\64\ http://www.reginfo.gov/public/do/eoHistReviewSearch (last
visited March 8, 2009). To find the report on the clearance of the
draft final rule, select ``Department of Transportation'' under
``Economically Significant Reviews Completed'' and select ``2008''
under ``Select Calendar Year.''
---------------------------------------------------------------------------

14. Department of Treasury Extends Loans to General Motors and Chrysler
(December 2008)
    The Department of the Treasury established the Automotive Industry
Financing Program ``to prevent a significant disruption of the American
automotive industry that poses a systemic risk to financial market
stability and will have a negative effect on the real economy of the
United States.'' \65\ Under that program, initial loans were made to
General Motors and Chrysler.
---------------------------------------------------------------------------

    \65\ http://www.treasury.gov/initiatives/eesa/program-
descriptions/aifp.shtml (last visited March 8, 2009).
---------------------------------------------------------------------------

15. Department of Transportation Decides Not To Issue MY 2011-2015
Final Rule (January 2009)
    On January 7, 2009, the Department of Transportation announced that
the Bush Administration would not issue the final rule.
16. The President Requests NHTSA To Issue Final Rule for MY 2011 Only
(January 2009)
    As explained above, in his memorandum of January 26, 2009, the
President requested the agency to issue a final rule adopting CAFE
standards for MY 2011 only. Further, the President requested NHTSA to
establish standards for MY 2012 and later after considering the
appropriate legal factors, the comments filed in response to the May
2008 proposal, the relevant technological and scientific
considerations, and, to the extent feasible, a forthcoming report by
the National Academy of Sciences assessing automotive technologies that
can practicably be used to improve fuel economy.
17. General Motors and Chrysler Submit Restructuring Reports to
Department of the Treasury (February 2009)
    The reports were required under the terms of the loans made
available to these companies in December to assist the domestic auto
industry in becoming financially viable.

D. Energy Policy and Conservation Act, as Amended

    EPCA, which was enacted in 1975, mandates a motor vehicle fuel
economy regulatory program to meet the various facets of the need to
conserve energy, including ones having environmental and foreign policy
implications. EPCA allocates the responsibility for implementing the
program between NHTSA and EPA as follows: NHTSA sets CAFE standards for
passenger cars and light trucks; EPA establishes the procedures for
testing, test vehicles, collects and analyzes manufacturers' data, and
calculates the average fuel economy of each manufacturer's passenger
cars and light trucks; and NHTSA enforces the standards based on EPA's
calculations.
    We have summarized below EPCA, as amended by EISA.
1. Vehicles Subject to Standards for Automobiles
    With two exceptions specified in EPCA, all four-wheeled motor
vehicles with a gross vehicle weight rating of 10,000 pounds or less
will be subject to the CAFE standards, beginning with MY 2011. The
exceptions will be work trucks \66\ and multi-stage vehicles. Work
trucks are defined as vehicles that are:
---------------------------------------------------------------------------

    \66\ While EISA excluded work trucks from ``automobiles,'' it
did not exclude them from regulation under EPCA. As amended by EISA,
EPCA requires that work trucks be subjected to average fuel economy
standards (49 U.S.C. 32902(b)(1)(C)), but only after first the
National Academy of Sciences completes a study and then NHTSA
completes a follow-on study. Congress thus recognized and made
allowances for the practical difficulties that led NHTSA to decline
to include work trucks in its final rule for MY 2008-11 light
trucks.

--Rated at between 8,500 and 10,000 pounds gross vehicle weight; and
--Are not a medium-duty passenger vehicle (as defined in section
86.1803-01 of title 40, Code of Federal Regulations, as in effect on
the date of the enactment of the Ten-in-Ten Fuel Economy Act).\67\
---------------------------------------------------------------------------

    \67\ 49 U.S.C. 32902(a)(19).

Medium-duty passenger vehicles (MDPV) include 8,500 to 10,000 lb. GVWR
sport utility vehicles (SUVs), short bed pick-up trucks, and passenger
vans, but exclude pickup trucks with longer beds and cargo vans rated
at between 8,500 and 10,000 lb. GVWR. It is those excluded pickup
trucks and cargo vans that are work trucks. ``Multi-stage vehicle''
includes any vehicle manufactured in different stages by 2 or more
manufacturers, if no intermediate or final-stage manufacturer of that
vehicle manufactures more than 10,000 multi-stage vehicles per
year.\68\
---------------------------------------------------------------------------

    \68\ 49 U.S.C. 32902(a)(3).
---------------------------------------------------------------------------

    Under EPCA, as it existed before EISA, the agency had discretion
whether to regulate vehicles with a GVWR between 6,000 lb and 10,000
GVWR. It could regulate the fuel economy of vehicles with a GVWR within
that range under CAFE if it determined that (1) standards were feasible
for these vehicles, and (2) either (a) that these vehicles were used
for the same purpose as vehicles rated at not more than 6,000 lbs.
GVWR, or (b) that their regulation would result in significant energy
conservation.
    EISA eliminated the need for administrative determinations in order
to subject vehicles between 6,000 and 10,000 lb. GVWR to the CAFE
standards for automobiles. Congress did so by making the determination
itself that all vehicles within that GVWR range should be included,
with the exceptions noted above.
2. Mandate To Set Standards for Automobiles
    For each future model year, EPCA requires that the agency establish
standards for all new automobiles at the maximum feasible levels for
that model year. EISA made no change in this requirement. A
manufacturer's individual passenger cars and light trucks are not
required to meet a particular fuel economy level. Instead, EPCA
requires that the average fuel economy of a manufacturer's fleet of
passenger cars (or light trucks) in a particular model year must meet
the standard for those automobiles for that model year.
    For MYs 2011-2020 and for MYs 2021-2030, EPCA specifies additional
requirements regarding standard setting. Each of those requirements and
the maximum feasible requirement must be interpreted in the context of
the other requirements. For MYs 2011-2020, separate standards for
passenger cars and for light trucks must be set at high enough levels
to ensure that the CAFE of the industry-wide combined fleet of new
passenger cars and light trucks for MY 2020 is not less than 35 mpg.

    In light of the evident confusion of some commenters about the 35
mpg requirement, we want to emphasize that that figure is not the CAFE
level that any individual manufacturer's combined CAFE will be required
to meet. The 35 mpg requirement applies solely to the agency's standard
setting and concerns the required combined effect that the separate MY
2020 standards for passenger cars and light trucks must achieve with
respect to the single fleet containing the MY 2020 passenger cars and
light trucks of all manufacturers. That single industry-wide fleet must
have a CAFE of at least 35 mpg. If that requirement were exactly met,
we anticipate that manufacturers with relatively larger proportions of
smaller automobiles would be required to achieve combined CAFEs greater
than 35 mpg, while manufacturers with relatively largely proportions of
larger automobiles would be required to achieve combined CAFEs that
might in that year be somewhat below 35 mpg. EISA does not specify
precisely how compliance with this minimum requirement is to be ensured
or how or when the CAFE of the industry-wide combined fleet for MY 2020
is to be calculated for purposes of determining the agency's
compliance.
    If the current gap between passenger car CAFE and light truck CAFE
persists, the standard for MY 2020 passenger cars would likely, as a
practical matter, need to be set high enough to ensure that the
industry-wide level of average fuel economy for passenger cars is not
less than 40 mpg in order for the CAFE of the combined industry-wide
fleet to reach 35 mpg,. The standard for MY 2020 light trucks could be
somewhat below 35 mpg. Again, these are the levels of stringency
necessary to meet the minimum requirement of an industry-wide combined
average of at least 35 mpg in MY 2020. Reaching 35 mpg earlier than MY
2020 would require even higher car and light truck standards in MY
2020. In addition, the CAFE of each manufacturer's fleet of domestic
passenger cars must meet a sliding, absolute minimum level in each
model year: 27.5 mpg or 92 percent of the projected CAFE of the
industry-wide fleet of new domestic and non-domestic passenger cars for
that model year.
    The standards for passenger cars and those for light trucks must
increase ratably each year. We interpret this requirement, in
combination with the requirement to set the standards for each model
year at the level determined to be the maximum feasible level for that
model year, to mean that the annual increases should not be
disproportionately large or small in relation to each other.
    EPCA, as it existed before EISA, required that light truck
standards be set at the maximum feasible level for each model year, but
simply specified a default standard of 27.5 mpg for passenger cars for
MY 1985 and thereafter. It permitted, but did not require that NHTSA
establish a higher or lower standard for passenger cars if the agency
found that the maximum feasible level of fuel economy is higher or
lower than 27.5 mpg. Henceforth, the agency must establish a standard
for each model year at the maximum feasible level.
3. Attribute-Based Standards
    The standards for passenger cars and light trucks must be based on
one or more vehicle attributes, like size or weight, that correlate
with fuel economy and must be expressed in terms of a mathematical
function. Fuel economy targets are set for individual vehicles and
increase as the attribute decreases and vice versa. For example, size-
based (i.e., size-indexed) standards assign higher fuel economy targets
to smaller (and generally, but not necessarily lighter) vehicles and
lower ones to larger (and generally, but not necessarily heavier)
vehicles. The fleet wide average fuel economy that a particular
manufacturer must achieve depends on the size mix of its fleet, i.e.,
the proportion of the fleet that is small-, medium- or large-sized.
    This approach can be used to require virtually all manufacturers to
increase significantly the fuel economy of a broad range of both
passenger cars and light trucks. Further, this approach can do so
without creating an incentive for manufacturers to make small vehicles
smaller or large vehicles larger, with attendant implications for
safety.
4. Factors Considered in the Setting of Standards
    In determining the maximum feasible level of average fuel economy
for a model year, EPCA requires that the agency consider four factors:
Technological feasibility, economic practicability, the effect of other
standards of the Government on fuel economy, and the need of the nation
to conserve energy. EPCA does not define these terms or specify what
weight to give each concern in balancing them; thus, NHTSA defines them
and determines the appropriate weighting based on the circumstances in
each CAFE standard rulemaking.
(a) Factors That Must Be Considered
(i) Technological Feasibility
    ``Technological feasibility'' refers to whether a particular method
of improving fuel economy can be available for commercial application
in the model year for which a standard is being established. Thus, the
agency is not limited in a CAFE rulemaking to technology that is
already being commercially applied at that time.
(ii) Economic Practicability
    ``Economic practicability'' refers to whether a standard is one
``within the financial capability of the industry, but not so stringent
as to'' lead to ``adverse economic consequences, such as a significant
loss of jobs or the unreasonable elimination of consumer choice.'' \69\
In an attempt to ensure the economic practicability of attribute based
standards, the agency considers a variety of factors, including the
annual rate at which manufacturers can increase the percentage of its
fleet that has a particular type of fuel saving technology, and cost to
consumers. Since consumer acceptability is an element of economic
practicability, the agency, in this rule, has limited its consideration
of fuel saving technologies to be added to vehicles to those that
provide benefits that match their costs. The agency believes this
approach is reasonable for the MY 2011 standards in view of the facts
before it at this time. The agency is aware, however, that facts
relating to a variety of key issues in CAFE rulemaking are steadily
evolving and will review its balancing of these factors in light of the
facts before it in the next rulemaking proceeding.
---------------------------------------------------------------------------

    \69\ 67 FR 77015, 77021; December 16, 2002.
---------------------------------------------------------------------------

    At the same time, the law does not preclude a CAFE standard that
poses considerable challenges to any individual manufacturer. The
Conference Report for EPCA, as enacted in 1975, makes clear, and the
case law affirms, ``(A) determination of maximum feasible average fuel
economy should not be keyed to the single manufacturer which might have
the most difficulty achieving a given level of average fuel economy.''
\70\ Instead, the agency is compelled ``to weigh the benefits to the
nation of a higher fuel economy standard against the difficulties of
individual automobile manufacturers.'' Id. The law permits CAFE
standards exceeding the projected capability of any particular
manufacturer as long as the standard is economically practicable for
the industry as a whole. Thus, while

a particular CAFE standard may pose difficulties for one manufacturer,
it may also present opportunities for another. The CAFE program is not
necessarily intended to maintain the competitive positioning of each
particular company. Rather, it is intended to enhance fuel economy of
the vehicle fleet on American roads, while protecting motor vehicle
safety and being mindful of the risk of harm to the overall United
States economy.
---------------------------------------------------------------------------

    \70\ CEI-I, 793 F.2d 1322, 1352 (D.C. Cir. 1986).
---------------------------------------------------------------------------

(iii) The Effect of Other Motor Vehicle Standards of the Government on
Fuel Economy
    ``The effect of other motor vehicle standards of the Government on
fuel economy'' means, according to the agency's longstanding view,
``the unavoidable adverse effects on fuel economy of compliance with
emission, safety, noise, or damageability standards.'' \71\ The purpose
of this provision was to ensure that any adverse effects of other
standards on fuel economy were taken into consideration in connection
with the fuel economy standards. The concern about adverse effects is
evident in a 1974 report, entitled ``Potential for Motor Vehicle Fuel
Economy Improvement,'' prepared and submitted to Congress by the
Department of Transportation and Environmental Protection Agency.\72\
That report noted that the weight added by safety standards would
reduce, and one set of emissions standards might temporarily reduce,
the level of achievable fuel economy.\73\ The same concern can also be
found in the congressional committee reports on the bills that became
EPCA.\74\
---------------------------------------------------------------------------

    \71\ 42 FR 63184, 63188; Dec. 15, 1977. See also 42 FR 33534,
33537; June 30, 1977.
    \72\ This report was prepared in compliance with Section 10 of
the Energy Supply and Environmental Coordination Act of 1974, Public
Law 93-319.
    \73\ See pages 6-8 and 91-93.
    \74\ See page 22 of Senate Report 94-179, pages 88 and 90 of
House Report 94-340, and pages 155-7 of the Conference Report,
Senate Report 94-516.
---------------------------------------------------------------------------

    In the case of emission standards, this includes standards adopted
by the Federal government and can include standards adopted by the
States as well, since in certain circumstances the Clean Air Act allows
States to adopt and enforce State standards different from the Federal
ones.
(iv) The Need of the United States To Conserve Energy
    ``The need of the United States to conserve energy'' means ``the
consumer cost, national balance of payments, environmental, and foreign
policy implications of our need for large quantities of petroleum,
especially imported petroleum.'' \75\ Environmental implications
principally include reductions in emissions of criteria pollutants and
carbon dioxide. A prime example of foreign policy implications are
energy independence and security concerns.
---------------------------------------------------------------------------

    \75\ 42 FR 63184, 63188 (1977).
---------------------------------------------------------------------------

1. Fuel Prices and the Value of Saving Fuel
    Projected future fuel prices are a critical input into the
preliminary economic analysis of alternative CAFE standards, because
they determine the value of fuel savings both to new vehicle buyers and
to society. In this rule, NHTSA relies on fuel price projections from
the U.S. Energy Information Administration's (EIA) Annual Energy
Outlook (AEO) for this analysis.
2. Petroleum Consumption and Import Externalities
    U.S. consumption and imports of petroleum products impose costs on
the domestic economy that are not reflected in the market price for
crude petroleum, or in the prices paid by consumers of petroleum
products such as gasoline. These costs include (1) higher prices for
petroleum products resulting from the effect of U.S. oil import demand
on the world oil price; (2) the risk of disruptions to the U.S. economy
caused by sudden reductions in the supply of imported oil to the U.S.;
and (3) expenses for maintaining a U.S. military presence to secure
imported oil supplies from unstable regions, and for maintaining the
strategic petroleum reserve (SPR) to cushion against resulting price
increases. Higher U.S. imports of crude oil or refined petroleum
products increase the magnitude of these external economic costs, thus
increasing the true economic cost of supplying transportation fuels
above the resource costs of producing them. Conversely, reducing U.S.
imports of crude petroleum or refined fuels or reducing fuel
consumption can reduce these external costs.
3. Air Pollutant Emissions
    While reductions in domestic fuel refining and distribution that
result from lower fuel consumption will reduce U.S. emissions of
various pollutants, additional vehicle use associated with the rebound
effect from higher fuel economy will increase emissions of these
pollutants. Thus, the net effect of stricter CAFE standards on
emissions of each pollutant depends on the relative magnitudes of its
reduced emissions in fuel refining and distribution, and increases in
its emissions from vehicle use.
    Fuel savings from stricter CAFE standards also result in lower
emissions of CO2, the main greenhouse gas emitted as a
result of refining, distribution, and use of transportation fuels.
Lower fuel consumption reduces carbon dioxide emissions directly,
because the primary source of transportation-related CO2
emissions is fuel combustion in internal combustion engines.
    The agency has considered environmental issues, both within the
context of EPCA and the National Environmental Policy Act, in making
decisions about the setting of standards from the earliest days of the
CAFE program. As courts of appeal have noted in three decisions
stretching over the last 20 years,\76\ the agency defined the ``need of
the Nation to conserve energy'' in the late 1970s as including ``the
consumer cost, national balance of payments, environmental, and foreign
policy implications of our need for large quantities of petroleum,
especially imported petroleum.'' \77\ Pursuant to that view, the agency
declined in the past to include diesel engines in determining the
maximum feasible level of average fuel economy for passenger cars and
for light trucks because particulate emissions from diesels were then
both a source of concern and unregulated.\78\
---------------------------------------------------------------------------

    \76\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 n. 12
(D.C. Cir. 1986); Public Citizen v. NHTSA, 848 F.2d 256, 262-3 n. 27
(D.C. Cir. 1988) (noting that ``NHTSA itself has interpreted the
factors it must consider in setting CAFE standards as including
environmental effects''); and Center for Biological Diversity v.
NHTSA, 508 F.3d 508, 529 (9th Cir. 2007).
    \77\ 42 FR 63,184, 63,188 (Dec. 15, 1977) (emphasis added).
    \78\ For example, the final rules establishing CAFE standards
for MY 1981-84 passenger cars, 42 FR 33533, 33540-1 and 33551; June
30, 1977, and for MY 1983-85 light trucks, 45 FR 81593, 81597;
December 11, 1980.
---------------------------------------------------------------------------

    In the late 1980s, NHTSA cited concerns about climate change as one
of its reasons for limiting the extent of its reduction of the CAFE
standard for MY 1989 passenger cars \79\ and for declining to reduce
the standard for MY 1990 passenger cars.\80\
---------------------------------------------------------------------------

    \79\ 53 FR 39275, 39302; October 6, 1988.
    \80\ 54 FR 21985,
---------------------------------------------------------------------------

    Since then, DOT has considered the indirect benefits of reducing
tailpipe carbon dioxide emissions in its fuel economy rulemakings
pursuant to the statutory requirement to consider the nation's need to
conserve energy by reducing consumption. In this rulemaking, consistent
with the Ninth Circuit's decision and its observations about the
potential effect of changing information about climate change on the

balancing of the EPCA factors and aided by the 2007 reports of the
United Nations Intergovernmental Panel on Climate Change \81\ and other
information, NHTSA has monetized the reductions in tailpipe emissions
of CO2 that will result from the CAFE standards and is
adopting CAFE standards for MY 2011 at levels that reflect an estimated
value of those reductions in CO2 as well as the value of
other benefits of those standards. In setting these CAFE standards,
NHTSA also considered environmental impacts under NEPA, 42 U.S.C. 4321-
4347.
---------------------------------------------------------------------------

    \81\ The IPCC 2007 reports can be found at http://www.ipcc.ch/.
(Last accessed March 8, 2009.)
---------------------------------------------------------------------------

(v) Other Factors--Safety
    In addition, the agency historically has considered the potential
for adverse safety consequences when deciding upon a maximum feasible
level. This practice is recognized approvingly in case law.\82\
---------------------------------------------------------------------------

    \82\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F. 2d
1322 (D.C. Cir. 1986) (Administrator's consideration of market
demand as component of economic practicability found to be
reasonable); Public Citizen 848 F.2d 256 (Congress established broad
guidelines in the fuel economy statute; agency's decision to set
lower standard was a reasonable accommodation of conflicting
policies). As the United Staets Court of Appeals pointed out in
upholding NHTSA's exercise of judgment in setting the 1987-1989
passenger car standards, ``NHTSA has always examined the safety
consequences of the CAFE standards in its overall consideration of
relevant factors since its earliest rulemaking under the CAFE
program.'' Competitive Enterprise Institute v. NHTSA (CEI I), 901
F.2d 107, 120 at n.11 (D.C. Cir. 1990).
---------------------------------------------------------------------------

(b) Factors That Cannot be Considered
    EPCA provides that in determining the level at which it should set
CAFE standards for a particular model year, NHTSA may not consider the
ability of manufacturers to take advantage of several EPCA provisions
that facilitate compliance with the CAFE standards and thereby reduce
the costs of compliance.\83\ As noted below in Section XII,
manufacturers can earn compliance credits by exceeding the CAFE
standards and then use those credits to achieve compliance in years in
which their measured average fuel economy falls below the standards.
Manufacturers can also increase their CAFE levels through MY 2019 by
producing alternative fuel vehicles. EPCA provides an incentive for
producing these vehicles by specifying that their fuel economy is to be
determined using a special calculation procedure that results in those
vehicles being assigned a high fuel economy level.
---------------------------------------------------------------------------

    \83\ 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

(c) Weighing and Balancing of Factors
    EPCA did not define the factors or specify the relative weight to
be given the factors in weighing and balancing them. Instead, EPCA gave
broad guidelines within which the agency is to exercise discretion in
determining what level of stringency is the maximum feasible level of
stringency. Thus, the agency has substantial discretion in defining and
weighing the terms and accommodating conflicting priorities consistent
with the purposes of EPCA.
5. Consultation in Setting Standards
    EPCA provides that NHTSA is to consult with the Department of
Energy (DOE) and Environmental Protection Agency prior to prescribing
CAFE standards. It specifies further that NHTSA is to provide DOE with
an opportunity to provide written comments on draft proposed and final
CAFE standards.\84\
---------------------------------------------------------------------------

    \84\ In addition, Executive Order No. 13432 provides that a
Federal agency undertaking a regulatory action that can reasonably
be expected to regulate emissions directly, or to substantially and
predictably affect emissions, of greenhouse gases from motor
vehicles, shall act jointly and consistently with other agencies to
the extent possible and to consider the views of other agencies
regarding such action.
---------------------------------------------------------------------------

6. Test Procedures for Measuring Fuel Economy
    EPA's fuel economy test procedures specify equations for
calculating fuel economy. These equations are based on the carbon
balance technique which allows fuel economy to be determined from
measurement of exhaust emissions. As noted above, this technique relies
upon the premise that the quantity of carbon in a vehicle's exhaust gas
is equal to the quantity of carbon consumed by the engine as fuel.
    After measuring the amount of CO2 emitted from the
tailpipe of a test vehicle, as well as the amount of carbon in
hydrocarbon (HC) and carbon monoxide (CO), EPA then uses the carbon
content of the test fuel to calculate the amount of fuel that had to be
consumed per mile in order for the vehicle to produce that amount of
carbon containing emissions.\85\ Finally, EPA converts that fuel figure
into a miles-per-gallon figure.
---------------------------------------------------------------------------

    \85\ Under the procedures established by EPA, compliance with
the CAFE standards is based on the rates of emission of
CO2, CO, and hydrocarbons from covered vehicles, but
primarily on the emission rates of CO2. In the
measurement and calculation of a given vehicle model's fuel economy
for purposes of determining a manufacturer's compliance with federal
fuel economy standards, the role of CO2 is approximately
100 times greater than the combined role of the other two relevant
carbon exhaust gases. Given that the amount of CO2, CO,
and hydrocarbons emitted by a vehicle varies directly with the
amount of fuel it consumes, EPA can reliably and accurately convert
the amount of those gases emitted by that vehicle into the miles per
gallon achieved by that vehicle.
---------------------------------------------------------------------------

7. Enforcement and Compliance Flexibility
    EPA is responsible for measuring automobile manufacturers' CAFE so
that NHTSA can determine compliance with the CAFE standards. In making
these measurements for passenger cars, EPA is required by EPCA \86\ to
use the EPA test procedures in place as of 1975 (or procedures that
give comparable results), which are the city and highway tests of
today, with adjustments for procedural changes that have occurred since
1975. EPA uses similar procedures for light trucks, although, as noted
above, EPCA does not require it to do so.
---------------------------------------------------------------------------

    \86\ 49 U.S.C. 32904(c).
---------------------------------------------------------------------------

    When NHTSA finds that a manufacturer is not in compliance, it
notifies the manufacturer. Surplus credits generated from the five
previous years can be used to make up the deficit. The amount of credit
earned is determined by multiplying the number of tenths of a mpg by
which a manufacturer exceeds a standard for a particular category of
automobiles by the total volume of automobiles of that category
manufactured by the manufacturer for a given model year. If there are
no (or not enough) credits available, then the manufacturer can either
pay the fine, or submit a carry back plan to the agency. A carry back
plan describes what the manufacturer plans to do in the following three
model years to earn enough credits to make up for the deficit. NHTSA
must examine and determine whether to approve the plan.
    In the event that a manufacturer does not comply with a CAFE
standard, even after the consideration of credits, EPCA provides for
the assessing of civil penalties, unless, as provided below, the
manufacturer has earned credits for exceeding a standard in an earlier
year or expects to earn credits in a later year. The Act specifies a
precise formula for determining the amount of civil penalties for such
a noncompliance. The penalty, as adjusted for inflation by law, is
$5.50 for each tenth of a mpg that a manufacturer's average fuel
economy falls short of the standard for a given model year multiplied
by the total volume of those vehicles in the affected fleet (i.e.,
import or domestic passenger car, or light truck), manufactured for
that model year. The amount of the penalty may not be reduced except
under the unusual or extreme circumstances specified in the statute.

    Unlike the National Traffic and Motor Vehicle Safety Act, EPCA does
not provide for recall and remedy in the event of a noncompliance. The
presence of recall and remedy provisions \87\ in the Safety Act and
their absence in EPCA is believed to arise from the difference in the
application of the safety standards and CAFE standards. A safety
standard applies to individual vehicles; that is, each vehicle must
possess the requisite equipment or feature which must provide the
requisite type and level of performance. If a vehicle does not, it is
noncompliant. Typically, a vehicle does not entirely lack an item or
equipment or feature. Instead, the equipment or features fails to
perform adequately. Recalling the vehicle to repair or replace the
noncompliant equipment or feature can usually be readily accomplished.
---------------------------------------------------------------------------

    \87\ 49 U.S.C. 30120, Remedies for defects and noncompliance.
---------------------------------------------------------------------------

    In contrast, a CAFE standard applies to a manufacturer's entire
fleet for a model year. It does not require that a particular
individual vehicle be equipped with any particular equipment or feature
or meet a particular level of fuel economy. It does require that the
manufacturer's fleet, as a whole, comply. Further, although under the
attribute-based approach to setting CAFE standards fuel economy targets
are established for individual vehicles based on their footprints, the
vehicles are not required to comply with those targets. However, as a
practical matter, if a manufacturer chooses to design some vehicles so
that fall below their target levels of fuel economy, it will need to
design other vehicles so that exceed their targets if the
manufacturer's overall fleet average is to meet the applicable
standard.
    Thus, under EPCA, there is no such thing as a noncompliant vehicle,
only a noncompliant fleet. No particular vehicle in a noncompliant
fleet is any more, or less, noncompliant than any other vehicle in the
fleet.

III. The Anticipated Vehicles in the MY 2011 Fleets and NHTSA's
Baseline Market Forecast

    NHTSA has a long-standing practice of analyzing regulatory options
in fuel economy rulemakings based on the best available information,
including information regarding the future vehicle market and future
fuel economy technologies. The passenger cars and light trucks
currently sold in the United States, and which are anticipated to be
sold in MY 2011, are highly varied and satisfy a wide range of consumer
needs. From the two-seater Mercedes Benz Smart (produced by Daimler) to
the Ford F-150 pickup truck, from the Honda CR-V to the Chrysler Town
and Country to the GMC Savana, American consumers have a great number
of vehicle options to accommodate their needs and preferences.
    Automobile manufacturers generally attempt to plan their motor
vehicle production several years in advance. When a new vehicle is
introduced, it is the product of several years of design, testing,
product-specific tooling investment, and regulatory certification. In
order to minimize costs, manufacturers generally attempt to place large
automotive parts supply contracts years in advance. Manufacturers must
therefore attempt to predict the types, characteristics, and quantities
of vehicles that consumers will wish to purchase a few years hence.
These plans include what is currently known about the salability and
marketability of these future vehicles, and hence consider the future
state of prices facing the consumer, including that of gasoline. These
plans also contain not only the specific vehicle models which
manufacturers intend to build and their planned annual production, but
also information about specific design features and configurations as
well as the fuel-efficient technologies they are planning to
incorporate in these vehicles. Manufacturer's plans rapidly become
embodied in special tooling and production configurations in factories
and advance orders for component parts. NHTSA requests, and
manufacturers provide, product plan information to the agency during
rulemaking. NHTSA begins its analysis with the submitted product plans
and uses them to establish a baseline, which is used to analyze varying
levels of future CAFE standards.
    In anticipation of the analysis to support today's final rule,
NHTSA issued a request in May 2008 that manufacturers provide the
agency with updated product plans, as well as estimates of the
availability, effectiveness, and cost of fuel-saving technologies.\88\
Considering its past experiences integrating manufacturers' product
plans, reviewing the content of those plans, and seeking clarification
and appropriate correction of those plans, the agency provided
manufacturers with updated tools to facilitate manufacturers' quality
control efforts. NHTSA also tripled the number of agency engineers
assigned to reviewing manufacturers' plans.
---------------------------------------------------------------------------

    \88\ See 73 FR 24910 (May 2, 2008) for NHTSA's most recent
request for comments, which accompanied the NPRM.
---------------------------------------------------------------------------

A. Why does NHTSA establish a baseline market forecast?

    NHTSA begins its analysis by establishing the baseline market
forecast. This forecast represents the fleet that the agency believes
would exist in the absence of fuel economy standards for MY 2011. A
forecast is necessary because the standards will apply to a future
fleet which does not yet exist and therefore must be predicted in order
to estimate the costs and benefits of CAFE standards, as well as
regulatory alternatives as required by OMB and DOT.

B. How does NHTSA develop the baseline market forecast?

1. NHTSA First Asks Manufacturers for Updated Product Plan Data
    NHTSA relies on product plans from manufacturers to help the agency
determine the composition of the future fleets. The product plan
information is provided in response to NHTSA's request for information
from the manufacturers, and responds to very detailed questions about
vehicle model characteristics that influence fuel economy.\89\ The
baseline market forecast that NHTSA uses in its analysis is based
significantly on this confidential product plan information. Individual
manufacturers are better able than any other entity to anticipate what
mix of products they are likely to sell in the future. In this
rulemaking as in prior rulemakings, some commenters requested that
NHTSA make product plan information public to allow members of the
public to comment more fully on the baseline developed by the agency.
For example, the Attorneys General commented that ``the agency should
provide sufficient summaries or aggregations of this information or
make special arrangements so that interested parties such as the state
Attorneys General can view this confidential information under a
confidentiality agreement.''
---------------------------------------------------------------------------

    \89\ Id.
---------------------------------------------------------------------------

    NHTSA cannot make public the entire contents of the product plans.
The submitted product plans contain confidential business information,
which the agency is prohibited by federal law from disclosing; \90\
making

this information publicly available would cause competitive harm to
manufacturers. See 5 U.S.C. 552(b)(4); 18 U.S.C. 1905; 49 U.S.C.
30167(a); 49 CFR part 512; Critical Mass Energy Project v. Nuclear
Regulatory Comm'n, 975 F.2d 871 (D.C. Cir. 1992). In its publicly
available rulemaking documents the agency does, however, provide
aggregated information compiled from individual manufacturer
submissions regarding its forecasts of the future vehicle market in
such a way that confidential business information is not disclosed.
This aggregated information, such as appears below and in the
accompanying Regulatory Impact Analysis (RIA), includes vehicle fleet
size and composition (passenger cars versus light trucks), overall fuel
economy baseline and major technology applications and design trends.
---------------------------------------------------------------------------

    \90\ NHTSA grants confidentiality to manufacturers' future
specific product plans under 49 CFR Part 512. Once NHTSA has granted
a manufacturer's claim of confidentiality, NHTSA may not release the
covered information except in certain circumstances listed in Sec.
512.23, none of which include increasing the ability of the public
to comment on rulemakings employing the confidential information,
unless the manufacturers consent to the disclosure.
---------------------------------------------------------------------------

(a) Why does NHTSA use manufacturer product plans to develop the
baseline?
    In order to analyze potential new CAFE standards in a way that
tries to simulate how manufacturers could comply with them, NHTSA
develops a forecast of the future vehicle market on a model-by-model,
engine-by-engine, and transmission-by-transmission basis, such that
each defined vehicle model refers to a separately-defined engine and a
separately-defined transmission. For the 2011 model year covered by
this final rule, the light vehicle (passenger car and light truck)
market forecast included almost 1,400 vehicle models, 400 specific
engines, and 300 specific transmissions. NHTSA believes that this level
of detail in the representation of the vehicle market is important both
to an accurate analysis of manufacturer-specific costs and to the
analysis of attribute-based CAFE standards. Because CAFE standards
apply to the average fuel economy performance of each manufacturer's
fleets of cars and light trucks, the impact of potential standards on
individual manufacturers is effectively estimated through analysis of
manufacturers' planned fleets. NHTSA has used this level of detail in
CAFE analysis throughout the history of the program. Furthermore,
because required CAFE levels under an attribute-based CAFE standard
depend on manufacturers' fleet composition, the stringency of an
attribute-based standard is effectively predicted by performing
analysis at this level of detail.
    EPCA does not require NHTSA to use manufacturers' product plans in
order to develop a baseline for purposes of analyzing potential new
CAFE standards. The agency could use exclusively non-confidential
information to develop a market forecast at the same level of detail as
mentioned above, and has done exactly so for purposes of analytical
development and testing, and to represent manufacturers that have not
provided product plans to NHTSA. However, as discussed above, the
agency believes that one of the most valuable sources of information
about future product mix projections is the product plan information
provided by individual manufacturers, because individual manufacturers
are in a unique position to anticipate what mix of products they are
likely to sell in the future.
    Manufacturers generally support NHTSA's use of product plan data in
developing the baseline. Other commenters such as CFA and Public
Citizen, in contrast, stated that the product plans relied upon in the
NPRM are outdated because they were developed before EISA was enacted,
and that the agency should develop its own projections of the vehicle
fleets, which could be made public, instead of relying on confidential
industry plans, which could bias the standards in favor of the
industry. CFA suggested that NHTSA's analysis was based on only ``a
very thin body of knowledge about the veracity, relevance and
predictive value of auto manufacturer product plans, recent changes in
fuel economy and the practices of automakers in adopting fuel economy
technologies.'' Public Citizen stated that because the product plans
are confidential, ``This significantly biases the standards in favor of
industry by shutting the public out of the process,'' and that
``Consumers must essentially trust that NHTSA has set standards in
their interest using information provided by industry.'' Public Citizen
argued that ``In the past, * * * NHTSA has done its own research and
evaluation of these factors which was more transparent.''
    NHTSA's analysis of product plan data is much more rigorous than
commenters suggest. NHTSA engineers carefully examine the information
submitted by manufacturers, and upon discovering what appear to be
errors or inconsistencies, request and receive manufacturers'
explanations and, as appropriate, corrections. For example, the
agency's analysis in preparation for the final rule revealed systematic
errors in plans submitted by two major manufacturers, both of which
resubmitted their plans with corrections.\91\ In addition, the agency
found that two manufacturers inappropriately planned to have some 2-
wheel drive sport-utility vehicles (2WD SUVs) classified as light
trucks, even though the agency explained in the NPRM that, for
enforcement purposes, it planned to classify such vehicles as passenger
cars, and other manufacturers submitted product plans consistent with
the agency's intentions. As discussed below and in Section IX, NHTSA
performed its analysis with these vehicles reassigned to the passenger
car fleet.
---------------------------------------------------------------------------

    \91\ Specifically, one manufacturer had submitted data with a
structure that had inadvertently been misaligned, such that many
vehicle models were incorrectly identified as using engines
applicable to other vehicle models (e.g., a vehicle known to use an
inline 4-cylinder engine might have been identified as using a V-8
engines). Another manufacturer had submitted vehicle dimensional
estimates based on an incorrect SAE measurement procedure.
---------------------------------------------------------------------------

    NHTSA also disagrees with Public Citizen's suggestion that the
agency's use of product plans precludes public participation in the
rulemaking process. As discussed, analysis of confidential product
plans has long been a core feature of developing the CAFE standards,
and the agency is fully transparent in providing aggregated information
about the plans as well as detailed information about the agency's
technology and economic assumptions and the process the agency
undertakes to evaluate and set the standards.
    NHTSA could potentially conduct rulemaking analysis as Public
Citizen suggests using exclusively public information, (including
commercially available information). Indeed, the agency has done
exactly so for purposes of development and testing, and to develop
forecasts of fleets likely to be produced by manufacturers that have
not responded to the agency's request for product plans. However, the
agency currently believes that an analysis based exclusively on
publicly- and commercially-available information would be less
accurate--in terms of its representation of the future light vehicle
market--than an analysis based in large measure on product plan data.
Most publicly available information about vehicles and vehicle
technologies concerns the current fleet, not potential future fleets.
In many cases, manufacturers are prepared to provide far more detail in
confidential submissions then they are prepared to provide in public.
This detail may include the manufacturer's expectation of sales for
particular future models; which technologies are being applied to
particular vehicles; and the manufacturer's expectation of fuel

economy for future vehicles. This information is typically considered
business confidential by the manufacturer, but is helpful in more
accurately ascertaining both the baseline technology level and fuel
economy of manufacturer's future sales as well as the extent of
opportunities for improving fuel economy.
    NHTSA notes that manufacturers' public statements about future
vehicles have been very optimistic recently with regard to fuel
economy-enhancing technologies, and NHTSA takes these statements into
account when evaluating the submitted product plans. When manufacturer
statements about future vehicles differ substantially from the
submitted product plans, NHTSA generally contacts the manufacturer to
determine the reason for the discrepancy. However, manufacturers
frequently make announcements regarding vehicles or technologies they
hope to produce in the future. Often, they are conditional statements
and plans, and whether they reach the point of commercialization
depends greatly on how circumstances, including public acceptance,
evolve. Thus, for purposes of analyzing the MY 2011 CAFE standards, the
agency currently concludes that information manufacturers provide
confidentially to NHTSA is more reliable than the information appearing
in public sources such as press reports and speeches by manufacturers'
employees, especially given the short time period between the
submission of this information in 2008 and when manufacturers will
begin building their MY 2011 vehicles.
    Nevertheless, EPCA does not require NHTSA to use manufacturers'
confidential business information when evaluating the maximum feasible
levels for new CAFE standards. The agency will base its analysis for
future rulemakings on information--public, commercially-available, or
confidential--it considers most accurate.
    NHTSA recognizes that automobile manufacturers are facing a period
of uncertainty with respect to demand for their products that is
without parallel. Recent swings in prices for fuel have altered demand
patterns, while commodity prices have impacted costs of production.
Concurrently, turmoil in the credit markets and recent upswings in
unemployment also affect the vehicle market. The short and long term
implications of such volatility for future sales will not be known for
some time. In light of such conditions, reliance on product plans in
this rulemaking helps to align the analysis with the best available
information.
    NHTSA further recognizes that, in connection with their recent
requests for federal assistance, some manufacturers made statements in
December 2008 regarding future technologies and fuel economy levels,
and that some of these statements indicated plans to achieve CAFE
levels considerably higher than reflected in the product plans
submitted to NHTSA in mid-2008.\92\ The information provided in these
submissions to Congress reflects a level of detail much less than NHTSA
typically receives in the confidential product plan submissions, so it
is difficult for NHTSA to determine whether these manufacturer
statements and submissions reflect the same underlying assumptions as
manufacturers' mid-2008 product plans.
---------------------------------------------------------------------------

    \92\ Available on the Internet at http://
financialservices.house.gov/autostabilization.html (last accessed
February 15, 2009).
---------------------------------------------------------------------------

    More recently, in mid-February, Chrysler and General Motors
submitted restructuring plans to the U.S. Department of the Treasury to
support those companies' requests for federal loans. Like the
information these companies provided in December, these plans do not
contain complete and detailed forecasts of the volume and
characteristics of specific vehicle models Chrysler and General Motors
plan to produce. However, the restructuring plans do contain specific
information regarding the CAFE levels that these manufacturers expect
to achieve.
    Chrysler's plan shows that, during MYs 2008-2015, Chrysler plans to
exceed required CAFE levels in some model years and to apply credits it
earns in doing so toward shortfalls in other model years.\93\ The
charts in Chrysler's plans specifically reference the ``Dec 2008 Draft
Rule'' (presumably, the final standards NHTSA submitted to OMB in
November 2008), and indicate that Chrysler appears to believe that
attribute-based CAFE standards for those model years will result in
required CAFE levels for Chrysler similar to those originally estimated
by NHTSA for MYs 2011-2015 based on the product plan information that
Chrysler submitted to NHTSA in July 2008.
---------------------------------------------------------------------------

    \93\ Chrysler's submission to the Treasury Department, p. 117.
Available at http://www.treasury.gov/initiatives/eesa/agreements/
auto-reports/ChryslerRestructuringPlan.pdf, (last accessed Feb. 19,
2009).
---------------------------------------------------------------------------

    GM's plan states that GM ``is committed to meeting or exceeding all
Federal fuel economy standards in the 2010-2015 model years'', and
shows the CAFE levels that GM plans to achieve in those model years,
assuming ``full usage of all credit flexibilities under the CAFE
program.'' \94\ However, GM's plan does not show the CAFE levels
expected to be required of GM under new attribute-based CAFE standards,
and it is unclear from GM's plan how specific changes (since July 2008)
in the company's plans relate to its planned CAFE levels. For example,
while GM's restructuring plan refers to plans to increase hybrid
vehicle offerings, the plan does not include production forecasts
needed to understand how those offerings affect GM's planned CAFE
levels.
---------------------------------------------------------------------------

    \94\ GM's submission to the Treasury Department, p. 21.
Available at, http://www.treasury.gov/initiatives/eesa/agreements/
auto-reports/GMRestructuringPlan.pdf (last accessed Feb. 19, 2009).
---------------------------------------------------------------------------

    Considering the context for and generality of the Chrysler and GM
restructuring plans, and the lack of such plans from other
manufacturers, and notwithstanding the considerable uncertainties
currently surrounding the future market for light vehicles, NHTSA
believes that its market forecast for MY 2011, as informed by product
plans submitted to the agency in mid-2008, remains the most useful
available point of reference for the establishment of MY 2011
standards, and the evaluation of the costs and benefits of these new
standards.
(b) What product plan data did NHTSA use in the NPRM?
    For the NPRM, NHTSA received product plan information from
Chrysler, Ford, GM, Honda, Nissan, Mitsubishi, Porsche and Toyota
covering multiple model years. The agency did not receive any product
plan information from BMW, Ferrari, Hyundai, Mercedes (Daimler) or VW.
However, only Chrysler and Mitsubishi provided us with product plans
that showed differing production quantities, vehicle introductions,
vehicle redesign/refresh changes, without any carryover production
quantities through MY 2015. For the other companies that provided data,
the agency carried over production quantities for their vehicles,
allowing for growth, starting with the year after their product plan
data showed changes in production quantities or showed the introduction
or redesign/refresh of vehicles.
    Product plan information was provided through MY 2013 by Ford and
Toyota, thus the first year that the agency carried over production
quantities for those companies was MY 2014. Product plan information
was provided through MY 2012 for GM and Nissan, thus the first year
that the agency carried over production quantities for those companies
was MY 2013. Product plan information was

provided by Honda through MY 2008. Honda asked the agency to carry over
those plans and also provided data for the last redesign of a vehicle
and asked the agency to carry them forward. Product plan information
was provided through MY 2008 for Porsche, thus the first year that the
agency carried over production quantities for Porsche was MY 2009.
    Because Hyundai was one of the seven largest vehicle manufacturers,
and thus factored explicitly into the optimization process, and NHTSA
desired to conduct this process using the best and most complete
forecast of the future vehicle market, NHTSA used Hyundai's mid-year
2007 data contained in the agency's CAFE database to establish the
baseline models and production quantities for their vehicles.\95\ For
the other manufacturers that did not submit product plans, NHTSA used
the 2005 information from the database, the latest complete data set
that NHTSA had available for use.
---------------------------------------------------------------------------

    \95\ Manufacturers must submit pre- and mid-model year CAFE
reports to the agency as part of the CAFE compliance process under
49 CFR part 537.
---------------------------------------------------------------------------

    As mentioned above, NHTSA received comments that the product plans
it relied upon in the NPRM were out of date and not reflective of
recent announcements from manufacturers regarding new products. CFA
referred to NHTSA's discussion in the NPRM of the relative completion
of various manufacturers' product plans to argue that the product plans
were incomplete and inaccurate. Public Citizen argued that the product
plans were out of date. The Attorneys General and NRDC argued that
NHTSA should update the product plans, the baseline, and the technology
inputs to the Volpe model in light of recent manufacturer statements
about their intent to introduce advanced technologies, such as plug-in
hybrid vehicles, in the near future.
    In response, as noted above, NHTSA published a request for comments
seeking updated information from manufacturers regarding their future
product plans in a companion notice to the NPRM. In examining the
updated product plans received in response to the request for
information, and as discussed more fully below, NHTSA has determined
that the product plans for MY 2011 provided incorporate these
announcements and reflect changes to planned product introduction by
manufacturers in response to the recent market shift towards more fuel-
efficient vehicles, particularly the shift towards increased production
of smaller cars.
(c) What product plan data did NHTSA receive for the final rule?
    For the final rule, NHTSA received product plan information from
Chrysler, Ford (Ford's product plans included separate plans for Jaguar
and Land Rover vehicles, both of which are now owned by Tata Motors and
are thus attributed to that company in the final rule), GM, Honda,
Hyundai, Mitsubishi, Nissan, Porsche, Subaru, and Toyota, covering
multiple model years. The agency did not receive product plan
information from BMW, Daimler (Mercedes), Ferrari, Suzuki or VW.
Chrysler, Ford, Hyundai and Mitsubishi provided us with product plans
that showed changes in production quantities, vehicle introductions,
and vehicle redesigns/refreshes changes, without any carryover
production quantities through MY 2015. For the other companies that
provided data, the agency was careful to carry over production
quantities for their vehicles, allowing for growth, starting with the
year after their product plan data showed changes in production
quantities or showed the introduction or redesign/refresh of vehicles.
    Further, NHTSA used the pre-model year 2008 CAFE reports as the
basis for the future MY 2011 product plans and filled in gaps in the
data (e.g., engine specifications, wheelbase, track width, etc.) for
those manufacturers with information gathered from the Web sites of the
individual manufacturers and from general automotive Web sites such as
Edmunds.com, Cars.com, and Wards.com.
(d) How is the product plan data received for the final rule different
from what the agency used in the NPRM analysis, and how does it impact
the baseline?
    Informed by the overall fleet size and market share estimates
applied by the agency (and discussed below), manufacturers' plans
changed considerably between 2007 and 2008. NHTSA's forecast, based on
the Energy Information Administration's (EIA's) Annual Energy Outlook
(AEO) 2008, of the total number of light vehicles likely to be sold
during MY 2011 through MY 2015 dropped from 85 to 83 million vehicles--
about 16.5 million vehicles annually.\96\ Also, due in part to the
reclassification of roughly 1.4 million 2WD SUVs, the share of MY 2011
vehicles expected to be classified as light trucks fell from 49 percent
in NHTSA's 2007 market forecast to 42 percent in the agency's current
forecast.
---------------------------------------------------------------------------

    \96\ NHTSA recognizes that domestic vehicle sales are currently
well below this rate. However, as discussed below, the agency
considers this an aspect (like gasoline prices near $2 per gallon)
of the current economy, and not an indicator of the longer-term
prospect for light vehicle sales in the U.S. Just as the agency
currently expects fuel prices to return to high levels, it expects
vehicle sales to rise well above today's rate.
---------------------------------------------------------------------------

    The latter of the above changes is reflected in the baseline
distribution of vehicle models with respect to fuel economy and
footprint. Figures III-1 and III-2 show passenger car and light truck
2011 models, respectively, in the 2007 plans. Figures III-3 and III-4
show passenger car and light truck models, respectively, in the 2008
plans. A comparison of Figures III-1 and III-3 shows that the number of
passenger cars models with footprints between roughly 41 and 52 square
feet has increased considerably, and that the number of passenger car
models with relatively high fuel economy levels (e.g., above 35 mpg)
has increased. Conversely, a comparison of Figures III-2 and III-3
shows less pronounced differences between the 2007 and 2008 plans,
although the number of small light truck models decreased (due to
reclassification).

[GRAPHIC] [TIFF OMITTED] TR30MR09.003

[GRAPHIC] [TIFF OMITTED] TR30MR09.004

    NHTSA's expectations regarding manufacturers' market shares (the
basis for which is discussed below) have also changed since 2007. These
changes are reflected below in Table III-1, which shows the agency's
2007 and 2008 sales forecasts for passenger cars and light trucks.\97\
---------------------------------------------------------------------------

    \97\ As explained below, although NHTSA normalized each
manufacturer's overall market share to produce a realistically-sized
fleet, the product mix for each manufacturer that submitted product
plans was preserved. The agency has reviewed manufacturers' product
plans in detail, and understands that manufacturers do not sell the
same mix of vehicles in every model year.
[GRAPHIC] [TIFF OMITTED] TR30MR09.006

    Additionally, for some advanced technologies, the updated product
plans submitted by manufacturers for the final rule include higher
quantities in MY 2011 and beyond than the older product plans used for
the NPRM had indicated. These changes are consistent with most
manufacturers' indications that their product planning was informed by
expectations that fuel prices considerably higher than those in EIA's
AEO 2008 reference case forecast would prevail during the first half of
the next decade. Most recently, the restructuring plans submitted by
General Motors and Chrysler offer additional information on changes to
product plans, albeit at an aggregate level, that are deemed necessary
to achieve ``operational and functional viability.''
    Manufacturers' most recently submitted detailed plans (i.e., those
submitted to NHTSA in July 2008) show significant application of the
following engine technologies in MY 2011 (percent of the entire fleet
having that technology is shown in the parentheses): Intake cam phasing
(34 percent), dual cam phasing (35 percent), stoichiometric gasoline
direction injection (11 percent), and turbocharging and engine
downsizing (6 percent). Regarding transmission technologies,
manufacturers' plans show significant application of the following
technologies by MY 2011: 6-, 7-, or 8-speed automatic transmissions (27
percent), and strong hybrids (4 percent). Manufacturers' plans also
show significant application of electric power steering (3 percent) and
integrated starter/generators (34 percent) by MY 2011.
    Though not applicable to today's rulemaking, and while updated
product plans may reflect different rates of technology application,
manufacturers' July 2008 plans also indicated expectations that the use
of some of these and other technologies would continue to increase
after MY 2011. For example, manufacturers' product plans indicated at
the time that use of stoichiometric gasoline direction injection would
increase from 11 percent of the fleet in MY 2011 to 15 percent of the
fleet in MY 2015, and that use of turbocharging and engine downsizing
would increase from 6 percent of the fleet in MY 2011 to 13 percent of
the fleet in MY 2015. These plans further indicated that use of dual
cam phasing, combustion restart, and integrated starter/generators
would increase to 49 percent, 10 percent, and 49 percent, respectively,
by MY 2015.
    The restructuring plans Chrysler and GM submitted to the Department
of the Treasury in February 2009 both indicate intentions to increase
the rate of technology adoption and alter the mix towards higher
numbers of flexible fuel, alternative fuel and electric vehicles.
Chrysler's restructuring plan shows plans to introduce three new
electric or hybrid-electric vehicle models in MYs 2010-2011, and an
additional seven such models during MYs 2012-2015.\98\ As mentioned
above, Chrysler's restructuring plan is clearly informed by and
responsive to NHTSA's 2008 draft final standards for MYs 2011-2015.
Though less clear in terms of specific requirements to the company,
GM's restructuring plan also appears to be responsive to those MYs
2011-2015 standards. GM's restructuring plan indicates that in MY 2012,
the company plans greater deployment of 2-step variable valve timing,
new 4-cylinder gasoline engines, dry dual clutch transmissions, ``Gen
2'' strong hybrids, extended range electric vehicles, and possibly
compressed natural gas.\99\ The plan further indicates that in MY 2015,
GM expects to introduce ``Gen 3'' hybrids, lean-burn homogeneous charge
compression ignition (HCCI) gasoline engines, and fuel cell vehicles.
---------------------------------------------------------------------------

    \98\ Chrysler, p. 135.
    \99\ GM, p. 21.
---------------------------------------------------------------------------

    Manufacturers' July 2008 product plans also show increasing numbers
of mid-size ladder-frame SUVs being planned for redesign as unibody
SUVs/crossover vehicles. Additionally, some ladder-frame SUVs and mid-
size pickup

trucks are planned to be discontinued altogether and replaced with
totally new products that have unibody construction. Some of the trend
for mid-size SUVs being replaced by unibody vehicles is already visible
in the marketplace and reflected in NHTSA's forecast of the MY 2011
light vehicle market.
    Concerning engine trends, the manufacturers' plans show a
significant amount of engine downsizing. This downsizing is of two
major types: first, replacing existing engines with smaller
displacement engines while keeping the same number of cylinders per
engine; second, replacing existing engines with engines having a
smaller number of cylinders (e.g., 6-cylinder engines instead of 8-
cylinder engines and 4-cylinder engines instead of 6-cylinder engines).
The plans indicate that for many of the engines being downsized, the
replacement engines have some form of advanced valve actuation (e.g.,
variable valve lift) combined with other technologies, such as engine
friction reduction or direct injection. When such changes occur the
replacement engines appear to provide higher fuel economy, with maximum
power and torque similar to the engines they are replacing. It is not
clear from manufacturers' product plans whether and, if so, how vehicle
prices and other performance measures (e.g., launch, gradeability) will
be affected.
    When engines are planned to be replaced with fewer-cylinder engines
(e.g., smaller V6 engines instead of large V8 engines), the plans show
some of these engines having some form of advanced valve actuation,
combined with direct injection and turbocharging. Some of these engines
also have combustion restart. These engines also provide maximum power
and torque similar to the engines they are replacing while delivering
higher fuel economy, although impacts on price and performance measures
are also uncertain.
    For some selected technologies, Table III-2 compares MY 2011
penetration rates in manufacturers' product plans from the 2007 plans
to those from the 2008 plans. This comparison reveals both increases
and decreases in planned technology application for MY 2011, including
a doubling in the planned production of hybrid electric vehicles (here,
including only ``strong'' hybrids such as power-split hybrids and plug-
in hybrids). Because this comparison is limited to MY 2011, it does not
evidence manufacturers' plans--discussed above--to redesign many
vehicles in MY 2012 (and later years) and, in doing so, to increase
further the use of some fuel-saving technologies. This also holds true
for the GM and Chrysler restructuring plans, which describe limits to
attaining anticipated MY 2011 targets, in particular for GM trucks in
that year, but at the same time differ markedly in terms of the
estimates of the total number of vehicles sold. Information on the
impact of penetration rates is of course conditioned on sales volumes,
which vary for MY 2011 from 11.1 million for Chrysler to 14.3 million
for GM. While information regarding these later technology improvements
was provided to NHTSA, it did not form the basis for the establishment
of the MY 2011 CAFE standards.
[GRAPHIC] [TIFF OMITTED] TR30MR09.007

    Manufacturers have also, in 2008, indicated plans to sell more
dual-fuel or flexible-fuel vehicles (FFVs) than indicated in the plans
they submitted to NHTSA in 2007. FFVs create a potential market for
alternatives to petroleum-based gasoline and diesel fuel. For purposes
of determining compliance with CAFE standards, the fuel economy of a
FFV is, subject to limitations, adjusted upward to account for this
potential.\100\ However, NHTSA is precluded from ``taking credit'' for
the compliance flexibility by accounting for manufacturers' ability to
earn and use credits in determining what standards would be ``maximum
feasible.''\101\ Some manufacturers plan to produce a considerably
greater share of FFVs than can earn full credit under EPCA. The
projected average FFV share of the market in MY 2011 is 14 percent for
the NPRM and 17 percent for the final rule.
---------------------------------------------------------------------------

    \100\ See 49 U.S.C. 32905 and 32906.
    \101\ 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

    Consistent with these expected trends toward wider application of
fuel-saving technologies, the product plan data indicates that almost
all manufacturers expect to produce a more efficient fleet than they
had planned to produce in 2007. However, because manufacturers' product
plans also reflect simultaneous changes in fleet mix and other vehicle
characteristics, the relationship between increased technology
utilization and

increased fuel economy cannot be isolated with any certainty. To do so
would require an apples-to-apples ``counterfactual'' fleet of vehicles
that are, except for technology and fuel economy, identical--for
example, in terms of fleet mix and vehicle performance and utility. As
a result, NHTSA's baseline market forecast shows industry-wide average
fuel economy levels somewhat higher than shown in the NPRM. Average
fuel economy for MY 2011 is 26.0 mpg in the NPRM baseline forecast, and
26.5 mpg in the final rule.
    These changes are shown in greater detail below in Table III-3a,
which shows manufacturer-specific CAFE levels (not counting CAFE
credits that some manufacturers expect to earn by producing flexible
fuel vehicles) planned in 2007 for passenger cars and light trucks.
Table III-3b shows the combined averages of these planned CAFE levels.
Tables III-4a and III-4b show corresponding information from
manufacturers' 2008 plans. These tables demonstrate that, with very few
exceptions, manufacturers are planning to increase overall average fuel
economy beyond the levels shown in the plans they submitted in 2007. In
addition, according to the restructuring plans submitted to the
Treasury Department, GM states that it will reach average fleet fuel
economy of 32.5 mpg for passenger vehicles and 23.6 mpg for trucks in
MY 2011, compared to the 30.3 and 21.4 reported in Table III-4a,
below.\102\ Also, Chrysler's restructuring plan states that the company
plans to accelerate its utilization of more fuel-efficient power
trains, for example, to improve fuel efficiency on a remixed product
line. In addition, Chrysler plans, according to the restructuring, to
offer flexible fuel capability in half of its light trucks by 2012.
---------------------------------------------------------------------------

    \102\ Unlike the values shown in Table III-4a, the average fuel
economy levels shown in GM's restructuring plan reflect ``full usage
of all credit flexibilities under the CAFE program.'' It is not
clear how much of the difference between Table III-4a and GM's
February 2009 estimates is accounted for by such flexibilities.
[GRAPHIC] [TIFF OMITTED] TR30MR09.008

[GRAPHIC] [TIFF OMITTED] TR30MR09.009

[GRAPHIC] [TIFF OMITTED] TR30MR09.010

    Tables III-5 through III-7 summarize other changes in
manufacturers' product plans between those submitted to NHTSA in 2007
(for the NPRM) and 2008 (for the final rule). These tables present
average vehicle footprint, curb weight, and power-to-weight ratios for
each of the seven largest manufacturers, and for the overall industry.
The tables do not identify manufacturers by name, and do not present
them in the same sequence.
    Table III-5 shows that manufacturers' latest plans reflect a very
slight (less than 0.1 square feet) increase in overall average
passenger vehicle size, and suggests that manufacturers currently plan
to sell larger trucks than they reported previously. However, these
planned increases are, in the aggregate, attributable to the
reassignment of vehicles from the light truck to the passenger car
fleet. The average planned footprint among all planned passenger cars
and light trucks remained unchanged.
[GRAPHIC] [TIFF OMITTED] TR30MR09.011

    Table III-6 shows that manufacturers' latest plans reflect a small
increase in overall average vehicle weight. However, for both the
passenger car and light truck fleets, the reassignment of some light
trucks to the passenger car fleet caused the average curb weight for
both fleets to increase, even though doing so did not (and, of course,
could not) change the overall average curb weight. Without these
reassignments, the average curb weights of the passenger car and light
truck fleets would have dropped by about 5 and 35 pounds,
respectively.\103\
---------------------------------------------------------------------------

    \103\ Notwithstanding the reassignment of some vehicles to the
passenger car fleet, manufacturers' July 2008 product plans also
indicated shifts in the mix of passenger cars and light trucks, such
that overall average curb weight increased despite these small
decreases in average passenger car and average light truck curb
weight.

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

[GRAPHIC] [TIFF OMITTED] TR30MR09.012

    Table III-7 shows that manufacturers' latest plans reflect a small
increase (about 1.7 percent) in overall average performance, and
suggests that increases will mostly occur in the light truck fleet.
Considering that this 3.5 percent increase in light truck performance
is accompanied by a 2.7 percent increase in light truck curb weight,
this suggests that (1) the vehicles being reassigned to the passenger
car fleet are among the less powerful (per pound) of the vehicles
previously assigned to the light truck fleet and (2) manufacturers are
planning to install somewhat more powerful engines in many light trucks
than previously reported to NHTSA. This trend is detectable by analysis
of the detailed product plans, and is appears to be corroborated by the
reported change in intended product mix that GM and Chrysler state in
their restructuring plans.
[GRAPHIC] [TIFF OMITTED] TR30MR09.013

    These overall trends mask the fact that manufacturers' plans did
not all change in the same ways. In terms of planned average footprint,
changes in manufacturers' plans ranged from a 4 percent decrease to a 5
percent increase. In terms of planned average curb weight and power-to-
weight ratio, these ranges covered -4 percent to 3 percent and -5
percent to 15 percent, respectively.
    NHTSA recognizes that some manufacturers' plans to increase vehicle
performance reflect an intention to apply some fuel-saving technologies
in ways that do not hold performance and utility constant, and
therefore do not achieve the same fuel economy increases that NHTSA
would assume when estimating the effect of adding these technologies
for the sole purpose of complying with CAFE standards. This continues
what has long been standard practice in the industry. Vehicle
performance, amenities, and utility have been generally increasing for
more than a century, in response to consumer demand. Manufacturers have
applied innumerable technological advances during that time, and
although they have achieved significant fuel economy gains, they have
not applied these technological advances for the sole purpose of
increasing fuel economy. When applying a given technology to a given
vehicle, a manufacturer does so in a way that balances multiple vehicle
characteristics, including fuel economy. For example, while a
manufacturer might make both a gasoline and diesel version of a given
sedan, the diesel version might offer more weight-increasing amenities
(e.g., luxury seating) and significantly better performance (e.g.,
torque). In this case, the diesel version would have greater value to
the consumer, and would thus command a higher price.
    The Union of Concerned Scientists (UCS) and some other commenters
suggested that manufacturers' product plans, and NHTSA's use of these
plans, may have at least the appearance of wrongdoing.\104\ Such
comments cite a ``lack of transparency'' ultimately traceable to the
fact that the submitted product plans contain confidential business
information, which the agency is prohibited by federal law from
disclosing, as discussed above. However, NHTSA believes these
perceptions may also arise because UCS and others realize that
manufacturers often use technology to increase performance (and other
vehicle characteristics), not just to increase fuel economy, and thus
may assign a fuel economy ``effectiveness'' to a technology in their
product plans that is lower than if the technology was used solely to
increase fuel economy. If so, NHTSA rejects the notion that for
manufacturers to do so constitutes any

form of ``wrongdoing.'' Manufacturers compete in a marketplace that
reflects the values that consumers place on vehicle amenities,
performance, and utility, as well as fuel economy.
---------------------------------------------------------------------------

    \104\ See, e.g., UCS, p. 14.
---------------------------------------------------------------------------

    When NHTSA estimates the cost and effect of adding technologies in
response to CAFE standards, the agency is treating these technologies
as being applied solely for that purpose; therefore, the agency's
analysis reflects an attempt to hold amenities, performance, and
utility constant. Thus, NHTSA's analysis estimates means by which
manufacturers could comply with CAFE standards. Manufacturers, however,
determine how they actually will comply. As an example, if a
manufacturer plans to apply technologies in ways that increase vehicle
performance in addition to increasing fuel economy, NHTSA would have to
find a way of accounting for the value that those performance increases
represent. While the manufacturers seeking federal funds have reported
plans to alter their product mix in favor of smaller, more fuel-
efficient vehicles, it is too soon to tell to what extent consumers
will adapt to such a product mix for MY 2011 (which may, to a large
extent, depend on fuel prices), or whether the rest of the industry
will follow or instead decide to serve the market for larger
performance vehicles left behind by GM and Chrysler.
    Expected model years in which each vehicle model will be redesigned
or freshened constitute another important aspect of NHTSA's market
forecast. As discussed in Section IV, NHTSA's analysis supporting
today's rulemaking times the addition of most technologies to coincide
with either a vehicle redesign or a vehicle freshening. Product plans
submitted to NHTSA preceding both the NPRM and the final rule contained
manufacturers' estimates of vehicle redesign and freshening schedules.
However, as discussed in Section IV, NHTSA estimated that in the
future, most vehicles would be redesigned on a five-year schedule, with
vehicle freshening (i.e., refresh) occurring every two to three years
after a redesign. After applying these estimates, the shares of
manufacturers' passenger car and light truck estimated to be redesigned
in MY 2011 were as summarized below for the seven largest
manufacturers. Table III-8 shows the percentages of each manufacturer's
fleets expected to be redesigned in MY 2011 from the market forecast
used by NHTSA in the analysis documented in the NPRM. To protect
confidential information, manufacturers are not identified by name.
Table III-9 presents corresponding estimates from the analysis
supporting today's final rule. To further protect confidential
information, the numbering of individual manufacturers is different
from that shown in Table III-8.
[GRAPHIC] [TIFF OMITTED] TR30MR09.014

    We continue, therefore, to estimate that manufacturers' redesigns
will not be uniformly distributed across model years. This is in
keeping with standard industry practices, and reflects what
manufacturers actually do-NHTSA has observed that manufacturers in fact
do redesign more vehicles in some years than in others. NHTSA staff
have closely examined manufacturers' planned redesign schedules,
contacting some manufacturers for clarification of some plans, and
confirmed that these plans remain unevenly distributed over time. For
example, although Table 9 shows that NHTSA expects Company 2 to
redesign 34 percent of its passenger car models in MY 2011, current
information indicates that this company will then redesign only (a
different) 10 percent of its passenger cars in MY 2012. Similarly,
although Table 9 shows that NHTSA expects four of the largest seven
light truck manufacturers to redesign virtually no light truck models
in MY 2011, current information also indicates that these four
manufacturers will redesign 21-49 percent of their light trucks in MY
2012. GM and Chrysler's recent restructuring plans lend support to
these observations. Chrysler described its planned entries of new
vehicles (its ``launch cadence'') in

its plan, and there is clear phasing, with MY 2011 experiencing many
new introductions and some later years having none.\105\
---------------------------------------------------------------------------

    \105\ Chrysler plan, p. 135.
---------------------------------------------------------------------------

    NHTSA understands that a manufacturer may choose to time the
application of technologies to coincide with planned redesigns, and
elect in one model year to apply more technology than needed to meet
its required CAFE level in that year. However, NHTSA has decided not to
attempt to represent this type of manufacturer response to the MY 2011
CAFE standards because it is not relevant for the current
rulemaking.\106\ NHTSA will consider this issue further in future
rulemaking analyses.
---------------------------------------------------------------------------

    \106\ Additionally, although the agency will reconsider this
issue in future rulemakings, at this time the agency is not
confident that it has the statutory authority to base its
determination of the maximum feasible CAFE standard in a given model
year on manufacturers' ability to over-comply during prior model
years in which more vehicles were redesigned.
---------------------------------------------------------------------------

2. Once NHTSA has the product plans, how does it develop the baseline?
    In all cases, manufacturers' sales volumes were normalized to
produce passenger car and light truck fleets which reflected each
manufacturers' MY 2008 market shares within the aggregate vehicle sales
volume forecast in EIA's 2008 Annual Energy Outlook. NHTSA does this in
order to develop a market forecast that is realistic in terms of both
its overall size as well as manufacturers' relative market shares. The
product mix for each manufacturer that submitted product plans was
preserved and, in the case of those than did not submit plans, the
product mix used was the same as indicated in their pre-model year 2008
CAFE data. As was discussed earlier, the manufacturers themselves are
uncertain about future aggregate sales volumes. Although the market is
facing a downturn of unprecedented magnitude, NHTSA currently expects
that pent-up demand (driven, for example, by the continued use and
eventual scrappage of existing vehicles) and an eventual economic
recovery will, over time, bring sales back to more historic levels.
    CBD commented that this method of establishing the baseline fleet
``has illegally constrained [NHTSA's] analysis by locking [NHTSA] into
the assumption that a manufacturer's fleet mix need not, and will not,
change in response to'' increasing consumer demand for vehicles with
improved fuel economy. Whether NHTSA should incorporate market shifts
in its modeling has been a theme in comments for the past several CAFE
rulemakings. Comments with regard to market shift tend to address two
different issues. First, commenters request that NHTSA assume a higher
fuel economy baseline than manufacturer product plans indicate, due to
market shifts occurring because consumers demand higher fuel economy
even without CAFE standards. The Mercatus Center, for example, raised
this point in comments to the NPRM. Second, commenters suggest that
NHTSA should incorporate the market shifts that result due to CAFE
regulation, as manufacturers adjust vehicle prices and fuel economy
levels, and consumers respond to those changes. The Alliance
recommended that NHTSA use NERA's nested logit model, for example,
since it attempts to account for ``actual consumer demand behavior'' to
address this issue.
    NHTSA agrees in principle that some kind of ``market shift'' model
could provide useful information regarding the possible effects of
potential new CAFE standards, and has researched how to integrate such
a model into its stringency analysis. NHTSA recognizes that the product
plans on which the agency relies to determine CAFE stringency represent
a snapshot, and are subject to change in response to consumer demand,
whether driven by CAFE or by extrinsic factors. Although NHTSA has now
spent several years considering how to incorporate market shifts into
its analysis of potential CAFE standards, the agency has still not been
able to develop credible coefficients specifying such a model, and we
have therefore continued to refrain in the final rule from integrating
a market share model into the Volpe model.\107\ However, manufacturer
product plans for MY 2011 do already, at a minimum, reflect whatever
market shifts the manufacturers believe will occur in the absence of
regulations. Additionally, the agency conducts a separate analysis of
potential changes in manufacturers' overall sales volumes. NHTSA will
continue to consider ways in which to incorporate market shift modeling
into its analysis for future rulemakings. Recent upheavals in the
economy, including historically quick run-ups in gasoline prices
followed by as dramatic declines, greatly affect consumer demand for
vehicles. Econometric models such as nested logit are necessarily
calibrated on historic data and thus, while offering a consistent
method for describing the future, are constrained to reflect behavior
based on past reactions to events. The release of the restructuring
plans for GM and Chrysler are cases in point. They show considerable
alterations in product plans, including reduction of planned sales
volumes and nameplates, along with introduction of new models and
accelerated adoption of technology, that appear to reflect a break with
historical trends.
---------------------------------------------------------------------------

    \107\ NHTSA is aware that Resources for the Future (RFF) has
drafted a report regarding its examination of consumer behavior
modeling. Although a market share model, as currently envisioned by
NHTSA, would also need to address manufacturer behavior (in
particular, regarding pricing), NHTSA will consider RFF's work in
evaluating future changes to NHTSA's analytical methods. NHTSA has
met with EPA and RFF staff to discuss the status of RFF's efforts,
and will consider any results RFF is able to develop.
---------------------------------------------------------------------------

    Thus, the baseline fleet for MY 2011, or the baseline market
forecast, consists of the vehicles present in the normalized and
completed product plans, before NHTSA applies technologies to them.
Manufacturers typically provide product plans not only for the years
covered by a CAFE rulemaking, but also for prior years--so, for
purposes of this rulemaking, NHTSA has product plans from many
manufacturers beginning with MY 2008. As discussed above, NHTSA uses
the baseline market forecast as a way of gauging what manufacturer fuel
economy levels would exist in the absence of new CAFE standards. In
order to provide a point of reference for estimating the costs and
benefits of new standards, NHTSA assumes that, without new standards,
the fuel economy standards would remain at the level of the MY 2010
standards.\108\ However, the baseline market forecast, which again, is
based on the product plans, does not show all manufacturers in
compliance with the MY 2010 standards. This results from manufacturers'
ability to use compliance flexibilities, like credits (AMFA and
otherwise) and fines, to meet the standards, which NHTSA is statutorily
prohibited from considering in setting the standards.
---------------------------------------------------------------------------

    \108\ As a point of reference for analysis, we note that
assuming that CAFE standards remain at 2010 levels is different from
assuming that manufacturer fuel economy levels remains at their 2010
levels. As a legal matter under EISA, after MY 2011, if NHTSA does
not set standards for a model year, there are no standards for that
model year. However, as a practical matter, it is reasonable to
assume that manufacturers would proceed as if the previous year's
standard carried over, rather than changing their vehicles and
allowing fuel economy to fall without limit.
---------------------------------------------------------------------------

    In order to ensure that our analysis does not incorporate such
flexibilities and thus result in double-counting of costs that were
evaluated in the previous rulemaking, NHTSA must adjust the baseline
market forecast upwards. For manufacturers whose

product plans show fuel economy levels below the MY 2010 standards,
NHTSA adjusts them upwards by adding technology to the manufacturer's
fleet in order to get the manufacturer into compliance without use of
credits or payment of fines. For manufacturers whose product plans meet
or exceed the MY 2010 standards, NHTSA incorporates them as-is. NHTSA
develops an adjusted baseline because the costs and benefits of
reaching the MY 2010 standards were already accounted for in prior
rulemakings, just as the costs and benefits of reaching the MY 2011
standards are accounted for in the current rulemaking. To avoid double-
counting the costs to manufacturers or the benefits to society required
to meet the MY 2010 standards, NHTSA develops this adjusted baseline,
which the agency then uses in analyzing the MY 2011 standards.
    The Alliance commented that NHTSA should use an ``actual'' baseline
instead of a ``projected'' baseline. The Alliance stated that ``NHTSA
assumes that manufacturers were going to increase fuel economy
significantly in numerous ways apart from a congressional or agency
mandate to do so,'' and argued that ``by failing to consider the price
increases needed to reach its `projected baseline,' NHTSA
underestimates the increase in vehicle prices by about $260 per vehicle
for cars and $920 per vehicle for trucks on average.''
    As explained, NHTSA would be double-counting to incorporate the
costs of meeting the MY 2010 standards in the cost/benefit analysis for
the current rulemaking. NHTSA discusses these costs, however, in the
FRIA in Chapter I.
3. How does NHTSA's market forecast reflect current market conditions?
    NHTSA's market forecast for MY 2011, which is based significantly
on confidential product plans provided to the agency by vehicle
manufacturers, reflects the agency's best judgment at the time it was
developed. Manufacturers submitted plans during the summer of 2008. In
preceding months, the industry had begun to show signs of stress, and
the agency believes manufacturers' revised plans submitted after the
NPRM were informed by this. NHTSA is well aware that market conditions
have deteriorated since late summer, just as the agency is aware that
gasoline prices have fallen considerably in recent months.
    The agency notes, as mentioned above, that manufacturers' product
plans were submitted along with manufacturers' indications that these
plans were generally informed by expectations that relatively high fuel
prices would prevail in the future. Although NHTSA did not request that
manufacturers provide comprehensive and detailed forecasts of the world
economy, including markets for credit and petroleum, the agency
believes that manufacturers anticipated that, at least from MY 2011
forward, the economic environment would look much less dire than more
recent events would suggest. The agency believes these expectations
were consistent with those embodied in the high price scenario in EIA's
AEO 2008, upon which the agency has based the fuel prices and total
light vehicle market size used in the analysis supporting today's final
rule.
    NHTSA is cautiously hopeful that market conditions will rebound,
and our market forecast remains consistent with that expectation. The
recent restructuring plans submitted by Chrysler and GM, while
diverging in absolute terms with respect to sales volumes, also
anticipate significant sales growth by the middle part of the decade.
In any event, were NHTSA to adopt more pessimistic expectations, those
expectations would need to be reflected in other economic forecasts--in
particular of petroleum prices. Were NHTSA to apply economic estimates
that assume credit markets remain very constricted during MY 2011, it
should, for internal consistency, apply considerably reduced estimates
of the overall number of light vehicles sold in the U.S., and
potentially lower estimates of gasoline and diesel fuel prices during
the lifetimes of the vehicles covered by the standards.
    NHTSA has concluded that the forecasts it has applied in its
current rulemaking for MY 2011 reflect the best internally consistent
information available. The agency will, of course, update these
forecasts in future rulemakings, and will base its analysis in those
rulemakings on information--public, commercially-available, or
confidential--that it considers most indicative of the fleets that
manufacturers are likely to produce in future model years

IV. Fuel Economy-Improving Technologies

    As explained above, pursuant to the President's January 26, 2009
memorandum, this final rule establishes passenger car and light truck
CAFE standards for one year, MY 2011. Although this final rule
establishes standards for that year alone, the agency undertook a
comprehensive analysis of fuel economy-improving technologies with a
time horizon similar to the one considered in the 2002 National Academy
of Sciences (NAS) CAFE report. Like NAS, the agency considered
technologies that are readily available, well known and could be
incorporated into vehicles once production decisions are made (these
are referred to as ``production intent'' technologies). Other
technologies considered, called ``emerging'', are beyond the research
phase and under development, but are not widely used at this time. The
agency did not consider technologies in the research stage because
their costs and/or performance are not presently well known.
    The agency has elected to include the full analysis in this final
rule for several reasons. First, it supplements the analysis of fuel
saving technology released by the 2002 NAS study. Second, it places in
meaningful context the portion of the analysis that relates directly to
MY 2011, showing which technologies are not available for that year and
why. The agency typically evaluates technologies within a time context
spanning more than a single model year, even if the rulemaking itself
addresses only a single year as in the current rulemaking, because when
manufacturers add technologies to vehicle models in order to meet CAFE
standards, they tend to phase them in over several model years,
consistent with vehicle redesign and refresh schedules, supplier
contract procedures, the need for testing and validation of new
technologies, and so forth. Consequently, although the final rule
establishes standards for MY 2011 only, NHTSA believes that including
the entire technology analysis will increase public understanding of
the agency's estimates for MY 2011 of technology costs, effectiveness,
and availability, as well as manufacturer vehicle freshening and
redesign cycles.
    With that in mind, the following section details the cost and
effectiveness estimates completed for technologies in the production
intent or emerging technology phase timeline. The estimates are drawn
from an analysis conducted in the summer of 2008. It relied as much as
possible on published studies and confidential product plan data
submitted by manufacturers on July 1, 2008 in response to the agency's
NPRM request for comments published May 2, 2008. The analysis was
conducted by engineers from DOT and Ricardo, an international
consulting firm that specializes in automotive engineering consulting
(discussed below). The engineering team used all data available at that
time, along with their expert opinion to derive cost and effectiveness
estimates for technologies

either in production or in the emerging stage of production for
purposes of this rulemaking.
    The agency believes that the resulting estimates are the best
available for MY 2011, given the information that existed at the time.
NHTSA recognizes, however, that the analysis of and public debate over
the cost and effectiveness of the various fuel saving technologies is
an ongoing one. It recognizes too that aspects of its technology
analysis will likely require updating or otherwise merit revision for
the next CAFE rulemaking. As time progresses, new research occurs, new
studies become available and product plan information changes. As with
all CAFE rulemakings and pursuant to the President's memorandum, the
agency will take a fresh look at all of its technology-related
assumptions for the purpose of future rulemakings.

A. NHTSA Analyzes What Technologies Can Be Applied Beyond Those in the
Manufacturers' Product Plans

    One of the key statutory factors that NHTSA must consider in
setting maximum feasible CAFE standards for each model year is the
availability and feasibility of fuel saving technologies. When
manufacturers submit their product plans to NHTSA, they identify the
technologies they are planning for each vehicle model in each model
year. They also provide their assessments of the costs and
effectiveness of those fuel saving technologies. The agency uses the
manufacturers' product plan data to ascertain the ``baseline''
capabilities and average fuel economy of each manufacturer. Given the
agency's need to consider economic practicability in determining how
quickly additional fuel saving technologies can be added to the
manufacturers' vehicle planned fleets, the agency researches and
develops, based on the best available information and data, its own
list of technologies that it believes will be ready for implementation
during the model years covered by the rulemaking. This includes
developing estimates of the costs and effectiveness of each technology
and lead time needs. The resultant technology assumptions form an input
into the Volpe model. The model simulates how manufacturers can comply
with a given CAFE level by adding technologies beyond those they
planned in a systematic, efficient and reproducible manner. The
following sections describe NHTSA's fuel-saving technology assumptions
and methodology for estimating them, and their applicability to MY 2011
vehicles.

B. How NHTSA Decides Which Technologies to Include

1. How NHTSA Did This Historically, and How for the NPRM
    In the agency's last two CAFE rulemakings, which established light
truck CAFE standards for MYs 2005-2007 and MYs 2008-2011, NHTSA relied
on the 2002 National Academy of Sciences' report, ``Effectiveness and
Impact of Corporate Average Fuel Economy Standards'' \109\ (``the 2002
NAS Report'') for estimating potential fuel economy effectiveness
values and associated retail costs of applying combinations of
technologies in 10 classes of production vehicles. The NAS study was
commissioned by the agency, at the direction of Congress, in order to
provide independent and peer reviewed estimates of cost and
effectiveness numbers. The NAS list was determined by a panel of
experts formed by the National Academy of Sciences, and was then peer-
reviewed by individuals chosen for their diverse perspectives and
technical expertise in accordance with procedures approved by the
Report Review Committee of the National Research.
---------------------------------------------------------------------------

    \109\ National Research Council, ``Effectiveness and Impact of
Corporate Average Fuel Economy (CAFE) Standards,'' National Academy
Press, Washington, DC (2002). Available at http://www.nap.edu/
openbook.php?isbn=0309076013 (last accessed October 11, 2008).
---------------------------------------------------------------------------

    In the NPRM for the MY 2011-2015 CAFE standards, NHTSA explained
that there has been substantial advancement in fuel-saving automotive
technologies since the publication of the 2002 NAS Report. New
technologies, i.e., ones that were not assessed in the NAS report, have
appeared in the market place or are expected to appear in the timeframe
of the proposed rulemaking. Also, new studies have been conducted and
reports issued by several other organizations providing new or
different information regarding the fuel economy technologies that will
be available and their costs and effectiveness values. To aid the
agency in assessing these developments, NHTSA contracted with the NAS
to update the fuel economy section, Chapter 3, of the 2002 NAS Report.
However, as NHTSA explained, the NAS update was not available in time
for this rulemaking.
    Accordingly, NHTSA worked with EPA staff to update the technology
assumptions, and used the results as a basis for its NPRM. EPA staff
published a related report and submitted it to the NAS committee.\110\
---------------------------------------------------------------------------

    \110\ EPA Staff Technical Report: Cost and Effectiveness
Estimates of Technologies Used to Reduce Light-Duty Vehicle Carbon
Dioxide Emissions, EPA 420-R-08-008, March 2008.
---------------------------------------------------------------------------

2. NHTSA's Contract with Ricardo for the Final Rule
    NHTSA specifically sought comment on the estimates, which it had
developed jointly with EPA, of the availability, applicability, cost,
and effectiveness of fuel-saving technologies, and the order in which
the technologies were applied. See 73 FR 24352, 24367. To aid the
agency in analyzing those comments and increasing the accuracy, clarity
and transparency of its technology assumptions and methodologies
employed in developing them, it hired an international consulting firm,
Ricardo, which specializes in automotive engineering consulting.
Ricardo, which describes itself as an eco-innovation technology
company, is a leading independent provider of technology, product
innovation, engineering solutions, software and strategic consulting.
Its skill base includes the state-of-the-art in low emissions and fuel-
efficient powertrain and vehicle technology. Its customers include
government agencies here and abroad and the world's automotive,
transport and new-energy industries.\111\ For example, it has provided
technical consulting on low CO2 strategies to the UK
Department for Transport (DfT).\112\ Additionally, in December 2007,
Ricardo completed an important study for EPA titled ``A Study of
Potential Effectiveness of Carbon Dioxide Reducing Vehicle
Technologies.'' \113\
---------------------------------------------------------------------------

    \111\ More information about Ricardo's work is available at
their Web site, http://www.ricardo.com (last accessed September 20,
2008). Its 2007 Annual Report provides a comprehensive view of some
of its current work. See http://www.ricardo.com/investors/download/
annualreport2007.pdf (last accessed September 22, 2008).
    \112\ Ricardo UK Ltd., ``Understanding manufacturers' responses
to policy measures to incentivise fuel efficiency,'' Oct. 5, 2007.
Available at http://www.dft.gov.uk/consultations/closed/
co2emissions/ricardoreport.pdf (last accessed Oct. 4, 2008).
    \113\ A slightly updated (June 2008) version of Ricardo's study
for EPA is available on EPA's Web site, at http://www.epa.gov/otaq/
technology/420r08004a.pdf (last accessed September 20, 2008).
---------------------------------------------------------------------------

    Ricardo's role was as a technical advisor to NHTSA staff. In this
capacity, Ricardo helped NHTSA undertake a comprehensive review of the
NPRM technology assumptions and all comments received on those
assumptions, based on both old and new public and confidential
manufacturer information. NHTSA and Ricardo staff reviewed and compared
comments on the availability and applicability of technologies, and the
logical progression between them. NHTSA also reviewed and compared the
methodologies used for determining

the costs and effectiveness of the technologies as well as the specific
estimates provided. Relying on the technical expertise of Ricardo and
taking into consideration all the information available, NHTSA revised
its estimates of the availability and applicability of many
technologies, and revised its estimate of the order in which the
technologies were applied and how they are differentiated by vehicle
class, as well as the costs and effectiveness estimates and used the
revised numbers in analyzing alternative levels of stringency.
    While NHTSA sought Ricardo's expertise and relied significantly on
their assistance as a neutral expert in developing its technical
assumptions, it retained responsibility for the final estimates. The
agency believes that the representation of technologies for MY 2011--
that is, estimates of the availability, applicability, cost, and
effectiveness of fuel-saving technologies, and the order in which the
technologies were applied--used in this rulemaking is more accurate
than that used in the NPRM, and is the best available for purposes of
this rulemaking.

C. What Technology Assumptions has NHTSA Used for the Final Rule?

1. How do NHTSA's technology assumptions in the final rule differ from
those used in the NPRM?
    This final rule uses the same basic framework as the NPRM. However,
NHTSA made several changes to its technology assumptions based on
comments and information received during the rulemaking. As in the NPRM
and the MY 2008-2011 light truck rule, the agency relied on the Volpe
model CAFE Compliance and Effects Modeling System which was developed
by the Department of Transportation's Volpe National Transportation
Systems Center (Volpe Center) to apply technologies. The model, known
as the Volpe model, is the primary tool the agency has used in
conducting a ``compliance analysis'' of various CAFE stringencies. The
Volpe model relied on the same types of technology related inputs as in
previous rules, including market data files, technology cost and
effectiveness estimates by vehicle classification, technology
synergies, phase-in rates, learning curve adjustments, and technology
decision trees.
    Regarding the decision trees, both the structure of the trees and
ordering of the technologies were revised. The decision trees have been
expanded so that NHTSA is better able to track the incremental and net/
cumulative cost and effectiveness of each technology, which
substantially improves the ``accounting'' of costs and effectiveness
for the final rule.\114\ The revised decision trees also have improved
integration, accuracy, and technology representations.
---------------------------------------------------------------------------

    \114\ In addition to the (simplified) decision trees, as
published in this document, NHTSA also utilized ``expanded''
decision trees in the final rule analysis. Expanded decision trees
graphically represent each unique path, considering the branch
points available to the Volpe model, which can be utilized for
applying fuel saving technologies. For instance, the engine decision
tree shown in this document has 20 boxes representing engine
technologies, whereas the expanded engine decision tree requires a
total of 45 boxes to accurately represent all available application
variants. Expanded decision trees presented a significant
improvement, compared to the NPRM analysis, in the overall
assessment and tracking of applied technologies since they allowed
NHTSA staff to accurately view and assess both the incremental and
the accumulated, or net cost and effectiveness at any stage of
technology application in a decision tree. Because of the large
format of the expanded decision trees, they could not be included in
the Federal Register, so NHTSA refers the reader to Docket No.
NHTSA-2008-0177. Expanded decision trees for the engine,
electrification/transmission/hybridization, and the vehicle
technologies (three separate decision trees) were developed for each
of the 12 vehicle technology application classes (the vehicle
subclasses discussed in Section IV.D.4) and the three expanded
decision trees for the Large Car subclass have been placed in the
docket as an example for the reader's information.
---------------------------------------------------------------------------

    In revising the decision trees, NHTSA updated, combined, split and/
or renamed technologies. Several technologies were added, while others
were deleted. The three technologies that were deleted because they do
not appear in either public or confidential data and are primarily in
the research phase of development are: Camless Valve Actuation, Lean-
Burn Gasoline Direct-Injection and Homogenous Charge Compression
Ignition.\115\ NHTSA also added three advanced technologies based on
confidential manufacturer submissions which showed these technologies
as being emerging and currently under development. These technologies
are: Combustion Restart, Exhaust Gas Recirculation Boost, and Plug-in
Hybrids.
---------------------------------------------------------------------------

    \115\ We note that GM included lean burn HCCI in its
restructuring plans submitted to Congress, but the restructuring
plans were submitted too late for the agency to consider them in its
technology analysis, among other reasons. GM Restructuring Plan, p.
22.
---------------------------------------------------------------------------

    The Volpe model was modified to allow a non-linear phase-in rate
across the five model years, rather than a constant phase-in rate as
was used in the NPRM and in previous rules. Most technology
applications have tighter phase-in caps in the early years to provide
for additional lead time.
    In the NPRM, NHTSA applied volume-based learning factors to
technology costs for the first time. These learning factors were
developed using the parameters of learning threshold, learning rate
(decremented over two cycles), and the initial (unlearned) cost. In the
NPRM, NHTSA applied a learning rate discount of 20 percent each time a
technology was projected for use on 25,000 vehicles per manufacturer,
which was the threshold volume for learning rate discounts. The
discounts were only taken twice, at 25,000 and 50,000 vehicles. A
technology was viewed as being fully learned out at 100,000 units.
    The agency also reconsidered volume-based learning factors and made
significant revisions. First, the volume learning is now applied on an
industry basis as opposed to a manufacturer basis. This takes into
account the fact that the automobile industry shares best practices and
that manufacturers learn from that sharing to produce their vehicles at
lower costs. For the final rule, the revised learning threshold is set
to 300,000 vehicles per year by the automobile industry. This number
was developed based on comments indicating that many of the publicly
available technology cost estimates are based on production quantities
of 900,000 to 1.5 million vehicles by at least 3 manufacturers. The
agency notes, however, that none of the technologies applied in MY 2011
receive volume-based learning, due to the time frame applicable.
    For the technologies applied in the final rule, a time-based
learning factor was used in response to public comments from Ford and
others. This learning factor was not applied in the NPRM. Time-based
learning is applied to widely available, high volume, stable and mature
technologies typically purchased under negotiated multi-year
contractual agreement with suppliers. This type of an agreement is
typical of most supplier-provided fuel saving technologies. With time-
based learning, the initial cost of a technology is reduced by a fixed
amount in its second and subsequent year of availability. A fixed rate
3 percent year-over-year cost reduction is applied up to a maximum of
12 percent cost reduction.
    In the NPRM NHTSA divided vehicles into ten subclasses based on
technology applicability: four for cars and six for trucks. NHTSA
assigned passenger cars into one of the following subclasses:
Subcompact, Compact, Midsize, or Large Car. NHTSA assigned light trucks
into one of the following subclasses: Minivan, Small SUV, Medium SUV,
Large SUV, Small Pickup

Truck, or Large Pickup Truck. In its 2008 NPRM for MY 2011-2015, NHTSA
included some differentiation in cost and effectiveness numbers between
the various classes to account for differences in technology costs and
effectiveness that are observed when technologies are applied on to
different classes and subclasses of vehicles.
    For the final rule, NHTSA, working with Ricardo, increased the
accuracy of its technology assumptions by reexamining the subclasses
developed for the purpose of modeling technology application. For
passenger cars, NHTSA divided vehicles into eight subclasses based on
technology applicability by creating a performance class under each of
the four subclasses. For trucks, NHTSA established four subclasses,
including a minivan subclass, and small, midsize and large SUV/Pickup/
Van subclasses. NHTSA also provided more differentiation in the costs
and effectiveness values by vehicle subclass. The agency found it
important to make that differentiation because the agency estimated
that some technologies would have different implications for large
vehicles than for smaller vehicles.
    In summary, the revisions to NHTSA's methodology for technology
application and cost and effectiveness estimates are designed to
respond to comments, many of which focused on various inaccuracies and
lack of clarity in the NPRM. NHTSA believes that the methodology for
the final rule, as compared to the NPRM methodology, is much clearer,
more accurate, and more representative of likely manufacturer behavior,
although, of course, manufacturers are free to respond to the CAFE
standards with whatever application of technology they choose. The
revised technology related assumptions help substantially ensure the
technological feasibility and economic practicability of the MY 2011
CAFE standards promulgated in this final rule.
2. How are the technologies applied in the model?
    For the final rule, as in the NPRM, NHTSA made significant use of
the CAFE Volpe model as discussed above. The NPRM contained a detailed
discussion of the Volpe model and specifically stated its two primary
objectives as (1) identifying technologies that manufacturers could
apply in order to comply with a specified CAFE standard, and (2)
calculating the cost and effects of manufacturers' technology
applications. The NPRM also discussed other modeling systems and
approaches that NHTSA considered to accomplish these same objectives,
and also discusses why ultimately the agency chose to use the Volpe
model (see 79 FR 24352, 24391). However, having done so for this final
rule does not limit the agency's ability to use another approach for
future CAFE rulemakings, and NHTSA will continue to consider other
methods for estimating the costs and effects of adding technologies to
manufacturers' future fleets.
    The Volpe model relies on several inputs and data files to conduct
the compliance analysis, and each of these are discussed in detail in
the NPRM. Many of these inputs contain economic and environmental data
required for the full CAFE analysis. However, for the purposes of
applying technologies, the subject of this section, the Volpe model
primarily uses three data files, one that contains data on the vehicles
being manufactured, one that identifies the appropriate stage within
the vehicle's life-cycle for the technology to be applied, and one that
contains data/parameters regarding the available technologies the model
can apply. These inputs are discussed below.
    The Volpe model begins with an ``initial state'' of the domestic
vehicle market, which in this case is the market for passenger cars and
light trucks to be sold during the period covered by the final rule.
The vehicle market is defined on a model, engine, and transmission
basis, such that each defined vehicle model refers to a separately-
defined engine and a separately-defined transmission. For the final
rule, this represented roughly 5,500 cars and trucks, 700 engines, and
600 transmissions. The information, which is stored in a file called
the ``vehicle market forecast,'' is informed significantly by product
plans provided to NHTSA by vehicle manufacturers.\116\ However, the
Volpe model does not require that the market forecast be based on
confidential product plans, and the model is often tested using input
files developed using only publicly- and commercially-available
information. Also, as discussed in Section III above, EPCA does not
require NHTSA to use manufacturers' confidential product plans as a
basis for setting future CAFE standards, and the agency will continue
to base its market forecasts on whatever it determines is the best
available information, whether from public, commercially-available, or
confidential sources.
---------------------------------------------------------------------------

    \116\ The market forecast is developed by NHTSA using the
product plan information provided to the agency by individual
vehicle manufacturers in response to NHTSA's requests. The submitted
product plans contain confidential business information (CBI), which
the agency is prohibited by federal law from disclosing.
---------------------------------------------------------------------------

    In addition to containing data about each vehicle, engine, and
transmission, this file contains information for each technology under
consideration as it pertains to the specific vehicle (whether the
vehicle is equipped with it or not), the model year the vehicle is
undergoing redesign, and information about the vehicle's subclass for
purposes of technology application.
    The market forecast file provides NHTSA the ability to identify, on
a technology by technology basis, which technologies may already be
present (manufactured) on a particular vehicle, engine, or
transmission, or which technologies are not applicable (due to
technical considerations) to a particular vehicle, engine, or
transmission. These identifications are made on a model-by-model,
engine-by-engine, and transmission-by-transmission basis. For example,
if Manufacturer X advises NHTSA that Vehicle Y will be manufactured
with Technology Z, then for this vehicle Technology Z will be shown as
used. Or alternatively, NHTSA might conclude based on its own
assessment that for a given four cylinder engine, Manufacturer A cannot
utilize a particular Technology C due to an engineering issue that
prohibits it. In this case, NHTSA would, in the market forecast file,
indicate that Technology C should not be applied to this particular
engine (i.e., is unavailable). Since multiple vehicle models may be
equipped with this engine, this may affect multiple models. In using
this aspect of the market forecast file, NHTSA ensures the Volpe model
only applies technologies in an appropriate manner, since before any
application of a technology can occur, the model checks the market
forecast to see if it is either already present or unavailable.
    Manufacturers typically plan vehicle changes to coincide with
certain stages of a vehicle's life cycle that are appropriate for the
change, or in this case the technology being applied. For instance,
some technologies (e.g., those that require significant revision) are
nearly always applied only when the vehicle is expected to be
redesigned. Other technologies can be applied only when the vehicle is
expected to be refreshed or redesigned and some others can be applied
at any time, regardless of whether a refresh or redesign event is
conducted. Accordingly, the model will only apply a technology at the
particular point deemed suitable. These constraints are intended to
produce results consistent with manufacturers' product planning
practices. For each technology under consideration,

NHTSA stipulates whether it can be applied any time, at refresh/
redesign, or only at redesign. The data forms another input to the
Volpe model, as discussed in detail below, called the Technology
Refresh and Redesign Application table (Table IV-6). Each manufacturer
identifies its planned redesign model year for each of its vehicles,
and this data is also stored in the market forecast file. Vehicle
redesign/refresh assumptions are discussed in Section IV.C.9 below.
    As discussed in Section IV.C.4 on vehicle subclasses below, NHTSA
assigns one of 12 subclasses to each vehicle manufactured in the
rulemaking period. The vehicle subclass data is used for the purposes
of technology application. Each vehicle's class is stored in the market
forecast file. When conducting a compliance analysis, if the Volpe
model seeks to apply technology to a particular vehicle, it checks the
market forecast to see if the technology is available and if the
refresh/redesign criteria are met. If these conditions are satisfied,
the model determines the vehicle's subclass, which it then uses to
reference another input called the technology input file.
    In the technology input file, NHTSA has developed a separate set of
technology data variables for each of the twelve vehicle subclasses.
Each set of variables is referred to as an ``input sheet,'' so for
example, the subcompact input sheet holds the technology data that is
appropriate for the subcompact subclass. Each input sheet contains a
list of technologies available for members of the particular vehicle
subclass. The following items are provided for each technology: a brief
description, its abbreviation, the decision tree with which it is
associated, the (first) year in which it is available, the upper and
lower cost and effectiveness (fuel consumption reduction) estimates,
the learning type and rate, the cost basis, its applicability, and the
phase-in values.
    The input sheets are another method NHTSA uses to determine how to
properly apply, or in some cases constrain, a technology's application,
as well as to establish the costs and fuel consumption changes that
occur as it is applied. Examples of how technologies are applied (or
constrained) include the ``Applicability'' variable: if it is set to
``TRUE,'' then the technology can be applied to all members of the
vehicle subclass (a value of ``FALSE'' would prevent the Volpe model
from applying the technology to any member). Another example would be
the ``Year Available'' variable, which if set to ``2012'' means the
model can apply it to MY 2012 and later members, but cannot apply the
technology to MY 2011 models. The ``Learning Type'' and ``Learning
Rate'' define reductions in technology costs, if any are appropriate,
that the Volpe model may apply under certain conditions, as discussed
in the Learning Curve section below. ``Phase-in Values'' are intended
to address the various constraints that limit a manufacturer's ability
to apply technologies within a short period of time. For phase-ins,
once the model applies a given technology to a percentage of a given
manufacturers' fleet up to a specified phase-in cap, the model then
ceases to apply it further instead applying other technologies. Phase-
in caps are also discussed below in Section IV.C.10.
    Perhaps the most important data contained in the input sheets are
the cost and effectiveness information associated with each technology.
One important concept to understand about the cost and effectiveness