[Federal Register: March 30, 2009 (Volume 74, Number 59)]
[Rules and Regulations]
[Page 14195-14456]
[DOCID:fr30mr09-12]

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

Part II

Department of Transportation

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

National Highway Traffic Safety Administration

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

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

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

Average Fuel Economy Standards Passenger Cars and Light Trucks Model
Year 2011; Final Rule

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

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 523, 531, 533, 534, 536 and 537

[Docket No. NHTSA-2009-0062]
RIN 2127-AK29

Average Fuel Economy Standards Passenger Cars and Light Trucks
Model Year 2011

AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).

ACTION: Final rule; record of decision.

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

SUMMARY: The future of this country's economy, security, and
environment are linked to one key challenge: energy. To reduce fuel
consumption, NHTSA has been issuing Corporate Average Fuel Economy
(CAFE) standards since the late 1970's under the Energy Policy and
Conservation Act (EPCA). However, the principal effects of these
standards are broader than their statutory purpose. Reducing fuel
consumption conserves petroleum, a non-renewable energy source, saves
consumers money, and promotes energy independence and security by
reducing dependence on foreign oil. It also directly reduces the motor
vehicle tailpipe emissions of carbon dioxide (CO2), which is
the principal greenhouse gas emitted by motor vehicles.
    The Energy Independence and Security Act (EISA) amended EPCA by
mandating that the model year (MY) 2011-2020 CAFE standards be set
sufficiently high to ensure that the industry-wide average of all new
passenger cars and light trucks, combined, is not less than 35 miles
per gallon by MY 2020. This is a minimum requirement, as NHTSA must set
standards at the maximum feasible level in each model year. NHTSA will
determine, based on all of the relevant circumstances, whether that
additional requirement calls for establishing standards that reach the
35 mpg goal earlier than MY 2020.
    NHTSA published a proposal in May 2008 to begin implementing EISA
by establishing CAFE standards for MYs 2011-2015. A draft final rule
for those model years was completed, but not issued.
    In the context of his calls for the development of new national
policies to prompt sustained domestic and international actions to
address the closely intertwined issues of energy independence, energy
security and climate change, the President issued a memorandum on
January 26, 2009, requesting NHTSA to divide its rulemaking into two
parts. First, he requested the agency to issue a final rule adopting
CAFE standards for MY 2011 only. Given the substantial time and
analytical effort involved in developing CAFE standards and the limited
amount of time before the statutory deadline of March 30, 2009 for
establishing the MY 2011 standards, the agency has necessarily based
this one year final rule almost wholly on the information available to
it and the analysis performed by it in support of the draft final rule
completed last fall.
    Second, the President requested NHTSA to establish standards for MY
2012 and later after considering the appropriate legal factors, the
comments filed in response to the May 2008 proposal, the relevant
technological and scientific considerations, and, to the extent
feasible, a forthcoming report by the National Academy of Sciences,
mandated under section 107 of EISA, assessing existing and potential
automotive technologies and costs that can practicably be used to
improve fuel economy. The deferral of action on standards for the later
model years provides the agency with an opportunity to review its
approach to CAFE standard setting, including its methodologies,
economic and technological inputs and decisionmaking criteria, so as to
ensure that it will produce standards that contribute, to the maximum
extent possible within the limits of EPCA/EISA, to meeting the energy
and environmental challenges and goals outlined by the President.
    NHTSA estimates that the MY 2011 standards will raise the industry-
wide combined average to 27.3 mpg, save 887 million gallons of fuel
over the lifetime of the MY 2011 cars and light trucks, and reduce
CO2 emissions by 8.3 million metric tons during that period.

DATES: This final rule is effective May 29, 2009.
    Petitions for reconsideration must be received by May 14, 2009.

ADDRESSES: Petitions for reconsideration must be submitted to:
Administrator, National Highway Traffic Safety Administration, 1200 New
Jersey Avenue, SE., Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: For policy and technical issues: Ms.
Julie Abraham or Mr. Peter Feather, Office of Rulemaking, National
Highway Traffic Safety Administration, 1200 New Jersey Avenue, SE.,
Washington, DC 20590. Telephone: Ms. Abraham<PHONE_NUMBER>; Mr.
Feather<PHONE_NUMBER>.
    For legal issues: Mr. Stephen Wood or Ms. Rebecca Yoon, Office of
the Chief Counsel, National Highway Traffic Safety Administration, 1200
New Jersey Avenue, SE., Washington, DC 20590. Telephone: (202) 366-
2992.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive overview
    A. The President's January 26, 2009 Memorandum on CAFE Standards
for Model Years 2011 and Beyond
    1. Rulemaking Background
    2. Requests in the President's Memorandum
    (a) CAFE Standards for Model Year 2011
    (b) CAFE Standards for Model Years 2012 and Beyond
    3. Implementing the President's Memorandum
    B. Energy Independence and Security Act of 2007
    C. Notice of Proposed Rulemaking for MYs 2011-2015 and Request
for New Product Plans
    1. Key Economic Values for Benefits Computations and Standard
Setting
    2. Standards
    (a) Classification of Vehicles
    (b) Stringency
    (c) Benefits and Costs
    (i) Benefits
    (ii) Costs
    (d) Effect of Flexibilities on Benefits and Costs
    3. Credits
    4. Preemption
    D. Brief Summary of Public Comments on the NPRM
    E. New Information Received or Developed by NHTSA Between the
NPRM and Final Rule
    1. New Manufacturer Product Plans
    2. Revised Assessment of Technology Effectiveness and Costs
    3. Final Environmental Impact Statement
    F. Final Rule for MY 2011
    1. Introduction
    2. Key Economic Values for Benefits Computations
    3. Standards
    (a) Classification
    (b) Stringency
    (c) Benefits and Costs
    (i) Benefits
    (ii) Costs
    (d) Flexibilities
    4. Credits
    5. Preemption
II. Background
    A. Role of Fuel Economy Improvements in Promoting Energy
Independence, Energy Security, and a Low Carbon Economy
    B. Contributions of Fuel Economy Improvements to CO2
Tailpipe Emission Reductions Since 1975
    C. Chronology of Events Since the National Academy of Sciences
Called for Reforming and Increasing CAFE Standards
    1. National Academy of Sciences Issues Report on Future of CAFE
Program (February 2002)
    (a) Significantly Increasing CAFE Standards Without Making Them

Attribute-Based Would Adversely Affect Safety
    (b) Climate Change and Other Externalities Justify Increasing
the CAFE Standards
    2. NHTSA Issues Final Rule Establishing Attribute-Based CAFE
Standards for MY 2008-2011 Light Trucks (March 2006)
    3. Supreme Court Issues Decision in Massachusetts v. EPA (April
2007)
    4. NHTSA and EPA Coordinate on Development of Rulemaking
Proposals (Summer-Fall 2007)
    5. Ninth Circuit Issues Decision Re Final Rule for MY 2008-2011
Light Trucks (November 2007)
    6. Congress Enacts Energy Security and Independence Act of 2007
(December 2007)
    7. NHTSA Proposes CAFE Standards for MYs 2011-2015 and Requests
New Product Plans for Those Years (April 2008)
    8. NHTSA Contracts With ICF International To Conduct Climate
Modeling and Other Analyses in Support of Draft and Final
Environmental Impact Statements (May 2008)
    9. Manufacturers Submit New Product Plans (June 2008)
    10. NHTSA Contracts With Ricardo To Aid in Assessing Public
Comments On Cost and Effectiveness of Fuel Saving Technologies (June
2008)
    11. Ninth Circuit Revises Its Decision Re Final Rule for MY
2008-2011 Light Trucks (August 2008)
    12. NHTSA Releases Final Environmental Impact Statement (October
2008)
    13. Office of Information and Regulatory Affairs Completes
Review of a Draft MY 2011-2015 Final Rule (November 2008)
    14. Department of Treasury Extends Loans to General Motors and
Chrysler (December 2008)
    15. Department of Transportation Decides Not To Issue MY 2011-
2015 Final Rule (January 2009)
    16. The President Requests NHTSA To Issue Final Rule for MY 2011
Only (January 2009)
    17. General Motors and Chrysler Submit Restructuring Reports to
Department of Treasury (February 2009)
    D. Energy Policy and Conservation Act, as Amended
    1. Vehicles Subject to Standards for Automobiles
    2. Mandate To Set Standards for Automobiles
    3. Attribute-Based Standards
    4. Factors Considered in the Setting of Standards
    (a) Factors That Must Be Considered
    (i) Technological Feasibility
    (ii) Economic Practicability
    (iii) The Effect of Other Motor Vehicle Standards of the
Government on Fuel Economy
    (iv) The Need of the United States To Conserve Energy
    1. Fuel Prices and the Value of Saving Fuel
    2. Petroleum Consumption and Import Externalities
    3. Air Pollutant Emissions
    (v) Other Factors--Safety
    (b) Factors That Cannot Be Considered
    (c) Weighing and Balancing of Factors
    5. Consultation in Setting Standards
    6. Test Procedures for Measuring Fuel Economy
    7. Enforcement and Compliance Flexibility
III. The Anticipated Vehicles in the MY 2011 Fleets and NHTSA's
Baseline Market Forecast
    A. Why does NHTSA establish a baseline market forecast?
    B. How does NHTSA develop the baseline market forecast?
    1. NHTSA first asks manufacturers for updated product plan data
    (a) Why does NHTSA use manufacturer product plans to develop the
baseline?
    (b) What product plan data did NHTSA use in the NPRM?
    (c) What product plan data did NHTSA receive for the final rule?
    (d) How is the product plan data received for the final rule
different from what the agency used in the NPRM analysis, and how
does it impact the baseline?
    2. Once NHTSA has the product plans, how does it develop the
baseline?
    3. How does NHTSA's market forecast reflect current market
conditions?
IV. Fuel Economy-Improving Technologies
    A. NHTSA Analyzes What Technologies Can Be Applied Beyond Those
in the Manufacturers' Product Plans
    B How NHTSA Decides Which Technologies To Include
    1. How NHTSA Did This Historically, and How for the NPRM
    2. NHTSA's Contract With Ricardo for the Final Rule
    C. What technology assumptions has NHTSA used for the final
rule?
    1. How do NHTSA's technology assumptions in the final rule
differ from those used in the NPRM?
    2. How are the technologies applied in the model?
    3. Technology Application Decision Trees
    4. Division of Vehicles Into Subclasses Based on Technology
Applicability, Cost and Effectiveness
    5. How did NHTSA develop technology cost and effectiveness
estimates for the final rule?
    6. Learning Curves
    7. Technology Synergies
    8. How does NHTSA use full vehicle simulation?
    9. Refresh and Redesign Schedule
    10. Phase-In Caps
    D. Specific Technologies Considered for Application and NHTSA's
Estimates of Their Incremental Costs and Effectiveness
    1. What data sources did NHTSA evaluate?
    2. Individual Technology Descriptions and Cost/Effectiveness
Estimates
    (a) Gasoline Engine Technologies
    (i) Overview
    (ii) Low Friction Lubricants (LUB)
    (iii) Engine Friction Reduction (EFR)
    (iv) Variable Valve Timing (VVT)
    1. Intake Cam Phasing (ICP)
    2. Coupled Cam Phasing (CCPS and CCPO)
    3. Dual Cam Phasing (DCP)
    (v) Discrete Variable Valve Lift (DVVLS, DVVLD, DVVLO)
    (vi) Continuously Variable Valve Lift (CVVL)
    (vii) Cylinder Deactivation (DEACS, DEACD, DEACO)
    (viii) Conversion to Double Overhead Camshaft Engine With Dual
Cam Phasing (CDOHC)
    (ix) Stoichiometric Gasoline Direct Injection (SGDI)
    (x) Combustion Restart (CBRST)
    (xi) Turbocharging and Downsizing (TRBDS)
    (xii) Cooled Exhaust Gas Recirculation Boost (EGRB)
    (b) Diesel Engine Technologies
    (i) Diesel Engine With Lean NOX Trap (LNT) Catalyst
After-Treatment
    (ii) Diesel Engine With Selective Catalytic Reduction (SCR)
After-Treatment
    (c) Transmission Technologies
    (i) Improved Transmission Controls and Externals (IATC)
    (ii) Automatic 6-, 7- and 8-Speed Transmissions (NAUTO)
    (iii) Dual Clutch Transmissions/Automated Manual Transmissions
(DCTAM)
    (iv) Continuously Variable Transmission (CVT)
    (v) 6-Speed Manual Transmissions (6MAN)
    (d) Hybrid and Electrification/Accessory Technologies
    (i) Overview
    (ii) Hybrid System Sizing and Cost Estimating Methodology
    (iii) Electrical Power Steering (EPS)
    (iv) Improved Accessories (IACC)
    (v) 12V Micro Hybrid (MHEV)
    (vi) High Voltage/Improved Alternator (HVIA)
    (vii) Integrated Starter Generator (ISG)
    (viii) Power Split Hybrid
    (ix) 2-Mode Hybrid
    (x) Plug-In Hybrid
    (e) Vehicle Technologies
    (i) Material Substitution (MS1, MS2, MS5)
    (ii) Low Drag Brakes (LDB)
    (iii) Low Rolling Resistance Tires (ROLL)
    (iv) Front or Secondary Axle Disconnect for Four-Wheel Drive
Systems (SAX)
    (v) Aerodynamic Drag Reduction (AERO)
    (f) Technologies Considered But Not Included in the Final Rule
Analysis
    (i) Camless Valve Actuation
    (ii) Lean-Burn Gasoline Direct Injection Technology
    (iii) Homogeneous Charge Compression Ignition
    (iv) Electric Assist Turbocharging
    E. Cost and Effectiveness Tables
V. Economic Assumptions Used in NHTSA's Analysis
    A. Introduction: How NHTSA Uses the Economic Assumptions in Its
Analysis
    B. What economic assumptions does NHTSA use in its analysis?
    1. Determining Retail Price Equivalent
    2. Potential Opportunity Costs of Improved Fuel Economy
    3. The On-Road Fuel Economy `Gap'
    4. Fuel Prices and the Value of Saving Fuel
    5. Consumer Valuation of Fuel Economy and Payback Period
    6. Vehicle Survival and Use Assumptions
    7. Growth in Total Vehicle Use
    8. Accounting for the Rebound Effect of Higher Fuel Economy
    9. Benefits From Increased Vehicle Use
    10. Added Costs From Congestion, Crashes, and Noise

    11. Petroleum Consumption and Import Externalities
    12. Air Pollutant Emissions
    (a) Impacts on Criteria Pollutant Emissions
    (b) Reductions in CO2 Emissions
    (c) Economic Value of Reductions in CO2 Emissions
    13. The Value of Increased Driving Range
    14. Discounting Future Benefits and Costs
    15. Accounting for Uncertainty in Benefits and Costs
VI. How NHTSA Sets the CAFE Standards
    A. Which attributes does NHTSA use to determine the standards?
    B. Which mathematical function does NHTSA use to set the
standards?
    C. What other types of standards did commenters propose?
    D. How does NHTSA fit the curve and estimate the stringency that
maximizes net benefits to society?
    E. Why has NHTSA used the Volpe model to support its analysis?
VII. Determining the Appropriate Level of the Standards
    A. Analyzing the Preferred Alternative
    B. Alternative Levels of Stringency Considered for Establishment
as the Maximum Feasible Level of Average Fuel Economy
    C. EPCA Provisions Relevant to the Selection of the Final
Standards
    1. 35 in 2020
    2. Annual Ratable Increase
    3. Maximum Feasibility and the Four Underlying EPCA
Considerations
    (a) Technological Feasibility
    (b) Economic Practicability
    (c) Effect of Other Motor Vehicle Standards of the Government on
Fuel Economy
    (d) Need of the United States To Conserve Energy
    (i) Consumer Cost
    (ii) National Balance of Payments
    (iii) Environmental Implications
    (iv) Foreign Policy Considerations
    4. Comparison of Alternatives
    5. Other Considerations Under EPCA
    (a) Safety
    (b) AMFA Credits
    (c) Flexibility Mechanisms: Credits, Fines
    D. Analysis of Environmental Consequences in Selecting the Final
Standards
    E. Picking the Final Standards
    1. Eliminating the Alternatives Facially Inconsistent With EPCA
    (a) No-Action Alternative
    (b) Technology Exhaustion Alternative
    2. Choosing Among the Remaining Alternatives
    (a) Difficulty and Importance of Achieving a Reasonable
Balancing of the Factors
    (b) The Correct Balancing of the Factors for Setting the MY 2011
Standards Is To Maximize Societal Net Benefits
VIII. Safety
    A. Summary of NHTSA's Approach in This Final Rule
    B. Background
    1. NHTSA's Early Studies
    2. The 2002 National Academy of Sciences Study
    3. NHTSA's updated 2003 Study
    4. Summary of Studies Prior to This Rulemaking
    B. Response to Comments in This Rulemaking on Safety and Vehicle
    Weight
    1. Views of Other Government Agencies
    2. Comments From Other Parties
    C. Comments on Other Issues Related to Safety
    1. Vehicle Compatibility Design Issues
    2. Whether Manufacturers Downweight in Response to Increased
CAFE Stringency
    3. Whether Flat Standards Are More or Less Harmful to Safety
Than Footprint-Based Standards
    4. Whether NHTSA Should Set Identical Targets for Passenger Cars
and Light Trucks for Safety Reasons
    5. Whether NHTSA Should Have Considered the 2002 NAS Report
Dissent in Deciding Not To Apply Material Substitution for Vehicles
Under 5,000 Pounds
IX. The Final Fuel Economy Standards for MY 2011
    A. Final Passenger Car Standard
    B. Final Light Truck Standard
    C. Energy and Environmental Backstop
    D. Combined Fleet Performance
    E. Costs and Benefits of Final Standards
    1. Benefits
    2. Costs
    F. Environmental Impacts of Final Standards
X. Other Fuel Economy Standards Required by EISA
XI. Vehicle Classification
    A. Summary of Comments
    B. Response to Comments
    1. This Rule Substantially Tightens NHTSA's Vehicle
Classification Definitions
    (a) Under Sec.  523.5(b), Only Vehicles That Actually Have 4WD
Will Be Classified as 4WD Vehicles
    (b) The Final Rule Amends Sec.  523.5(a)(4) To Prevent Gaming
That Might Jeopardize Fuel Savings Created by NHTSA's Clarified
Position on 2WD Vehicles
    2. Especially as Tightened by This Rule, NHTSA's Classification
Definitions Are More Difficult to Game Than Commenters Suggest
    3. Additional Changes in NHTSA's Classification Definitions
Would Not Result in Greater Fuel Savings and Lower CO2
Emissions
    4. The Vehicle Classification Definitions Embodied in This Final
Rule Are Consistent With NHTSA's Statutory Authority and Respond to
the Ninth Circuit's Opinion
XII. Flexibility Mechanisms and Enforcement
    A. NHTSA's Request for Comment Regarding Whether the Agency
Should Consider Raising the Civil Penalty for CAFE Non-Compliance
    B. CAFE Credits
    C. Extension and Phasing Out of Flexible-Fuel Incentive Program
XIII. Test Procedure for Measuring Wheelbase and Track Width and
Calculating Footprint
    A. Test Procedure Execution
    B. Measured Value Tolerances
    C. Administrative and Editorial Issues
XIV. Sensitivity and Monte Carlo Analysis
XV. NHTSA's Record of Decision
XVI. Regulatory Notices and Analyses
    A. Executive Order 12866 and DOT Regulatory Policies and
Procedures
    B. National Environmental Policy Act
    1. Clean Air Act (CAA)
    2. National Historic Preservation Act (NHPA)
    3. Executive Order 12898 (Environmental Justice)
    4. Fish and Wildlife Conservation Act (FWCA)
    5. Coastal Zone Management Act (CZMA)
    6. Endangered Species Act (ESA)
    7. Floodplain Management (Executive Order 11988 & DOT Order
5650.2)
    8. Preservation of the Nation's Wetlands (Executive Order 11990
& DOT Order 5660.1a)
    9. Migratory Bird Treaty Act (MBTA), Bald and Golden Eagle
Protection Act (BGEPA), Executive Order 13186
    10. Department of Transportation Act (Section 4(f))
    C. Regulatory Flexibility Act
    D. Executive Order 13132 (Federalism)
    E. Executive Order 12988 (Civil Justice Reform)
    F. Unfunded Mandates Reform Act
    G. Paperwork Reduction Act
    H. Regulation Identifier Number (RIN)
    J. Executive Order 13045
    K. National Technology Transfer and Advancement Act
    L. Executive Order 13211
    M. Department of Energy Review
    N. Privacy Act
XVII. Regulatory Text

I. Executive Overview

A. The President's January 26, 2009 Memorandum on CAFE Standards for
Model Years 2011 and Beyond

1. Rulemaking Background
    On May 2, 2008, NHTSA published a Notice of Proposed Rulemaking
entitled Average Fuel Economy Standards, Passenger Cars and Light
Trucks; Model Years 2011-2015, 73 FR 24352. In mid-October, the agency
completed and released a final environmental impact statement in
anticipation of issuing standards for those years. Based on its
consideration of the public comments and other available information,
including information on the financial condition of the automotive
industry, the agency adjusted its analysis and the standards and
prepared a final rule for MYs 2011-2015. On November 14, the Office of
Information and Regulatory Affairs (OIRA) of the Office of Management
and Budget cleared the rule as consistent with the Order.\1\ However,
issuance of the final rule was held in abeyance. On January 7, 2009,

the Department of Transportation announced that the final rule would
not be issued, saying:
---------------------------------------------------------------------------

    \1\ Record of OIRA's action can be found at http://
www.reginfo.gov/public/do/eoHistReviewSearch (last visited March 8,
2009). To find the report on the clearance of the draft final rule,
select ``Department of Transportation'' under ``Economically
Significant Reviews Completed'' and select ``2008'' under ``Select
Calendar Year.''

    The Bush Administration will not finalize its rulemaking on
Corporate Fuel Economy Standards. The recent financial difficulties
of the automobile industry will require the next administration to
conduct a thorough review of matters affecting the industry,
including how to effectively implement the Energy Independence and
Security Act of 2007 (EISA). The National Highway Traffic Safety
Administration has done significant work that will position the next
Transportation Secretary to finalize a rule before the April 1, 2009
deadline.\2\
---------------------------------------------------------------------------

    \2\ The statement can be found at http://www.dot.gov/affairs/
dot0109.htm (last accessed February 11, 2009).
---------------------------------------------------------------------------

2. Requests in the President's Memorandum
    In light of the requirement to prescribe standards for MY 2011 by
March 30, 2009 and in order to provide additional time to consider
issues concerning the analysis used to determine the appropriate level
of standards for MYs 2012 and beyond, the President issued a memorandum
on January 26, 2009, requesting the Secretary of Transportation and
Administrator \3\ of the National Highway Traffic Safety Administration
NHTSA to divide the rulemaking into two parts: (1) MY 2011 standards,
and (2) standards for MY 2012 and beyond.
---------------------------------------------------------------------------

    \3\ Currently, the National Highway Traffic Safety
Administration does not have an Administrator. Ronald L. Medford is
the Acting Deputy Administrator.
---------------------------------------------------------------------------

(a) CAFE Standards for Model Year 2011
    The request that the final rule establishing CAFE standards for MY
2011 passenger cars and light trucks be prescribed by March 30, 2009
was based on several factors. One was the requirement that the final
rule regarding fuel economy standards for a given model year must be
adopted at least 18 months before the beginning of that model year (49
U.S.C. 32902(g)(2)). The other was that the beginning of MY 2011 is
considered for the purposes of CAFE standard setting to be October 1,
2010. As part of that final rule, the President requested that NHTSA
consider whether any provisions regarding preemption are consistent
with the EISA, the Supreme Court's decision in Massachusetts v. EPA and
other relevant provisions of law and the policies underlying them.
(b) CAFE Standards for Model Years 2012 and Beyond
    The President requested that, before promulgating a final rule
concerning the model years after model year 2011, NHTSA

    [C]onsider the appropriate legal factors under the EISA, the
comments filed in response to the Notice of Proposed Rulemaking, the
relevant technological and scientific considerations, and to the
extent feasible, the forthcoming report by the National Academy of
Sciences mandated under section 107 of EISA.

    In addition, the President requested that NHTSA further consider
whether any provisions regarding preemption are appropriate under
applicable law and policy.
3. Implementing the President's Memorandum
    In keeping with the President's remarks on January 26 for new
national policies to address the closely intertwined issues of energy
independence, energy security and climate change, and for the
initiation of serious and sustained domestic and international action
to address them, NHTSA will develop CAFE standards for MY 2012 and
beyond only after collecting new information, conducting a careful
review of technical and economic inputs and assumptions, and standard
setting methodology, and completing new analyses.
    For MY 2011, however, time limitations precluded the adoption of
this approach. As noted above, EPCA requires that standards for that
model year be established by the end of March of this year. Thus,
immediate decisions had to be made about the establishment of the MY
2011 standards. There was insufficient time between the issuance of the
President's memorandum in late January and the end of March to revisit
and, if and as appropriate, revise the extensive and complex analysis
in any substantively significant way. This is particularly so given the
requirement under EPCA to consult with the Environmental Protection
Agency and the Department of Energy on these complicated and important
technical matters. Decisions regarding those matters potentially affect
not just NHTSA's CAFE rulemaking, but also programs of other
departments and agencies. Accordingly, the methodologies, economic and
technological inputs and decisionmaking criteria used in this rule are
necessarily largely those developed by NHTSA in the fall of 2008.
    In looking ahead to the next CAFE rulemaking, the agency emphasizes
that while the methodologies, economic and technological inputs and
decisionmaking criteria used in this rule were well-supported choices
for the purposes of the MY 2011 rulemaking, they were not the only
reasonable choices that the agency could have made for that purpose.
Many of the key aspects of this rulemaking reflect decisions among
several reasonable alternatives. The choices made in the context of
last fall may or may not be the choices that will be made in the
context of the follow-on rulemaking.
    The deferral of action on the CAFE standards for the years after MY
2011 provides the agency with an opportunity to review its approach to
CAFE standard setting, including its methodologies, economic and
technological inputs, and decisionmaking criteria. It is reasonable to
anticipate that this process may lead to changes, given the further
review and analysis that will be conducted pursuant to the President's
request, and given the steady and potentially substantial evolution in
technical and policy factors relevant to the next CAFE rulemaking.
These factors include, but are not limited to, energy and climate
change needs and policy choices regarding goals and approaches to
achieving them, developments in domestic legislation and international
negotiations regarding those goals and approaches, the financial health
of the industry, technologies for reducing fuel consumption, fuel
prices, and climate change science and damage valuation.
    The goal of the review and re-evaluation will be to ensure that the
approach used for MY 2012 and thereafter produces standards that
contribute, to the maximum extent possible under EPCA/EISA, to meeting
the energy and environmental challenges and goals outlined by the
President. We will seek to craft our program with the goal of creating
the maximum incentives for innovation, providing flexibility to the
regulated parties, and meeting the goal of making substantial and
continuing reductions in the consumption of fuel. To that end, we are
committed to ensuring that the CAFE program for beyond MY 2011 is based
on the best scientific, technical, and economic information available,
and that such information is developed in close coordination with other
federal agencies and our stakeholders, including the states and the
vehicle manufacturers.
    We will also re-examine EPCA, as amended by EISA, to consider
whether additional opportunities exist for achieving the President's
goals. For example, EPCA authorizes, within relatively narrow limits
and subject to making specified findings, for increasing the amount of
civil penalties

for violating the CAFE standards.\4\ Further, while EPCA prohibits
updating the test procedures used for measuring passenger car fuel
economy, it places no such limitation on the test procedures for light
trucks.\5\ If the test procedures used for light trucks were revised to
provide for the operation of air conditioning during fuel economy
testing, vehicle manufacturers would have a regulatory incentive to
increase the efficiency and reduce the weight of air conditioning
systems, thereby reducing fuel consumption and tailpipe emissions of
CO2.
---------------------------------------------------------------------------

    \4\ Under 49 U.S.C. 32904(c), EPA must ``use the same procedures
for passenger automobiles the Administrator used for model year 1975
(weighted 55 percent urban cycle and 45 percent highway cycle), or
procedures that give comparable results.''
    \5\ 49 U.S.C. 32912(c).
---------------------------------------------------------------------------

    In response to the President's request that NHTSA consider whether
any provisions regarding preemption are consistent with EISA, the
Supreme Court's decision in Massachusetts v. EPA and other relevant
provisions of law and the policies underlying them, NHTSA has decided
not to include any provisions addressing preemption in the Code of
Federal Regulations at this time. The agency will re-examine the issue
of preemption in the content of its forthcoming rulemaking to establish
Corporate Average Fuel Economy standards for 2012 and later model
years.

B. Energy Independence and Security Act of 2007

    The mandates in the Energy Independence and Security Act of 2007
(EISA) \6\ for reducing fuel consumption by motor vehicles and
expanding the production of renewable fuels represent major steps
forward in promoting energy independence and security and in addressing
climate change risks by reducing CO2 emissions. EISA
requires the first statutory increase in fuel economy standards for
passenger automobiles (referred to below as ``passenger cars'') since
those standards were originally mandated in 1975. It also includes an
important reform--switching to ``attribute-based standards.'' This
switch will help to ensure that increased fuel efficiency does not come
at the expense of automotive safety.
---------------------------------------------------------------------------

    \6\ Public Law 110-140, 121 Stat. 1492 (Dec. 18, 2007).
---------------------------------------------------------------------------

    More specifically, EISA made a number of important changes to EPCA.
EISA:
     Establishes a statutory mandate to establish passenger car
standards for each model year at the maximum feasible level and
eliminates the old statutory default standard of 27.5 mpg for passenger
cars and the provision giving us discretion to amend that default
standard. Thus, given that there will no longer be a default standard,
the agency must act affirmatively to establish a new passenger car
standard for each model year.
     Retains the requirement to establish separate standards
for passenger cars and light trucks and to set them at the maximum
feasible level, but sets forth special requirements for the MY 2011-
2020 standards.
     The standards must increase ratably each year and, at a
minimum, be set sufficiently high to ensure that the average fuel
economy of the combined industry-wide fleet of all new passenger cars
and light trucks sold in the United States during MY 2020 is at least
35 mpg.\7\
---------------------------------------------------------------------------

    \7\ Although NHTSA previously established an attribute-based
standard for MY 2011 light trucks in its 2006 final rule, EISA
mandates a new rulemaking, reflecting new statutory considerations
and a new administrative record, and consistent with EPCA as amended
by EISA, to establish the standard for those light trucks.
---------------------------------------------------------------------------

     Mandates the reforming of CAFE standards for passenger
cars by requiring that all CAFE standards be based on one or more
vehicle attributes related to fuel economy (like size or weight). Fuel
economy targets are set for individual vehicles and increase as the
attribute decreases and vice versa. For example, size-based (i.e.,
size-indexed) standards assign higher fuel economy targets to smaller
vehicles and lower ones to larger vehicles. Use of this approach helps
to ensure that the improvements in fuel economy do not come at the
expense of safety. NHTSA pioneered that approach in its last rulemaking
on CAFE standards for light trucks.
     Requires that for each model year, beginning with MY 2011,
each manufacturer's domestically-manufactured passenger car fleet must
achieve a measured average fuel economy that is not less than 92
percent of the average fuel economy of the combined industry-wide fleet
of domestic and non-domestic passenger cars sold in the United States
in that model year.
     Limits to five the number of model years for which
standards can be established in a single rulemaking.
     Provides greater flexibility for automobile manufacturers
by (a) increasing from three to five the number of years that a
manufacturer can carry forward the compliance credits it earns by
exceeding CAFE standards, (b) allowing a manufacturer to transfer the
credits it has earned from one of its compliance categories of
automobiles to another class, and (c) authorizing the trading of
credits between manufacturers.

C. Notice of Proposed Rulemaking for MYs 2011-2015 and Request for New
Product Plans

1. Key Economic Values for Benefits Computations and Standard Setting
    NHTSA's analysis of the proposed and alternative CAFE standards in
the Notice of Proposed Rulemaking (NPRM) \8\ relied on a range of
information, economic estimates, and input parameters. These economic
assumptions play a role in the determination of the level of the
standards, with some having greater impacts than others. The cost of
technologies, the price of gasoline, and discount rate used for
discounting future benefits had the greatest influence over the level
of the standards. In order of impact, the full list of the economic
assumptions is as follows: (1) Technology cost; (2) fuel prices; (3)
discount rate; (4) oil import externalities; (5) rebound effect; (6)
criteria air pollutant damage costs; (7) carbon costs. The table below
shows the NPRM assumptions on which the agency received the most
extensive public comment.
---------------------------------------------------------------------------

    \8\ 73 FR 24352, May 2, 2008. In a separate notice published on
the same day, the agency requested automobile manufacturers to
submit new product plans for MYs 2011-15. 73 FR 24190.
    \9\ Although Table V-3 Economic Values for Benefits Computations
in the NPRM indicated that all of the values in that table were
2006$, several values were actually in 2005$. Thus, the monopsony
component, which was shown in that table as $0.176, should have been
shown as $0.182. Likewise, the price shock component should have
been $0.113, instead of $0.109. The sum of those two values should
have been $0.295, not $0.285.

  Table I-1--NPRM Key Economic Values for Benefits Computations (2006$)
                                   \9\
------------------------------------------------------------------------

------------------------------------------------------------------------
Fuel Prices (average retail gasoline price per gallon, 2011-       $2.34
 30).........................................................
Discount Rate Applied to Future Benefits.....................         7%
Economic Costs of Oil Imports ($/gallon):
    ``Monopsony'' Component..................................     $0.182

    Price Shock Component....................................     $0.113
    Military Security Component..............................  .........
                                                              ----------
        Total Economic Costs.................................     $0.295
Emission Damage Costs:
    Carbon Dioxide ($/metric ton)............................      $7.00
    Annual Increase in CO2 Damage Cost.......................       2.4%
------------------------------------------------------------------------

2. Standards
(a) Classification of Vehicles
    In the NPRM, the agency classified the vehicles subject to the
proposed standards as passenger cars or as light trucks in the same way
that the vehicles had been traditionally classified under the CAFE
program. In particular, sport utility vehicles (SUVs), mini-vans and
pickup trucks were classified as light trucks. However, the agency
raised the possibility of reclassifying many of the two-wheel drive
SUVs as passenger cars for the purposes of the final rule.
(b) Stringency
    We proposed setting separate attribute-based fuel economy standards
for passenger cars and light trucks consistent with the size-based
approach that NHTSA used in establishing the light truck standards for
MY 2008-2011 light trucks.
    Compared to the April 2006 final rule that established those
attribute-based standards, the NPRM more thoroughly evaluated the value
of the costs and benefits of setting CAFE standards. This was important
because assumptions regarding projected gasoline prices, along with
assumptions about the value of reducing the negative externalities
(economic and environmental) from producing and consuming fuel, were
based on changed economic, environmental, and energy security
conditions. These environmental externalities include, among other
things, an estimation of the value of reducing tailpipe emissions of
CO2.\10\
---------------------------------------------------------------------------

    \10\ The externalities included in our analysis do not, however,
include those associated with the reduction of the other GHG emitted
by automobiles, i.e., methane (CH4), nitrous oxide
(N2O), and hydroflurocarbons (HFCs). Actual air
conditioner operation is not included in the test procedures used to
obtain both (1) emission rates for purposes of determining
compliance with EPA criteria pollutant emission standards and (2)
fuel economy values for purposes of determining compliance with
NHTSA CAFE standards, although air conditioner operation is included
in ``supplemental'' federal test procedures used to determine
compliance with corresponding and separate EPA criteria pollutant
emission standards. As noted above, EPCA precludes basing passenger
car standards on those other test procedures, but places no such
limit on the test procedures used as the basis for light truck
standards.
---------------------------------------------------------------------------

    In light of EISA and the need to balance the statutory
considerations in a way that reflects the current need of the nation to
conserve energy, including the current assessment of climate change
risks, the agency revisited the various assumptions used to determine
the level of the standards. Specifically, the agency used higher
gasoline prices and higher estimates for energy security values ($0.29
per gallon instead of $0.09 per gallon). The agency also monetized
carbon dioxide (at $7.00/ton), which it did not do in the previous
rulemaking, and expanded the list of technologies it used in assessing
the capability of manufacturers to improve fuel economy. In addition,
the agency used cost estimates that reflect economies of scale and
estimated ``learning''-driven reductions in the cost of technologies as
well as quicker penetration rates for advanced technologies.
    The agency could not set out the exact level of CAFE that each
manufacturer would be required to meet for each model year under the
passenger car or light truck standards since the levels would depend on
information that would not be available until the end of each of the
model years, i.e., the final actual production figures for each of
those years. The agency could, however, project what the industry-wide
level of average fuel economy would be for passenger cars and for light
trucks if each manufacturer produced its expected mix of automobiles
and just met its obligations under the proposed ``optimized'' standards
for each model year. Adjacent to each average fuel economy figure in
the NPRM was the estimated associated level of tailpipe emissions of
CO2 that would be achieved.\11\
---------------------------------------------------------------------------

    \11\ Given the contributions made by CAFE standards to
addressing not only energy independence and security, but also to
reducing tailpipe emissions of CO2, fleet performance was
stated in the above discussion both in terms of fuel economy and the
associated reductions in tailpipe emissions of CO2 since
the CAFE standards would have the practical effect of limiting those
emissions approximately to the indicated levels during the official
CAFE test procedures established by EPA. The relationship between
fuel consumption and carbon dioxide emissions is discussed
ubiquitously, such as at www.fueleconomy.gov, a fuel economy-related
web site managed by DOE and EPA (see http://www.fueleconomy.gov/feg/
contentIncludes/co2_inc.htm, which provides a rounded value of 20
pounds of CO2 per gallon of gasoline). (Last accessed
March 8, 2009.) The CO2 emission rates shown were based
on gasoline characteristics. Because diesel fuel contains more
carbon (per gallon) than gasoline, the presence of diesel engines in
the fleet--which NHTSA expects to increase in response to the
proposed CAFE standards--will cause the actual CO2
emission rate corresponding to any given CAFE level to be slightly
higher than shown here. (The agency projected that 4 percent of the
MY 2015 passenger car fleet and 10 percent of the MY 2015 light
truck fleet would have diesel engines.) Conversely (and
hypothetically), applying the same CO2 emission standard
to both gasoline and diesel vehicles would discourage manufacturers
from improving diesel engines, which show considerable promise as a
means to improve fuel economy.
---------------------------------------------------------------------------

    For passenger cars:

MY 2011: 31.2 mpg (285 g/mi of tailpipe emissions of CO2)
MY 2012: 32.8 mpg (271 g/mi of tailpipe emissions of CO2)
MY 2013: 34.0 mpg (261 g/mi of tailpipe emissions of CO2)
MY 2014: 34.8 mpg (255 g/mi of tailpipe emissions of CO2)
MY 2015: 35.7 mpg (249 g/mi of tailpipe emissions of CO2)

    For light trucks:

MY 2011: 25.0 mpg (355 g/mi of tailpipe emissions of CO2)
MY 2012: 26.4 mpg (337 g/mi of tailpipe emissions of CO2)
MY 2013: 27.8 mpg (320 g/mi of tailpipe emissions of CO2)
MY 2014: 28.2 mpg (315 g/mi of tailpipe emissions of CO2)
MY 2015: 28.6 mpg (310 g/mi of tailpipe emissions of CO2)

    The combined industry-wide average fuel economy (in miles per
gallon, or mpg) levels (in grams per mile, or g/mi) for both cars and
light trucks, if each manufacturer just met its obligations under the
proposed ``optimized'' standards for each model year, would be as
follows:

MY 2011: 27.8 mpg (2.5 mpg increase above MY 2010; 320 g/mi
CO2)
MY 2012: 29.2 mpg (1.4 mpg increase above MY 2011; 304 g/mi
CO2)
MY 2013: 30.5 mpg (1.3 mpg increase above MY 2012; 291 g/mi
CO2)
MY 2014: 31.0 mpg (0.5 mpg increase above MY 2013; 287 g/mi
CO2)
MY 2015: 31.6 mpg (0.6 mpg increase above MY 2014; 281 g/mi
CO2)

    The annual average increase during this five year period was
approximately

4.5 percent. Due to the uneven distribution of new model introductions
during this period and to the fact that significant technological
changes could be most readily made in conjunction with those
introductions, the annual percentage increases were greater in the
early years in this period.
(c) Benefits and Costs
(i) Benefits
    We estimated that the proposed standards for the five-year period
would save approximately 54.7 billion gallons of fuel (18.7 billion
gallons for passenger cars and 36 billion gallons for light trucks) and
reduce tailpipe CO2 emissions by 521 million metric tons
(178 million metric tons for passenger cars and 343 million metric tons
for light trucks) over the lifetime of the vehicles sold during those
model years, compared to the fuel use and emissions reductions that
would occur if the standards remained at the adjusted baseline (i.e.,
the higher of manufacturer's plans and the manufacturer's required
level of average fuel economy for MY 2010).
    We estimated that the value of the total benefits of the proposed
standards would be approximately $88 billion ($31 billion for passenger
cars and $57 billion for light trucks) over the lifetime of the
vehicles sold during those model years.
(ii) Costs
    The total costs for manufacturers to comply with the standards for
the five-year period would be approximately $47 billion ($16 billion
for passenger cars and $31 for light trucks) compared to the costs they
would incur if the standards remained at the adjusted baseline.
(d) Effect of Flexibilities on Benefits and Costs
    The above benefit and cost estimates did not reflect the
availability and use of flexibility mechanisms, such as compliance
credits and credit trading, because EPCA prohibits NHTSA from
considering the effects of those mechanisms in setting CAFE standards.
However, the agency noted that, in reality, manufacturers were likely
to rely to some extent on flexibility mechanisms provided by EPCA and
would thereby reduce the cost of complying with the proposed standards
to a meaningful extent.
3. Credits
    NHTSA also proposed a new Part 536 on trading and transferring
``credits'' earned for exceeding applicable CAFE standards.\12\ Under
the proposed Part 536, credit holders (including, but not limited to,
manufacturers) would have credit accounts with NHTSA, and would be able
to hold credits, apply them to compliance with CAFE standards, transfer
them to another ``compliance category'' for application to compliance
there, or trade them. Traded credits would be subject to an
``adjustment factor'' to ensure total oil savings are preserved, as
required by EISA. EISA also prohibits credits earned before MY 2011
from being transferred, so NHTSA developed several regulatory
restrictions on trading and transferring to facilitate Congress' intent
in this regard.
---------------------------------------------------------------------------

    \12\ Congress required that DOT establish a credit
``transferring'' regulation, to allow individual manufacturers to
move credits from one of their fleets to another (e.g., using a
credit earned for exceeding the light truck standard for compliance
in the domestic passenger car standard). Congress allowed DOT to
establish a credit ``trading'' regulation, so that credits may be
bought and sold between manufacturers and other parties.
---------------------------------------------------------------------------

4. Preemption
    In the proposal, the agency continued its discussion, conducted in
a series of rulemaking proposals and final rules spanning a six-year
period, of the issue of preemption of state regulations regulating
tailpipe emissions of GHGs, especially carbon dioxide.

D. Brief Summary of Public Comments on the NPRM

    Standard stringency: Automobile manufacturers argued that the
standards, especially those for light trucks in the early years, should
be lower. Environmental and consumer groups and states wanted higher
standards throughout the five-year period.
    Footprint attribute: Commenters generally supported the agency's
choice of footprint as an attribute, although several urged
consideration of additional attributes and a few argued for different
attributes.
    Setting standards at levels at which net benefits are projected to
be maximized (optimized standards) vs. using other decision-making
formulae: A consumer group urged setting standards at the optimized +
50% alternative level, while some environmental groups favored setting
them at levels at which total benefits equal total costs. Manufacturers
contended that the optimized approach does not assure economic
practicability, especially for manufacturers needing to borrow at high
interest rates to finance design changes. A manufacturer association
and other commenters said agency did not assess the ability of the
manufacturers to raise the capital necessary to develop and implement
sufficient technologies.
    Front-loading/ratable increase: Some commenters, especially the
manufacturers, argued that the statutory requirement for ``ratable''
increases in standards means that the increases must be proportional or
at least must not be disproportionately large or small in relation to
one another. They did not discuss how that requirement is to be read
together with either the statutory requirement to set standards for
each model year at the level that is the maximum feasible level for
that model year, or the separate statutory requirement for the overall
fleet to achieve at least 35 mpg.
    Key economic and other assumptions affecting stringency--
     Technology costs and effectiveness--The manufacturers said
that NHTSA underestimated the costs. A manufacturer association
submitted a study by Sierra Research challenging the cost and
effectiveness estimates developed by NHTSA and EPA for the NPRM.
     Fuel prices--A manufacturer association and dealer
associations said that Energy Information Administration's (EIA)
reference case should be used. Environmental and consumer groups,
states and some members of Congress said NHTSA should use at least the
EIA high price case. The EIA Administrator stated at a June 2008
Congressional hearing that the then current prices were at or above
EIA's high case and that he would use that case in the CAFE rulemaking.
     Discount rate--The manufacturers said the rate should be
at least 7%, while environmental and consumer groups and states said it
should not be greater than 3 percent.
     Military costs--Many commenters argued that NHTSA should
place a value other than zero on military security externalities.
     Social cost of carbon--Some commenters said the domestic
value of reducing CO2 emissions should be lower than the
NPRM value of $7; environmental and consumer groups and states said it
should be much higher. The former tended to favor a value reflecting
damage to the U.S. only, while the latter favored a global value.
     Weight reduction--States and environmental and consumer
groups said that NHTSA should consider downweighting for vehicles under
5,000 lbs; an insurance safety research group supported the proposal
not to consider that.
    Rate of application of advanced technologies (diesels and hybrids):

Manufacturers argued that NHTSA was overly optimistic; environmental/
consumer groups and states argued that NHTSA relied too much on
manufacturer product plans and should require manufacturers to improve
fuel economy more quickly.
    Fitting of standard curve to data: A manufacturer association and
two manufacturers questioned the empirical and technical bases for the
shape of the curves.
    Steepness of car standard curve: The two manufacturer associations
and several environmental groups said that the proposed car curves were
too steep: manufacturers did so because of impracticability;
environmental groups, because of what they saw as an incentive to
increase vehicle size.
    Backstop standard: Environmental and consumer groups argued that
NHTSA must establish absolute backstop standards for all vehicles.
Manufacturers argued that anti-backsliding features of the attribute-
based standards function as a backstop.
    ``SUV loophole'': In general, manufacturers agreed with the
agency's decision to reclassify 2 WD SUVs from the light truck fleet to
the passenger car fleet, as long as this change would take effect after
MY 2010. Environmental and consumer groups argued that the
classification system should be further revised to address ``gaming''
and did not address the agency's justification for the proposed
revisions.
    Credits: Manufacturers argued that earned carry forward/back
credits, as long as they were not acquired by transfer or trade, should
be available to meet the minimum standard for domestic cars.
Manufacturers also requested flexibility to manage their own credit
shortfalls, instead of having the agency automatically decide upon and
implement plans for them. One manufacturer asked that the new statutory
provision giving credits a 5 year life be applied to all existing
credits, instead of only those credits earned in model year 2009 or
thereafter.
    Impact on small/limited-line manufacturers: Small/limited-line
manufacturers argued that the proposed standards impact them more than
full-line manufacturers, and requested either that the car standards be
set based on the plans of all car manufacturers, instead of just the
seven largest, or that some alternative form of standard be set for
them.
    Preemption: Manufacturers argued that the effects of state
regulation of CO2 emissions are ``related to'' the
regulation of fuel economy within the meaning of section 32919(a) of
EPCA; environmental and consumer groups and states argued that the
purpose of regulating CO2 emissions may overlap with, but is
different from the purpose of regulating fuel economy

E. New Information Received or Developed by NHTSA Between the NPRM and
Final Rule

    There were a number of changes after the NPRM that made possible
analytical improvements for the final rule. These changes also caused
the CAFE levels, fuel savings, and CO2 emissions that are
attributable to each alternative and scenario examined for this final
rule to differ from those presented in the NPRM.
1. New Manufacturer Product Plans
    As discussed in the NPRM, the agency requested new product plans
from manufacturers to aid in determining appropriate standards for the
final rule. The product plans submitted in May 2007 naturally did not
take into consideration the later passage of EISA and its minimum 35
mpg combined fleet requirement by 2020. In addition, during that time,
the fuel prices rose substantially.
    The new product plans submitted in the summer of 2008 in response
to the NPRM reflect those new realities in a couple of ways. First,
companies provided product plans that reflected the manufacturers'
implementation of some of the cost-effective technologies that the
agency had projected in the NPRM. This increased the baseline against
which the fuel saving from the standards are calculated. As a result,
some of the savings and CO2 emission reductions that were
attributed in the NPRM to the rulemaking action are now attributed to
actions taken ``independently by the manufacturers, as reflected in the
improved product plans. Second, the size of the overall fleet had
declined from the time of the NPRM to the final rule, resulting in
fewer vehicle miles traveled.
2. Revised Assessment of Technology Effectiveness and Costs
    With the aid of an expert consulting firm, NHTSA revised the
technology assumptions in the NPRM based on comments and new
information received during the comment period and used those revised
assumptions for analyzing alternatives and scenarios for the Final
Environmental Impact Assessment (FEIS) and final rule. In several
cases, the agency concluded on the basis of analysis of that additional
information that the costs in the NPRM and Draft EIS were
underestimated and benefits overestimated, and in most cases, these
estimates were not well differentiated by vehicle class. The agency
also revised its phase-in schedule of the technologies to account more
fully for needed lead time.
3. Final Environmental Impact Statement
    With the aid of an expert consulting firm, the agency completed a
final environmental impact statement (FEIS), the first FEIS prepared by
a federal agency to examine climate change issues comprehensively.\13\
The FEIS examines the climate change and other environmental effects of
the changes in emissions of greenhouse gases and criteria air
pollutants resulting from a wide variety of alternative standards. For
this purpose, the agency relied extensively on the 2007 reports of the
Intergovernmental Panel on Climate Change and contracted with ICF
International to perform climate modeling. That impact statement also
carefully assesses the cumulative impacts of past, present and future
CAFE rulemakings.
---------------------------------------------------------------------------

    \13\ The Final Environmental Impact Statement can be found on
the NHTSA website at http://www.nhtsa.gov/staticfiles/DOT/NHTSA/
Rulemaking/Rules/Associated%20Files/CAFE%20FEIS.pdf (last accessed
March 8, 2009).
---------------------------------------------------------------------------

F. Final Rule for MY 2011

1. Introduction
    As discussed above, and at length later in this rule, NHTSA's
review and analysis of comments on its proposal have led the agency to
make many changes to its methods for analyzing potential MY 2011 CAFE
standards, as well as to the data and other information to which the
agency has applied these methods. The following are some of the more
prominent changes:
     After receiving, reviewing, and integrating updated
product plans from vehicle manufacturers, NHTSA has revised its
forecast of the future light vehicle market.
     NHTSA has changed the methods and inputs it uses to
represent the applicability, availability, cost, and effectiveness of
future fuel-saving technologies.
     NHTSA has based its fuel price forecast on the AEO 2008
High Case price scenario instead of the AEO 2008 Reference Case.
     NHTSA has reduced mileage accumulation estimates (i.e.,
vehicle miles traveled) to levels consistent with this increased fuel
price forecast.
     NHTSA has applied increased estimates for the value of oil
import externalities.
     NHTSA has now included all manufacturers--not just the
largest

seven--in the process used to fit the curve and estimate the stringency
at which societal net benefits are maximized.
     NHTSA has tightened its application of the definition of
``nonpassenger automobiles,'' causing a reassigning of over one million
vehicles from the light truck fleet to the passenger car fleet.
     NHTSA has now fitted the shape of the curve based on
``exhaustion'' of available technologies instead of on manufacturer-
level optimization of CAFE levels.
    These changes affected both the shape and stringency of the
attribute-based standards. Taken together, the last three of the above
changes reduced the steepness of the curves defining fuel economy
targets for passenger cars, and also less significantly reduced the
steepness of the light truck curves.
    NHTSA recognizes that, when considered in isolation, some of the
above changes might, on an ``intuitive'' basis, be expected to result
in higher average required fuel economy levels. For example, setting
aside other changes, the increase in estimated fuel prices and oil
import externalities might be expected to result in higher average fuel
economy requirements. On the other hand, again setting aside other
changes, the updated characterization of fuel-saving technologies, the
reassignment of over one million vehicles to the passenger car fleet,
the reduction in mileage accumulation, and the inclusion of all
manufacturers in the standard setting process might intuitively be
expected to result in lower average fuel economy requirements.
    However, there are theoretical reasons for which even such isolated
expectations might not be met. For example, if a change in inputs
caused societal net benefits to increase equally at all stringencies,
the level of stringency that maximized societal net benefits would
remain unchanged, although it would produce greater net benefits after
the change in inputs. Further, some of the changes listed above are
interdependent, making it difficult, if not impossible, to isolate the
effect attributable to every change. For example, NHTSA applied the
reduced mileage accumulation, which reduces the benefits of adding
technology, in conjunction with applying increased fuel prices, which
increase the benefits of adding technology.
    There is no obvious way to determine reliably the net effect of all
these (and other) changes short of applying all of the revised values
to the model and looking at the results. We devote a good deal of the
preamble discussion to these changes and their net implications for the
standards in this rule.
    The final rule reflects the combined effect of all of these
changes, as well as minor changes not listed above.
2. Key Economic Values for Benefits Computations
    NHTSA's analysis of the final standards and alternative CAFE
standards for MYs 2011 relied on an expanded range of information and
revised economic estimates and input parameters. These economic
assumptions played a role in the determination of the level of the
standards, with some having greater impacts than others. The agency,
following discussions with other agencies of the U.S. government,
updated its estimate of the global value of the social cost of carbon
(i.e., the value of reducing CO2 emissions) and developed a
domestic value, as well as updated its estimates for other
externalities based on comments and updated information received during
the comment period. Specifically, the final standards are based the
following revised economic assumptions:

   Table I-2--Final Rule Key Economic Values for Benefits Computations
                                 (2007$)
------------------------------------------------------------------------

------------------------------------------------------------------------
Fuel Prices (average retail gasoline price per gallon, 2011-       $3.33
 30)........................................................
Discount Rates Applied to Future Benefits:
    Reductions in CO2 Emissions.............................          3%
    Other Benefits..........................................          7%
Economic Costs of Oil Imports ($/gallon):
     ``Monopsony'' Component................................       $0.27
    Price Shock Component...................................       $0.12
    Military Security Component.............................  ..........
                                                             -----------
        Total Economic Costs................................       $0.39
Emission Damage Costs:
    Carbon Dioxide ($/metric ton):
        (U.S. domestic value)...............................    14 $2.00
        (Mean global value from Tol (2008)).................      $33.00
        (One standard deviation above mean global value)....      $80.00
    Annual Increase in CO2 Damage Cost......................        2.4%
------------------------------------------------------------------------

3. Standards
(a) Classification
    In the NPRM, the two-wheel drive sport-utility vehicles (2WD SUVs)
were classified in the same way they were classified by their
manufacturers in their May 2007 product plans. For the purposes of this
final rule, however, they were reclassified in accordance with the
discussion in the NPRM of the proper classification of those vehicles.
This resulted in the shifting of over one million two-wheel drive
vehicles from the truck fleet to the car fleet. This shift had the
effect of lowering the average fuel economy for cars due to the
inclusion of vehicles previously categorized as trucks, and lowered
average fuel economy for trucks because the truck category now has a
larger proportion of heavier trucks. Following our careful
consideration of the public comments on that discussion, we reaffirm
the reasoning and conclusions of that discussion.
---------------------------------------------------------------------------

    \14\ Derived from NHTSA's $33 per metric ton estimate of the
global value of reducing CO2 emissions.
---------------------------------------------------------------------------

(b) Stringency
    This final rule establishes footprint-based fuel economy standards
for MY 2011 passenger cars and light trucks.
    Each vehicle manufacturer's required level of CAFE is based on
target levels of average fuel economy set for vehicles of different
sizes and on the distribution of that manufacturer's vehicles among
those sizes. Size is defined by vehicle footprint. The curves defining
the performance target at each footprint reflect the technological and
economic capabilities of the industry. The target for each footprint is
the same for all

manufacturers, regardless of differences in their overall fleet mix.
Compliance will be determined by comparing a manufacturer's
harmonically averaged fleet fuel economy levels in a model year with a
required fuel economy level calculated using the manufacturer's actual
production levels and the targets for each footprint of the vehicles
that it produces.
    The standards were developed with the aid of a computer model
(known as the ``Volpe Model''). NHTSA uses the Volpe model as a tool to
inform its consideration of potential CAFE standards for MY 2011. The
Volpe model requires the following types of information as inputs: (1)
A forecast of the future vehicle market, (2) estimates of the
availability, applicability, and incremental effectiveness and cost of
fuel-saving technologies, (3) estimates of vehicle survival and mileage
accumulation patterns, the rebound effect, future fuel prices, the
social cost of carbon, and many other economic factors, (4) fuel
characteristics and vehicular emissions rates, and (5) coefficients
defining the shape and level of CAFE curves to be examined. These
inputs are selected by the agency based on best available information
and data.
    The agency analyzed seven regulatory alternatives, one of which
maximizes net benefits within the limits of available information and
is known as the ``optimized standards.'' The optimized standards are
set at levels, such that, considering all of the manufacturers
together, no other alternative is estimated to produce greater net
benefits to society. Those net benefits reflect the difference between
(1) the present value of all monetized benefits of the standards, and
(2) the total costs of all technologies applied in response to the
standards. Many of the other alternative standards exceed the level at
which the estimated net benefits are maximized, including one
alternative in which standards are set at a level at which total costs
equal total benefits and another alternative set at a level of maximum
technology application without regard to cost. For each alternative,
the model estimates the costs associated with additional technology
utilization, as well as accompanying changes in travel demand, fuel
consumption, fuel outlays, emissions, and economic externalities
related to petroleum consumption and other factors. These comprehensive
analyses, which also included scenarios with different economic input
assumptions as presented in the Final Environmental Impact Statement
(FEIS) and the Final Regulatory Impact Analysis (FRIA), informed and
contributed to the agency's consideration of the ``need of the United
States to conserve energy,'' as well as the other statutory factors in
49 U.S.C. 32902(f), and safety impacts. In addition, they informed the
agency's consideration of environmental impacts under NEPA. The agency
identified the optimized standards as its preferred alternative in the
FEIS.
    NHTSA considered the results of analyses conducted on alternative
standards for MY 2011 by the Volpe model and analyses conducted outside
of the Volpe model, including analysis of the impacts of emissions of
carbon dioxide and criteria pollutants, and analysis of which
technologies are available now and which will not be available until
the longer term, and analysis of the extent to which changes in vehicle
prices and fuel economy might affect vehicle production and sales.
Further, NHTSA considered whether it could expedite the entry of any
technologies into the market through these standards. Using all of this
information, the agency considered the governing statutory factors,
along with environmental issues and other relevant societal issues such
as safety, and is promulgating the maximum feasible standards based on
its best judgment on how to balance these factors.
    Upon a considered analysis of all information available, including
all information submitted to NHTSA in comments, the agency is adopting
the ``optimized standard'' alternative as the final standards for MY
2011.\15\ We note that we used the Volpe Model in the last two light
truck rulemakings and that we adopted ``optimized standards'' in the
last light truck rulemaking. We believe that use of the Volpe model is
a valid and objective way to establish attribute-based standards under
EPCA. Further, by limiting the standards to levels that can be achieved
using technologies each of which are estimated to provide benefits that
at least equal its costs, the net benefit maximization approach helps
to assure the marketability of the manufacturers' vehicles and thus
economic practicability of the standards.
---------------------------------------------------------------------------

    \15\ The agency notes, for NEPA purposes, that the ``optimized
standard'' alternative adopted as the final standards corresponds to
the ``Optimized Mid-2'' scenario described in Section 2.2.2 of the
FEIS.
---------------------------------------------------------------------------

    Providing this assurance assumes increased importance in view of
current and anticipated conditions in the industry in particular and
the economy in general. As has been widely reported in the public
domain throughout this rulemaking, and as shown in public comments, the
national and global economies raise serious concerns. Even before those
recent developments, the automobile manufacturers were already facing
substantial difficulties. Together, these problems have made NHTSA's
economic practicability analysis particularly important and challenging
in this rulemaking.
    The agency cannot set out the exact level of CAFE that each
manufacturer will be required to meet for MY 2011 under the passenger
car or light truck standards because the levels will depend on
information that will not be available until the end of that model
year, i.e., the final actual production figures for that year. The
agency can, however, project what the industry-wide level of average
fuel economy will be for passenger cars and for light trucks if each
manufacturer produced its expected mix of automobiles and just met its
obligations under the ``optimized'' standards. Adjacent to each average
fuel economy figure is the estimated associated level of tailpipe
emissions of CO2 that will be achieved.\16\
---------------------------------------------------------------------------

    \16\ See supra note 6.

MY 2011 passenger cars: 30.2 mpg (294 g/mi of tailpipe emissions of
CO2)
MY 2011 light trucks: 24.1 mpg (369 g/mi of tailpipe emissions of
CO2)

    The combined industry-wide average fuel economy (in miles per
gallon, or mpg) levels (in grams per mile, or g/mi) for both cars and
light trucks, if each manufacturer just met its obligations under the
``optimized'' standards, will be as follows:

MY 2011: 27.3 mpg (2.0 mpg increase above MY 2010; 326 g/mi
CO2)

    In addition, per EISA, each manufacturer's domestic passenger fleet
is required in MY 2011 to achieve 27.5 mpg or 92 percent of the CAFE of
the industry-wide combined fleet of domestic and non-domestic passenger
cars \17\ for that model year, whichever is higher. This requirement
results in the following alternative minimum standard (not attribute-
based) for domestic passenger cars:
---------------------------------------------------------------------------

    \17\ Those numbers set out several paragraphs above.

MY 2011: 27.8 mpg (320 g/mi of tailpipe emissions of CO2)
(c) Benefits and Costs
(i) Benefits
    We estimate that the MY 2011 standards will save approximately 887
million gallons of fuel and reduce tailpipe emissions of CO2
by 8.3 million metric tons.

    For passenger cars, the standards will save approximately 463
million gallons of fuel and reduce tailpipe CO2 emissions by
4.3 million metric tons over the lifetime of the MY 2011 passenger
cars, compared to the fuel savings and emissions reductions that would
occur if the standards remained at the adjusted baseline (i.e., the
higher of manufacturer's plans and the manufacturer's required level of
average fuel economy for MY 2010). The value of the total benefits of
the passenger car standards are estimated to be slight over $1 billion
\18\ over the lifetime of the MY 2011 cars. This estimate of societal
benefits includes direct impacts from lower fuel consumption as well as
externalities and also reflects offsetting societal costs resulting
from the rebound effect.
---------------------------------------------------------------------------

    \18\ The slightly over $1 billion estimate is based on a 7
percent discount rate for valuing future impacts.
---------------------------------------------------------------------------

    We estimate that the standards for light trucks will save
approximately 424 million gallons of fuel and prevent the tailpipe
emission of 4.0 million metric tons of CO2 over the lifetime
of the light trucks sold during those model years, compared to the fuel
savings and emissions reductions that would occur if the standards
remained at the adjusted baseline. The value of the total benefits of
the light truck standards will be approximately $921 million \19\ over
the lifetime of the MY 2011 light trucks. This estimate of societal
benefits includes direct impacts from lower fuel consumption as well as
externalities and also reflects offsetting societal costs resulting
from the rebound effect.
---------------------------------------------------------------------------

    \19\ The $921 million estimate is based on a 7 percent discount
rate for valuing future impacts.
---------------------------------------------------------------------------

(ii) Costs
    NHTSA estimates that, as a result of the final standards for MY
2011, manufacturers will incur costs of approximately $1.460 billion
for additional fuel-saving technologies, compared to the costs they
would incur if the standards remained at MY 2010 levels.
    For passenger cars, we estimate that manufacturers will incur costs
of approximately $595 million for additional fuel-saving technologies,
compared to the costs they would incur if the standards remained at MY
2010 levels. Our estimate is that the resulting vehicle price increases
to buyers of MY 2011 passenger cars will be recovered or paid back \20\
in additional fuel savings in an average of 4.4 years (53 months),
assuming fuel prices ranging from $2.95 per gallon in 2011 to $3.62 per
gallon in 2030.\21\
---------------------------------------------------------------------------

    \20\ See Section V.B.5 below for discussion of payback period.
    \21\ The fuel prices (shown here in 2007 dollars) used to
calculate the length of the payback period are those projected
(Annual Energy Outlook 2008) by the Energy Information
Administration over the life of the MY 2011 light trucks, not
current fuel prices.
---------------------------------------------------------------------------

    The agency further estimates that, in response to the final
standards for MY 2011 light trucks, manufacturers will incur costs of
approximately $865 million for additional fuel-saving technologies,
compared to the costs they would incur if the standards remained at MY
2010 levels. We estimate that the resulting vehicle price increases to
buyers of MY 2011 light trucks will be paid back in additional fuel
savings in an average of 7.7 years (92 months), assuming the same fuel
prices as mentioned above.
(d) Flexibilities
    Manufacturers are likely to rely extensively on flexibility
mechanisms provided by EPCA (as described in Section XII) and will
thereby reduce the costs (and benefits) of complying with the standards
to a meaningful extent. However, the benefit and compliance cost
estimates used by the agency in determining the maximum feasible level
of the CAFE standards and shown above assume that manufacturers will
rely solely on the installation of fuel economy technology to achieve
compliance with the standards. The estimates do not reflect the
availability and use of flexibility mechanisms, such as compliance
credits and credit trading. The reason for this is because EPCA
prohibits NHTSA from considering the effects of those mechanisms in
setting CAFE standards. EPCA has precluded consideration of the FFV
adjustments ever since it was amended to provide for those adjustments.
The prohibition against considering compliance credits was added by
EISA.
4. Credits
    NHTSA is also adopting a new Part 536 on use of ``credits'' earned
for exceeding applicable CAFE standards. Part 536 will implement the
provisions in EISA authorizing NHTSA to establish by regulation a
credit trading program and directing it to establish by regulation a
credit transfer program.\22\ Since its enactment, EPCA has permitted
manufacturers to earn credits for exceeding the standards and to apply
those credits to compliance obligations in years other than the model
year in which it was earned. EISA extended the ``carry-forward'' period
to five model years, and left the ``carry-back'' period at three model
years. Under Part 536, credit holders (including, but not limited to,
manufacturers) will have credit accounts with NHTSA, and will be able
to hold credits, apply them to compliance with CAFE standards, transfer
them to another ``compliance category'' for application to compliance
there, or trade them. A credit may also be cancelled before its expiry
date, if the credit holder so chooses. Traded and transferred credits
will be subject to an ``adjustment factor'' to ensure total oil savings
are preserved, as required by EISA. EISA also prohibits credits earned
before MY 2011 from being transferred, so NHTSA has developed several
regulatory restrictions on trading and transferring to facilitate
Congress' intent in this regard. Additional information on Part 536 is
available in Section XII below.
---------------------------------------------------------------------------

    \22\ Congress required that DOT establish a credit
``transferring'' regulation, to allow individual manufacturers to
move credits from one of their fleets to another (e.g., using a
credit earned for exceeding the light truck standard for compliance
with the domestic passenger car standard). Congress allowed DOT to
establish a credit ``trading'' regulation, so that credits may be
bought and sold between manufacturers and other parties.
---------------------------------------------------------------------------

5. Preemption
    As noted above, NHTSA has decided not to include any preemption
provisions in the regulatory text at this time and will re-examine the
issue of preemption in the context of the rulemaking for MY 2012 and
later years.

II. Background

A. Role of Fuel Economy Improvements in Promoting Energy Independence,
Energy Security, and a Low Carbon Economy

    Improving vehicle fuel economy has been long and widely recognized
as one of the key ways of achieving energy independence, energy
security, and a low carbon economy.\23\ Most recently,

the United Nations Environment Programme, International Energy Agency,
International Transport Forum and FIA Foundation released a report \24\
in March 2009 calling for a 50 percent increase in fuel economy in
response to predictions by the IEA that fuel consumption and
CO2 emissions from the global light duty fleet will
otherwise roughly double between 2000 and 2050.
---------------------------------------------------------------------------

    \23\ Among the reports and studies noting this point are the
following:
    John Podesta, Todd Stern and Kim Batten, ``Capturing the Energy
Opportunity; Creating a Low-Carbon Economy,'' Center for American
Progress (November 2007), pp. 2, 6, 8, and 24-29, Available at:
http://www.americanprogress.org/issues/2007/11/pdf/energy_
chapter.pdf (last accessed March 8, 2009).
    Sarah Ladislaw, Kathryn Zyla, Jonathan Pershing, Frank
Verrastro, Jenna Goodward, David Pumphrey, and Britt Staley, ``A
Roadmap for a Secure, Low-Carbon Energy Economy; Balancing Energy
Security and Climate Change,'' World Resources Institute and Center
for Strategic and International Studies (January 2009), pp. 21-22;
Available at: http://pdf.wri.org/secure_low_carbon_energy_
economy_roadmap.pdf. (last accessed March 7, 2009).
    Alliance to Save Energy et al., ``Reducing the Cost of
Addressing Climate Change Through Energy Efficiency (2009).
Available at: http://Aceee.org/energy/climate/leg.htm. (last
accessed March 7, 2009).
    John DeCicco and Freda Fung, ``Global Warming on the Road; The
Climate Impact of America's Automobiles,'' Environmental Defense
(2006) pp. iv-vii; available at: http://www.edf.org/documents/5301_
Globalwarmingontheroad.pdf. (last accessed March 7, 2009).
    ``Why is Fuel Economy Important?,'' a Web page maintained by the
Department of Energy and Environmental Protection Agency, Available
at http://www.fueleconomy.gov/feg/why.shtml (last accessed February
17, 2009);
    Robert Socolow, Roberta Hotinski, Jeffery B. Greenblatt, and
Stephen Pacala, ``Solving The Climate Problem: Technologies
Available to Curb CO2 Emissions,'' Environment, volume
46, no. 10, 2004. pages 8-19. Available at: http://
www.princeton.edu/~cmi/resources/CMI_Resources_new_files/
Environ_08-21a.pdf. (last accessed March 7, 2009).
    \24\ ``50BY50 Global Fuel Economy Initiative, Making Cars 50%
More Fuel Efficient by 2050 Worldwide,'' Available at: http://
www.fiafoundation.org/50by50/Documents/50BY50_report.pdf (last
accessed March 7, 2009).
---------------------------------------------------------------------------

    The significance accorded improving fuel economy reflects several
factors. The emission of CO2 from the tailpipes of cars and
light trucks is one of the largest sources of U.S. CO2
emissions.\25\
---------------------------------------------------------------------------

    \25\ EPA Inventory of U.S. Greenhouse Gas Emissions and Sinks:
1990-2006 (April 2008), pp. ES-4, ES-8, and 2-24.
---------------------------------------------------------------------------

    Further, using vehicle technology to improve fuel economy, thereby
reducing tailpipe emissions of CO2, is one of the three main
measures of reducing those tailpipe emissions of CO2.\26\
The two other measures for reducing the tailpipe emissions of
CO2 are switching to vehicle fuels with lower carbon content
and changing driver behavior, i.e., inducing people to drive less.
---------------------------------------------------------------------------

    \26\ Podesta et al., p. 25; Ladislaw et al. p. 21; DeCicco et
al. p. vii; ``Reduce Climate Change,'' a Web page maintained by the
Department of Energy and Environmental Protection Agency at http://
www.fueleconomy.gov/feg/climate.shtml (last accessed March 7, 2009).
---------------------------------------------------------------------------

    In order to reduce the amount of tailpipe emissions of
CO2 per mile, either the amount of fuel consumed per mile
must be reduced or lower carbon intensive fuels must be used. While
there are emission control technologies that can capture or destroy the
pollutants (e.g., carbon monoxide) that are produced by imperfect
combustion of fuel, there is no current or anticipated control
technology for CO2. Thus, the technologies for reducing
tailpipe emissions of CO2 are the technologies that reduce
fuel consumption and thereby reduce CO2 emissions as well,
as well as the technologies for accommodating the use of alternative
fuels. Consequently, substantially reducing fuel use through using
automotive technology to improve fuel economy is indispensable if
automobile manufacturers are to make substantial and continuing
progress in reducing those emissions.
    The relationship between improving fuel economy and reducing
CO2 tailpipe emissions is a very direct and close one.
CO2 is the natural by-product of the combustion of fuel in
motor vehicle engines. The more fuel efficient a vehicle is, the less
fuel it burns to travel a given distance. The less fuel it burns, the
less CO2 it emits in traveling that distance.\27\ Since the
amount of CO2 emissions is essentially constant per gallon
combusted of a given type of fuel, the amount of fuel consumption per
mile is directly related to the amount of CO2 emissions per
mile. Thus, requiring improvements in fuel economy necessarily has the
effect of requiring reductions in tailpipe emissions of CO2
emissions.
---------------------------------------------------------------------------

    \27\ Panel on Policy Implications of Greenhouse Warming,
National Academy of Sciences, National Academy of Engineering,
Institute of Medicine, ``Policy Implications of Greenhouse Warming:
Mitigation, Adaptation, and the Science Base,'' National Academies
Press, 1992. p. 287.
---------------------------------------------------------------------------

    This can be seen in the graph \28\ and table below. The graph shows
how the amount of CO2 emitted by a vehicle per year varies
according to the vehicle's fuel economy. The table shows the limit that
a CAFE standard would indirectly place on tailpipe CO2
emissions. To take the first value of fuel economy from the table below
as an example, a standard of 21.0 mpg would indirectly place
substantially the same limit on tailpipe CO2 emissions as a
tailpipe CO2 emission standard of 423.2 g/mi of
CO2, and vice versa.\29\
---------------------------------------------------------------------------

    \28\ The graph is the same as the one shown on Reduce Climate
Change, a Web page maintained by the Department of Energy and
Environmental Protection Agency. Available at: http://
www.fueleconomy.gov/feg/climate.shtml (last accessed March 8, 2009).
    \29\ To the extent that manufacturers comply with a CAFE
standard with diesel automobiles instead of gasoline ones, the level
of CO2 tailpipe emissions would be higher. As noted
above, the agency projects that 4 percent of the MY 2015 passenger
car fleet and 10 percent of the MY 2015 light truck fleet will have
diesel engines. The CO2 tailpipe emissions of a diesel
powered passenger car are 15 percent per mile higher than those of a
comparable gasoline powered-passenger car achieving the same mpg.

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

[GRAPHIC] [TIFF OMITTED] TR30MR09.000

    The relationship between improving fuel economy and reducing
tailpipe emissions of CO2 is so strong that EPA determines
fuel economy by the simple expedient of measuring the amount of
CO2 emitted from the tailpipe, not by attempting to measure
directly the amount of fuel consumed during a vehicle test, a difficult
task to accomplish with precision. EPA then uses the carbon content of
the test fuel \30\ to calculate the amount of fuel that had to be
consumed per mile in order to produce that amount of CO2.
Finally, EPA converts that fuel figure into a miles-per-gallon figure.
---------------------------------------------------------------------------

    \30\ This is the method that EPA uses to determine compliance
with NHTSA's CAFE standards.

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

B. Contribution of Fuel Economy Improvements to CO2 Tailpipe
Emission Reductions Since 1975

    The need to take action to reduce GHG emissions, e.g., motor
vehicle tailpipe emissions of CO2, in order to forestall and
even mitigate climate change is well recognized.\31\ Less well
recognized are two related facts.
---------------------------------------------------------------------------

    \31\ IPCC (2007): Climate Change 2007: Mitigation of Climate
Change. Contribution of Working Group III to the Fourth Assessment
Report of the Intergovernmental Panel on Climate Change [B. Metz, O.
Davidson, P. Bosch, R. Dave, and L. Meyer (eds.)]. Cambridge
University Press, Cambridge, United Kingdom and New York, NY, USA.
---------------------------------------------------------------------------

    First, improving fuel economy is the only method available to motor
vehicle manufacturers for making substantial and continuing reductions
in the CO2 tailpipe emissions of motor vehicles and thus
must be the core element of any effort to achieve those reductions.
    Second, the significant improvements in fuel economy since 1975,
due to the CAFE standards and other market conditions as well, have
directly caused reductions in the rate of CO2 tailpipe
emissions per vehicle.
    In 1975, passenger cars manufactured for sale in the U.S. averaged
only 15.8 mpg (562.5 grams of CO2 per mile or 562.5 g/mi of
CO2). By 2007, the average fuel economy of new passenger
cars had increased to 31.3 mpg, causing the emission of CO2
to fall to 283.9 g/mi.\32\ Similarly, in 1975, light trucks produced
for sale in the U.S. averaged 13.7 mpg (648.7 g/mi of CO2).
By 2007, the average fuel economy of new light trucks had risen to 23.1
mpg, causing emission of CO2 to fall to 384.7 g/mi.
---------------------------------------------------------------------------

    \32\ These figures are not real world fuel economy figures. They
are based on the laboratory figures fuel economy test procedures
used for the CAFE program. Real world fuel economy figures would be
less (and CO2 emission figures higher).
[GRAPHIC] [TIFF OMITTED] TR30MR09.001

If fuel economy had not increased above the 1975 level, cars and light
trucks would have emitted an additional 11 billion metric tons of
CO2 into the atmosphere between 1975 and 2005. That is
nearly the equivalent of emissions from all U.S. fossil fuel combustion
for two years (2004 and 2005). The figure below shows the amount of
CO2 emissions avoided due to increases in fuel economy.
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TR30MR09.002

BILLING CODE 4910-59-C
    Some commenters on the NPRM argued that some of improvements in
fuel economy, and thus some of the reductions in CO2, shown
in that figure would have occurred in the absence of any CAFE
standards. We agree. Similarly, and to the same extent, some of the
improvements in fuel economy and accompanying reductions in
CO2 that would occur under a regulation directly regulating
CO2 would occur in the absence of any such regulation. We
note that no published research has isolated the contribution of CAFE
standards themselves to historical increases in fuel economy from those
of the many other factors that can affect fuel economy.

C. Chronology of Events Since the National Academy of Sciences Called
for Reforming and Increasing CAFE Standards

1. National Academy of Sciences Issues Report on Future of CAFE Program
(February 2002)
(a) Significantly Increasing CAFE Standards Without Making Them
Attribute-Based Would Adversely Affect Safety
    In the 2002 congressionally-mandated report entitled
``Effectiveness and Impact of Corporate Average Fuel Economy (CAFE)
Standards,'' \33\ a committee of the National Academy of Sciences (NAS)
(``2002 NAS Report'') concluded that the then-existing form of
passenger car and light truck CAFE standards permitted vehicle
manufacturers to comply in part by downweighting and even downsizing
their vehicles and that these actions had led to additional fatalities.
The committee explained that this safety problem arose because, at that
time, the CAFE standards were not attributed-based and thus subjected
all passenger cars to the same fuel economy target and all light trucks
to the same target, regardless of their weight, size, or load-carrying
capacity.\34\ The committee said that this experience suggests that
consideration should be given to developing a new system of fuel
economy targets that reflects differences in such vehicle attributes.
---------------------------------------------------------------------------

    \33\ National Research Council, ``Effectiveness and Impact of
Corporate Average Fuel Economy (CAFE) Standards,'' National Academy
Press, Washington, DC (2002). Available at  http://www.nap.edu/
openbook.php?isbn=0309076013 (last accessed March 8, 2009). The
conference committee report for the Department of Transportation and
Related Agencies Appropriations Act for FY 2001 (Pub. L. 106-346)
directed NHTSA to fund a study by NAS to evaluate the effectiveness
and impacts of CAFE standards (H. Rep. No. 106-940, p. 117-118). In
response to the direction from Congress, NAS published this lengthy
report.
    \34\ NHTSA formerly used this approach for CAFE standards. EISA
prohibits its use after MY 2010.
---------------------------------------------------------------------------

    Looking to the future, the committee made a critical distinction
between possible ways of improving fuel economy and the ways likely to
be chosen for doing so. It said that while it was technically feasible
and potentially economically practicable for manufacturers to improve
fuel economy without reducing vehicle weight or size and, therefore,
without significantly affecting the safety of motor vehicle travel, the
actual strategies chosen by manufacturers to improve fuel economy would
depend on a variety of factors. In the committee's judgment, the
extensive downweighting and downsizing that occurred after fuel economy
requirements were established in the 1970s suggested that the
likelihood of a similar response to further increases in fuel economy
requirements must be considered seriously. Any reduction in vehicle
size and weight would have safety implications.
    The committee said, ``to the extent that the size and weight of the
fleet have been constrained by CAFE requirements * * * those
requirements have caused more injuries and fatalities on the road than
would otherwise have occurred.'' \35\ Specifically, it noted: ``the
downweighting and downsizing that occurred in the late 1970s and early
1980s, some of which was due to CAFE standards, probably resulted in an
additional 1300 to 2600 traffic fatalities in 1993.'' \36\
---------------------------------------------------------------------------

    \35\ NAS, p. 29.
    \36\ NAS, p. 3 (Finding 2).
---------------------------------------------------------------------------

    The committee cautioned that the safety effects of future
downsizing and downweighting were likely to be hidden by the generally
increasing safety of the light-duty vehicle fleet.\37\ It said that
some might argue that this improving safety picture means that there is
room to improve fuel economy without adverse safety consequences;
however, such an approach would not achieve the goal of avoiding the
adverse safety consequences of fuel economy increases. Rather, the
safety penalty imposed by increased fuel economy (if weight reduction
were used as one of the fuel economy improving measures) would be more
difficult to identify in light of the continuing improvement in vehicle
safety. NAS said that although it anticipated that these safety
innovations would improve the safety of vehicles of all sizes, that
fact did not mean downsizing to achieve fuel economy improvements would
not have any safety costs. If two vehicles of the same size were
modified, one both by downsizing it and adding the safety innovations
and the other solely by adding safety innovations, the latter vehicle
would in all likelihood be safer.
---------------------------------------------------------------------------

    \37\ Two of the 12 members of the committee dissented from the
majority's safety analysis and conclusions.
---------------------------------------------------------------------------

    The committee concluded that if an increase in fuel economy were
implemented pursuant to standards that were structured so as to
encourage either downsizing or the increased production of smaller
vehicles, some additional traffic fatalities would be expected. It said
that the larger and faster the required increases, the more likely
adverse impacts. Without a thoughtful restructuring of the program,
there would be the trade-offs that must be made if CAFE standards were
increased by any significant amount.\38\
---------------------------------------------------------------------------

    \38\ NAS, p. 9.
---------------------------------------------------------------------------

    In response to these conclusions, NHTSA issued attribute-based CAFE
standards for light trucks and sought legislative authority to issue
attribute-based CAFE standards for passenger cars before undertaking to
raise the car standards. Congress went a step further in enacting EISA,
not only authorizing the issuance of attribute-based standards, but
also mandating them.
(b) Climate Change and Other Externalities Justify Increasing the CAFE
Standards
    The 2002 NAS report also concluded that the CAFE standards have
increased fuel economy, which in turn has reduced dependence on
imported oil, improved the nation's terms of trade, and reduced
emissions of carbon dioxide, (a principal GHG), relative to what they
otherwise would have been. If fuel economy had not improved, gasoline
consumption (and crude oil imports) in 2002 would have been about 2.8
million barrels per day (mmbd) greater than it was then.\39\ As noted
above, reducing fuel consumption in vehicles also reduces carbon
dioxide emissions. If the nation were using 2.8 mmbd more gasoline in
2002, carbon emissions would have been more than 100 million metric
tons of carbon (mmtc) higher. Thus, improvements in light-duty vehicle
(4 wheeled motor vehicles under 10,000 pounds gross vehicle weight
rating) fuel economy reduced overall U.S. emissions by about 7 percent
as of 2002.\40\
---------------------------------------------------------------------------

    \39\ NAS, pp. 3 and 20.
    \40\ NAS, p. 20.
---------------------------------------------------------------------------

    The report concluded that technologies exist that could
significantly reduce fuel consumption by passenger cars and light
trucks further within 15 years (i.e., by about 2017), while maintaining
vehicle size,

weight, utility and performance.\41\ Given their lower fuel economy,
light duty trucks were said to offer the greatest potential for
reducing fuel consumption.\42\ The report also noted that vehicle
development cycles--as well as future economic, regulatory, safety and
consumer preferences--would influence the extent to which these
technologies could lead to increased fuel economy in the U.S. market.
---------------------------------------------------------------------------

    \41\ NAS, p. 3 (Finding 5).
    \42\ NAS, p. 4 (Finding 5).
---------------------------------------------------------------------------

    To assess the economic trade-offs associated with the introduction
of existing and emerging technologies to improve fuel economy, the NAS
conducted what it called a ``cost-efficient analysis'' based on the
direct benefits (value of saved fuel) to the consumer--``that is, the
committee identified packages of existing and emerging technologies
that could be introduced over the next 10 to 15 years that would
improve fuel economy up to the point where further increases in fuel
economy would not be reimbursed by fuel savings.'' \43\
---------------------------------------------------------------------------

    \43\ NAS, pp. 4 (Finding 6) and 64).
---------------------------------------------------------------------------

    The committee emphasized that it is critically important to be
clear about the reasons for considering improved fuel economy. While it
said that the dollar value of the saved fuel would be the largest
portion of the potential benefits, the committee noted that there is
theoretically insufficient reason for the government to issue higher
standards just to obtain those direct benefits since consumers have a
wide variety of opportunities to buy a fuel-efficient vehicle.\44\
---------------------------------------------------------------------------

    \44\ NAS, pp. 8-9.
---------------------------------------------------------------------------

    The committee said that there are two compelling concerns that
justify a government-mandated increase in fuel economy, both relating
to externalities. The first and most important concern, it argued, is
the accumulation in the atmosphere of greenhouse gases, principally
carbon dioxide.\45\
---------------------------------------------------------------------------

    \45\ NAS, pp. 2, 13, and 83.
---------------------------------------------------------------------------

    A second concern is that petroleum imports have been steadily
rising because of the nation's increasing demand for gasoline without a
corresponding increase in domestic supply. The high cost of oil imports
poses two risks: downward pressure on the strength of the dollar (which
drives up the cost of goods that Americans import) and an increase in
U.S. vulnerability to macroeconomic shocks that cost the economy
considerable real output.
    To determine how much the fuel economy standards should be
increased, the committee urged that all social benefits be considered.
That is, it urged not only that the dollar value of the saved fuel be
considered, but also that the dollar value to society of the resulting
reductions in greenhouse gas emissions and in dependence on imported
oil should be calculated and considered. The committee said that if it
is possible to assign dollar values to these favorable effects, it
becomes possible to make at least crude comparisons between the
socially beneficial effects of measures to improve fuel economy on the
one hand, and the costs (both out-of-pocket and more subtle) on the
other. The committee chose a value of about $0.30/gal of gasoline for
the externalities associated with the combined impacts of fuel
consumption on greenhouse gas emissions and on world oil market
conditions.\46\
---------------------------------------------------------------------------

    \46\ NAS, pp. 4 and 85-86.
---------------------------------------------------------------------------

    The report expressed concerns about increasing the standards under
the CAFE program as currently structured. While raising CAFE standards
under the existing structure would reduce fuel consumption, doing so
under alternative structures ``could accomplish the same end at lower
cost, provide more flexibility to manufacturers, or address inequities
arising from the present'' structure.\47\
---------------------------------------------------------------------------

    \47\ NAS, pp. 4-5 (Finding 10).
---------------------------------------------------------------------------

    To address those structural problems, the report suggested various
possible reforms. The report found that the ``CAFE program might be
improved significantly by converting it to a system in which fuel
targets depend on vehicle attributes.'' \48\ The report noted further
that under an attribute-based approach, the required CAFE levels could
vary among the manufacturers based on the distribution of their product
mix. NAS stated that targets could vary among passenger cars and among
trucks, based on some attribute of these vehicles such as weight, size,
or load-carrying capacity. The report explained that a particular
manufacturer's average target for passenger cars or for trucks would
depend upon the fractions of vehicles it sold with particular levels of
these attributes.\49\
---------------------------------------------------------------------------

    \48\ NAS, p. 5 (Finding 12).
    \49\ NAS, p. 87.
---------------------------------------------------------------------------

2. NHTSA Issues Final Rule Establishing Attribute-Based CAFE Standards
for MY 2008-2011 Light Trucks (March 2006)
    The 2006 final rule reformed the structure of the CAFE program for
light trucks by introducing an attribute-based approach and using that
approach to establish higher CAFE standards for MY 2008-2011 light
trucks.\50\ Reforming the CAFE program enables it to achieve larger
fuel savings, while enhancing safety and preventing adverse economic
consequences.
---------------------------------------------------------------------------

    \50\ 71 FR 17566; April 6, 2006.
---------------------------------------------------------------------------

    As noted above, under Reformed CAFE, fuel economy standards were
restructured so that they are based on a vehicle attribute, a measure
of vehicle size called ``footprint.'' It is the product of multiplying
a vehicle's wheelbase by its track width. A target level of fuel
economy was established for each increment in footprint (0.1 ft\2\).
Trucks with smaller footprints have higher fuel economy targets;
conversely, larger ones have lower targets. A particular manufacturer's
compliance obligation for a model year is calculated as the harmonic
average of the fuel economy targets for the manufacturer's vehicles,
weighted by the distribution of the manufacturer's production volumes
among the footprint increments. Thus, each manufacturer is required to
comply with a single overall average fuel economy level for each model
year of production.
    The approach for determining the fuel economy targets was to set
them just below the level where the increased cost of technologies that
could be adopted by manufacturers to improve fuel economy would first
outweigh the added benefits that would result from those technologies.
These targets translate into required levels of average fuel economy
that are technologically feasible because manufacturers can achieve
them using technologies that are or will become available. Those levels
also reflect the need of the nation to reduce energy consumption
because they reflect the economic value of the savings in resources, as
well as of the reductions in economic and environmental externalities
that result from producing and using less fuel.
    We carefully balanced the estimates costs of the rule with the
estimated benefits of reducing energy consumption. Compared to
Unreformed (non-attributed-based) CAFE, Reformed CAFE enhances overall
fuel savings while providing vehicle manufacturers with the flexibility
they need to respond to changing market conditions. Reformed CAFE also
provides a more equitable regulatory framework by creating a level
playing field for manufacturers, regardless of whether they are full-
line or limited-line manufacturers. We were particularly encouraged
that Reformed CAFE will confer no compliance advantage if vehicle
makers choose to downsize

some of their fleet as a CAFE compliance strategy, thereby reducing the
adverse safety risks associated with the Unreformed CAFE program.
3. Supreme Court Issues Decision in Massachusetts v. EPA (April 2007)
    On April 2, 2007, the U.S. Supreme Court issued its opinion in
Massachusetts v. EPA,\51\ a case involving a 2003 order of the
Environmental Protection Agency (EPA) denying a petition for rulemaking
to regulate greenhouse gas emissions from motor vehicles under the
Clean Air Act.\52\ The Court ruled that the state of Massachusetts had
standing to sue EPA because it had already lost an amount of land and
stood to lose more due to global warming-induced increases in sea
level; that some portion of this harm was traceable to the absence of a
regulation issued by EPA requiring reductions in GHG emissions
(CO2 emissions, most notably) by motor vehicles; and that
EPA's issuance of such a regulation would reduce the risk of further
harm to Massachusetts.\53\ On the merits, the Court ruled that
greenhouse gases are ``pollutants'' under the Clean Air Act and that
the Act therefore authorizes EPA to regulate greenhouse gas emissions
from motor vehicles if that agency makes the necessary findings and
determinations under section 202 of the Act.
---------------------------------------------------------------------------

    \51\ 127 S.Ct. 1438 (2007).
    \52\ 68 FR 52922, September 8, 2003.
    \53\ As noted above, a CAFE standard and its mathematically
equivalent CO2 tailpipe emission standard would each have
the same effect on those emissions and thus on the risk of further
harm except to the extent, as noted in a footnote above, diesel
engines are used to comply with the CAFE standards.
---------------------------------------------------------------------------

    The Court considered EPCA briefly, stating

    [T]hat DOT sets mileage standards in no way licenses EPA to
shirk its environmental responsibilities. EPA has been charged with
protecting the public's ``health'' and ``welfare,'' 42 U.S.C.
7521(a)(1), a statutory obligation wholly independent of DOT's
mandate to promote energy efficiency. See Energy Policy and
Conservation Act, Sec.  2(5), 89 Stat. 874, 42 U.S.C. 6201(5). The
two obligations may overlap, but there is no reason to think the two
agencies cannot both administer their obligations and yet avoid
inconsistency.

127 S.Ct. at 1462.

    The Supreme Court did not address or define the nature or extent of
the overlap or explore the types of benefits considered in establishing
the levels of the CAFE standards. Further, the Court did not address
the express preemption provision in EPCA.
4. NHTSA and EPA Coordinate on Development of Rulemaking Proposals
(Summer-Fall 2007)
    In the wake of the Supreme Court's decision, on May 14, 2007,
President Bush responded to the Supreme Court's opinion, stating

* * * I'm directing the EPA and the Departments of Transportation,
Energy, and Agriculture to take the first steps toward regulations
that would cut gasoline consumption and greenhouse gas emissions
from motor vehicles * * *

    On May 14, 2007, President Bush issued Executive Order 13432, which
announces

[i]t is the policy of the United States to ensure the coordinated
and effective exercise of the authorities of the President and the
heads of the Department of Transportation, the Department of Energy,
and the Environmental Protection Agency to protect the environment
with respect to greenhouse gas emissions from motor vehicles,
nonroad vehicles, and nonroad engines, in a manner consistent with
sound science, analysis of benefits and costs, public safety, and
economic growth.

    The Executive Order goes on to require coordination among the
agencies when taking action to directly regulate (or substantially and
predictably affect) greenhouse gas emissions from motor vehicles,
nonroad vehicles, and use of motor vehicle fuels. Such action is to be
undertaken jointly ``to the maximum extent permitted by law and
determined by the head of the agency to be practicable.''
    Consistent with these directives, NHTSA and EPA took the first
steps toward regulations that would cut gasoline consumption and
greenhouse gas emissions from motor vehicles pursuant to Presidential
directive. NHTSA and EPA staff jointly assessed which technologies
would be available and their effectiveness and cost. They also jointly
assessed the key economic and other assumptions affecting the
stringency of future standards. Finally, they worked together in
updating and further improving the Volpe model that had been used to
help determine the stringency of the MY 2008-2011 light truck CAFE
standards. Much of the work between NHTSA and EPA staff was reflected
in rulemaking proposals being developed by NHTSA prior to the enactment
of EISA and was substantially retained when NHTSA revised its proposals
to be consistent with that legislation. Ultimately, the NPRM published
by the agency in May and today's final rule are based on NHTSA's
assessments of how they meet EPCA, as amended by EISA.
5. Ninth Circuit Issues Decision Re Final Rule for MY 2008-2011 Light
Trucks (November 2007)
    On November 15, 2007, the United States Court of Appeals for the
Ninth Circuit issued its decision in Center for Biological Diversity v.
NHTSA,\54\ the challenge to the MY 2008-11 light truck CAFE rule. The
Court rejected the petitioners' argument that EPCA precludes the use of
a marginal cost-benefit analysis that attempted to weigh all of the
social benefits (i.e., externalities as well as direct benefits to
consumers) of improved fuel savings in determining the stringency of
the CAFE standards.
---------------------------------------------------------------------------

    \54\ 508 F.3d 508.
---------------------------------------------------------------------------

    The Court found that NHTSA had been arbitrary and capricious in the
following respects:
     NHTSA's decision that it could not monetize the benefit of
reducing CO2 emissions for the purpose of conducting its
marginal benefit-cost analysis based on its view that the value of the
benefit of CO2 emission reductions resulting from fuel
consumption reductions was too uncertain to permit the agency to
determine a value for those emission reductions; \55\
---------------------------------------------------------------------------

    \55\ As noted above in the preamble, the agency has developed a
value for those reductions and used it in the analyses underlying
the standards adopted in this final rule. For further discussion,
see Section V of this preamble.
---------------------------------------------------------------------------

     NHTSA's lack, in the Court's view, of a reasoned
explanation for its decision not to establish a ``backstop'' (i.e., a
fixed minimum CAFE standard applicable to manufacturers); \56\
---------------------------------------------------------------------------

    \56\ EISA's requirement that standards be based on one or more
vehicle attributes appears to preclude the specification of such a
backstop standard for the latter two categories of automobiles. For
further discussion, see Section VI of this preamble.
---------------------------------------------------------------------------

     NHTSA's lack, again in the Court's view, of a reasoned
explanation for its decision not to revise the regulatory definitions
for the passenger car and light truck categories of automobiles so that
some vehicles currently classified as light trucks are instead
classified as passenger cars; \57\
---------------------------------------------------------------------------

    \57\ In this final rule, NHTSA has moved 1.4 million 2 wheel
drive SUVs from the light truck class to the passenger car class. It
re-examined the legislative history of the statutory definitions of
``automobile'' and ``passenger automobile'' and the term
``nonpassenger automobile'' and analyzed the impact of that moving
any vehicles out of the nonpassenger automobile (light truck)
category into the passenger automobile (passenger car) category
would have the level of standards for both groups of automobiles.
For further discussion, see Section XI of this preamble.
---------------------------------------------------------------------------

     NHTSA's decision not to subject most medium- and heavy-
duty pickups and most medium- and heavy-duty cargo vans (i.e., those
between 8,500 and 10,000 pounds gross vehicle weight

rating (GVWR,) to the CAFE standards; \58\
---------------------------------------------------------------------------

    \58\ EISA removed these vehicles from the statutory definition
of ``automobile'' and mandated the establishment of CAFE standards
for them following the completion of reports by the National Academy
of Sciences and NHTSA.
---------------------------------------------------------------------------

     NHTSA's decision to prepare and publish an Environmental
Assessment (EA) and making a finding of no significant impact
notwithstanding what the Court found to be an insufficiently broad
range of alternatives, insufficient analysis of the climate change
effects of the CO2 emissions, and limited assessment of
cumulative impacts in its EA under the National Environmental Policy
Act (NEPA).\59\
---------------------------------------------------------------------------

    \59\ On February 6, 2008, the Government petitioned for en banc
rehearing by the 9th Circuit on the limited issue of whether it was
appropriate for the panel, having held that the agency
insufficiently explored the environmental implications of the MY
2008-11 rulemaking in its EA, to order the agency to prepare an EIS
rather than simply remanding the matter to the agency for further
analysis. The Court subsequently modified its order as described
below.
---------------------------------------------------------------------------

    The Court did not vacate the standards, but instead said it would
remand the rule to NHTSA to promulgate new standards consistent with
its opinion ``as expeditiously as possible and for the earliest model
year practicable.\60\ Under the decision, the standards established by
the April 2006 final rule would remain in effect unless and until
amended by NHTSA. In addition, it directed the agency to prepare an
Environmental Impact Statement.
---------------------------------------------------------------------------

    \60\ The deadline in EPCA for issuing a final rule establishing,
for the first time, a CAFE standard for a model year is 18 months
before the beginning of that model year. 49 U.S.C. 32902(g)(2). The
same deadline applies to issuing a final rule amending an existing
CAFE standard so as to increase its stringency. Given that the
agency has long regarded October 1 as the beginning of a model year,
the statutory deadline for increasing the MY 2009 standard was March
30, 2007, and the deadline for increasing the MY 2010 standard is
March 30, 2008. Thus, the only model year for which there was
sufficient time at the time of the Court's decision to gather all of
the necessary information, conduct the necessary analyses and
complete a rulemaking was MY 2011. As noted earlier in this notice,
however, EISA requires that a new standard be established for that
model year. This rulemaking was conducted pursuant to that
requirement.
---------------------------------------------------------------------------

    As of the date of the issuance of this final rule, the Court has
not yet issued its mandate in this case.
6. Congress Enacts Energy Security and Independence Act of 2007
(December 2007)
    As noted above in Section I.B., EISA significantly changed the
provisions of EPCA governing the establishment of future CAFE
standards. These changes made it necessary for NHTSA to pause in its
efforts so that it could assess the implications of the amendments made
by EISA and then, as required, revise some aspects of the proposals it
had been developing (e.g., the model years covered and credit issues).
7. NHTSA Proposes CAFE Standards for MYs 2011-2015 and Requests New
Product Plans for Those Years (April 2008) \61\
---------------------------------------------------------------------------

    \61\ A description of the NPRM appears in section I.C of this
preamble.
---------------------------------------------------------------------------

8. NHTSA Contracts With ICF International To Conduct Climate Modeling
and Other Analyses in Support of Draft and Final Environmental Impact
Statements (May 2008)
    NHTSA contracted with ICF International (ICF) to support it in
conducting its environmental analyses and preparing the draft and final
environmental impact statements. ICF provides consulting services and
technology solutions in energy, climate change, environment,
transportation, social programs, health, defense, and emergency
management.
9. Manufacturers Submit New Product Plans (June 2008)
    These product plans identify which vehicle models manufacturers
intend to build and which technologies the manufacturers intend to
apply and when to their vehicles. NHTSA began its analysis of the MY
2011 CAFE standards with the product plans and used them to establish a
baseline, which is then used to evaluate different potential levels of
future CAFE stringency.
10. NHTSA Contracts With Ricardo To Aid in Assessing Public Comments on
Cost and Effectiveness of Fuel Saving Technologies (June 2008)
    NHTSA received numerous public comments on the types of potential
fuel saving technologies that we discussed in the NPRM, their costs and
effectiveness in improving fuel economy, and in which model year and to
which vehicles they may be applied. To aid the agency in analyzing and
responding to these comments, and to ensure that the analysis for the
final rule is thorough and robust, NHTSA contracted with Ricardo, a
highly reputable and neutral source of outside expertise in the areas
of powertrain and vehicle technologies. NHTSA chose Ricardo because of
its extensive experience and expertise in working with both government
and industry on fuel economy-improving technology issues.
11. Ninth Circuit Revises Its Decision Re Final Rule for MY 2008-2011
Light Trucks (August 2008)
    In response to the Government petition for rehearing, the Ninth
Circuit modified its decision by replacing its direction to prepare an
EIS with a direction to prepare either a new EA or, if necessary, an
EIS.\62\
---------------------------------------------------------------------------

    \62\ See  CBD v. NHTSA, 538 F.3d 1172 (9th Cir. 2008).
---------------------------------------------------------------------------

12. NHTSA Releases Final Environmental Impact Statement (October 2008)
    On October 17, 2008, EPA published a notice announcing the
availability of NHTSA's final environmental impact statement (FEIS) for
this rulemaking.\63\ Throughout the FEIS, NHTSA relied extensively on
findings of the United Nations Intergovernmental Panel on Climate
Change (IPCC) and the U.S. Climate Change Science Program (USCCSP). In
particular, the agency relied heavily on the most recent, thoroughly
peer-reviewed, and credible assessments of global climate change and
its impact on the United States: the IPCC Fourth Assessment Report
Working Group I4 and II5 Reports, and reports by the USCCSP that
include Scientific Assessments of the Effects of Global Climate Change
on the United States and Synthesis and Assessment Products.
---------------------------------------------------------------------------

    \63\ 73 FR 61859.
---------------------------------------------------------------------------

    In the FEIS, NHTSA compared the environmental impacts of its
preferred alternative and those of reasonable alternatives. It
considered direct, indirect, and cumulative impacts and describes these
impacts to inform the decisionmaker and the public of the environmental
impacts of the various alternatives.
    Among other potential impacts, NHTSA analyzed the direct and
indirect impacts related to fuel and energy use, emissions, including
carbon dioxide and its effects on temperature and climate change, air
quality, natural resources, and the human environment. Specifically,
the FEIS used a climate model to estimate and report on four direct and
indirect effects of climate change, driven by alternative scenarios of
GHG emissions, including:
    1. Changes in CO2 concentrations;
    2. Changes in global mean surface temperature;
    3. Changes in regional temperature and precipitation; and
    4. Changes in sea level.
    NHTSA also considered the cumulative impacts of the proposed
standards for MY 2011-2015 passenger cars and light trucks, together
with

estimated impacts of NHTSA's implementation of the CAFE program through
MY 2010 and NHTSA's future CAFE rulemaking for MYs 2016-2020.
    NHTSA intends to review all analyses for model years after MY 2011
in connection with the rulemaking for MY 2012 and thereafter,
consistent with the President's Memorandum of January 26, 2009.
13. Office of Information and Regulatory Affairs Completes Review of a
Draft MY 2011-2015 Final Rule (November 2008)
    The Office of Information and Regulatory Affairs of the Office of
Management and Budget completed review of the rule under Executive
Order 12866, Regulatory Planning and Review, on November 14, 2008.\64\
---------------------------------------------------------------------------