x = footprint (square feet)
A = highest mpg value of fuel economy target
B = lowest mpg value of fuel economy target
C = coefficient (in square feet) determining horizontal midpoint of
f(x)
D = coefficient (in square feet) determining width of transition
between A and B.

    In the NPRM, NHTSA determined the curves relating footprint to fuel
economy for a given model year and vehicle type (passenger car or light
truck) for which the harmonic average of the functional values are the
manufacturers' fuel economy targets, using the following five-step
process. (In the discussion below, we shall refer to these ten curves--
one for each model year and vehicle type--as the ``fuel economy
curves.'')
    In Step 1, NHTSA determined the ``manufacturer-optimized'' fuel
economies for each vehicle in the product plans, submitted to NHTSA
prior to the NPRM, of the seven largest manufacturers (Chrysler, Ford,
General Motors, Honda, Hyundai, Nissan, Toyota). The ``manufacturer-
optimized'' fuel economies were obtained by applying fuel economy
technologies to a given manufacturer's fleet of a given vehicle type
(cars or trucks) and model year, until the incremental benefits are
equal to the incremental costs. The resulting fuel economies were
``manufacturer-optimized'' in the sense that they maximize societal net
benefits at the level of the manufacturer, model year, and vehicle
type. This approach was used to push each manufacturer's fleet to a
point of equal effort. NHTSA restricted data to the seven largest
manufacturers because those manufacturers accounted for most of the
market and because a number of other manufacturers did not submit
product plan data and/or had histories of paying civil penalties rather
than complying with CAFE standards.
    In Step 2, NHTSA determined initial values for parameters A and B
(values revised in steps 4 and 5, described below) for each vehicle
class (passenger car and light truck) and model year as follows. For
passenger cars (and light trucks, respectively) in a given model year,
NHTSA set the initial value of the parameter A to be the harmonic
average fuel economy among the vehicles of the given model year and
vehicle type (produced by the seven largest manufacturers) comprising
the lower third (respectively, eleventh) percentile of footprint
values. NHTSA set the initial value of B to be the harmonic average
fuel economy among the vehicles of the given model year and vehicle
type (produced by the seven largest manufacturers) comprising the upper
fourth (respectively, sixth) percentile of footprint values. NHTSA set
A and B in this manner, rather than fitting them, for example, through
regression, in order to ensure that the upper and lower fuel economy
values reflect the smallest and largest models in the fleet. NHTSA
chose the percentile values it used by examining the fuel economies of
the largest and smallest car and truck models, and determining its best
assessment of appropriate cohorts, acknowledging that there are no
canonical choices for the cohorts.
    In Step 3, NHTSA determined initial values for parameters C and D
for each vehicle type and model year as follows. (Their values were
revised for MYs 2012-2014 in Step 5.) For a given model year and
vehicle type, NHTSA set the initial values of C and D to be the values
for which the average (equivalently, sum) of the absolute values of the
differences between the manufacturer-optimized fuel consumptions for
the given model year and vehicle type and the values obtained by
applying the function f(x) (defined above) to the corresponding vehicle
footprints is minimal, where the values of A and B

are taken from those determined in Step 2 and where e denotes the base
of the natural logarithm (which is approximately equal to 2.71828).
That is, NHTSA determined C and D by minimizing the average absolute
residual, commonly known as the MAD (Mean Absolute Deviation) approach,
of the corresponding constrained logistic curve. NHTSA fit the curve in
fuel consumption space rather than fuel economy space because the
manufacturer targets are in terms of the harmonic average fuel economy,
and so it is more important that the curve fit the fuel consumption
data well than that it fit the fuel economy data well. NHTSA also
explained in the NPRM that it chose to use MAD in this Step instead of
minimizing the sum of the square errors (``least squares,'' another
common approach in curve fitting) in order to lessen the influence of
outliers. NHTSA believed that it was more appropriate to use unweighted
data in fitting the curve rather than weighting the data by sales
because of large variations in model sales.
    In Step 4, NHTSA determined for each model year and vehicle class
the integer value of t that maximized the societal net benefits
(considering the seven largest manufacturers) achieved by a fuel
economy standard under which fuel consumption targets were defined by
the function
[GRAPHIC] [TIFF OMITTED] TR30MR09.054

using the values of A and B determined in Step 2, and the values of C
and D determined in Step 3.\375\ NHTSA reset the values of 1/A and 1/B
to be 1/A + 0.0001t and 1/B + 0.0001t, respectively. (These were not
the final values of A and B for model years 2012-2014, which were
further adjusted in Step 5.) That is, NHTSA initially set the
stringency of the curves to maximize societal net benefits.
---------------------------------------------------------------------------

    \375\ This procedure uniformly shifts the upward and downward
(depending on whether t is positive or negative), but on the same
gallon per mile basis corresponding to the harmonic averaging of
fuel economy values.
---------------------------------------------------------------------------

    In Step 5, NHTSA adjusted the values of A, B, C, and D for
passenger cars and light trucks in MYs 2012-2014 as follows. NHTSA
replaced the values of A, B, C, D for passenger cars (respectively,
light trucks) in MYs 2012-2014 with the values obtained by making even
annual steps between the values obtained for MYs 2011 and 2015 under
Step 4. For A and B, these steps were made evenly on a gallon per mile
basis. For C and D, these steps were made evenly on a square foot
basis. Having done so, NHTSA then repeated Step 4 beginning with these
adjusted coefficients.
    NHTSA explained in the NPRM that it performed Step 5 because the MY
2011 car curve crossed the MY 2012 car curve and the MY 2011 truck
curve crossed the MY 2012 truck curve. This is undesirable because it
implies that the fuel economy target for a MY 2012 car in a certain
range of footprint values is lower than that for a MY 2011 car of the
same size (and likewise with trucks). We note that no further curve
crossings occurred. That is, the passenger car (respectively, light
truck) curves for MYs 2011-2015 that resulted upon the completion of
Step 5 were mutually non-intersecting.
    NHTSA thus set the fuel economy curve for a given model year and
vehicle type to be
[GRAPHIC] [TIFF OMITTED] TR30MR09.055

where A, B, C, and D assume the final values determined in Steps 1-5.
(Recall that the function f(x) above is in fuel consumption space, not
fuel economy space.) The values of A, B, C, and D in the NPRM for each
vehicle type and model year were as follows.
[GRAPHIC] [TIFF OMITTED] TR30MR09.056

    NHTSA noted in the NPRM that a manufacturer's CAFE standard may
decrease in a given year, compared to the prior year, even though the
passenger car (respectively, light truck) fuel economy curves increase
in functional values with increasing model year. A manufacturer's
standard may decrease as a result of increasing the

footprints of the vehicles it produces in the later of the two years by
a sufficiently large amount. (In the NPRM, NHTSA referred to the
decrease in vehicle or manufacturer fuel economy targets from one year
to the next as ``backsliding.'') However, as explained in the NPRM,
NHTSA believes it is unlikely that any manufacturer would take such a
step in the final rule time frame, given what appears to be a growing
consumer preference for smaller, higher-fuel economy vehicles.
    NHTSA noted in the NPRM that the curves obtained for passenger cars
might be undesirably steep near the inflection point, where small
changes in footprint can lead to not so small changes in target fuel
economy. NHTSA requested particular comment on this issue and a number
of other issues, including the determination of cohorts used to set
values for the asymptotes A and B, the manner in which C and D are
determined, the treatment of outliers, and curve crossing.
    NHTSA received several comments concerning the manner in which it
fit the fuel economy curves.
Comments Regarding the Fact That the Car and Truck Curves Are Set
Independently
    Three commenters (Honda, Wenzel and Ross, and Public Citizen)
stated it would or might be better if rather than setting the car and
truck curves independently, the car and truck fuel consumption data
were pooled and a single curve fit to the pooled data. Honda commented
that this would result in standards that treat cars and trucks more
equally and could fix the steepness problem with the car curve. Wenzel
and Ross argued that setting the same standards for passenger cars and
light trucks would lead to manufacturers producing relatively fewer
pickups and truck-based SUVs, compared to cars and crossover SUVs, and
this would result in fewer deaths and injuries resulting from crashes
of incompatibly-sized vehicles and greater fuel savings. Public Citizen
simply stated that NHTSA failed to set ``one continuous standard for
passenger cars and light trucks.''
    Agency response: In the NPRM, NHTSA did examine the standards that
would result from pooling the data in this manner. However, NHTSA is
required by statute to set separate average fuel economy standards for
cars and trucks, and upon further reflection we believe this
requirement extends to how the agency develops the curves. Pooling data
for both fleets would mean applying to passenger cars a standard based,
in part, on the technological capabilities of light trucks, and vice
versa. NHTSA is promulgating final standards for MY 2011 that, as
proposed, base the curve applied to each fleet only on the capabilities
of vehicles that would be covered the curve.
Comments Concerning the Manufacturers Whose Data to Which the Curves
Were Fit
    BMW, Mercedes, Mitsubishi, Porsche, Subaru, and the Alliance
commented that the fuel economy curves should be fit to data from all
manufacturers to which the fuel economy standards apply, and not just
to data from the seven largest manufacturers. Some commenters (BMW,
Mercedes, Mitsubishi, Porsche) argued that limiting to data from the
seven largest manufacturers results in disproportionate burdens to
other manufacturers subject to the standards. Mitsubishi stated that
all manufacturers need to be included in setting the standards in order
for the standards to comprehensively reflect the technological and
economic feasibility for the U.S. auto industry.
    Agency response: Upon further consideration, NHTSA agrees with the
commenters and has revised its methodology to include all manufacturers
to which the MY 2011 standards apply: BMW, Chrysler, Daimler, Ferrari,
Ford, General Motors, Honda, Hyundai, Maserati, Mitsubishi, Nissan,
Porsche, Subaru, Suzuki, Tata, Toyota, Volkswagen. That is, NHTSA has
revised Step 1 above to include the vehicles of the given model year
and vehicle type for all 17 of these manufacturers.\376\
---------------------------------------------------------------------------

    \376\ However, Ferrari and Maserati are not expected to
manufacturer light trucks for sale in the United States in MY 2011.
---------------------------------------------------------------------------

    In developing the standards promulgated today, NHTSA included all
manufacturers both in the curve fitting process and in the process by
which the agency determined the final stringency of the standards. In
addition, NHTSA has used the manufacturers' updated product plan
submissions in Step 1 for the final rule, as opposed to the 2007
product plans used in the NPRM.
Comments Concerning the Steepness of the Car Curve
    Several commenters (Chrysler, Honda, Nissan, Ferrari, Porsche,
Subaru, Toyota, Volkswagen, the Union of Concerned Scientists, AIAM,
ACEEE) expressed concern that the car curve was too steep and that this
could lead to manufacturers to artificially increase the footprint of
car models they produce near the point of inflection in order to reduce
their fuel economy targets. In addition, Volkswagen and AIAM commented
that the steepness of the car curve could pose inequitable burdens to
manufacturers. ACEEE stated that the steepness of the car curve could
lead to gaming of the classification of vehicles as passenger cars or
light trucks. Chrysler argued that the steepness problem could become
more serious in the face of changing consumer preferences.
    Conversely, the Alliance expressed concern that flattening the
curves might unjustifiably lower the fuel economy targets for the
smallest vehicles and raise the targets for the largest vehicles.
    ACEEE suggested that the steepness of the car curve is explained
largely by the fact that larger cars have more horsepower on average
than smaller cars, over and above what is needed for comparable
performance. ACEEE argued that excessive horsepower has adverse effects
on safety and that NHTSA should consider ways to discourage the
continued growth in horsepower in the U.S. car market.
    Commenters suggested a number of potential solutions to flatten the
car curve. Honda suggested pooling the car and truck data when fitting
the curves. Nissan suggested increasing D by a factor between 0.6 and
0.9. Ferrari suggested employing additional attributes besides
footprint to set the curves. AIAM suggested using a variant of ``shadow
size'' instead of footprint, changing the methodology used to determine
the value of the parameter D, adding data from more companies, using
additional attributes, or adding an alternative compliance option.
ACEEE suggested revisiting the idea of normalizing car footprint to
reduce the steepness of the car curve. Toyota suggested determining the
value of the parameter D before determining the values of A and B.
Chrysler suggested reducing the value of A or increasing the value of
D.
    Agency response: NHTSA is incorporating AIAM's suggestion to
include data from more manufacturers, as discussed in the section
``Comments concerning the manufacturers whose data to which the curves
were fit'' above. NHTSA reviewed the methods it presented in the NPRM
for flattening the curve and the commenters' response to these methods.
NHTSA has substantially revised its approach to mitigating the curve
steepness issue, and believes that this revised approach provides a
more rational solution than those presented either by NHTSA in the NPRM
or by commenters in response to the NPRM.

    Specifically, for the final rule, NHTSA has revised Step 1 as
follows: First, rather than limiting this Step solely to the seven
largest manufacturers, NHTSA included all manufacturers. Second, rather
than identifying CAFE levels that maximized net societal benefits
attributable (separately) to each individual manufacturer, the agency
identified CAFE levels that cause each manufacturer to exhaust
available technologies. In doing so, the agency has focused this Step
on the engineering aspects of available technologies, essentially
setting aside economic considerations at this point.
    The agency believes that using this technology exhaustion approach
and pooling product plan data from all model years better equalizes the
effort, or fuel saving potential, for each manufacturer's fleet and
provides a better estimation of the statistical relationship between
vehicle size and fuel economy.
    As mentioned above, NHTSA's NPRM discussed a constrained linear
function as a possible alternative to the constrained logistic function
used in today's final rule. Although the agency has concluded that, for
this rulemaking, the risks of unintended consequences near the
``kinks'' in a constrained linear function outweigh that function's
lesser tendency toward steepness, the agency believes that this
function may warrant further consideration in future CAFE rulemakings.
Comments Concerning the Determination of the Asymptotes (A and B)
    Chrysler, GM, Honda, and Toyota expressed a variety of concerns
about the manner in which the values of the parameters A and B were
determined.
    GM commented that the values of A and B in the NPRM could
discourage the production of larger vehicles. In addition, GM argued
that the cohort used to determine the value of A for cars did not
contain sufficiently many domestic cars to provide a value for A that
reflects small cars as a whole (both foreign and domestic). GM
suggested increasing A by 10 percent and decreasing B by 5 percent.
    Chrysler suggested reducing the value of A in a manner that
reflects lower consumer tolerance for fuel economy technologies on the
least expensive vehicles.
    Honda and Toyota argued that A and B should not be set as the
average fuel economies of cohort sets of vehicles, but rather be
determined in a metric-optimizing way similar to the determination of C
and D. Both manufacturers suggested setting D first through some means,
followed by determining A, B, and C by optimizing a curve-fitting
metric. Toyota suggested this would help with the steepness problem for
cars. In addition, Toyota stated that the process used to select the
cohorts in the NPRM appeared to lack a clear technical or empirical
basis.
    Agency response: NHTSA continues to believe that the values of A
and B should be set as the average values of cohorts, rather than to
optimize a curve-fitting metric. NHTSA believes that it is more
important that the largest and smallest target values for the fuel
economies of individual vehicle models reflect the smallest and largest
vehicles in the fleet, and do so in a manner that is relatively stable,
than that their values freely optimize a curve-fitting metric. The
analysis presented in NHTSA's 2006 final rule establishing standards
for MY 2008-2011 light trucks demonstrated that freely fitting all four
constants of the logistic curve produces unstable and potentially
extreme functional limits.\377\ As the agency explained in that notice,
such results can produce impossibly stringent standards for
manufacturers that only produce small vehicles, and/or unduly low
targets for large vehicles. These problems led the agency to conclude
then, as it concludes today, that the limits of the logistic curve must
be constrained, and that the constraints should be based on the
potential performance of identified cohorts of vehicles with the
smallest and largest footprints.
---------------------------------------------------------------------------

    \377\ 71 FR 17600-06 (Apr. 6, 2006).
---------------------------------------------------------------------------

    Given a cohort setting approach, NHTSA agrees with GM's comment to
enlarge the cohort used to determine the value of A for cars to include
more domestic small cars. NHTSA enlarged this cohort to comprise the
lower tenth percentile of footprints (based now on the data from the
seventeen manufacturers to which the standards apply). In addition,
upon reviewing the updated product plans from the seventeen
manufacturers, all of whose product plans we now use to determine
cohorts, NHTSA has slightly changed the percentiles used to determine
the remaining cohorts as follows: the percentile used to determine the
value of A for light trucks was changed to 10 from 11, while that used
to determine B for passenger cars (respectively, light trucks) was
changed from 4 (respectively, 6) to 9 (respectively, 6). Again, the
agency recognizes that there are no canonical choices for the
percentiles used to determine the cohorts. The cohorts NHTSA has set
for the final rule reflect the agency's best assessment of the
passenger car and light truck fleets. Also, because the agency is now
pooling data from five model years when fitting the fuel economy curves
for MY 2011, as described below in ``Comments concerning curve
crossing,'' these percentiles are applied to the pooled model year
data, rather than to each model year's dataset.
    That is, for the final rule, NHTSA has revised Step 2 as follows.
For passenger cars (respectively, light trucks), NHTSA set the initial
value of the parameter A to be the harmonic average fuel economy among
the vehicles of the given vehicle type (produced by the seventeen
manufacturers used in Step 1) comprising the lower tenth (respectively,
tenth) percentile of footprint values. NHTSA set the initial value of B
to be the harmonic average fuel economy among the vehicles of the given
vehicle type (produced by the seventeen manufacturers) comprising the
upper ninth (respectively, sixth) percentile of footprint values. (As
with the NPRM, these harmonic averages constitute the initial values of
A and B, which will later be revised in Step 4.) Note that the revised
Step 2 fits only two values for A (one for cars and one for trucks),
and likewise two values for B, whereas the version of Step 2 applied in
the NPRM fitted 10 values for each (one for each vehicle type and model
year).

[GRAPHIC] [TIFF OMITTED] TR30MR09.057

[GRAPHIC] [TIFF OMITTED] TR30MR09.058

Comments Concerning the Curve-Fitting Metric and Treatment of Outliers
    Honda expressed concern about NHTSA's use of unweighted data (i.e.,
data not weighted by sales) in the curve-fitting metric, stating that
vehicle models that are similar to a number of other vehicle models
would have an undue influence on the curve under an unweighted curve-
fitting metric.
    Subaru suggested that the initial curves should be fit to each
manufacturer separately and then the results pooled in some fashion.
    Commenters expressed differing views regarding how outliers should
be treated. Public Citizen stated that removing outliers has the effect
of reducing the stringency of the standards, and so all outliers should
be included when fitting the curve. Conversely, Honda stated that
outliers should be eliminated, presumably because of a concern that
they have an undue influence on the standards.
    Agency response: NHTSA further considered the potential to exclude
outliers from the curve fitting and/or stringency determination
processes. However, even considering all related comments, the agency
has been unable to arrive at a definition of ``outlier'' as it would
apply to these processes. Even after the maximal application of
technology (described above) to manufacturers' fleets, some vehicle
models have fuel economy values well below or well above those of other
vehicle models with similar footprint. However, these vehicles contain
information about the capability of some types of vehicles. Similarly,
some vehicles with considerable quantities of technology do not achieve
unusually high fuel economy values. Therefore, NHTSA finds that neither
performance- nor technology-based outliers can be definitively,
objectively identified. Furthermore, because NHTSA is using the
minimization of mean absolute deviation (MAD) for curve fitting in this
final rule, outliers have far less influence on the solution than they
would had the agency relied on conventional least-square regression.
    NHTSA has also continued to use an unweighted curve-fitting metric,
rather than weighting the data by sales. Each vehicle model provides an
equal amount of information concerning the underlying relationship
between footprint and fuel economy. As explained in the NPRM, sales-
weighted regression would give some vehicle models vastly more emphasis
than other vehicle models. On the other hand, Honda expressed concern
that, under unweighted regression, vehicle models that have been
disaggregated into multiple virtually identical ``models.'' To address
this concern, the agency has attempted to identify such models (e.g.,
vehicle models that appear to differ only in trim level), and to
consolidate them into single entries. Even so, the potential
distortions by such disaggregation are far smaller than the potential
distortions associated with sales-weighted analysis.
    In response to Subaru's suggestion, NHTSA believes that there is an
insufficient amount of data at the manufacturer level (particularly in
light of NHTSA's decision to use data from all manufacturers, including
a number of smaller manufacturers) to generate reliable curves at an
individual-manufacturer level.
    As explained above, NHTSA has concluded, based on further analysis
and taking into account all related comments, that unweighted MAD
provides a better approach for setting the MY 2011 standards. However
we note that because we pool the model year data when fitting the curve
in the final rule, for reasons described in ``Comments concerning curve
crossing'' below, unweighted MAD will be applied to the pooled model
year data for a given vehicle class.
    That is, for the final rule, NHTSA has revised Step 3 as follows:
NHTSA determined values for parameters C and D for each vehicle type as
follows. For a given vehicle type, NHTSA set the initial values of C
and D to be the values for which the average (equivalently, sum) of the
absolute values of the differences between the optimized fuel
consumption from Step 1 for the given vehicle type (all model years)
and the values obtained by applying the following function
[GRAPHIC] [TIFF OMITTED] TR30MR09.059

to the corresponding vehicle footprints is minimal, where the values of
A and B are taken from those determined in Step 2 and where e denotes
the base of the natural logarithm (which is approximately equal to
2.71828). That is, NHTSA determined C and D by minimizing the average
absolute residual of the pooled MY 2011-2015 data under the
corresponding constrained logistic curve. Note that the revised Step 3
fits only two values for C (one for cars and one for trucks), and
likewise two values for D, whereas the version of Step 3 applied in the
NPRM fitted 10 values for each (one for each vehicle type and model
year). We also note that because Step 5 has been eliminated in this
final rule, for reasons described in ``Comments concerning curve
crossing'' below, the values of C and D determined in Step 3 are the
final values of these parameters.
    For passenger cars, this procedure yielded a curve with the
following coefficients: A = 37.82 mpg, B = 27.70 mpg, C = 51.41 square
feet, D = 1.91 square feet. This curve, shown below on a fuel
consumption (i.e., gpm) basis, produced an average absolute difference
of 18 percent.

[GRAPHIC] [TIFF OMITTED] TR30MR09.060

    Each data point in this graph represents a car model in the updated
(May 2008) product plans, and the fuel consumption values for these
data points reflect the ``technology exhaustion'' fuel consumption
(i.e., the lowest fuel consumption achievable using technologies known
about today). The curve in this graph is the constrained logistic curve
defined by the parameters determined in Step 3. Step 4 has not yet been
applied. Note that the corresponding chart in the NPRM (Figure V-7 in
the NPRM) presented five curves, instead of one, since Steps 2 and 3 in
the NPRM fit five car curves (one for each model year) instead of one.
The sole curve in the above chart reflects the underlying relationship
between the footprint of cars and the fuel economy achievable in them
using technologies we know of today.
    For light trucks, the same procedure yielded a curve with the
following coefficients: A = 36.43 mpg, B = 26.43 mpg, C = 56.41 square
feet, and D = 4.28 square feet. This curve, shown below on a fuel
consumption (i.e., gpm) basis, produced an average absolute difference
of 14 percent.

[GRAPHIC] [TIFF OMITTED] TR30MR09.061

Comments Concerning Curve-Crossing
    NHTSA received comments on both sides of the curve-crossing issue.
While Nissan shared NHTSA's concern about curve crossing, Toyota
commented that curve crossing did not necessarily pose a problem
because it believed that manufacturers were not likely to reduce a
vehicle's fuel economy in a year in which its target fuel economy
declined from the previous year. Additionally, Toyota argued that
NHTSA's means of addressing curve crossing lacked an empirical basis
and clear objective factors.
    Nissan and Toyota proposed different solutions to address the curve
crossing issue: Nissan suggested increasing D by a factor between 0.6
and 0.9. Although it did not feel that curve crossing was necessarily
problematic, Toyota presented an alternative methodology for addressing
the curve crossing issue by smoothing the rate of increase between
model years.
    Agency response: NHTSA agrees with Nissan that curve crossing is
problematic, since it makes little sense for a vehicle's fuel economy
target to decrease from one model year to the next. However, NHTSA
disagrees with the solutions proposed to address curve crossing for the
following reasons. Nissan's suggestion to increase D by a factor
between 0.6 and 0.9 appears to have no rational basis for choosing such
a factor. Toyota's proposed alternative methodology, on the other hand,
is designed to produce standards that align with historic planning
cycles and allocation of engineering resources. While it is desirable
for the fuel economy standards to be consistent with historic planning
cycles and resource allocation, NHTSA believes that it is more
important that the standards are the maximum feasible, and artificially
``smoothing'' the rate of increase could not guarantee that standards
are the maximum feasible in each model year.
    Given that NHTSA is now applying maximized fuel economies in Step
1, NHTSA has concluded that it is beneficial to include data from all
model years (for the given vehicle type) in fitting the curve, as the
underlying relationship between fuel economy and footprint should not
change from one year to the next. (However, the relationship can change
as new technologies develop to improve fuel economy.) That is, we now
determine A and B using pooled model year data in Step 2, and fit C and
D using pooled model year data in Step 3. As a consequence of
eliminating Step 5, the values of C and D for cars (and likewise
trucks) agree in each model year. (Step 4 remains unchanged in this
final rule.) The inclusion of data from all model years eliminates the
possibility of curve crossing, and so NHTSA is eliminating Step 5 in
this final rule.
    With regard to Toyota's comment, the agency believes that the
revised approach to curve fitting significantly improves the
objectivity of the process for determining maximum feasible standards.
    The parameter values in this final rule are as follows.
    [GRAPHIC] [TIFF OMITTED] TR30MR09.062

E. Why has NHTSA used the Volpe model to support its analysis?

    In developing today's final CAFE standards, NHTSA has made
significant use of results produced by the CAFE Compliance and Effects
Model (commonly referred to as the Volpe model), which DOT's Volpe
National Transportation Systems Center developed specifically to
support NHTSA's CAFE rulemakings.
    As discussed above, the agency uses the Volpe model to estimate the
extent to which manufacturers could attempt to comply with a given CAFE
standard by adding technology to fleets that the agency anticipates
they will produce in future model years. This exercise constitutes a
simulation of manufacturers' decisions regarding compliance with CAFE
standards.
    The model also calculates the costs, effects, and benefits of
technologies it estimates could be added in response to a given CAFE
standard. It calculates costs by applying the cost estimation
techniques discussed above in Section IV and by accounting for the
number of affected vehicles. It accounts for effects such as changes in
vehicle travel, changes in fuel consumption, and changes in greenhouse
gas and criteria pollutant emissions. It does so by applying the fuel
consumption estimation techniques also discussed in Section IV, and the
vehicle survival and mileage accumulation forecasts, the rebound effect
estimate and the fuel properties and emission factors discussed in
discussed in Section V. Considering changes in travel demand and fuel
consumption, the model estimates the monetized value of accompanying
benefits to society, as discussed in Section V. The model calculates
both the current (i.e., undiscounted) and present (i.e., discounted)
value of these benefits.
    The Volpe model has other capabilities that facilitate the
development of a CAFE standard. It can be used to fit a mathematical
function forming the basis for an attribute-based CAFE standard,
following the steps described below. It can also be used to evaluate
many (e.g., 200 per model year) potential levels of stringency
sequentially, and identify the stringency at which specific criteria
are met. For example, it can identify the stringency at which net
benefits to society are maximized, the stringency at which a specified
total cost is reached, or the stringency at which a given average
required fuel economy level is attained. The model can also be used to
perform uncertainty analysis (i.e., Monte Carlo simulation), in which
input estimates are varied randomly according to specified probability
distributions, such that the uncertainty of key measures (e.g., fuel
consumption, costs, benefits) can be evaluated.
    Nothing in EPCA requires NHTSA to use the Volpe model. In
principle, NHTSA could perform all of these tasks through other means.
For example, in developing the MY 2011 standards promulgated today, the
agency did not use the Volpe model's curve fitting routines, because
they could not be modified in time to implement the changes discussed
below to this aspect of the agency's analysis. In general, though,
these model capabilities greatly increase the agency's ability to
rapidly, systematically, and reproducibly conduct key analyses relevant
to the formulation and evaluation of new CAFE standards.
    NHTSA received comments from the Alliance and CARB encouraging
NHTSA to examine the usefulness of other models. Examples of other
models and analyses that NHTSA and Volpe Center staff have considered
for the final rule include DOE's NEMS, Oak Ridge National Laboratory's
(ORNL) Transitional Alternative Fuels and Vehicles (TAFV) model, Sierra
Research's VEHSIM model and the California Air Resources Board's (CARB)
analysis supporting California's adopted greenhouse gas emissions
standards for light vehicles.
    DOE's NEMS represents the light-duty fleet in terms of five car
``manufacturers'' and four truck ``manufacturers,'' twelve vehicle
market classes (e.g., ``standard pickup''), and sixteen powertrain/fuel
combinations (e.g., methanol fuel-cell vehicle). Therefore, as
currently structured, NEMS is unable to estimate manufacturer-specific
implications of attribute-based CAFE standards. The analysis of
manufacturer-specific implications is useful in setting the standard,
because any given standard will have differential impacts on individual
manufacturers, depending on the composition of their vehicle fleets. In
order to balance national-level costs and benefits, assessment of
individual manufacturer's costs and compliance strategies is
appropriate.\378\
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    \378\ In principle, if all manufacturers freely traded fuel
economy credits among themselves, fleetwide estimates of compliance
costs and benefits would approximate the sum of individual
manufacturer costs and benefits. However, major manufacturers have
repeatedly indicated that they do not intend to trade credits, and
statutory language prohibits NHTSA from considering the benefits of
trading in setting standards.
---------------------------------------------------------------------------

    TAFV accounts for many powertrain/fuel combinations, having been
originally designed to aid understanding of possible transitions to
alternative fueled vehicles, but it also represents the light duty
fleet as four aggregated (i.e., industry-wide) categories of vehicles:
Small cars, large cars, small light trucks, and large light trucks.
Thus, again, as currently structured, TAFV is unable to estimate
manufacturer-specific implications of attribute-based CAFE standards.
    Sierra Research's vehicle simulation model, VEHSIM, which was
originally developed by General Motors, calculates the fuel economy for
a specified vehicle design over a specified driving cycle. Despite
theoretical advantages in terms of explicit representation of physical
phenomena underlying fuel consumption, VEHSIM has significant
shortcomings as a tool for model-by-model evaluation of the entire
future light vehicle fleet. Although submitted after the close of the
comment period specified in the NPRM, comments by several state
Attorneys General and other state and local official questioned the
need and merits of full vehicle simulation within the context of CAFE
analysis, stating that

Computer simulation models such as VEHSIM are not practical except
perhaps during vehicle development to determine the performance of
specific vehicle models where all vehicle engineering parameters are
known and can be accounted for in the inputs to the model. Such an
exercise is extremely data intensive, and extending it to the entire
fleet makes it subject to multiple errors unless the specific
parameters for each vehicle model are known and accounted for in the
model inputs.\379\
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    \379\ Attorneys General of the States of California, Arizona,
Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New
Mexico, Oregon, and Vermont, the Executive Officer of the California
Air Resources Board, the Commissioner of the New Jersey Department
of Environmental Protection, the Secretary of the New Mexico
Environment Department, the Secretary of the Commonwealth of
Pennsylvania Department of Environmental Protection, and the
Corporation Counsel of the City of New York, Supplemental Comments
Regarding Alliance of Automobile Manufacturers Comments, Docket No.
NHTSA-2008-0089-0495, October 8, 2008, p. 3.

    Nevertheless, the Volpe model could, in principle, be modified to
use VEHSIM or any other vehicle simulation tool to estimate fuel
consumption. However, in practice, NHTSA and Volpe Center staff are
skeptical that doing so will be either feasible or meaningful as long
as CAFE analysis continues to be informed by forecasts of the future
vehicle market--forecasts that, though detailed, will not foreseeably
contain the extensive information needed to perform full vehicle
simulation. The information required for full vehicle simulation is

not only exponentially greater than NHTSA currently requests of
manufacturers, but for future vehicles, the information may not yet
exist, as manufacturers may not have completed the design of future
vehicles. See Section IV.C.8 for a fuller discussion of full vehicle
simulation in the context of CAFE.
    CARB's analysis of light vehicle GHG emissions standards uses two
levels of accounting. First, based on a report prepared for NESCCAF,
CARB represents the light-duty fleet in terms of five
``representative'' vehicles, each with engineering properties estimated
by CARB to meaningfully typify the engineering characteristics of a
given type of vehicle (e.g., small cars). NHTSA is concerned that such
a limited a number of such vehicles does not reasonably represent the
engineering properties of individual vehicle models that vary widely
both among manufacturers and within manufacturers' individual fleets.
This concern was reflected in comments by the Alliance. For each of
these five vehicles, NESCCAF's report contains the results of full
vehicle simulation given several pre-specified technology ``packages.''
Second, to evaluate manufacturer-specific regulatory costs, CARB
represents each manufacturer's fleet as two average test weights, one
for each of California's two proposed regulatory classes. Even for a
flat standard such as that considered by California, NHTSA is concerned
that this level of aggregation would hinder reasonable estimation of
compliance costs faced by individual manufacturers. Further, use of
CARB's methods would not enable NHTSA to estimate manufacturer-specific
implications of the attribute-based CAFE standards. Under an attribute-
based standard, the CAFE level required of a given manufacturer depends
on the specific mix of vehicles sold by that manufacturer, not the
average properties of that manufacturers' fleet. As noted above, it is
useful to estimate national level costs and benefits of a standard
applied at the level of individual manufacturer's fleets by assessing
individual manufacturer's costs and compliance strategies.
    On the other hand, NHTSA recognizes that a more aggregated
representation of the fleet--such as CARB's five-vehicle approach--may
be the only way that full vehicle simulation could be integrated into
CAFE analysis. Although NHTSA has not yet been able to conduct an
analysis with the advantages of both detailed representation of
manufacturers' fleets and full integration of full vehicle simulation,
the agency cannot rule out the possibility of such an analysis in the
future.
    Although the Volpe model has limitations, having considered other
tools and analytical approaches, NHTSA concludes that for this final
rule, the Volpe model is a sound and reliable tool for the development
and evaluation of potential CAFE standards. However, the agency will
continue to consider other methods for evaluating potential CAFE
standards in the future as well as to examine ways to improve the Volpe
model.
    NHTSA notes that some commenters questioned the transparency of the
Volpe model, which Public Citizen and the Center for Biological
Diversity (CBD) referred to as a ``black box.'' In response to these
comments, the agency notes that model documentation, which is publicly
available in the rulemaking docket, explains how the model is
installed, how the model inputs (all of which, except for
manufacturers' confidential product plans, are available to the public)
and outputs are structured, and how the model is used. The model can be
used on any Windows-based personal computer with Microsoft Office 2003
and the Microsoft .NET framework installed (the latter available
without charge from Microsoft). The executable version of the model is
available upon request, and has been provided to manufacturers,
consulting firms, academic institutions, governmental and
nongovernmental organizations, research institutes, foreign government
officials, and a variety of other organizations. The current version of
the model was developed using Microsoft Development Environment 2003,
and every line of computer code (primarily in C.NET) has been
made available to individuals who have requested the code. With the
code, anyone is capable of running the model using market forecast data
that they obtain or estimate on their own. Given the comprehensive
disclosure of information about the Volpe model and the fact that many
entities and individuals have made use of it, the characterization of
the Volpe model as a ``black box'' is not accurate.
    Although NHTSA currently uses the Volpe model as a tool to inform
its consideration of potential CAFE standards, contrary to the
assertions of some commenters, the Volpe model does not determine the
CAFE standards NHTSA proposes or promulgates as final regulations. The
results it produces are completely dependent on inputs selected by
NHTSA, based on the best available information and data available in
the agency's estimation at the time standards are set. In addition to
identifying the input assumptions underlying its decisions, NHTSA
provides the rationale and justification for selecting those inputs as
described in Sections III through V of this notice. NHTSA also
determines whether to use the model to estimate at what stringency net
benefits are maximized, or to estimate other stringency levels, such as
the point where total costs equal total benefits. NHTSA also determines
whether to use the model to evaluate the costs and effects of
stringencies that fall outside of the scope of maximum feasible. For
example, the standards for the ``Technology Exhaustion'' Alternative
examined by NHTSA and discussed later in this section, were estimated
outside the model, which was subsequently used to estimate
corresponding costs and effects.\380\ Finally, NHTSA is guided by the
statutory requirements of EPCA as amended by EISA in the ultimate
selection of a CAFE standard.
---------------------------------------------------------------------------

    \380\ By definition, the ``maximum technology'' scenario far
exceeds the maximum feasible CAFE standard.
---------------------------------------------------------------------------

    NHTSA does not agree with Public Citizen that the agency ``does not
establish what is technologically feasible and economically practicable
based on an independent assessment of the current vehicle fleet and the
available technology to improve the fleet, but rather accepts industry
inputs, which are run through the black box of the Volpe model and a
variety of `optimization' factors, which are tied to maximizing
industry-wide benefits.'' The manufacturers' plans are only the
starting point for the agency's determination of how much technology
can and should be required consistent with the statutory factors, and
the Volpe model is often tested using inputs developed without reliance
on manufacturers' product plans. NHTSA considers the results of
analyses conducted by the Volpe model and analyses conducted outside of
the Volpe model, including analysis of the impacts of carbon dioxide
and criteria pollutant emissions, analysis of technologies that may be
available in the long term and whether NHTSA could expedite their entry
into the market through these standards, and analysis of the extent to
which changes in vehicle prices and fuel economy might affect vehicle
production and sales. Using all of this information--not solely that
from the Volpe model--the agency considers the governing statutory
factors, along with environmental issues and other relevant societal
issues such as safety, and promulgates the maximum feasible

standards based on its best judgment on how to balance these factors.
    This is why the agency considered seven regulatory alternatives,
only one of which maximizes net benefits based on the agency's
determinations and assumptions. The others assess alternative standards
that in many cases exceed the point at which net benefits are
maximized. These comprehensive analyses, which also included scenarios
with different economic input assumptions as presented in the FEIS and
FRIA, are intended to inform and contribute to the agency's
consideration of the ``need of the United States to conserve energy,''
as well as the other statutory factors. 49 U.S.C. 32902(f).
Additionally, the agency's analysis considers the need of the nation to
conserve energy by accounting for economic externalities of petroleum
consumption and monetizing the economic costs of incremental
CO2 emissions in the social cost of carbon. As mentioned
above, NHTSA will continue to consider other methods for determining
future CAFE standards in future rulemakings.

VII. Determining the Appropriate Level of the Standards

A. Analyzing the Preferred Alternative

    As discussed above, EPCA requires the agency to determine what
level of CAFE stringency would be ``maximum feasible'' for each model
year by considering the four factors of technological feasibility,
economic practicability, the effect of other motor vehicle standards of
the Government on fuel economy, and the need of the United States to
conserve energy. NEPA directs that environmental considerations be
integrated into that process. To accomplish that purpose, NEPA requires
an agency to compare the potential environmental impacts of its
proposed action to those of a reasonable range of alternatives. NHTSA
compared and analyzed these impacts in the DEIS and the FEIS. The
proposed standards for passenger cars and light trucks were set at the
point where societal net benefits were maximized in the agency's
analysis. NHTSA referred to those standards as the ``Optimized''
Alternative in the NPRM, DEIS, and FEIS. In the DEIS and the FEIS, the
agency identified the Optimized Alternative (maximizing societal net
benefits) as NHTSA's Preferred Alternative. The agency carefully
considered and analyzed each of the individual economic assumptions to
determine which assumptions most accurately represent future economic
conditions. For a discussion of the economic assumptions relied on by
the agency in this final rule, see Section V above. The economic
assumptions used by the agency in this final rule correspond to the
``Mid-2 Scenario'' set of assumptions identified in the FEIS. See FEIS
Sec.  2.2. The Optimized Alternative utilizing the Mid-2 Scenario
economic assumptions, which were prompted in part by public comments,
is squarely within the spectrum of alternatives set forth in the DEIS
and the FEIS, and all relevant environmental impacts associated with
the Optimized Alternative have been presented in the DEIS and FEIS, and
considered by NHTSA.

B. Alternative Levels of Stringency Considered for Establishment as the
Maximum Feasible Level of Average Fuel Economy

    NHTSA recognizes that alternative stringencies are possible,
depending on how the agency balances the four factors underlying the
selection of maximum feasible level of average fuel economy and the
attendant environmental concerns. To aid it in determining the maximum
feasible level, NHTSA chose six alternative regulatory actions. Each
alternative reflects a balancing of the four factors that differs from
the balancing on which the agency's Preferred Alternative is based. In
CBD v. NHTSA, the Ninth Circuit recognized that EPCA gives ``NHTSA
discretion to decide how to balance the statutory factors--as long as
NHTSA's balancing does not undermine the fundamental purpose of EPCA:
energy conservation.'' 538 F.3d 1172, 1195 (9th Cir. 2008). The Court
also raised the possibility that NHTSA's current balancing of the
statutory factors might be different from the agency's balancing in the
past, given the greater importance today of the need to conserve energy
and the more advanced understanding of climate change. Id. at 1197-98.
In the rulemaking for MY 2012 and beyond, NHTSA will carefully re-
evaluate the facts relevant to assessing the need to conserve energy,
including the latest developments in the understanding of climate
change and its effects, and will balance the factors accordingly.
    CEQ regulations state that consideration of alternatives is the
``heart'' of an EIS. 40 CFR 1502.14. However, under CEQ regulations,
NHTSA is not required to include every conceivable ``alternative'' in
an EIS. Rather, an agency is to consider ``reasonable'' alternatives.
See id. CEQ guidance also instructs that ``[w]hen there are potentially
a very large number of alternatives, only a reasonable number of
examples, covering the full spectrum of alternatives, must be analyzed
and compared in the EIS.'' Forty Most Asked Questions Concerning CEQ's
National Environmental Policy Act Regulations, 46 FR 18026, 18027
(March 23, 1981).
    Here, an infinite number of alternatives could theoretically have
been defined along a continuum of potential CAFE standards. Given the
infinite number of alternatives, and informed by CEQ regulations and
guidance, NHTSA's Environmental Impact Statement identifies and
analyzes six alternatives. Specifically, NHTSA evaluates the six
alternatives proposed in the NPRM as its reasonable range of
alternatives. The agency examined the six specific alternatives
described below to illustrate the effect of balancing the four factors
differently on the range of potential stringency levels, the
relationship of economic benefits to compliance costs, and the
resulting environmental impacts. These alternatives capture a full
spectrum of potential environmental impacts, ranging from vehicles
continuing to maintain their MY 2010 fuel economy to standards based on
the maximum technology expected to be available over the five-year
period proposed in the NPRM (i.e., MYs 2011-2015).
    The six alternatives considered in this rulemaking, and analyzed in
NHTSA's the Environmental Impact Statement, are described as follows:
     The ``no increase'' or ``baseline'' alternative assumes
that NHTSA would not issue a rule regarding CAFE standards, or
alternatively, that NHTSA would issue a rule continuing current
standards during the time frame of the final rule standards. Either
way, the ``baseline'' alternative thus assumes that average fuel
economy levels in the absence of CAFE standards beyond 2010 would equal
the higher of a manufacturer's product plans or the manufacturer's
required level of average fuel economy for MY 2010. The MY 2010 fuel
economy standards in mpg (27.5 mpg for cars and 23.3 mpg for light
trucks) represent the average fuel economy levels the agency believes
manufacturers would continue to achieve, assuming the agency does not
issue a rule.\381\ The baseline alternative provides a useful reference
point for measuring the impact of the new authorities granted to NHTSA
under EISA. The agency uses this baseline in both its NEPA and EPCA
analyses.
---------------------------------------------------------------------------

    \381\ In the FEIS, NHTSA refers to this alternative as the ``No
Action'' alternative. CEQ regulations require agencies to consider a
no action alternative as part of their NEPA analysis. See 40 CFR
1502.2(e) and 1502.14(d).

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

     The ``25 percent below optimized'' alternative reflects
standards that are more stringent than the ``baseline'' alternative,
but less stringent than the ``optimized'' alternative. The required
average CAFE levels under this alternative are less stringent than
those under the optimized alternative by 25 percent of the difference
in required fuel economy between the optimized alternative and the
``total costs equal total benefits'' alternative. For purposes of
comparison, we note that the average fuel economy levels required by
this alternative fall below those under the optimized alternative by
the same absolute amount by which the levels under the ``25 percent
above optimized'' alternative exceed those under the optimized
alternative.
     The ``25 percent above optimized'' alternative reflects
standards that exceed the required average fuel economy levels of the
optimized alternative by 25 percent of the difference between the
average fuel economy levels required by the optimized alternative and
those required by the total costs equal total benefits alternative.
     The ``50 percent above optimized'' alternative reflects
standards that exceed the required average fuel economy levels of the
optimized alternative by 50 percent of the difference between the
average fuel economy levels required by the optimized alternative and
those required by the total costs equal total benefits alternative.
     The ``total costs equal total benefits'' alternative
requires average fuel economy levels that result from increasing fuel
economy targets until the total cost of all applied technologies equals
the total benefits of all applied technologies. Adopting this
alternative would result in zero net benefits in the agency's analysis
because the benefits to society are completely offset by the
costs.\382\
---------------------------------------------------------------------------

    \382\ This analysis produced stringencies at which benefits were
approximately, but not necessarily exactly, equal to costs. The
precision of this exercise is limited by several factors, including
(1) the discrete amounts by which NHTSA varied stringency levels
under consideration, (2) ``carrying over'' of technologies between
model years, and (3) rounding of fuel economy levels, CAFE levels,
and required CAFE levels.
---------------------------------------------------------------------------

     The ``technology exhaustion'' alternative reflects
standards that are based on progressively increasing stringency in a
given model year until every manufacturer without a history of paying
civil penalties has exhausted all technologies estimated to be
available during that model year. Except for phase-in constraints, this
analysis was performed using the same technology-related estimates
(e.g., incremental costs, incremental fuel savings, availability,
applicability, and dependency on vehicle redesign and refresh cycles)
as used for the other alternatives. For the technology exhaustion
alternative, NHTSA removed phase-in constraints in order to develop an
estimate of the effects of fuel economy increases that might be
achieved if manufacturers could apply as much technology as
theoretically possible, while recognizing that some technologies
require major changes to vehicle architecture and can therefore be
applied only as part of a redesign or refresh. Thus, in each year,
NHTSA increased the stringency until the first manufacturer exhausted
available technologies; beyond this stringency, NHTSA estimated that
the manufacturer would be unable to comply (NHTSA is precluded from
considering manufacturers' ability to use CAFE credits in setting
standards) and would be forced to pay civil penalties. NHTSA then
increased the stringency until the next manufacturer was unable to
comply, and continued to increase the stringency of the standard until
every manufacturer was unable to apply enough technology to comply.

C. EPCA Provisions Relevant to the Selection of the Final Standards

1. 35 in 2020
    Section 102(a)(2) of EISA adds to 49 U.S.C. Sec.  32902(b) a
requirement that states as follows:

(A) AUTOMOBILE FUEL ECONOMY AVERAGE FOR MODEL YEARS 2011 THROUGH
2020--The Secretary shall prescribe a separate fuel economy standard
for passenger automobiles and a separate average fuel economy
standard for non-passenger automobiles for each model year beginning
with model year 2011 to achieve a combined fuel economy average for
model year 2020 of at least 35 miles per gallon for the total fleet
of passenger and non-passenger automobiles manufactured for sale in
the United States for that model year.

(Emphasis added.) As discussed, this requirement is one of several that
EISA mandated for CAFE standards between MY 2011 and MY 2020.
Subsection 32902(a) contains a general requirement, not limited to any
particular model year or period of model years, that the standards for
a model year must be the ``maximum feasible'' standards for that model
year. Subsections 32902(b)(2)(A) and (C) set forth three requirements
specific to MYs 2011-2020. The standards for those years must be
sufficiently high to result in a combined (passenger car and light
truck) fleet fuel economy of at least 35 mpg by MY 2020, they must
increase annually, and they must increase ratably. Each of these
general and specific requirements must be interpreted in light of the
other requirements.\383\
---------------------------------------------------------------------------

    \383\ We note that the requirement in subsection 32902(b)(2)(B)
specific to the MY 2021-2030 standards is markedly different from
the requirements in subsections 32902(b)(2)(A) and (C) specific to
the MY 2011-2020 standards. The single model year specific
requirement in subsection 32902(b)(2)(B) simply repeats the general
requirement in subsection 32902(a), i.e., that the standards must be
set at the maximum feasible level. In contrast, the model year-
specific requirements in subsections 32902(b)(2(A) and (C) do not
repeat the general requirement. Instead, they constitute separate
and additional requirements regarding the stringency of the MY 2011-
2020 standards.
---------------------------------------------------------------------------

    In the NPRM, NHTSA explained that the 35 mpg figure is not a
standard and is not a requirement applicable to any individual
manufacturer or group of manufacturers. Instead, it is a requirement
applicable to the agency regarding the combined effect of the separate
standards for passenger cars and light trucks that NHTSA is to
establish for the years leading up to MY 2020 and most particularly for
MY 2020 itself. EISA does not specify precisely how compliance with
this 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 compliance. As a practical matter, to ensure
that an industry-wide combined average fuel economy for passenger cars
and light trucks of at least 35 mpg is achieved, the standard for MY
2020 passenger cars would have to produce an industry-wide average for
passenger cars that is significantly above 35 mpg and the one for MY
2020 light trucks in an industry-wide average for light trucks that
might or might not be below 35 mpg. Similarly, the CAFE of some
manufacturers' combined fleet of MY 2020 passenger cars and light
trucks would be above 35 mpg, while the combined fleet of others might
or might not be below 35 mpg.
    NHTSA received numerous comments regarding the 35 mpg-in-2020
requirement referring to the 35 mpg requirement as a floor and not a
ceiling and urging the agency to set standards that raise the industry-
wide combined average to 35 mpg sooner, as early as MY 2015.
    On the other hand, many manufacturers commented that the proposed
standards were too aggressive in the first couple of years and even
overall for the full 5-year period. They argued that there was
insufficient lead time. Some manufacturers said NHTSA should revert to
setting standards based

on the capabilities of the least capable manufacturer.
    NHTSA is well aware that the 35 mpg-in-2020 requirement is a floor
and not a ceiling. EISA specifically states that the industry-wide
combined average must be at least 35 mpg. However, the agency must also
issue standards at the maximum feasible level in each model year, as
discussed below. The agency has discretion as to how it makes that
determination, with due regard to the 35 mpg-in-2020 requirement, and
has done so based on the best available information and data and with
full awareness of the three obligations under EISA (maximum feasible
standards for each model year, annual ratable increases and a combined
fleet average of at least 35 mpg in 2020) and environmental concerns
under NEPA. The standards for MY 2010 are 27.5 mpg for passenger cars
and 23.5 mpg for light trucks. The final standards for MY 2011 are 30.2
mpg for passenger cars and 24.1 mpg for light trucks, which represents
a rise of 2.7 mpg and 0.6 mpg, respectively, over the standards for MY
2010. NHTSA is confident that the final MY 2011 standards represent
full compliance with these obligations and will continue to monitor
manufacturers' achieved average fuel economy levels and capabilities to
ensure that the minimum 35 mpg fleet requirement will be met as
expeditiously as possible.
2. Annual Ratable Increase
    Section 102(a)(2) of EISA also adds to 49 U.S.C. Sec.  32902(b) a
requirement that states as follows:

(C) PROGRESS TOWARD STANDARD REQUIRED--In prescribing average fuel
economy standards under subparagraph (A), the Secretary shall
prescribe annual fuel economy standard increases that increase the
applicable average fuel economy standard ratably beginning with
model year 2011 and ending with model year 2020.

(Emphasis added.) Congress gave no indication in EISA itself as to what
it meant by the term ``ratably,'' but NHTSA notes that Representative
Markey inserted an extension of remarks into the Congressional Record
stating as follows:

In asking for ``ratable'' progress, the intent of Congress is to
seek relatively proportional increases in fuel economy standards
each year, such that no single year through 2020 should experience a
significantly higher increase than the previous year.\384\
---------------------------------------------------------------------------

    \384\ 153 CONG. REC. H14253 (editor's note) and H14444 (daily
ed. Dec. 6, 2007) (statement of Rep. Markey).

In the NPRM, NHTSA stated that ``EPCA requires that the MY 2011-2019
CAFE standards for passenger cars and for light trucks must both
increase ratably to at least the levels necessary to meet [the] 35 mpg
requirement for MY 2020.'' \385\ NHTSA interpreted the ``increase
ratably'' requirement ``to mean that the standards must make steady
progress toward the levels necessary for the average fuel economy of
the combined industry wide fleet of all new passenger cars and light
trucks sold in the United States during MY 2020 to reach at least 35
mpg.'' \386\
---------------------------------------------------------------------------

    \385\ 73 FR 24364 (May 2, 2008).
    \386\ Id.
---------------------------------------------------------------------------

    Several commenters argued that NHTSA had interpreted the ``increase
ratably'' requirement incorrectly, frequently linking this argument to
a criticism of the front-loading of the proposed standards as
inconsistent with the ``increase ratably'' requirement.
    The Alliance commented that NHTSA had provided insufficient
explanation or analysis of its interpretation that ``ratable'' meant
``steady progress'' within the context of EISA. The Alliance speculated
that NHTSA may have based its interpretation on the title of the EISA
section adding the ``increase ratably'' requirement, ``Progress Toward
Standard Required,'' but argued that titles of sections should only be
used for interpretive clues if the text of the section is ambiguous,
and that NHTSA should undertake a full definitional analysis of
``ratably'' in order to determine its meaning in the context of EISA.
    The Alliance commented that the two primary dictionary definitions
of ``ratable'' are ``capable of being rated, estimated, or appraised,''
and ``proportional.'' \387\ The Alliance argued that the meaning of
``proportionally'' made more sense in the context of EISA, without
providing any particular explanation of why it believed that that
definition made more sense, but citing NHTSA's use of the term
``diminishes ratably'' later in the NPRM with reference to the
proportional phase-out of the AMFA credit.\388\
---------------------------------------------------------------------------

    \387\ Alliance comment at 45, Docket No. NHTSA-2008-0089-0179.1,
citing American Heritage Dictionary 1027 (2d college ed. 1991).
    \388\ 73 FR 24456 (May 2, 2008).
---------------------------------------------------------------------------

    The Alliance further argued that NHTSA appeared to be incorrect in
equating ``ratable increase'' with ``steady progress,'' since the term
``steady progress'' appeared in an earlier version of EPCA and there is
a presumption against equating different statutory words chosen by
Congress. However, the Alliance commented that if NHTSA is indeed
correct that ``ratable increase'' meant ``steady progress,'' then NHTSA
should consider how it interpreted ``steady progress'' in prior
rulemakings--that is, as requiring ``annual increases in average fuel
economy, but with none of the annual increments varying dramatically
from the other annual increases.'' \389\
---------------------------------------------------------------------------

    \389\ Alliance comments at 48, citing 42 FR 33537 (June 30,
1977).
---------------------------------------------------------------------------

    The Alliance concluded by arguing that whether ``ratably'' means
``steady progress'' or ``proportionally,'' ``it seems clear that
`ratably' is intended to impose some limitation on the variability in
the rate of increase of CAFE standards over time.'' \390\ The Alliance
stated that NHTSA should undertake a more complete analysis of the
``increase ratably'' requirement for the final rule, and address how
the ``front-loaded'' proposed standards ``square with EISA's
directive.'' \391\
---------------------------------------------------------------------------

    \390\ Id. at 49.
    \391\ Id.
---------------------------------------------------------------------------

    GM supported the Alliance comments, and further urged NHTSA to
consider a more gradual, less ``front loaded'' increase in the CAFE
standards adopted in the final rule. GM argued that ``standards [should
be] more aligned with the ratable levels of increase noted in [EISA],
i.e., a progression that is more even, less aggressive than the
proposed aggressive and front loaded 4.5%/yr rate, and more in line
with the approximately 3%/yr rates needed to achieve the goal of
EISA.'' \392\
---------------------------------------------------------------------------

    \392\ GM comments at 8 of 10, Docket No. NHTSA-2008-0089-0182.
---------------------------------------------------------------------------

    Ford also supported the Alliance comments, and commented that the
dictionary definition of ``ratable'' must be ``proportional'' in the
context of EISA, because ``capable of being rated'' ``does not make
sense in the context of CAFE standard setting.'' \393\ Thus, Ford
argued, the ``current, front-loaded proposal does not appear to reflect
a series of `ratable' increases,'' if ``the rate of increase [should
be] roughly constant from year to year.'' \394\ Ford additionally
commented that NHTSA had provided no justification for how the proposed
standards reflected a ``ratable increase.'' Ford suggested that to
solve this problem of the proposed standards not being ``ratable,''
NHTSA should determine fuel economy targets for passenger cars and
light trucks for MY 2015, and then set footprint-based constrained
logistic function standards for MY 2011-2014 at approximately a 3.8
percent per year increase to reach the calculated MY 2015 levels. Ford
stated that the 3.8 percent per year

increase would be ``more equalized (`ratable').'' \395\
---------------------------------------------------------------------------

    \393\ Ford comments at 11, fn 1, Docket No. NHTSA-2008-0089-
0202.1.
    \394\ Id.
    \395\ Id. at 11-12.
---------------------------------------------------------------------------

    Toyota also combined its comments on the ``increase ratably''
requirement with criticism of the rate of increase in the stringency of
the proposed standards. Toyota argued that ``While the term `ratable'
was not defined in EISA, Toyota believes this language was intended to
recognize that large and/or inconsistent jumps in fuel economy targets
are difficult for manufacturers to plan for because of product cycles
and the lead time needed to incorporate technology throughout the fleet
consistent with these product cycles.'' \396\ Toyota further argued
that the 4.5 percent average rate of increase in the proposed standards
was far greater than the ``nominal 3.3% implied by the term `ratable'
in EISA.'' \397\ Toyota added, however, with reference to the rate of
increase in stringency of targets for smaller-footprint light trucks,
that nothing in EISA suggested that ``ratable'' applied to individual
footprint targets.\398\ Toyota urged NHTSA to ``reduce the disparity in
year-to-year fuel economy increases to be more `ratable.' ''
---------------------------------------------------------------------------

    \396\ Toyota comments at 2 of 15, Docket No. NHTSA-2008-0089-
0212.
    \397\ Id.
    \398\ Id. at 8 of 15.
---------------------------------------------------------------------------

    Other commenters on the ``increase ratably'' requirement included
the Washington Legal Foundation (WLF) and the American Council for an
Energy Efficient Economy (ACEEE). WLF stated that it agreed with the
Alliance comments that the ``front-loading approach is inconsistent
with EISA, which requires the yearly standards to be set `ratably' over
the ten-year period,'' although it did not explain further what it
thought the ``increase ratably'' requirement meant.\399\ ACEEE made no
attempt to define or interpret ``ratable,'' but commented that NHTSA
should ensure ``ratable'' progress toward an average of at least 35 mpg
in MY 2020 by including in the final rule ``an express provision
requiring NHTSA to periodically review progress toward the required
fuel economy level and revise the standards accordingly.'' \400\ This
provision would mandate ``mid-course corrections'' in the standards if
necessary.
---------------------------------------------------------------------------

    \399\ WLF comments at 4, Docket No. NHTSA-2008-0089-0228.1.
    \400\ ACEEE comments at 5, Docket No. NHTSA-2008-0089-0211.1.
---------------------------------------------------------------------------

    NHTSA has further considered the ``increase ratably'' requirement
in light of the comments received, bearing in mind that the three basic
requirements of EISA for the MY 2011-2020 standards--35 mpg in 2020,
increase annually and ratably, and maximum feasible--must be
interpreted together so as to best achieve EPCA and EISA's overarching
goal of energy conservation. NHTSA does not believe that the 35 mpg-in-
2020 requirement implies any intent by Congress to limit ``ratable''
increases to a particular percentage as suggested by several
commenters. As discussed above, 35 mpg in 2020 is a floor, not a
ceiling, and increasing standards at the percentage rate required just
to meet the 35-in-2020 target would not necessarily be consistent with
the agency's assessment of what standards will be maximum feasible in
future model years.
    NHTSA does agree with the commenters, however, that Congress' use
of the term ``ratably'' appears to be intended to impose some
limitation on the variability in the rate of increase of CAFE standards
over time. Given the other statutory requirements of EPCA and EISA,
NHTSA currently concludes that the best interpretation of the
``increase ratably'' requirement remains similar to the 1980s
requirement that CAFE standards increase annually, but with none of the
annual increments varying disproportionately from the other annual
increases. This interpretation is consistent with Representative
Markey's views expressed in his extension of remarks. From MY 1978 to
MY 1985, for example, passenger car standards increased anywhere from
0.5 to 2.0 mpg per year, a range of 1.5 mpg. The ratio of the smallest
to largest increase was 1 to 4.
    While it is difficult in setting only one year of CAFE standards to
demonstrate that the increase is ``ratable,'' the final combined
standards for MY 2011 are 27.3 mpg, which represents a rise of 2 mpg
over the combined standards for MY 2010. This is consistent with both
historical increases in CAFE and with Congress' other requirements in
EISA. NHTSA believes, therefore, that the MY 2011 standards represent a
``ratable'' increase over the MY 2010 standards.
    With regard to the comment by ACEEE that NHTSA should include an
express provision in the final rule that NHTSA must undertake ``mid-
course corrections'' to ensure ``ratable'' progress toward the 35 mpg
requirement in 2020, NHTSA does not believe that such an addition is
necessary. The agency is required to set standards at the maximum
feasible level for each model year, and has the authority under 49
U.S.C. Sec.  32902(g) to revise standards upward if necessary to
reflect a new determination of maximum feasible, as long as it does so
18 months before the beginning of the model year whose standards are in
question. NHTSA will carefully monitor manufacturers' achieved levels
of average fuel economy, as well as changes in their capabilities, and
set standards accordingly.
3. Maximum Feasibility and the Four Underlying EPCA Considerations
    As explained above, EPCA requires the agency to set fuel economy
standards for each model year and for each fleet separately at the
``maximum feasible'' level for that model year and fleet. 49 U.S.C.
Sec.  32902(a). In determining the maximum feasible level of average
fuel economy, the agency considers four statutory factors as required
by 49 U.S.C. 32902(f): technological feasibility, economic
practicability, the effect of other motor vehicle standards of the
Government on fuel economy, and the need of the United States to
conserve energy, which includes environmental considerations, along
with additional relevant factors such as safety. In balancing these
considerations, we are also mindful of EPCA's overarching purpose of
energy conservation, as well as the requirements that standards must
increase ratably to at least the level at which the combined U.S. fleet
achieves 35 mpg in MY 2020. We are also mindful that environmental
concerns are important to making the correct decision in this
rulemaking. NHTSA's NEPA analysis for this rulemaking has informed the
agency's final action.
    Section VI discussed how the agency fits the target curves and
analyzes different levels of CAFE stringency. This section sets forth
the agency's interpretation of the four EPCA statutory factors, and how
NHTSA has balanced the factors with NEPA considerations in deciding
what final standards would be the maximum feasible ones for MY 2011.
(a) Technological Feasibility
    NHTSA defines ``technological feasibility'' as pertaining 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. NHTSA explained in the NPRM that whether a
technology may be feasibly applied in a given model year is not simply
a function of whether the technology will exist in some form in that
model year, but also whether the data sources reviewed by the agency
support a conclusion that the technology will be mature enough to be
commercially applied in that model year, whether it will conflict with
other

technologies being applied, etc. Many commenters stated that ``the
technology is available to make all cars go farther on a gallon of
gas--farther than NHTSA proposes.'' \401\ According to NHTSA's final
rule analysis, manufacturers overall will likely need to apply advanced
fuel-saving technologies at significantly higher levels in order to
meet the standards than NHTSA estimated in the NPRM,\402\ although we
note that manufacturers are free to meet the standards using whatever
technologies they choose.
---------------------------------------------------------------------------

    \401\ See, e.g., Docket No. NHTSA-2008-0089-0192.1.
    \402\ See Tables IX-3 and IX-4 below.
---------------------------------------------------------------------------

    However, as NHTSA described in Chapter IV above, simply because a
technology exists does not make it feasible to apply it to all vehicles
during MY 2011. While NHTSA recognizes, for example, that hybrid
vehicles like the Toyota Prius are very popular currently with many
American consumers, and that diesel vehicles on the road in Europe
generally achieve higher fuel economy levels than otherwise-equivalent
gasoline-engine vehicles here, it would still not be technologically
feasible for NHTSA to set standards at the level that require all
vehicles sold in the U.S. to be either hybrids or diesels by MY 2011.
As discussed at much greater length in Chapter IV, component supply
issues, engineering resource issues, federal emissions regulation
issues (in the case of diesels), etc., together make such a level of
technology application infeasible in the time frame covered by the
rulemaking.
    NHTSA also recognizes, however, that there are potentially levels
of technological feasibility between the level at which NHTSA has set
the standards and the hypothetical example given above of a completely
dieselized-hybridized MY 2011 fleet. Nevertheless, technological
feasibility is but one of four EPCA factors that the agency must
balance. While higher stringency levels might still be technologically
feasible, they might not be consistent with the demands of the other
factors, and in fact might be outweighed by those factors.
(b) Economic Practicability
    As explained in the NPRM, NHTSA has historically assessed whether a
potential CAFE standard is economically practicable in terms of whether
the standard is one ``within the financial capability of the industry,
but not so stringent as to threaten substantial economic hardship for
the industry.'' See, e.g., Public Citizen v. NHTSA, 848 F.2d 256, 264
(DC Cir. 1988).
    As has been widely reported in the public domain throughout this
rulemaking, and as shown in public comments, the national and global
economies are in crisis. Even before those recent developments, the
automobile manufacturers were already facing substantial difficulties.
Together, these problems have made NHTSA's economic practicability
analysis particularly important and challenging in this rulemaking.
    Automobile sales have dropped significantly. U.S. motor vehicle
sales in 2008 were 18 percent below 2007 levels. January 2009 industry
sales were 37 percent lower than in January 2008.\403\ The sales of
every major manufacturer declined. Vehicle manufacturers have not been
able to raise prices to offset declining unit sales.\404\
---------------------------------------------------------------------------

    \403\ Ward's Automotive, ``Ward's U.S. Light Vehicle Sales
Summary,'' December 2008. Available at: http://wardsauto.com/
keydata/USSalesSummary0812.xls / (Last accessed February 6, 2008).
    \404\ Commerce Department data indicates no apparent change in
nominal prices of new vehicle sales over the past few years.
---------------------------------------------------------------------------

    The financial state of the major U.S. automotive manufacturers is
particularly difficult. General Motors' 2008 U.S. vehicle sales were
down 23 percent, and January 2009 sales were down 51 percent.\405\ GM
last earned an accounting profit in 2004, and has lost a cumulative $72
billion between 2005 and the third quarter of 2008.\406\ GM has a
negative net worth of $60 billion, and consumed more than $3.5 billion
in cash in the third quarter. GM is largely unable to borrow additional
funds in capital markets, and must rely on a dwindling pool of cash to
fund any further operating losses and capital investments.
---------------------------------------------------------------------------

    \405\ General Motors Corp, monthly sales report for December
2008. Available at: http://www.gm.com/corporate/investor_
information/sales_prod/hist_sales.jsp (last accessed February 6,
2009).
    \406\ General Motors Corp. annual report for 2007, quarterly
earnings announcement for the third quarter of 2008. Available at
http://www.gm.com/corporate/investor_information/earnings/index.jsp
(last accessed November 12, 2008).
---------------------------------------------------------------------------

    Ford Motor Company's 2008 sales declined 20 percent.\407\ The firm
has lost nearly $30 billion since 2006. The firm has a negative net
worth of $2 billion, and consumed some $5.5 billion in cash in the
fourth quarter of 2008.\408\ Ford is also largely unable to borrow
additional funds in capital markets, and must also rely on a dwindling
pool of cash to fund any further operating losses and capital
investments.
---------------------------------------------------------------------------

    \407\ Ford Motor Company, Fourth quarter 2008 financial results.
Available at: http://www.ford.com/about-ford/investor-relations/
company-reports/financial-results (last accessed February 6, 2009).
    \408\ Ford Motor Company, Annual Report 2007, p. 121 and fourth
quarter 2008 earning release, Slide 26.
---------------------------------------------------------------------------

    Chrysler is closely held, and consequently does not publish
financial statements. However, Chrysler's 2008 unit sales were 30
percent below last year's sales, and January 2009 sales were off 55
percent.\409\ In a report submitted to the Senate Banking Committee in
December 2008, Chrysler indicated that, if the Federal Government
provided $13 billion in financing, Chrysler expected to end 2009 with
some $6.7 billion in net cash.\410\ However, absent federal
intervention, it is not clear that Chrysler would be able to survive
2009 in one piece.
---------------------------------------------------------------------------

    \409\ Ward's Automotive, op. cit.
    \410\ Robert Nardelli, ``Chrysler's Plan for Short-Term and
Long-Term Viability,'' submitted to Senate Committee on Banking,
Housing, and Urban Affairs, December 2, 2008. Available at: http://
banking.senate.gov/public/files/ChryslerUSSenateViabilityPlan.pdf
(last accessed February 6, 2009).
---------------------------------------------------------------------------

    As the figures set forth above demonstrate, the automobile industry
is already experiencing substantial economic hardship, even in the
absence of new fuel economy standards. All three firms have announced a
steady stream of plant closings, layoffs, and employment of new
employees at reduced wages.
    NHTSA believes these hardships have much to do with the condition
of the national economy and perhaps the price of gasoline, and little,
if anything, to do with the stringency of CAFE standards for the
current or recent model years. We believe that given the scale of the
recent decline in industry sales, and the restrictiveness of private
credit markets, that near-term developments will be compelled by the
industry's immediate financial situation, rather than by the long-term
financial consequences of this rulemaking.
    Market forces are already requiring manufacturers to improve the
fuel economy of their vehicles, as shown both by changes in product
plans reported to NHTSA, and by automaker announcements in recent
weeks. The improvements in fleet fuel economy required by this rule are
consistent with the pressure induced by changing consumer preferences.
    The various compliance flexibility mechanisms permitted by EISA,
including flexible and alternative fuel vehicles, banking, averaging,
and trading of fuel economy credits will also reduce compliance costs
to some degree. By statute, NHTSA is not permitted to consider the
benefits of flexibility

mechanisms in assessing the costs and benefits of the rule.
    On the other hand, the agency is mindful that CAFE standards do
affect the relative competitiveness of different vehicle manufacturers,
and recognizes that standards more stringent than those promulgated
here could have a more detrimental effect.
    However, the core of the problem for the agency is to determine
what new standards might be economically practicable within the MY 2011
time frame, given the state of both the domestic and the international
auto industries. The complexity of an economic practicability
determination has been materially increased by the decision of GM and
Chrysler to seek, and the U.S. Government to provide, substantial
financial assistance. Congress has appropriated $7.5 billion (to
support a maximum of $25 billion in loans under Section 136 of EISA to
support the development of advanced technology vehicles and components
in the United States.\411\ DOE reports that 75 requests for funding,
totaling some $38 billion have been received by the deadline date, of
which 23 requests were deemed ``substantially complete,'' and hence
eligible for further consideration among the initial tranche of
projects.
---------------------------------------------------------------------------

    \411\ The authorizing language for this provision is in Section
136 of EISA. This language is amended and funds are appropriated in
the Emergency Economic Stabilization Act of 2008 (H.R. 1424, Pub. L.
110-343). See also the DOE Advanced Technology Vehicle Manufacturing
Loan Program Web site: http://www.atvmloan.energy.gov/ (last
accessed February 6, 2009).
---------------------------------------------------------------------------

    The Treasury Department has also advanced substantial funding to
GM, Chrysler and GMAC under the Troubled Asset Relief Program (TARP).
(Ford elected not to accept public funding under the TARP). GM received
a loan of $13.4 billion, while Chrysler received $4 billion.\412\ GM
and Chrysler have also submitted restructuring plans to the Treasury
Department in February 2009 requesting additional Federal assistance to
``achieve and sustain long-term viability'' while ``comply[ing] with
applicable Federal fuel efficiency and emission requirements.'' Since
this rule had not been promulgated at the time the report was
submitted, GM and Chrysler were left with a degree of doubt about
exactly what CAFE standards would apply to MYs 2011 and thereafter.
---------------------------------------------------------------------------

    \412\ U.S. Department of the Treasury, ``Indicative Summary of
Terms for Secured Term Loan Facility,'' December 19, 2008, for
Chrsyler and GM. Available at http://www.treasury.gov/press/
releases/hp1333.htm (last accessed February 6, 2009).
---------------------------------------------------------------------------

    Given the foregoing, therefore, the agency has decided that in this
exceptional situation, economic practicability must be determined based
on whether the expenditures needed to achieve compliance with the final
MY 2011 standards are ``within the financial capability of the
industry, but not so stringent as to threaten substantial economic
hardship for the industry,'' no matter who contributes the funds. This
is an operational definition of a standard set using cost-benefit
analysis. We have attempted to set the MY 2011 CAFE standards so that
they are both technologically and economically feasible while providing
the maximum national public social benefit. In principle, most vehicles
meeting the standard will provide social benefits to the public at
large and private benefits to automobile owners greater than their
extra cost.
    One of the primary ways in which the agency seeks to ensure that
its standards are within the financial capability of the industry is to
attempt to ensure that manufacturers have sufficient lead time to
modify their manufacturing plans to comply with the final standards in
the model years covered by them. Employing appropriate assumptions
about lead time in our analysis helps to avoid applying technologies
before they are ready to be applied, or when their benefits are
insufficient to justify their costs. It also helps avoid basing
standards on the assumption that technologies could be applied more
rapidly than practically achievable by manufacturers. NHTSA considers
these matters in its analysis of issues including refresh and redesign
schedules, phase-in caps, and learning rates.
    A number of manufacturers commented that the proposed standards
were too stringent in the early years and were therefore not
economically practicable. In reevaluating the range of fuel-saving
technologies expected to be available in MY 2011, the agency has
developed more realistic estimates of the set of technologies
available, the extent to which these technologies are most likely to be
applied either at a vehicle freshening or redesign, and the limits
(i.e., caps) that should be applied to the rates at which these
technologies can be phased in. NHTSA believes the resultant MY 2011
standards, which also reflect all other inputs to NHTSA analysis, are
not inappropriately ``front loaded,'' particularly given that they
cover only one model year.
    NHTSA also considers the potential impact on employment. There are
three potential areas of employment that fuel economy standards could
affect employment. The first is the hiring of additional engineers by
automobile companies and their suppliers to do research and development
and testing on new technologies to determine their capabilities,
durability, platform introduction, etc. The second area is the impact
that new technologies would have on the production line. The third area
is the potential impact that sales gains or losses could have on
production employment.
    Chapter VII of the FRIA contains estimates of employment impacts.
The calculations assume that compliance costs are passed onto consumers
in the form of higher prices. These higher vehicle prices (net of the
benefits of added fuel savings and added resale value) lead to reduced
demand for vehicles. Estimates of sales losses are made using the price
changes and the elasticity of demand for new vehicles (-1.0). Losses in
sales are translated into losses in jobs by dividing through by the
average number of vehicles produced per full time jobs in the
automotive industry (approximately 10.5 vehicles per job). In some rare
cases, the fuel savings benefits exceed the compliance costs leading a
reduction in price, and increase in sales, and an increase in
employment.
    The estimated job losses in 2011 for the six alternatives appear in
Table VII-1 for the passenger car and light truck fleets. The first two
alternatives (25 Percent Below Optimized, Optimized) have roughly
similar losses in employment: 714 to 1,024 jobs lost in 2011. The next
most stringent alternative (25 Percent Above Optimized) results in job
losses that are triple the losses in the Optimized alternative. Job
losses from the next two alternatives (50 Percent Above Optimized and
TC = TB) are 4.5 times and 8 times higher than the Optimized
alternative, but are still not a large number (8,232 for TC= TB). The
Technology Exhaustion alternative would result in significant impacts
on employment (55,740).

[GRAPHIC] [TIFF OMITTED] TR30MR09.063

(c) Effect of Other Motor Vehicle Standards of the Government on Fuel
Economy
    This EPCA statutory factor constitutes an express recognition that
fuel economy standards should not be set without giving due
consideration to the effects of efforts to address other regulatory
concerns, such as motor vehicle safety and pollutant emissions. The
primary influence of many of these regulations is the addition of
weight to the vehicle, with the commensurate reduction in fuel economy.
Manufacturers incorporate this added weight in their product plans,
which have informed the market forecast the agency has used as a
starting point for analysis that the agency has conducted to set the
standards. Because the addition of weight to the vehicle is only
relevant if it occurs within the time frame of the regulations, i.e.,
during MY 2011, we consider the Federal Motor Vehicle Safety Standards
set by NHTSA and the Federal motor vehicle emissions standards set by
EPA which become effective during the time frame.
Federal Motor Vehicle Safety Standards
    NHTSA has evaluated the impact of the Federal Motor Vehicle Safety
Standards (FMVSS) using MY 2010 vehicles as a baseline. NHTSA has
issued or proposed to issue a number of FMVSSs or amendments to FMVSSs
scheduled to become effective between the baseline year and MY 2011.
These have been analyzed for their potential impact on vehicle weight
for vehicles manufactured in these years--as noted above, the fuel
economy impact, if any, of these new requirements will take the form of
increased vehicle weight resulting from the design changes needed to
meet the new FMVSSs.
Weight Impacts of Required Safety Standards (Final Rules)
    NHTSA has issued two final rules on safety standards that become
effective for passenger cars and light trucks for MY 2011. These have
been analyzed for their potential impact on passenger car and light
truck weights, using manufacturers' voluntary plans as a baseline.

1. FMVSS No. 126, Electronic Stability Control
2. FMVSS No. 214, Side Impact Oblique Pole Test
FMVSS No. 126, Electronic Stability Control
    The phase-in schedule for vehicle manufacturers is as follows:
    [GRAPHIC] [TIFF OMITTED] TR30MR09.064

    The final rule requires 75 percent of all light vehicles to meet
the ESC requirement for MY 2010, 95 percent of all light vehicles to
meet the ESC requirements by MY 2011, and all light vehicles must meet
the requirements by MY 2012.
    The agency's analysis of weight impacts found that ABS adds 10.7
lbs. and ESC adds 1.8 lbs. per vehicle for a total of 12.5 lbs. Based
on manufacturers' plans for voluntary installation of ESC, 85 percent
of passenger cars in MY 2010 would have ABS and 52 percent would have
ESC. Thus, the total incremental added weight over manufacturers' plans
in MY 2011 for passenger cars would be about 1.8 lbs. (0.10*10.7 +
0.43*1.8). Light trucks manufacturers' plans show that 99 percent of
all light trucks would have ABS and that 74 percent would have ESC by
MY 2010. Thus, for light trucks the incremental weight impacts of
adding ESC would be 0.4 lbs. (0.21*1.8) in MY 2011.
FMVSS No. 214, Oblique Pole Side Impact Test
    The phase-in requirements for the side impact test are as follows:

[GRAPHIC] [TIFF OMITTED] TR30MR09.065

    A teardown study of 5 thorax air bags resulted in an average weight
increase per vehicle of 4.77 pounds (2.17 kg).\413\ A second study
\414\ performed teardowns of 5 window curtain systems. One of the
window curtain systems was very heavy (23.45 pounds). The other four
window curtain systems had an average weight increase per vehicle of
6.78 pounds (3.08 kg), a figure which is assumed to be average for all
vehicles in the future.
---------------------------------------------------------------------------

    \413\ Khadilkar, et al. ``Teardown Cost Estimates of Automotive
Equipment Manufactured to Comply with Motor Vehicle Standard--FMVSS
214(D)--Side Impact Protection, Side Air Bag Features'', April 2003,
DOT HS 809 809.
    \414\ Ludtke & Associates, ``Perform Cost and Weight Analysis,
Head Protection Air Bag Systems, FMVSS 201'', page 4-3 to 4-5, DOT
HS 809 842.
---------------------------------------------------------------------------

    Based on manufacturers' plans to voluntarily provide window
curtains and torso bags, we estimate that 90 percent of passenger cars
and light trucks would have window curtains for MY 2010 and 72 percent
would have torso bags. A very similar percentage is estimated for MY
2011. Thus, the final rule requiring 20 percent compliance is not
likely to impact manufacturers' weights in MY 2011.
Weight Impacts of Proposed/Planned Safety Standards
Proposed FMVSS No. 216, Roof Crush
    On August 23, 2005, NHTSA proposed amending the roof crush standard
to increase the roof crush standard from 1.5 times the vehicle weight
to 2.5 times the vehicle weight.\415\ The NPRM proposed to extend the
standard to vehicles with a GVWR of 10,000 pounds or less, thus
including many light trucks that had not been required to meet the
standard in the past. The proposed effective date was the first
September 1 occurring three years after publication of the final rule.
A Supplemental NPRM was published by the agency in January 2008, asking
for public comment on a number of issues that may affect the content of
the final rule, including possible variations in the proposed
requirements. In the PRIA, the average passenger car weight was
estimated to increase by 4.0 pounds and the average light truck weight
was estimated to increase by 6.1 pounds for a 2.5 strength to weight
ratio. Based on comments to the NPRM, the agency believes that this
weight estimate is likely to increase. However, the agency does not yet
have an estimate for the final rule. Regardless, the final rule will
not be effective for MY 2011 vehicles.
---------------------------------------------------------------------------

    \415\ See 70 FR 53753, the PRIA is in Docket No. 22143, entry
2 ``Preliminary Regulatory Impact Analysis, FMVSS 216, Roof
Crush Resistance,'' August 2005.
---------------------------------------------------------------------------

Planned NHTSA Initiative on Ejection Mitigation
    The agency is planning on issuing a proposal on ejection
mitigation. The likely result of the planned proposal is for window
curtain side air bags (likely to be used to meet the FMVSS No. 214
oblique pole test in all vehicles) to be larger and for a rollover
sensor to be installed. Preliminary agency estimates are that current
curtain bags need be widened by 28 percent to fully cover the window
opening area. According to a cost and weight analysis (DOT HS 809 842),
head air bags (loomed cloth) installed in a vehicle weigh 2.59 lbs and
the inflators weigh 4.73 lbs. Thus, the incremental weight would be
about 2 lbs. (2.59 lbs + 4.73 lbs) x 0.28 = 2 lbs. However, this
analysis is not complete at this time and will not be effective for MY
2011 vehicles.
Summary--Overview of Anticipated Weight Increases
    The table below summarizes estimates made by NHTSA regarding the
weight added by the above discussed standards or likely rulemakings.
NHTSA estimates that weight additions required by final rules and
likely NHTSA regulations effective in MY 2011, compared to the MY 2010
fleet and manufacturers' plans, will increase passenger car weight by
at least 10.4 lbs. and light truck weight by at least 10.6 lbs.

[GRAPHIC] [TIFF OMITTED] TR30MR09.066

    Based on NHTSA's weight-versus-fuel-economy algorithms, a 3-4 pound
increase in weight equates to a loss of 0.01 mpg in fuel economy. Thus,
the agency's estimate of the safety/weight effects for cars is 0.006
mpg or less and for light trucks is 0.001 mpg or less for already-
issued or likely future safety standards.
Federal Motor Vehicle Emissions Standards
    As discussed above, because the addition of weight to a vehicle is
only relevant to its ability to achieve the MY 2011 CAFE standards if
it occurs in that time frame, NHTSA only considers Federal motor
vehicle emissions standards that become effective during the time
frame.
    In the NPRM, NHTSA explained that on December 27, 2007, EPA
published a final rule for fuel economy labeling that employs a new
vehicle-specific, 5-cycle approach to calculating fuel economy labels
which incorporates estimates of the fuel efficiency of each vehicle
during high speed, aggressive driving, air conditioning operation and
cold temperatures into each vehicle's fuel economy label.\416\ The rule
took effect starting with MY 2008, and will not impact CAFE standards
or test procedures, or add weight to a vehicle or directly impact a
manufacturer's ability to meet the CAFE standards. It will, however,
allow for the collection of appropriate fuel economy data to ensure
that existing test procedures better represent real-world conditions,
and provide consumers with a more accurate estimate of fuel economy
based on more comprehensive factors reflecting real-world driving use.
---------------------------------------------------------------------------

    \416\ See 71 FR 77872 (Dec. 27, 2006).
---------------------------------------------------------------------------

    CARB commented that the NPRM had not addressed certain federal and
California emissions regulations that NHTSA had analyzed in previous
rulemakings, and stated that ``NHTSA must analyze the potential effect
of these emissions regulations on its proposed standards.'' CARB
further stated that ``the NPRM must analyze the impact of California's
ZEV regulations through at least MY 2011,'' which the commenter stated
would ``require NHTSA to consider the impact of rapidly shifting
technologies that manufacturers will apply to meet a combination of
government mandates and market conditions, most notably the
electrification of vehicle drivetrains.'' \417\
---------------------------------------------------------------------------

    \417\ CARB comments at 10-11, Docket No. NHTSA-2008-0089-0173.
---------------------------------------------------------------------------

    In response, NHTSA reiterates that emissions standards that are
completely phased in before MY 2011 are already accounted for in the
agency's baseline for this rulemaking. EPA's ``Tier 2'' standards,
which apply to all vehicles currently subject to CAFE and are designed
to focus on reducing the emissions most responsible for the ozone and
particulate matter (PM) impact from these vehicles, are scheduled to be
completely phased in by 2009.\418\ EPA's onboard vapor recovery (ORVR)
system standards, which apply to all passenger cars and light trucks
below 8,500 pounds GVWR, were completely phased in by MY 2008.\419\
Thus, there is no additional effect of these emissions regulations on
MY 2011 vehicles for NHTSA to analyze, beyond what manufacturers have
already included in their product plans in order to comply with these
regulations, which NHTSA already accounts for.\420\
---------------------------------------------------------------------------

    \418\ See 65 FR 6698 (Feb. 10, 2000).
    \419\ See 59 FR 16262 (Apr. 6, 1994).
    \420\ Additionally, in calculating criteria pollutant emissions
factors for analyzing air quality impacts, MOBILE6.2 accounted for
EPA's emission control requirements for passenger cars and light
trucks, including exhaust (tailpipe) emissions, evaporative
emissions, and the Tier 2 program. See FEIS Sec.  3.3.2.
---------------------------------------------------------------------------

    NHTSA agrees with CARB, however, that portions of the ZEV standards
come into effect during MY 2011, although compliance with these
standards is also already accounted for in manufacturers' product plans
and thus forms part of NHTSA's baseline analysis. The State of
California has established several emission requirements under section
209(b) of the Clean Air Act as part of its Low Emission Vehicle (LEV)
program. California initially promulgated these section 209(b)
standards in its LEV I standards, and has subsequently adopted more
stringent LEV II standards, also under section 209(b). The relevant LEV
II regulations have been completely phased in for passenger cars and
light trucks as of MY 2007.
    The LEV II Program has requirements for ``zero emission vehicles''
(ZEVs) that apply to passenger cars and light trucks up to 3,750 pounds
loaded vehicle weight (LVW) beginning in MY 2005, while trucks between
3,750 and 8,500 pounds are phased in to the ZEV regulation from 2007-
2012. The ZEV requirements begin at 10 percent of vehicles sold by a
manufacturer in California in 2005, and ramp up to 16 percent for 2018
under different paths. California will allow the 16 percent requirement
to be met by greater numbers of ``partial ZEVs'' until 2018, which
include ultra-clean gasoline-engine vehicles and hybrids.
    Compliance with the ZEV standards is most often achieved through
more sophisticated combustion management, frequently involving some of
the technologies considered by NHTSA in its analysis. The associated
improvements and refinement in engine controls generally improve fuel
efficiency and have a positive impact on fuel economy.\421\ However,
such gains may be diminished because the advanced technologies required
by the program can affect the impact of other fuel economy
improvements, primarily due to increased weight. The agency has
considered this potential impact in our evaluation of manufacturer
product plans, many of which voluntarily identified particular models
as ZEV or PZEV-compliant. This indicates to NHTSA that the
manufacturers have already included compliance with these

standards in their product plans, which in turn indicates that
compliance with these standards is already accounted for in the
agency's baseline.
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    \421\ NESCAUM, ``White Paper: Comparing the Emissions Reductions
of the LEV II Program to the Tier 2 Program,'' October, 2003.
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    CARB also commented that ``NHTSA will need to consider the impact
of California and other adopting states' motor vehicle GHG emission
standard when those standards receive a waiver of preemption under the
Clean Air Act; this may require reopening this rulemaking or starting a
new one.'' In response, NHTSA notes again that EPA denied California's
request for a waiver, and while NHTSA recognizes that EPA is seeking
comment anew on the waiver issue, the agency cannot prejudge how it
would respond to any EPA decision until EPA makes a decision. Thus,
NHTSA need not determine at this time that it should reopen the
rulemaking or begin a new one in the event that EPA decided to grant
the waiver.
(d) Need of the United States to Conserve Energy
    Congress' requirement to set standards at the maximum feasible
level and inclusion of the need of the nation to conserve energy as a
factor to consider in setting CAFE standards ensures that standard
setting decisions are made with this purpose and all of the associated
benefits in mind. As discussed above, ``the need of the United States
to conserve energy'' is a broad concept encompassing ``the consumer
cost, national balance of payments, environmental, and foreign policy
implications of our need for large quantities of petroleum, especially
imported petroleum.'' \422\ Due to the breadth and scope of these
issues, NHTSA does not believe that the need of the United States to
conserve energy need be limited to consideration of purely domestic
effects. While the overarching goal of EPCA is energy conservation,
this energy savings factor (and related environmental concerns in
connection with climate change) must nonetheless be balanced with the
other EPCA factors. EPCA does not require or authorize the issuance of
standards that require the reducing of fuel consumption regardless of
cost. The benefits of the energy savings from overly high standards
would not outweigh countervailing severe economic costs. See, e.g.,
Public Citizen v. NHTSA, 248 F.2d 256, 265 (DC Cir. 1988).
Environmental implications principally include reductions in emissions
of criteria pollutants and carbon dioxide and the associated public
health and climate effects.
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    \422\ 42 FR 63184, 63188 (Dec. 15, 1977).
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    The need to reduce energy consumption is, from several different
standpoints, more crucial today than it was at the time of EPCA's
enactment in the late 1970s. U.S. energy consumption has been
outstripping U.S. energy production at an increasing rate. At the time
of this final rule, crude oil prices are currently around $40 per
barrel, having peaked at $134 in mid-July 2008, despite having averaged
about $13 per barrel as recently as 1998, and gasoline prices have
doubled in this period.\423\ Net petroleum imports now account for 60
percent of U.S. domestic petroleum consumption.\424\ World crude oil
production continues to be highly concentrated, exacerbating the risks
of supply disruptions and their negative effects on both the U.S. and
global economies. Figure VII-1 below shows the increase of crude oil
imports and the decline of U.S. oil production since 1920.
---------------------------------------------------------------------------

    \423\ Energy Information Administration, Annual Energy Review
2006, Table 5.21, p. 171. Available at http://www.eia.doe.gov/emeu/
aer/pdf/pages/sec5_51.pdf (last accessed Nov. 29, 2007).
    \424\ Energy Information Administration, Annual Energy Review
2006, Table 5.1, p. 125. Available at http://www.eia.doe.gov/emeu/
aer/pdf/pages/sec5_5.pdf (last accessed Nov. 29, 2007).

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[GRAPHIC] [TIFF OMITTED] TR30MR09.067

    The need of the nation to reduce energy consumption would be
reflected in the buying decisions of vehicle purchasers, if:
     Vehicle buyers behaved as if they had unbiased
expectations of their future driving patterns and fuel prices;
     The public social, economic, security, and environmental
impacts of petroleum consumption were fully identified, quantified and
reflected in current and future gasoline prices; and
     Vehicle buyers behaved as if they accounted for the impact
of fuel economy on their future driving costs in their purchasing
decisions.

Basic economic theory suggests that the price of vehicles should
reflect the value that the consumer places on the fuel economy
attribute of his or her vehicle. It is not clear that consumers have
the information or inclination to value the impact of fuel economy in
their vehicle purchasing decisions. Consumers generally have no direct
incentive to value benefits that are not included in the price of
fuel--for example, benefits such as energy security and limiting global
climate change. These are the market failures that EPCA requires NHTSA
to address as part of considering the need of the nation to conserve
energy.
    In this rulemkaing, NHTSA quantifies the need of the nation to
conserve energy by calculating how much a vehicle buyer ought to value
fuel economy, based both on fuel prices and potentially estimable
externalities (including energy security, the benefits of mitigating a
ton of CO2 emissions, criteria pollutant emissions, noise,
safety, and others). NHTSA discusses the specific issues related to the
need of the United States to conserve energy in more detail below.
(i) Consumer Cost
    The Bureau of Labor Statistics estimates that about 4.9 percent of
personal consumption expenditures in 2006 were accounted for by vehicle
fuel and oil.\425\ Given much higher gasoline prices since, the figure
will certainly be higher in 2007-2008. Historically, gasoline
consumption has been relatively insensitive to fluctuations in both
price and consumer income, in large part because consumers are largely
``locked in'' in the short run to particular travel patterns by their
choice of job, housing, schools, and lifestyle. People in most parts of
the country tend

to view gasoline consumption as a non-discretionary expense.
---------------------------------------------------------------------------

    \425\ Bureau of Labor Statistics, 2006 Consumer Expenditure
Survey, http://www.bls.gov/cex/#tables (last accessed Oct. 23,
2008).
---------------------------------------------------------------------------

    Other non-discretionary expenses such as housing (34 percent of
expenditures) and insurance/social security (11 percent), and health
expenditures (6 percent) are larger, but more predictable. The mirror
image of the relative stability in gasoline consumption is instability
in the amount of money available in household budgets for everything
else, and particularly for savings and discretionary expenses. When
gasoline's share in consumer expenditures rises, the public experiences
fiscal distress. This fiscal distress can, in some cases, have
macroeconomic consequences for the economy at large.
    NHTSA incorporates the impacts of consumer cost into its analysis
through the use of fuel price projections in setting fuel economy
standards. It should be noted that fuel economy is not free for
consumers: consumers must ``pay'' for fuel economy through some
combination of higher vehicle prices or loss of valued vehicle
attributes. Vehicle purchases accounted for 7 percent of consumer
expenditures in 2006. NHTSA uses cost-benefit analysis to help ensure
that consumers do not lose more through higher vehicle costs than they
gain through lower fuel consumption.
(ii) National Balance of Payments
    According to EIA, imports of crude oil and petroleum products
accounted for about 65 percent of U.S. petroleum consumption in
2007.\426\ Since U.S. crude oil and liquids production is only affected
by fluctuations in crude oil prices over a period of years, any changes
in petroleum consumption largely flow into changes in the quantity of
imports; and any changes in crude oil or wholesale products prices
directly flow into changes in the value of imports. Thus, any
improvement in light duty vehicle fuel economy will flow into a
corresponding reduction in merchandise imports, just as higher prices
flow into an increase in the value of imports.
---------------------------------------------------------------------------

    \426\ Energy Information Administration, Petroleum Supply Annual
2007, http://tonto.eia.doe.gov/dnav/pet/pet_sum_snd_d_nus_
mbbl_a_cur.htm (last accessed Oct. 23, 2008).
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    According to the Census, in 2007, the United States imported $293
billion in crude oil and petroleum products, accounting for 36 percent
of the dollar value of U.S. imports of goods.\427\ In the first eight
months of 2008, petroleum accounted for 49 percent of the dollar value
of U.S. merchandise imports. The United States gross domestic product
is about $14 trillion per year, so petroleum imports only account for
about 2 percent of GDP. Nonetheless, petroleum imports are large enough
to create a discernable fiscal drag, particularly since the usual
macroeconomic adjustment mechanisms, such as price or income
elasticity, or offsetting changes in currency valuation, are not very
effective in reducing petroleum imports. Hence, most of the burden for
any necessary macroeconomic adjustment will be borne by other sectors
of the economy, and unrelated imports. Conversely, however, measures
that reduce petroleum consumption, such as fuel economy standards, will
flow directly into the balance-of-payments account, and strengthen the
domestic economy to some degree.
---------------------------------------------------------------------------

    \427\ U.S. Department of Commerce, Bureau of the Census, FT900,
U.S. International Trade in Goods and Services, August 2008. http://
www.census.gov/foreign-trade/Press-Release/current_press_release/
press.html (last accessed October 21, 2008).
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(iii) Environmental Implications
    The need to conserve energy is also more crucial today because of
growing greenhouse gas emissions from growing petroleum consumption by
the on-the-road fleet of motor vehicles, and growing concerns about the
climate effects of those emissions. Since 1999, the transportation
sector has led all U.S. end-use sectors in emissions of CO2.
Transportation sector CO2 emissions in 2006 were 407.5
million metric tons higher than in 1990, an increase that represents
46.4 percent of the growth in unadjusted energy related CO2
emissions from all sectors over the period. Petroleum consumption,
which is directly and substantially related to fuel economy, is the
largest source of CO2 emissions in the transportation
sector.\428\ Moreover, transportation sector emissions from gasoline
and diesel fuel combustion generally parallel total vehicle miles
traveled. The need of the nation to conserve energy encompasses all of
these issues, since CO2 emissions from passenger cars and
light trucks decrease as fuel economy improves and more energy is
conserved.\429\ Indeed, the only way to make the substantial necessary
reductions in CO2 tailpipe emissions is to improve fuel
economy.
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    \428\ However, increases in ethanol fuel consumption have
mitigated the growth in transportation-related emissions somewhat
(emissions from energy inputs to ethanol production plants are
counted in the industrial sector).
    \429\ The above statistics are derived from Energy Information
Administration, ``Emissions of Greenhouse Gases Report,'' Report
 DOE/EIA-0573 (2006), released November 28, 2007. Available
at http://www.eia.doe.gov/oiaf/1605/ggrpt/carbon.html (last accessed
Oct. 23, 2008).
---------------------------------------------------------------------------

    These MY 2011 CAFE standards will reduce passenger car and light
truck fuel consumption and CO2 tailpipe emissions over the
next several decades, responding to the need of the nation to conserve
energy, as EPCA intended. More specifically, the final standards will
save over 9 billion gallons of fuel and avoid over 8 million metric
tons of CO2 tailpipe emissions over the lifetime of the
regulated vehicles.
    NHTSA evaluated in great detail the potential environmental impacts
associated with such CO2 emissions reductions and other
environmental impacts of the proposed standards through the Final
Environmental Impact Statement prepared in conjunction with this
rulemaking.\430\ They take the form of unambiguous reductions in
emissions of CO2, and very small and uncertain changes in
emissions of urban air pollutants and toxic pollutants, with reductions
in emissions of most pollutants.
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    \430\ The Final Environmental Impact Statement (FEIS) is
available on NHTSA's Web site at http://www.nhtsa.gov, under ``Fuel
Economy.'' On October 17, 2008, EPA published a notice announcing
the availability of NHTSA's EIS for this rulemaking. 73 FR 61859.
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(iv) Foreign Policy Considerations
    Fuel economy standards have only an indirect and general impact on
U.S. foreign policy. U.S. foreign policy has been affected for decades
by rising U.S. and world dependency of crude oil as the basis for
modern transportation systems. In general, the United States and oil
exporting states have a powerful long-term mutual interest in a
smoothly functioning international oil market. However, other
governments sometimes behave erratically, and, on occasion, will pursue
short-term benefits at the expense of long-term advantage.
     The political stability of major oil exporting states and
states controlling petroleum transportation routes is important to the
United States, because chaos could lead to an interruption of oil
production or shipments and worldwide increases in oil prices affecting
the U.S. and world economy. Physical shortages of petroleum would be
even more disruptive than high prices.
     The United States may give additional consideration to the
political views of the governments of current or potential future oil
exporting states, because the United States would like to influence
these governments to invest in increased oil production capacity, to
produce more oil, to sell their oil at reasonable prices, and to
encourage other oil exporters to do the same.

     The United States may, under some circumstances, be
prepared to overlook otherwise objectionable behavior by actual or
potential oil exporters.
     The United States must take an interest in the military
security of major foreign oil production, refining, export, and
transportation facilities because damage to these facilities could
affect the U.S. and world economy, even if the affected facilities do
not produce or ship petroleum for the U.S. market.
     To the extent that oil exporting states accumulate large
foreign currency reserves as a result of cumulative balance-of-payments
surpluses, the United States may have additional reasons for giving
such states additional consideration.
    NHTSA considers oil price externalities that cover the benefits
associated with reduced risk of an oil price spike, possibly induced by
foreign political developments. However, other externalities in
connection with foreign policy considerations such as those set forth
above are exceedingly difficult to quantify, much less monetize as a
discrete economic value. No commenter set forth a methodology by which
NHTSA could reasonably quantify this particular set of externalities,
and NHTSA is unaware of literature which addresses quantifying these
considerations. Nevertheless, in considering the need of the nation to
conserve energy, NHTSA has taken foreign policy considerations into
account as a part of its qualitative analysis. For further discussion
of how NHTSA accounts for petroleum consumption and import
externalities in its analysis, see section V.B.11 above.
    Accordingly, upon consideration of the entire record, and on the
basis of all public comments and applicable law, NHTSA has considered
the need of the nation to conserve energy.
4. Comparison of Alternatives
    NHTSA's analyses of the levels of CAFE that would be required under
the alternatives considered by the agency and the associated costs are
described below and then summarized in Tables VII-2 through VII-6:
    VII-2. Average Required CAFE Levels: Under an attribute-based CAFE
standard, the CAFE level required of each manufacturer depends on the
distribution of footprint values and projected sales of individual
models comprising the fleet of vehicles it produces. Table VII-2
contains a sales-weighted harmonic average of these requirements.
    VII-3. Average CAFE Shortfall: If a manufacturer is not expected to
achieve the required CAFE level, either because of an expected economic
decision or because all opportunities to add technology are expected to
be exhausted, the manufacturer is expected to have a shortfall that
will result in civil penalties (unless sufficient CAFE credits are
available to offset the shortfall). Table VII-3 summarizes these
shortfalls (where they exist) at the industry-wide level.
    VII-4. Total Benefits (versus Baseline): The societal benefits
resulting from each alternative are calculated relative to the baseline
CAFE standards. Section V discusses the components of these benefits.
Table VII-4 shows the discounted present value of benefits accrued over
the useful life of vehicles sold in MY 2011.
    VII-5. Total Costs (versus Baseline): The total costs of each
alternative are measured by the estimated industry-wide increase in
technology outlays from those under baseline CAFE standards.