducing
emissions of greenhouse gases and regulated air pollutants each have
more modest effects on determining the final CAFE standards. NHTSA has
analyzed the sensitivity of the final standards and their resulting
benefits to plausible variation in the most important of these inputs,
both by varying their values individually and conducting a Monte Carlo-
type analysis of joint variation in their probably values. NHTSA
recognizes that there may be other reasonable assumptions that the
agency could have made. However, for purposes of the MY 2011
rulemaking, NHTSA continues to believe that the assumptions made are
the most appropriate based on the information available. The agency
will, however, review these assumptions in future rulemakings,
especially in light of comments received and accounting for changing
circumstances, both domestically and globally, and consider whether
other assumptions would be more reasonable under the circumstances at
that time.
    For the reader's reference, Table V-1 below summarizes the values
of many of the variables NHTSA uses to estimate the costs, fuel
savings, and resulting economic benefits from increases in car and
light truck CAFE standards.
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[GRAPHIC] [TIFF OMITTED] TR30MR09.047

BILLING CODE 4910-59-C

B. What economic assumptions does NHTSA use in its analysis?

1. Determining Retail Price Equivalent
    NHTSA explained in the NPRM that the technology cost estimates used
in the agency's analysis are intended to represent manufacturers'
direct costs for high-volume production of vehicles with these
technologies and sufficient experience with their application so that
all cost reductions due to ``learning curve'' effects were fully
realized. However, NHTSA recognized that manufacturers may also incur
additional corporate overhead, marketing, or distribution and selling
expenses as a consequence of their efforts to improve the fuel economy
of individual vehicle models and their overall product lines.
---------------------------------------------------------------------------

    \219\ Derived from NHTSA's $33 per metric ton estimate of the
global value of reducing CO2 emissions.
---------------------------------------------------------------------------

    In order to account for these additional costs, NHTSA applied an
indirect cost multiplier in the NPRM of 1.5 to the estimate of the
vehicle manufacturers' direct costs for producing or acquiring each
fuel economy-improving technology. Historically, NHTSA used an almost
identical multiplier, 1.51, for the markup from variable costs or
direct manufacturing costs to consumer costs. The markup takes into
account fixed costs, burden, manufacturer's profit, and dealers'
profit. NHTSA's methodology for determining this markup was peer-
reviewed in 2006.\220\
---------------------------------------------------------------------------

    \220\ See Docket No. NHTSA-2007-27453, Item 4.
---------------------------------------------------------------------------

    NHTSA stated in the NPRM that the estimate of 1.5 was confirmed by
Argonne National Laboratory in a recent review of vehicle
manufacturers' indirect costs. The Argonne study was specifically
intended to improve the accuracy of future cost estimates for
production of vehicles that achieve high fuel economy by employing many
of the same advanced technologies considered in NHTSA's analysis.\221\
Thus, NHTSA stated in the NPRM that it believed that

applying a multiplier of 1.5 to direct manufacturing costs to reflect
manufacturers' increased indirect costs for deploying advanced fuel
economy technologies is appropriate for use in the analysis for this
rulemaking. NHTSA describes this multiplier in Section IV above as the
Retail Price Equivalent factor, or RPE factor.
---------------------------------------------------------------------------

    \221\ Vyas, Anant, Dan Santini, and Roy Cuenca, Comparison of
Indirect Cost Multipliers for Vehicle Manufacturing, Center for
Transportation Research, Argonne National Laboratory, April 2000.
Available at http://www.transportation.anl.gov/pdfs/TA/57.pdf (last
accessed August 14, 2008).
---------------------------------------------------------------------------

    Some commenters argued that NHTSA's mark-up factor of 1.5 was too
high. NESCAUM commented that NHTSA had relied on the 2004 NESCCAF study
as one source for its technology estimates, but appeared to have
incorrectly reported information from that study with regard to the
mark-up factor.\222\ NESCAUM stated that in the report, entitled
``Reducing Greenhouse Gas Emissions from Light-Duty Motor Vehicles,''
NESCCAF only used a 1.4 RPE, but ``NHTSA applies a 1.5 retail price
equivalent (RPE) factor to the manufacturer costs presented in Appendix
C of the NESCCAF report, and at other times uses a 1.4 RPE--and
presents both costs as NESCCAF costs.'' NESCAUM argued that ``The
reporting of costs using the 1.5 multiplier as NESCCAF costs is
incorrect and leads to uncertainty as to how the costs were
developed.'' \223\ NESCAUM stated that ``All reported costs and
benefits, attributed to NESCCAF by NHTSA, [should] be reviewed
carefully for errors and amended accordingly.'' CARB also stated that
there was ``inconsistency * * * in the treatment of NESCCAF costs,''
because NHTSA sometimes used a 1.5 markup and sometimes 1.4, and argued
that ``These errors in citing the NESCCAF report raise doubts about
whether RPE costs from other sources are cited accurately.''
---------------------------------------------------------------------------

    \222\ NESCAUM stated that NESCCAF, or Northeast States Center
for a Clean Air Future, is an affiliate organization of NESCAUM.
    \223\ NESCAUM gave a specific example with regard to the cost of
a turbocharger, as follows:
    NHTSA states the NESCCAF turbocharger cost is $600. In this
case, NHTSA applied a 1.5 RPE factor to manufacturer costs presented
in Appendix C of the NESCCAF report to arrive at the $600 cost. This
is different from the cost that NESCCAF developed. Conversely, on
page 24369 of the Federal Register notice, NHTSA accurately states
the NESCCAF cylinder deactivation costs ranged from $161 to $210.
This cost accurately reflects manufacturer costs presented in
Appendix C of the NESCCAF report, multiplied by the 1.4 retail price
equivalent used by NESCCAF.
---------------------------------------------------------------------------

    CARB further commented that NHTSA had inconsistently added costs
for the engineering effort required to add some technologies to
vehicles, when those costs should have been covered by the RPE markup.
CARB cited NHTSA's language in the NPRM that ``manufacturers' actual
costs for applying these technologies to specific vehicle models are
likely to include additional outlays for accompanying design or
engineering changes to each model, development and testing of prototype
versions, recalibrating engine operating parameters, and integrating
the technology with other attributes of the vehicle.'' (Emphasis added)
CARB argued that adding additional costs for engineering effort to any
technology amounted to double-counting. CARB also commented that
NHTSA's methodology for determining the indirect cost markup was
unsound, because ``the cost to incorporate a technology is the same
regardless of vehicle production,'' and because ``manufacturers are
moving toward global vehicle architectures in an effort to spread
development costs across the largest volume of vehicles possible, thus
reducing engineering costs.'' CARB argued that ``The engineering cost
methodology cited in the NPRM conflicts with this trend as well.''
    Other commenters argued that NHTSA's mark-up factor of 1.5 was too
low. The Alliance commented that the RPE mark-up factor of 1.5 used by
NHTSA is ``far too low,'' and cited the Sierra Research report and a
study by Wynn V. Bussman, submitted as an attachment by the Alliance,
as concluding that ``the best estimate for RPE is more on the order of
2.0.'' The Alliance argued that NHTSA's citation of the Argonne study
as support for an RPE of 1.5 was incorrect and out of context, stating
that ``As both Bussman and Sierra noted, the Argonne National
Laboratory recommended use of 2.0 as the RPE factor.'' The Alliance
stated that the Argonne study had simply used a 1.5 RPE for outsourced
components, because ``Manufacturers that outsource components do not
bear warranty and other costs under typical contractual arrangements.''
The Alliance argued that ``A 1.5 RPE * * * is simply unrepresentative
for components that are developed in house by the original equipment
manufacturers (``OEMs'').'' The Alliance further argued that ``Use of a
1.5 RPE for all purposes also glosses over the fact that outsourced
components can nevertheless require significant integration
expenditures from manufacturers putting together and selling entire
vehicles.'' \224\ Chrysler concurred separately with the Alliance that
``NHTSA's use of an RPE of 1.5 does not adequately account for the full
cost of implementing new technologies,'' and stated that an RPE of 2.0
``is the appropriate factor to use for new technologies.''
---------------------------------------------------------------------------

    \224\ The Alliance cited the Sierra Research report as stating
that ``* * * the 1.5 multiplier clearly does not apply to changes in
engines, transmissions, or bodies in cases where the vehicle
manufacturer designs and produces its own engines, transmissions,
and bodies.'' Sierra Research report at 61.
---------------------------------------------------------------------------

    The Alliance also commented that Bussman had ``considered the
literature on RPE factors extensively,'' and ``concluded that studies
that advised RPEs of approximately 1.5 were filled with errors and that
when these errors were corrected, these studies also supported the
conclusion that the proper RPE is 2.0.'' The Alliance concluded by
arguing that the Sierra Research report had found that ``some recent
analyses of RPE are based on unrepresentative and unsustainable profit
levels by manufacturers,'' and that ``If realistic long-term profit
rates are used, then the RPE increases from 2.0 to a range of 2.09 to
2.15.''
    NADA did not expressly agree or disagree with a mark-up factor of
1.5, but commented that since the NPRM states that the 1.5 multiplier
includes ``dealer profit'' among other related additional costs, NHTSA
``should review whether its estimates include all dealer costs-of-sales
when calculating `dealer profit' and the extent to which it has
properly accounted for the finance costs consumers typically pay when
purchasing new automobiles.''
    Agency response: NHTSA notes that the analysis for this final rule
relies on entirely new cost estimates for fuel economy technologies
developed by the agency in response to comments and in coordination
with an international engineering consulting firm, Ricardo, Inc., based
on a bill of materials approach as described in Section IV of this
notice and not based on the 2004 NESCCAF study, so the issue of
apparent inconsistency in the RPE factor applied to those estimates
noted by NESCAUM and CARB is no longer relevant. The agency also notes
that both the production and application of fuel economy-improving
technologies include separate engineering cost components. Developing
these technologies and readying them for high-volume production entails
significant initial investments in product design and engineering,
while as the NPRM pointed out, applying individual technologies to
specific vehicle models can entail significant additional costs for
accompanying engineering changes to its existing drive train,
development and testing of prototype versions, recalibrating engine
operating parameters, and integrating the technology with other
attributes of the vehicle. While design and engineering costs for
developing fuel economy-improving technologies are included in the
production cost estimates for individual technologies,

additional engineering costs incurred by manufacturers in applying them
to specific vehicle models are included in NHTSA's estimate of the RPE
factor. Finally, the agency notes that its estimate of the RPE factor
includes high-volume production and application of fuel economy
technologies, because it assumes that initial design and engineering
costs to develop and begin production of these technologies will be
recovered over large production volumes. Thus, NHTSA believes that
CARB's concerns about potential double-counting of engineering costs
for developing and applying fuel economy technologies reflect a failure
to recognize that engineering costs arise in both their development and
application. The agency also believes that CARB's concern about whether
NHTSA's RPE factor assumes the spreading of initial design and
engineering costs for developing these technologies over insufficiently
high production volumes is unfounded.
    In response to the concerns expressed by the Alliance and others
that NHTSA's RPE factor is too low, the agency notes that the RPE
factor of 2.0 reported in the Argonne and Sierra Research studies
includes various categories of production overhead costs (for product
development and engineering, depreciation and amortization of
production facilities, and warranty) that are included in NHTSA's
estimates of production costs for fuel economy technologies. When
applied to technology production costs defined to include these
components, the agency's RPE factor of 1.5 is thus consistent with full
recovery of these cost components. This conclusion is independent of
whether overhead costs for developing and producing fuel economy
technologies are initially borne by equipment suppliers or by vehicle
manufacturers themselves. Consequently, NHTSA has continued to employ
an RPE factor of 1.5 in its analysis for this final rule.
2. Potential Opportunity Costs of Improved Fuel Economy
    In the NPRM, NHTSA discussed the issue of whether achieving the
fuel economy improvements required by alternative CAFE standards would
require manufacturers to compromise the performance, carrying capacity,
safety, or comfort of some vehicle models. If so, the resulting
reduction in the value of those models to potential buyers would
represent an additional cost of achieving the improvements in fuel
economy required by stricter CAFE standards. While exact dollar values
of these attributes to consumers are difficult to infer from vehicle
purchase prices, changing vehicle attributes can affect the utility
that vehicles provide to their owners, and thus their value to
potential buyers. This is not to suggest that buyers typically attach
low values to fuel economy; rather, it recognizes that buyers value
many different attributes, so that requiring manufacturers to make
tradeoffs among them may alter the overall value of certain vehicle
models to individual buyers.
    NHTSA has approached this potential problem by developing tentative
cost estimates for fuel economy-improving technologies that include any
additional production costs necessary to maintain the product plan
levels of performance, comfort, capacity, and safety of the models on
which they are used. In doing so, NHTSA primarily followed the
precedent established by the 2002 NAS Report, although the NPRM updated
its assumptions as necessary for purposes of the current rulemaking.
The NAS Report estimated ``constant performance and utility'' costs for
fuel economy technologies, and NHTSA used those as the basis for its
further efforts to develop the initial technology costs employed in
analyzing manufacturers' costs for complying with alternative CAFE
standards.
    NHTSA acknowledged the difficulty of estimating technology costs
that include costs for the accompanying changes in vehicle design that
are necessary to maintain performance, capacity, and utility. However,
as NHTSA stated in the NPRM, the agency believes that the tentative
cost estimates for fuel economy-improving technologies should be
generally sufficient to prevent significant reductions in consumer
welfare provided by vehicle models to which manufacturers apply those
technologies. Nonetheless, the NPRM sought comment on alternative ways
to address these issues.
    NHTSA did not receive comments that explicitly addressed NHTSA's
question of whether there are better ways for the agency to estimate
technology costs that capture changes in vehicle design so that fuel
economy can be improved while maintaining performance, capacity, and
utility. Some comments, however, expressed concern that the proposed
CAFE standards, and more stringent CAFE standards generally, would
prevent manufacturers from maintaining intended levels of performance,
comfort, capacity, and/or safety of at least some of their vehicle
models.
    For example, the American Farm Bureau Federation commented that the
proposed standards would result in ``more expensive trucks that lack
the power needed to perform the tasks required'' of them by farmers,
and that ``trucks laden with expensive untested technologies may prove
undependable and costly to repair.'' AFBF stated that farmers need
trucks that can haul and tow heavy loads and trailers, which requires
``heavy frames, strong engines, and adequate horsepower and torque.''
AFBF argued that the proposal would cause manufacturers either to
downsize and reduce power in their vehicles, or to sell fewer powerful
trucks and increase their cost, all of which would create hardship for
farmers who need such trucks for their livelihoods.
    NADA similarly suggested in its comments that the proposed
standards could constrain the ability of light truck manufacturers to
meet ``market needs'' for towing and hauling capability, as well as
space and power. NADA also stated that manufacturers of small high-
performance (i.e., sports) cars might be forced by the stringency of
the proposed standards to exit the market or reduce product offerings.
    BMW expressed concern that the proposed footprint-based standards
will ``provide a disincentive to install safety devices on vehicles,''
since ``In general, safety devices add mass,'' and ``additional mass
will lead to higher fuel consumption.'' Thus, BMW argued, all
manufacturers will think twice before adding safety equipment to a
vehicle, in order not to hurt their chances of meeting the CAFE
standards. Along those lines, BMW argued that its vehicles were ``high
feature-density vehicles,'' which it defined as ``those that include
extraordinary safety, comfort, and convenience features like
electronic/advanced stability, braking, suspension, steering, lighting,
and security controls.'' BMW stated that these vehicles ``have a high
mass per footprint density,'' and suggested that the proposed
footprint-based standards provide manufacturers with a disincentive to
continue offering this type of vehicle.
    Agency response: The agency did not include a reduction in
performance as one of the countermeasures that the manufacturers could
take to meet the final rule for two main reasons. First, the agency
believes that manufacturers could meet the standards adopted in this
final rule at the estimated compliance costs without noticeably
affecting vehicle performance or utility. As noted previously, NHTSA's
cost estimates for individual fuel economy-improving technologies are
intended to include any additional production costs necessary to
maintain the performance,

comfort, capacity, and safety of the models on which they are used. The
agency has reviewed its cost estimates for individual fuel economy
technologies in detail, and is confident that they include sufficient
allowances to prevent significant reductions in these critical
attributes, and this in the utility that vehicle models to which
manufacturers apply those technologies will provide to potential
buyers.
    Second, NHTSA believes that the commenters' concerns about
potential opportunity costs for reduced vehicle performance and utility
are largely unfounded. Manufacturers are technically capable of
producing vehicles with reduced performance, as evidenced by the fact
that most manufacturers offer otherwise-similar vehicle models that
feature a range of engine sizes, and thus different levels of power and
performance. Although some manufacturers offer versions of the same
vehicle model with a smaller engine in Europe than is sold in the
United States, their decisions not to market these vehicles
domestically demonstrates that they do not believe that they can
produce and sell such vehicles to U.S. buyers in sufficient quantities
to be profitable at this time. This is presumably because in order to
sell vehicles that do not meet U.S. buyers' preferences for power and
performance, manufacturers would be required to discount their prices
sufficiently to compensate for their lower levels of these attributes.
    While it may be true that a manufacturer could produce lower-
performance versions of its vehicle models at reduced costs compared to
a higher-performance version of that same model, this does not make
performance reduction a zero or negative cost compliance option.
Manufacturers apparently estimate that the reduction in the values of
lower-performing versions to their potential buyers exceeds their
savings in manufacturing costs to produce them, since otherwise they
would already produce and offer lower-performance versions of their
existing models for sale. The net cost of reducing performance, which
is measured by the difference between the reduced value of lower-
performance models to buyers and manufacturers' cost savings for
producing them, represents a cost of employing performance reduction as
a compliance strategy.
    Both manufacturers and NHTSA experience difficulty in determining
how much value consumers place on performance, as well as in
determining whether this value would remain stable over time. While
NHTSA recognizes that there may be specific situations where
performance reduction may be a cost-effective compliance strategy for
certain manufacturers, the agency believes that the net cost of
reducing performance must generally be comparable to or higher than
that of technological approaches to fuel economy improvement. Thus the
outcome of this rulemaking process is not significantly affected by
omission of performance reduction as an explicit compliance strategy.
    In response to BMW's comment that footprint-based standards may
discourage manufacturers from offering safety and other features that
increase vehicle weight, NHTSA notes that increased vehicle weight due
to safety and other features will make it more difficult for
manufacturers to comply with any CAFE standard--whether attribute-based
or uniform--and not just with footprint-based standards. Further, NHTSA
believes that manufacturers will continue to include features whose
value to potential buyers exceeds manufacturers' costs for supplying
them. Those costs will include any outlays for additional fuel economy
technologies that are necessary to compensate for the fuel economy
penalties imposed by features that add weight, and thus enable
manufacturers to comply with higher CAFE standards. NHTSA notes,
however, that buyers generally appear to value such features highly, as
evidenced by the prices of car and light truck models on which they are
featured, as well as by prices that manufacturers generally charge when
they offer such features as options. Any increase in costs to achieve
CAFE compliance that BMW or other manufacturers might experience as a
result of providing these features likely should not, therefore, affect
significantly the extent to which they are included as standard
features or offered as optional features and purchased by vehicle
buyers.
3. The On-Road Fuel Economy `Gap'
    NHTSA explained in the NPRM that actual fuel economy levels
achieved by passenger cars and light trucks in on-road driving fall
somewhat short of their levels measured under the laboratory-like test
conditions that EPA uses to establish its published fuel economy
ratings. In analyzing the fuel savings from alternative CAFE standards
for previous light truck rulemakings, NHTSA adjusted the actual fuel
economy performance of each light truck model downward by 15 percent
from its rated value to reflect the expected size of this on-road fuel
economy ``gap.''
    However, in December 2006, EPA adopted changes to its regulations
on fuel economy labeling which were intended to bring vehicles' rated
fuel economy levels closer to their actual on-road fuel economy
levels.\225\ In its Final Rule, EPA estimated that actual on-road fuel
economy for light-duty vehicles averages 20 percent lower than
published fuel economy levels. For example, if the overall EPA fuel
economy rating of a light truck is 20 mpg, the on-road fuel economy
actually achieved by a typical driver of that vehicle is expected to be
16 mpg (20 mpg x 0.8). In the NPRM, NHTSA employed EPA's revised
estimate of this on-road fuel economy gap in its analysis of the fuel
savings resulting from the proposed and alternative CAFE standards.
---------------------------------------------------------------------------

    \225\ 71 FR 77871 (Dec. 27, 2006).
---------------------------------------------------------------------------

    NHTSA received no explicit comments regarding the on-road fuel
economy gap. CARB submitted a report by Greene et al. that addressed
in-use fuel economy, but was completed prior to EPA's changes to its
labeling regulations, and CARB did not indicate in its comments how
this report was relevant to the CAFE rulemaking.\226\ The report by
Sierra Research included by the Alliance did not comment specifically
on NHTSA's use of EPA's estimate of the on-road fuel economy gap, but
employed different ``adjustment factors'' ``to translate CAFE to
customer service fuel economy,'' using a factor of 0.85 to ``adjust[]
the `composite' CAFE value to what consumers are expected to achieve in
customer service when the `city' mpg is discounted by 10% and the
`highway' mpg is discounted by 22%.'' Sierra Research also used a 0.82
adjustment factor for hybrid vehicles. However, these estimates were
presented as part of Sierra's analysis with no explanation of how they
were derived, nor why they differed from EPA's estimate of 20 percent
(which was available at the time when Sierra developed its
report).\227\ Moreover, neither Sierra nor the Alliance suggested that
NHTSA use these numbers instead of EPA's for analyzing fuel savings.
---------------------------------------------------------------------------

    \226\ David L. Greene et al., ``Analysis of In-Use Fuel Economy
Shortfall Based on Voluntarily Reported MPG Estimates,'' 2005.
Available at Docket No. NHTSA-2008-0089-0173.11.
    \227\ Sierra Research report, at 96-97. Available at Docket No.
NHTSA-2008-0089-0179.1, Attachment 2.
---------------------------------------------------------------------------

    Because no substantive comments were received on this issue, and
because no new information on the magnitude of the on-road fuel economy
gap has come to NHTSA's attention since the NPRM was published, NHTSA
has continued

to use the EPA estimate of a 20 percent on-road fuel economy gap for
purposes of this final rule.
4. Fuel Prices and the Value of Saving Fuel
    NHTSA explained in the NPRM that projected future fuel prices are a
critical input into the economic analysis of alternative CAFE
standards, because they determine the value of fuel savings both to new
vehicle buyers and to society. NHTSA relied on the most recent fuel
price projections from the U.S. Energy Information Administration's
(EIA) Annual Energy Outlook (AEO) in analyzing the proposed standards.
Specifically, the agency used the AEO 2008 Early Release forecasts of
inflation-adjusted (constant-dollar) retail gasoline and diesel fuel
prices, which NHTSA stated represent the most up-to-date estimate of
the most likely course of future prices for petroleum products.\228\
Federal government agencies generally use EIA's projections in their
assessments of future energy-related policies.
---------------------------------------------------------------------------

    \228\ U.S. Department of Energy, Energy Information
Administration, Annual Energy Outlook 2008, Early Release, Reference
Case Table 12. Available at http://www.eia.doe.gov/oiaf/aeo/pdf/
aeotab_12.pdf (last accessed October 10, 2008). EIA released the
full AEO 2008 in June 2008, which NHTSA stated in the NPRM it would
use in the final rule. EIA explained upon releasing the full AEO
2008 that it had been updated from the Early Release to reflect
EIA's expectations of the effect of EISA, which was enacted after
the Early Release was made public. The full AEO 2008 is available at
http://www.eia.doe.gov/oiaf/aeo/pdf/0383(2008).pdf (last accessed
October 10, 2008).
---------------------------------------------------------------------------

    The retail fuel price forecasts presented in AEO 2008 span the
period from 2008 through 2030. Measured in constant 2006 dollars, the
Reference Case forecast of retail gasoline prices during calendar year
2020 in the Early Release was $2.36 per gallon, rising gradually to
$2.51 by the year 2030 (these values include federal, state, and local
taxes). However, NHTSA explained in the NPRM that valuing fuel savings
over the 36-year maximum lifetime of light trucks assumed in this
analysis required fuel price forecasts that extended through 2050, the
last year during which a significant number of MY 2015 vehicles would
remain in service.\229\ To obtain fuel price forecasts for the years
2031 through 2050, NHTSA assumed that retail fuel prices would remain
constant (in 2006 dollars) from 2031 through 2050.
---------------------------------------------------------------------------

    \229\ The agency defines the maximum lifetime of vehicles as the
highest age at which more than 2 percent of those originally
produced during a model year remain in service. For recent model
years, this age has typically been 25 years for passenger cars and
36 years for light trucks.
---------------------------------------------------------------------------

    NHTSA stated that the value to buyers of passenger cars and light
trucks of fuel savings resulting from improved fuel economy is
determined by the retail price of fuel, which includes federal, state,
and any local taxes imposed on fuel sales. Total taxes on gasoline
averaged $0.47 per gallon during 2006, while those levied on diesel
averaged $0.53. These figures include federal taxes plus the sales-
weighted average of state fuel taxes. Because fuel taxes represent
transfers of resources from fuel buyers to government agencies,
however, rather than real resources that are consumed in the process of
supplying or using fuel, NHTSA explained that their value must be
deducted from retail fuel prices to determine the value of fuel savings
resulting from more stringent CAFE standards to the U.S. economy.
    In estimating the economy-wide or ``social'' value of fuel savings
due to increasing CAFE levels, NHTSA assumed that current fuel taxes
would remain constant in real or inflation-adjusted terms over the