[Federal Register: May 2, 2008 (Volume 73, Number 86)]
[Proposed Rules]
[Page 24351-24487]
[DOCID:fr02my08-28]

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Part II

Department of Transportation

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 National Highway Traffic Safety Administration

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

Average Fuel Economy Standards, Passenger Cars and Light Trucks; Model
Years 2011-2015; Proposed Rule

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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

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

[Docket No. NHTSA-2008-0089]
RIN 2127-AK29

Average Fuel Economy Standards, Passenger Cars and Light Trucks;
Model Years 2011-2015

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

ACTION: Notice of Proposed Rulemaking (NPRM).

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SUMMARY: This document proposes substantial increases in the Corporate
Average Fuel Economy (CAFE) standards for passenger cars and light
trucks that would enhance energy security by improving fuel economy.
Since the carbon dioxide (CO2) emitted from the tailpipes of
new motor vehicles is the natural by-product of the combustion of fuel,
the increased standards would also address climate change by reducing
tailpipe emissions of CO2. Those emissions represent 97
percent of the total greenhouse gas emissions from motor vehicles.
Implementation of the new standards would dramatically add to the
billions of barrels of fuel already saved since the beginning of the
CAFE program in 1975.

DATES: Comments must be received on or before July 1, 2008.

ADDRESSES: You may submit comments to the docket number identified in
the heading of this document by any of the following methods:
     Federal eRulemaking Portal: Go to http://
www.regulations.gov. Follow the online instructions for submitting
comments.
     Mail: Docket Management Facility, M-30, U.S. Department of
Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New
Jersey Avenue, SE., Washington, DC 20590.
     Hand Delivery or Courier: West Building Ground Floor, Room
W12-140, 1200 New Jersey Avenue, SE., between 9 a.m. and 5 p.m. Eastern
Time, Monday through Friday, except Federal holidays.
     Fax:<PHONE_NUMBER>.
    Regardless of how you submit your comments, you should mention the
docket number of this document.
    You may call the Docket Management Facility at<PHONE_NUMBER>.
    Instructions: For detailed instructions on submitting comments and
additional information on the rulemaking process, see the Public
Participation heading of the Supplementary Information section of this
document. Note that all comments received will be posted without change
to http://www.regulations.gov, including any personal information
provided.
    Privacy Act: Please see the Privacy Act heading under Rulemaking
Analyses and Notices.

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

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive overview
    A. Summary
    B. Energy Independence and Security Act of 2007
    C. Proposal
    1. Standards
    a. Stringency
    b. Benefits
    c. Costs
    d. Flexibilities
    2. Credits
II. Background
    A. Contribution of fuel economy improvements to addressing
energy independence and security and climate change
    1. Relationship between fuel economy and CO2 tailpipe
emissions
    2. Fuel economy improvements/CO2 tailpipe emission
reductions since 1975
    B. Chronology of events since the National Academy of Sciences
called for reforming and increasing CAFE standards
    1. National Academy of Sciences CAFE report (February 2002)
    a. Significantly increasing CAFE standards without reforming
them would adversely affect safety
    b. Environmental and other externalities justify increasing the
CAFE standards
    2. Final rule establishing reformed (attribute-based) CAFE
standards for MY 2008-2011 light trucks (March 2006)
    3. Twenty-in-Ten Initiative (January 2007)
    4. Request for passenger car and light truck product plans
(February 2007)
    5. Supreme Court decision in Massachusetts v. EPA (April 2007)
    6. Coordination between NHTSA and EPA on development of
rulemaking proposals (Summer-Fall 2007)
    7. Ninth Circuit decision re final rule for MY 2008-2011 light
trucks (November 2007)
    8. Enactment of Energy Independence and Security Act of 2007
(December 2007)
    C. Energy Policy and Conservation Act, as amended
    1. Vehicles subject to standards for automobiles
    2. Mandate to set standards for automobiles
    3. Structure of standards
    4. Factors governing or considered in the setting of standards
    5. Consultation in setting standards
    6. Compliance flexibility and enforcement
III. Fuel economy enhancing technologies
    A. Data sources for technology assumptions
    B. Technologies and estimates of costs and effectiveness
    1. Engine technologies
    2. Transmission technologies
    3. Vehicle technologies
    4. Accessory technologies
    5. Hybrid technologies
    C. Technology synergies
    D. Technology cost learning curve
    E. Ensuring sufficient lead time
    1. Linking to redesign and refresh
    2. Technology phase-in caps
IV. Basis for attribute-based structure for setting fuel economy
standards
    A. Why attribute-based instead of a single industry-wide
average?
    B. Which attribute is most appropriate?
    1. Footprint-based function
    2. Functions based on other attributes
    C. The continuous function
V. Volpe model/analysis/generic description of function
    A. The Volpe model
    1. What is the Volpe model?
    2. How does the Volpe model apply technologies to manufacturers'
future fleets?
    3. What effects does the Volpe model estimate?
    4. How can the Volpe model be used to calibrate and evaluate
potential CAFE standards?
    5. How has the Volpe model been updated since the April 2006
light truck CAFE final rule?
    a. Technology synergies
    b. Technology learning curves
    c. Calibration of reformed CAFE standards
    6. What manufacturer information does the Volpe model use?
    7. What economic information does the Volpe model use?
    a. Costs of fuel economy technologies
    b. Potential opportunity costs of improved fuel economy
    c. The on-road fuel economy `gap'
    d. Fuel prices and the value of saving fuel
    e. Consumer valuation of fuel economy and payback period
    f. Vehicle survival and use assumptions
    g. Growth in total vehicle use
    h. Accounting for the rebound effect of higher fuel economy
    i. Benefits from increased vehicle use
    j. Added costs from congestion, crashes and noise
    k. Petroleum consumption and import externalities
    l. Air pollutant emissions
    (i) Impacts on criteria air pollutant emissions
    (ii) Reductions in CO2 emissions
    (iii) Economic value of reductions in CO2 emissions

    m. The value of increased driving range
    n. Discounting future benefits and costs
    o. Accounting for uncertainty in benefits and costs
    B. How has NHTSA used the Volpe model to select the proposed
standards?
    1. Establishing a continuous function standard
    2. Calibration of initial continuous function standards
    3. Adjustments to address policy considerations
    a. Curve crossings
    b. Steep curve for passenger cars
    c. Risk of upsizing
VI. Proposed fuel economy standards
    A. Standards for passenger cars and light trucks
    1. Proposed passenger car standards MY 2011-2015
    2. Proposed light truck standards MY 2011-2015
    3. Energy and environmental backstop
    4. Combined fleet performance
    B. Estimated technology utilization under proposed standards
    C. Costs and benefits of proposed standards
    D. Flexibility mechanisms
    E. Consistency of proposed standards with EPCA statutory factors
    1. Technological feasibility
    2. Economic practicability
    3. Effect of other motor vehicle standards of the Government on
fuel economy
    4. Need of the U.S. to conserve energy
    F. Other considerations in setting standards under EPCA
    1. Safety
    2. Alternative fuel vehicle incentives
    3. Manufacturer credits
    G. Environmental impacts of the proposed standards
    H. Balancing the factors to determine maximum feasible CAFE
levels
VII. Standards for commercial medium- and heavy-duty on-highway
vehicles and ``work trucks''
VIII. Vehicle classification
    A. Origins of the regulatory definitions
    B. Rationale for the regulatory definitions in light of the
current automobile market
    C. NHTSA is not proposing to change regulatory definitions at
this time
IX. Enforcement
    A. Overview
    B. CAFE credits
    1. Credit trading
    2. Credit transferring
    3. Credit carry-forward/carry-back
    C. Extension and phasing out of flexible-fuel incentive program
X. Regulatory alternatives
XI. Sensitivity and Monte Carlo analysis
XII. Public participation
XIII. Regulatory notices and analyses
    A. Executive Order 12866 and DOT Regulatory Policies and
Procedures
    B. National Environmental Policy Act
    C. Regulatory Flexibility Act
    D. Executive Order 13132 (Federalism)
    E. Executive Order 12988 (Civil Justice Reform)
    F. Unfunded Mandates Reform Act
    G. Paperwork Reduction Act
    H. Regulation Identifier Number (RIN)
    I. Executive Order 13045
    J. National Technology Transfer and Advancement Act
    K. Executive Order 13211
    L. Department of Energy Review
    M. Plain Language
    N. Privacy Act
XIV. Regulatory Text

I. Executive overview

A. Summary

    This document is being issued pursuant to the Energy Independence
and Security Act of 2007 (EISA), which Congress passed in December
2007. EISA mandates the setting of separate maximum feasible standards
for passenger cars and for light trucks at levels sufficient to ensure
that the average fuel economy of the combined fleet of all passenger
cars and light trucks sold by all manufacturers in the U.S. in model
year (MY) 2020 equals or exceeds 35 miles per gallon. That is a 40
percent increase above the average of approximately 25 miles per gallon
for the current combined fleet.
    Congress enabled NHTSA to require these substantial increases in
fuel economy by requiring that passenger car standards be reformed
through basing them on one or more vehicle attributes. The attribute-
based approach was originally recommended by the National Academy of
Sciences in 2002 and adopted by NHTSA for light trucks in 2006. The new
approach is a substantial improvement over the old approach of
specifying the same numerical standard for each manufacturer. It avoids
creating undue risks of adverse safety and employment impacts and
distributes compliance responsibilities among the vehicle manufacturers
more equitably.
    This document proposes standards for MYs 2011-2015, the maximum
number of model years for which NHTSA can establish standards in a
single rulemaking under EISA. Since lead time is a significant
consideration in determining the stringency of future standards, the
agency needs to establish the standards as far in advance as possible
so as to maximize the amount of lead time for manufacturers to develop
and implement plans for making the vehicle design changes necessary to
achieve the requirements of EISA.
    In developing the proposed standards, the agency considered the
four statutory factors underlying maximum feasibility (technological
feasibility, economic practicability, the effect of other standards of
the Government on fuel economy, and the need of the nation to conserve
energy) as well as other relevant considerations such as safety. After
assessing what fuel saving technologies would be available, how
effective they are, and how quickly they could be introduced, and then
factoring that information into the computer model its uses for
applying technologies to particular vehicle models, the agency then
balanced the factors relevant to standard setting. In its decision
making, the agency used a marginal benefit-cost analysis that placed
monetary values on relevant externalities (both energy security and
environmental externalities, including the benefits of reductions in
CO2 emissions). In the above process, the agency consulted
with the Department of Energy and particularly the Environmental
Protection Agency regarding a wide variety of matters, including, for
example, the cost and effectiveness of available technologies,
improvements to the computer model, and the selection of appropriate
analytical assumptions.
    This document also proposes to add a new regulation designed to
give manufacturers added flexibility in using credits earned by
exceeding CAFE standards. The regulation would authorize the trading of
credits between manufacturers. In addition, it would permit a
manufacturer to transfer its credits from one of its compliance
categories to another of its categories.
    NHTSA is also publishing two companion documents, one requesting
vehicle manufacturers to provide up-to-date product plans for the model
years covered by this document, and the other inviting Federal, State,
and local agencies, Indian tribes, and the public to participate in
identifying the environmental issues and reasonable alternatives to be
examined in an environmental impact statement.

B. Energy Independence and Security Act of 2007

    The Energy Independence and Security Act of 2007 (EISA)\1\ builds
on the President's ``Twenty in Ten'' initiative, which was announced in
January 2007. That initiative sought to reduce gasoline usage by 20
percent in the next 10 years. The enactment of EISA represents a major
step forward in expanding the production of renewable fuels, reducing
oil consumption, and confronting global climate change.
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    \1\ Pub. L. 110-140, 121 Stat. 1492 (Dec. 18, 2007).
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    EISA will help reduce America's dependence on oil by reducing U.S.
demand for oil by setting a national fuel economy standard of at least
35 miles per gallon by 2020--which will increase fuel economy standards
by 40 percent and save billions of gallons of fuel. In January 2007,
the President called for the first statutory increase in fuel economy
standards for passenger

automobiles (referred to below as ``passenger cars'') since those
standards were mandated in 1975, and EISA delivers on that request.
EISA also includes an important reform the President has called for
that allows the Transportation Department to issue ``attribute-based
standards,'' which will ensure that increased fuel efficiency does not
come at the expense of automotive safety. EISA also mandates increases
in the use of renewable fuels by setting a mandatory Renewable Fuel
Standard requiring fuel producers to use at least 36 billion gallons of
renewable fuels in 2022.
    As the President noted in signing EISA, the combined effect of the
various actions required by the Act will be to produce some of the
largest CO2 emission reductions in our nation's history.
    EISA made a number of important changes to the Energy Policy and
Conservation Act (EPCA) (Pub. L. 94-163), the 1975 statute that governs
the CAFE program. EISA:
     Replaces the old statutory default standard of 27.5 mpg
for passenger cars with a mandate to establish separate passenger car
and light truck standards annually, beginning with MY 2011, set at the
maximum feasible level. The standards for MYs 2011-2020 must, as a
minimum, be set sufficiently high to ensure that the average fuel
economy of the combined industrywide fleet of all new passenger cars
and light trucks sold in the United States during MY 2020 is at least
35 mpg.\2\
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    \2\ Although NHTSA established an attribute-based standard for
MY 2011 light trucks in its 2006 final rule, EISA mandates a new
rulemaking, reflecting new statutory considerations and a new, up-
to-date administrative record, and consistent with EPCA as amended
by EISA, to establish the standard for those light trucks.
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     Limits to five the number of years for which standards can
be established in a single rulemaking. That requirement, in combination
with the requirement to start rulemaking with MY 2011, necessitates
limiting this rulemaking to MYs 2011-2015.
     Mandates the reforming of CAFE standards for passenger
cars by requiring that all CAFE standards be based on one or more
vehicle attributes, thus ensuring that the improvements in fuel economy
do not come at the expense of safety. NHTSA pioneered that approach in
its last rulemaking on CAFE standards for light trucks.
     Requires that for each model year, beginning with MY 2011,
the domestic passenger cars of each manufacturer of those cars must
achieve a measured average fuel economy that is not less than 92
percent of the average fuel economy of the combined fleet of domestic
and non-domestic passenger cars sold in the United States in that model
year.
     Provides greater flexibility for automobile manufacturers
by (a) increasing from three to five the number of years that a
manufacturer can carry forward the compliance credits it earns for
exceeding CAFE standards, (b) allowing a manufacturer to transfer the
credits it has earned from one of its classes of automobiles to
another, and (c) authorizing the trading of credits between
manufacturers.

C. Proposal

1. Standards
a. Stringency
    This document proposes to set attribute-based fuel economy
standards for passenger cars and light trucks consistent with the
Reformed CAFE approach that NHTSA used in establishing the light truck
standards for MY 2008-2011 light trucks. Separate passenger car
standards would be set for MYs 2011-2015, and light truck standards
would be set for MYs 2011-2015. As noted above, EISA limits the number
of model years for which standards may be established in a single
rulemaking to five. We are proposing to establish standards for five
years to maximize the amount of lead time that we can provide the
manufacturers. This is necessary to make it possible to achieve the
levels of average fuel economy required by MY 2020.
    Each vehicle manufacturer's required level of CAFE would be based
on target levels of average fuel economy set for vehicles of different
sizes and on the distribution of that manufacturer's vehicles among
those sizes. Size would be defined by vehicle footprint. The level of
the performance target for each footprint would reflect the
technological and economic capabilities of the industry. The target for
each footprint would be the same for all manufacturers, regardless of
differences in their overall fleet mix. Compliance would be determined
by comparing a manufacturer's harmonically averaged fleet fuel economy
levels in a model year with a required fuel economy level calculated
using the manufacturer's actual production levels and the targets for
each footprint of the vehicles that it produces.
    The proposed standards were developed using a computer model (known
as the ``Volpe Model'') that, for any given model year, applies
technologies to a manufacturer's fleet until the manufacturer reaches
compliance with the standard under consideration. The standards were
tentatively set at levels such that, considering the seven largest
manufacturers, the cost of the last technology application equaled the
benefits of the improvement in fuel economy resulting from that
application. We reviewed these proposed standards to consider the
underlying increased use of technologies and the associated impact on
the industry. This process recognizes that the relevance of costs in
achieving benefits, and uses benefit figures that include the value of
reducing the negative externalities (economic and environmental) from
producing and consuming fuel. These environmental externalities
include, among other things, reducing tailpipe emissions of CO2.\3\ In
view of the process used to develop the proposed standards, they are
also referred to as ``optimized standards.''
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    \3\ The externalities included in our analysis do not, however,
include those associated with the reduction of the other GHG emitted
by automobiles, i.e., methane (CH4), nitrous oxide (N2O), and
hydroflurocarbons (HFCs). Actual air conditioner operation is not
included in the test procedures used to obtain both (1) emission
rates for purposes of determining compliance with EPA criteria
pollutant emission standards and (2) fuel economy values for
purposes of determining compliance with NHTSA CAFE standards,
although air conditioner operation is included in ``supplemental''
federal test procedures used to determine compliance with
corresponding and separate EPA criteria pollutant emission
standards.
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    Compared to the 2006 rulemaking that established the MY 2008-11
CAFE standards for light trucks, this rulemaking much more fully
captures the value of the costs and benefits of setting CAFE standards.
This is important because assumptions regarding gasoline price
projections, along with assumptions for externalities, are based on
changed economic and environmental and energy security conditions and
play a big role in the agency's balancing of the statutory
considerations in arriving at a determination of maximum feasible. In
light of EISA and the need to balance the statutory considerations in a
way that reflects the current need of the nation to conserve energy,
including the current assessment of the climate change problem, the
agency revisited the various assumptions used in the Volpe Model to
determine the level of the standards. Specifically, in running the
Volpe Model and stopping at a point where marginal costs equaled
marginal benefits or where net benefits to society are maximized, the
agency used higher gasoline prices and higher estimates for energy
security values ($0.29 per gallon instead of $0.09 per gallon). The
agency also monetized carbon dioxide (at

$7.00/ton), which it did not do in the previous rulemaking, and
expanded its technology list. In addition, the agency used cost
estimates that reflect economies of scale and estimated ``learning''-
driven reductions in the cost of technologies as well as quicker
penetration rates for advanced technologies. These changes to the
inputs to the model had a major impact on increasing the benefits in
certain model years by allowing for greater penetration of
technologies.
    The agency cannot set out the exact level of CAFE that each
manufacturer will be required to meet for each model year under the
proposed passenger car or light truck standards since the levels will
depend on information that will not be available until the end of each
of the model years, i.e., the final actual production figures for each
of those years. The agency can, however, project what the industry wide
level of average fuel economy would be for passenger cars and for light
trucks if each manufacturer produced its expected mix of automobiles
and just met its obligations under the proposed ``optimized'' standards
for each model year. Adjacent to each average fuel economy figure is
the estimated associated level of tailpipe emissions of CO2 that would
be achieved.\4\
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    \4\ Given the contributions made by CAFE standards to addressing
not only energy independence and security, but also to reducing
tailpipe emissions of CO2, fleet performance is stated in the above
discussion both in terms of fuel economy and the associated
reductions in tailpipe emissions of CO2 since the CAFE standard will
have the practical effect of limiting those emissions approximately
to the indicated levels during the official CAFE test procedures
established by EPA. The relationship between fuel consumption and
carbon dioxide emissions is discussed ubiquitously, such as at
www.fueleconomy.gov, a fuel economy-related Web site managed by DOE
and EPA (see http://www.fueleconomy.gov/feg/contentIncludes/co2_
inc.htm, which provides a rounded value of 20 pounds of CO2 per
gallon of gasoline). (Last accessed April 20, 2008.) The CO2
emission rates shown are based on gasoline characteristics. Because
diesel fuel contains more carbon (per gallon) than gasoline, the
presence of diesel engines in the fleet--which NHTSA expects to
increase in response to the proposed CAFE standards--will cause the
actual CO2 emission rate corresponding to any given CAFE level to be
slightly higher than shown here. (The agency projects that 4 percent
of the MY 2015 passenger car fleet and 10 percent of the MY 2015
light truck fleet will have diesel engines.) Conversely (and
hypothetically), applying the same CO2 emission standard to both
gasoline and diesel vehicles would discourage manufacturers from
improving diesel engines, which show considerable promise as a means
to improve fuel economy.

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

    For light trucks:

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

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

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

    The annual average increase during this five year period is
approximately 4.5 percent. Due to the uneven distribution of new model
introductions during this period and to the fact that significant
technological changes can be most readily made in conjunction with
those introductions, the annual percentage increases are greater in the
early years in this period.
    Given a starting point of 31.8 mpg in MY 2015, the average annual
increase for MYs 2016-2020 would need to be only 2.1 percent in order
for the projected combined industry wide average to reach at least 35
mpg by MY 2020, as mandated by EISA.
    In addition, per EISA, each manufacturer's domestic passenger fleet
is required in each model year to achieve 27.5 mpg or 92 percent of the
CAFE of the industry wide combined fleet of domestic and non-domestic
passenger cars \5\ for that model year, whichever is higher. This
requirement results in the following alternative minimum standard (not
attribute-based) for domestic passenger cars:
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    \5\ Those numbers set out several paragraphs above.

MY 2011: 28.7 mpg (310 g/mi of tailpipe emissions of CO2)
MY 2012: 30.2 mpg (294 g/mi of tailpipe emissions of CO2)
MY 2013: 31.3 mpg (284 g/mi of tailpipe emissions of CO2)
MY 2014: 32.0 mpg (278 g/mi of tailpipe emissions of CO2)
MY 2015: 32.9 mpg (270 g/mi of tailpipe emissions of CO2)

    The agency is also issuing, along with this document, a notice
requesting updated product plan information and other data to assist in
developing a final rule. We recognize that the manufacturer product
plans relied upon in developing this proposal--those plans received in
late spring of 2007 in response to an early 2007 request for
information--may already be outdated in some respects. We fully expect
that manufacturers have revised those plans to reflect subsequent
developments, especially the enactment of EISA.
    We solicit comment on all aspects of this proposal, including the
methodology, economic assumptions, analysis and tentative conclusions.
In particular, we solicit comment on whether the proposed levels of
CAFE satisfy EPCA, e.g., reflect an appropriate balancing of the
explicit statutory factors and other relevant factors. Other specific
areas where we request comments are identified elsewhere in this
preamble and in the Preliminary Regulatory Impact Analysis (PRIA).
Based on public comments and other information, including new data and
analysis, and updated product plans,\6\ the standards adopted in the
final rule could well be different from those proposed in this
document.
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    \6\ The proposed standards are, in the first instance, based on
the confidential product plans submitted by the manufacturers in the
spring of 2006. The final rule will be based on the confidential
plans submitted in the next several months. The agency anticipates
that those new plans, which presumably will reflect in some measure
the enactment of EISA and the issuance of this proposal, will
project higher levels of average fuel economy than the 2006 product
plans.
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b. Benefits
    We estimate that the proposed standards for passenger cars would
save approximately 18.7 billion gallons of fuel and avoid tailpipe
CO2 emissions by 178 billion metric tons over the lifetime
of the passenger cars sold during those model years, compared to the
fuel savings and emissions reductions that would occur if the standards
remained at the adjusted baseline (i.e., the higher of manufacturer's
plans and the manufacturer's required level of average fuel economy for
MY 2010).
    We estimate that the value of the total benefits of the proposed
passenger car standards would be approximately $31 billion \7\ over the
lifetime of the 5 model

years combined. This estimate of societal benefits includes direct
impacts from lower fuel consumption as well as externalities and also
reflects offsetting societal costs resulting from the rebound effect.
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    \7\ The $22 billion estimate is based on a 7% discount rate for
valuing future impacts. NHTSA estimated benefits using both 7% and
3% discount rates. Under a 3% rate, net consumer benefits for
passenger car CAFE improvements total $28 million.
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    We estimate that the proposed standards for light trucks would save
approximately 36 billion gallons of fuel and prevent the tailpipe
emission of 343 million metric tons of CO2 over the lifetime
of the light trucks sold during those model years, compared to the fuel
savings and emissions reductions that would occur if the standards
remained at the adjusted baseline. We estimate that the value of the
total benefits of the proposed light truck standards would be
approximately $57 billion \8\ over the lifetime of the 5 model years of
light trucks combined. This estimate of societal benefits includes
direct impacts from lower fuel consumption as well as externalities and
also reflects offsetting societal costs resulting from the rebound
effect.
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    \8\ The $56 billion estimate is based on a 7% discount rate for
valuing future impacts. NHTSA estimated benefits using both 7% and
3% discount rates. Under a 3% rate, net consumer benefits for light
truck CAFE improvements total $70 million.
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c. Costs
    The total costs for manufacturers just complying with the standards
for MY 2011-2015 passenger cars would be approximately $16 billion,
compared to the costs they would incur if the standards remained at the
adjusted baseline. The resulting vehicle price increases to buyers of
MY 2015 passenger cars would be recovered or paid back \9\ in
additional fuel savings in an average of 56 months, assuming fuel
prices ranging from $2.26 per gallon in 2016 to $2.51 per gallon in
2030.\10\
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    \9\ See Section V.A.7 below for discussion of payback period.
    \10\ The fuel prices (shown here in 2006 dollars) used to
calculate the length of the payback period are those projected
(Annual Energy Outlook 2008, revised early release) by the Energy
Information Administration over the life of the MY 2011-2015 light
trucks, not current fuel prices.
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    The total costs for manufacturers just complying with the standards
for MY 2011-2015 light trucks would be approximately $31 billion,
compared to the costs they would incur if the standards remained at the
adjusted baseline. The resulting vehicle price increases to buyers of
MY 2015 light trucks would be paid back in additional fuel savings in
an average of 50 months, assuming fuel prices ranging from $2.26 to
$2.51 per gallon.
d. Flexibilities
    The agency's benefit and cost estimates do not reflect the
availability and use of flexibility mechanisms, such as compliance
credits and credit trading because EPCA prohibits NHTSA from
considering the effects of those mechanisms in setting CAFE standards.
EPCA has precluded consideration of the FFV adjustments ever since it
was amended to provide for those adjustments. The prohibition against
considering compliance credits was added by EISA.
    The benefit and compliance cost estimates used by the agency in
determining the maximum feasible level of the CAFE standards assume
that manufacturers will rely solely on the installation of fuel economy
technology to achieve compliance with the proposed standards. In
reality, however, manufacturers are likely to rely to some extent on
flexibility mechanisms provided by EPCA (as described in Section VI)
and will thereby reduce the cost of complying with the proposed
standards to a meaningful extent.
2. Credits
    NHTSA is also proposing a new Part 536 on use of ``credits'' earned
for exceeding applicable CAFE standards. Part 536 will implement the
provisions in EISA authorizing NHTSA to establish by regulation a
credit trading program and directing it to establish by regulation a
credit transfer program.\11\ Since its enactment, EPCA has permitted
manufacturers to earn credits for exceeding the standards and to apply
those credits to compliance obligations in years other than the model
year in which it was earned. EISA extended the ``carry-forward'' period
to five model years, and left the ``carry-back'' period at three model
years. Under the proposed Part 536, credit holders (including, but not
limited to, manufacturers) will have credit accounts with NHTSA, and
will be able to hold credits, apply them to compliance with CAFE
standards, transfer them to another ``compliance category'' for
application to compliance there, or trade them. A credit may also be
cancelled before its expiry date, if the credit holder so chooses.
Traded credits will be subject to an ``adjustment factor'' to ensure
total oil savings are preserved, as required by EISA. EISA also
prohibits credits earned before MY 2011 from being transferred, so
NHTSA has developed several regulatory restrictions on trading and
transferring to facilitate Congress' intent in this regard. Additional
information on the proposed Part 536 is available in section IX below.
---------------------------------------------------------------------------

    \11\ Congress required that DOT establish a credit
``transferring'' regulation, to allow individual manufacturers to
move credits from one of their fleets to another (e.g., using a
credit earned for exceeding the light truck standard for compliance
in the domestic passenger car standard). Congress allowed DOT to
establish a credit ``trading'' regulation, so that credits may be
bought and sold between manufacturers and other parties.
---------------------------------------------------------------------------

II. Background

A. Contribution of Fuel Economy Improvements to Addressing Energy
Independence and Security and Climate Change

1. Relationship Between Fuel Economy and CO2 Tailpipe Emissions
    Improving fuel economy reduces the amount of tailpipe emissions of
CO2. CO2 emissions are directly linked to fuel consumption because CO2
is the ultimate end product of burning gasoline. The more fuel a
vehicle burns, the more CO2 it emits. Since the CO2 emissions are
essentially constant per gallon of fuel combusted, the amount of fuel
consumption per mile is directly related to the amount of CO2 emissions
per mile. Thus, requiring improvements in fuel economy indirectly, but
necessarily requires reductions in tailpipe emissions of CO2 emissions.
This can be seen in the table below. To take the first value of fuel
economy from the table below as an example, a standard of 21.0 mpg
would indirectly place substantially the same limit on tailpipe CO2
emissions as a tailpipe CO2 emission standard of 423.2 g/mi of CO2, and
vice versa.\12\
---------------------------------------------------------------------------

    \12\ To the extent that manufacturers comply with a CAFE
standard with diesel automobiles instead of gasoline ones, the level
of CO2 tailpipe emissions would be less. As noted above, the agency
projects that 4 percent of the MY 2015 passenger car fleet and 10
percent of the MY 2015 light truck fleet will have diesel engines.
The CO2 tailpipe emissions of a diesel powered passenger car are 15
percent higher than those of a comparable gasoline power passenger
car.

                       Table II-1.--CAFE Standards (mpg) and the Limits They Indirectly Place on Tailpipe Emissions of CO2 (g/mi)*
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  CAFE Std                     CO2     CAFE Std    CO2     CAFE Std    CO2     CAFE Std    CO2     CAFE Std    CO2     CAFE Std    CO2
--------------------------------------------------------------------------------------------------------------------------------------------------------
21.0.......................................    444.4       26.0    341.8       31.0    286.7       36.0    246.9       41.0    216.8       46.0    193.2
22.0.......................................    404.0       27.0    329.1       32.0    277.7       37.0    240.2       42.0    211.6       47.0    188.3
23.0.......................................    386.4       28.0    317.4       33.0    269.3       38.0    233.9       43.0    206.7       48.0    189.1
24.0.......................................    370.3       29.0    306.4       34.0    261.4       39.0    227.9       44.0    202.0       49.0    181.4
25.0.......................................    355.5       30.0    296.2       35.0    253.9       40.0    222.2       45.0    197.5       50.0   177.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
 This table is based on calculations that use the figure of 8,887 grams of CO2 per gallon of gasoline consumed, based on characteristics of gasoline
  vehicle certification fuel. To convert a mpg value into CO2 g/mi, divide 8,887 by the mpg value.

2. Fuel Economy Improvements/CO2 Tailpipe Emission
Reductions Since 1975
    The need to take action to reduce greenhouse gas emissions, e.g.,
motor vehicle tailpipe emissions of CO2, in order to forestall and even
mitigate climate change is well recognized.\13\ Less well recognized
are two related facts. First, improving fuel economy is the only method
available to motor vehicle manufacturers for making significant
reductions in the CO2 tailpipe emissions of motor vehicles and thus
must be the core element of any effort to achieve those reductions.
Second, the significant improvements in fuel economy since 1975, due to
the CAFE standards and in some measure to market conditions as well,
have directly caused reductions in the rate of CO2 tailpipe emissions
per vehicle.
---------------------------------------------------------------------------

    \13\ IPCC (2007): Climate Change 2007: Mitigation of Climate
Change. Contribution of Working Group III to the Fourth Assessment
Report of the Intergovernmental Panel on Climate Change [B. Metz, O.
Davidson, P. Bosch, R. Dave, and L. Meyer (eds.)]. Cambridge
University Press, Cambridge, United Kingdom and New York, NY, USA.
---------------------------------------------------------------------------

    In 1975, passenger cars manufactured for sale in the U.S. averaged
only 15.8 mpg (562.5 grams of CO2 per mile or 562.5 g/mi of CO2). By
2007, the average fuel economy of passenger cars had increased to 31.3
mpg, causing g/mi of CO2 to fall to 283.9. Similarly, in 1975, light
trucks averaged 13.7 mpg (648.7 g/mi of CO2). By 2007, the average fuel
economy of light trucks had risen to 23.1 mpg, causing g/mi of CO2 to
fall to 384.7.

  Table II-2.--Improvements in MPG/Reductions in G/MI of CO2 Passenger
                                  Cars
                               [1975-2007]
------------------------------------------------------------------------
                                                    MPG      G/MI of CO2
------------------------------------------------------------------------
1975..........................................         15.8        562.5
2007..........................................         31.3        283.9
------------------------------------------------------------------------

 Table II-3.--Improvements in MPG/Reductions in G/MI of CO2 Light Trucks
                               [1975-2007]
------------------------------------------------------------------------
                                                    MPG      G/MI of CO2
------------------------------------------------------------------------
1975..........................................         13.7        648.7
2007..........................................         23.1        384.7
------------------------------------------------------------------------

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

[GRAPHIC] [TIFF OMITTED] TP02MY08.000

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

1. National Academy of Sciences CAFE Report (February 2002)
a. Significantly Increasing CAFE Standards Without Reforming Them Would
Adversely Affect Safety
    In the congressionally-mandated report entitled ``Effectiveness and
Impact of Corporate Average Fuel Economy (CAFE) Standards,'' \14\ a
committee of the National Academy of Sciences (NAS) (``2002 NAS
Report'') concluded that the then-existing form of passenger car and
light truck CAFE standards created an incentive for vehicle
manufacturers to comply in part by downweighting and even downsizing
their vehicles and that these actions had led to additional fatalities.
The committee explained that these problems arose because the CAFE
standards subjected all passenger cars to the same fuel economy target
and all light trucks to the same target, regardless of their weight,
size, or load-carrying capacity. The committee said that this
experience suggests that consideration should be given to developing a
new system of fuel economy targets that reflects differences in such
vehicle attributes.
---------------------------------------------------------------------------

    \14\ National Research Council, ``Effectiveness and Impact of
Corporate Average Fuel Economy (CAFE) Standards,'' National Academy
Press, Washington, DC (2002). Available at http://www.nap.edu/
openbook.php?isbn=0309076013 (last accessed April 20, 2008). The
conference committee report for the Department of Transportation and
Related Agencies Appropriations Act for FY 2001 (Pub. L. 106-346)
directed NHTSA to fund a study by NAS to evaluate the effectiveness
and impacts of CAFE standards (H. Rep. No. 106-940, p. 117-118). In
response to the direction from Congress, NAS published this lengthy
report.
---------------------------------------------------------------------------

    Looking to the future, the committee said that while it is
technically feasible and potentially economically practicable to
improve fuel economy without reducing vehicle weight or size and,
therefore, without significantly affecting the safety of motor vehicle
travel, the actual strategies chosen by manufacturers to improve fuel
economy will depend on a variety of factors. In the committee's
judgment, the extensive downweighting and downsizing that occurred
after fuel economy requirements were established in the 1970s suggested
that the likelihood of a similar response to further increases in fuel
economy requirements must be considered seriously. Any reduction in
vehicle size and weight would have safety implications.
    The committee cautioned that the safety effects of downsizing and
downweighting are likely to be hidden by the generally increasing
safety of the light-duty vehicle fleet.\15\ It said that some might
argue that this improving safety picture means that there is room to
improve fuel economy without adverse safety consequences; however, such
an approach would not achieve the goal of avoiding the adverse safety
consequences of fuel economy increases. Rather, the safety penalty
imposed by increased fuel economy (if weight reduction is one of the
measures) will be more difficult to identify in light of the continuing
improvement in traffic safety. Although it is anticipated that these
safety innovations will improve the safety of vehicles of all sizes,
that does not mean that downsizing to achieve fuel economy improvements
will not have any safety costs. If two vehicles of the same size are
modified, one both by downsizing it and adding the safety innovations
and the other just by adding the safety innovations, the latter vehicle
will in all likelihood be safer.
---------------------------------------------------------------------------

    \15\ Two of the 12 members of the committee dissented from the
majority's safety analysis and conclusions.
---------------------------------------------------------------------------

    The committee concluded that if an increase in fuel economy were
implemented pursuant to standards that are structured in a way that
encourages either downsizing or the increased production of smaller
vehicles, some additional traffic fatalities would be expected. Without
a thoughtful restructuring of the program, there would be the trade-
offs that must be made if CAFE standards were increased by any
significant amount.\16\
---------------------------------------------------------------------------

    \16\ NAS, p. 9.
---------------------------------------------------------------------------

    In response to these conclusions, NHTSA began issuing attribute-
based CAFE standards for light trucks and sought legislative authority
to issue attribute-based CAFE standards for passenger cars before
undertaking to raise the car standards. Congress went a step further in
enacting EISA, not only authorizing the issuance of attribute-based
standards, but also mandating them.
    Fully realizing all of the safety and other \17\ benefits of these
reforms will depend in part on whether the unreformed, non-attribute
based greenhouse standards adopted by California and other states are
implemented. Apart from issues of relative stringency, the effects on
vehicle manufacturers of implementing those state emission standards
should be substantially similar to the effects of implementing non-
attribute-based CAFE standards, given the nearly identical nature of
most aspects of those emission standards and CAFE standards in terms of
technological means of compliance and methods of measuring performance.
---------------------------------------------------------------------------

    \17\ Reformed CAFE has several advantages compared to Unreformed
CAFE:
    First, Reformed CAFE increases energy savings. The energy-saving
potential of Unreformed CAFE is limited because only a few full-line
manufacturers are required to make improvements. Under Reformed
CAFE, which accounts for size differences in product mix, virtually
all manufacturers will be required to use advanced fuel-saving
technologies to achieve the requisite fuel economy for their
automobiles.
    Second, Reformed CAFE reduces the chances of adverse safety
consequences. Downsizing of vehicles as a CAFE compliance strategy
is discouraged under Reformed CAFE since as vehicles become smaller,
the applicable fuel economy target becomes more stringent.
    Third, Reformed CAFE provides a more equitable regulatory
framework for different vehicle manufacturers. Under Unreformed
CAFE, the cost burdens and compliance difficulties have been imposed
nearly exclusively on the full-line manufacturers.
    Fourth, Reformed CAFE is more market-oriented because it more
fully respects economic conditions and consumer choice. Reformed
CAFE does not force vehicle manufacturers to adjust fleet mix toward
smaller vehicles although they can make adjustments if that is what
consumers are demanding. Instead, it allows the manufacturers to
adjust the mix of their product offerings in response to the market
place.
---------------------------------------------------------------------------

b. Environmental and Other Externalities Justify Increasing the CAFE
Standards
    The 2002 NAS report also concluded that the CAFE standards have
contributed to increased fuel economy, which in turn has reduced
dependence on imported oil, improved the nation's terms of trade, and
reduced emissions of carbon dioxide (a principal greenhouse gas),
relative to what they otherwise would have been. If fuel economy had
not improved, gasoline consumption (and crude oil imports) would be
about 2.8 million barrels per day (mmbd) greater than it is.\18\
Reducing fuel consumption in vehicles also reduces carbon dioxide
emissions. If the nation were using 2.8 mmbd more gasoline, carbon
emissions would be more than 100 million metric tons of carbon (mmtc)
higher. Thus, improvements in light-duty vehicle (4 wheeled motor
vehicles under 10,000 pounds gross vehicle weight rating) fuel economy
have reduced overall U.S. emissions by about 7 percent.\19\
---------------------------------------------------------------------------

    \18\ NAS, pp. 3 and 20.
    \19\ NAS, p. 20.
---------------------------------------------------------------------------

    The report concluded that technologies exist that could
significantly further reduce fuel consumption by passenger cars and
light trucks within 15 years, while maintaining vehicle size, weight,
utility and performance.\20\ Light duty trucks

were said to offer the greatest potential for reducing fuel
consumption.\21\ The report also noted that vehicle development
cycles--as well as future economic, regulatory, safety and consumer
preferences--would influence the extent to which these technologies
could lead to increased fuel economy in the U.S. market. To assess the
economic trade-offs associated with the introduction of existing and
emerging technologies to improve fuel economy, the NAS conducted what
it called a ``cost-efficient analysis'' based on the direct benefits
(value of saved fuel) to the consumer--``that is, the committee
identified packages of existing and emerging technologies that could be
introduced over the next 10 to 15 years that would improve fuel economy
up to the point where further increases in fuel economy would not be
reimbursed by fuel savings.'' \22\
---------------------------------------------------------------------------

    \20\ NAS, p. 3 (Finding 5).
    \21\ NAS, p. 4 (Finding 5).
    \22\ NAS, pp. 4 (Finding 6) and 64.
---------------------------------------------------------------------------

    The committee emphasized that it is critically important to be
clear about the reasons for considering improved fuel economy. While
the dollar value of the saved fuel would be largest portion of the
potential benefits, the committee noted that there is theoretically
insufficient reason for the government to issue higher standards just
to obtain those direct benefits since consumers have a wide variety of
opportunities to buy a fuel-efficient vehicle.\23\
---------------------------------------------------------------------------

    \23\ NAS, pp. 8-9.
---------------------------------------------------------------------------

    The committee said that there are two compelling concerns that
justify a government mandated increase in fuel economy, both relating
to externalities. The most important concern, it argued, is the one
about the accumulation in the atmosphere of greenhouse gases,
principally carbon dioxide.\24\
---------------------------------------------------------------------------

    \24\ NAS, pp. 2, 13, and 83.
---------------------------------------------------------------------------

    A second concern is that petroleum imports have been steadily
rising because of the nation's increasing demand for gasoline without a
corresponding increase in domestic supply. The high cost of oil imports
poses two risks: Downward pressure on the strength of the dollar (which
drives up the cost of goods that Americans import) and an increase in
U.S. vulnerability to macroeconomic shocks that cost the economy
considerable real output.
    To determine how much the fuel economy standards should be
increased, the committee urged that all social benefits be considered.
That is, it urged not only that the dollar value of the saved fuel be
considered, but also that the dollar value to society of the resulting
reductions in greenhouse gas emissions and in dependence on imported
oil should be calculated and considered. The committee said that if it
is possible to assign dollar values to these favorable effects, it
becomes possible to make at least crude comparisons between the
socially beneficial effects of measures to improve fuel economy on the
one hand, and the costs (both out-of-pocket and more subtle) on the
other. The committee chose a value of about $0.30/gal of gasoline for
the externalities associated with the combined impacts of fuel
consumption on greenhouse gas emissions and on world oil market
conditions.\25\
---------------------------------------------------------------------------

    \25\ NAS, pp. 4 and 85-86.
---------------------------------------------------------------------------

    The report expressed concerns about increasing the standards under
the CAFE program as currently structured. While raising CAFE standards
under the existing structure would reduce fuel consumption, doing so
under alternative structures ``could accomplish the same end at lower
cost, provide more flexibility to manufacturers, or address inequities
arising from the present'' structure.\26\ Further, the committee said,
``to the extent that the size and weight of the fleet have been
constrained by CAFE requirements * * * those requirements have caused
more injuries and fatalities on the road than would otherwise have
occurred.'' \27\ Specifically, it noted: ``The downweighting and
downsizing that occurred in the late 1970s and early 1980s, some of
which was due to CAFE standards, probably resulted in an additional
1300 to 2600 traffic fatalities in 1993.'' \28\
---------------------------------------------------------------------------

    \26\ NAS, pp. 4-5 (Finding 10).
    \27\ NAS, p. 29.
    \28\ NAS, p. 3 (Finding 2).
---------------------------------------------------------------------------

    To address those structural problems, the report suggested various
possible reforms. The report found that the ``CAFE program might be
improved significantly by converting it to a system in which fuel
targets depend on vehicle attributes.'' \29\ The report noted further
that under an attribute-based approach, the required CAFE levels could
vary among the manufacturers based on the distribution of their product
mix. NAS stated that targets could vary among passenger cars and among
trucks, based on some attribute of these vehicles such as weight, size,
or load-carrying capacity. The report explained that a particular
manufacturer's average target for passenger cars or for trucks would
depend upon the fractions of vehicles it sold with particular levels of
these attributes.\30\
---------------------------------------------------------------------------

    \29\ NAS, p. 5 (Finding 12).
    \30\ NAS, p. 87.
---------------------------------------------------------------------------

    In February 2002, Secretary Mineta asked Congress ``to provide the
Department of Transportation with the necessary authority to reform the
CAFE program, guided by the NAS report's suggestions.''
2. Final Rule Establishing Reformed (Attribute-Based) CAFE Standards
for MY 2008-2011 Light Trucks (March 2006)
    The 2006 final rule reformed the structure of the CAFE program for
light trucks and established higher CAFE standards for MY 2008-2011
light trucks.\31\ Reforming the CAFE program enables it to achieve
larger fuel savings, while enhancing safety and preventing adverse
economic consequences.
---------------------------------------------------------------------------

    \31\ 71 FR 17566; April 6, 2006.
---------------------------------------------------------------------------

    During a transition period of MYs 2008-2010, manufacturers may
comply with CAFE standards established under the reformed structure
(Reformed CAFE) or with standards established in the traditional way
(Unreformed CAFE). This permits manufacturers and the agency to gain
experience with implementing the Reformed CAFE standards. Under the
2006 rule, all manufacturers were required to comply with a Reformed
CAFE standard in MY 2011.
    Under Reformed CAFE, fuel economy standards were restructured so
that they are based on a measure of vehicle size called ``footprint,''
which is the product of multiplying a vehicle's wheelbase by average
its track width. A target level of fuel economy was established for
each increment in footprint (0.1 ft\2\). Trucks with smaller footprints
have higher fuel economy targets; conversely, larger ones have lower
targets. A particular manufacturer's compliance obligation for a model
year will be calculated as the harmonic average of the fuel economy
targets for the manufacturer's vehicles, weighted by the distribution
of manufacturer's production volumes among the footprint increments.
Thus, each manufacturer will be required to comply with a single
overall average fuel economy level for each model year of production.
    The approach for determining the fuel economy targets was to set
them just below the level where the increased cost of technologies that
could be adopted by manufacturers to improve fuel economy would first
outweigh the added benefits that would result from such technology.
These targets translate into required levels of average fuel economy
that are technologically feasible because manufacturers can achieve
them using available technologies. Those levels also reflect the need
of the nation to reduce

energy consumption because they reflect the economic value of the
savings in resources, as well as of the reductions in economic and
environmental externalities that result from producing and using less
fuel.
    The Unreformed CAFE standards are: 22.5 miles per gallon (mpg) for
MY 2008, 23.1 mpg for MY 2009, and 23.5 mpg for MY 2010. To aid the
transition to Reformed CAFE, the Reformed CAFE standards for those
years were set at levels intended to ensure that the industry-wide
costs of the Reformed standards are roughly equivalent to the industry-
wide costs of the Unreformed CAFE standards in those model years. For
MY 2011, the Reformed CAFE standard was set at the level that maximizes
net benefits. Net benefits include the increase in light truck prices
due to technology improvements, the decrease in fuel consumption, and a
number of other factors. All of the standards were set at the maximum
feasible level, while accounting for technological feasibility,
economic practicability and other relevant factors.
    We carefully balanced the costs of the rule with the benefits of
reducing energy consumption. Compared to Unreformed CAFE, Reformed CAFE
enhances overall fuel savings while providing vehicle manufacturers
with the flexibility they need to respond to changing market
conditions. Reformed CAFE will also provide a more equitable regulatory
framework by creating a level-playing field for manufacturers,
regardless of whether they are full-line or limited-line manufacturers.
We were particularly encouraged that Reformed CAFE will eliminate the
incentive to downsize some of their fleet as a CAFE compliance
strategy, thereby reducing the adverse safety risks associated with the
Unreformed CAFE program.
3. Twenty-in-Ten Initiative (January 2007)
    In his January 2007 State of the Union address, the President
announced his Twenty-in-Ten initiative for increasing the supply of
renewable and alternative fuels and reforming and increasing the CAFE
standards. Consistent with the NAS report, he urged the authority be
provided to reform CAFE for passenger cars by adopting an attribute-
based system (for example, a size-based system) reduces the risk that
vehicle safety is compromised, helps preserve consumer choice, and
helps spread the burden of compliance across all product lines and
manufacturers. He also urged that authority be provided to set the CAFE
standards, based on cost/benefit analysis, using sound science, and
without impacting safety.
4. Request for Passenger Car and Light Truck Product Plans (February
2007)
    In late February 2007, NHTSA published a notice to acquire new and
updated information regarding vehicle manufacturers' future product
plans to aid in implementing the President's plan for reforming and
increasing CAFE standards for passenger cars and further increasing the
already reformed light truck standards. More specifically, the agency
said:

    * * * we are seeking information related to fuel economy
improvements for MY 2007-2017 passenger cars and MY 2010-2017 light
trucks. The agency is seeking information in anticipation of
obtaining statutory authority to reform the passenger car CAFE
program and to set standards under that structure for MY 2010-2017
passenger cars. The agency is also seeking this information in
anticipation of setting standards for MY 2012-2017 light trucks.\32\
---------------------------------------------------------------------------

    \32\ 72 FR 8664; February 27, 2007.
---------------------------------------------------------------------------

5. Supreme Court Decision in Massachusetts v. EPA (April 2007)
    On April 2, 2007, the U.S. Supreme Court issued its opinion in
Massachusetts v. EPA.\33\ The Court ruled that the state of
Massachusetts had standing because it had already lost a small amount
of land and stood to lose more due to global warming induced increases
in sea level; that some portion of this harm was traceable to the
absence of a regulation issued by EPA requiring reductions in GHG
emissions (CO2 emissions, most notably) by motor vehicles;
and that issuance of such an EPA regulation by EPA would reduce the
risk of further harm to Massachusetts. On the merits, the Court ruled
that greenhouse gases are ``pollutants'' under the Clean Air Act and
that the Act therefore authorizes EPA to regulate greenhouse gas
emissions from motor vehicles if EPA makes the necessary findings and
determinations under section 202 of the Act.
---------------------------------------------------------------------------

    \33\ 127 S.Ct. 1438 (2007).
---------------------------------------------------------------------------

    The Court considered EPCA briefly, noting that it and the Clean Air
Act have different overall purposes. It noted further that the two acts
overlap, but did not define the nature or extent of that overlap. It
concluded that EPCA did not relieve EPA of its statutory obligations
and expressed confidence that the two acts could be consistently
administered. The Court did not address the express preemption
provision in EPCA.
6. Coordination Between NHTSA and EPA on Development of Rulemaking
Proposals (Summer-Fall 2007)
    In the wake of the Supreme Court's decision and in the absence of
the legislation he called for in his 2007 State of the Union message,
the President called on NHTSA and EPA to take the first steps toward
regulations that would cut gasoline consumption and greenhouse gas
emissions from motor vehicles, using his Twenty-in-Ten initiative as a
starting point. He asked them ``to listen to public input, to carefully
consider safety, science, and available technologies, and evaluate the
benefits and costs before they put forth the new regulation.'' He also
issued an executive order directing all of the departments and agencies
to work together on the proposal.
    Pursuant to the President's directive, NHTSA and EPA staff jointly
assessed which technologies would be available and their effectiveness
and cost. They also jointly assessed the key economic and other
assumptions affecting the stringency of future standards. Finally, they
worked together in updating and further improving the Volpe model that
had been used to help determine the stringency of the MY 2008-2011
light truck CAFE standards. Much of the work between NHTSA and EPA
staff was reflected in rulemaking proposals being developed by NHTSA
prior to the enactment of EISA and was substantially retained when
NHTSA revised its proposals to be consistent with that legislation.
Ultimately, the proposals being published today are based on NHTSA's
assessments of how they meet EPCA, as amended by EISA.
7. Ninth Circuit Decision Re Final Rule for MY 2008-2011 Light Trucks
(November 2007)
    On November 15, 2007, the United States Court of Appeals for the
Ninth Circuit issued its decision in Center for Biological Diversity v.
NHTSA,\34\ the challenge to the MY 2008-11 light truck CAFE rule. The
Court rejected the petitioners' argument that EPCA precludes the use of
a marginal cost-benefit analysis that attempted to weigh all of the
social benefits (i.e., externalities as well as direct benefits to
consumers) of improved fuel savings in determining the stringency of
the CAFE standards. It cautioned, however, that it had not reviewed
whether the agency's balancing of the statutory factors in setting
those standards was arbitrary and capricious. In that regard, it noted
that much had changed since a court of appeals had last (i.e., in the
late 1980's) reviewed the agency's balancing of those factors in a
rulemaking. Specifically, it noted increases in scientific knowledge of
climate change

and in the need to reduce importation of petroleum since that time.
---------------------------------------------------------------------------

    \34\ 508 F.3d 508.
---------------------------------------------------------------------------

    Further, the Court found that NHTSA had been arbitrary and
capricious in its treatment of the following issues:
     NHTSA's decision not to monetize the benefit of reducing
CO2 emissions and use that value in conducting its marginal
benefit-cost analysis based on its view that the value of the benefit
of CO2 emission reductions resulting from fuel consumption
reductions was too uncertain to permit the agency to determine a value
for those emission reductions;\35\
---------------------------------------------------------------------------

    \35\ The agency has developed a value for those reductions and
used it in the analyses underlying the standards proposed in this
NPRM. For further discussion, see section V of this preamble.
---------------------------------------------------------------------------

     NHTSA's decision not to establish a ``backstop'' (i.e., a
fixed minimum CAFE standard applicable to manufacturers); \36\
---------------------------------------------------------------------------

    \36\ EISA's requirement that standards be based on one or more
vehicle attributes and its specification for domestic passenger
cars, but not for nondomestic passenger cars or light trucks of an
absolute CAFE level appear to preclude the specification of such a
backstop standard for the latter two categories of automobiles. For
further discussion, see Section VI of this preamble.
---------------------------------------------------------------------------

     NHTSA's decision not to proceed to revise the regulatory
definitions for the passenger car and light truck categories of
automobiles so that some vehicles currently classified as light trucks
are instead classified as passenger cars; \37\
---------------------------------------------------------------------------

    \37\ In this NPRM, NHTSA examines the legislative history of the
statutory definitions of ``automobile'' and ``passenger automobile''
and the term ``nonpassenger automobile'' and analyses the impact of
that moving any vehicles out of the nonpassenger automobile (light
truck) category into the passenger automobile (passenger car)
category would have the level of standards for both groups of
automobiles. For further discussion, see Section VIII of this
preamble.
---------------------------------------------------------------------------

     NHTSA's decision not to subject most medium- and heavy-
duty pickups and most medium- and heavy-duty cargo vans (i.e., those
between 8,500 and 10,000 pounds gross vehicle weight rating (GVWR,) to
the CAFE standards; \38\
---------------------------------------------------------------------------

    \38\ EISA removed these vehicles from the statutory definition
of ``automobile'' and mandated the establishment of CAFE standards
for them following the completion of reports by the National Academy
of Sciences and NHTSA.
---------------------------------------------------------------------------

     NHTSA's limited assessment of cumulative impacts and
regulatory alternatives in its Environmental Assessment (EA) under the
National Environmental Policy Act (NEPA), and its decision to prepare
and publish an EA, coupled with a finding of no significant impact,
instead of an Environmental Impact Statement (EIS).\39\
---------------------------------------------------------------------------

    \39\ On February 9, NHTSA filed a petition with the Ninth
Circuit for rehearing en banc on the issue of whether the panel in
CBD acted within its authority in ordering the agency to prepare an
EIS instead of remanding the issue to the agency and directing it to
conduct a new, fuller environmental analysis and decide whether an
EIS is required. In addition, NHTSA has published a notice of intent
to prepare an environmental impact statement, thus beginning the EIS
process for this rulemaking, as discussed in Section XIII.B. of this
NPRM.
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    The Court did not vacate the standards, but instead said it would
remand the rule to NHTSA to promulgate new standards consistent with
its opinion ``as expeditiously as possible and for the earliest model
year practicable.\40\ Under the decision, the standards established by
the April 2006 final rule would remain in effect unless and until
amended by NHTSA.
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    \40\ The deadline in EPCA for issuing a final rule establishing,
for the first time, a CAFE standard for a model year is 18 months
before the beginning of that model year. 49 U.S.C. 32902(g)(2). The
same deadline applies to issuing a final rule amending an existing
CAFE standard so as to increase its stringency. Given that the
agency has long regarded October 1 as the beginning of a model year,
the statutory deadline for increasing the MY 2009 standard was March
30, 2007, and the deadline for increasing the MY 2010 standard is
March 30, 2008. Thus, the only model year for which there is
sufficient time to gather all of the necessary information, conduct
the necessary analyses and complete a rulemaking is MY 2011. As
noted earlier in this document, however, EISA requires that a new
standard be established for that model year. This rulemaking is
being conducted pursuant to that requirement.
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    On February 6, 2008, the Government petitioned for en banc
rehearing by the Ninth Circuit on the limited issue of whether it was
appropriate for the panel, having held that the agency insufficiently
explored the environmental implications of the MY 2008-11 rulemaking in
its EA, to order the agency to prepare an EIS rather than simply
remanding the matter to the agency for further analysis.
    As of the date of the issuance of this proposal, the Court has not
yet issued its mandate in this case.
8. Enactment of Energy Security and Independence Act of 2007 (December
2007)
    As noted above in section I.B., EISA significantly changed the
provisions of EPCA governing the establishment of future CAFE
standards. These changes made it necessary for NHTSA to pause in its
efforts so that it could assess the implications of the amendments made
by EISA and then, as required, revise some aspects of the proposals it
had been developing (e.g., the model years covered and credit issues).

C. Energy Policy and Conservation Act, as Amended

    EPCA, which was enacted in 1975, mandates a motor vehicle fuel
economy regulatory program to improve the nation's energy security and
energy efficiency. It gives the authority under EPCA to regulate fuel
economy to DOT, which has delegated that authority to NHTSA at 49 CFR
1.50. EPCA allocates the responsibility for implementing the program as
follows: NHTSA sets CAFE standards for passenger cars and light trucks;
EPA calculates the average fuel economy of each manufacturer's
passenger cars and light trucks; and NHTSA enforces the standards based
on EPA's calculations.
    We have summarized below EPCA, as amended by EISA. We request
comment on how EPCA should be implemented to achieve the goals and meet
the requirements of EISA. For example, what assumptions, methodologies
and computations should be used in establishing and implementing the
new standards?
1. Vehicles Subject to Standards for Automobiles
    With two exceptions, all four-wheeled motor vehicles with a gross
vehicle weight rating of 10,000 pounds or less will be subject to the
CAFE standards, beginning with MY 2011. The exceptions will be work
trucks \41\ and multi-stage vehicles. Work trucks are defined as
vehicles that are:
---------------------------------------------------------------------------

    \41\ While EISA excluded work trucks from ``automobiles,'' it
did not exclude them from regulation under EPCA. EISA requires that
work trucks be subjected to CAFE standards, but only first after the
National Academy of Sciences completes a study and then after NHTSA
completes a follow-on study. Congress thus recognized and made
allowances for the practical difficulties that led NHTSA to decline
to include work trucks in its final rule for MY 2008-11 light
trucks.

--rated at between 8,500 and 10,000 pounds gross vehicle weight; and
--are not a medium-duty passenger vehicle (as defined in section
86.1803-01 of title 40, Code of Federal Regulations, as in effect on
the date of the enactment of the Ten-in-Ten Fuel Economy Act).\42\
---------------------------------------------------------------------------

    \42\ 49 U.S.C. 32902(a)(19).

Medium-duty passenger vehicles (MDPV) include 8,500 to 10,000 lb. GVWR
sport utility vehicles (SUVs), short bed pick-up trucks, and passenger
vans, but exclude pickup trucks with longer beds and cargo vans rated
at between 8,500 and 10,000 lbs GVWR. It is those excluded pickup
trucks and cargo vans that are work trucks. ``Multi-stage vehicle''
includes any vehicle manufactured in different stages by 2 or more
manufacturers, if no intermediate or final-stage manufacturer of that
vehicle manufactures more than 10,000 multi-stage vehicles per
year.\43\
---------------------------------------------------------------------------

    \43\ 49 U.S.C. 32902(a)(3).
---------------------------------------------------------------------------

    Under EPCA, as it existed before EISA, the agency had discretion
whether to regulate vehicles with a GVWR between 6,000 and 10,000 lbs.,
GVWR. It could regulate the fuel

economy of vehicles with a GVWR within that range under CAFE if it
determined that (1) standards were feasible for these vehicles, and (2)
either (a) that these vehicles were used for the same purpose as
vehicles rated at not more than 6,000 lbs. GVWR, or (b) that their
regulation would result in significant energy conservation.
    EISA eliminated the need for administrative determinations in order
to subject vehicles between 6,000 and 10,000 lbs. GVWR to the CAFE
standards for automobiles. Congress did so by making the determination
itself that all vehicles within that GVWR range should be included,
with the exceptions noted above.
2. Mandate To Set Standards for Automobiles
    As amended by EISA, EPCA requires that the agency establish
standards for all new automobiles for each model year at the maximum
feasible levels for that model year. A manufacturer's individual
passenger cars and light trucks are not required to meet a particular
fuel economy level. Instead, the harmonically averaged fuel economy of
a manufacturer's production of passenger cars (or light trucks) in a
particular model year must meet the standard for those automobiles for
that model year.
    For model years 2011-2020, several special requirements, in
addition to the maximum feasible requirement, are specified.\44\ Each
of the requirements must be interpreted in light of the other
requirements. For those model years, separate standards for passenger
cars and for light trucks must be set at high enough levels to ensure
that the CAFE of the industry wide combined fleet of new passenger cars
and light trucks for MY 2020 is not less than 35 mpg. The 35 mpg figure
is not a standard applicable to any individual manufacturer. It is a
requirement, applicable to the agency, regarding the combined effect of
the separate standards for passenger cars and light trucks that NHTSA
is to establish for MY 2020. EISA does not specify precisely how
compliance with this requirement is to be ensured or how or when the
CAFE of the industry wide combined fleet for MY 2020 is to be
calculated for purposes of determining compliance. As a practical
matter, to ensure that this level is achieved, the standard for MY 2020
passenger cars would have to be above 35 mpg and the one for MY 2020
light trucks might or might not be below 35 mpg. Similarly, the CAFE of
some manufacturers' combined fleet of passenger cars and light trucks
would be above 35 mpg, while the combined fleet of others might or
might not be below 35 mpg. The standards for passenger cars and those
for light trucks must increase ratably each year. The CAFE of each
manufacturer's fleet of domestic passenger cars must meet a sliding,
absolute minimum level in each model year: 27.5 mpg or 92 percent of
the projected CAFE of the industry wide fleet of new domestic passenger
cars for that model year.
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    \44\ Under EPCA, prior to its amendment by EISA, the standard
for passenger cars was 27.5 mpg unless amended to a higher or lower
level by DOT. Per EISA, the standard will remain at 27.5 mpg through
MY 2010.
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    EPCA, as it existed before EISA, EPCA required that light truck
standards be set at the maximum feasible level for each model year, but
simply specified a default standard of 27.5 mpg for passenger cars for
MY 1985 and thereafter. It permitted, but did not require that NHTSA
establish a higher or lower standard for passenger cars if the agency
found that the maximum feasible level of fuel economy is higher or
lower than 27.5 mpg.
3. Structure of Standards
    The standards for passenger cars and light trucks must be based on
one or more vehicle attributes and expressed in terms of a mathematical
function. This makes it possible to increase the CAFE standards for
both passenger cars and light trucks significantly without creating
incentives to improve fuel economy in ways that reduce safety.
Formerly, EPCA provided authority for this approach for light trucks,
but not passenger cars.
4. Factors Governing or Considered in the Setting of Standards
    In determining the maximum feasible level of average fuel economy
for a model year, EPCA requires that the agency consider four factors:
technological feasibility, economic practicability, the effect of other
standards of the Government on fuel economy, and the need of the nation
to conserve energy. EPCA does not define these terms or specify what
weight to give each concern in balancing them; thus, NHTSA defines them
and determines the appropriate weighting based on the circumstances in
each CAFE standard rulemaking.
    ``Technological feasibility'' means whether a particular method of
improving fuel economy can be available for commercial application in
the model year for which a standard is being established.
    ``Economic practicability'' means whether a standard is one
``within the financial capability of the industry, but not so stringent
as to'' lead to ``adverse economic consequences, such as a significant
loss of jobs or the unreasonable elimination of consumer choice.'' \45\
In an attempt to ensure the economic practicability of attribute based
standards, the agency considers a variety of factors, including the
annual rate at which manufacturers can increase the percentage of its
fleet that has a particular type of fuel saving technology, and cost to
consumers. Since consumer acceptability is an element of economic
practicability, the agency has limited its consideration of fuel saving
technologies to be added to vehicles to those that provide benefits
that match their costs. Disproportionately expensive technologies are
not likely to be accepted by consumers.
---------------------------------------------------------------------------

    \45\ 67 FR 77015, 77021; December 16, 2002.
---------------------------------------------------------------------------

    At the same time, the law does not preclude a CAFE standard that
poses considerable challenges to any individual manufacturer. The
Conference Report for EPCA, as enacted in 1975, makes clear, and the
case law affirms, ``(A) determination of maximum feasible average fuel
economy should not be keyed to the single manufacturer which might have
the most difficulty achieving a given level of average fuel
economy.''\46\ Instead, the agency is compelled ``to weigh the benefits
to the nation of a higher fuel economy standard against the
difficulties of individual automobile manufacturers.'' Id. The law
permits CAFE standards exceeding the projected capability of any
particular manufacturer as long as the standard is economically
practicable for the industry as a whole. Thus, while a particular CAFE
standard may pose difficulties for one manufacturer, it may also
present opportunities for another. The CAFE program is not necessarily
intended to maintain the competitive positioning of each particular
company. Rather, it is intended to enhance fuel economy of the vehicle
fleet on American roads, while protecting motor vehicle safety and the
totality of American jobs and the overall United States economy.
---------------------------------------------------------------------------

    \46\ CEI-I, 793 F.2d 1322, 1352 (DC Cir. 1986).
---------------------------------------------------------------------------

    ``The effect of other motor vehicle standards of the Government on
fuel economy'' means ``the unavoidable adverse effects on fuel economy
of compliance with emission, safety, noise, or damageability
standards.'' In the case of emission standards, this includes standards
adopted by the Federal government and can include standards adopted by
the States as well, since in certain circumstances the Clean Air Act

permits States to adopt and enforce State standards in lieu of the
Federal ones. It does not, however, include State standards expressly
preempted by EPCA.\47\
---------------------------------------------------------------------------

    \47\ 49 U.S.C. 32919 and 71 FR 17566, 17654-70; April 6, 2006.
---------------------------------------------------------------------------

    ``The need of the United States to conserve energy'' means ``the
consumer cost, national balance of payments, environmental, and foreign
policy implications of our need for large quantities of petroleum,
especially imported petroleum.'' Environmental implications principally
include reductions in emissions of criteria pollutants and carbon
dioxide. A prime example of foreign policy implications are energy
independence and security concerns.
    The agency has considered environmental issues in making decisions
about the setting of standards from the earliest days of the CAFE
program. As the three courts of appeal have noted in decisions
stretching over the last 20 years,\48\ the agency defined the ``need of
the Nation to conserve energy'' in the late 1970's as including ``the
consumer cost, national balance of payments, environmental, and foreign
policy implications of our need for large quantities of petroleum,
especially imported petroleum.'' \49\ Pursuant to that view, the agency
declined to include diesel engines in determining the maximum feasible
level of average fuel economy for passenger cars and for light trucks
because particulate emissions from diesels were then both a source of
concern and unregulated.\50\ In the late 1980's, NHTSA cited concerns
about climate change as one of its reasons for limiting the extent of
its reduction of the CAFE standard for MY 1989 passenger cars \51\ and
for declining to reduce the standard for MY 1990 passenger cars.\52\
Since then, DOT has considered the indirect benefits of reducing
tailpipe carbon dioxide emissions in its fuel economy rulemakings
pursuant to the statutory requirement to consider the nation's need to
conserve energy by reducing consumption. In this rulemaking, consistent
with the Ninth Circuit's decision and its observations about the
potential effect of changing information about climate change on the
balancing of the EPCA factors and aided by the 2007 reports of the
United Nations Intergovernmental Panel on Climate Change \53\ and other
information, NHTSA is monetizing the reductions in tailpipe emissions
of CO2 that will result from the CAFE standards and is
proposing to set the MY 2011-15 CAFE standards at levels that reflect
the value of those reductions in CO2. as well as the value
of other benefits of those standards. In setting CAFE standards, NHTSA
also considers environmental impacts under NEPA, 42 U.S.C. 4321-4347.
---------------------------------------------------------------------------

    \48\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 n. 12
(DC Cir. 1986); Public Citizen v. NHTSA, 848 F.2d 256, 262-3 n. 27
(DC Cir. 1988) (noting that ``NHTSA itself has interpreted the
factors it must consider in setting CAFE standards as including
environmental effects''); and Center for Biological Diversity v.
NHTSA, 508 F.3d 508, 529 (9th Cir. 2007).
    \49\ 42 FR 63,184, 63,188 (Dec. 15, 1977) (emphasis added).
    \50\ For example, the final rules establishing CAFE standards
for MY 1981-84 passenger cars, 42 FR 33,533, 33,540-1 and 33,551;
June 30, 1977, and for MY 1983-85 light trucks, 45 FR 81,593,
81,597; December 11, 1980.
    \51\ 53 FR 39,275, 39,302; October 6, 1988.
    \52\ 54 FR 21985,
    \53\ The IPCC 2007 reports can be found at http://www.ipcc.ch/.
(Last accessed April 20, 2008.)
---------------------------------------------------------------------------

    In addition, the agency is permitted to consider additional
relevant societal considerations. For example, historically, it has
considered the potential for adverse safety consequences when deciding
upon a maximum feasible level. This practice is sanctioned in case
law.\54\
---------------------------------------------------------------------------

    \54\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F. 2d
1322 (DC Cir. 1986) (Administrator's consideration of market demand
as component of economic practicability found to be reasonable);
Public Citizen 848 F.2d 256 (Congress established broad guidelines
in the fuel economy statute; agency's decision to set lower standard
was a reasonable accommodation of conflicting policies). As the
United States Court of Appeals pointed out in upholding NHTSA's
exercise of judgment in setting the 1987-1989 passenger car
standards, ``NHTSA has always examined the safety consequences of
the CAFE standards in its overall consideration of relevant factors
since its earliest rulemaking under the CAFE program.'' Competitive
Enterprise Institute v. NHTSA (CEI I), 901 F.2d 107, 120 at n.11 (DC
Cir. 1990).
---------------------------------------------------------------------------

    EPCA requires that the MY 2011-2019 CAFE standards for passenger
cars and for light trucks must both increase ratably to at least the
levels necessary to meet 35 mpg requirement for MY 2020. NHTSA
interprets this to mean that the standards must make steady progress
toward the levels necessary for the average fuel economy of the
combined industry wide fleet of all new passenger cars and light trucks
sold in the United States during MY 2020 to reach at least 35 mpg.
    Finally, EPCA provides that in determining the level at which it
should set CAFE standards for a particular model year, NHTSA may not
consider the ability of manufacturers to take advantage of several EPCA
provisions that facilitate compliance with the CAFE standards and
thereby reduce the costs of compliance. As noted below in Section II,
manufacturers can earn compliance credits by exceeding the CAFE
standards and then use those credits to achieve compliance in years in
which their measured average fuel economy falls below the standards.
Manufacturers can also increase their CAFE levels through MY 2019 by
producing alternative fuel vehicles. EPCA provides an incentive for
producing these vehicles by specifying that their fuel economy is to be
determined using a special calculation procedure that results in those
vehicles being assigned a high fuel economy level.
5. Consultation in Setting Standards
    EPCA provides that NHTSA is to consult with the Department of
Energy (DOE) and Environmental Protection Agency in prescribing CAFE
standards. It provides further that NHTSA is to provide DOE with an
opportunity to provide written comments on draft proposed and final
CAFE standards.\55\
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    \55\ In addition, Executive Order No. 13432 provides that a
Federal agency undertaking a regulatory action that can reasonably
be expected to directly regulate emissions, or to substantially and
predictably affect emissions, of greenhouse gases from motor
vehicles, shall act jointly and consistently with other agencies to
the extent possible and to consider the views of other agencies
regarding such action.
---------------------------------------------------------------------------

6. Compliance Flexibility and Enforcement
    EPCA specifies a precise formula for determining the amount of
civil penalties for failure to comply with a standard. The penalty, as
adjusted for inflation by law, is $5.50 for each tenth of a mpg that a
manufacturer's average fuel economy falls short of the standard for a
given model year multiplied by the total volume of those vehicles in
the affected fleet (i.e., import or domestic passenger car, or light
truck), manufactured for that model year. The amount of the penalty may
not be reduced except under the unusual or extreme circumstances
specified in the statute.
    Likewise, EPCA provides that manufacturers earn credits for
exceeding a standard. The amount of credit earned is determined by
multiplying the number of tenths of a mpg by which a manufacturer
exceeds a standard for a particular category of automobiles by the
total volume of automobiles of that category manufactured by the
manufacturer for a given model year.
    EPA is responsible for measuring automobile manufacturers' CAFE so
that NHTSA can determine compliance with the CAFE standards. In making
these measurements for passenger cars, EPA is required by EPCA \56\ to
use the EPA test

procedures in place as of 1975 (or procedures that give comparable
results), which are the city and highway tests of today, with
adjustments for procedural changes that have occurred since 1975.
---------------------------------------------------------------------------

    \56\ 49 U.S.C. 32904(c).
---------------------------------------------------------------------------

    EPA's fuel economy test procedures specify equations for
calculating fuel economy. These equations are based on the carbon
balance technique which allows fuel economy to be determined from
measurement of exhaust emissions. This technique relies upon the
premise that the quantity of carbon in a vehicle's exhaust gas is equal
to the quantity of carbon consumed by the engine as fuel.
    When NHTSA finds that a manufacturer is not in compliance, it
notifies the manufacturer. Surplus credits generated from the five
previous years can be used to make up the deficit. If there are no (or
not enough) credits available, then the manufacturer can either pay the
fine, or submit a carry back plan to the agency. A carry back plan
describes what the manufacturer plans to do in the following three
model years to make up for the deficit in credits. NHTSA must examine
and determine whether to approve the plan.

III. Fuel Economy Enhancing Technologies

    In the Agency's last two rulemakings covering light truck CAFE
standards for MYs 2005-2007 and MYs 2008-2011, the agency relied on the
2002 National Academy of Sciences' report, Effectiveness and Impact of
Corporate Average Fuel Economy Standards (``the 2002 NAS Report'') \57\
for estimating potential fuel economy benefits and associated retail
costs of applying combinations of technologies in 10 classes of
production vehicles. The NAS cost and effectiveness numbers were the
best available estimates at this time, determined by a panel of experts
formed by the National Academy of Sciences, and the report had been
peer reviewed by individuals chosen for their diverse perspectives and
technical expertise in accordance with procedures approved by the
Report Review Committee of the National Research Council. However,
since the publication of the 2002 NAS Report, there has been
substantial advancement in fuel-saving technologies, including
technologies not discussed in the NAS Report that are expected to
appear on vehicles in the MY 2011-2015 timeframe. There also have been
reports issued and studies conducted by several other organizations and
companies that discuss fuel economy technologies and their benefits and
costs. NHTSA has contracted with the NAS to update the fuel economy
section, Chapter 3, of the 2002 NAS Report. However, this update will
not be available in time for this rulemaking. Due to the expedited
nature of this rulemaking, NHTSA, in consultation with the
Environmental Protection Agency (EPA), developed an updated technology
cost and effectiveness list to be used in this document.
---------------------------------------------------------------------------

    \57\ National Research Council, ``Effectiveness and Impact of
Corporate Average Fuel Economy (CAFE) Standards,'' National Academy
Press, Washington, DC (2002). Available at http://www.nap.edu/
openbook.php?isbn=0309076013 (last accessed April 20, 2008).
---------------------------------------------------------------------------

    This list presents NHTSA and EPA technical staff's current
assessment of the costs and effectiveness from a broad range of
technologies which can be applied to cars and light-duty trucks. EPA
published the results of this collaboration in a report and submitted
it to the NAS committee.\58\ A copy of the report and other studies
used in the technology update will be placed in NHTSA's docket.
---------------------------------------------------------------------------

    \58\ EPA Staff Technical Report: Cost and Effectiveness
Estimates of Technologies Used to Reduce Light-duty Vehicle Carbon
Dioxide Emissions. EPA420-R-08-008, March, 2008.
---------------------------------------------------------------------------

    NHTSA believes that the estimates used for this document, which
rely on the best available public and confidential information, are
defensible and reasonable predictions for the next five years.
Nevertheless, NHTSA still believes that the ideal source for this
information comes from a peer reviewed process such as the NAS. NHTSA
will continue to work with NAS to update this list on a five year
interval as required by the Energy Independence and Security Act of
2007.
    The majority of the technologies discussed in this section are in
production and available on vehicles today, either in the United
States, Japan, or Europe. A number of the technologies are commonly
available, while others have only recently been introduced into the
market. In a few cases, we provide estimates on technologies which are
not currently in production, but are expected to be so in the next few
years. These are technologies which can be applied to cars and trucks
that are capable of achieving significant improvements in fuel economy
and reductions in carbon dioxide emissions, and improve vehicle fuel
economy, at reasonable costs.
    NHTSA and EPA conducted the technology examination using concepts
from the 2002 NAS report which constituted a starting point for the
analysis. In the NAS Report, there were three exemplary technology
paths or scenarios identified for each class of production vehicles,
which lead to successively greater improvements in fuel consumption and
greater costs. Path I included production-intent technologies that will
be available within 10 years and could be implemented under current
economic and regulatory conditions. Path II included more costly
production-intent technologies that are technically feasible for
introduction within 10 years if economic and regulatory conditions
justify their use. Path III included emerging technologies that will be
available within 10 to 15 years but that may require further
development prior to commercial introduction. These three paths
represented vehicle development steps that would offer increasing
levels of fuel economy gains (as incremental gains) at incrementally
increasing cost. As stated earlier, since the publication of the 2002
NAS Report, automotive technology has continued to advance and many of
the technologies that were identified in the report as emerging have
already entered the marketplace.
    In this rulemaking, NHTSA in consultation with EPA have examined a
variety of technologies, looking beyond path I and path II to path III
and to emerging technologies beyond path III. These technologies were
in their infancy when the 2002 NAS Report was being formulated. In
addition, unlike for past rulemakings where NHTSA projected the use of
different variants of a technology as a combined technology, in this
rulemaking, NHTSA working with EPA examined advanced forms and
subcategories of existing technologies and reflected the effectiveness
and cost for each of the variants separately for all ten vehicle
classes. The specific technologies affected are variable valve timing
(VVT), variable valve lift and timing (VVLT) and cylinder deactivation.
Manufacturers are currently using many different types of VVTs and
VVLTs, which have a variety of different names and methods. This
rulemaking employs specific cost and effectiveness estimates for
variants of VVT, including Intake Camshaft Phasing (ICP), Coupled
Camshaft Phasing (CCP), and Dual (Independent) Camshaft Phasing (DCP).
It also employs specific cost and effectiveness estimates for variants
of VVLT, including Discrete Variable Valve Lift (DVVL) and Continuous
Variable Valve Lift (CVVL). We also now include the effectiveness and
cost estimates for each of the variants of cylinder deactivation. The
most common type of cylinder deactivation is one in which an eight-
cylinder overhead

valve engine disables four of its cylinders under light loads. Cylinder
deactivation could be incorporated on overhead cam engines, and can be
applied to four and six cylinder engines as well (we have restricted
application to 6 and 8 cylinder engines). Thus, the variants of
cylinder deactivation that now have specific cost and effectiveness
estimates include both overhead valve engine cylinder deactivation and
overhead cam engine cylinder deactivation.
    The update also revisited technology lead time issues and took a
fresh look at technology application rates, how to link certain
technologies to certain redesign and refresh patterns, synergistic
impacts resulting from adding technology packaging, and learning costs.

A. Data Sources for Technology Assumptions

    A large number of technical reports and papers are available which
contain data and estimates of the fuel economy improvements of various
vehicle technologies. In addition to specific peer-reviewed papers
respecting individual technologies, we also utilized a number of recent
reports which had been utilized by various State and Federal Agencies
and which were specifically undertaken for the purpose of estimating
future vehicle fuel economy reduction effectiveness or improvements in
fuel economy. The reports we utilized most frequently were:
     2002 National Academy of Science (NAS) report titled
``Effectiveness and Impact of Corporate Average Fuel Economy
Standards''. At the time it was published, the NAS report was
considered by many to be the most comprehensive summary of current and
future fuel efficiencies improvements which could be obtained by the
application of individual technologies. The focus of this report was
fuel economy, which can be directly correlated with CO2
emissions. The 2002 NAS report contains effectiveness estimates for ten
different vehicle classifications (small car, mid-SUV, large truck,
etc), but did not differentiate these effectiveness values across the
classes. Where other sources or engineering principles indicated that a
differentiation was warranted, we utilized the 2002 NAS effectiveness
estimates as a starting point and further refined the estimate to one
of the vehicle classes using engineering judgment or by consulting
additional reliable sources.
     2004 Northeast States Center for a Clean Air Future
(NESCCAF) report ``Reducing Greenhouse Gas Emissions from Light-Duty
Motor Vehicles''. This report, which was utilized by the California Air
Resources Board for their 2004 regulatory action on vehicle
CO2 emissions, includes a comprehensive vehicle simulation
study undertaken by AVL, a world-recognized leader in automotive
technology and engineering. In addition, the report included cost
estimates developed by the Martec Group, a market-based research and
consulting firm which provides services to the automotive industry. The
NESCCAF report considered a number of technologies not examined in the
2002 NAS report. In addition, through the use of vehicle simulation
modeling, the 2004 NESCCAF report provides a scientifically rigorous
estimation of the synergistic impacts of applying multiple fuel economy
technologies to a given vehicle.
     2006 Energy and Environmental Analysis Inc (EEA) report
``Technology to Improve the Fuel Economy of Light Duty Trucks to 2015''
Prepared for The U.S. Department of Energy and The U.S. Department of
Transportation. This update of technology characteristics is based on
new data obtained by EEA from technology suppliers and auto-
manufacturers, and these data are compared to data from studies
conducted earlier by EEA, the National Academy of Sciences (NAS), the
Northeast States Center for a Clean Air future (NESCCAF) and California
Air Resources Board (CARB).
     Data from Vehicle Manufacturers, Component Suppliers, and
other reports. We also evaluated confidential data from a number of
vehicle manufacturers as well as a number of technology component
suppliers. In February of 2007, the NHTSA published a detailed Request
for Comment (RFC) in the Federal Register. This RFC included, among
other items, a request for information from automotive manufacturers
and the public on the fuel economy improvement potential of a large
number of vehicle technologies. The manufacturer's submissions to this
RFC were supplemented by confidential briefing and data provided by
vehicle component suppliers, who for many of the technologies
considered are the actual manufacturers of the specific technology and
often undertake their own development and testing efforts to
investigate the fuel economy improvement potential of their products.
Manufacturers that provided NHTSA and EPA with fuel economy cost and
effectiveness estimates include BMW, Chrysler, Ford, General Motors,
Honda, Nissan, Toyota and Volkswagen. The major suppliers that provided
NHTSA with fuel economy cost and effectiveness estimates include Borg-
Warner, Bosch, Corning, Delphi, and Siemens.
     Finally, to verify that the fuel economy cost and
effectiveness estimates for each of the technologies was reasonable and
within currently available estimates for these technologies, NHTSA
examined those estimates provided by other reports or sources, such as
the Martec (contained in the 2004 NESCAFF report) and Sierra Research
reports.\59\

B. Technologies and Estimates of Costs and Effectiveness

    This section describes each technology and associated cost and
effectiveness numbers. The technologies can be classified into five
main groups similar to how they were classified in the NAS Report:
engine technologies; transmission technologies; accessory technologies;
vehicle technologies; and hybrid technologies.
    While NHTSA and EPA followed the general approach taken by the NAS
in estimating the cost and effectiveness numbers, we decided to update
some of these estimates to reflect better the changed marketplace and
regulatory environment, as well as the advancement in and greater
penetration of some production-intent and emerging technologies, which
have led to lower costs. The values contained in the 2002 NAS report
were used to establish a baseline for the fuel economy cost and
effectiveness estimates for each of the technologies. We then examined
all other estimates provided by manufacturers and major suppliers or
other sources. In examining these values, we gave more weight to values
or estimates provided by manufacturers that have already implemented
these technologies in their fleet, especially those that have
introduced them in the largest quantities. Likewise, for technologies
that have not penetrated the fleet to date, but will by early in the
next decade (according to confidential manufacturer plans), we gave
more weight to values or estimates provided by manufacturers that have
stated that they will be introducing these technologies in their fleet,
especially those that plan to introduce them in the largest quantities.
In addition, for the technologies that will appear on vehicles by early
in the next decade, we carefully examined the values provided

by those suppliers who have developed these technologies and may have
contracts in place to provide them to manufacturers.
    Because not all technologies can be applied on all types of
vehicles, engines or transmissions, we separately evaluated 10 classes
of vehicles to estimate fuel economy cost and effectiveness for each of
the technologies. As discussed above, these ten classes, also used in
NHTSA's 2006 light truck CAFE rule, were derived from the 2002 NAS
Report, which estimated the feasibility, potential incremental fuel
consumption benefit and the incremental cost of three product
development paths for the following ten vehicle classes: Subcompact
passenger cars, compact passenger cars, midsize passenger cars, large
passenger cars, small sport utility vehicles, midsize sport utility
vehicles, large sport utility vehicles, small pickups, large pickups,
and minivans.
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    \59\ ``Alternative and Future Technologies for Reducing
Greenhouse Gas Emission from Road Vehicles'' Sierra Research Report
for Environment Canada, 1999 (SR99-07-01). http://
www.sierraresearch.com/ReportListing.htm (Last accessed April 20,
2008.)
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    The application of technologies to a vehicle class is limited not
only by whether the manufacturer is capable of applying it within a
particular development cycle, but also by whether the technology may
physically be applied to the vehicle. For example, continuously
variable transmissions (CVTs) were only allowed to be projected on
vehicles with unibody construction, which includes all passenger cars
and minivans and some small and midsize SUVs. CVTs could not be
projected for use on vehicles with ladder-frame construction, which
includes all pickups and large SUVs and some small and midsize SUVs.
Another example is cylinder deactivation being limited to vehicles with
6- or 8-cylinder engines. To simplify the analysis, NHTSA assumed that
each class of vehicles would typically have vehicle construction and
engines with a specific number of cylinders that is most representative
of that vehicle class.
    Although we looked at ten vehicle classes separately, for some
technologies the estimated incremental fuel consumption benefit and
incremental cost were the same across all vehicle classes (as for
engine accessory improvement), while for other technologies the
estimated incremental fuel consumption benefit and incremental cost
differed across classes (as for hybrid drivetrains). The main
difference was with which path(s) each technology was expected to be
associated.
    The exact cost and benefit of a given technology depends on
specific vehicle characteristics (size, weight, base engine, etc.) and
the existence of additional technologies that were already applied to
the vehicle. In the section below, ranges of incremental cost and fuel
consumption reduction values are listed where the values depend on
vehicle characteristics and are independent of the order in which they
are applied to a vehicle. All costs, which are reflective of estimated
retail price equivalents (RPEs) were inflated by the producer price
index (if needed) and are presented in year 2006 dollars, because this
is the last year for which final economic indexing is available. Some
cost estimates are based on supplier costs. In those instances,
multipliers were included in those costs so that they would be treated
in the same manner as cost estimates that are based on manufacturer
costs. These incremental values were calculated by subtracting out all
same-path synergies associated with a given technology and any
preceding items on the same path. Essentially, the incremental percent
reduction in fuel consumption and cost impacts represent improvements
beyond the ones realized due to technologies already applied to the
vehicle. As an example, a 5-speed automatic transmission could
incrementally reduce fuel consumption by 2 to 3 percent at an
incremental cost of $75 to $165 per vehicle, relative to a 4-speed
automatic transmission. In turn, a 6-speed automatic transmission could
incrementally reduce fuel consumption by 4.5 to 6.5 percent at an
incremental cost of $10 to $20 per vehicle, relative to a 5-speed
transmission.
    NHTSA acknowledges that this approach is different from the one it
followed in establishing the reformed light truck standards for MYs
2008-2011, where we relied nearly exclusively on the 2002 NAS report's
estimates. Our preference remains to rely upon peer-review and credible
studies, such as the 2002 NAS report; however we believe that the
estimates made by the joint EPA/NHTSA team are accurate and defensible.
The agency seeks comments on our assumptions and the cost,
effectiveness and availability estimates provided. NHTSA also seeks
comments on whether the order in which these technologies was applied
by the Volpe model is proper and whether we have accurately accounted
for technologies already included on vehicles and whether we have
accurately accounted for technologies that are projected to be applied
to vehicles. The agency also seeks comments on the ``synergy'' factors
(discussed below) it has applied in order to adjust the estimated
incremental effectiveness of some pairs of technology and on whether
similar adjustments to the estimated incremental cost of some
technologies should be made. In preparation for a final rule, NHTSA
intends to update its technology-related methodologies and estimates,
and expects that these anticipated updates will affect the form and
stringency of the final standards.
a. Engine Technologies

Low-Friction Lubricants

    The use of lower viscosity engine and transmission lubricants can
reduce fuel consumption. More advanced multi-viscosity engine and
transmission oils are now available with improved performance in a
wider temperature band, with better lubricating properties. However,
even without any changes to fuel economy standards, most MY 2011-2015
vehicles are likely to use 5W-30 motor oil, and some will use even less
viscous oils, such as 5W-20 or possibly even 0W-20 to reduce cold start
friction. This may directionally benefit the fuel economy improvements
of valvetrain technologies such as cylinder deactivation, which rely on
a minimum oil temperature (viscosity) for operation. Most manufacturers
therefore attributed smaller potential fuel economy reductions and cost
increases to lubricant improvements.
    The NAS Report estimated that low-friction lubricants could
incrementally reduce fuel consumption by 1 percent at an incremental
cost of $8 to $11.\60\ The NESCCAF study projected that low-friction
lubricants could incrementally reduce fuel consumption by 1 percent at
an incremental cost of $5 to $15; while the EEA report projected that
low-friction lubricants could incrementally reduce fuel consumption by
1 percent at an incremental cost of $10 to $20. In contrast,
manufacturer data projected an estimated fuel consumption potential of
0 percent to 1 percent at an incremental cost that ranged from $1 to
$11, with many of them stating the costs as ranging from $1 to $5.
NHTSA believes that these manufacturer estimates are more accurate and
estimates that low-friction lubricants could reduce fuel consumption by
0.5 percent for all vehicle types at an incremental cost of $3, which
represents the mid-point of $2.50, rounded up to the next dollar.
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    \60\ The price increases noted in this chapter are slightly
higher than shown in the NAS study, since they have been converted
into calendar year 2006 prices.
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Reduction of Engine Friction Losses

    All reciprocating and rotating components in the engine are
candidates for friction reduction, and minute improvements in several

components can add to a measurable fuel economy improvement. The amount
of energy an engine loses to friction can be reduced in a variety of
ways. Improvements in the design of engine components and subsystems
will result in friction reduction, improved engine operation, greater
fuel economy and reduced emissions. Examples include low-tension piston
rings, roller cam followers, crankshaft design, improved material
coatings, material substitution, more optimal thermal management,
piston surface treatments, and as lubricant friction reduction.
Additionally, as computer-aided modeling software continues to improve,
more opportunities for incremental friction reduction might become
apparent. Even without any changes to fuel economy standards, most MY
2010-2015 vehicles are likely to employ one or more such techniques to
reduce engine friction and other mechanical and hydrodynamic losses.
    The NAS Report estimated that such technologies could incrementally
reduce fuel consumption by 1 to 5 percent at an incremental cost of $36
to $146. NESCCAF predicted that such technologies could incrementally
reduce fuel consumption by 0.5 percent at an incremental cost of $5 to
$15; while the EEA report predicted that such technologies could reduce
fuel consumption at an incremental cost of $10 to $55. Confidential
manufacturer data indicates that engine friction reduction could
incrementally reduce fuel consumption by 1 to 3 percent at an
incremental cost of $0 to $168. Based on available information from
these reports and confidential manufacturer data, NHTSA estimates that
friction reduction could reduce fuel consumption for all vehicles by 1
to 3 percent at a cost of $21 per cylinder. Thus, the incremental cost
of engine friction reduction for a 4-cylinder engine is $0 to $84
(applicable to subcompact and compact cars); for a 6-cylinder engine is
$0 to $126 (applicable to midsize cars, large cars, small pickups,
small SUVs, minivans and midsize SUVs); and for an 8-cylinder engine is
$0 to $168 (applicable to large pickups and SUVs).

Multi-Valve Overhead Camshaft Engine

    It appears likely that many vehicles would still use overhead valve
(OHV) engines with pushrods and one intake and one exhaust valve per
cylinder during the early part of the next decade. Engines with
overhead cams (OHC) and more than two valves per cylinder achieve
increased airflow at high engine speeds and reductions of the valve
train's moving mass and enable central positioning of spark plugs. Such
engines, which are already used in some light trucks, typically develop
higher power at high engine speeds. The NAS Report projected that
multi-valve OHC engines could incrementally reduce fuel consumption by
2 percent to 5 percent at an incremental cost of $109 to $146, and
NHTSA found no sources to update these projections.
    For purposes of this rule, OHV engines and OHC engines were
considered separately, and the model was generally not allowed to apply
multivalve OHC technology to OHV engines, except where continuous
variable valve timing and lift (CVVL) is applied to OHV engines. In
that case, the model assumes conversion to DOHC valvetrain, because
DOHC valvetrains are prerequisites for the application of any advanced
engine technology over and above CVVL. Since applying CVVL to an OHV is
the last improvement that could be made to such an engine, it's logical
to assume that manufacturers would redesign that engine as a DOHC and
include CVVL as part of that redesign.
    For 4-cylinder engines we estimated that the cost to redesign an
OHV engine as a DOHC that includes CVVL would be $599 ($169 for
conversion to DVVL, $254 for conversion to CVVL, and $176 for
conversion to DOHC, which comprises an additional camshaft and valves),
with estimated fuel consumption reduction of 2 to 3 percent. For 6-
cylinder engines we estimated that the cost to redesign an OHV engine
as a DOHC that includes CVVL would be $1262 ($246 for conversion to
DVVL, $488 for conversion to CVVL, and $550 for conversion to DOHC,
which comprises an additional camshaft and valves), with estimated fuel
consumption reduction of 1 to 4 percent. For 8-cylinder engines we
estimated that the cost to redesign an OHV engine as a DOHC that
includes CVVL would be $1380 ($322 for conversion to DVVL, $508 for
conversion to CVVL, and $550 for conversion to DOHC, which comprises an
additional camshaft and valves), with estimated fuel consumption
reduction of 2 to 3 percent. Incremental cost estimates for DVVL and
CVVL are discussed below.
    NHTSA believes that the NESCCAF report and confidential
manufacturer data are more accurate, and thereby estimates that a
conversion of an OHV engine to a DOHC engine with CVVL could
incrementally reduce fuel consumption by 1 to 4 percent at an
incremental cost of $599 to $1,380 compared to an OHV with VVT.

Cylinder Deactivation

    For the vast majority of vehicles, each cylinder is always active
while the engine is running. Under partial load conditions, the
engine's specific fuel consumption could be reduced if some cylinders
could be disabled, such that the active cylinders operate at higher
load. In cylinder deactivation, some (usually half) of the cylinders
are ``shut down'' during light load operation--the valves are kept
closed, and no fuel is injected--as a result, the trapped air within
the deactivated cylinders is simply compressed and expanded as an air
spring, with minimal friction and heat losses. The active cylinders
combust at almost double the load required if all of the cylinders were
operating. Pumping losses are significantly reduced as long as the
engine is operated in this ``part-cylinder'' mode.
    The theoretical engine operating region for cylinder deactivation
is limited to no more than roughly 50 percent of peak power at any
given engine speed. In practice, however, cylinder deactivation is
employed primarily at lower engine cruising loads and speeds, where the
transitions in and out of deactivation mode are less apparent to the
operator and where the noise and vibration (NVH) associated with fewer
firing cylinders may be less of an issue. Manufacturers are exploring
the possibilities of increasing the amount of time that part-cylinder
mode might be suitable to a vehicle with more refined powertrain and
NVH treatment strategies.
    General Motors and Chrysler Group have incorporated cylinder
deactivation across a substantial portion of their V8-powered lineups.
Honda (Odyssey, Pilot) and General Motors (Impala, Monte Carlo) offer
V6 models with cylinder deactivation.
    There are two variants of cylinder deactivation. The most common
type of cylinder deactivation is one in which an eight-cylinder
overhead valve engine disables four cylinders under light loads. Thus
an eight-cylinder engine could disable four cylinders under light
loads, such as when the vehicle is cruising at highway speed. This
technology could be applied to four and six cylinder engines as well.
General Motors and Chrysler Group have incorporated cylinder
deactivation across a substantial portion of their V8-powered overhead
valve lineups.
    Cylinder deactivation could be incorporated on overhead cam engines
and can be applied to four and six cylinder engines as well. Honda has
already begun offering three V6 models

with cylinder deactivation (Accord, Odyssey, and Pilot) and GM will
soon release cylinder deactivation on its 3.9L 6-cylinder engine. Fuel
economy improvement potential scales roughly with engine displacement-
to-vehicle weight ratio: the higher displacement-to-weight vehicles,
operating at lower relative loads for normal driving, have the
potential to operate in part-cylinder mode more frequently.
    Honda's technology includes the use of active engine mounts and
noise damping amongst other items added to its V6 engines with cylinder
deactivation. This, of course, increases the cost relative to a four or
eight cylinder OHC engine.
    Some manufacturers are getting results in excess of 6 percent and
most are at the high end of the range. This higher number is supported
by official fuel economy test data on a V6 Honda Odyssey with cylinder
deactivation compared to the same vehicle (and engine displacement)
without cylinder deactivation and by confidential manufacturer
information.
    The NAS Report projected that cylinder deactivation could
incrementally reduce fuel consumption by 3 percent to 6 percent at an
incremental cost of $112 to $252. The NESCCAF study projected that
cylinder deactivation could incrementally reduce fuel consumption by
1.7 percent to 4.2 percent at an incremental cost of $161 to $210;