rulemaking, the agencies have used the Energy Information
Administration's (EIA's) National Energy Modeling System (NEMS) to
estimate the future relative market shares of passenger cars and
light trucks. However, NEMS methodology includes shifting vehicle
sales volume, starting after 2007, away from fleets with lower fuel
economy (the light-truck fleet) towards vehicles with higher fuel
economies (the passenger car fleet) in order to facilitate
compliance with CAFE and GHG MYs 2012-2016 standards. Because we use
our market projection as a baseline relative to which we measure the
effects of new standards, and we attempt to estimate the industry's
ability to comply with new standards without changing product mix,
the Interim AEO 2011- and Early Release AEO 2012-projected shifts in
passenger car market share as a result of required fuel economy
improvements create a circularity. Therefore, for the current
analysis, the agencies developed new projections of passenger car
and light truck sales shares by running scenarios from the Interim
AEO 2011 and Early Release AEO 2012 reference cases that first
deactivate the above-mentioned sales-volume shifting methodology and
then hold post-2017 CAFE standards constant at MY 2016 levels.
Incorporating these changes reduced the projected passenger car
share of the light vehicle market by an average of about 5 percent
during 2017-2025. NHTSA and EPA refer to this as the ``Unforced
Reference Case.''

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

d. How are these baselines different quantitatively from the baseline
that NHTSA used for the proposed rule?
    As discussed above, the current baselines were developed from
adjusted MY 2008 and MY 2010 compliance data, respectively, and cover
MY 2017-2025. This section describes, for the reader's comparison, some
of the differences between the current baselines and baseline
supporting the NPRM. These comparisons provide a basis for
understanding general characteristics and measures of the difference
between the three baselines. The current MY 2008-based baseline, while
largely identical to that supporting the NPRM, reflects corrections to
the footprint of some vehicle models, and corrections to the regulatory
classification of a few General Motors vehicle models. The MY 2010-
based baseline reflects use of MY 2010 certification data, a newer
commercially-available forecast purchased by EPA in 2011 from LMC
(formerly J.D. Power), and total passenger car and light truck volumes
based on use of EIA's National Energy Modeling System (NEMS) for AEO
2012. The differences are in input assumptions rather than the basic
approach and methodology.
e. Estimated Vehicle Sales During MYs 2017-2025
    The fleetwide sales forecasts, based on the Energy Information
Administration's (EIA's) Early Annual Energy Outlooks for 2011 and 2012
(Interim AEO 2011 and Early Release AEO 2012), used in the current MY
2008-based and MY 2010-based baselines, respectively, indicate that the
total number of light vehicles expected to be sold during MYs 2017-2025
is 143-146 million, or about 15.9-16.2 million vehicles annually.
NHTSA's NPRM forecast, also based on AEO 2011, of the total number of
light vehicles likely to be sold during MY 2012 through MY 2016 was 146
million, or about 16.2 million vehicles annually. Light trucks are
expected to make up 34-35 percent of the MY 2017-2025 baseline market
forecast in the current baselines, compared to 35 percent of the
baseline market forecast in the proposed rule.
f. Estimated Manufacturer Market Shares in MY 2016
    Table IV-1 shows the agency's sales forecasts for passenger cars
and light trucks under the current baselines and NPRM baseline. The MY
2008-based baseline is nearly identical to the NPRM baseline. The MY
2010-based baseline exhibits several significant differences,
including, but not limited to, the following: A significant increase in
Chrysler's market share; declines in some other manufacturers' (e.g.,
BMW's, Suzuki's, and Toyota's) market shares; relative declines in
light trucks as a share of many manufacturers' total production; the
exit of Saab from the light vehicle market; and a lack of MY 2010-based
data for Tesla. Also, underlying the overall volumes reported below for
some manufacturers are some significant brand-level differences between
the MY 2008- and MY 2010-based fleets, reflecting significant changes
in some manufacturers' offerings--changes that began in MY 2007/2008
and were complete or in progress by MY 2010. In particular, the MY
2010-based forecast for General Motors contains about 90% fewer Hummers
and about 75% fewer Pontiacs than the MY 2008-based forecast,
reflecting GM's discontinuation of those brands.

                                        Table IV-1--NHTSA Sales Forecasts
                              [Production for U.S. sale in MY 2016, thousand units]
----------------------------------------------------------------------------------------------------------------
                                                           NPRM baseline                 Current Baselines
          Manufacturer               Fleet MY    ---------------------------------------------------------------
                                                     Passenger     Non-passenger     Passenger     Non-passenger
----------------------------------------------------------------------------------------------------------------
Aston Martin....................            2008               1  ..............              1-              0-
                                            2010               1  ..............  ..............               0
BMW.............................            2008             383             184            383-            184-
                                            2010  ..............  ..............             317             107
Daimler.........................            2008             245             136            245-            136-
                                            2010  ..............  ..............             250              97
Fiat/Chrysler...................            2008             392             498            394-            495-
                                            2010  ..............  ..............             725             794
Ford............................            2008           1,393             930          1,393-            930-
                                            2010  ..............  ..............           1,354           1,039
Geely/Volvo.....................            2008              94              50             94-             50-
                                            2010  ..............  ..............              58              34
General Motors \953\............            2008           1,391           1,444          1,444-          1,391-
                                            2010  ..............  ..............           1,672           1,222
Honda...........................            2008             862             588            862-            588-
                                            2010  ..............  ..............           1,127             531
Hyundai.........................            2008             489              99            489-             99-
                                            2010  ..............  ..............             847             136
Kia.............................            2008             512             124            512-            124-
                                            2010  ..............  ..............             333              46
Lotus...........................            2008             0.3               -            0.3-            0.0-
                                            2010  ..............  ..............             0.4             0.0
Mazda...........................            2008             393              78            378-             93-
                                            2010  ..............  ..............             258              60
Mitsubishi......................            2008              80              60             98-             42-
                                            2010  ..............  ..............              57              13
Nissan..........................            2008             869             410            869-            410-
                                            2010  ..............  ..............             907             310

Porsche.........................            2008              30              18             30-             18-
                                            2010  ..............  ..............              19              20
Spkyer/Saab.....................            2008              18               2             18-              2-
                                            2010  ..............  ..............               0               0
Subaru..........................            2008             236              74            236-             74-
                                            2010  ..............  ..............             213              94
Suzuki..........................            2008              94              21             94-             21-
                                            2010  ..............  ..............              43               3
Tata............................            2008              59              46             59-             46-
                                            2010  ..............  ..............              29              53
Tesla...........................            2008              27               -             27-              0-
                                            2010  ..............  ..............  ..............  ..............
Toyota..........................            2008           2,043           1,159          2,043-          1,159-
                                            2010  ..............  ..............           1,532             970
Volkswagen......................            2008             528             134            528-            134-
                                            2010  ..............  ..............             486             104
                                 -------------------------------------------------------------------------------
    Total \954\.................            2008          10,140           6,055         10,198-          5,997-
                                            2010  ..............  ..............          10,227           5,635
----------------------------------------------------------------------------------------------------------------

g. Estimated Unadjusted Baseline Achieved Fuel Economy Levels in MY
2016
---------------------------------------------------------------------------

    \953\ For this final rule, the MY 2008-based baseline was
corrected to reassign the Chevrolet Blazer, GMC Envoy, and Pontiac
Torrent to the General Motors passenger car fleet.
    \954\ For this final rule, the MY 2008-based baseline was
corrected to reassign the Chevrolet Blazer, GMC Envoy, and Pontiac
Torrent to the General Motors passenger car fleet.
---------------------------------------------------------------------------

    Table IV-2, below, compares unadjusted average fuel economy levels
(i.e., levels reflecting vehicle model fuel economy levels the CAFE
certification data and vehicle model sales volumes adjusted to produce
estimated future baseline fleets) in the current market forecasts to
those in the market forecast supporting the NPRM. Under the current
baselines, average fuel economy for MY 2016 is 27.0-27.9 mpg, versus
27.0 mpg under the baseline in the NPRM. The upward extension of this
range relative to the value from the NPRM reflects a combination of
changes in technology and fuel economy between MY 2008 and MY 2010
(e.g., the introduction of Ford's ``Ecoboost'' engine). Manufacturer-
specific CAFE levels are shown below in Table IV-2, which does not
count FFV credits that some manufacturers expect to earn. Table IV-3
shows the combined averages of these planned CAFE levels in the
respective baseline fleets. Because the agencies have, based today's
market forecasts on vehicles in the MY 2008 and MY 2010 fleets,
respectively, these CAFE levels the projected future vehicle mix, not
changes in the fuel economy that might be achieved by individual
vehicle models by MY 2016.

         Table IV-2--Current Baseline CAFE Levels in MY 2016 Versus MY 2012-2016 Rulemaking CAFE Levels
----------------------------------------------------------------------------------------------------------------
                                                           NPRM Baseline                 Current Baselines
          Manufacturer               Fleet MY    ---------------------------------------------------------------
                                                     Passenger     Non-passenger     Passenger     Non-passenger
----------------------------------------------------------------------------------------------------------------
Aston Martin....................            2008            18.8  ..............           18.8-  ..............
                                            2010  ..............  ..............            19.0  ..............
BMW.............................            2008            27.2            23.0           27.2-           23.0-
                                            2010  ..............  ..............            27.4            24.1
Daimler.........................            2008            25.5            21.1           25.5-           21.1-
                                            2010  ..............  ..............           24.7-           21.0-
Fiat/Chrysler...................            2008            27.7            22.2           27.7-           22.2-
                                            2010  ..............  ..............            28.2            21.7
Ford............................            2008            28.2            21.3           28.2-           21.3-
                                            2010  ..............  ..............            30.3            22.2
Geely/Volvo.....................            2008            25.9            21.1           25.9-           21.1-
                                            2010  ..............  ..............            28.2            22.8
General Motors..................            2008            28.4            21.4           28.2-           21.4-
                                            2010  ..............  ..............            30.3            22.5
Honda...........................            2008            33.8            25.0           33.8-           25.0-
                                            2010  ..............  ..............            34.5            25.1
Hyundai.........................            2008            31.7            24.3           31.7-           24.3-
                                            2010  ..............  ..............            32.9            28.2
Kia.............................            2008            32.7            23.8           32.7-           23.8-
                                            2010  ..............  ..............            35.2            25.0

Lotus...........................            2008            29.7  ..............           29.7-  ..............
                                            2010  ..............  ..............            26.7  ..............
Mazda...........................            2008            30.8            26.4           31.3-           25.6-
                                            2010  ..............  ..............            32.0            25.2
Mitsubishi......................            2008            28.8            23.6           27.5-           23.9-
                                            2010  ..............  ..............            32.5            28.1
Nissan..........................            2008            32.0            22.1           32.0-           22.1-
                                            2010  ..............  ..............            32.6            23.6
Porsche.........................            2008            26.2            20.0           26.2-           20.0-
                                            2010  ..............  ..............            25.4            20.5
Spkyer/Saab.....................            2008            26.6            19.8            26.6            19.8
                                            2010  ..............  ..............  ..............  ..............
Subaru..........................            2008            29.6            27.3           29.6-           27.3-
                                            2010  ..............  ..............            29.7            30.7
Suzuki..........................            2008            30.8            23.3           30.8-           23.3-
                                            2010  ..............  ..............            33.1            26.1
Tata............................            2008            24.6            19.7           24.6-           19.7-
                                            2010  ..............  ..............            23.3            18.9
Tesla...........................            2008           244.0  ..............           244.0  ..............
                                            2010  ..............  ..............  ..............  ..............
Toyota..........................            2008            35.2            24.3           35.2-           24.3-
                                            2010  ..............  ..............            35.4            24.1
Volkswagen......................            2008            28.9            20.2           28.9-           20.2-
                                            2010  ..............  ..............            31.8            24.0
                                 -------------------------------------------------------------------------------
    Total.......................            2008            30.7            22.6           30.6-           22.6-
                                            2010  ..............  ..............            31.6            23.1
----------------------------------------------------------------------------------------------------------------

    Table IV-3--Current Baseline CAFE Levels in MY 2016 Versus MY 2012-2016 Rulemaking CAFE Levels (Combined)
----------------------------------------------------------------------------------------------------------------
                                                                                Current
                         Manufacturer                             Fleet MY     NPRM  baseline      baselines
----------------------------------------------------------------------------------------------------------------
Aston Martin.................................................            2008            18.8              18.8-
                                                                         2010  ..............               19.0
BMW..........................................................            2008            25.7              25.7-
                                                                         2010  ..............               26.5
Daimler......................................................            2008            23.7              23.7-
                                                                         2010  ..............               23.6
Fiat/Chrysler................................................            2008            24.3              24.3-
                                                                         2010  ..............               24.4
Ford.........................................................            2008            25.0              25.0-
                                                                         2010  ..............               26.1
Geely/Volvo..................................................            2008            24.0              24.0-
                                                                         2010  ..............               25.9
General Motors...............................................            2008            24.4              24.4-
                                                                         2010  ..............               26.4
Honda........................................................            2008            29.6              29.6-
                                                                         2010  ..............               30.8
Hyundai......................................................            2008            30.2              30.2-
                                                                         2010  ..............               32.2
Kia..........................................................            2008            30.5              30.5-
                                                                         2010  ..............               33.5
Lotus........................................................            2008            29.7              29.7-
                                                                         2010  ..............               26.7
Mazda........................................................            2008            30.0              30.0-
                                                                         2010  ..............               30.5
Mitsubishi...................................................            2008            26.3              26.3-
                                                                         2010  ..............               31.6
Nissan.......................................................            2008            28.0              28.0-
                                                                         2010  ..............               29.7
Porsche......................................................            2008            23.5              23.5-
                                                                         2010  ..............               22.6
Spkyer/Saab..................................................            2008            25.7               25.7
                                                                         2010  ..............  .................
Subaru.......................................................            2008            29.0              29.0-

                                                                         2010  ..............               30.0
Suzuki.......................................................            2008            29.1              29.1-
                                                                         2010  ..............               32.5
Tata.........................................................            2008            22.2              22.2-
                                                                         2010  ..............               20.3
Tesla........................................................            2008           244.0              244.0
                                                                         2010  ..............  .................
Toyota.......................................................            2008            30.3              30.3-
                                                                         2010  ..............               30.0
Volkswagen...................................................            2008            26.6              26.6-
                                                                         2010  ..............               30.1
                                                              --------------------------------------------------
    Total....................................................            2008            27.0              27.0-
                                                                         2010  ..............               27.9
----------------------------------------------------------------------------------------------------------------

h. What sensitivity analyses is NHTSA conducting on the baseline?
    As discussed below in Section IV.G, when evaluating the potential
impacts of new CAFE standards, NHTSA considered the potential that,
depending on how the cost and effectiveness of available technologies
compare to the price of fuel, manufacturers would add more fuel-saving
technology than might be required solely for purposes of complying with
CAFE standards. This reflects that agency's consideration that there
could, in the future, be at least some market for fuel economy
improvements beyond the required MY 2016 CAFE levels. In these
sensitivity analyses, this causes some additional technology to be
applied, more so under baseline standards than under the more stringent
standards proposed today by the agency. Results of these sensitivity
analyses are summarized in Section IV.G and in NHTSA's FRIA
accompanying today's notice.
i. How else is NHTSA considering looking at the baseline in the future?
    Beyond the sensitivity analysis discussed above, NHTSA is also in
the process of developing a vehicle choice model to estimate the extent
to which sales volumes would shift in response to changes in vehicle
prices and fuel economy levels. As discussed in IV.C.4 of the NPRM, the
agency is currently sponsoring research directed toward developing such
a model. However, that effort is still underway, so the agency has not
integrated such a model into the CAFE modeling system. The agency may
do so in the future, and use the integrated system for future analysis
of potential CAFE standards. If the agency does so, we expect that the
vehicle choice model would impact estimated fleet composition not just
under new CAFE standards, but also under baseline CAFE standards.
    For today's rulemaking, the agency has, for purposes of the
probabilistic uncertainty analysis documented in the accompanying FRIA,
considered uncertainty regarding the future relative shares of
passenger cars and light trucks. As discussed in the FRIA, we applied
an approach relating these shares to, among other things, the price of
fuel, such that shares varied as we varied fuel price, leading to
changes in estimated outcomes such as fuel consumption and
CO2 emissions.
2. How were the technology inputs developed?
    As discussed above in Section II.D, for developing the technology
inputs for the proposed MYs 2017-2025 CAFE and GHG standards, which
have been carried over largely unchanged since the NPRM, the agencies
primarily began with the technology inputs used in the MYs 2012-2016
CAFE final rule and in the 2010 TAR. For the NPRM, the agencies also
updated information based on newly completed FEV tear-down studies and
new vehicle simulation work conducted by Ricardo Engineering, both of
which were contracted by EPA. The agencies also relied on a model
developed by Argonne National Laboratory to estimate hybrid, plug-in
hybrid and electric vehicle battery costs, which was updated between
the NPRM and final rule. As another update for the final rule analysis,
NHTSA used information from vehicle simulation work conducted by
Argonne National Laboratory, which was contracted by the U.S. DOT Volpe
Center to support CAFE rulemaking analyses. The Argonne work was used
to inform several technology effectiveness estimates. More detail is
available regarding how the agencies developed the technology inputs
for the final rule above in Section II.D, in Chapter 3 of the Joint
TSD, and in Chapter V of NHTSA's FRIA.
a. What technologies does NHTSA consider?
    For purposes of this final rule and as discussed in greater detail
in the Joint TSD, NHTSA and EPA built upon the list of technologies
used by the agencies for the MYs 2012-2016 CAFE and GHG standards.
Section II.D.1 above describes the fuel-saving technologies considered
by the agencies that manufacturers could use to improve the fuel
economy of their vehicles during MYs 2017-2025. Many of the
technologies described in this section are readily available, well
known, and could be incorporated into vehicles once production
decisions are made. Other technologies, added for this rulemaking
analysis, are considered that are not currently in production, but are
beyond the initial research phase, under development and are expected
to be in production in the next 5-10 years. These new technologies
include higher BMEP turbocharged and downsized engines, advanced diesel
engines, higher efficiency transmissions, additional mass reduction
levels, PHEVs, EVs, etc. As discussed, the technologies considered fall
into five broad categories: engine technologies, transmission
technologies, vehicle technologies, electrification/accessory
technologies, and hybrid technologies. We note that one technology has
been added since the NPRM--Integrated Starter Generator (or Mild
Hybrid)--based on the Argonne work. This addition is discussed in more
detail in Chapter V of the FRIA.
    Table IV-4 below lists all the technologies considered and provides
the abbreviations used for them in the

CAFE model,\955\ as well as their year of availability, which for
purposes of NHTSA's analysis means the first model year in the
rulemaking period that the CAFE model is allowed to apply a technology
to a manufacturer's fleet.\956\ ``Year of availability'' recognizes
that technologies must achieve a level of technical viability before
they can be implemented in the CAFE model, and are thus a means of
constraining technology use until such time as it is considered to be
technologically feasible. Year of availability may vary in NHTSA's
analysis depending on whether the modeling runs are for purposes of
evaluating whether a given regulatory alternative is maximum feasible
(``standard-setting runs''), or for evaluating the real-world impacts
of a given regulatory alternative (``real-world runs'')--the difference
occurs because EPCA/EISA restricts NHTSA's ability to consider the
availability of certain technologies in certain model years. For a more
detailed description of each technology and their costs and
effectiveness, we refer the reader to Chapter 3 of the Joint TSD and
Chapter V of NHTSA's FRIA.
---------------------------------------------------------------------------

    \955\ The abbreviations are used in this section both for
brevity and for the reader's reference if they wish to refer to the
expanded decision trees and the model input and output sheets, which
are available in Docket No. NHTSA-2010-0131 and at http://www.nhtsa.gov/fuel-economy.
    \956\ A date of 2007 or 2012 means the technology can be applied
in all model years, while a date of 2020, for example, means the
technology can only be applied in model years 2020 through 2025.

          Table IV-4--List of Technologies in NHTSA's Analysis
------------------------------------------------------------------------
           Technology              Model abbreviation    Year available
------------------------------------------------------------------------
Low Friction Lubricants--Level 1  LUB1...............               2007
Engine Friction Reduction--Level  EFR1...............               2007
 1.
Low Friction Lubricants and       LUB2--EFR2.........               2017
 Engine Friction Reduction--
 Level 2.
Variable Valve Timing (VVT)--     CCPS...............               2007
 Coupled Cam Phasing (CCP) on
 SOHC.
Discrete Variable Valve Lift      DVVLS..............               2007
 (DVVL) on SOHC.
Cylinder Deactivation on SOHC...  DEACS..............               2007
Variable Valve Timing (VVT)--     ICP................               2007
 Intake Cam Phasing (ICP).
Variable Valve Timing (VVT)--     DCP................               2007
 Dual Cam Phasing (DCP).
Discrete Variable Valve Lift      DVVLD..............               2007
 (DVVL) on DOHC.
Continuously Variable Valve Lift  CVVL...............               2007
 (CVVL).
Cylinder Deactivation on DOHC...  DEACD..............               2007
Stoichiometric Gasoline Direct    SGDI...............               2007
 Injection (GDI).
Cylinder Deactivation on OHV....  DEACO..............               2007
Variable Valve Actuation--CCP     VVA................               2007
 and DVVL on OHV.
Stoichiometric Gasoline Direct    SGDIO..............               2007
 Injection (GDI) on OHV.
Turbocharging and Downsizing--    TRBDS1--SD.........               2007
 Level 1 (18 bar BMEP)--Small
 Displacement.
Turbocharging and Downsizing--    TRBDS1--MD.........               2007
 Level 1 (18 bar BMEP)--Medium
 Displacement.
Turbocharging and Downsizing--    TRBDS1--LD.........               2007
 Level 1 (18 bar BMEP)--Large
 Displacement.
Turbocharging and Downsizing--    TRBDS2--SD.........               2012
 Level 2 (24 bar BMEP)--Small
 Displacement.
Turbocharging and Downsizing--    TRBDS2--MD.........               2012
 Level 2 (24 bar BMEP)--Medium
 Displacement.
Turbocharging and Downsizing--    TRBDS2--LD.........               2012
 Level 2 (24 bar BMEP)--Large
 Displacement.
Cooled Exhaust Gas Recirculation  CEGR1--SD..........               2012
 (EGR)--Level 1 (24 bar BMEP)--
 Small Displacement.
Cooled Exhaust Gas Recirculation  CEGR1--MD..........               2012
 (EGR)--Level 1 (24 bar BMEP)--
 Medium Displacement.
Cooled Exhaust Gas Recirculation  CEGR1--LD..........               2012
 (EGR)--Level 1 (24 bar BMEP)--
 Large Displacement.
Cooled Exhaust Gas Recirculation  CEGR2--SD..........               2017
 (EGR)--Level 2 (27 bar BMEP)--
 Small Displacement.
Cooled Exhaust Gas Recirculation  CEGR2--MD..........               2017
 (EGR)--Level 2 (27 bar BMEP)--
 Medium Displacement.
Cooled Exhaust Gas Recirculation  CEGR2--LD..........               2017
 (EGR)--Level 2 (27 bar BMEP)--
 Large Displacement.
Advanced Diesel--Small            ADSL--SD...........               2017
 Displacement.
Advanced Diesel--Medium           ADSL--MD...........               2017
 Displacement.
Advanced Diesel--Large            ADSL--LD...........               2017
 Displacement.
6-Speed Manual/Improved           6MAN...............               2007
 Internals.
High Efficiency Gearbox (Manual)  HETRANSM...........               2017
Improved Auto. Trans. Controls/   IATC...............               2007
 Externals.
6-Speed Trans with Improved       NAUTO..............               2007
 Internals (Auto).
6-Speed DCT.....................  DCT................               2007
8-Speed Trans (Auto or DCT).....  8SPD...............               2014
High Efficiency Gearbox (Auto or  HETRANS............               2017
 DCT).
Shift Optimizer.................  SHFTOPT............               2017
Electric Power Steering.........  EPS................               2007
Improved Accessories--Level 1...  IACC1..............               2007
Improved Accessories--Level 2 (w/ IACC2..............               2014
 Alternator Regen and 70%
 efficient alternator).
12V Micro-Hybrid (Stop-Start)...  MHEV...............               2007
Integrated Starter Generator      ISG................               2012
 (Mild Hybrid).
Strong Hybrid--Level 1..........  SHEV1..............               2012
Strong Hybrid--Level 2..........  SHEV2..............               2017
Plug-in Hybrid--30 mi range.....  PHEV1..............              *2020
Electric Vehicle (Early           EV1................             **2017
 Adopter)--75 mile range.
Electric Vehicle (Broad Market)-- EV4................             **2017
 150 mile range.
Mass Reduction--Level 1.........  MR1................               2007

Mass Reduction--Level 2.........  MR2................               2007
Mass Reduction--Level 3.........  MR3................               2007
Mass Reduction--Level 4.........  MR4................               2011
Mass Reduction--Level 5.........  MR5................               2016
Low Rolling Resistance Tires--    ROLL1..............               2007
 Level 1.
Low Rolling Resistance Tires--    ROLL2..............               2017
 Level 2.
Low Drag Brakes.................  LDB................               2007
Secondary Axle Disconnect.......  SAX................               2007
Aero Drag Reduction, Level 1....  AERO1..............               2007
Aero Drag Reduction, Level 2....  AERO2..............               2011
------------------------------------------------------------------------
* PHEV is applied in NHTSA's standard setting analysis starting from MY
  2020 and in the real-world analysis starting from MY 2017.
** EV is not applied in NHTSA's standard setting analysis and applied in
  the real-world analysis starting from MY 2017.

b. How did NHTSA determine the costs and effectiveness of each of these
technologies for use in its modeling analysis?
    Building on the estimates developed for the MYs 2012-2016 CAFE and
GHG final rule and the 2010 TAR, the agencies incorporated new cost and
effectiveness estimates for the new technologies being considered and
some of the technologies carried over from the MYs 2012-2016 final rule
and 2010 TAR. This joint work is reflected in Chapter 3 of the Joint
TSD and in Section II of this preamble, as summarized below. For more
detailed information on the effectiveness and cost of fuel-saving
technologies, please refer to Chapter 3 of the Joint TSD and Chapter V
of NHTSA's FRIA.
    For costs, the FEV tear-down work was expanded between the 2012-
2016 final rule and the proposal to include an 8-speed DCT, a power-
split hybrid, which was used to determine a P2 hybrid cost, and a mild
hybrid with stop-start technology; the estimates based on this work
were carried forward into the final rule. Battery costs were revised
between the 2012-2016 final rule and the NPRM using Argonne National
Laboratory's battery cost model, which allows users to estimate unique
battery pack cost using user customized input sets for different
hybridization applications, such as strong hybrid, PHEV and EV. Argonne
updated the model and EPA updated costs for battery packs between the
NPRM and this final rule to account for air cooling (for HEVs) and
parallel battery modules. EPA and NHTSA also modified how the indirect
costs (using ICM factors) were derived and applied for the NPRM based
on staff input and public feedback, and carried this change forward
into the final rule. The updates are discussed at length in Chapter 3
of the Joint TSD and in Chapter V of NHTSA's FRIA.
    Some of the effectiveness estimates for technologies applied in MYs
2012-2016 and 2010 TAR have remained the same. However, nearly all of
the effectiveness estimates for carryover technologies have been
updated based on a newer version of EPA's lumped parameter model, which
was calibrated by the vehicle simulation work performed by Ricardo
Engineering. The Ricardo simulation study was also used to estimate the
effectiveness for the technologies newly considered for this proposal,
like higher BMEP turbocharged and downsized engine, advanced
transmission technologies, and P2 hybrids. For the final rule, NHTSA
conducted a vehicle simulation project with Argonne National Laboratory
(ANL), described in more detail in NHTSA's FRIA, that performed
additional analyses on mild hybrid technologies and advanced
transmissions to help NHTSA develop effectiveness values better
tailored for the CAFE model's incremental structure. The effectiveness
values that were developed by ANL for the mild hybrid vehicles were
applied by both agencies for the final rule. Additionally, NHTSA
updated the effectiveness values of advanced transmissions when coupled
with naturally-aspirated engines based on ANL's simulation work for the
final rule. While NHTSA and EPA apply technologies differently, the
agencies have sought to ensure that the resultant effectiveness of
applying technologies is consistent between the two agencies.
    NHTSA notes that, in developing technology cost and effectiveness
estimates, the agencies have made every effort to hold constant aspects
of vehicle performance and utility typically valued by consumers, such
as horsepower, carrying capacity, drivability, durability, noise,
vibration and harshness (NVH) and towing and hauling capacity. For
example, NHTSA includes in its analysis technology cost and
effectiveness estimates that are specific to performance passenger cars
(i.e., sports cars), as compared to non-performance passenger cars.
NHTSA sought comment on the extent to which commenters believed that
the agencies have been successful in holding constant these elements of
vehicle performance and utility in developing the technology cost and
effectiveness estimates.
    With respect to the cost estimates employed in the NPRM analysis,
ICCT commented that technology costs continue to drop in the agencies'
assessments over the past several rulemakings, which is evidence that
technology will be even cheaper in the future.\957\ ICCT expressed
optimism that reductions in technology costs could lead the agencies to
set higher standards for MYs 2022-2025 as part of NHTSA's future
rulemaking and the mid-term evaluation.\958\ With regard to the FEV
tear-down studies in particular, ICCT stated that it was continuing to
fund such work, and that it would share the cost estimates for P2
hybrids, advanced diesel engines, basic start-stop systems, manual
transmissions, and cooled EGR systems with the agencies when they
became available.\959\ CBD concurred with ICCT's assessment.\960\ NACAA
suggested that costs could be brought down more quickly if more
technology was introduced earlier.\961\ NADA provided a number of
comments related to cost, albeit focused on the broader issue of
programmatic costs rather than on costs for specific technologies. NADA
argued generally that attempting to estimate cost increases so far in
advance was ``inherently suspect,'' given the uncertainty involved, and
that

the agencies' cost estimates were very likely significantly
undervalued.\962\ NRDC commented that NADA's cost estimates appeared to
be incorrect and overstated.\963\ API commented that the agencies
should review and use the technology cost estimates employed in AEO
2011.\964\ BMW commented that the agencies' assessment of costs for BMW
was understated, because BMW had already employed many of the
technologies considered for BMW in the agencies' NPRM analysis, and
thus further improvements will have to come from more advanced (and
expensive) technologies than the agencies had estimated.\965\ In
response, while we recognize that our cost analyses only identify one
feasible path for manufacturers to comply with the standards and that
individual manufacturers may pursue other approaches, we continue to
believe that tear-down analyses are the most accurate method to
estimate costs for purposes of rulemaking analysis. We also recognize
the inherent uncertainty in estimating costs in the 2017-2025
timeframe; to address some of this uncertainty, we are conducting
sensitivity analyses to understand its magnitude with respect to costs
and benefits. We will closely monitor the development of the
technologies and their cost over the next several years, and will
revisit these areas as needed during the future rulemaking to develop
the MYs 2022-2025 standards and concurrent mid-term evaluation.
---------------------------------------------------------------------------

    \957\ ICCT, Docket No. NHTSA-2010-0131-0258, at 8.
    \958\ Id.
    \959\ Id.
    \960\ CBD, Docket No. NHTSA-2010-0131-0255, at 7.
    \961\ NACAA, Docket No. EPA-HQ-OAR-2010-0799-8084, at 3.
    \962\ NADA, Docket No. NHTSA-2010-0131-0261, at 3.
    \963\ NRDC, Docket No. EPA-HQ-OAR-2010-0799-9472, at 20.
    \964\ API, Docket No. NHTSA-2010-0131-0238, at 10.
    \965\ BMW, Docket No. NHTSA-2010-0131-0250, at 9-10.
---------------------------------------------------------------------------

    With respect to battery costs, ICCT commented that future versions
of the BatPaC model should include the option to select either air or
liquid cooling.\966\ Tesla commented that that while it thought the
BatPaC model was helpful, Tesla rather ``supports a more comprehensive
approach to assessing battery cost,'' i.e., by ``factor[ing] in all the
costs of the battery and attendant systems including cell management,
thermal management and the disconnect unit.'' \967\ Tesla stated that
the battery systems in its Model S would cost only $350/kWh at
production levels of 25,000/year, and that it expected its costs to
come down in the future.\968\ Porsche, in contrast, argued that the
battery costs used in the NPRM were significantly underestimated, which
``inflates the apparent cost-effectiveness'' of the standards.\969\ As
stated above, for the final rulemaking the agencies requested that ANL
update the BatPaC model to allow for either air or liquid cooling.
These updates were incorporated in the final rule analysis.
Additionally, the agencies are accounting for the costs of cell
management, thermal management, and battery disconnect. As mentioned
above, recognizing that future battery costs are uncertain, we have run
sensitivity analyses using upper and lower bounds of expected battery
cost. The cost projections produced by BatPaC are sensitive to the
inputs and assumptions the user provides. The battery pack cost
projection from BatPaC model ranges from $160/kWh for EV150 for a large
truck to $306/kWh for a PHEV40 for large passenger cars using NMC
battery chemistry, and up to $376/kWh for a PHEV20 for large passenger
cars using LMO battery chemistry.
---------------------------------------------------------------------------

    \966\ ICCT, Docket No. NHTSA-2010-0131-0258, at 21-22.
    \967\ Tesla, Docket No. NHTSA-2010-0131-0259, at 5.
    \968\ Id.
    \969\ Porsche, Docket No. NHTSA-2010-0131-0224, at 6.
---------------------------------------------------------------------------

    With respect to the cost estimate for mass reduction, ICCT
commented that it expected costs to drop in the future as computer
modeling improves manufacturers' ability to reduce mass.\970\ ICCT
recommended that the agencies use the Lotus and FEV mass reduction
studies for the final rule.\971\ VW, on the other hand, agreed that
mass reduction costs were likely best represented by an exponential
function, but argued that based on its experience, the agencies' cost
curve was too shallow and should increase faster in general and even
faster for passenger cars as compared to light trucks, since passenger
cars are already lighter and may have fewer opportunities for simple
mass removal.\972\ We agree, as VW implies, that the cost of mass
reduction may vary between manufacturers, depending on what a
manufacturer has already applied in its current fleet and the approach
the OEMs take to address mass reduction, such as the material usage,
manufacturing process, etc. As suggested by ICCT, the study sponsored
by NHTSA took advantage of computer optimization, computer simulation,
and advanced materials. The costs derived from NHTSA's study are based
on a clean-sheet-of-paper approach and take advantage of secondary mass
reduction. NHTSA's study is discussed in greater details in Chapter V
of NHTSA's FRIA and Chapter 3 of the joint TSD.
---------------------------------------------------------------------------

    \970\ ICCT, Docket No. NHTSA-2010-0131-0258, at 8.
    \971\ Id. at 9.
    \972\ VW, Docket No. NHTSA-2010-0131-0247, at 17.
---------------------------------------------------------------------------

    As discussed in Section II.D above and Chapter 3 of the joint TSD,
as well as in Chapter V of NHTSA's RIA, however, the agencies are
continuing to employ the NPRM estimates for mass reduction costs in
this final rule. The agencies considered updating cost estimates based
on the studies that were underway when the NPRM was issued. Those
studies included the EPA/ICCT funded Phase 2 Toyota Venza Low
Development project and the NHTSA funded Honda Accord mass reduction
project, which are described in the section titled ``What additional
studies are the agencies conducting to inform our estimates of mass
reduction amounts, cost, and effectiveness?'' However, these studies
were in the middle of the peer review process and had not yet been
finalized at the time when the inputs for the main analysis for this
final rule were required. We continue to believe the NPRM estimates are
reasonable and appropriate for several reasons. First, given what we
know about how differently individual manufacturers may undertake mass
reduction, coming up with a single cost curve applicable to the entire
industry is inherently uncertain. The mass reduction amounts and costs
derived by design studies are typically directly applicable to a
particular vehicle model and may not be completely applicable to other
vehicle models and vehicle subclasses. The NPRM estimates were
developed by reviewing nearly every available information source for
mass reduction costs, which gives the agency some confidence that even
if the estimates are not exactly correct for every vehicle model and
subclass, they are reasonable to some extent by virtue of being fully
informed. Second, while NHTSA's study was not completed in time to
incorporate its results in the final rule analysis, we note that
NHTSA's study developed mass reduction cost estimates both for the
glider only, and for the glider plus the powertrain. At 20 percent mass
reduction, the NPRM cost essentially falls in between the two cost
estimates from the NHTSA study. On balance, NHTSA believes that
continuing to employ the NPRM estimates for mass reduction cost is a
reasonable surrogate for the result that the agency might have obtained
if it had been able to incorporate results from NHTSA's mass reduction
study in time for the final rule analysis. Third, the agencies
conducted sensitivity studies varying the cost for mass reduction using
a 40% unit cost range, and found that even when using

costs at these limits, there was little change in the average vehicle
technology cost. This supports that had the agencies used a different
cost curve based on the completion of their studies, the use of the
revised cost curve would have had very little effect on the results of
agencies' analyses. Therefore, the agencies conclude that it is
reasonable and appropriate to use the NPRM cost estimates for mass
reduction in the final rule.
    The agency notes that the technology costs included in this final
rule for the central analysis take into account only those associated
with the initial build of the vehicle. Although comments were received
to the MYs 2012-2016 rulemaking that suggested there could be
additional maintenance required with some new technologies (e.g.,
turbocharging, hybrids, etc.), and that additional maintenance costs
could occur as a result, in the proposal the agencies did not
explicitly incorporate maintenance costs (or potential savings) as a
separate element. The agency sought comments on this topic and
undertook a more detailed review of these potential costs for the final
rule. NADA commented that the agencies should evaluate the potential
impact on a vehicle's total cost of ownership, including maintenance
costs, in the final rule. In response, NHTSA identified a list of
technologies for which sufficient data on frequency and cost of
maintenance events exists to support quantification of changes in
vehicle maintenance costs. This list includes costs associated with low
rolling resistance tires, diesel fuel filters, and benefits resulting
from electric vehicle characteristics that eliminate the need for oil
changes as well as engine air filter changes. These repair costs during
the warranty period that are identifiably different for new
technologies were included in the central analysis for the final rule.
The full list of technologies shown is in Chapter 3 of the joint TSD,
along with the maintenance interval comparisons, and costs per
maintenance event. In the final rule as in the NPRM, repair costs
during the warranty period that are common for all vehicles remain a
component of the indirect cost multiplier. A sensitivity analysis was
added to the FRIA to examine repair costs in the post-warranty period,
discussed further in Chapter X of NHTSA's FRIA. For example, EVs may
have reduced total life compared to a conventional vehicle due to
battery degradation. For the NPRM analysis, the agencies assumed that
the batteries would last the full useful life of the vehicle. In the
final rule analysis, NHTSA has considered a cost to estimate the value
of the possibility for an EV to have a different lifetime than a
conventional vehicle. NHTSA only applied this cost to ``broad-market''
EVs (those sold above a 5 percent penetration threshold), as it assumed
that early-adopters would not be concerned by the possibility of
earlier end-of-life (this is consistent with our previous assumption
that early adopters would not be concerned by EVs' shorter driving
range). This out-of-warranty cost is only included in a sensitivity
analysis, not the central run. For further detail on how this cost is
implemented in our analysis, please refer to Chapter VII of NHTSA's
FRIA.
    For some of the technologies, NHTSA's inputs, which are designed to
be as consistent as practicable with EPA's, indicate negative
incremental costs. In other words, the agency is estimating that some
technologies, if applied in a manner that holds performance and utility
constant, will, following initial investment (for, e.g., R&D and
tooling) by the manufacturer and its suppliers, incrementally improve
fuel savings and reduce vehicle costs. Nonetheless, in the agency's
central analysis, these and other technologies are applied only insofar
as is necessary to achieve compliance with standards defining any given
regulatory alternative (where the baseline no action alternative
assumes CAFE standards are held constant after MY 2016). The agency has
also performed a sensitivity analysis involving market-based
application of technology--that is, the application of technology
beyond the point needed to achieve compliance, if the cost of the
technology is estimated to be sufficiently attractive relative to the
accompanying fuel savings. NHTSA invited comment on all of its
technology estimates, and specifically requested comment on the
likelihood that each technology will, if applied in a manner that holds
vehicle performance and utility constant, be able to both deliver the
estimated fuel savings and reduce vehicle cost. NHTSA did not receive
any comment on this aspect. The agency also invited comment on whether
its central analysis should be revised to include estimated market-
driven application of technology. Some comments addressed this specific
question; these will be summarized and discussed below.
    The agencies received several comments on the approach used to
estimate indirect costs in the proposal. NADA argued that the ICM
approach was not valid and an RPE approach was the only appropriate
approach, and that the RPE factor should be 2.0 x direct costs \973\
rather than the 1.5 that is supported by filings to the Securities and
Exchange Commission. ICCT agreed with the new ICM approach as presented
in the proposal, but argued that sensitivity analyses examining the
impact of using an RPE should be deleted from the final rule.\974\ Both
agencies have conducted thorough analysis of the comments received on
the RPE versus ICM approach. Regarding NADA's concerns about the
accuracy of ICMs, although the agencies recognize that there is
uncertainty regarding the impact of indirect costs on vehicle prices,
they have retained ICMs for use in the central analysis because it
offers the advantage of a disaggregated approach that better
differentiates among technologies. The impact of using an RPE is
examined in sensitivity analyses, and we note that even under the
higher cost estimates that result from using the RPE, the rulemaking is
highly cost beneficial. The agencies disagree with NADA's contention
that the correct factor to reflect the RPE should be 2.0, and we cite
data demonstrating that the overall RPE should average about 1.5.
Regarding ICCT's contention that NHTSA should delete sensitivity
analyses examining the impact of using an RPE, NHTSA disagrees based on
both compliance with OMB guidance and good analytical practice. Further
analysis of NADA's comments is summarized in Chapter 3 of the joint
TSD. NHTSA's full response to both NADA and ICCT is presented in
Chapter VII of NHTSA's FRIA. For this final rule, each agency is using
an ICM approach with ICM factors identical to those used in the
proposal. The impact of using an RPE rather than ICMs to calculate
indirect costs is examined in sensitivity and uncertainty analyses in
Chapters VII, X, and XII of NHTSA's FRIA.
---------------------------------------------------------------------------

    \973\ NADA, Docket No. NHTSA-2010-0131-0261, at 4.
    \974\ ICCT, Docket No. NHTSA-2010-0131-0258, at 19-20.
---------------------------------------------------------------------------

    With respect to technology effectiveness, ICCT commented generally
in support of simulation modeling, but argued that the Ricardo work
resulted in conservative effectiveness estimates because it is
restricted to currently-available data and engine maps, and cannot
account for future improvements that might result from CAD used in
technology design and on-board vehicle controls that will increase
technology effectiveness.\975\ ICCT stated that estimates for

technology effectiveness continue to improve, citing the example of
turbocharging and downsizing, which ICCT said the agencies used to
estimate at 5-7 percent and now estimate at closer to 12-20 percent
effectiveness improvement.\976\ Therefore, ICCT stated, the agencies'
technology effectiveness estimates were likely to be understated.\977\
Several commenters also discussed the agencies' effectiveness estimates
for various technologies. For example, VW suggested that the
effectiveness of high BMEP engines might be overstated, because the
torque curve for future engines may be constrained over the rpm range
by charging limits, exhaust temperature, peak cylinder pressures and
mechanical forces that may limit the practicable increase in BMEP.\978\
VW also commented that the maximum cost-effective amount of mass
reduction is likely closer to 10 percent instead of 20 percent. In
response, NHTSA recognizes that different manufacturers may obtain
different amounts of ``bang for their buck,'' at different costs, when
they apply different technologies. We maintain that we analyze a
possible feasible path for compliance with the standards, although we
recognize that actual manufacturer compliance paths may vary due to
their judgment of cost-effectiveness. We will continue to monitor
changes in cost and effectiveness of technologies and will revisit all
estimates during the mid-term review and future rulemaking for the MYs
2022-2025.
---------------------------------------------------------------------------

    \975\ ICCT, Docket No. NHTSA-2010-0131-0258, at 4-7.
    \976\ ICCT, Docket No. NHTSA-2010-0131-0258,. at 7.
    \977\ Id.
    \978\ VW, Docket No. NHTSA-2010-0131-0247, at 19.
---------------------------------------------------------------------------

    The tables below provide examples of the incremental cost and
effectiveness estimates employed by the agency in developing this final
rule, according to the decision trees used in the CAFE modeling
analysis. Thus, the effectiveness and cost estimates are not absolute
to a single reference vehicle, but are incremental to the technology or
technologies that precede it.

                                            Table IV-5--NHTSA Technology Effectiveness Estimates Employed in the CAFE Model for Certain Technologies
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Perform.   Perform.   Perform.
                                                               Subcomp.   Compact    Midsize   Large car   subcomp.   compact    midsize    Perform.   Minivan    Small LT   Midsize    Large LT
                                                                 car        car        car                   car        car        car     large car      LT                    LT
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 VEHICLE TECHNOLOGY INCREMENTAL FUEL CONSUMPTION REDUCTION (-%)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Low friction lubricants (level 1)...........................        0.5        0.5        0.7        0.8        0.5        0.5        0.7        0.8        0.7        0.6        0.7        0.7
Engine friction reduction (level 1).........................        2.0        2.0        2.6        2.7        2.0        2.0        2.6        2.7        2.6        2.0        2.6        2.4
VVT--Dual cam phasing (DCP).................................        2.0        2.0        2.5        2.7        2.0        2.0        2.5        2.7        2.6        2.0        2.6        2.4
Discrete variable valve lift (DVVL) on DOHC.................        2.8        2.8        3.6        3.9        2.8        2.8        3.6        3.9        3.5        2.8        3.5        3.4
Cylinder deactivation on OHV................................        4.7        4.7        5.9        6.3        4.7        4.7        5.9        6.3        5.9        4.7        5.9        5.5
Stoichiometric gasoline direct injection....................        1.6        1.6        1.5        1.5        1.6        1.6        1.5        1.5        1.5        1.6        1.5        1.5
Turbocharging and downsizing (level 1)......................        7.2        7.2        8.3        7.8        7.2        6.7        7.5        7.8        7.9        7.1        7.9        7.3
Turbocharging and downsizing (level 2)......................        2.9        2.9        3.5        3.7        2.9        2.9        3.5        3.7        3.4        2.9        3.4        3.4
Cooled exhaust gas recirculation (EGR)--(level 1)...........        3.6        3.6        3.5        3.5        3.6        3.6        3.5        3.5        3.6        3.6        3.6        3.6
Cooled exhaust gas recirculation (EGR)--(level 2)...........        1.0        1.0        1.4        1.4        1.0        1.0        1.4        1.4        1.1        1.0        1.1        1.2
Advanced Diesel.............................................        5.5        5.5        2.8        2.9        5.5        5.5        2.8        2.9        3.4        5.3        3.4        3.5
6-speed auto. trans. with improved internals................        1.9        1.9        2.0        2.0        1.9        1.9        2.0        2.0        2.0        2.0        2.0        2.1
6-speed DCT.................................................        4.0        4.0        4.1        3.8        4.0        3.4        4.1        3.8        n/a        3.8        n/a        n/a
High Efficiency Gearbox.....................................        2.2        2.2        2.7        2.6        2.2        2.2        2.7        2.6        3.1        2.5        3.1        3.7
Shift Optimizer.............................................        3.3        3.3        4.1        4.3        3.3        3.3        4.1        4.3        4.1        3.3        4.1        3.9
Electric power steering.....................................        1.5        1.5        1.3        1.1        1.5        1.5        1.3        1.1        1.0        1.2        1.0        0.8
12V micro-hybrid............................................        1.7        1.7        2.1        2.2        1.7        1.7        2.1        2.2        2.1        1.8        2.1        2.1
Integrated Starter-Generator (Mild Hybrid)..................        7.5        7.5        6.6        6.4        7.5        7.5        6.6        6.4        5.7        6.1        5.7        3.0
Strong Hybrid (level 2).....................................        3.0        3.0        0.1        0.6        3.0        3.0        0.1        0.6      (0.3)        4.3      (0.3)        1.6
Plug-in Hybrid..............................................       40.7       40.7       40.7       40.7       40.7       40.7       40.7       40.7       40.7       40.7       40.7       40.7

Electric Vehicle (Early Adopter)............................       68.5       68.5       68.5       68.5       68.5       68.5       68.5       68.5       68.5       68.5       68.5       68.5
Low Rolling Resistance Tires (level 1)......................        1.9        1.9        1.9        1.9        1.9        1.9        1.9        1.9        1.9        1.9        1.9        1.9
Low Rolling Resistance Tires (level 2)......................        2.0        2.0        2.0        2.0        2.0        2.0        2.0        2.0        2.0        2.0        2.0        2.0
Aero Drag Reduction (level 1)...............................        2.3        2.3        2.3        2.3        2.3        2.3        2.3        2.3        2.3        2.3        2.3        2.3
Aero Drag Reduction (level 2)...............................        2.5        2.5        2.5        2.5        2.5        2.5        2.5        2.5        2.5        2.5        2.5        2.5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                                             Table IV-6 NHTSA Technology Cost Estimates Employed in the CAFE Model for Certain Technologies, MY 2017
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Perform.   Perform.   Perform.
                                                               Subcomp.   Compact    Midsize   Large car   subcomp.   compact    midsize    Perform.   Minivan    Small LT   Midsize    Large LT
                                                                 car        car        car                   car        car        car     large car      LT                    LT
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        VEHICLE TECHNOLOGY ICM COSTS PER VEHICLE (2010$)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Nominal baseline engine (for cost purposes).................   Inline 4   Inline 4   Inline 4         V6   Inline 4         V6         V6         V8         V6   Inline 4         V6         V8
Low friction lubricants (level 1)...........................          4          4          4          4          4          4          4          4          4          4          4          4
Engine friction reduction (level 1).........................         60         60         60         91         60         91         91        121         91         60         91        121
VVT--Dual cam phasing (DCP).................................         44         44         44         89         44         89         89         89         89         44         89         89
Discrete variable valve lift (DVVL) on DOHC.................        163        163        163        245        163        245        245        326        245        163        245        326
Cylinder deactivation on OHV................................        208        208        208        208        208        208        208        208        208        208        208        208
Stoichiometric gasoline direct injection....................        268        268        268        403        268        403        403        537        403        268        403        537
Turbocharging and downsizing (level 1)......................        494        494        494         19        494         19         19        621         19        494         19        621
Turbocharging and downsizing (level 2)......................         26         26         26        262         26        262        262        442        262         26        262        442
Cooled exhaust gas recirculation (EGR)--(level 1)...........        302        302        302        302        302        302        302        302        302        302        302        302
Cooled exhaust gas recirculation (EGR)--(level 2)...........        525        525        525        525        525        525        525      (300)        525        525        525      (300)
Advanced Diesel.............................................        889        889        889        855        889        855        855      1,710        855        889        855      1,710
6-speed auto. trans. with improved internals................       (39)       (39)       (39)       (39)       (39)       (39)       (39)       (39)       (39)       (39)       (39)       (39)
6-speed DCT.................................................      (109)      (109)       (75)       (75)       (75)       (75)       (75)       (75)          0       (75)          0          0
High Efficiency Gearbox.....................................        251        251        251        251        251        251        251        251        251        251        251        251
Shift Optimizer.............................................          2          2          2          2          2          2          2          2          2          2          2          2
Electric power steering.....................................        109        109        109        109        109        109        109        109        109        109        109        109
12V micro-hybrid............................................        325        351        385        414        325        351        385        414        414        366        424        480
Integrated Starter-Generator (Mild Hybrid)..................        976        976        976        976        976        976        976        976        976        976        976        976
Strong Hybrid (level 2).....................................      1,921      1,921      2,334      3,054      1,921      1,921      2,334      3,054      2,723      2,205      2,723      3,111

Plug-in Hybrid..............................................     11,043     11,043     13,449     18,538     11,043     11,043     13,449     18,538          0     12,828          0          0
Electric Vehicle (Early Adopter)............................      2,416      2,416      3,711      4,614      2,416      2,416      3,711      4,614          0      2,208          0          0
Low Rolling Resistance Tires (level 1)......................          7          7          7          7          7          7          7          7          7          7          7          7
Low Rolling Resistance Tires (level 2)......................         73         73         73         73         73         73         73         73         73         73         73         73
Aero Drag Reduction (level 1)...............................         49         49         49         49         49         49         49         49         49         49         49         49
Aero Drag Reduction (level 2)...............................        164        164        164        164        164        164        164        164        164        164        164        164
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

c. How does NHTSA use these assumptions in its modeling analysis?
    NHTSA relies on several inputs and data files to conduct the
compliance analysis using the CAFE model, as discussed further below
and in Chapter V of the FRIA. For the purposes of applying
technologies, the CAFE model primarily uses three data files, one that
contains data on the vehicles expected to be manufactured in the model
years covered by the rulemaking and identifies the appropriate stage
within the vehicle's life-cycle for the technology to be applied, one
that contains data/parameters regarding the available technologies the
model can apply, and one that contains economic assumption inputs for
calculating the costs and benefits of the standards. The inputs for the
first two data files are discussed below.
    As discussed above, the CAFE model begins with an initial state of
the domestic vehicle market, which in this case is the market for
passenger cars and light trucks to be sold during the period covered by
the proposed standards. The vehicle market is defined on a year-by-
year, model-by-model, engine-by-engine, and transmission-by-
transmission basis, such that each defined vehicle model refers to a
separately defined engine and a separately defined transmission.
Comparatively, EPA's OMEGA model defines the vehicle market using
representative vehicles at the vehicle platform level, which are binned
into 5 year timeframes instead of year-by-year.
    For the current standards, which cover MYs 2017-2025, the light-
duty vehicle (passenger car and light truck) two sets of market
forecast were developed jointly by NHTSA and EPA staff using MY 2008
and 2010 CAFE compliance data. The 2008 data was used in the NPRM
analysis, while both the 2008 and 2010 data are used in the final rule
analysis. The MY 2008 compliance data includes about 1,100 vehicle
models, about 400 specific engines, and about 200 specific
transmissions, which is a somewhat lower level of detail in the
representation of the vehicle market than that used by NHTSA in prior
CAFE analyses--previous analyses would count a vehicle as ``new'' in
any year when significant technology differences are made, such as at a
redesign.\979\ However, within the limitations of information that can
be made available to the public, it provides the foundation for a
reasonable analysis of manufacturer-specific costs and the analysis of
attribute-based CAFE standards, and is much greater than the level of
detail used by many other models and analyses relevant to light-duty
vehicle fuel economy.\980\ The MY 2010 compliance data includes about
1,170 vehicle models, about 330 specific engines, and about 330
specific transmissions, while the MY 2008 compliance data includes
about 1,300 vehicle models, about 440 specific engines and about 210
specific transmissions.
---------------------------------------------------------------------------

    \979\ The market file for the MY 2011 final rule, which included
data for MYs 2011-2015, had 5500 vehicles, about 5 times what we are
using in this analysis of the MY 2010 certification data.
    \980\ Because CAFE standards apply to the average performance of
each manufacturer's fleet of cars and light trucks, the impact of
potential standards on individual manufacturers cannot be credibly
estimated without analysis of the fleets that manufacturers can be
expected to produce in the future. Furthermore, because required
CAFE levels under an attribute-based CAFE standard depend on
manufacturers' fleet composition, the stringency of an attribute-
based standard cannot be predicted without performing analysis at
this level of detail.
---------------------------------------------------------------------------

    In addition to containing data about each vehicle, engine, and
transmission, this file contains information for each technology under
consideration as it pertains to the specific vehicle (whether the
vehicle is equipped with it or not), the estimated model year the
vehicle is undergoing a refresh or redesign, and information about the
vehicle's subclass for purposes of technology application. In essence,
the model considers whether it is appropriate to apply a technology to
a vehicle.
i. Is a vehicle already equipped, or can it not be equipped, with a
particular technology?
    The market forecast file provides NHTSA the ability to identify, on
a technology-by-technology basis, which technologies may already be
present (manufactured) on a particular vehicle, engine, or
transmission, or which technologies are not applicable (due to
technical considerations or engineering constraints) to a particular
vehicle, engine, or transmission. These identifications are made on a
model-by-model, engine-by-engine, and transmission-by-transmission
basis. For example, if the market forecast file indicates that
Manufacturer X's Vehicle Y is manufactured with Technology Z, then for
this vehicle Technology Z will be shown as used. Additionally, NHTSA
has determined that some technologies are only suitable or unsuitable
when certain vehicle, engine, or transmission conditions exist. For
example, secondary axle disconnect is only suitable for 4WD vehicles
and cylinder deactivation is unsuitable for any engine with fewer than
6 cylinders. Similarly, comments received to the 2012-2016 NPRM
indicated that cylinder deactivation could not likely be applied to
vehicles equipped with manual transmissions during the rulemaking
timeframe, due primarily to the cylinder

deactivation system not being able to anticipate gear shifts. The CAFE
model employs ``engineering constraints'' to address issues like these,
which are a programmatic method of controlling technology application
that is independent of other constraints. Thus, the market forecast
file would indicate that the technology in question should not be
applied to the particular vehicle/engine/transmission (i.e., is
unavailable). Since multiple vehicle models may be equipped with an
engine or transmission, this may affect multiple models. In using this
aspect of the market forecast file, NHTSA ensures the CAFE model only
applies technologies in an appropriate manner, since before any
application of a technology can occur, the model checks the market
forecast to see if it is either already present or unavailable. NHTSA
sought comment on the continued appropriateness of the engineering
constraints used by the model, and specifically whether many of the
technical constraints will be resolved (and therefore the engineering
constraints should be changed) given the increased focus of engineering
resources that will be working to solve these technical challenges.
NHTSA did not receive any comments on this issue.
    Whether a vehicle can be equipped with a particular technology
could also theoretically depend on certain technical considerations
related to incorporating the technology into particular vehicles. For
example, GM commented on the MY 2012-2016 NPRM that there are certain
issues in implementing turbocharging and downsizing technologies on
full-size trucks, like concerns related to engine knock, drivability,
control of boost pressure, packaging complexity, enhanced cooling for
vehicles that are designed for towing or hauling, and noise, vibration
and harshness. NHTSA stated in response that we believed that such
technical considerations are well recognized within the industry and it
is standard industry practice to address each during the design and
development phases of applying turbocharging and downsizing
technologies. The cost and effectiveness estimates used in the final
rule for MYs 2012-2016, as well as the cost and effectiveness estimates
employed in this final rule, are based on analysis that assumes each of
these factors is addressed prior to production implementation of the
technologies. NHTSA sought comment on whether the engineering
constraints should be used to address concerns like these (and if so,
how), or alternatively, whether some of the things that the agency
currently treats as engineering constraints should be (or actually are)
accounted for in the cost and effectiveness estimates through
assumptions like those described above, and whether the agency might be
double-constraining the application of technology. The Pennsylvania
Department of Environmental Protection and Clean Fuel Development
Coalition both commented that the agencies should evaluate the benefits
of higher octane fuels and whether or not they are required for some of
the advanced engine technologies like turbocharging and downsizing.
While the agencies agree that higher octane ratings could provide
additional benefits, the agencies relied in the rulemaking analyses on
the Ricardo simulation study, which assumed certification gasoline
which typically has a Research Octane Number (RON) of approximately 95
versus approximately 91 RON for regular grade 87 anti-knocking index
gasoline, to determine the effectiveness of engine technologies. We
note, however, that in the Ricardo simulation cooled EGR was included
on higher BMEP engines and it as assumed that all of the 27-bar BMEP
engine packages with cooled EGR would allow for the use of 91 RON
(regular grade) fuels while reducing the need for enrichment and spark
retard to prevent the onset of knocking combustion.
ii. Is a vehicle being redesigned or refreshed?
    Manufacturers typically plan vehicle changes to coincide with
certain stages of a vehicle's life cycle that are appropriate for the
change, or in this case the technology being applied. In the automobile
industry there are two terms that describe when technology changes to
vehicles occur: Redesign and refresh (i.e., freshening). Vehicle
redesign usually refers to significant changes to a vehicle's
appearance, shape, dimensions, contents, material usage and powertrain.
Redesign is traditionally associated with the introduction of ``new''
vehicles into the market, often characterized as the ``next
generation'' of a vehicle, or a new platform. Vehicle refresh usually
refers to less extensive vehicle modifications, such as minor changes
to a vehicle's appearance, a moderate upgrade to a powertrain system,
or small changes to the vehicle's feature or safety equipment content.
Refresh is traditionally associated with mid-cycle cosmetic changes to
a vehicle, within its current generation, to make it appear ``fresh.''
Vehicle refresh generally occurs no earlier than two years after a
vehicle redesign, or at least two years before a scheduled redesign. To
be clear, this is a general description of how manufacturers manage
their product lines and refresh and redesign cycles but in some cases
the timeframes could be shorter and others longer depending on market
factors, regulations, etc. For many of the technologies discussed
today, manufacturers will only be able to apply them at a refresh or
for a majority of the technologies at redesign, because their
application would be significant enough to involve some level of
engineering, testing, and calibration work.\981\
---------------------------------------------------------------------------

    \981\ For example, applying material substitution through weight
reduction, or even something as simple as low rolling-resistance
tires, to a vehicle will likely require some level of validation and
testing to ensure that the vehicle may continue to be certified as
compliant with NHTSA's Federal Motor Vehicle Safety Standards
(FMVSS). Weight reduction might affect a vehicle's crashworthiness;
low rolling-resistance tires might change a vehicle's braking
characteristics or how it performs in crash avoidance tests.
---------------------------------------------------------------------------

    Some technologies (e.g., those that require significant revision)
are nearly always applied only when the vehicle is expected to be
redesigned, like turbocharging and engine downsizing, conversion to
diesel or hybridization, or significant amounts of mass reduction.
Other technologies, like cylinder deactivation, electric power
steering, and low rolling resistance tires can be applied either when
the vehicle is expected to be refreshed or when it is expected to be
redesigned, while low friction lubricants can be applied at any time,
regardless of whether a refresh or redesign event is conducted.
Accordingly, the CAFE model will only apply a technology at the
particular point deemed suitable. These constraints are intended to
produce results consistent with how we assume manufacturers will apply
technologies in the future based on how they have historically
implemented new technologies. For each technology under consideration,
NHTSA specifies whether it can be applied any time, at refresh/
redesign, or only at redesign. The data forms another input to the CAFE
model. NHTSA develops redesign and refresh schedules for each of a
manufacturer's vehicles included in the analysis, essentially based on
the last known redesign year for each vehicle and projected forward
using a 5- to 8-year redesign and a 2-3 year refresh cycle, and this
data is also stored in the market forecast file. While most vehicles
are projected to follow a 5-year redesign a few of the niche market or
small-volume manufacturer vehicles (e.g., luxury and performance
vehicles) and large trucks are assumed to have 6- to

8-year redesigns based on historic redesign schedules and the agency's
understanding of manufacturers' intentions moving forward. This
approach is used because of the nature of the current baseline, which
as a single year of data does not contain its own refresh and redesign
cycle cues for future model years, and to ensure the complete
transparency of the agency's analysis. We note that this approach is
different from what NHTSA has employed previously for determining
redesign and refresh schedules, where NHTSA included the redesign and
refresh dates in the market forecast file as provided by manufacturers
in confidential product plans. Vehicle redesign/refresh assumptions are
discussed in more detail in Chapter V of the FRIA and in Chapter 3 of
the TSD.
    NHTSA has previously received comments stating that manufacturers
do not necessarily adhere to strict five-year redesign cycles, and may
add significant technologies by redesigning vehicles at more frequent
intervals, albeit at higher costs. Conversely, other comments received
stated that as compared to full-line manufacturers, small-volume
manufacturers in fact may have 7- to 8-year redesign cycles.\982\ The
agency believes that manufacturers can and will accomplish much
improvement in fuel economy and GHG reductions while applying
technology consistent with their redesign schedules. No comments were
received on this specific issue.
---------------------------------------------------------------------------

    \982\ In the MY 2011 final rule, NHTSA noted that the CAR report
submitted by the Alliance, prepared by the Center for Automotive
Research and EDF, stated that ``For a given vehicle line, the time
from conception to first production may span two and one-half to
five years,'' but that ``The time from first production
(``Job1'') to the last vehicle off the line (``Balance
Out'') may span from four to five years to eight to ten years or
more, depending on the dynamics of the market segment.'' The CAR
report then stated that ``At the point of final production of the
current vehicle line, a new model with the same badge and similar
characteristics may be ready to take its place, continuing the
cycle, or the old model may be dropped in favor of a different
product.'' See NHTSA-2008-0089-0170.1, Attachment 16, at 8 (393 of
pdf). NHTSA explained that this description, which states that a
vehicle model will be redesigned or dropped after 4-10 years, was
consistent with other characterizations of the redesign and
freshening process, and supported the 5-year redesign and 2-3 year
refresh cycle assumptions used in the MY 2011 final rule. See id.,
at 9 (394 of pdf). Given that the situation faced by the auto
industry today is not so wholly different from that in March 2009,
when the MY 2011 final rule was published, and given that the
commenters did not present information to suggest that these
assumptions are unreasonable (but rather simply that different
manufacturers may redesign their vehicles more or less frequently,
as the range of cycles above indicates), NHTSA believes that the
assumptions remain reasonable for purposes of this NPRM analysis.
See also ``Car Wars 2009-2012, The U.S. automotive product
pipeline,'' John Murphy, Research Analyst, Merrill Lynch research
paper, May 14, 2008 and ``Car Wars 2010-2013, The U.S. automotive
product pipeline,'' John Murphy, Research Analyst, Bank of America/
Merrill Lynch research paper, July 15, 2009. Available at http://www.autonews.com/assets/PDF/CA66116716.PDF (last accessed Jul. 8,
2012).
---------------------------------------------------------------------------

    Once the model indicates that a technology should be applied to a
vehicle, the model must evaluate which technology should be applied.
This will depend on the vehicle subclass to which the vehicle is
assigned; what technologies have already been applied to the vehicle
(i.e., where in the ``decision tree'' the vehicle is); when the
technology is first available (i.e., year of availability); whether the
technology is still available (i.e., ``phase-in caps''); and the costs
and effectiveness of the technologies being considered. Technology
costs may be reduced, in turn, by learning effects and short- vs. long-
term ICMs, while technology effectiveness may be increased or reduced
by synergistic effects between technologies. In the technology input
file, NHTSA has developed a separate set of technology data variables
for each of the twelve vehicle subclasses. Each set of variables is
referred to as an ``input sheet,'' so for example, the subcompact
passenger car input sheet holds the technology data that is appropriate
for the subcompact subclass. Each input sheet contains a list of
technologies available for members of the particular vehicle subclass.
The following items are provided for each technology: the name of the
technology, its abbreviation, the decision tree with which it is
associated, the (first) year in which it is available, the year-by-year
cost estimates and effectiveness (fuel consumption reduction)
estimates, its applicability and the consumer value loss. The phase-in
values and the potential stranded capital costs are common for all
vehicle subclasses and are thus listed in a separate input sheet that
is referenced for all vehicle subclasses.
iii. To which vehicle subclass is the vehicle assigned?
    As part of its consideration of technological feasibility, the
agency evaluates whether each technology could be implemented on all
types and sizes of vehicles, and whether some differentiation is
necessary in applying certain technologies to certain types and sizes
of vehicles, and with respect to the cost incurred and fuel consumption
and CO2 emissions reduction achieved when doing so. The 2010
NAS Report differentiated technology application using eight vehicle
``classes'' (4 car classes and 4 truck classes).\983\ NAS's purpose in
separating vehicles into these classes was to create groups of ``like''
vehicles, i.e., vehicles similar in size, powertrain configuration,
weight, and consumer use, and for which similar technologies are
applicable. NAS also used these vehicle classes along with powertrain
configurations (e.g., 4 cylinder, 6 cylinder or 8 cylinder engines) to
determine unique cost and effectiveness estimates for each class of
vehicles.
---------------------------------------------------------------------------

    \983\ The NAS classes included two-seater convertibles and
coupes; small cars; intermediate and large cars; high-performance
sedans; unit-body standard trucks; unit-body high-performance
trucks; body-on-frame small and midsize trucks; and body-on-frame
large trucks.
---------------------------------------------------------------------------

    NHTSA similarly differentiates vehicles by ``subclass'' for the
purpose of applying technologies to ``like'' vehicles and assessing
their incremental costs and effectiveness. NHTSA assigns each vehicle
manufactured in the rulemaking period to one of 12 subclasses: for
passenger cars, Subcompact, Subcompact Performance, Compact, Compact
Performance, Midsize, Midsize Performance, Large, and Large
Performance; and for light trucks, Small SUV/Pickup/Van, Midsize SUV/
Pickup/Van, Large SUV/Pickup/Van, and Minivan. The agency sought
comment on the appropriateness of these 12 subclasses for the MYs 2017-
2025 timeframe. The agency also sought comment on the continued
appropriateness of maintaining separate ``performance'' vehicle classes
or if as fuel economy stringency increases the market for performance
vehicles will decrease. NHTSA did not receive any comments on this
issue.
    For this final rule, as in the NPRM, NHTSA divides the vehicle
fleet into subclasses based on model inputs, and applies subclass-
specific estimates, also from model inputs, of the applicability, cost,
and effectiveness of each fuel-saving technology. The model's estimates
of the cost to improve the fuel economy of each vehicle model thus
depend upon the subclass to which the vehicle model is assigned. Each
vehicle's subclass is stored in the market forecast file. When
conducting a compliance analysis, if the CAFE model seeks to apply
technology to a particular vehicle, it checks the market forecast to
see if the technology is available and if the refresh/redesign criteria
are met. If these conditions are satisfied, the model determines the
vehicle's subclass from the market data file, which it then uses to
reference another input called the technology input file. NHTSA
reviewed its methodology for dividing vehicles into subclasses for
purposes of

technology application that it used in the MY 2011 final rule and for
the MYs 2012-2016 rulemaking, and concluded that the same methodology
would be appropriate for this final rule for MYs 2017-2025. Vehicle
subclasses are discussed in more detail in Chapter V of the FRIA and in
Chapter 3 of the TSD.
    For the reader's reference, the subclasses and example vehicles
from the market forecast file are provided in Table IV-7 and Table IV-
8.

  Table IV-7--NHTSA Passenger Car Subclasses Example (MY 2008) Vehicles
------------------------------------------------------------------------
               Class                          Example vehicles
------------------------------------------------------------------------
Subcompact........................  Chevrolet Aveo, Hyundai Accent
Subcompact performance............  Mazda MX-5, BMW Z4
Compact...........................  Chevrolet Cobalt, Nissan Sentra and
                                     Altima
Compact performance...............  Audi S4, Mazda RX-8
Mid-size..........................  Chevrolet Impala, Toyota Camry,
                                     Honda Accord, Hyundai Azera
Mid-size performance..............  Chevrolet Corvette, Ford Mustang
                                     (V8), Nissan 350Z
Large.............................  Audi A8, Cadillac CTS and DTS
Large performance.................  Bentley Arnage, Mercedes-Benz CL600
------------------------------------------------------------------------

   Table IV-8--NHTSA Light Truck Subclasses Example (MY 2008) Vehicles
------------------------------------------------------------------------
               Class                          Example vehicles
------------------------------------------------------------------------
Minivans..........................  Dodge Grand Caravan, Toyota Sienna
Small SUV/Pickup/Van..............  Ford Escape and Ranger, Nissan Rogue
Mid-size SUV/Pickup/Van...........  Chevrolet Colorado, Jeep Wrangler,
                                     Toyota Tacoma
Large SUV/Pickup/Van..............  Chevrolet Silverado, Ford E-Series,
                                     Toyota Sequoia
------------------------------------------------------------------------

iv. What technologies have already been applied to the vehicle (i.e.,
where in the ``decision trees'' is it)?
    NHTSA's methodology for technology analysis evaluates the
application of individual technologies and their incremental costs and
effectiveness. Individual technologies are assessed relative to the
prior technology state, which means that it is crucial to understand
what technologies are already present on a vehicle in order to
determine correct incremental cost and effectiveness values. The
benefit of the incremental approach is transparency in accounting,
insofar as when individual technologies are added incrementally to
individual vehicles, it is clear and easy to determine how costs and
effectiveness add up as technology levels increase and explicitly
account for any synergies that exist between technologies which are
already present on the vehicle and new technologies being applied.
    To keep track of incremental costs and effectiveness and to know
which technology to apply and in which order, the CAFE model's
architecture uses a logical sequence, which NHTSA refers to as
``decision trees,'' for applying fuel economy-improving technologies to
individual vehicles. For purposes of this proposal, NHTSA reviewed the
MYs 2012-2016 final rule's technology sequencing architecture, which
was based on the MY 2011 final rule's decision trees that were jointly
developed by NHTSA and Ricardo, and, as appropriate, updated the
decision trees to include new technologies that have been defined for
the MYs 2017-2025 timeframe.
    In general, and as described in great detail in Chapter V of the
current FRIA,\984\ each technology is assigned to one of the five
following categories based on the system it affects or impacts: engine,
transmission, electrification/accessory, hybrid or vehicle. Each of
these categories has its own decision tree that the CAFE model uses to
apply technologies sequentially during the compliance analysis. The
decision trees were designed and configured to allow the CAFE model to
apply technologies in a cost-effective, logical order that also
considers ease of implementation. For example, software or control
logic changes are implemented before replacing a component or system
with a completely redesigned one, which is typically a much more
expensive and integration-intensive option. In some cases, and as
appropriate, the model may combine the sequential technologies shown on
a decision tree and apply them simultaneously, effectively developing
dynamic technology packages on an as-needed basis. For example, if
compliance demands indicate, the model may elect to apply LUB, EFR, and
ICP on a dual overhead cam engine, if they are not already present, in
one single step. An example simplified decision tree for engine
technologies is provided below; the other simplified decision trees may
be found in Chapter V of the FRIA. Expanded decision trees are
available in the docket for this final rule.
---------------------------------------------------------------------------

    \984\ Additional details about technologies are categorized can
be found in the MY 2011 final rule.

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

[GRAPHIC] [TIFF OMITTED] TR15OC12.026

    Each technology within the decision trees has an incremental cost
and an incremental effectiveness estimate associated with it, and
estimates are specific to a particular vehicle subclass (see the tables
in Chapter V of the FRIA). Each technology's incremental estimate takes
into account its position in the decision tree path. If a technology

is located further down the decision tree, the estimates for the costs
and effectiveness values attributed to that technology are influenced
by the incremental estimates of costs and effectiveness values for
prior technology applications. In essence, this approach accounts for
``in-path'' effectiveness synergies, as well as cost effects that occur
between the technologies in the same path. When comparing cost and
effectiveness estimates from various sources and those provided by
commenters in this and the previous CAFE rulemakings, it is important
that the estimates evaluated are analyzed in the proper context,
especially as concerns their likely position in the decision trees and
other technologies that may be present or missing. Not all estimates
available in the public domain or that have been (or will be) offered
for the agencies' consideration can be evaluated in an ``apples-to-
apples'' comparison with those used by the CAFE model, since in some
cases the order of application, or included technology content, is
inconsistent with that assumed in the decision tree.
    The MY 2011 final rule discussed in detail the revisions and
improvements made to the CAFE model and decision trees during that
rulemaking process, including the improved handling and accuracy of
valve train technology application and the development and
implementation of a method for accounting path-dependent correction
factors in order to ensure that technologies are evaluated within the
proper context. The reader should consult the MY 2011 final rule
documents for further information on these modeling techniques, all of
which continued to be utilized in developing this proposal.\985\ To the
extent that the decision trees have changed for purposes of the MYs
2012-2016 final rule and this final rule, it was due not to revisions
in the order of technology application, but rather to redefinitions of
technologies or addition or subtraction of technologies.
---------------------------------------------------------------------------

    \985\ See, e.g., 74 FR 14238-46 (Mar. 30, 2009) for a full
discussion of the decision trees in NHTSA's MY 2011 final rule, and
Docket No. NHTSA-2009-0062-0003.1 for an expanded decision tree used
in that rulemaking.
---------------------------------------------------------------------------

v. Is the next technology available in this model year?
    Some of technologies considered are available on vehicles today,
and thus will be available for application (albeit in varying degrees)
in the model starting in MY 2017. Other technologies, however, will not
become available for purposes of NHTSA's analysis until later in the
rulemaking time frame. When the model is considering whether to add a
technology to a vehicle, it checks its year of availability--if the
technology is available, it may be added; if it is not available, the
model will consider whether to switch to a different decision tree to
look for another technology, or will skip to the next vehicle in a
manufacturer's fleet. The year of availability for each technology is
provided above in Table IV-4.
    The agency has received comments previously stating that if a
technology is currently available or available prior to the rulemaking
timeframe that it should be immediately made available in the model. In
response, as discussed above, technology ``availability'' is not
determined based simply on whether the technology exists, but depends
also on whether the technology has achieved a level of technical
viability that makes it appropriate for widespread application. This
depends in turn on component supplier constraints, capital investment
and engineering constraints, and manufacturer product cycles, among
other things. Moreover, even if a technology is available for
application, it may not be available for every vehicle. Some
technologies may have considerable fuel economy benefits, but are not
applied to some vehicles due to technological constraints--for example,
cylinder deactivation has not been applied to vehicles with current 4-
cylinder engines (because operating on three or fewer cylinders can
cause unacceptable noise, vibration and harshness) or on vehicles with
manual transmissions within the rulemaking timeframe. The agencies have
provided for increases over time to reach the mpg level of the MY 2025
standards precisely because of these types of constraints, because they
have a real effect on how quickly manufacturers can apply technology to
vehicles in their fleets. NHTSA sought comment on the appropriateness
of the assumed years of availability. As discussed above, VW raised
concerns with the viability of high BMEP engines.
vi. Has the technology reached the phase-in cap for this model year?
    Besides the refresh/redesign cycles used in the CAFE model, which
constrain the rate of technology application at the vehicle level so as
to ensure a period of stability following any modeled technology
applications, the other constraint on technology application employed
in NHTSA's analysis is ``phase-in caps.'' Unlike vehicle-level cycle
settings, phase-in caps constrain technology application at the vehicle
manufacturer level.\986\ They are intended to reflect a manufacturer's
overall resource capacity available for implementing new technologies
(such as engineering and development personnel and financial
resources), thereby ensuring that resource capacity is accounted for in
the modeling process. At a high level, phase-in caps and refresh/
redesign cycles work in conjunction with one another to avoid the
modeling process out-pacing an OEM's limited pool of available
resources during the rulemaking time frame and the years leading up to
the rulemaking time frame, especially in years where many models may be
scheduled for refresh or redesign. Even though this rulemaking is being
proposed 5 years before it takes effect, OEMs will still be utilizing
their limited resources to meet the MYs 2012-2016 CAFE standards. This
helps to ensure technological feasibility and economic practicability
in determining the stringency of the standards.
---------------------------------------------------------------------------

    \986\ While phase-in caps are expressed as specific percentages
of a manufacturer's fleet to which a technology may be applied in a
given model year, phase-in caps cannot always be applied as precise
limits, and the CAFE model in fact allows ``override'' of a cap in
certain circumstances. When only a small portion of a phase-in cap
limit remains, or when the cap is set to a very low value, or when a
manufacturer has a very limited product line, the cap might prevent
the technology from being applied at all since any application would
cause the cap to be exceeded. Therefore, the CAFE model evaluates
and enforces each phase-in cap constraint after it has been exceeded
by the application of the technology (as opposed to evaluating it
before application), which can result in the described overriding of
the cap.
---------------------------------------------------------------------------

    NHTSA has been developing the concept of phase-in caps for purposes
of the agency's modeling analysis over the course of the last several
CAFE rulemakings, as discussed in greater detail in the MY 2011 final
rule,\987\ in the MY 2012-2016 final rule and in Chapter V of the FRIA
and Chapter 3 of the Joint TSD. The MYs 2012-2016 final rule like the
MY 2011 final rule employed non-linear phase-in caps (that is, caps
that varied from year to year) that were designed to respond to
previously received comments on technology deployment.
---------------------------------------------------------------------------

    \987\ 74 FR 14195-14456 (Mar. 30, 2009).
---------------------------------------------------------------------------

    For purposes of this final rule, as in the MY 2011 and MYs 2012-
2016 final rules, NHTSA combines phase-in caps for some groups of
similar technologies, such as valve phasing technologies that are
applicable to different forms of engine design (SOHC, DOHC, OHV), since
they are very similar from an engineering and implementation
standpoint. When the phase-in caps for two technologies are combined,
the maximum total application of either or

both to any manufacturer's fleet is limited to the value of the
cap.\988\
---------------------------------------------------------------------------

    \988\ See 74 FR 14270 (Mar. 30, 2009) for further discussion and
examples.
---------------------------------------------------------------------------

    In developing phase-in cap values for purposes of this final rule,
NHTSA reviewed the MYs 2012-2016 final rule's phase-in caps, which for
the majority of technologies were set to reach 85 or 100 percent by MY
2016, although more advanced technologies like diesels and strong
hybrids reach only 15 percent by MY 2016. The phase-in caps used in the
MYs 2012-2016 final were developed to harmonize with EPA's proposal and
consider the fact that manufacturers, as part of the information shared
during the discussions that occurred during summer 2011, appeared to be
anticipating higher technology application rates than assumed in prior
rules. NHTSA determined that these phase-in caps for MY 2016 were still
reasonable and thus used those caps as the starting point for the MYs
2017-2025 phase-in caps. For many of the carryover technologies this
means that for MYs 2017-2025 the phase-in caps are assumed to be 100
percent. NHTSA along with EPA used confidential OEM submissions, trade
press articles, company publications and press releases to estimate the
phase-in caps for the newly defined technologies that will be entering
the market just before or during the MYs 2017-2025 time frame. For
example, advanced cooled EGR engines have a phase-in cap of 3 percent
per year through MY 2021 and then 10 percent per year through 2025. The
agency sought comment on the appropriateness of both the carryover
phase-in caps and the newly defined ones proposed in this NPRM. The
only comment received on phase-in caps was from AFPM, who stated that
the agencies should use lower phase-in caps for electrification
technologies, and consider the 2011 NAS report in developing them. In
our analyses for the final rule, the penetration of electrification
technologies (from strong hybrid to EV) was significantly below the
phase-in caps; thus, changing the phase-in caps would not affect the
analysis. The agencies will continue to monitor the application of
electrification technologies and will revisit the levels of the phase-
in caps for the future rulemaking to develop final standards for MYs
2022-2025 and the concurrent mid-term evaluation.
vii. Is the technology less expensive due to learning effects?
    In the past two rulemakings NHTSA has explicitly accounted for the
cost reductions a manufacturer might realize through learning achieved
from experience in actually applying a technology. These cost
reductions, due to learning effects, were taken into account through
two kinds of mutually exclusive learning, ``volume-based'' and ``time-
based.'' NHTSA and EPA included a detailed description of the learning
effect in the MYs 2012-2016 final rule and the more recent heavy-duty
rule.\989\
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    \989\ 76 FR 57106, 57320 (Sept. 15, 2011).
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    Most studies of the effect of experience or learning on production
costs appear to assume that cost reductions begin only after some
initial volume threshold has been reached, but not all of these studies
specify this threshold volume. The rate at which costs decline beyond
the initial threshold is usually expressed as the percent reduction in
average unit cost that results from each successive doubling of
cumulative production volume, sometimes referred to as the learning
rate. Many estimates of experience curves do not specify a cumulative
production volume beyond which cost reductions would no longer occur,
instead depending on the asymptotic behavior of the effect for learning
rates below 100 percent to establish a floor on costs.
    In past rulemaking analyses, as noted above, both agencies have
used a learning curve algorithm that applied a learning factor of 20
percent for each doubling of production volume. NHTSA has used this
approach in analyses supporting recent CAFE rules. In its analyses, EPA
has simplified the approach by using an ``every two years'' based
learning progression rather than a pure production volume progression
(i.e., after two years of production it was assumed that production
volumes would have doubled and, therefore, costs would be reduced by 20
percent).\990\
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    \990\ To clarify, EPA has simplified the steep portion of the
volume learning curve by assuming that production volumes of a given
technology will have doubled within two years time. This has been
done largely to allow for a presentation of estimated costs during
the years of implementation, without the need to conduct a feedback
loop that ensures that production volumes have indeed doubled. If
EPA was to attempt such a feedback loop, it would need to estimate
first year costs, feed those into OMEGA, review the resultant
technology penetration rate and volume increase, calculate the
learned costs, feed those into OMEGA (since lower costs would result
in higher penetration rates, review the resultant technology
penetration rate and volume increase, etc., until an equilibrium was
reached. To do this for the dozens of technologies considered in the
analysis for this rulemaking was deemed not feasible. Instead, EPA
estimated the effects of learning on costs, fed those costs into
OMEGA, and reviewed the resultant penetration rates. The assumption
that volumes have doubled after two years is based solely on the
assumption that year two sales are of equal or greater number than
year one sales and, therefore, have resulted in a doubling of
production. This could be done on a daily basis, a monthly basis, or
a yearly basis as was done for this analysis.
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    In the MYs 2012-2016 final rule, the agencies employed an
additional learning algorithm to reflect the volume-based learning cost
reductions that occur further along on the learning curve. This
additional learning algorithm was termed ``time-based'' learning simply
as a means of distinguishing this algorithm from the volume-based
algorithm mentioned above, although both of the algorithms reflect the
volume-based learning curve supported in the literature. To avoid
confusion, we are now referring to this learning algorithm as the
``flat portion'' of the learning curve. This way, we maintain the
clarity that all learning is, in fact, volume-based learning, and that
the level of cost reductions depend only on where on the learning curve
a technology's learning progression is. We distinguish the flat portion
of the curve from the ``steep portion'' of the curve to indicate the
level of learning taking place in the years following implementation of
the technology. The agencies have applied the steep portion learning
algorithm for those technologies considered to be newer technologies
likely to experience rapid cost reductions through manufacturer
learning, and the flat portion learning algorithm for those
technologies considered to be mature technologies likely to experience
only minor cost reductions through manufacturer learning. The agencies
employ a number of different learning curves, depending on the nature
of the technology. As an example, as noted above, the steep portion
learning algorithm results in 20 percent lower costs after two full
years of implementation (i.e., the MY 2016 costs are 20 percent lower
than the MYs 2014 and 2015 costs). Once two steep portion learning
steps have occurred (for technologies having the steep portion learning
algorithm applied while flat portion learning would begin in year 2 for
technologies having the flat portion learning algorithm applied), flat
portion learning at 3 percent per year becomes effective for 5 years.
Beyond 5 years of learning at 3 percent per year, 5 years of learning
at 2 percent per year, then 5 at 1 percent per year become effective.
    Technologies assumed to be on the steep portion of the learning
curve are hybrids and electric vehicles, while no learning is applied
to technologies likely to be affected by commodity costs (LUB, ROLL) or
that have loosely-

defined Bills of Materials (EFR, LDB), as was the case in the MY 2012-
2016 final rule. Chapter 3 of the Joint TSD and the Chapter 7 of the
FRIA show the specific learning factors that NHTSA has applied in this
analysis for each technology, and discuss learning factors, each
agency's use of them and how much learning reduces the cost of each
technology. EPA and NHTSA included discussion of learning cost
assumptions in the FRIAs and TSD Chapter 3. Since the agencies had to
project how learning will occur with new technologies over a long
period of time, we requested comments on the assumptions of learning
costs and methodology. In particular, we were interested in input on
the assumptions for advanced 27-bar BMEP cooled EGR engines, which are
currently still in the experimental stage and not expected to be
available in volume production until 2017. For our analysis, we have
based estimates of the costs of high-BMEP engines on current (or soon
to be current) production engines, and assumed that learning (and the
associated cost reductions) begins as early as 2012. We sought comment
on the appropriateness of these pre-production applications of
learning. There were no significant comments on the issue of learning
curves.
viii. Is the technology more or less effective due to synergistic
effects?
    When two or more technologies are added to a particular vehicle
model to improve its fuel efficiency and reduce CO2
emissions, the resultant fuel consumption reduction may sometimes be
higher or lower than the product of the individual effectiveness values
for those items.\991\ This may occur because one or more technologies
applied to the same vehicle partially address the same source (or
sources) of engine, drivetrain or vehicle losses. Alternately, this
effect may be seen when one technology shifts the engine operating
points, and therefore increases or reduces the fuel consumption
reduction achieved by another technology or set of technologies. The
difference between the observed fuel consumption reduction associated
with a set of technologies and the product of the individual
effectiveness values in that set is referred to for purposes of this
rulemaking as a ``synergy.'' Synergies may be positive (increased fuel
consumption reduction compared to the product of the individual
effects) or negative (decreased fuel consumption reduction). An example
of a positive synergy might be a vehicle technology that reduces road
loads at highway speeds (e.g., lower aerodynamic drag or low rolling
resistance tires), that could extend the vehicle operating range over
which cylinder deactivation may be employed. An example of a negative
synergy might be a variable valvetrain system technology, which reduces
pumping losses by altering the profile of the engine speed/load map,
and a six-speed automatic transmission, which shifts the engine
operating points to a portion of the engine speed/load map where
pumping losses are less significant.
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    \991\ More specifically, the products of the differences between
one and the technology-specific levels of effectiveness in reducing
fuel consumption. For example, not accounting for interactions, if
technologies A and B are estimated to reduce fuel consumption by 10
percent (i.e., 0.1) and 20 percent (i.e., 0.2) respectively, the
``product of the individual effectiveness values'' would be (1 -
0.1) times (1 - 0.2), or 0.9 times 0.8, which equals 0.72,
corresponding to a combined effectiveness of 28 percent rather than
the 30 percent obtained by adding 10 percent to 20 percent. The
``synergy factors'' discussed in this section further adjust these
multiplicatively combined effectiveness values.
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    As the complexity of the technology combinations is increased, and
the number of interacting technologies grows accordingly, it becomes
increasingly important to account for these synergies. NHTSA and EPA
determined synergistic impacts for this proposed rule using EPA's
``lumped parameter'' analysis tool, which EPA describes at length in
Chapter 3 of the joint TSD. The lumped parameter tool is a spreadsheet
model that represents energy consumption in terms of average
performance over the fuel economy test procedure, rather than
explicitly analyzing specific drive cycles. The tool begins with an
apportionment of fuel consumption across several loss mechanisms and
accounts for the average extent to which different technologies affect
these loss mechanisms using estimates of engine, drivetrain and vehicle
characteristics that are averaged over the 2-cycle CAFE drive cycle.
Results of this analysis were generally consistent with those of full-
scale vehicle simulation modeling performed in 2010-2011 for EPA by
Ricardo, Inc.
    For the current rulemaking, NHTSA is using an updated version of
lumped parameter tool that incorporates results from simulation
modeling performed in 2010-2011 by Ricardo, Inc. NHTSA and EPA
incorporate synergistic impacts in their analyses in slightly different
manners. Because NHTSA applies technologies individually in its
modeling analysis, NHTSA incorporates synergistic effects between
pairings of individual technologies. The use of discrete technology
pair incremental synergies is similar to that in DOE's National Energy
Modeling System (NEMS).\992\ Inputs to the CAFE model incorporate NEMS-
identified pairs, as well as additional pairs from the set of
technologies considered in the CAFE model.
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    \992\ U.S. Department of Energy, Energy Information
Administration, Transportation Sector Module of the National Energy
Modeling System: Model Documentation 2007, May 2007, Washington, DC,
DOE/EIAM070(2007), at 29-30. Available at http://tonto.eia.doe.gov/ftproot/modeldoc/m070(2007).pdf (last accessed Sept. 25, 2011).
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    NHTSA notes that synergies that occur within a decision tree are
already addressed within the incremental values assigned and therefore
do not require a synergy pair to address. For example, all engine
technologies take into account incremental synergy factors of preceding
engine technologies, and all transmission technologies take into
account incremental synergy factors of preceding transmission
technologies. These factors are expressed in the fuel consumption
improvement factors in the input files used by the CAFE model.
    For applying incremental synergy factors in separate path
technologies, the CAFE model uses an input table (see the tables in
Chapter 3 of the TSD and in the FRIA) that lists technology pairings
and incremental synergy factors associated with those pairings, most of
which are between engine technologies and transmission/electrification/
hybrid technologies. When a technology is applied to a vehicle by the
CAFE model, all instances of that technology in the incremental synergy
table which match technologies already applied to the vehicle (either
pre-existing or previously applied by the CAFE model) are summed and
applied to the fuel consumption improvement factor of the technology
being applied. Many of the synergies for the strong hybrid technology
fuel consumption reductions are included in the incremental value for
the specific hybrid technology block since the model applies all
available electrification, engine and transmission technologies before
applying strong hybrid technologies.
    As discussed in the proposal, the U.S. DOT Volpe Center has entered
into a contract with Argonne National Laboratory (ANL) to provide full
vehicle simulation modeling support for this MYs 2017-2025 rulemaking.
While modeling was not complete in time for use in the NPRM, the ANL
results were available for the final rule and were used to define the
effectiveness of mild hybrids for both agencies, and NHTSA used the
results to update the effectiveness of advanced transmission
technologies coupled with naturally-aspirated engines for the CAFE
analysis.

This simulation modeling was accomplished using ANL's full vehicle
simulation tool called ``Autonomie,'' which is the successor to ANL's
Powertrain System Analysis Toolkit (PSAT) simulation tool, and which
includes sophisticated models for advanced vehicle technologies. The
ANL simulation modeling process and results are discussed in greater
detail in Chapter V of NHTSA's FRIA and fully documented in multiple
reports that can be found in NHTSA's docket.\993\
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    \993\ Moawad, A. and Rousseau, A., ``Impact of Transmission
Technologies on Fuel Efficiency,'' Energy Systems Division, Argonne