differences in findings can be reduced to differences in assumptions.
EPA finds that the Alliance has not met its burden of proof that the
greenhouse gas regulations undermine California's previous LEV II and
ZEV protectiveness determinations or that California was arbitrary and
capricious in its greenhouse gas protectiveness determination.
---------------------------------------------------------------------------

    \95\ To the extent that an analysis of the in-use effects of
California's greenhouse gas standards may be appropriate, then such
analysis properly includes consideration of the upstream emission
reduction impacts identified and linked to the standards. A holistic
examination of the in-use effects of a regulation should naturally
include those effects that have a plausible connection to the
standards, including such consequences as indirect upstream emission
reductions. The March 6, 2008 Denial stated that California may
otherwise have independent authority to regulate stationary sources
and therefore there was no basis to include emission reductions from
such sources as part of a mobile source rulemaking. However, EPA
believes that the issue under section 209(b)(1)(A) is whether the
indirect reductions of ozone pollutants from stationary sources
created by the greenhouse gas emission standards for motor vehicles,
can reasonably be considered by California in its determination that
its standards are as protective of public health and welfare as
applicable federal standards. Given that the effects are reasonably
related to the regulations, if it is appropriate to consider in-use
effects then it was not arbitrary and capricious for California to
include such effects in this analysis.
---------------------------------------------------------------------------

    EPA, therefore, finds that opponents of the waiver have not
presented clear and compelling evidence that CARB was arbitrary and
capricious in finding that the real-world effect of its standards ``in
the aggregate'' would not lead to greater emissions of pollutants than
the federal program.

D. Section 209(b)(1)(A) Conclusion

    Based on the record before me, I cannot find that CARB was
arbitrary and capricious in its finding that the California motor
vehicle emission standards including the greenhouse gas standards are,
in the aggregate, at least as protective of public health and welfare
as applicable Federal standards.

V. Does California Need Its Standards To Meet Compelling and
Extraordinary Conditions?

    Under section 209(b)(1)(B) of the Act, I cannot grant a waiver if I
find that California ``does not need such State standards to meet
compelling and extraordinary conditions.'' EPA has traditionally
interpreted this provision as considering whether California needs a
separate motor vehicle program to meet compelling and extraordinary
conditions. However in the March 6, 2008 Denial, EPA limited this
interpretation to California's motor vehicle standards that are
designed to address local or regional air pollution problems. EPA
determined that the traditional interpretation was not appropriate for
standards designed to address a global air pollution problem and its
effects and that it was appropriate to address such standards
separately from the remainder of the program. EPA then proceeded to
find that California did not need such standards to meet compelling and
extraordinary conditions. The interpretation adopted in the March 6,
2008 Denial is now before me for reconsideration.

A. Basis of March 6, 2008 Denial

    In the March 6, 2008 Denial, EPA provided its reasoning for
changing its long-standing interpretation of this provision, as it
pertains to California standards designed to address global air
pollution. EPA described its long-standing interpretation in some
detail, stating that:

    Under this approach EPA does not look at whether the specific
standards at issue are needed to meet compelling and extraordinary
conditions related to that air pollutant. For example, EPA reviewed
this issue in detail with regard to particulate matter in a 1984
waiver decision.\96\ In that waiver proceeding, California argued
that EPA is restricted to considering whether California needs its
own motor vehicle program to meet compelling and extraordinary
conditions, and not whether any given standard is necessary to meet
such conditions. Opponents of the waiver in that proceeding argued
that EPA was to consider whether California needed these PM
standards to meet compelling and extraordinary conditions related to
PM air pollution.
---------------------------------------------------------------------------

    \96\ 49 FR 18887 (May 3, 1984).
---------------------------------------------------------------------------

    The Administrator agreed with California that it was appropriate
to look at the program as a whole in determining compliance with
section 209(b)(1)(B). One justification of the Administrator was
that many of the concerns with regard to having separate state
standards were based on the manufacturers' worries about having to
meet more than one motor vehicle program in the country, but that
once a separate California program was permitted, it should not be a
greater administrative hindrance to have to meet further standards
in California. The Administrator also justified this decision by
noting that the language of the statute referred to ``such state
standards,'' which referred back to the use of the same phrase in
the criterion looking at the protectiveness of the standards in the
aggregate. He also noted that the phrase referred to standards in
the plural, not individual standards. He considered this
interpretation to be consistent with the ability of California to
have some standards that are less stringent than the federal
standards, as long as, per section 209(b)(1)(A), in the aggregate
its standards were at least as protective as the federal standards.
    The Administrator further stated that in the legislative history
of section 209, the phrase ``compelling and extraordinary
circumstances'' refers to ``certain general circumstances, unique to
California, primarily responsible for causing its air pollution
problem,'' like the numerous thermal inversions caused by its local
geography and wind patterns. The Administrator also noted that
Congress recognized ``the presence and growth of California's
vehicle population, whose emissions were thought to be responsible
for ninety percent of the air pollution in certain parts of
California.'' \97\ EPA reasoned that the term compelling and
extraordinary conditions ``do not refer to the levels of pollution
directly.'' Instead, the term refers primarily to the factors that
tend to produce higher levels of pollution--``geographical and
climatic conditions (like thermal inversions) that, when combined
with large numbers and high concentrations of automobiles, create
serious air pollution problems.'' \98\
---------------------------------------------------------------------------

    \97\ Id. at 18890.
    \98\ 73 FR 12156, 12159-60 (March 6, 2008).

    The Administrator summarized that under this interpretation the
question to be addressed in the second criterion is whether these
``fundamental conditions'' (i.e. the geographical and climate
conditions and large motor vehicle population) that cause air pollution
continued to exist, not whether the air pollution levels for PM were
compelling and extraordinary, or the extent to which these specific PM
standards will address the PM air pollution problem.\99\
---------------------------------------------------------------------------

    \99\ 73 FR at 12159-60.
---------------------------------------------------------------------------

    However in the March 6, 2008 Denial, EPA limited this
interpretation to California's motor vehicle standards that are
designed to address local or regional air pollution problems. EPA
determined that the traditional interpretation was not appropriate for
standards designed to address a global air pollution problem and its
effects.\100\
---------------------------------------------------------------------------

    \100\ EPA recently reaffirmed that the traditional
interpretation still applied for motor vehicle standards designed to
address air pollution problems that are local or regional in nature.
71 FR 78190, 78192 (December 28, 2008); see also 71 FR 78190 and
Decision Document for Waiver of Federal Preemption for California
Zero Emission Vehicle Standards, at 34.
---------------------------------------------------------------------------

    With respect to a global air pollution problem like elevated
concentrations of greenhouse gases, EPA's March 6, 2008 Denial found
that the text of section 209(b)(1)(B) was ambiguous and does not limit
EPA to this prior interpretation. In addition, EPA noted that the
legislative history supported a decision to ``examine the second
criterion specifically in the context of global climate change.'' The
legislative history:

    [I]ndicates that Congress was moved to allow waivers of
preemption for California motor vehicle standards based on the
particular effects of local conditions in California on the air
pollution problems in California. Congress discussed ``the unique
problems faced in California as a result of its climate and
topography.'' H.R. Rep. No. 728, 90th Cong. 1st Sess., at 21 (1967).
See also Statement of Cong. Holifield (CA), 113 Cong. Rec. 30942-43
(1967). Congress also noted the large effect of local vehicle
pollution on such local problems. See, e.g., Statement of Cong. Bell
(CA) 113 Cong. Rec. 30946. In particular, Congress focused on
California's

smog problem, which is especially affected by local conditions and
local pollution. See Statement of Cong. Smith (CA) 113 Cong. Rec.
30940-41 (1967); Statement of Cong. Holifield (CA), id. at 30942.
See also, MEMA I, 627 F. 2d 1095, 1109 (DC Cir., 1979) (noting the
discussion of California's ``peculiar local conditions'' in the
legislative history). Congress did not justify this provision based
on pollution problems of a more national or global nature in
justifying this provision.\101\
---------------------------------------------------------------------------

    \101\ 73 FR at 12161.

    Relying on this, and without any further significant discussion of
either congressional intent or how this new approach properly furthered
---------------------------------------------------------------------------
the goals of section 209(b), EPA determined that it was appropriate to:

    [R]eview California's GHG standards separately from the
remainder of its motor vehicle emission control program for purposes
of section 209(b)(1)(B). In this context it is appropriate to give
meaning to this criterion by looking at whether the emissions from
California motor vehicles, as well as the local climate and
topography in California, are the fundamental causal factors for the
air pollution problem--elevated concentrations of greenhouse gases--
apart from the other parts of California's motor vehicle program,
which are intended to remediate different air pollution concerns.

    EPA then proceeded to apply this interpretation to the GHG
standards at issue in this waiver proceeding, and found that California
did not need the GHG standards under this interpretation. Having
limited the meaning of this provision to situations where the air
pollution problem was local or regional in nature, EPA found that
California's greenhouse gas standards do not meet this criterion. EPA
found that the elevated concentrations of greenhouse gases in
California are similar to concentrations elsewhere in the world, and
that local conditions in California such as the local topography and
climate and the number of motor vehicles in California are not the
determinant factors causing the elevated GHG concentrations found in
California and elsewhere. Thus, the March 6, 2008 Denial found that
California did not need its GHG standards to meet compelling and
extraordinary conditions, and the waiver was denied.
    EPA also considered an alternative interpretation, where EPA would
consider ``the effects in California of this global air pollution
problem in California in comparison to the rest of the country, again
addressing the GHG standards separately from the rest of California's
motor vehicle program.'' Under this alternative interpretation, EPA
considered whether the impacts of global climate change in California
were significant enough and different enough from the rest of the
country such that California could be considered to need its greenhouse
gas standards to meet compelling and extraordinary conditions. EPA
determined that the waiver should be denied under this alternative
interpretation as well.

B. Should EPA Review This Criterion Based on the Need for California's
Motor Vehicle Program or the Need for the GHG Standards?

    The essential first question to resolve in addressing whether
California needs ``such State standards to meet compelling and
extraordinary conditions'' is whether it is appropriate for EPA to
evaluate this criterion based on California's need for its motor
vehicle program as a whole, or to evaluate only the particular
standards being addressed in this waiver proceeding.
1. Comments Supporting a Review of the Entire Program
    In its initial waiver request, CARB restates its need for its own
engine and vehicle programs to meet serious air pollution problems. It
notes that the relevant inquiry is whether California needs its own
emission control program as opposed to the need for any given standard
as necessary to meet compelling and extraordinary conditions. CARB
notes that in prior waivers the Administrator has determined that:

    ``[C]ompelling and extraordinary conditions'' does not refer to
levels of pollution directly, but primarily to the factors that tend
to produce them: geographical and climatic conditions that, when
combined with large numbers and high concentrations of automobiles
create serious air pollution problems.''
    In its initial waiver request letter, CARB stated:

    California, the South Coast and San Joaquin Air basins in
particular, continues to experience some of the worst air quality in
the nation. California's ongoing need for dramatic emission
reductions generally and from passenger vehicles specifically is
abundantly clear from its recent adoption of state implementation
plans for the South Coast and other California air basins. The
unique geographical and climatic conditions, and the tremendous
growth in the vehicle population and use which moved Congress to
authorize California to establish separate vehicle standards in
1967, still exist today.\102\
---------------------------------------------------------------------------

    \102\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 27.

    CARB notes that these conditions have not changed to warrant a
change in confirmation by EPA and that the opponents of the waiver bear
the burden on showing why California no longer has a compelling need,
informed by its own circumstances and benefits that would accrue to it
and other states.
    EPA also received comment that the Massachusetts v. EPA holding
suggests that EPA should treat greenhouse gases just like all other air
pollutants when evaluating a section 209(b) waiver request for
greenhouse gases. These comments suggest that once the Supreme Court
clarified that greenhouse gases are Clean Air Act air pollutants, there
was no room left to distinguish greenhouse gases from other air
pollutants when evaluating waiver requests under section 209(b). These
comments suggest that EPA ought not to treat elevated concentrations of
greenhouse gases as an air pollution problem different from
California's traditional air pollution problems. Likewise, the comments
suggest, greenhouse gas pollutants should be treated just like other
air pollutants which give rise to the need for California's motor
vehicle emission program, and, therefore, be subject to EPA's
traditional section 209(b)(1)(B) analysis.
    Several commenters suggest that review of California's need for its
motor vehicle emissions program as a whole is not only appropriate but
is mandated by the statute.
2. Comments Supporting a Review of the GHG Standards Separately
    Several commenters opposing the GHG waiver request have advocated
that EPA should review California's GHG standards separately under the
``compelling and extraordinary conditions'' criterion. Essentially,
this would require that EPA's determination be based on California's
need for GHG standards in isolation of its need for its own motor
vehicle emissions program.
    These commenters state that the statute requires a linkage between
the compelling and extraordinary conditions and the particular
standards that California wishes to enforce, and that a set of
standards that cannot be linked to the compelling and extraordinary
conditions cannot be said to be needed to meet such conditions. The
commenters note that the statute refers to ``standards''--not to a
``program''--and that such an approach would shield regulations that
would not meet the criterion from any review simply by referring to
other regulations that do meet the criterion. Moreover, they state that
the need for such standards must be based on the particular
characteristics (topography, photochemistry) that make California's
conditions compelling and

extraordinary, whereas global climate change (and, thus, control of
GHGs) is not related to such conditions.
    Included among the comments suggesting that section 209(b) was
intended to allow California to address local air pollution problems
and not global environmental issues like climate change was an argument
that the phrase ``need for such State standards to meet compelling and
extraordinary conditions'' is unambiguous.\103\ That lack of ambiguity,
according to these comments, compels the conclusion that global warming
is not the type of condition California was meant to address with its
motor vehicle emissions program. These commenters further suggest that
the intent of Congress was to allow California the ability to set its
own standards to address the state's unique local air pollution
problems and ``scientific evidence confirms that California's
temperature trends are neither unique nor particularly distinct from
those of at least a dozen other States.''
---------------------------------------------------------------------------

    \103\ This comment, suggesting that the ``need for such State
standards to meet compelling and extraordinary conditions,'' is made
under Step 1 of the test established under Chevron, USA., Inc. v.
NRDC.
---------------------------------------------------------------------------

3. Decision
    After reviewing the comments and the March 6, 2008 Denial, I
believe the better approach is to review California's need for its new
motor vehicle emissions program as a whole to meet compelling and
extraordinary conditions, and not to apply this criterion to specific
standards, or to limit it to standards designed to address only local
or regional air pollution problems. The traditional approach to
interpreting this provision is the best approach for considering a
waiver for greenhouse standards, as well as a waiver for standards
designed to address local or regional air pollution problems.\104\
Therefore, I believe the interpretation that was applied in the March
6, 2008 Denial should be rejected and no longer be followed.
---------------------------------------------------------------------------

    \104\ The traditional interpretation of section 209(b)(1)(B) is
certainly not ``unambiguous precluded'' by the language of the
statute. See Entergy Corp. v. Riverkeeper, Inc., 129 S.Ct. 1498
(2009)(``That view governs if it is a reasonable interpretation of
the statute--not necessarily the only possible interpretation, nor
even the interpretation deemed most reasonable by the courts.
Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837, 843-844 (1984).'') (``It seems to us, therefore, that the
phrase ``best available,'' even with the added specification ``for
minimizing adverse environmental impact,'' does not unambiguously
preclude cost-benefit analysis.''). Carrow v. Merit Systems
Protection Board, 564 F.3d 1359 (Fed. Cir. 2009) (``[W]e are
obligated to give controlling effect to [agency's] interpretation if
it is reasonable and is not contrary to the unambiguously expressed
intent of Congress'', citing Entergy Corp.) .
---------------------------------------------------------------------------

    This traditional interpretation is the most straightforward reading
of the text and legislative history of section 209(b). Congress decided
in 1977 to allow California to promulgate individual standards that are
not as stringent as comparable federal standards, as long as the
standards are ``in the aggregate, at least as protective of public
health and welfare as applicable federal standards.'' This decision by
Congress requires EPA to allow California to promulgate individual
standards that, in and of themselves, might not be considered needed to
meet compelling and extraordinary circumstances, but are part of
California's overall approach to reducing vehicle emissions to address
air pollution problems.
    EPA is to determine whether California's determination is arbitrary
and capricious under section 209(b)(1)(A), and is to determine whether
California does not need ``such State standards'' to meet compelling
and extraordinary conditions. The natural reading of these provisions
leads EPA to consider the same group of standards that California
considered in making its protectiveness determination. While the words
``in the aggregate'' are not specifically applicable to section
209(b)(1)(B), it does refer to the need for ``such State standards,''
rather than ``each State standard'' or otherwise indicate a standard-
by-standard analysis.
    In addition, EPA's March 6, 2008 Denial determined that this
provision was appropriately interpreted to consider California's
standards as a group for standards designed to address local or
regional air pollution problems, but should be interpreted in the
opposite fashion for standards designed to address global air pollution
problems. The text of the provision, however, draws no such
distinction, and provides no indication other than Congress intended a
single interpretation for this provision, not one that varied based on
the kind of air pollution problem at issue.
    The March 6, 2008 Denial considered the legislative history, and
determined that Congress was motivated by concern over local conditions
in California that lead to local or regional air pollution problems.
From this, EPA determined that Congress intended to allow California to
address these kinds of local or regional air pollution problems, but no
others. In effect, EPA inferred from the discussion in the legislative
history that Congress intended to limit California's authority in this
way, and to prohibit a waiver for California standards aimed at global
air pollution problems.
    This ignores the main thrust of the text and legislative history of
section 209(b), and improperly reads too much into an absence of
discussion of global air pollution problems in the legislative history.
The structure of section 209, both as adopted in 1967 and as amended in
1977, is notable in its focus on limiting the ability of EPA to deny a
waiver, and thereby preserves discretion for California to construct
its motor vehicle program as it deems appropriate to protect the health
and welfare of its citizens. The legislative history indicates Congress
quite intentionally restricted and limited EPA's review of California's
standards, and its express legislative intent was to ``provide the
broadest possible discretion [to California] in selecting the best
means to protect the health of its citizens and the public welfare.''
\105\ The DC Circuit recognized that ``[t]he history of the
congressional consideration of the California waiver provision, from
its original enactment up through 1977, indicates that Congress
intended the State to continue and expand its pioneering efforts at
adopting and enforcing motor vehicle emission standards different from
and in large measure more advanced than the corresponding federal
program. In short, to act as a kind of laboratory for innovation. * * *
For a court [to limit California's authority] despite the absence of
such an indication would only frustrate the congressional intent.''
\106\
---------------------------------------------------------------------------

    \105\ H.R. Rep. No. 294, 95th Cong., 1st Sess. 301-302 (1977).
See MEMA, 627 F. 2d at 1110-11.
    \106\ MEMA, 627 F. 2d at 1111.
---------------------------------------------------------------------------

    In this context, it is fully consistent with the expressed
intention of Congress to interpret section 209(b)(1)(B) the same way
both for standards designed to address local and regional air pollution
problems, and standards designed to address global air pollution
problems. Congress intended to provide California the broadest possible
discretion to develop its motor vehicle emissions program. Neither the
text nor the legislative history of section 209(b) indicates that
Congress intended to limit this broad discretion to a certain kind of
air pollution problem, or to take away all discretion with respect to
global air pollution problems.\107\ In

addition, applying the traditional interpretation to greenhouse gas
standards does not change the basic nature of the compromise
established by Congress--California could act as the laboratory for the
nation with respect to motor vehicle emission control, and
manufacturers would continue to face just two sets of emissions
standards--California's and EPA's.
---------------------------------------------------------------------------

    \107\ This broad interpretation of section 209(b) is similar to
the broad reading the Court provided to section 302(g) of the Clean
Air Act when it held that the term ``air pollutant'' included
greenhouse gases, rejecting among other things the argument that
Congress limited the term to apply only to certain kinds of air
pollution. Massachusetts v. EPA, 549 U.S. 497, 532 footnote 26.
---------------------------------------------------------------------------

    This interpretation is directly in line with the purpose of
Congress, as compared to the interpretation adopted in the March 6,
2008 Denial. The 2008 interpretation relied on the discussion in the
legislative history of local conditions in California leading to air
pollution problems like ozone. While this was properly read to support
the view that this provision should be interpreted to address
California's need for a motor vehicle program as a whole, the March 6,
2008 Denial went further and inferred that by discussing such local
conditions, Congress also intended to limit California's discretion to
only these kinds of local or regional air pollution problems. The March
6, 2008 Denial pointed to no particular language in the legislative
history or the text of section 209(b) indicating such, instead,
congressional intent to limit California's discretion was inferred from
the discussion of local conditions. However, basing a limitation on
such an inference is not appropriate given the express indication that
Congress intended to provide California the ``broadest possible
discretion'' in selecting the best means to protect the health of its
citizens and the public welfare.
    The text of section 209(b) and the legislative history, when viewed
as a whole, leads me to conclude that the interpretation adopted in the
March 6, 2008 Denial should be rejected. The better way to interpret
this provision is to apply the traditional interpretation to the
evaluation of California's greenhouse gas standards for motor vehicles.
If California needs a separate motor vehicle program to address the
kinds of compelling and extraordinary conditions discussed in the
traditional interpretation, then Congress intended that California
could have such a program. Congress also intentionally provided
California the broadest possible discretion in adopting the kind of
standards in its motor vehicle program that California determines are
appropriate to address air pollution problems that exist in California,
whether or not those problems are local or regional in nature, and to
protect the health and welfare of its citizens. The better
interpretation of the text and legislative history of this provision is
that Congress did not intend this criterion to limit California's
discretion to a certain category of air pollution problems, to the
exclusion of others. In this context it is important to note that air
pollution problems, including local or regional air pollution problems,
do not occur in isolation. Ozone and PM air pollution, traditionally
seen as local or regional air pollution problems, occur in a context
that to some extent can involve long range transport of this air
pollution or its precursors. This long-range or global aspect of ozone
and PM can have an impact on local or regional levels, as part of the
background in which the local or regional air pollution problem occurs.
As discussed later, the effects of global concentrations of greenhouse
gases can have an impact on local ozone levels. This context for air
pollution problems supports the view that Congress did not draw such a
line between the types of air pollution problems under this criterion,
and that EPA should not implement this criterion in a narrow way
restricting how California determines it should develop its motor
vehicle program to protect the health and welfare of its citizens.\108\
---------------------------------------------------------------------------

    \108\ See Massachusetts v. EPA, ``While the Congresses that
drafted section 202(a)(1) might not have appreciated the possibility
that burning fossil fuels could lead to global warming, they did
understand that without regulatory flexibility, changing
circumstances and scientific developments would soon render the
Clean Air Act obsolete. The broad language of section 202(a)(1)
reflects an intentional effort to confer the flexibility necessary
to forestall such obsolescence. See Pennsylvania Dept. of
Corrections v. Yeskey, 524 U.S. 206, 212 (1998) (``[T]he fact that a
statute can be applied in situations not expressly anticipated by
Congress does not demonstrate ambiguity. It demonstrates breadth''
(internal quotation marks omitted)). Because greenhouse gases fit
well within the Clean Air Act's capacious definition of ``air
pollutant,'' we hold that EPA has the statutory authority to
regulate the emission of such gases from new motor vehicles.'' 549
U.S. 497 at 532.
---------------------------------------------------------------------------

    This approach does not make section 209(b)(1)(B) a nullity, as some
have suggested. EPA must still determine whether California does not
need its motor vehicle program to meet the compelling and extraordinary
conditions discussed in the legislative history. If that is the case,
then a waiver would be denied on those grounds. As discussed below,
that is not the case at this point, even though conditions in
California may one day improve such that it no longer has the need for
a separate motor vehicle program. The statute contemplates that such
improvement is possible. In addition, the opponents of a waiver always
have the ability to raise their legal, policy, and other concerns in
the State administrative process, or through judicial review in State
courts. Congress, however, provided EPA a much more limited role under
section 209(b) in considering objections raised by opponents of a
waiver.
    For these reasons, I believe that the better approach for analyzing
the need for ``such State standards'' to meet ``compelling and
extraordinary conditions'' is to review California's need for its
program, as a whole, for the class or category of vehicles being
regulated, as opposed to its need for individual standards.
    Having adopted this interpretation of section 209(b)(1)(B), I apply
it below to determine whether EPA can find that California does not
need its motor vehicle program to meet compelling and extraordinary
conditions. Given the basis for EPA's March 6, 2008 Denial and the
considerable debate regarding the permissible interpretations of this
provision, EPA has also evaluated this criterion reviewing the
greenhouse gas standards separately--using the two interpretations
discussed in the March 6, 2008 Denial. In either case, EPA also cannot
deny California's request for a waiver based on a finding that
California does not need such standards to meet compelling and
extraordinary circumstances.

C. Does California Need Its Motor Vehicle Program To Meet Compelling
and Extraordinary Conditions?

    As discussed above, the better interpretation of this criterion,
adopted herein, is the traditional approach of evaluating California's
need for a separate program to meet compelling and extraordinary
conditions. Applying this approach, with due deference to California, I
cannot deny the waiver.
    CARB has repeatedly demonstrated the need for its motor vehicle
program to address compelling and extraordinary conditions in
California. In its Waiver Request letter, CARB stated:

    California--the South Coast and San Joaquin Air basins in
particular--continues to experience some of the worst air quality in
the nation. California's ongoing need for dramatic emission
reductions generally and from passenger vehicles specifically is
abundantly clear from its recent adoption of state implementation
plans for the South Coast and other California air basins.\109\ The
unique geographical and climatic conditions, and the tremendous
growth in the vehicle population and use which moved Congress to

authorize California to establish separate vehicle standards in
1967, still exist today.\110\
---------------------------------------------------------------------------

    \109\ See e.g. Approval and Promulgation of State Implementation
Plans; California--South Coast, 64 FR 1770, 1771 (January 12, 1999).
See also 69 FR 23858, 23881-90 (April 30, 2004) (designating 15
areas in California as nonattainment for the federal 8-hour ozone
national ambient air quality standard).
    \110\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1, at 16.

    CARB notes in its July 14, 2007 comments that it testified at EPA's
earlier hearings on this waiver request that ``since nothing has
changed in the few months since EPA last easily made this determination
[regarding the need for the motor vehicle emission program] on December
28, 2006 (71 FR 78190), and since California still has the
``geographical and climatic conditions that, when combined with the
large numbers and high concentrations of automobiles, create serious
pollution problems,'' (49 FR at 18890 (citing legislative history)),
this is the end of a proper and legal EPA analysis of the extraordinary
and compelling conditions waiver prong.'' \111\
---------------------------------------------------------------------------

    \111\ California Air Resources Board, EPA-HQ-OAR-2006-0173-1686
at 7.
---------------------------------------------------------------------------

    EPA has not received any adverse comments suggesting that
California no longer needs a separate motor vehicle emissions program
to address the various conditions that lead to serious and unique air
pollution problems in California.
    Based on the record, I am unable to identify any change in
circumstances or any evidence to suggest that the conditions that
Congress identified as giving rise to serious air quality problems in
California no longer exist. Therefore, using the traditional approach
of reviewing the need for a separate California program to meet
compelling and extraordinary conditions, I cannot deny the waiver based
on this criterion.

D. Does California Need Its Motor Vehicle GHG Standards To Meet
Compelling and Extraordinary Conditions?

    As discussed above, EPA has also evaluated this criterion under two
alternative approaches, reviewing the greenhouse gas standards
separately using the two interpretations discussed in the March 6, 2008
Denial. While recognizing that they are not the interpretations adopted
here by EPA, this section discusses the Agency's consideration of these
alternative interpretations.
1. Are California's GHG Standards Designed in Part To Address an Air
Pollution Problem That Is Local or Regional in Nature?
    In the March 6, 2008 Denial, EPA interpreted this criterion as
calling for a review of California's GHG standards separately from the
remainder of its motor vehicle emission control program. In that
context, it was determined appropriate to look at whether the emissions
from California motor vehicles, as well as the local climate and
topography in California, are the fundamental causal factors for the
air pollution problem of greenhouse gases. This interpretation limited
the meaning of this provision to situations where the motor vehicle
standards at issue were designed to address an air pollution problem
that was local or regional in nature, such that the local conditions in
California were the fundamental causes of the air pollution problem.
    The March 6, 2008 Denial applied this interpretation by focusing on
elevated concentrations of greenhouse gases as the air pollution--a
global air pollution problem. The March 6, 2008 Denial rejected
arguments that the GHG standards should also been seen as an ozone
control strategy, on the grounds that even if elevated concentrations
of greenhouse gases lead to climate changes that exacerbate ozone, the
causes of elevated concentrations of greenhouse gases are not solely
local to California but are global in nature.
    This overly narrow view fails to consider that although the factors
that cause ozone are primarily local in nature and that ozone is a
local or regional air pollution problem, the impacts of global climate
change can nevertheless exacerbate this local air pollution problem.
Whether or not local conditions are the primary cause of elevated
concentrations of greenhouse gases and climate change, California has
made a case that its greenhouse gas standards are linked to
amelioration of California's smog problems. Reducing ozone levels in
California cities and agricultural areas is expected to become harder
with advancing climate change. California and many other commenters
note that ``California's high ozone levels--clearly a condition
Congress considered--will be exacerbated by higher temperatures from
global warming.'' \112\ California also notes that there is general
consensus that temperature increases from climate change will
exacerbate the historic climate, topography, and population factors
conducive to smog formation in California, which were the driving
forces behind Congress' inclusion of the waiver provision in the Clean
Air Act.\113\ There is a logical link between the local air pollution
problem of ozone and California's desire to reduce GHGs as one way to
address the adverse impact that climate change may have on local ozone
conditions.\114\ Given the clear deference that Congress intended to
provide California on the mechanisms it chooses to use to address its
air pollution problems, it would be appropriate to consider its GHG
standards as designed in part to help address a local air pollution
problem, and, thus, a waiver should not be denied even under the narrow
interpretation employed in the March 6, 2008 Denial.
---------------------------------------------------------------------------

    \112\ California submits evidence that at the national scale,
using global to regional air quality models, various papers
demonstrate that climate change alone can worsen summertime surface
ozone pollution in polluted regions of the United States including
one finding that ``climate change alone will increase summertime
ozone in polluted regions by 1-10 ppb over the coming decades, with
the largest effects in urban areas and during pollution episodes''
and therefore ``climate change will partly offset the benefit of the
emissions reductions.'' See Jacob and Winner (2009), EPA-HQ-OAR-
2006-0173-9010.4. CARB also cites the 2007 Interim Report of the
U.S. EPA Global Change Research Program Assessment of the Impacts of
Global Change on Regional U.S. Air Quality, a draft EPA study which
concludes that climate change may significantly increase ground-
level ozone in areas throughout the nation. See also EPA's final
April 2009 ``Assessment of the Impacts of Global Climate Change on
Regional U.S. Air Quality: A Synthesis of Climate Change Impacts on
Ground-Level Ozone'' which states as one of its general findings:
``[W]hile these modeling studies cannot tell us what the future will
hold, they demonstrate the potential for global climate change to
make U.S. air quality management more difficult, and therefore
future air quality management decisions should begin to account for
the impacts of climate change.'' EPA-HQ-OAR-2006-0173-9006 at 7-9.
    \113\ Id.
    \114\ California also submits evidence that its GHG emission
regulations would result in a slight reduction of ozone precursors.
EPA-HQ-OAR-2006-0173-9006 at 10.
---------------------------------------------------------------------------

2. Do the Impacts of Climate Change in California Support a Denial of
the Waiver?
    As part of EPA's March 6, 2008 Denial, EPA also considered an
alternative interpretation for this criterion, where EPA would consider
``the effects in California of this global air pollution problem * * *
in comparison to the rest of the country, again addressing the GHG
standards separately from the rest of California's motor vehicle
program.'' EPA considered evidence and arguments submitted by
commenters concerning whether the impacts of global climate change in
California were significant enough and different enough from the rest
of the country such that California could be considered to need its
greenhouse gas standards to meet compelling and extraordinary
conditions.\115\ EPA determined in the March 6, 2008 Denial that the
waiver should be denied under this approach as well.
---------------------------------------------------------------------------

    \115\ 73 FR 12156, 12164.

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    As discussed above, this is not the interpretation that EPA now
adopts. However, even if EPA were to examine the impacts of climate
change in California under this interpretation, based on a review of
all the evidence in the record, I cannot deny the waiver.
a. What Test Applies Under This Alternative Approach?
    In the March 6, 2008 Denial, EPA found that legislative intent
called for particular circumstances in California that are
``sufficiently different'' from the nation as a whole that justify
separate standards in California.
    EPA received comment stating that there is no statutory foundation
for a ``sufficiently different'' test. Commenters noted there is
nothing in the term ``compelling and extraordinary conditions'' that
requires a comparison to the rest of the country. Similarly, commenters
point to EPA's 1984 PM waiver where EPA's Administrator found that
``there is no indication in the language of section 209 or the
legislative history that California's pollution problem must be the
worst in the country for a waiver to be granted.'' EPA also received
comment that it was not reasonable for EPA to conclude that California
does not face global warming impacts, including water supply,
agricultural production, and wildfire seasonal impacts that present
compelling and extraordinary conditions, since other states will face
similar impacts. Under this rationale, since states other than
California are also experiencing serious global warming impacts,
California could never receive a waiver to combat climate change.
Commenters find flaw in this rationale: similar impacts in other states
have never before prevented California from receiving a waiver. Even
though many states are faced with non-attainment ozone areas and smog
problems similar to California, California has never had a waiver
denied based on a finding under section 209(b)(1)(B) that it did not
need its standards to meet compelling and extraordinary conditions. As
such, EPA also received comment suggesting that the impacts of climate
change should be reviewed within the State of California to determine
their severity, and that such impacts need not be compared to impacts
experienced or projected to occur elsewhere in the country.
    Several commenters maintain that although the impacts of climate
change in California may be compelling, they are not extraordinary when
compared to the rest of the nation.\116\ These commenters point to the
record and the many submissions from other states, which recount the
variety of impacts and risks of climate change in their respective
states and claim that California is no different than any other state.
---------------------------------------------------------------------------

    \116\ Association of International Automobile Manufacturers,
EPA-HQ-OAR-2006-0173-9005. This comment notes the finding in
Massachusetts v. EPA that the impacts of global warming are ``widely
shared'' among the states.
---------------------------------------------------------------------------

    EPA does not need to resolve this issue. As discussed below, EPA
has evaluated the evidence submitted concerning the observed and
projected impacts of global climate change in California and other
states and determined that even under the alternative approach used in
the March 6, 2008 Denial, EPA cannot deny a waiver.
b. Would a Waiver Be Denied Under This Alternative Approach?
    Commenters supporting the waiver maintain that California has
clearly demonstrated that the impacts in California of global warming
are ``compelling and extraordinary.'' Several commenters point to the
impacts of global warming recited in EPA's March 6, 2008 initial denial
as evidence that EPA committed an error in judgment by not finding that
the extreme and various impacts of climate change in California are
compelling and extraordinary in nature and that, further, California
clearly satisfied the section 209(b)(1)(B) requirements.\117\
---------------------------------------------------------------------------

    \117\ EPA has not received any comment suggesting EPA's prior
inventory of evidentiary information is incorrect as set forth in
its discussion of the ``Relationship of Impacts of Global Climate
Change in California to the Rest of the Country'' at 73 FR 12156,
12163-12168. In addition, several new studies have been submitted to
EPA, including: a recent report from the Pacific Institute examining
the impacts that sea level rise would have on population,
infrastructure, and property in California (this report uses
projections of medium to medium-high greenhouse gas emissions
scenarios indicating a 1.4 meter rise in the seal level by 2100 with
480,000 people at risk and $100 million in property at risk from a
100 year flood event); California's Climate Action Team Reports that
emphasizes many of the points made in California's waiver request
including the air quality impacts (``Climate change could slow
progress toward attainment of health-based air quality standards and
increase pollution control costs by increasing the potential for
high ozone and high particulate days.'' The report itself
synthesizes 37 recent reports that address a wide body of
information on the range and gravity of the risks that climate
change poses to California's citizens, natural resources, and
economy); and the Public Policy Institute of California assessment
of climate change on public health in California and cites number
impacts including ``an increase in the frequency and severity of air
pollution episodes'' and ``an increase in extreme heat events and
associated increases in heat related morbidity and mortality.'' See
Environmental Defense Fund, EPA-HQ-OAR-2006-0173-9025 at 15-18; See
also California Air Resources Board, EPA-HQ-OAR-2006-0173-9006 at 7-
16.
---------------------------------------------------------------------------

    Commenters supporting the waiver, including California, have
submitted an extensive array of reports and data outlining the risks
and impacts of climate change on California. EPA received comment
restating EPA's own statements from its March 6, 2008 Denial, including
the following:

    California has the largest agricultural based economy (13% of
the U.S. market value of agricultural products sold) which is
heavily dependent on irrigation, has the nation's highest crop value
and is the nation's leading dairy producer. There is improved
information on how livestock productivity may be affected by thermal
stress and through nutritional changes in forage caused by elevated
CO2 concentrations. In addition, wine is California's
highest value agricultural product, and wine grapes are very
sensitive to temperature changes. California has the largest state
coast population, representing 25% of the U.S. oceanic coastal
population. The conditions which create California's tropospheric
ozone problems remain (e.g., topography, regional meteorology,
number of vehicles) and climate change is expected to exacerbate
tropospheric ozone levels. California's water resources are already
stressed due to demands from agricultural, industrial and municipal
uses, and climate change is expected to introduce an additional
stress to an already over-allocate system by increasing temperatures
and by decreasing snowpack which is an important water source in
spring and summer. California has the greatest variety of ecosystems
in the U.S., and the second most threatened and endangered species
(of plants and animals combined) and the most threatened and
endangered animal species, representing about 21% of the U.S. total.

In addition, one commenter suggests that this summary of findings about
California's special characteristics that differentiate the magnitude,
intensity and range of impacts of climate change supports that
assessment. Dr. Stephen Schneider of Stanford University stated that
``not only are California's conditions `unique and arguably more
severe' (e.g. temperature impacts from global warming are more certain
for states like California) but also that no other state faces the
combination of ozone exacerbation, wildfire emission's contributions,
water system and coast system impacts and other impacts faced by
California.'' \118\ Conversely, opponents of the waiver do not contest
California's claims that the impacts of climate change in California
and elsewhere are substantial.\119\ Instead,

opponents of the waiver claim that the impacts in California are not
unique or extraordinary. EPA received comment suggesting that the
impacts of climate change in California are not sufficiently different
from the nation as a whole to warrant a waiver.\120\ Commenters note
that the ``need'' requirement in section 209(b)(1)(B) authorizes the
creation of regulatory standards specific to California only in cases
where it is necessary to meet conditions unique to California.
Commenters claim that California cannot meet this standard with respect
to a global problem that does not affect California in a unique way as
compared to other states. The commenters claim the impacts to
coastline, ozone levels, and other impacts are not unique to California
as they affect many other states as well.\121\
---------------------------------------------------------------------------

    \118\ Environmental Defense Fund, EPA-HQ-OAR-2006-0173-9025 at
11-12.
    \119\ The Association of International Automobile Manufacturers
notes that although in the March 6, 2008 Denial, ``EPA found that
there is ample evidence that global warming is `compelling' in the
sense that it presents serious environmental issues, the agency
correctly determined that it does not present an extraordinary
condition in California.'' EPA-HQ-OAR-2006-0173-9005 at 9. EPA did
receive comment from Air Improvement Resources (AIR) suggesting that
it might be contesting whether positive feedback from CO2
concentrations on temperature increases (as seen in the models and
data submitted to EPA by proponents of the waiver) will be seen in
certain geographic areas due to an increase in cloudiness. EPA-HQ-
OAR-2006-0173-13662 at 5-6. However, in its same submission it also
states that while it may be true that California's cities will be
disproportionately affected by increased temperatures it is by no
means clear that this will be true in the future. (See p. 7). As
noted in the text, the burden of proof is on the opponents of the
waiver to demonstrate that the effects of climate change are not
compelling or serious. Such opponents have not clearly stated the
basis for making such a determination nor countered the many studies
and data submitted by California and other proponents of the waiver.
For purposes of this waiver proceeding, EPA is not making its own
judgment with regard to the issues under section 202(a).
    \120\ Association of International Automobile Manufacturers,
EPA-HQ-OAR-2006-0173-9005 at 9, citing 73 FR 12168--``As the
discussion above indicates, global climate change has affected, and
is expected to affect, the nation, indeed the world, in ways very
similar to the conditions noted in California * * * These identified
impacts are found to affect other parts of the United States and
therefore these effects are not sufficiently different compared to
the nation as a whole. California's precipitation increases are not
qualitatively different from changes in other areas. Rise in sea
level in the coastal parts of the United States are projected to be
severe, or more severe, particularly in consequences, in the
Atlantic and Gulf Regions than in the Pacific regions, which
includes California. Temperature increases have occurred in most
parts of the United States, and while California's temperatures have
increased by more than the national average, there are other places
in the United States with higher or similar increases in
temperature.''
    \121\ Id. at 9-10. The Association of International Automobile
Manufacturers notes that comments submitted from States supporting
the waiver include statements such as ``Connecticut faces loss of
its shoreline and beaches, forest die offs, destruction of shell
fisheries and marine resources, * * *'' ``Global warming is having a
serious impact on New Jersey's public health and economy * * *''
``Rhode Island * * * As the most densely populated State in the
country, direct impacts due to climate change, such as heat wave,
increased fire frequency, increased storm intensity resulting in
beach erosion, loss of property, and loss of life--pose great
concerns for us,'' and other concerns expressed by states such as
Pennsylvania, Maryland, and New Mexico. See also Alliance of
Automobile Manufacturers, EPA-HQ-OAR-2006-0173-1297 at 14-17 and
EPA-HQ-OAR-2006-0173-0421-12 at 61-70 and General Motors
Corporation, EPA-HQ-OAR-2006-0173-1596 at 6-8.
---------------------------------------------------------------------------

    EPA notes that under this alternative approach the opponents of the
waiver continue to bear the burden of proof to demonstrate their
claims. Commenters opposing the waiver primarily focus and argue on one
issue: Whether the effects of climate change in California are
sufficiently different from the nation as a whole. Opponents of the
waiver identify singular or multiple impacts in some other states but
they largely submit conclusions--not factual evidence--as to why such
adverse impacts demonstrate that California is not sufficiently
different. On the other hand, California has identified a wide variety
of impacts and potential impacts within California, which include
exacerbation of tropospheric ozone, heat waves, sea level rise and salt
water intrusion, an intensification of wildfires, disruption of water
resources by, among other things, decreased snowpack levels, harm to
high value agricultural production, harm to livestock production, and
additional stresses to sensitive and endangered species and ecosystems.
Opponents have not demonstrated that any other state, group of states,
or area within the United States would face a similar or wider-range of
vulnerabilities and risks. In addition, California has submitted
information that climate change can impact ozone levels in California
due to temperature exacerbation effects. Although other areas of the
country are also projected to experience increases in temperatures
which may also exacerbate local ozone levels, opponents of the waiver
have not demonstrated that California's ozone levels should not be
considered compelling and extraordinary conditions.
    Under this alternative interpretation, the burden of proof is on
the opponents of the waiver to demonstrate that the impacts of global
climate change in California are either not significant enough or are
not different enough from the rest of the country to be considered
compelling and extraordinary conditions. The opponents of the waiver
have focused their argument on the latter part of this interpretation,
whether the impacts in California are sufficiently different from the
rest of the country. Limiting evaluation to this issue, California has
presented evidence of a wide variety of vulnerabilities, impacts and
potential impacts within California, while the opponents have not
demonstrated that any other state, group of states, or area within the
United States would face a similar or wider-range of vulnerabilities
and risks. Therefore, EPA believes that those opposing the waiver have
not met their burden of proof to demonstrate that the conditions in
California are not sufficiently different and that a waiver should be
denied under this alternative approach.
    It is important to note that nothing in this decision or this
document should be construed as reflecting a judgment concerning the
issues pending before EPA under section 202(a) of the Act--whether
emissions of GHGs from new motor vehicles or engines cause or
contribute to air pollution which may reasonably be anticipated to
endanger public health or welfare. EPA recently proposed to make an
affirmative finding under that statutory provision.\122\ The issues
involved in that proposal are separate and different from those
involved in this decision on California's request for a waiver under
section 209(b). Nothing in this decision should be construed as
reflecting the Agency's judgment regarding any issue relevant to the
determinations in the pending proposal under section 202(a). The
statutory provisions and criteria are different, and the judgments
called for under these provisions are very different in nature. For
example, in evaluating the alternative section 209(b)(1)(B)
interpretation, I am not evaluating how serious the impacts or
potential impacts of global climate change are, either in California or
the rest of the country, as the opponents of the waiver have not
focused on that issue. My finding under this alternative interpretation
is a narrow one, and is limited to finding that the opponents of the
waiver have not met their burden of proof under this alternative
interpretation of section 209(b) concerning how the impacts in
California might differ from the rest of the country.
---------------------------------------------------------------------------

    \122\ See EPA's ``Proposed Endangerment and Cause or Contribute
Findings for Greenhouse Gases under Section 202(a) of the Clean Air
Act'' at 74 FR 18886 (April 29, 2009).
---------------------------------------------------------------------------

3. Must California's GHG Standards Achieve a Demonstrated Reduction in
GHG Atmospheric Concentrations or Impacts Under Section 209(b)(1)(B)?
    Regardless of whether EPA examines the need for California's motor
vehicle emissions program or conversely the need just for the GHG
emission standards, some commenters suggest

that the GHG emission standards must be proven to have some mitigative
effect in order for them to be needed. Some commenters suggest that to
the extent that California's high ozone levels could be exacerbated by
higher temperatures from global warming, there is no demonstration in
the waiver record that implementation of the California GHG standards
would have any perceptible impact on temperature trends in California.
Opponents of the waiver have argued that California, therefore, cannot
show that its GHG emission regulations will achieve a measurable and
specific temperature reduction in California, and thereby mitigate the
identified climate change impacts in California.\123\ They maintain
that California's GHG regulations will not be needed to meet a
particular condition since there is no analysis suggesting that
California's GHG standards will have any discernible impact on that
condition or achieve any perceptible improvement in environmental
conditions inside California. In terms of GHG concentrations in
California's atmosphere, EPA received comment stating there is no
offered proof that a reduction in GHG emissions from California
vehicles would have any impact on GHG concentrations in California's
atmosphere compared to the GHG concentration impacts already in the
record.
---------------------------------------------------------------------------

    \123\ However, the Alliance presented some evidence at the May
30, 2007 waiver hearing that some temperature reduction may be
achieved, based on application of the Wigley equation. EPA-HQ-OAR-
2006-0173-0421 at 71.
---------------------------------------------------------------------------

    In response, other commenters supporting the waiver assert that the
efficacy of California's standards is not at issue in this proceeding.
There is no requirement in section 209(b)(1)(B) that California prove a
certain level of environmental benefit. They assert that is
particularly true in this instance, where the actual and anticipated
impacts of global warming are complex and historically unprecedented,
and it is widely-recognized that a number of efforts by governments,
private entities, and individuals globally will be required to mitigate
climate change, as no single source of GHG emissions, whether from an
entire state, sector of the nation's economy, or of individual
countries, is completely dominant in terms of influencing atmospheric
concentrations of GHGs. They claim that California need not show that
the climate will in fact respond to its regulatory action; rather its
obligation is to show a rational connection between the regulation it
has promulgated and the problem it seeks to address.
    As noted above, the Agency's inquiry under section 209(b)(1)(B) is
whether California needs its own motor vehicle emission control program
to meet compelling and extraordinary conditions. Under this criterion,
EPA does not consider, for example, the extent to which specific PM
standards will address the PM air pollution problem.\124\ Under this
approach, there is no need to delve into the extent to which the GHG
standards at issue here would address climate change or ozone problems.
That is an issue appropriately left to California's judgment.
---------------------------------------------------------------------------

    \124\ 74 FR 12156, 12159-60 (March 6, 2008).
---------------------------------------------------------------------------

    Given the comments submitted, however, EPA has also considered an
alternative interpretation, which would evaluate whether the program or
standards has a rational relationship to contributing to amelioration
of the air pollution problems in California. Even under this approach,
EPA's inquiry would end there. California's policy judgment that an
incremental, directional improvement will occur and is worth pursuing
is entitled, in EPA's judgment, to great deference.\125\ EPA's
consistent view is that it should give deference to California's policy
judgments, as it has in past waiver decisions, on California's choice
of mechanism used to address air pollution problems. EPA does not
second-guess the wisdom or efficacy of California's standards.\126\ EPA
has also considered this approach with respect to the specific GHG
standards themselves, as well as California's motor vehicle emissions
program.
---------------------------------------------------------------------------

    \125\ MEMA I at 1110-11.
    \126\ California Air Resources Board, EPA-HQ-OAR-2006-0173-0004.
---------------------------------------------------------------------------

    After reviewing the arguments, I conclude that California has
submitted evidence demonstrating not only the causal connection between
higher temperatures from global warming and its general exacerbation of
tropospheric ozone, but also the serious effects of that potential
increase in ozone on the public health and welfare in California. EPA
notes that several commenters have stated that while California's GHG
regulations will provide only a small difference in temperatures and/or
GHG concentrations, there clearly will be some reductions. These
commenters note that given the numerous sources in California and
around the world that contribute to GHG concentrations, no single
regulation could on its own reduce GHG emissions to the levels
necessary to reduce all concerns, but that every small reduction is
helpful in reducing these concerns. As noted by the Supreme Court in
Massachusetts v. EPA, while it is true that regulating motor vehicle
GHG emissions will not by itself reverse global warming, a reduction in
domestic automobile emissions would slow the pace of global emissions
increase no matter what happens with regard to other emissions.\127\
Moreover, there is some evidence in the record that proffers a specific
level of reduction in temperature resulting from California's
regulations.\128\ EPA believes that under this alternative approach,
opponents have not met their burden of demonstrating that California's
motor vehicle program, or its GHG standards, does not have a rational
relationship to contributing to amelioration of the air pollution
problems in California.
---------------------------------------------------------------------------

    \127\ Massachusetts v. EPA, 59 U.S. 497, 525-526 (2007).
    \128\ EPA also received comment during the second comment period
indicating that a local decrease in GHGs can have a direct effect on
reducing local ozone concentrations, as well as particulate matter
concentrations, in California, before they mix with other greenhouse
gases in the upper atmosphere. The comments that address Dr.
Jacobson's testimony do not dispute these atmospheric reactions and
the fact that they can increase local temperature which can increase
ozone concentrations.
---------------------------------------------------------------------------

E. Section 209(b)(1)(B) Conclusion

    With respect to the need for California's state standards to meet
compelling and extraordinary conditions, I have found that the March 6,
2008 Denial was based on a departure from the traditional
interpretation of the waiver provision. An examination of the text of
section 209(b) and the legislative history, when viewed together, lead
to the conclusion that the best way to interpret this provision and the
interpretation I adopt here, is to apply the traditional interpretation
to the evaluation of California's greenhouse gas standards for motor
vehicles. As such, if California needs a separate motor vehicle program
to address the kinds of compelling and extraordinary conditions
discussed in the traditional interpretation, then Congress intended
that California could have such a program. The best interpretation of
the text and legislative history of this provision is that Congress did
not use this criterion to limit California's discretion to a certain
category of air pollution problems, to the exclusion of others.
    Under that interpretation, I cannot find that opponents of the
waiver have demonstrated that California does not need its state
standards to meet compelling and extraordinary conditions. The
opponents of the waiver have not adequately demonstrated that

California no longer has a need for its motor vehicle emission program.
    Separately, even applying the alternative interpretations set forth
in the March 6, 2008 Denial, I cannot find that that the opponents of
the waiver have demonstrated that California does not need its
greenhouse gas emission standards to meet compelling and extraordinary
conditions. Nor can I find that the opponents of the waiver have
demonstrated that the impacts from climate change in California are not
compelling and extraordinary.
    Therefore, upon reconsideration of the March 6, 2008 Denial, I
determine that I cannot deny the waiver request under section
209(b)(1)(B).

VI. Are the California GHG Standards Consistent With Section 202(a) of
the Clean Air Act?

    EPA has reviewed the information submitted to the record of this
proceeding to determine whether the parties opposing this waiver
request have met their burden to demonstrate that the GHG standards are
not consistent with section 202(a). In its submissions, CARB has
submitted information and argument that these GHG standards do provide
regulated manufacturers with sufficient lead-time for the near term
standards regardless of how it is measured and regardless of the waiver
denial. For the mid-term standards, CARB has stated that initially,
manufacturers can achieve compliance with credits from the near-term
production, and subsequently can achieve compliance with refinements to
existing technology and advanced technology combinations. The industry
opponents of the waiver have submitted information and argument that
there is insufficient leadtime for the CARB near-term standards because
the already short time-frame for technology development was made even
shorter by EPA's waiver denial. For the mid-term standards, the
industry stated that it is likely that most large-volume manufacturers
will be able to comply with the CARB standards only by ``mix-shifting''
their products to offer for sale more higher mileage vehicles to ensure
meeting the CARB fleet average. The industry also submitted information
and argument that the GHG standards will result in unsafe vehicles
because vehicles meeting the standards will be lighter and more
hazardous to occupants in accidents, and will be driven more because of
higher fuel efficiency, so more accidents will occur. The industry
argued that these complying vehicles are technologically infeasible
because of the safety concerns. EPA's analysis of the consistency of
the CARB standards with section 202(a) of the Act follows.

A. Historical Approach: The Standard of Review for Consistency With
Section 202(a)

    Under section 209(b)(1)(C), EPA must deny California's waiver
request if the Agency finds that California standards and accompanying
enforcement procedures are not consistent with section 202(a) of the
Act. The scope of EPA's review under this criterion is narrow. EPA has
previously stated that the determination is limited to whether those
opposed to the waiver have met their burden of establishing that
California's standards are technologically infeasible, or that
California's test procedures impose requirements inconsistent with the
Federal test procedure.\129\ Previous waivers of federal preemption
have stated that California's standards are not consistent with section
202(a) if there is inadequate lead time to permit the development of
technology necessary to meet those requirements, giving appropriate
consideration to the cost of compliance within that time.\130\
California's accompanying enforcement procedures would be inconsistent
with section 202(a) if the Federal and California test procedures
conflict, i.e., if manufacturers would be unable to meet both the
California and Federal test requirements with the same test
vehicle.\131\
---------------------------------------------------------------------------

    \129\ MEMA I, 627 F.2d at 1126.
    \130\ See e.g., 38 FR 30136 (November 1, 1973) and 40 FR 30311
(July 18, 1975).
    \131\ To be consistent, the California certification test
procedures need not be identical to the Federal test procedures.
California procedures would be inconsistent, however, if
manufacturers would be unable to meet both the state and Federal
requirements with the same test vehicle in the course of the same
test. See, e.g., 43 FR 32182, (July 25, 1978).
---------------------------------------------------------------------------

    EPA does not believe that there is any reason to review these
criteria any differently for EPA's evaluation of California's
greenhouse gas waiver request. There is nothing inherently different
about how GHG control technologies should be reviewed when making a
determination about technological feasibility or consistency of test
procedures.
    In the GHG waiver proceeding, automobile industry opponents of the
waiver have presented evidence for EPA's consideration which they
believe will require EPA to make the finding of inconsistency with
section 202(a), and therefore require EPA to deny this waiver. They
believe this finding should be made on one or more grounds that there
is inadequate lead time provided by the CARB standards. EPA's process
for evaluating lead time is discussed immediately below. The industry
opponents also raise arguments based on the cost of compliance with the
standards, and claims of possible significant vehicle safety problems
caused, at least indirectly, by compliance with the GHG standards,
which will be discussed in other parts of this section.
    Regarding lead time, EPA historically has relied on two decisions
from the U.S. Court of Appeals for the DC Circuit for guidance
regarding the lead time requirements of section 202(a). Section 202(a)
provides that an emission standard shall take effect after such period
as the Administrator finds necessary to permit the development and
application of the requisite technology, giving appropriate
consideration to the cost of compliance. In Natural Resources Defense
Council v. EPA (``NRDC''), 655 F.2d 318 (DC Cir. 1981), the court
reviewed claims that EPA's particulate matter standards for diesel cars
and light trucks were either too stringent or not stringent enough. In
upholding the EPA standards, the court concluded:

    Given this time frame [a 1980 decision on 1985 model year
standards]; we feel that there is substantial room for deference to
the EPA's expertise in projecting the likely course of development.
The essential question in this case is the pace of that development,
and absent a revolution in the study of industry, defense of such a
projection can never possess the inescapable logic of a mathematical
deduction. We think that the EPA will have demonstrated the
reasonableness of its basis for projection if it answers any
theoretical objections to the [projected control technology],
identifies the major steps necessary in refinement of the
technology, and offers plausible reasons for believing that each of
those steps can be completed in the time available.\132\
---------------------------------------------------------------------------

    \132\ Natural Resources Defense Council v. EPA, 655 F.2d 318,
331. (emphasis added)

    Another key case addressing the lead time requirements of section
202(a) is International Harvester v. Ruckelshaus (``International
Harvester''), 478 F 2.d 615 (DC Cir. 1979). In International Harvester,
the court reviewed EPA's decision to deny applications by several
automobile and truck manufacturers for a one-year suspension of the
1975 emission standards for light-duty vehicles. In the suspension
proceeding, the manufacturers presented data which, on its face, showed
little chance of compliance with the 1975 standards, but which, at the
same time, contained many uncertainties and inconsistencies regarding
test procedures and parameters. In a May 1972 decision, the
Administrator applied an EPA

methodology to the submitted data, and concluded that ``compliance with
the 1975 standards by application of present technology can probably be
achieved,'' and so denied the suspension applications.\133\ In
reviewing the Administrator's decision, the court found that the
applicants had the burden of coming forward with data showing that they
could not comply with the standards, and if they did, then EPA had the
burden of demonstrating that the methodology it used to predict
compliance was sufficiently reliable to permit a finding of
technological feasibility. In that case, EPA failed to meet this
burden.
---------------------------------------------------------------------------

    \133\ International Harvester v. Ruckelshaus, 478 F.2d 615, 626.
---------------------------------------------------------------------------

    With respect to lead time, the court in NRDC pointed out that the
court in International Harvester ``probed deeply into the reliability
of EPA's methodology'' because of the relatively short amount of lead
time involved (a May 1972 decision regarding 1975 model year vehicles,
which could be produced starting in early 1974), and because ``the
hardship resulting if a suspension were mistakenly denied outweigh the
risk of a suspension needlessly granted.'' \134\ The NRDC court
compared the suspension proceedings with the circumstances concerning
the diesel standards before it: ``The present case is quite different;
`the base hour' for commencement of production is relatively distant,
and until that time the probable effect of a relaxation of the standard
would be to mitigate the consequences of any strictness in the final
rule, not to create new hardships.'' \135\ The NRDC court further noted
that International Harvester did not involve EPA's predictions of
future technological advances, but an evaluation of presently available
technology.
---------------------------------------------------------------------------

    \134\ NRDC, 655 F.2d 318, 330.
    \135\ Id. The ``hardships'' referred to are hardships that would
be created for manufacturers able to comply with the more stringent
standards being relaxed late in the process.
---------------------------------------------------------------------------

    EPA also evaluates CARB's request in light of congressional intent
regarding the waiver program generally. This is consistent with the
motivation behind section 209(b) to foster California's role as a
laboratory for motor vehicle emission control, in order ``to continue
the national benefits that might flow from allowing California to
continue to act as a pioneer in this field.'' \136\
---------------------------------------------------------------------------

    \136\ 40 FR 23102, 23103 (waiver decision citing views of
Congressman Moss and Senator Murphy) (May 28, 1975).
---------------------------------------------------------------------------

    For these reasons, EPA believes that California must be given
substantial deference when adopting motor vehicle emission standards
which may require new and/or improved technology to meet challenging
levels of compliance. This deference was discussed in an early waiver
decision when EPA approved the waiver request for California's 1977
model year standards:

    Even on this issue of technological feasibility I would feel
constrained to approve a California approach to the problem which I
might also feel unable to adopt at the Federal level in my own
capacity as a regulator. The whole approach of the Clean Air Act is
to force the development of new types of emission control technology
where that is needed by compelling the industry to `catch up' to
some degree with newly promulgated standards. Such an approach to
automotive emission control might be attended with costs, in the
shape of a reduced product offering, or price or fuel economy
penalties, and by risks that a wider number of vehicle classes may
not be able to complete their development work in time. Since a
balancing of these risks and costs against the potential benefits
from reduced emissions is a central policy decision for any
regulatory agency, under the statutory scheme outlined above I
believe I am required to give very substantial deference to
California's judgment on that score.'' \137\
---------------------------------------------------------------------------

    \137\ Id. at 23103.

EPA has traditionally considered lead time as starting with the date
that the rules are adopted and become effective under California state
law--not from the subsequent date of a request for a waiver or the
decision on a waiver.\138\ This is consistent with the structure of
section 209(b), where the waiver criteria are presumed to be met absent
an affirmative finding that requires EPA to deny it, which gives EPA a
limited scope of review and affords deference to California. At the
time that California adopts its rules, manufacturers have clear
knowledge and are fully on notice of California's requirements and the
date when such requirements will be implemented. In this case, the CARB
GHG regulations became final and effective in 2004. This was five years
before the first phase of compliance (the 2009 model year) and eight
years before compliance with the ``mid-term'' standards, which include
the most stringent standards (model year 2016). Because of this large
amount of lead time available to manufacturers under CARB's regulatory
schedule, the approach described in NRDC is the most appropriate under
the circumstances at issue here.
---------------------------------------------------------------------------

    \138\ See e.g., 59 FR 40625 (September 22, 1994).
---------------------------------------------------------------------------

    EPA notes, however, that manufacturers have disputed whether ample
lead time exists. Because EPA initially denied this waiver request,
manufacturers have asserted that the lead time should have ``tolled''
at the time of the denial, since California could not implement and
enforce standards which had not received a waiver. This tolling issue
is discussed below in section VI.F.1. Additionally, if the tolling
might be considered to cause a reduction in lead time for the CARB
near-term standards, it could be argued that the International
Harvester approach, involving circumstances where the lead time is
short, should apply. CARB, while maintaining that the NRDC approach is
the correct measurement here, commented that even if International
Harvester was the correct guide, ``we believe that a combination of
manufacturers' statements and plans indicated that manufacturers are
already in, or with minor changes can demonstrate compliance for the
2009 and 2010 model years.'' \139\ Under International Harvester, the
burden was on the industry to demonstrate that the evidence supported
the grant of an extension, then, the burden shifted to EPA to
demonstrate the reasonableness of its projection. As discussed below,
the manufacturers have not met their burden to show that the California
standards are not technologically feasible, considering the lead time
provided and cost of compliance.
---------------------------------------------------------------------------

    \139\ California Air Resources Board, EPA-HQ-OAR-2006-0173-9006,
at 23.
---------------------------------------------------------------------------

    Under NRDC, when compliance with CARB standards is phased-in over a
lengthy time period, the reasonableness of a projection of
technological feasibility can be based on answering any theoretical
objections to the projected control technology; identifying the major
steps necessary in refinement of the technology; and offering plausible
reasons for believing that each of those steps can be completed in the
time available.\140\ EPA's review of the evidence on the technological
feasibility of GHG technologies follows.
---------------------------------------------------------------------------

    \140\ NRDC, 655 F.2d 318, 331.
---------------------------------------------------------------------------

B. CARB's Assessment of the State of Development of GHG Reduction
Technology and Comments Supporting CARB's Assessment

1. Development of GHG Reduction Technology
    Under the terms of Assembly Bill 1493, which is the legislation
that directed CARB to establish greenhouse gas emission standards, the
CARB staff was directed to set those standards in a manner that would
``achieve the maximum feasible and cost-effective reduction of
greenhouse gas emissions from motor vehicles.'' CARB has

identified four basic areas of GHG reduction technology: (1) Engine,
drivetrain and other vehicle modifications; (2) mobile air conditioning
system modifications; (3) alternative fuel vehicles; and (4) exhaust
catalyst improvements.
    To accomplish the assessment mandated by AB 1493, CARB staff held
several meetings and workshops in 2003 and 2004 on GHG vehicle
technology. Those meetings brought together technology developers,
researchers from the auto industry, vehicle component suppliers,
academic participants, and vehicle simulation firms to discuss
technologies and their potential to reduce climate change emissions
from motor vehicles. CARB staff presented its preliminary findings in a
draft technology and cost assessment and held a public workshop to
receive comments in April 2004. Following that presentation, CARB
issued a draft proposal on the methodology for developing the GHG
standards and the preliminary standards themselves, in June 2004. A
public workshop on this draft was held in July 2004. After considering
all the comments from these sessions, CARB published its final staff
proposal in the Staff Report: Initial Statement of Reasons (ISOR) in
August 2004.\141\
---------------------------------------------------------------------------

    \141\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.44.
---------------------------------------------------------------------------

    The CARB vehicle technology results in the ISOR relied on an
existing vehicle simulation study (discussed below), as well as other
existing studies and research, rather than on any sort of primary
development or engineering work. CARB staff acknowledged that ``because
powertrain changes will be the focus for obtaining the reductions
sought in this (GHG) rulemaking rather than aftertreatment
technologies, staff could not reasonably build prototypes and test them
in our laboratory. * * * Because building and testing prototypes is so
expensive, and time consuming, even major automobile manufacturers rely
on vehicle simulation firms to predict the performance of new
technology either individually or in combination, and to assess their
performance and emissions.'' \142\ CARB further commented that the
advantage of systems modeling ``is to allow a wide diversity of
combinations of technologies to be modeled together and examine how
they interact when simulating a vehicle operating on various driving
cycles.'' \143\
---------------------------------------------------------------------------

    \142\ Id. at 43.
    \143\ Id. at 58.
---------------------------------------------------------------------------

    The study forming the basis of the ISOR vehicle technology results
was a comprehensive vehicle simulation modeling effort and a thorough
cost analysis performed for the Northeast States Center for a Clean Air
Future (NESCCAF), by the recognized expert companies AVL Powertrain
Engineering, Martec, and Meszler Engineering Services.\144\ CARB staff
believed that ``the NESCAAF study is the most advanced and accurate
evaluation of vehicle technologies that reduce greenhouse gas emissions
yet performed.'' \145\ Besides the NESCAAF study on vehicle
technologies, CARB monitored a separate analysis of the GHG benefits of
alternative fuel technologies, including upstream benefits and the cost
associated with alternative fuel technologies, from work performed by
TIAX, LLC. Finally, for air conditioning research, CARB staff met with
various groups (including EPA) to develop its approach for reducing the
emissions of air conditioning refrigerant and excess CO2
emissions from air conditioning use.
---------------------------------------------------------------------------

    \144\ NESCCAF undertook this study ``to help define GHG--
reducing motor vehicle technologies that are expected to be
feasible, commercially available and cost effective in the 2009-2015
timeframe.'' It was ``inspired by the California's legislature's
passage of Assembly Bill 1493 * * *'' and it related to the
Northeast U.S. because ``the results presented in this report have
significant implications for states in the Northeast and elsewhere
that share California's commitment to reducing transportation
related GHG emissions as part of a broader effort to address the
risks posed by global climate change.'' Reducing Greenhouse Gas
Emissions from Light-Duty Motor Vehicles, NESCCAF, p 1-1, September
2004.
    \145\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.44 at 44.
---------------------------------------------------------------------------

    After the release of the Initial Staff Report, CARB received
comments on its evaluation of technological steps that could be taken
to meet its GHG standards from parties who supported the CARB study,
and from various industry parties who disagreed with many of the CARB
conclusions. As part of its standard-setting process, CARB staff
considered the comments from all parties on both sides, and responded
to industry concerns in its Final Statement of Reasons (FSOR),
published in August 2005.\146\ CARB concluded that it had identified
the necessary technology in existence at that time that could enable
vehicles to meet the GHG standards; or specifically identified the
projected control technologies; answered the industry objections
regarding the technology; and has explained its reasons for believing
that each of the steps can be completed in the time available.
---------------------------------------------------------------------------

    \146\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.116.
---------------------------------------------------------------------------

2. Overview of Technologies and Their Projected Applications
    The NESCAAF study identified technologies for reducing
CO2 emissions that were modeled both individually and in
various technology combinations (or ``packages''). Because there were a
multitude of technologies available for the CO2 reductions,
CARB realized that there needed to be engineering guidelines for
choosing combinations that would be economical to the consumer. The
guidelines tried to avoid combining technologies that tend to address
the same categories of losses or technologies that may not complement
one another from a drivability standpoint. Participants in the NESCAAF
study and CARB staff then assembled a wide variety of combined
technologies to evaluate through simulation modeling in order to
identify those which would provide the greatest CO2
reductions. In an effort to cover the full spectrum of CO2
reductions that could be accomplished, CARB staff divided the results
into two categories: near-term phase-in and mid-term phase-in
applications. These translate to the following model year ranges: Near-
term (2009-2012) and mid-term to fully phased-in (2013-2016).\147\
---------------------------------------------------------------------------

    \147\ The NESCAAF study had a different schedule: Near-term
technologies (2009-2012), mid-term (2013-2015) and long term (2015
and later). California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 27.
---------------------------------------------------------------------------

    In the Initial Staff Report, CARB staff summarized the state of
near-term technology for meeting its proposed CO2 standards:

    The technologies explored (in the Initial Staff Report) are
currently available on vehicles in various forms, or have been
demonstrated by auto companies and/or vehicle suppliers in at least
prototype form * * * There is near term, or off the shelf technology
package in each of the vehicles classes evaluated (small and large
car, minivan, small and large truck) that resulted in a reduction of
CO2 emissions of at least 15 to 20 percent from baseline
values. In addition there is generally a near-term technology
package in each of the vehicle classes that results in about a 25
percent CO2 emission reduction.'' \148\
---------------------------------------------------------------------------

    \148\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.44 at iii.

    For engines, CO2 is emitted with engine exhaust as a
result of the combustion process. CARB projected that by 2009,
reductions in engine CO2 emissions would result from these
primary technology drive-train changes which could be expected in all
vehicle classes: Dual cam phasing, turbocharging with engine
downsizing, automated manual transmissions, and

camless valve actuation.\149\ CARB also described several other
technology items that may not be present in most vehicles in the early
years of the standards, but are expected to be used in later years as
development continues. These include: Gasoline direct injection, engine
friction reduction, aerodynamic drag and rolling resistance, more
aggressive shift logic, and early torque converter lock-up. Finally,
CARB staff identified two other technology choices that while offering
real GHG reduction capability were not as cost effective as the other
technologies, and, accordingly, were not projected to be applied in the
near-term--these are hybridization and greater dieselization of the
fleet.
---------------------------------------------------------------------------

    \149\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.44 at 59-60.
---------------------------------------------------------------------------

    For the later years of these standards, CARB stressed that its GHG
regulations ``rely less on traditional technology-forcing than
repackaging a combination of off-the-shelf technologies to meet the
adopted standards.'' \150\ The NESCAAF Report included, for each of the
five vehicle categories, a table showing several promising technology
packages, for each of the three time frames (near-, mid-, and long-
term), their resulting CO2 reductions, and expected
costs.\151\ Additionally, for the long-term phase of the standards
(2015-2016), CARB projects that there will be increased market
penetration of hybrid-electric vehicles and advanced multi-mode diesel
vehicles.\152\ In its December 2005 request letter, CARB discussed how
improvements will occur, as it expects ``that a manufacturer would plan
for a rollout of new technologies that would begin in 2009 and then
build on the initial efforts with additional near and mid-term
technologies that would be commensurate with previous
investments.''\153\
---------------------------------------------------------------------------

    \150\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 34.
    \151\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 27 and 35, and OAR-2006-0173-0010.44 at 59.
    \152\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 27.
    \153\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0004.1 at 35-36.
---------------------------------------------------------------------------

    For air conditioning systems, GHG emissions are either direct or
indirect. Direct emissions are the result of normal leakage of the air
conditioning refrigerant from the system over time, as well as leakages
that occur because of vehicle accidents, poorly performed maintenance,
or improper refrigerant recovery prior to vehicle scrappage. Air
conditioning refrigerants used in vehicles today are typically a hydro-
fluorocarbon (HFC), which is a very strong GHG. Indirect emissions are
the additional CO2 emissions from the engine which occur
because of the added load on the engine from operation of the air
conditioning system. CARB, using the modeling in the NESCAAF Report,
projected that CO2 equivalent reductions could result from
these improvements in the air conditioning system: improved variable
displacement compressor with revised controls, improved low-leak
systems, and the use of an improved refrigerant.\154\
---------------------------------------------------------------------------

    \154\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.44 at 69-73, and EPA-HQ-OAR-2006-0173-0004.1 at 22-23.
---------------------------------------------------------------------------

    CARB notes that alternative fueled vehicles generally can help
reduce GHG emissions by: (1) Direct reduction of GHG emissions because
the alternative fuels will produce fewer GHG emissions, and (2)
indirect reductions in GHG emissions because of the decreased upstream
emissions. Upstream emissions are well-to-tank emissions, including the
fuels' extraction, processing, distribution and marketing. The
alternative fuels which result in GHG reductions are CNG, LPG, ethanol
(including E85), electric, and hybrid-electric.
    In its ISOR, CARB identified exhaust catalyst improvement as
another technology area that could lead to GHG emission reductions,
specifically the reduction of methane and nitrous oxide
(N2O). These gases are greenhouse gases just like
CO2, but their mass emissions from motor vehicles are very
small compared to CO2. CARB notes that ``although it is
conceivable that these methane and N2O emissions could be
reduced by faster catalyst heating at vehicle start-up and enhanced
catalysts systems with higher surface density or higher and/or revised
catalyst loadings, staff is not aware of such efforts at this time
(August 2004).'' \155\ There were no further submissions to the record
by CARB or any other party on this particular technology area.
---------------------------------------------------------------------------

    \155\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.44 at 78-79.
---------------------------------------------------------------------------

3. CARB's Updates on Technological Development
    At the time of the first set of EPA hearings on the CARB waiver
request, in April 2007, CARB presented additional information to
bolster its assertions on technological feasibility to highlight
developments in GHG technology since CARB originally submitted its
request to EPA in 2005. CARB summarized the recent developments and
additional examples of real-life implementation of the technologies
identified in its waiver request. In its comments following the April
2007 hearings, and its July 2007 letter responding to post-hearing
comments, CARB offered additional information to bolster their GHG
technology projections. Generally, CARB pointed to numerous instances
in which many of the near-term and mid-term technologies have been
applied in vehicles which have been produced in the years since 2004
(when the CARB standards became final) right up to mid-2007. For
example, attached to additional comment letters it submitted to EPA's
Docket in June and July 2007, CARB discussed the increased use of the
GHG technologies discussed in the ISOR and provided summaries of GHG
technology used in 2007 and 2008 model year vehicles showing increased
use of all the near-term and mid-term technologies.\156\ CARB also
offered numerous examples, contained in manufacturer news releases and
advertisements, and trade press stories, illustrating real-life
adoption of the GHG technologies in both domestic and foreign
manufacturers' vehicles.\157\
---------------------------------------------------------------------------

    \156\ California Air Resources Board, EPA-HQ-OAR-2006-0173-1686,
Attachments 84 and 85.
    \157\ California Air Resources Board, EPA-HQ-OAR-2006-0173-1686,
Attachments 86 through 93 and 103, 104, 114, and California Air
Resources Board, EPA-HQ-OAR-2006-0173-3601, Attachments 173-177.
---------------------------------------------------------------------------

    At its March 5, 2009 hearing following EPA's decision to reconsider
its previous denial, CARB presented additional new information
highlighting developments in GHG technology since the last opportunity
to submit public comment on this issue. In addition, some environmental
groups submitted testimony and comments in support of the CARB finding
of technological feasibility of the GHG standards. This next section
will summarize the technological feasibility information submitted by
CARB and other parties. CARB noted that the manufacturers were
employing the individual GHG-reducing technologies as well as the
packages of those technologies CARB had projected as viable compliance
pathways as early as 2004. CARB also noted that in addition to phasing-
in technologies, as CARB had originally predicted, manufacturers were
using other technologies that CARB did not rely on originally--
including increased hybrid sales, downsized turbocharged engines in
light truck lines, a large influx of diesel vehicle sales, and improved
air conditioning systems. In some cases, the resulting reductions
produced as much as 10% of the GHG reductions needed for manufacturers'
fleet averages to meet the CARB standards.
    CARB also cited to recent EPA studies on technological feasibility
and costs for

GHG reductions in motor vehicles, conducted by EPA in 2007. These EPA
reports were discussed in EPA's Advanced Notice of Proposed Rulemaking
on Regulating Greenhouse Gas Emissions Under the Clean Air Act
published on July 30, 2008.\158\ The findings in these studies were
very consistent with the technological feasibility, cost and lead time
estimates from the CARB ISOR in 2004.
---------------------------------------------------------------------------

    \158\ Advanced Notice of Proposed Rulemaking, Regulating
Greenhouse Gas Emissions Under the Clean Air Act, 73 FR 44354 (July
30, 2008).
---------------------------------------------------------------------------

    Three EPA studies were referenced by CARB. First, CARB discussed
the June 2008 document ``Vehicle Technical Support Document: Evaluating
Potential GHG Reduction Programs for Light-Duty Vehicles (Light-Duty
Vehicle TSD).'' \159\ The Light-Duty Vehicle TSD represented EPA's
assessment during 2007 of how a light-duty vehicle program for GHG
emission reductions under the Clean Air Act might be designed and
implemented, with two program options: either (1) a fixed percentage
reduction (4%) in CO2 emissions per model year from 2011 to
2018, or (2) an annual reduction in CO2 emissions per model
year from 2011 to 2018, based on a model developed by the Department of
Transportation's Volpe Center, establishing CO2 emission
standards, at the point the model projects maximum net benefits for
those model years.\160\ The Light-Duty Vehicle TSD collected
information from a wide range of sources, including a 2002 National
Academy of Sciences report, the 2004 NESCAAF report (also used by
CARB), current technical literature, and information from vehicle
manufacturers and automotive suppliers. CARB noted that the emission
reduction potentials and costs in the EPA study were similar to the
reduction potentials and costs estimated by CARB in its ISOR. In
discussing the Light-duty TSD in the ANPRM, EPA also acknowledged that,
based on enhancements to the Volpe Model later in 2007, the earlier EPA
analysis ``tended to underestimate the benefits and/or overestimate the
costs of light-duty vehicle CO2 standards that could be
established under the CAA.'' \161\
---------------------------------------------------------------------------

    \159\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.5.
    \160\ This approach uses a computer model developed by the
Department of Transportation Volpe Center called the ``CAFE Effects
and Compliance Model'' (``Volpe Model'').
    \161\ This EPA assessment of the Light-Duty Vehicle TSD was
contained in the Advanced Notice of Proposed Rulemaking, Regulating
Greenhouse Gas Emissions Under the Clean Air Act, 73 FR 44354, at
44444 (July 30, 2008).
---------------------------------------------------------------------------

    CARB also referenced the March 2008 ``EPA Staff Technical Report:
Cost and Effectiveness Estimates of Technologies Used to Reduce Light-
duty Vehicle Carbon Dioxide Emissions.'' This report presented the EPA
staff assessment of costs and effectiveness of over 40 CO2
reduction technologies in the categories of engines, transmissions,
hybrids, accessories and other technologies (e.g., aerodynamic
improvements). EPA noted that the majority of the technologies
investigated are in production and available on current vehicles,
either in the U.S., Europe or Japan. As part of that report, EPA worked
with an internationally recognized automotive technology firm to
perform a detailed vehicle simulation modeling study of the GHG
reduction effectiveness of a number of advanced automotive
technologies. As noted by CARB, the EPA Report obtained technology
package reductions and cost estimates very similar to those in the CARB
ISOR.\162\ As in the earlier Light-Duty TSD, EPA noted that the
estimates in this report are conservative because they rely on data
sources from one to six years old and declared that the ``automotive
industry is a technology-driven industry, and new technologies are
developed and introduced quickly. A number of technologies which have
only recently been introduced or will be within the next year are
likely to see improvements in their effectiveness and cost reductions
beyond what we estimate (in this report).'' \163\
---------------------------------------------------------------------------

    \162\ California Air Resources Board, EPA-HQ-OAR-2006-0173-9006,
at 21.
    \163\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.6. at 1.
---------------------------------------------------------------------------

    Finally, CARB referenced an EPA staff technical memorandum
``Documentation of Updated Light-duty Vehicle GHG Scenarios,'' dated
June 23, 2008.\164\ This memorandum summarized the staff work to update
the ``4% per year'' GHG reduction scenario that was first documented in
the Light-duty Vehicle TSD, by addressing some of the deficiencies of
the earlier study,\165\ and was discussed in the ANPRM for GHG
Standards. EPA once again noted that because the updated analysis did
not address all the issues identified in the earlier TSD, it continued
to believe that the results of this updated analysis are conservative,
tending to overestimate the costs and/or underestimate the benefits. In
its most recent comment, CARB noted that the EPA lead time estimates in
EPA's ANPRM cite implementation rates supportive of CARB's estimates
for implementing vehicle GHG reducing technologies.\166\
---------------------------------------------------------------------------

    \164\ California Air Resources Board, EPA-HQ-OAR-2007-0173-
9019.7.
    \165\ For example, this updated analysis included factors such
as consideration of multi-year planning cycles available to
manufacturers, consideration of CO2 trading between car
and truck fleets within the same manufacturer, and inclusion of
plug-in hybrids as a viable technology beginning in 2012. Advanced
Notice of Proposed Rulemaking, Regulating Greenhouse Gas Emissions
Under the Clean Air Act, 73 FR 44354, at 44444 (July 30, 2008).
    \166\ California Air Resources Board, EPA-HQ-OAR-2006-0173-9006,
at 21.
---------------------------------------------------------------------------

    CARB summarizes the reports from EPA, NESCAAF and others by
declaring that ``the technologies examined are well known and most are
already being implemented on today's vehicles, while the others are
simply advanced versions of conventional technologies that are already
being demonstrated by vehicle manufacturers and component suppliers.''
\167\ To bolster this statement, CARB submitted a list of Model Year
2009 vehicles which employ GHG reduction technologies, which shows a
gradual phasing-in of these technologies across all manufacturers and
all product lines. CARB also submitted a list showing 2009 Model Year
vehicles that comply with the CARB GHG standards; the list shows
significant numbers of 2009 passenger cars and light trucks meeting the
2012 and later standards, significantly ahead of the deadlines.
---------------------------------------------------------------------------

    \167\ Id.
---------------------------------------------------------------------------

    With respect to the overall technological feasibility of its GHG
standards, CARB believes that it has reasonably projected technological
feasibility, consistent with the approach employed in the NRDC
decision, when manufacturers have several years of lead time before
compliance. CARB notes that it ``either has demonstrated that the
necessary technologies presently exist to meet the established
standards or we have specifically identified the projected control
technologies, answered objections raised by industry regarding those
technologies, and explained why we believe that each of the steps can
be completed in the time available.'' \168\
---------------------------------------------------------------------------

    \168\ Id. at 23.
---------------------------------------------------------------------------

    In support of its conclusion, CARB submitted for the record three
analyses showing that the manufacturers are employing the GHG
technologies at least as fast as CARB predicted, and certainly in time
for compliance with the early model years. First, CARB did an
``industry-wide'' projection using manufacturers' 2009 sales
projections and worst case CO2 values per single test
vehicle, and used the 2009 projected sales as unchanged for 2010 and
2011 model years.\169\ The results of this analysis show industry-wide
GHG

credits for 2009 and 2010 and a debit for 2011, but an overall credit
for the three-year period. CARB noted that because this was done on a
worst-case testing basis, it is likely that testing with additional
vehicles in each test group would show even the debiting companies in
compliance.\170\
---------------------------------------------------------------------------

    \169\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.12.
    \170\ California Air Resources Board, EPA-HQ-OAR-2006-0173-9006
at 24.
---------------------------------------------------------------------------

    Second, CARB looked at the compliance projection for the major
domestic manufacturers (Ford, GM and Chrysler) for the 2009 and 2010
model years.\171\ CARB used the actual 2009 model year registration
data (from Polk) and, then, applied CO2 emissions data by
vehicle model obtained from EPA, selecting the highest CO2
emissions data for those vehicle models with multiple engines. The
results showed that for the 2009 model year, GM and Ford have ample
compliance margins for both PC/LDT1 and LDT2/MDV, while Chrysler has a
debit for its PC/LDT1 fleet, but a wide margin for its LDT2/MDV fleet.
The overall net result is compliance for all three companies. For 2010,
the three companies run debits for PC/LDT1 but have compliance margins
for LDT2/MDV (a small margin for GM, and substantial margins for Ford
and Chrysler). Again, based on the use of accumulated credits, these
companies would comply with the model years analyzed.
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    \171\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.13. CARB limited this particular analysis to the domestic
manufacturers because, in its assessment, ``the international auto
companies are better positioned to comply and will unquestionably
meet early model year standards.'' As summarized in the first
(industry-wide) CARB analysis, although at least one international
manufacturer (BMW) projected a slight debit for 2009, all the
manufacturers were projected for overall compliance for the period
2009-2011.
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    Third, CARB focused on just GM for the 2009 model year, using a
different technique than their study directly above.\172\ CARB used
certification data provided by GM, projected sales based on GM's latest
manufacturer update to CARB, and CO2 results provided by
EPA. Then each GM certification test group was divided by GM into sales
sub-groups, each having one or several vehicle models. For each sub-
group, the CO2 emissions of the highest emitting model were
multiplied with the total number of vehicles in the subgroup to
calculate the sub-group's GHG value. The GHG values from all sales
subgroups in a test group were summed up to represent the sales group
GHG value. For the 2009 model year, under this analysis, the GM PC/LDT1
fleet over-complies by 14 grams per mile and the LDT2/MDV fleet over-
complied by 27 grams per mile, generating substantial credits for 2010
and beyond.
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    \172\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.14.
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    Additional support for 2009-2011 compliance was provided by the
Natural Resources Defense Council. At EPA's March 5, 2009 waiver
hearing, NRDC presented testimony regarding the technological
feasibility of the GHG standards for the early years of compliance.
NRDC performed its analysis by using EPA fuel economy trends data for
MY 2008, which predicted a national average fuel economy level without
CAFE credits for flexible fuel vehicles. NRDC then converted the miles
per gallon numbers to CO2 grams per mile levels using the
California sales mix and the GHG conversion established by CARB. The
result is that industry accrues substantial amount of credits in 2009
and 2010, and then runs a small deficit in 2011 that can be easily made
up using banked credits from the first two years.\173\
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    \173\ Natural Resources Defense Council, EPA-HQ-OAR-2006-0173-
7176.13, at 5-6. The NRDC testimony also noted that developments in
the period between the first waiver hearing (May 2007) and the new
hearing strengthen the California case that the GHG standards are
cost-effective and technically feasible--namely, higher gas prices,
the market shift to cleaner cars and the passage of new Federal fuel
economy standards.
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    Beyond submitting results from its own recent analyses, CARB
submitted a very recent (March 2009) study by Energy & Environmental
Analysis (EEA) entitled ``Automakers Ability to Comply with California
GHG Standards Through 2012.'' \174\ The EEA study notes that, if the
California waiver is granted, manufacturers would be required to comply
with standards for MY 2009 vehicles, which are already in production
and being sold, and would have very little lead time to make changes
for MY 2010 (which will start production in mid-calendar year 2009),
and limited opportunity to make changes at this point for MY 2011 and
2012. EEA looked at the product plans for the ``Big Six'' manufacturers
in the U.S. (GM, Ford, Chrysler, Toyota, Honda and Nissan) based on
commercially available data, and from public information reported in
the trade press, as well as the information submitted by the
manufacturers to the Federal government in connection to the auto
restructuring plans.\175\ Generally, because of projected large sales
of hybrids and to a lesser extent, sales of diesel vehicles, EEA
projected that Toyota and Honda will meet California GHG standards
through 2012, and that Nissan may have a shortfall in LDV/LDT1 for
2012, but will easily comply with LDT2/MDV in 2012, and will be able to
meet the 2012 standards by trading between categories and using banked
credits from prior years.
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    \174\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.15.
    \175\ EEA completed a detailed study of product plans for the
Big Six manufacturers for the U.S. Department of Energy in late
2008, and they used that study as a baseline for this report on
California GHG compliance.
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    For the domestic manufacturers, EEA noted concerns about compliance
with the California GHG standards, in part because these companies have
Federal CAFE values which are significantly below the three Japanese
companies, meaning that it will be harder for them to reach the target.
Nevertheless, the EEA report noted that the product plans of these
companies show the following industry-wide technology improvements
coming on line in the next 4 to 5 years:

--Luxury vehicles adopting GDI across most product lines;
--4 valve OHC/DOHC engines with VVT replacing the few remaining 2-valve
OHC 4 and 6 cylinder engines;
--6-speed transmissions replacing 4 or 5 speed units in most mass
market vehicles
--Electric power steering replacing hydraulic units in compact and mid
size cars;
--Cylinder cut-out applications to V-8 and some V-6 units;
--Variable valve lift used more widely by Japanese manufacturers;
--Introduction of several new diesel models and hybrid models by all
manufacturers;
--Introduction of new small ``crossover'' SUV and car models that are
one size class below the existing smallest models offered by the
domestic manufacturers to compete with the Toyota Scion XD and XB
models and the Honda Fit model.

    To perform the GHG estimate, the EEA study used the actual fuel
economy data by vehicle model for MY 2009, and used the product-plan
based technology forecasts to derive fuel economy by model for MY 2010
through 2012. For sales numbers, EEA used 2008 sales data and sales for
the first two months of 2009 both nationally and for California as
sales indicators for the near term (MY 2009 and 2010). For 2011 and
2012, EEA used the sales forecast it had developed in the 2008 DOE
study, which was a 15 million annual sales level of light duty vehicles
nationally. The power train mix numbers (engine/transmission
combinations) for all years were the 2008 numbers because this was the
latest data available from the CAFE data base.
    Using this approach, EEA found that all three domestic
manufacturers are in

compliance with current and expected CAFE through 2012, with Chrysler
lagging somewhat behind Ford and GM. EEA then translated these
forecasts to GHG forecasts for the California vehicle class
definitions, assuming no A/C improvement credits or alternative fuel
credits, and no trading of credits between manufacturers, and predicted
as follows:

--All manufacturers will comply with GHG requirements for 2009;
--GM and Chrysler will comply with GHG regulation in 2010 while Ford is
on the edge of compliance. Ford can likely comply by either using
banked credits from 2009 or with small adjustments to the power train
and sales mix sold in California if necessary;
--Chrysler and GM may be able to meet 2011 GHG standards using banked
credits from 2009 and 2010 and credit trading between classes. All
three manufacturers could require additional efforts such as air
conditioner improvements to comply with 2011 GHG requirements.
--Compliance with 2012 GHG requirements will be a challenge and may
require credit trading and banked past and future credits over and
above credits from air conditioner improvements and introduction of
alternative fuel vehicles.
--The results appear to be very realistic based on the auto-
manufacturers public statements of future fuel economy.\176\
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    \176\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9019.15.

    Regarding the long-term (MY 2012 and later) outlook, CARB compared
the restructuring plans submitted by the automakers to the arguments
manufacturers made in this proceeding, regarding later model year
feasibility. CARB stated that ``by 2015, even those manufacturers
facing the most difficult challenge complying with California's
standards have made statements that on their face show they plan to
comply with the later model years standards, even before receiving
additional credit for GHG reductions from air conditioning improvements
and regardless of 2009 and 2010 credits carrying forward.'' \177\ For
example, CARB cited from the GM restructuring plan that the company
stated that it will work to develop any changes needed to * * * meet
such additional requirements as California's.\178\ Further, at EPA's
March 5, 2009 hearing, NRDC pointed out that the plans of both GM and
Ford show MY 2012 fuel economy levels for cars and light trucks fleet
average that come very close to allowing the automakers to comply with
the GHG standards with little or no additional effort.\179\
Additionally, CARB noted that Chrysler stated that, should this GHG
waiver be granted, the company would try its best to comply using
available technology; however, as a last resort it might restrict sales
of certain vehicle models in California and other states adopting the
California standards, out of necessity.\180\ Finally, regarding Ford,
NRDC stated in its testimony that Ford plans to improve the average
fuel economy by 26 percent by 2012 and by 36 percent by 2015.\181\
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    \177\ California Air Resources Board, EPA-HQ-OAR-2006-0173-9006,
at 27.
    \178\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9021.1, at 21.
    \179\ Natural Resources Defense Council, EPA-HQ-OAR-2006-0173-
7176.13, at 4.
    \180\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
9020.2, at U116, and California Air Resources Board, EPA-HQ-OAR-
2006-0173-9020.3, at 118-120.
    \181\ Natural Resources Defense Council, EPA-HQ-OAR-2006-0173-
7176.13, at 4, citing from Ford Motor Company Business Plan,
Submitted to the House Financial Services Committee, December 2,
2008.
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4. Manufacturers' Comments on the Technological Feasibility of the GHG
Standards
    Manufacturers raised arguments regarding the feasibility of the
CARB GHG standards both in the underlying rulemaking in California, and
in the EPA waiver proceeding. In the CARB rulemaking, the manufacturers
generally criticized some aspects of the CARB modeling work that
substantiated CARB's conclusions on technological feasibility. For
example, a manufacturer argued that CARB overestimated the emission
reductions from the powertrain changes in many of the technology
packages used in the modeling studies, such as the NESCAAF study.
Because the studies assumed changes in the use of advanced
transmissions and engines in such a magnitude to be unrealistic for the
U.S. fleet, the manufacturer stated that the changes would require
retooling of all U.S. driveline plants, perhaps more than once.\182\
Manufacturers also argued that the modeling of technology packages
risked ``double-counting'' emission benefits produced by the individual
technologies, thus producing an unrealistic estimate of emission
reductions.\183\ CARB responded to these comments by stating that
manufacturers were already planning to incorporate advanced
transmissions and engine technologies in their vehicles, and that the
gradual phase-in of the CARB standards allowed manufacturers to
accomplish this during regular scheduled vehicle upgrades. CARB also
noted that its modeling done by AVL specifically avoided double-
counting (while some manufacturers' modeling did not).
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    \182\ California Air Resources Board, EPA-HQ- OAR-2006-0173-
0010.116, Comment 154 (at 107) and Comments 158-159(-115).
    \183\ California Air Resources Board, EPA-HQ-OAR-2006-0173-
0010.116, Comment 162 at 117.
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    Regarding the EPA waiver proceeding, while the manufacturers did
take issue with some of the CARB modeling work during the CARB
rulemaking, the manufacturers did not challenge CARB's general
conclusions that the necessary technology presently exists to meet the
near-term standards, that projected control technologies for future
years have been identified, and that objections raised by industry have
been answered. Rather, the industry offered an assessment that much of
this technology is already at hand. At the first EPA hearing in March
2007, although no individual manufacturer presented testimony, the
Alliance of Automobile Manufacturers discussed the progress of the
industry in producing more fuel-efficient vehicles. The Alliance stated
that ``every model available today is equipped with some kind of fuel
efficient technology, including direct fuel injection, variable valve
timing, continuously variable transmissions, cylinder deactivations,
and more.'' \184\ These technologies in the 2007 and 2008 MY vehicles
are among those that CARB projected as being in use for the near-term
GHG standards (see above discussion on ``Overview of Technologies and
Their Projected Applications,'' section VI.B.2).
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