$1.3
                                                                           $2.6
                                     2022
                                                                           $0.5
                                                                           $1.7
                                                                           $2.6
                                                                           $5.3
                                     2023
                                                                           $0.8
                                                                           $2.7
                                                                           $4.0
                                                                           $8.1
                                     2024
                                                                           $1.1
                                                                           $3.7
                                                                           $5.4
                                                                            $11
                                     2025
                                                                           $1.4
                                                                           $4.7
                                                                           $6.9
                                                                            $14
                                     2026
                                                                           $1.8
                                                                           $5.9
                                                                           $8.6
                                                                            $18
                                     2027
                                                                           $2.2
                                                                           $7.1
                                                                            $10
                                                                            $22
                                     2028
                                                                           $2.5
                                                                           $8.3
                                                                            $12
                                                                            $25
                                     2029
                                                                           $3.0
                                                                            $10
                                                                            $14
                                                                            $29
                                     2030
                                                                           $3.4
                                                                            $11
                                                                            $16
                                                                            $34
                                     2035
                                                                           $5.2
                                                                            $15
                                                                            $22
                                                                            $48
                                     2040
                                                                           $6.1
                                                                            $18
                                                                            $25
                                                                            $56
                                     2050
                                                                           $8.4
                                                                            $23
                                                                            $31
                                                                            $71
                                      NPV
                                                                            $44
                                                                           $200
                                                                           $320
                                                                           $630
                  a The SC-CO2 values are dollar-year and emissions-year specific.
Non-CO2 GHG Benefits Based on Directly Modeled Estimates
Several researchers have directly estimated the social cost of non-CO2 emissions using integrated assessment models (IAMs), though the number of such estimates is small compared to the large number of SC-CO2 estimates available in the literature.  As discussed in previous RIAs (e.g., EPA 2012), there is considerable variation among these published estimates in the models and input assumptions they employ.  These studies differ in the emission perturbation year, employ a wide range of constant and variable discount rate specifications, and consider a range of baseline socioeconomic and emissions scenarios that have been developed over the last 20 years.  However, none of the other published estimates of the social cost of non-CO2 GHG are consistent with the SC-CO2 estimates, and most are likely underestimates due to changes in the underlying science since their publication.
Recently, a paper by Marten et al. (2014) provided the first set of published SC-CH4 and SC-N2O estimates that are consistent with the modeling assumptions underlying the SC-CO2. Specifically, the estimation approach of Marten et al. (2014) used the same set of three IAMs, five socioeconomic-emissions scenarios, equilibrium climate sensitivity distribution, three constant discount rates, and aggregation approach used to develop the SC-CO2 estimates.
The resulting SC-CH4 and SC-N2O estimates are presented in Table IX-17. More detailed discussion of their methodology, results and a comparison to other published estimates can be found in the RIA and in Marten et al. (2014).  The tables do not include HFC-134a because EPA is unaware of analogous estimates.
Table IX-17 Social Cost of CH4 and N2O, 2012  -  2050[a] [in 2012$ per metric ton] (Source: Marten et al., 2014)
Year
                                    SC-CH4
                                    SC-N2O

                                      5%
                                    Average
                                      3%
                                    Average
                                     2.5%
                                    Average
                                      3%
                                95th percentile
                                      5%
                                    Average
                                  3% Average
                                 2.5% Average
                                      3%
                                95th percentile
2012
                                                                           $440
                                                                          $1000
                                                                          $1400
                                                                          $2800
                                                                          $4000
                                                                         $14000
                                                                         $20000
                                                                         $37000
2015
                                                                            500
                                                                           1200
                                                                           1500
                                                                           3100
                                                                           4400
                                                                          15000
                                                                          22000
                                                                          39000
2020
                                                                            590
                                                                           1300
                                                                           1700
                                                                           3500
                                                                           5200
                                                                          16000
                                                                          24000
                                                                          44000
2025
                                                                            710
                                                                           1500
                                                                          19000
                                                                           4100
                                                                           6000
                                                                          18000
                                                                          27000
                                                                          50000
2030
                                                                            840
                                                                           1700
                                                                           2300
                                                                           4600
                                                                           7000
                                                                          20000
                                                                          29000
                                                                          55000
2035
                                                                            990
                                                                           2000
                                                                           2500
                                                                           5400
                                                                           8100
                                                                          23000
                                                                          32000
                                                                          61000
2040
                                                                           1200
                                                                           2300
                                                                           2800
                                                                           6000
                                                                           9300
                                                                          25000
                                                                          35000
                                                                          67000
2045
                                                                           1300
                                                                           2500
                                                                           3100
                                                                           6800
                                                                          11000
                                                                          27000
                                                                          38000
                                                                          73000
2050
                                                                           1500
                                                                           2700
                                                                           3300
                                                                           7400
                                                                          12000
                                                                         290000
                                                                          41000
                                                                          80000
Notes:
a The values are emissions-year specific and have been rounded to two significant digits. Unrounded numbers were used to calculate the GHG benefits.
The application of directly modeled estimates from Marten et al. (2014) to benefit-cost analysis of a regulatory action is analogous to the use of the SC-CO2 estimates.  Specifically, the SC-CH4 and SC-N2O estimates in Table IX-17 are used to monetize the benefits of changes in CH4 and N2O emissions expected as a result of the proposed rulemaking.  Forecast changes in CH4 and N2O emissions in a given year resulting from the regulatory action are multiplied by the SC-CH4 and SC-N2O estimate for that year, respectively. To obtain a present value estimate, the monetized stream of future non-CO2 benefits are discounted back to the analysis year using the same discount rate used to estimate the social cost of the non-CO2 GHG emission changes.
The CH4 and N2O benefits based on Marten et al. (2014) are presented for each calendar year in Table IX-18. Including these benefits would increase the total net present value of the annual GHG benefits for this proposed rulemaking by about $1.5 billion to $12 billion (2012$), or roughly 4 to 6 percent, depending on discount rate.

Table IX-18 Annual Upstream and Downstream non-CO2 GHG Benefits for the Given SC-non-CO2 Value using Method B and Relative to the Less Dynamic Baseline, Using the Directly Modeled Approach[a][,b] (Millions of 2012$)

                                      CH4
                                      N2O
                                   Calendar
                                     Year
                                      5%
                                    Average
                                      3%
                                    Average
                                     2.5%
                                    Average
                                      3%,
                                95th Percentile
                                      5%
                                    Average
                                      3%
                                    Average
                                     2.5%
                                    Average
                                      3%,
                                95th Percentile
                                     2018
                                                                           $0.6
                                                                           $1.3
                                                                           $1.6
                                                                           $3.3
                                                                           $0.0
                                                                           $0.1
                                                                           $0.1
                                                                           $0.2
                                     2019
                                                                           $1.1
                                                                           $2.6
                                                                           $3.4
                                                                           $6.8
                                                                           $0.0
                                                                           $0.1
                                                                           $0.2
                                                                           $0.3
                                     2020
                                                                           $1.8
                                                                           $3.9
                                                                           $5.2
                                                                            $10
                                                                           $0.1
                                                                           $0.2
                                                                           $0.3
                                                                           $0.5
                                     2021
                                                                           $5.8
                                                                            $13
                                                                            $17
                                                                            $35
                                                                           $0.1
                                                                           $0.4
                                                                           $0.6
                                                                           $1.2
                                     2022
                                                                            $11
                                                                            $24
                                                                            $31
                                                                            $65
                                                                           $0.3
                                                                           $0.8
                                                                           $1.1
                                                                           $2.1
                                     2023
                                                                            $17
                                                                            $35
                                                                            $49
                                                                            $97
                                                                           $0.4
                                                                           $1.1
                                                                           $1.7
                                                                           $3.1
                                     2024
                                                                            $26
                                                                            $56
                                                                            $72
                                                                           $150
                                                                           $0.6
                                                                           $1.8
                                                                           $2.5
                                                                           $4.7
                                     2025
                                                                            $35
                                                                            $74
                                                                            $95
                                                                           $200
                                                                           $0.8
                                                                           $2.4
                                                                           $3.5
                                                                           $6.5
                                     2026
                                                                            $46
                                                                            $99
                                                                           $130
                                                                           $260
                                                                           $1.0
                                                                           $3.0
                                                                           $4.5
                                                                           $8.4
                                     2027
                                                                            $57
                                                                           $120
                                                                           $150
                                                                           $320
                                                                           $1.3
                                                                           $4.0
                                                                           $5.8
                                                                            $11
                                     2028
                                                                            $69
                                                                           $140
                                                                           $190
                                                                           $390
                                                                           $1.6
                                                                           $4.8
                                                                           $6.9
                                                                            $13
                                     2029
                                                                            $82
                                                                           $170
                                                                           $220
                                                                           $460
                                                                           $1.9
                                                                           $5.8
                                                                           $8.2
                                                                            $15
                                     2030
                                                                            $95
                                                                           $190
                                                                           $260
                                                                           $520
                                                                           $2.2
                                                                           $6.5
                                                                           $9.3
                                                                            $18
                                     2035
                                                                           $160
                                                                           $330
                                                                           $400
                                                                           $870
                                                                           $3.7
                                                                            $10
                                                                            $15
                                                                            $28
                                     2040
                                                                           $230
                                                                           $430
                                                                           $540
                                                                         $1,200
                                                                           $5.2
                                                                            $14
                                                                            $19
                                                                            $37
                                     2050
                                                                           $350
                                                                           $620
                                                                           $770
                                                                         $1,700
                                                                           $7.9
                                                                            $20
                                                                            $27
                                                                            $53
                                      NPV
                                                                         $1,500
                                                                         $4,600
                                                                         $6,400
                                                                        $12,000
                                                                            $34
                                                                           $150
                                                                           $230
                                                                           $400
  a The SC-CH4 and SC-N2O values are dollar-year and emissions-year specific.
  b Note that net present discounted values of reduced GHG emissions is are calculated differently than other benefits.  The same discount rate used to discount the value of damages from future emissions (SC-CH4 and SC-N2O at 5, 3, and 2.5 percent) is used to calculate net present value discounted values of SC-CH4 and SC-N2O for internal consistency.  Refer to SCC TSD for more detail.

As illustrated above, compared to the use of directly modeled estimates the GWP-based approximation approach underestimates the climate benefits of the CH4 emission reductions by 14 percent to 50 percent and the climate benefits of N2O reductions by 9 percent to 25 percent, depending on the discount rate assumption.

Additional non-CO2 GHGs Co-benefits
In determining the relative social costs of the different gases, the Marten et al. (2014) analysis accounts for differences in lifetime and radiative efficiency between the non-CO2 GHGs and CO2.  The analysis also accounts for radiative forcing resulting from methane's effects on tropospheric ozone and stratospheric water vapor, and for at least some of the fertilization effects of elevated carbon dioxide concentrations.  However, there exist several other differences between these gases that have not yet been captured in this analysis, namely the non-radiative effects of methane-driven elevated tropospheric ozone levels on human health, agriculture, and ecosystems, and the effects of carbon dioxide on ocean acidification. Inclusion of these additional non-radiative effects would potentially change both the absolute and relative value of the various gases.
    Of these effects, the human health effect of elevated tropospheric ozone levels resulting from methane emissions is the closest to being monetized in a way that would be comparable to the SCC.  Premature ozone-related cardiopulmonary deaths resulting from global increases in tropospheric ozone concentrations produced by the methane oxidation process have been the focus of a number of studies over the past decade (e.g., West et al. 2006).  Recent studies have produced an estimate of a monetized benefit of methane emissions reductions, with results on the order of $1000 per metric ton of CH4 emissions reduced (Anenberg et al. 2012; Shindell et al. 2012), an estimate similar in magnitude to the climate benefits of CH4 reductions estimated by the Marten et al. or GWP methods.  However, though EPA is continuing to monitor this area of research as it evolves, EPA is not applying them for benefit estimates at this time.

Monetized Non-GHG Health Impacts
This section analyzes the economic benefits from reductions in health and environmental impacts resulting from non-GHG emission reductions that can be expected to occur as a result of the proposed Phase 2 standards.  CO2 emissions are predominantly the byproduct of fossil fuel combustion processes that also produce criteria and hazardous air pollutant emissions.  The vehicles that are subject to the proposed standards are also significant sources of mobile source air pollution such as direct PM, NOX, VOCs and air toxics.  The proposed standards would affect exhaust emissions of these pollutants from vehicles and would also affect emissions from upstream sources that occur during the refining and distribution of fuel.  Changes in ambient concentrations of ozone, PM2.5, and air toxics that would result from the proposed standards are expected to affect human health by reducing premature deaths and other serious human health effects, as well as other important improvements in public health and welfare.
It is important to quantify the health and environmental impacts associated with the proposed standards because a failure to adequately consider these ancillary impacts could lead to an incorrect assessment of their costs and benefits.  Moreover, the health and other impacts of exposure to criteria air pollutants and airborne toxics tend to occur in the near term, while most effects from reduced climate change are likely to occur only over a time frame of several decades or longer.
Although EPA typically quantifies and monetizes the health and environmental impacts related to both PM and ozone in its regulatory impact analyses (RIAs), it was unable to do so in time for this proposal.  Instead, EPA has applied PM-related "benefits per-ton" values to its estimated emission reductions as an interim approach to estimating the PM-related benefits of the proposal.[,]  EPA also characterizes the health and environmental impacts that will be quantified and monetized for the final rulemaking.
This section is split into two sub-sections: the first presents the benefits-per-ton values used to monetize the benefits from reducing population exposure to PM associated with the proposed standards; the second explains what PM- and ozone-related health and environmental impacts EPA will quantify and monetize in the analysis for the final rule.  EPA bases its analyses on peer-reviewed studies of air quality and health and welfare effects and peer-reviewed studies of the monetary values of public health and welfare improvements, and is generally consistent with benefits analyses performed for the analysis of the final Tier 3 Vehicle Rule, the final 2012 PM NAAQS Revision, and the final 2017-2025 Light Duty Vehicle GHG Rule.
Though EPA is characterizing the changes in emissions associated with toxic pollutants, we are not able to quantify or monetize the human health effects associated with air toxic pollutants for either the proposal or the final rule analyses (see Section VIII.G.1.b.iii for more information).  Please refer to Section VIII for more information about the air toxics emissions impacts associated with the proposed standards.
     Economic Value of Reductions in Criteria Pollutants
As described in Section VIII, the proposed standards would reduce emissions of several criteria and toxic pollutants and their precursors.  In this analysis, EPA estimates the economic value of the human health benefits associated with the resulting reductions in PM2.5 exposure.  Due to analytical limitations with the benefit per ton method, this analysis does not estimate benefits resulting from reductions in population exposure to other criteria pollutants such as ozone.   Furthermore, the benefits per-ton method, like all air quality impact analyses, does not monetize all of the potential health and welfare effects associated with reduced concentrations of PM2.5.
This analysis uses estimates of the benefits from reducing the incidence of the specific PM2.5-related health impacts described below.  These estimates, which are expressed per ton of PM2.5-related emissions eliminated by the proposed rule, represent the monetized value of human health benefits (including reductions in both premature mortality and premature morbidity) from reducing each ton of directly emitted PM2.5 or its precursors (SO2 and NOx), from a specified source.  Ideally, the human health benefits would be estimated based on changes in ambient PM2.5 as determined by full-scale air quality modeling.  However, this modeling was not possible in the timeframe for this proposal.
The dollar-per-ton estimates used in this analysis are provided in Table IX-19.  As the table indicates, these values differ among pollutants, and also depend on their original source, because emissions from different sources can result in different degrees of population exposure and resulting health impacts.  In the summary of costs and benefits, Section IX.K of this preamble, EPA presents the monetized value of PM-related improvements associated with the proposal.

Table IX-19 Benefits-per-ton Values (Thousands, 2012$)[a]
                                    Year[c]
                            On-road Mobile Sources
                              Upstream Sources[d]

                                 Direct PM2.5
                                      SO2
                                      NOX
                                 Direct PM2.5
                                      SO2
                                      NOx
                 Estimated Using a 3 Percent Discount Rate[b]
                                     2016
                                   $380-$850
                                    $20-$45
                                   $7.7-$18
                                   $330-$750
                                   $69-$160
                                   $6.8-$16
                                     2020
                                   $400-$910
                                    $22-$49
                                   $8.1-$18
                                   $350-$790
                                   $75-$170
                                   $7.4-$17
                                     2025
                                  $440-$1,000
                                    $24-$55
                                   $8.8-$20
                                   $390-$870
                                   $83-$190
                                   $8.1-$18
                                     2030
                                  $480-$1,100
                                    $27-$61
                                   $9.6-$22
                                   $420-$950
                                   $91-$200
                                   $8.7-$20
                 Estimated Using a 7 Percent Discount Rate[b]
                                     2016
                                   $340-$770
                                    $18-$41
                                   $6.9-$16
                                   $290-$670
                                   $63-$140
                                   $6.2-$14
                                     2020
                                   $370-$820
                                    $20-$44
                                   $7.4-$17
                                   $320-$720
                                   $67-$150
                                   $6.6-$15
                                     2025
                                   $400-$910
                                    $22-$49
                                   $8.0-$18
                                   $350-$790
                                   $75-$170
                                   $7.3-$17
                                     2030
                                   $430-$980
                                    $24-$55
                                   $8.6-$20
                                   $380-$850
                                   $81-$180
                                   $7.9-$18
Notes:
a The benefit-per-ton estimates presented in this table are based on a range of premature mortality estimates derived from the ACS study (Krewski et al., 2009) and the Six-Cities study (Lepeule et al., 2012). See Chapter VIII of the RIA for a description of these studies.
b The benefit-per-ton estimates presented in this table assume either a 3 percent or 7 percent discount rate in the valuation of premature mortality to account for a twenty-year segmented premature mortality cessation lag.
[c] Benefit-per-ton values were estimated for the years 2016, 2020, 2025 and 2030.  We hold values constant for intervening years (e.g., the 2016 values are assumed to apply to years 2017-2019; 2020 values for years 2021-2024; 2030 values for years 2031 and beyond).
[d] We assume for the purpose of this analysis that total "upstream emissions" are most appropriately monetized using the refinery sector benefit per-ton values.  The majority of upstream emission reductions associated with the NPRM are related to domestic onsite refinery emissions and domestic crude production.  While total upstream emissions also include storage and transport sources, as well as sources upstream from the refinery, we have chosen to simply apply the refinery values.  Full-scale air quality modeling, and the associated benefits analysis, will include upstream emissions from all sources in the FRM.

The benefit-per-ton technique has been used in previous analyses, including EPA's 2017-2025 Light-Duty Vehicle Greenhouse Gas Rule, the Reciprocating Internal Combustion Engine rules,[,] and the Residential Wood Heaters NSPS.  Table IX-20 shows the quantified PM2.5-related co-benefits captured in those benefit per-ton estimates, as well as unquantified effects the benefit per-ton estimates are unable to capture.
Table IX-20 Human Health and Welfare Effects of PM2.5
Pollutant / Effect
Quantified and Monetized
in Primary Estimates
Unquantified Effects
Changes in:
PM2.5
Adult premature mortality
Acute bronchitis
Hospital admissions: respiratory and cardiovascular
Emergency room visits for asthma
Nonfatal heart attacks (myocardial infarction)
Lower and upper respiratory illness
Minor restricted-activity days
Work loss days
Asthma exacerbations (asthmatic population)
Infant mortality
Chronic and subchronic bronchitis cases
Strokes and cerebrovascular disease
Low birth weight
Pulmonary function
Chronic respiratory diseases other than chronic bronchitis
Non-asthma respiratory emergency room visits
Visibility
Household soiling

A more detailed description of the benefit-per-ton estimates is provided in Chapter VIII of the Draft RIA that accompanies this rulemaking.  Readers interested in reviewing the complete methodology for creating the benefit-per-ton estimates used in this analysis can consult EPA's "Technical Support Document: Estimating the Benefit per Ton of Reducing PM2.5 Precursors from 17 Sectors."  Readers can also refer to Fann et al. (2012) for a detailed description of the benefit-per-ton methodology.
As Table IX-18 indicates, EPA projects that the per-ton values for reducing emissions of non-GHG pollutants from both vehicle use and upstream sources such as fuel refineries will increase over time.  These projected increases reflect rising income levels, which increase affected individuals' willingness to pay for reduced exposure to health threats from air pollution.  They also reflect future population growth and increased life expectancy, which expands the size of the population exposed to air pollution in both urban and rural areas, especially among older age groups with the highest mortality risk.
     Human Health and Environmental Benefits for the Final Rule
Human Health and Environmental Impacts
To model the ozone and PM air quality benefits of the final rule, EPA will use the Community Multiscale Air Quality (CMAQ) model (see Section VIII for a description of the CMAQ model).  The modeled ambient air quality data will serve as an input to the Environmental Benefits Mapping and Analysis Program  -  Community Edition (BenMAP CE).  BenMAP CE is a computer program developed by EPA that integrates a number of the modeling elements used in previous RIAs (e.g., interpolation functions, population projections, health impact functions, valuation functions, analysis and pooling methods) to translate modeled air concentration estimates into health effects incidence estimates and monetized benefits estimates.
Chapter VIII in the DRIA that accompanies this proposal lists the co-pollutant health effect concentration-response functions EPA will use to quantify the non-GHG incidence impacts associated with the proposed heavy-duty vehicle standards.  These include PM- and ozone-related premature mortality, nonfatal heart attacks, hospital admissions (respiratory and cardiovascular), emergency room visits, acute bronchitis, minor restricted activity days, and days of work and school lost.
Monetized Impacts
To calculate the total monetized impacts associated with quantified health impacts, EPA applies values derived from a number of sources.  For premature mortality, EPA applies a value of a statistical life (VSL) derived from the mortality valuation literature.  For certain health impacts, such as a number of respiratory-related ailments, EPA applies willingness-to-pay estimates derived from the valuation literature.  For the remaining health impacts, EPA applies values derived from current cost-of-illness and/or wage estimates.  Chapter VIII in the DRIA that accompanies this proposal presents the monetary values EPA will apply to changes in the incidence of health and welfare effects associated with reductions in non-GHG pollutants that will occur when these GHG control strategies are finalized.
Other Unquantified Health and Environmental Impacts
In addition to the co-pollutant health and environmental impacts EPA will quantify for the analysis of the final standard, there are a number of other health and human welfare endpoints that EPA will not be able to quantify or monetize because of current limitations in the methods or available data.  These impacts are associated with emissions of air toxics (including benzene, 1,3-butadiene, formaldehyde, acetaldehyde, acrolein, naphthalene and ethanol), ambient ozone, and ambient PM2.5 exposures.  Chapter VIII of the DRIA lists these unquantified health and environmental impacts.
While there will be impacts associated with air toxic pollutant emission changes that result from the final standard, EPA will not attempt to monetize those impacts.  This is primarily because currently available tools and methods to assess air toxics risk from mobile sources at the national scale are not adequate for extrapolation to incidence estimations or benefits assessment.  The best suite of tools and methods currently available for assessment at the national scale are those used in the National-Scale Air Toxics Assessment (NATA).  EPA's Science Advisory Board specifically commented in their review of the 1996 NATA that these tools were not yet ready for use in a national-scale benefits analysis, because they did not consider the full distribution of exposure and risk, or address sub-chronic health effects.   While EPA has since improved the tools, there remain critical limitations for estimating incidence and assessing benefits of reducing mobile source air toxics.  EPA continues to work to address these limitations; however, EPA does not anticipate having methods and tools available for national-scale application in time for the analysis of the final rules.
Energy Security Impacts
The Phase 2 standards are designed to require improvements in the fuel efficiency of medium- and heavy-duty vehicles and, thereby, reduce fuel consumption and GHG emissions. In turn, the Phase 2 standards help to reduce U.S. petroleum imports.  A reduction of U.S. petroleum imports reduces both financial and strategic risks caused by potential sudden disruptions in the supply of imported petroleum to the U.S., thus increasing U.S. energy security.  This section summarizes the agency's estimates of U.S. oil import reductions and energy security benefits of the proposed Phase 2 standards.  Additional discussion of this issue can be found in Chapter 8 of the draft RIA.
         Implications of Reduced Petroleum Use on U.S. Imports
U.S. energy security is broadly defined as the continued availability of energy sources at an acceptable price.  Most discussion of U.S. energy security revolves around the topic of the economic costs of U.S. dependence on oil imports.  However, it is not imports alone, but both imports and consumption of petroleum from all sources and their role in economic activity, that expose the U.S. to risk from price shocks in the world oil price. The relative significance of petroleum consumption and import levels for the macroeconomic disturbances that follow from oil price shocks is not fully understood.  Recognizing that changing petroleum consumption will change U.S. imports, this assessment of oil costs focuses on those incremental social costs that follow from the resulting changes in imports, employing the usual oil import premium measure. The agencies request comment on how to incorporate the impact of changes in oil consumption, rather than imports exclusively, into our energy security analysis.
While the U.S. has reduced its consumption and increased its production of oil in recent years, it still relies on oil from potentially unstable sources.  In addition, oil exporters with a large share of global production have the ability to raise the price of oil by exerting the monopoly power associated with a cartel, the Organization of Petroleum Exporting Countries (OPEC), to restrict oil supply relative to demand.  These factors contribute to the vulnerability of the U.S. economy to episodic oil supply shocks and price spikes. In 2012, U.S. net expenditures for imports of crude oil and petroleum products were $290 billion and expenditures on both imported oil and domestic petroleum and refined products totaled $634 billion (see Figure IX-1).  Import costs have declined since 2011 but total oil expenditures (domestic and imported) remain near historical highs, at roughly triple the inflation-adjusted levels experienced by the U.S. from 1986 to 2002.
In 2010, just over 40 percent of world oil supply came from OPEC nations and the AEO 2014 (Early Release) projects that this share will rise gradually to over 45 percent by 2040.  Approximately 31 percent of global supply is from Middle East and North African countries alone, a share that is also expected to grow.  Measured in terms of the share of world oil resources or the share of global oil export supply, rather than oil production, the concentration of global petroleum resources in OPEC nations is even larger.  As another measure of concentration, of the 137 countries/principalities that export either crude or refined products, the top 12 have recently accounted for over 55 percent of exports.  Eight of these countries are members of OPEC, and a ninth is Russia.  In a market where even a 1-2 percent supply loss can raise prices noticeably, and where a 10 percent supply loss could lead to an unprecedented price shock, this regional concentration is of concern.  Historically, the countries of the Middle East have been the source of eight of the ten major world oil disruptions, with the ninth originating in Venezuela, an OPEC country, and the tenth being Hurricanes Katrina and Rita.

                           	Figure IX-1: U.S. Expenditures on Crude Oil from 1970 through 2015
The agencies used EPA's MOVES model to estimate the reductions in U.S. fuel consumption due to this proposed rule for vocational vehicles and tractors. For HD pickups and vans, the agencies used both DOT's CAFE model and EPA's MOVES model to estimate the fuel consumption impacts. (Detailed explanations of the MOVES and CAFE models can be found in Chapters 5 and 10 of the draft RIA.  See IX.C of the preamble for estimates of reduced fuel consumption from the proposed rule).  Based on a detailed analysis of differences in U.S. fuel consumption, petroleum imports, and imports of  petroleum products, the agencies estimate that approximately 90 percent of the reduction in fuel consumption resulting from adopting improved GHG emissions standards and fuel efficiency standards is likely to be reflected in reduced U.S. imports of crude oil and net imported petroleum products.  Thus, on balance, each gallon of fuel saved as a consequence of the HD GHG and fuel efficiency standards is anticipated to reduce total U.S. imports of petroleum by 0.90 gallons.  Based upon the fuel savings estimated by the MOVES/CAFE models and the 90 percent oil import factor, the reduction in U.S. oil imports from this proposed rule are estimated for the years 2020, 2025, 2030, 2040, and 2050 (in millions of barrels per day (MMBD)) in Table IX-23 below.  For comparison purposes, Table IX-23 also shows U.S. imports of crude oil in 2020, 2025, 2030 and 2040 as projected by DOE in the Annual Energy Outlook 2014 (Early Release) Reference Case. U.S. Gross Domestic Product (GDP) is projected to grow by roughly 59 percent over the same time frame (e.g., from 2020 to 2040) in the same AEO projections.
Table IX-21 Projected U.S. Imports of Crude Oil and U.S. Oil Import Reductions Resulting from the Proposed Phase Two Heavy-Duty Vehicle Rule in 2020, 2025, 2030, 2040 and 2050 using Method B and Relative to the Less Dynamic Baseline
(Millions of barrels per day (MMBD)
                                     Year
                               U.S. Oil Imports

                       Reductions from Proposed HD Rule
                                     2020
                                     4.93
                                     0.01
                                     2025
                                     5.04
                                     0.16
                                     2030
                                     5.35
                                     0.37
                                     2040
                                     5.92
                                     0.65
                                     2050
                                       *
                                     0.78
                 * The AEO 2014 (Early Release) only projects energy market and economic trends through 2040.
         Energy Security Implications
     In order to understand the energy security implications of reducing U.S. oil imports, EPA has worked with Oak Ridge National Laboratory (ORNL), which has developed approaches for evaluating the social costs and energy security implications of oil use.  The energy security estimates provided below are based upon a methodology developed in a peer-reviewed study entitled, "The Energy Security Benefits of Reduced Oil Use, 2006-2015," completed in March 2008.  This ORNL study is an updated version of the approach used for estimating the energy security benefits of U.S. oil import reductions developed in a 1997 ORNL Report.  For EPA and NHTSA rulemakings, the ORNL methodology is updated periodically to account for forecasts of future energy market and economic trends reported in the U.S. Energy Information Administration's Annual Energy Outlook.
When conducting this analysis, ORNL considered the full cost of importing petroleum into the U.S.  The full economic cost is defined to include two components in addition to the purchase price of petroleum itself.  These are: (1) the higher costs for oil imports resulting from the effect of U.S. demand on the world oil price (i.e., the "demand" or "monopsony" costs); and (2) the risk of reductions in U.S. economic output and disruption to the U.S. economy caused by sudden disruptions in the supply of imported oil to the U.S. (i.e., macroeconomic disruption/adjustment costs).
The literature on the energy security for the last two decades has routinely combined the monopsony and the macroeconomic disruption components when calculating the total value of the energy security premium.  However, in the context of using a global value for the Social Cost of Carbon (SCC) the question arises: how should the energy security premium be used when some benefits from the rule, such as the benefits of reducing greenhouse gas emissions, are calculated from a global perspective?  Monopsony benefits represent avoided payments by U.S. consumers to oil producers that result from a decrease in the world oil price as the U.S. decreases its demand for oil.  Although there is clearly an overall benefit to the U.S. when considered from a domestic perspective, the decrease in price due to decreased demand in the U.S. also represents a loss to oil producing countries, one of which is the United States.  Given the redistributive nature of this monopsony effect from a global perspective, and the fact that an increasing fraction of it represents a transfer between U.S. consumers and producers, it is excluded in the energy security benefits calculations for this proposed rule.
In contrast, the other portion of the energy security premium, the avoided U.S. macroeconomic disruption and adjustment cost that arises from reductions in U.S. petroleum imports, does not have offsetting impacts outside of the U.S., and, thus, is included in the energy security benefits estimated for this proposed rule.  To summarize, the agencies have included only the avoided macroeconomic disruption portion of the energy security benefits to estimate the monetary value of the total energy security benefits of this proposed rule.
	For this rulemaking, ORNL updated the energy security premiums by incorporating the most recent oil price forecast and energy market trends, particularly regional oil supplies and demands, from the AEO 2014 (Early Release) into its model. ORNL developed energy security premium estimates for a number of different years.  Table IX-22 provides estimates for energy security premiums for the years 2020, 2025, 2030 and 2040, as well as a breakdown of the components of the energy security premiums for each year.  The components of the energy security premiums and their values are discussed below.
Table IX-22 Energy Security Premiums in 2020, 2025, 2030 and 2040 (2012$/Barrel)*
                                 Year (range)
                                   Monopsony
                                    (Range)
               Avoided Macroeconomic Disruption/Adjustment Costs
                                    (Range)
                                Total Mid-Point
                                    (Range)
2020
                                     $4.91
                                (1.63  -  9.15)
                                     $6.35
                               (3.07  -  10.15)
                                    $11.25
                               (6.67  -  16.53)
2025
                                     $5.46
                               (1.81  -  10.47)
                                     $7.29
                               (3.57  -  11.67)
                                    $12.75
                               (7.58  -  18.65)
2030
                                     $6.04
                               (2.00  -  11.67)
                                     $8.39
                               (4.12  -  13.41)
                                    $14.43
                               (8.54  -  21.13)
2040
                                     $7.17
                               (2.32  -  14.03)
                                    $10.74
                               (5.36  -  17.22)
                                    $17.91
                                   -  26.14)
      * Top values in each cell are the midpoints, the values in parentheses are the 90 percent confidence intervals.
(a) Effect of Oil Use on the Long-Run Oil Price
The first component of the full economic costs of importing petroleum into the U.S. follows from the effect of U.S. import demand on the world oil price over the long-run.  Because the U.S. is a sufficiently large purchaser of global oil supplies, its purchases can affect the world oil price.  This monopsony power means that increases in U.S. petroleum demand can cause the world price of crude oil to rise, and conversely, that reduced U.S. petroleum demand can reduce the world price of crude oil.  Thus, one benefit of decreasing U.S. oil purchases, due to improvements in the fuel efficiency of medium- and heavy-duty vehicles, is the potential decrease in the crude oil price paid for all crude oil purchased.
A variety of oil market and economic factors have contributed to lowering the estimated monopsony premium compared to monopsony premiums cited in recent EPA/NHTSA rulemakings.  Three principal factors contribute to lowering the monopsony premium: lower world oil prices, lower U.S. oil imports and less responsiveness of world oil prices to changes in U.S. oil demand.  For example, between 2012 (using the AEO 2012 (Early Release)) and 2014 (using the AEO 2014 (Early Release)), there has been a general downward revision in world oil price projections in the near term (e.g. 19 percent in 2020) and a sharp reduction in projected U.S. oil imports in the near term, due to increased U.S. supply (i.e., a 41 percent reduction in U.S. oil imports by 2017 and a 36 percent reduction in 2020).  Over the longer term, oil's share of total U.S. imports is projected to gradually increase after 2020 but still remain 27 percent below the AEO2012 (Early Release) projected level in 2035.
Another factor influencing the monopsony premium is that U.S. demand on the global oil market is projected to decline, suggesting diminished overall influence and some reduction in the influence of U.S. oil demand on the world price of oil.  Outside of the U.S., projected OPEC supply remains roughly steady as a share of world oil supply compared to the AEO2012 (Early Release).  OPEC's share of world oil supply outside of the U.S. actually increases slightly.  Since OPEC supply is estimated to be more price sensitive than non-OPEC supply, this means that under AEO2014 (Early Release) world oil supply is slightly more responsive to changes in U.S. oil demand.  Together, these factors suggest that changes in U.S. oil import reductions have a somewhat smaller effect on the long-run world oil price than changes based on 2012 estimates.
These changes in oil price and import levels lower the monopsony portion of energy security premium since this portion of the security premium is related to the change in total U.S. oil import costs that is achieved by a marginal reduction in U.S oil imports.  Since both the price and the quantity of oil imports are lower, the monopsony premium component is 46  -  57 percent lower over the years 2017  -  2025 than the estimates based upon the AEO 2012 (Early Release) projections.
There is disagreement in the literature about the magnitude of the monopsony component, and its relevance for policy analysis. Brown and Huntington (2013),  for example, argue that the United States' refusal to exercise its market power to reduce the world oil price does not represent a proper externality, and that the monopsony component should not be considered in calculations of the energy security externality.  However, they also note in their earlier discussion paper (Brown and Huntington 2010) that this is a departure from the traditional energy security literature, which includes sustained wealth transfers associated with stable but higher-price oil markets. On the other hand, Greene (2010) and others in prior literature (e.g., Toman 1993) have emphasized that the monopsony cost component is policy-relevant because the world oil market is non-competitive and strongly influenced by cartelized and government-controlled supply decisions.  Thus, while sometimes couched as an externality, Greene notes that the monopsony component is best viewed as stemming from a completely different market failure than an externality (Ledyard 2008), yet still implying marginal social costs to importers.
There is also a question about the ability of gradual, long-term reductions, such as those resulting from this proposed rule, to reduce the world oil price in the presence of OPEC's monopoly power.  OPEC is currently the world's marginal petroleum supplier, and could conceivably respond to gradual reductions in U.S. demand with gradual reductions in supply over the course of several years as the fuel savings resulting from this rule grow.  However, if OPEC opts for a long-term strategy to preserve its market share, rather than maintain a particular price level (as they have done recently in response to increasing U.S. petroleum production), reduced demand would create downward pressure on the global price.  The Oak Ridge analysis assumes that OPEC does respond to demand reductions over the long run, but there is still a price effect in the model.  Under the mid-case behavioral assumption used in the premium calculations, OPEC responds by gradually reducing supply to maintain market share (consistent with the long-term self-interested strategy suggested by Gately (2004, 2007)).
It is important to note that the decrease in global petroleum prices resulting from this rulemaking could spur increased consumption of petroleum in other sectors and countries, leading to a modest uptick in GHG emissions outside of the United States.  This increase in global fuel consumption could offset some portion of the GHG reduction benefits associated with this proposed rule.  The agencies have not quantified this increase in global GHG emissions. We request comments, data sources and methodologies for how global rebound effects may be quantified.
   (b) Macroeconomic Disruption Adjustment Costs
The second component of the oil import premium, "avoided macroeconomic disruption/adjustment costs", arises from the effect of oil imports on the expected cost of supply disruptions and accompanying price increases.  A sudden increase in oil prices triggered by a disruption in world oil supplies has two main effects: (1) it increases the costs of oil imports in the short-run and (2) it can lead to macroeconomic contraction, dislocation and Gross Domestic Product (GDP) losses.  For example, ORNL estimates the combined value of these two factors to be $6.34/barrel when U.S. oil imports are reduced in 2020, with a range from $3.07/barrel to $10.15/barrel of imported oil reduced.
Since future disruptions in foreign oil supplies are an uncertain prospect, each of the disruption cost components must be weighted by the probability that the supply of petroleum to the U.S. will actually be disrupted.  Thus, the "expected value" of these costs  -  the product of the probability that a supply disruption will occur and the sum of costs from reduced economic output and the economy's abrupt adjustment to sharply higher petroleum prices  -  is the relevant measure of their magnitude.  Further, when assessing the energy security value of a policy to reduce oil use, it is only the change in the expected costs of disruption that results from the policy that is relevant.  The expected costs of disruption may change from lowering the normal (i.e., pre-disruption) level of domestic petroleum use and imports, from any induced alteration in the likelihood or size of disruption, or from altering the short-run flexibility (e.g., elasticity) of petroleum use.
With updated oil market and economic factors, the avoided macroeconomic disruption component of the energy security premiums is slightly lower in comparison to avoided macroeconomic disruption premiums used in previous rulemakings.  Factors that contribute to moderately lowering the avoided macroeconomic disruption component are lower projected GDP, moderately lower oil prices and slightly smaller price increases during prospective shocks.  For example, oil price levels are 5  -  19 percent lower over the 2020  -  2035 period, and the likely increase in oil prices in the event of an oil shock are somewhat smaller, given small increases in the responsiveness of oil supply to changes in the world price of oil.  Overall, the avoided macroeconomic disruption component estimates for the oil security premiums are 2  -  19 percent lower over the period from 2020  -  2035 based upon different projected oil market and economic trends in the AEO2014 (Early Release) compared to the AEO2012 (Early Release).
There are several reasons why the avoided macroeconomic disruption premiums change only moderately.  One reason is that the macroeconomic sensitivity to oil price shocks is assumed unchanged in recent years since U.S. oil consumption levels and the value share of oil in the U.S. economy remain at high levels.  For example, Figure IX-2 below shows that under AEO2014 (Early Release), projected U.S. real annual oil expenditures continue to rise after 2015 to over $800 billion (2012$) by 2030.  The value share of oil use in the U.S. economy remains between three and four percent, well above the levels observed from 1985 to 2005.  A second factor is that oil disruption risks are little changed.  The two factors influencing disruption risks are the probability of global supply interruptions and the world oil supply share from OPEC. Both factors are not significantly different from previous forecasts of oil market trends.
The energy security costs estimated here follow the oil security premium framework, which is well established in the energy economics literature.  The oil import premium gained attention as a guiding concept for energy policy around the time of the second and third major post-war oil shocks (Plummer 1981, Bohi and Montgomery 1982, EMF 1982) .  Plummer (1981, 1981a) provided valuable discussion of many of the key issues related to the oil import premium as well as the analogous oil stockpiling premium.  Bohi and Montgomery (Bohi and Montgomery, 1982) detailed the theoretical foundations of the oil import premium established many of the critical analytic relationships through their thoughtful analysis.  Hogan (1981) and Broadman and Hogan (1986, 1988) revised and extended the established analytical framework to estimate optimal oil import premia with a more detailed accounting of macroeconomic effects.
Since the original work on energy security was undertaken in the 1980's, there have been several reviews on this topic. For example, Leiby, Jones, Curlee and Lee (1997) provided an extended review of the literature and issues regarding the estimation of the premium.  Parry and Darmstadter (2004) also provided an overview of extant oil security premium estimates and estimated of some premium components.
The recent economics literature on whether oil shocks are a threat to economic stability that they once were is mixed.  Some of the current literature asserts that the macroeconomic component of the energy security externality is small. For example, the National Research Council (2009) argued that the non-environmental externalities associated with dependence on foreign oil are small, and potentially trivial.  Analyses by Nordhaus (2007) and Blanchard and Gali (2010) question the impact of more recent oil price shocks on the economy.  They were motivated by attempts to explain why the economy actually expanded immediately after the last shocks, and why there was no evidence of higher energy prices being passed on through higher wage inflation.  Using different methodologies, they conclude that the economy has largely gotten over its concern with dramatic swings in oil prices.
One reason, according to Nordhaus, is that monetary policy has become more accommodating to the price impacts of oil shocks.  Another is that consumers have simply decided that such movements are temporary, and have noted that price impacts are not passed on as inflation in other parts of the economy.  He also notes that real changes to productivity due to oil price increases are incredibly modest, and that the general direction of the economy matters a great deal regarding how the economy responds to a shock.  Estimates of the impact of a price shock on aggregate demand are insignificantly different from zero.
Blanchard and Gali (2010) contend that improvements in monetary policy (as noted above), more flexible labor markets, and lessening of energy intensity in the economy, combined with an absence of concurrent shocks, all contributed to lessen the impact of oil shocks after 1980.  They find "... the effects of oil price shocks have changed over time, with steadily smaller effects on prices and wages, as well as on output and employment."  In a comment at the chapter's end, this work is summarized as follows: "The message of this chapter is thus optimistic in that it suggests a transformation in U.S. institutions has inoculated the economy against the responses that we saw in the past."
At the same time, the implications of the "Shale Oil Revolution" are now being felt in the international markets, with current prices at four year lows.  Analysts generally attribute this result in part to the significant increase in supply resulting from U.S. production, which has put liquid petroleum production on par with Saudi Arabia.  The price decline is also attributed to the sustained reductions in U.S. consumption and global demand growth from fuel efficiency policies and high oil prices.  The resulting decrease in foreign imports, down to about one-third of domestic consumption (from 60 percent in 2005, for example), effectively permits U.S. supply to act as a buffer against artificial or other supply restrictions (the latter due to conflict or natural disaster, for example).
However, other papers suggest that oil shocks, particularly sudden supply shocks, remain a concern.  Both Blanchard and Gali's and Nordhaus work were based on data and analysis through 2006, ending with a period of strong global economic growth and growing global oil demand. The Nordhaus work particularly stressed the effects of the price increase from 2002-2006 that were comparatively gradual (about half the growth rate of the 1973 event and one-third that of the 1990 event). The Nordhaus study emphasizes the robustness of the U.S. economy during a time period through 2006. This time period was just before rapid further increases in the price of oil and other commodities with oil prices more-than-doubling to over $130/barrel by mid-2008, only to drop after the onset of the largest recession since the Great Depression.
Hamilton (2012) reviewed the empirical literature on oil shocks and suggested that the results are mixed, noting that some work (e.g. Rasmussen and Roitman (2011) finds less evidence for economic effects of oil shocks, or declining effects of shocks (Blanchard and Gali 2010), while other work continues to find evidence regarding the economic importance of oil shocks.  For example, Baumeister and Peersman (2011) found that an oil price increase of a given size seems to have a decreasing eﬀect over time, but noted that the declining price-elasticity of demand meant that a given physical disruption had a bigger eﬀect on price and turned out to have a similar eﬀect on output as in the earlier data."  Hamilton observes that "a negative effect of oil prices on real output has also been reported for a number of other countries, particularly when nonlinear functional forms have been employed" (citing as recent examples Kim 2012, Engemann, Kliesen, and Owyang 2011 and Daniel, et. al. 2011).  Alternatively, rather than a declining effect, Ramey and Vine (2010) found "remarkable stability in the response of aggregate real variables to oil shocks once we account for the extra costs imposed on the economy in the 1970s by price controls and a complex system of entitlements that led to some rationing and shortages."
Some of the recent literature on oil price shocks has emphasized that economic impacts depend on the nature of the oil shock, with differences between price increases caused by sudden supply loss and those caused by rapidly growing demand.  Most recent analyses of oil price shocks have confirmed that "demand-driven" oil price shocks have greater effects on oil prices and tend to have positive effects on the economy while "supply-driven" oil shocks still have negative economic impacts (Baumeister, Peersman and Robays, 2010).  A recent paper by Kilian and Vigfusson (2014), for example, assigned a more prominent role to the effects of price increases that are unusual, in the sense of being beyond range of recent experience.  Kilian and Vigfussen also conclude that the difference in response to oil shocks may well stem from the different effects of demand- and supply-based price increases: "One explanation is that oil price shocks are associated with a range of oil demand and oil supply shocks, some of which stimulate the U.S. economy in the short run and some of which slow down U.S. growth (see Kilian 2009a). How recessionary the response to an oil price shock is thus depends on the average composition of oil demand and oil supply shocks over the sample period."
The general conclusion that oil supply-driven shocks reduce economic output is also reached in a recently published paper by Cashin et al. (2014) for 38 countries from 1979-2011.  "The results indicate that the economic consequences of a supply-driven oil-price shock are very different from those of an oil-demand shock driven by global economic activity, and vary for oil-importing countries compared to energy exporters," and "oil importers [including the U.S.] typically face a long-lived fall in economic activity in response to a supply-driven surge in oil prices" but almost all countries see an increase in real output for an oil-demand disturbance. Note that the energy security premium calculation in this analysis is based on price shocks from potential future supply events only.
Finally, despite continuing uncertainty about oil market behavior and outcomes and the sensitivity of the U.S. economy to oil shocks, it is generally agreed that it is beneficial to reduce petroleum fuel consumption from an energy security standpoint.  Reducing fuel consumption reduces the amount of domestic economic activity associated with a commodity whose price depends on volatile international markets. Also, reducing U.S. oil import levels reduces the likelihood and significance of supply disruptions.

Figure IX-2:  Projected and Historical U.S. Expenditures, and Expenditure Share, on Crude Oil
(c) Cost of Existing U.S. Energy Security Policies
The last often-identified component of the full economic costs of U.S. oil imports are the costs to the U.S. taxpayers of existing U.S. energy security policies.  The two primary examples are maintaining the Strategic Petroleum Reserve (SPR) and maintaining a military presence to help secure a stable oil supply from potentially vulnerable regions of the world.  The SPR is the largest stockpile of government-owned emergency crude oil in the world.  Established in the aftermath of the 1973/1974 oil embargo, the SPR provides the U.S. with a response option should a disruption in commercial oil supplies threaten the U.S. economy.  It also allows the U.S. to meet part of its International Energy Agency obligation to maintain emergency oil stocks, and it provides a national defense fuel reserve.  While the costs for building and maintaining the SPR are more clearly related to U.S. oil use and imports, historically these costs have not varied in response to changes in U.S. oil import levels.  Thus, while the effect of the SPR in moderating price shocks is factored into the ORNL analysis, the cost of maintaining the SPR is excluded.
U.S. military costs are excluded from the analysis performed by ORNL because their attribution to particular missions or activities is difficult, and because it is not clear that these outlays would decline in response to incremental reductions in U.S. oil imports.  Most military forces serve a broad range of security and foreign policy objectives.  The agencies also recognize that attempts to attribute some share of U.S. military costs to oil imports are further challenged by the need to estimate how those costs might vary with incremental variations in U.S. oil imports.
       (3) Energy Security Benefits of this Program
Using the ORNL "oil premium" methodology, updating world oil price values and energy trends using AEO 2014 (Early Release) and using the estimated fuel savings from the proposed rule estimated from the MOVES/CAFE models, the agencies has calculated the annual energy security benefits of this proposed rule through 2050.  Since the agencies are taking a global perspective with respect to valuing greenhouse gas benefits from the rule, only the avoided macroeconomic adjustment/disruption portion of the energy security premium is used in the energy security benefits estimates present below.  These results are shown below in Table IX-23. The agencies have also calculated the net present value at 3 percent and 7 percent discount rates of model year lifetime benefits associated with energy security; these values are presented in Table IX-24.

Table IX-23 Annual U.S. Energy Security Benefits of the Preferred Alternative and Net Present Values at 3% and 7% Discount Rates using Method B and Relative to the Less Dynamic Baseline (in millions of 2012$)
                                     YEAR
                               BENEFITS (2012$)
                                     2018
                                                                            $10
                                     2019
                                                                            $20
                                     2020
                                                                            $31
                                     2021
                                                                            $77
                                     2022
                                                                           $140
                                     2023
                                                                           $211
                                     2024
                                                                           $328
                                     2025
                                                                           $456
                                     2026
                                                                           $596
                                     2027
                                                                           $770
                                     2028
                                                                           $947
                                     2029
                                                                         $1,126
                                     2030
                                                                         $1,306
                                     2035
                                                                         $2,156
                                     2040
                                                                         $2,920
                                     2050
                                                                         $3,498
                                    NPV, 3%
                                                                        $28,947
                                    NPV, 7%
                                                                        $11,857

Table IX-24:  Discounted Model Year Lifetime Energy Security Benefits due to the Preferred Alternative at 3% and 7% Discount Rates using Method B and Relative to the Less Dynamic Baseline (Millions of 2012$)
                                   Calendar
                                     Year
                                      3%
                                 Discount Rate
                                      7%
                                 Discount Rate
                                     2018
                                                                            $86
                                                                            $60
                                     2019
                                                                            $85
                                                                            $56
                                     2020
                                                                            $84
                                                                            $53
                                     2021
                                                                           $534
                                                                           $326
                                     2022
                                                                           $579
                                                                           $341
                                     2023
                                                                           $621
                                                                           $353
                                     2024
                                                                           $996
                                                                           $546
                                     2025
                                                                         $1,060
                                                                           $560
                                     2026
                                                                         $1,121
                                                                           $571
                                     2027
                                                                         $1,375
                                                                           $676
                                     2028
                                                                         $1,388
                                                                           $657
                                     2029
                                                                         $1,397
                                                                           $637
                                      Sum
                                                                         $9,325
                                                                         $4,837

Other Impacts
Costs of Noise, Congestion and Accidents Associated with Additional (Rebound) Driving
Although it provides benefits to drivers as described above, increased vehicle use associated with the rebound effect also contributes to increased traffic congestion, motor vehicle accidents, and highway noise.  Depending on how the additional travel is distributed over the day and where it takes place, additional vehicle use can contribute to traffic congestion and delays by increasing the number of vehicles using facilities that are already heavily traveled.  These added delays impose higher costs on drivers and other vehicle occupants in the form of increased travel time and operating expenses.  At the same time, this additional travel also increases costs associated with traffic accidents and vehicle noise.
The agencies estimate these costs using the same methodology as used in the two light-duty and the HD Phase 1 rule analyses, which relies on estimates of congestion, accident, and noise costs imposed by automobiles and light trucks developed by the Federal Highway Administration to estimate these increased external costs caused by added driving.  We provide the details behind the estimates in Chapter 8.7 of the draft RIA.  The agencies request comment on all input metrics used in the analysis of accidents, congestion and noise and on the calculation methodology.  Table IX-25 presents the estimated annual impacts associated with accidents, congestion and noise along with net present values at both 3 percent and 7 percent discount rates.  Table IX-26 presents the estimated discounted model year lifetime impacts associated with accidents, congestion and noise.
Table IX-25 Annual Costs Associated with Accidents, Congestion and Noise and Net Present Values at 3% and 7% Discount Rates using Method B and Relative to the Less Dynamic Baseline (Millions of 2012$)
                                   Calendar
                                     Year
                                   Costs of
                            Accidents, Congestion,
                                   And Noise
                                     2018
                                                                             $0
                                     2019
                                                                             $0
                                     2020
                                                                             $0
                                     2021
                                                                           $117
                                     2022
                                                                           $172
                                     2023
                                                                           $226
                                     2024
                                                                           $279
                                     2025
                                                                           $330
                                     2026
                                                                           $379
                                     2027
                                                                           $425
                                     2028
                                                                           $467
                                     2029
                                                                           $506
                                     2030
                                                                           $542
                                     2035
                                                                           $676
                                     2040
                                                                           $758
                                     2050
                                                                           $871
                                    NPV, 3%
                                                                         $9,334
                                    NPV, 7%
                                                                         $4,202

Table IX-26 Discounted Model Year Lifetime Costs of Accidents, Congestion and Noise at 3% and 7% Discount Rates using Method B and Relative to the Less Dynamic Baseline (Millions of 2012$)
                                   Calendar
                                     Year
                                      3%
                                 Discount Rate
                                      7%
                                 Discount Rate
                                     2018
                                                                           $132
                                                                            $85
                                     2019
                                                                           $146
                                                                            $94
                                     2020
                                                                           $162
                                                                           $103
                                     2021
                                                                           $450
                                                                           $284
                                     2022
                                                                           $438
                                                                           $266
                                     2023
                                                                           $427
                                                                           $250
                                     2024
                                                                           $424
                                                                           $239
                                     2025
                                                                           $422
                                                                           $229
                                     2026
                                                                           $420
                                                                           $219
                                     2027
                                                                           $415
                                                                           $209
                                     2028
                                                                           $409
                                                                           $198
                                     2029
                                                                           $402
                                                                           $187
                                      Sum
                                                                         $4,247
                                                                         $2,362

Benefits Associated with Reduced Refueling Time
By reducing the frequency with which drivers typically refuel their vehicles and by extending the upper limit of the range that can be traveled before requiring refueling (i.e., future fuel tank sizes remain constant), savings would be realized associated with less time spent refueling vehicles.  Alternatively, refill intervals may remain the same (i.e., future fuel tank sizes get smaller), resulting in the same number of refills as today but less time spent per refill because there would be less fuel to refill.  The agencies have estimated this impact using the former approach -- by assuming that future tank sizes remain constant.
The savings in refueling time are calculated as the total amount of time the driver of a typical truck in each class would save each year as a consequence of pumping less fuel into the vehicle's tank.  The calculation does not include any reduction in time spent searching for a fueling station or other time spent at the station; it is assumed that time savings occur only when truck operators are actually refueling their vehicles.
The calculation uses the reduced number of gallons consumed by truck type and divides that value by the tank volume and refill amount to get the number of refills, then multiplies that by the time per refill to determine the number of hours saved in a given year.  The calculation then applies DOT-recommended values of travel time savings to convert the resulting time savings to their economic value, including a 1.2 percent growth rate in those time savings going forward.  The input metrics used in the analysis are presented in greater detail in draft RIA Chapter 9.7.  The annual benefits associated with reduced refueling time are shown in Table IX-27 along with net present values at both 3 percent and 7 percent discount rates.  The discounted model year lifetime benefits are shown in Table IX-28
Table IX-27 Annual Refueling Benefits and Net Present Values at 3% and 7% Discount Rates using Method B and Relative to the Less Dynamic Baseline (Millions of 2012$)
                                   Calendar
                                     Year
                                   Refueling
                                   Benefits
                                     2018
                                                                             $3
                                     2019
                                                                             $6
                                     2020
                                                                             $9
                                     2021
                                                                            $25
                                     2022
                                                                            $47
                                     2023
                                                                            $72
                                     2024
                                                                           $113
                                     2025
                                                                           $157
                                     2026
                                                                           $205
                                     2027
                                                                           $266
                                     2028
                                                                           $327
                                     2029
                                                                           $386
                                     2030
                                                                           $444
                                     2035
                                                                           $698
                                     2040
                                                                           $890
                                     2050
                                                                         $1,195
                                    NPV, 3%
                                                                         $9,410
                                    NPV, 7%
                                                                         $3,868

Table IX-28 Discounted Model Year Lifetime Refueling Benefits using Method B and relative to the Less Dynamic Baseline (Millions of 2012$)
                                     Model
                                     Year
                                      3%
                                 Discount Rate
                                      7%
                                 Discount Rate
                                     2018
                                                                            $23
                                                                            $16
                                     2019
                                                                            $22
                                                                            $15
                                     2020
                                                                            $21
                                                                            $14
                                     2021
                                                                           $163
                                                                           $101
                                     2022
                                                                           $184
                                                                           $110
                                     2023
                                                                           $203
                                                                           $117
                                     2024
                                                                           $325
                                                                           $181
                                     2025
                                                                           $349
                                                                           $187
                                     2026
                                                                           $372
                                                                           $191
                                     2027
                                                                           $466
                                                                           $231
                                     2028
                                                                           $465
                                                                           $222
                                     2029
                                                                           $463
                                                                           $213
                                      Sum
                                                                         $3,055
                                                                         $1,597

Benefits of Increased Travel Associated with Rebound Driving
 The increase in travel associated with the rebound effect produces additional benefits to vehicle owners and operators, which reflect the value of the added (or more desirable) social and economic opportunities that become accessible with additional travel.  The analysis estimates the economic benefits from increased rebound-effect driving as the sum of fuel expenditures incurred plus the consumer surplus from the additional accessibility it provides.  As evidenced by the fact that vehicles make more frequent or longer trips when the cost of driving declines, the benefits from this added travel exceed added expenditures for the fuel consumed.  The amount by which the benefits from this increased driving exceed its increased fuel costs measures the net benefits from the additional travel, usually referred to as increased consumer surplus.
The agencies' analysis estimates the economic value of the increased consumer surplus provided by added driving using the conventional approximation, which is one half of the product of the decline in vehicle operating costs per vehicle-mile and the resulting increase in the annual number of miles driven.  Because it depends on the extent of improvement in fuel economy, the value of benefits from increased vehicle use changes by model year and varies among alternative standards.  Under even those alternatives that would impose the highest standards, however, the magnitude of the consumer surplus from additional vehicle use represents a small fraction of this benefit.
The annual benefits associated with increased travel are shown in Table IX-29 along with net present values at both 3 percent and 7 percent discount rates.  The discounted model year lifetime benefits are shown in Table IX-30.
Table IX-29 Annual Value of Increased Travel and Net Present Values at 3% and 7% Discount Rates using Method B and Relative to the Less Dynamic Baseline(Millions of 2012$)
                                   Calendar
                                     Year
                         Benefits of Increased Travel
                                     2018
                                                                             $0
                                     2019
                                                                             $0
                                     2020
                                                                             $0
                                     2021
                                                                           $445
                                     2022
                                                                           $636
                                     2023
                                                                           $821
                                     2024
                                                                         $1,001
                                     2025
                                                                         $1,179
                                     2026
                                                                         $1,346
                                     2027
                                                                         $1,506
                                     2028
                                                                         $1,647
                                     2029
                                                                         $1,783
                                     2030
                                                                         $1,909
                                     2035
                                                                         $2,445
                                     2040
                                                                         $2,873
                                     2050
                                                                         $3,286
                                    NPV, 3%
                                                                        $34,240
                                    NPV, 7%
                                                                        $15,316

Table IX-30 Discounted Model Year Lifetime Value of Increased Travel at 3% and 7% Discount Rates using Method B and Relative to the Less Dynamic Baseline (Millions of 2012$)
                                   Calendar
                                     Year
                                      3%
                                 Discount Rate
                                      7%
                                 Discount Rate
                                     2018
                                                                           $554
                                                                           $353
                                     2019
                                                                           $618
                                                                           $390
                                     2020
                                                                           $686
                                                                           $429
                                     2021
                                                                         $1,510
                                                                           $942
                                     2022
                                                                         $1,488
                                                                           $894
                                     2023
                                                                         $1,463
                                                                           $847
                                     2024
                                                                         $1,434
                                                                           $799
                                     2025
                                                                         $1,442
                                                                           $774
                                     2026
                                                                         $1,447
                                                                           $748
                                     2027
                                                                         $1,421
                                                                           $708
                                     2028
                                                                         $1,415
                                                                           $678
                                     2029
                                                                         $1,406
                                                                           $649
                                      Sum
                                                                        $14,884
                                                                         $8,211

Summary of Benefits and Costs
[Updated text will be forthcoming.]
This section summarizes the costs and benefits presented above, and detailed in the draft RIA. Table IX-31 shows the annual impacts and net impacts of the preferred alternative along with net present values at both 3 percent and 7 percent discount rates.  Table IX-32 and Table IX-33 show the discounted model year lifetime costs and benefits at 3 percent and 7 percent discount rates, respectively.
Table IX-31 Annual Benefits & Costs of the Preferred Alternative and Net Present Values at 3% and 7% Discount Rates using Method B and Relative to the Less Dynamic Baseline (Billions of 2012$)[a]

                                     2018
                                     2021
                                     2024
                                     2030
                                     2035
                                     2040
                                     2050
                                    NPV, 3%
                                    NPV, 7%
Vehicle program
                                                                          -$0.1
                                                                          -$2.4
                                                                          -$3.7
                                                                          -$5.4
                                                                          -$5.9
                                                                          -$6.3
                                                                          -$7.0
                                                                         -$86.8
                                                                         -$41.1
Maintenance
                                                                           $0.0
                                                                           $0.0
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$1.8
                                                                          -$0.9
Pre-tax fuel
                                                                           $0.2
                                                                           $1.7
                                                                           $6.9
                                                                          $24.0
                                                                          $37.2
                                                                          $47.8
                                                                          $57.5
                                                                         $495.6
                                                                         $206.7
Energy security
                                                                           $0.0
                                                                           $0.1
                                                                           $0.3
                                                                           $1.3
                                                                           $2.2
                                                                           $2.9
                                                                           $3.5
                                                                          $28.9
                                                                          $11.9
Accidents/Congestion/Noise
                                                                           $0.0
                                                                          -$0.1
                                                                          -$0.3
                                                                          -$0.5
                                                                          -$0.7
                                                                          -$0.8
                                                                          -$0.9
                                                                          -$9.3
                                                                          -$4.2
Refueling impacts
                                                                           $0.0
                                                                           $0.0
                                                                           $0.1
                                                                           $0.4
                                                                           $0.7
                                                                           $0.9
                                                                           $1.2
                                                                           $9.4
                                                                           $3.9
Travel value
                                                                           $0.0
                                                                           $0.4
                                                                           $1.0
                                                                           $1.9
                                                                           $2.4
                                                                           $2.9
                                                                           $3.3
                                                                          $34.2
                                                                          $15.3
Non-GHG impacts
                                                                   $0.0 to $0.1
                                                                   $0.4 to $0.9
                                                                   $1.0 to $2.4
                                                                   $3.3 to $8.3
                                                                  $4.8 to $12.1
                                                                  $5.7 to $14.3
                                                                  $7.0 to $17.5
                                                                $69.7 to $157.0
                                                                 $26.6 to $60.4
SCCb,c

SCC_CO2; 5% Avg
                                                                           $0.0
                                                                           $0.1
                                                                           $0.4
                                                                           $1.5
                                                                           $2.5
                                                                           $3.3
                                                                           $5.0
                                                                          $22.1
                                                                          $22.1
SCC_CO2; 3% Avg
                                                                           $0.0
                                                                           $0.3
                                                                           $1.3
                                                                           $4.8
                                                                           $7.4
                                                                           $9.7
                                                                          $13.6
                                                                         $103.1
                                                                         $103.1
SCC_CO2; 2.5% Avg
                                                                           $0.1
                                                                           $0.5
                                                                           $1.9
                                                                           $6.9
                                                                          $10.6
                                                                          $13.7
                                                                          $18.5
                                                                         $164.1
                                                                         $164.1
SCC_CO2; 3% 95th
                                                                           $0.1
                                                                           $1.0
                                                                           $4.0
                                                                          $14.6
                                                                          $23.2
                                                                          $30.3
                                                                          $42.0
                                                                         $320.5
                                                                         $320.5
Net benefits d

SCC_CO2; 5% Avg
                                                                           $0.2
                                                                           $0.4
                                                                           $6.4
                                                                          $28.8
                                                                          $46.8
                                                                          $60.6
                                                                          $74.6
                                                                         $605.8
                                                                         $257.1
SCC_CO2; 3% Avg
                                                                           $0.2
                                                                           $0.7
                                                                           $7.3
                                                                          $32.1
                                                                          $51.7
                                                                          $66.9
                                                                          $83.2
                                                                         $686.8
                                                                         $338.1
SCC_CO2; 2.5% Avg
                                                                           $0.2
                                                                           $0.8
                                                                           $7.9
                                                                          $34.2
                                                                          $54.9
                                                                          $70.9
                                                                          $88.2
                                                                         $747.8
                                                                         $399.1
SCC_CO2; 3% 95th
                                                                           $0.3
                                                                           $1.3
                                                                          $10.0
                                                                          $41.9
                                                                          $67.5
                                                                          $87.6
                                                                         $111.7
                                                                         $904.1
                                                                         $555.5
Notes:
a Negative values denote increased social expenditures (costs); positive values denote decreased social expenditures (benefits).
b Net present value of reduced CO2 emissions is calculated differently than other benefits.  The same discount rate used to discount the value of damages from future emissions (SC-CO2 at 5, 3, 2.5 percent) is used to calculate net present value of SC-CO2 for internal consistency.  Refer to the SCC TSD for more detail.
c Section IX.G notes that SC-CO2 increases over time.  For the years 2012-2050, the SC-CO2 estimates range as follows:  for Average SC-CO2 at 5%:  $12-$28; for Average SC-CO2 at 3%:  $37-$77; for Average SC-CO2 at 2.5%:  $58-$105; and for 95th percentile SC-CO2 at 3%:  $105-$237. Section IX.G also presents these SC-CO2 estimates.
d Net impacts are the summation of results within columns of the table with the exception that the net impacts at each SC-CO2 value include only the SC-CO2 impacts at that value.

Table IX-32 Discounted Model Year Lifetime Benefits & Costs of the Preferred Alternative using Method B and Relative to the Less Dynamic Baseline (Billions of 2012$ discounted at 3%)[a]

                                     2018
                                     2019
                                     2020
                                     2021
                                     2022
                                     2023
                                     2024
                                     2025
                                     2026
                                     2027
                                     2028
                                     2029
                                      Sum
Vehicle
program
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$2.0
                                                                          -$1.9
                                                                          -$1.9
                                                                          -$2.8
                                                                          -$2.7
                                                                          -$2.7
                                                                          -$3.7
                                                                          -$3.6
                                                                          -$3.5
                                                                         -$25.1
Maintenance
                                                                          -$0.1
                                                                           $0.0
                                                                           $0.0
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$1.1
Pre-tax fuel
                                                                           $1.9
                                                                           $1.9
                                                                           $1.8
                                                                          $11.1
                                                                          $11.5
                                                                          $11.9
                                                                          $18.9
                                                                          $19.6
                                                                          $20.2
                                                                          $24.1
                                                                          $24.1
                                                                          $24.1
                                                                         $171.1
Energy security
                                                                           $0.1
                                                                           $0.1
                                                                           $0.1
                                                                           $0.5
                                                                           $0.6
                                                                           $0.6
                                                                           $1.0
                                                                           $1.1
                                                                           $1.1
                                                                           $1.4
                                                                           $1.4
                                                                           $1.4
                                                                           $9.3
Accidents/
Congestion/
Noise
                                                                          -$0.1
                                                                          -$0.1
                                                                          -$0.2
                                                                          -$0.4
                                                                          -$0.4