phase down to a value of 1.3 in MY 2021.\55\ The multiplier would be
1.0 for MYs 2022-2025.
---------------------------------------------------------------------------

    \55\ The multipliers for EV/FCV would be: 2017-2019--2.0, 2020--
1.75, 2021--1.5; for PHEV: 2017-2019--1.6, 2020--1.45, 2021--1.3.
---------------------------------------------------------------------------

    NHTSA currently interprets EPCA and EISA as precluding the agency
from offering additional incentives for EVs, FCVs and PHEVs, except as
specified by statute,\56\ and thus is not proposing incentive
multipliers comparable to the EPA incentive multipliers described
above.
---------------------------------------------------------------------------

    \56\ Because 49 U.S.C. 32904(a)(2)(B) expressly requires EPA to
calculate the fuel economy of electric vehicles using the Petroleum
Equivalency Factor developed by DOE, which contains an incentive for
electric operation already, and because 49 U.S.C. 32905(a) expressly
requires EPA to calculate the fuel economy of FCVs using a specified
incentive, NHTSA believes that Congress' having provided clear
incentives for these technologies in the CAFE program suggests that
additional incentives beyond those would not be consistent with
Congress' intent. Similarly, because the fuel economy of PHEVs'
electric operation must also be calculated using DOE's PEF, the
incentive for electric operation appears to already be inherent in
the statutory structure.
---------------------------------------------------------------------------

    For EVs, PHEVs and FCVs, EPA is proposing to set a value of 0 g/
mile for the tailpipe compliance value for EVs, PHEVs (electricity
usage) and FCVs for MY 2017-2021, with no limit on the quantity of
vehicles eligible for 0 g/mi tailpipe emissions accounting. For MY
2022-2025, EPA is proposing that 0 g/mi only be allowed up to a per-
company cumulative sales cap, tiered as follows: 1) 600,000 vehicles
for companies that sell 300,000 EV/PHEV/FCVs in MYs 2019-2021; 2)
200,000 vehicles for all other manufacturers. EPA believes the
industry-wide impact of such a tiered cap will be approximately 2
million vehicles. EPA

proposes to phase-in the change in compliance value, from 0 grams per
mile to net upstream accounting, for any manufacturer that exceeds its
cumulative production cap for EV/PHEV/FCVs. EPA proposes that, starting
with MY 2022, the compliance value for EVs, FCVs, and the electric
portion of PHEVs in excess of individual automaker cumulative
production caps would be based on net upstream accounting.
    For EVs and other dedicated alternative fuel vehicles, EPA is
proposing to calculate fuel economy for the CAFE program using the same
methodology as in the MYs 2012-2016 rulemaking, which aligns with EPCA/
EISA statutory requirements. For liquid alternative fuels, this
methodology generally counts 15 percent of the volume of fuel used in
determine the mpg-equivalent fuel economy. For gaseous alternative
fuels, the methodology generally determines a gasoline equivalent mpg
based on the energy content of the gaseous fuel consumed, and then
adjusts the fuel consumption by effectively only counting 15 percent of
the actual energy consumed. For electricity, the methodology generally
determines a gasoline equivalent mpg by measuring the electrical energy
consumed, and then using a petroleum equivalency factor (PEF) to
convert to an mpg-equivalent value. The PEF for electricity includes an
adjustment that effectively only counts 15 percent of the actual energy
consumed. Counting 15 percent of the volume or energy provides an
incentive for alternative fuels in the CAFE program.
    The methodology that EPA is proposing for dual fueled vehicles
under the GHG program and to calculate fuel economy for the CAFE
program is discussed below in subsection I.B.7.a.
e. Incentives for ``Game Changing'' Technologies Performance for Full-
Size Pickup Truck Including Hybridization
    The agencies recognize that the standards under consideration for
MYs 2017-2025 will be challenging for large trucks, including full size
pickup trucks. In order to incentivize the penetration into the
marketplace of ``game changing'' technologies for these pickups,
including their hybridization, EPA is proposing a CO2 credit
in the GHG program and an equivalent fuel consumption improvement value
in the CAFE program for manufacturers that employ significant
quantities of hybridization on full size pickup trucks, by including a
per-vehicle CO2 credit and fuel consumption improvement
value available for mild and strong hybrid electric vehicles (HEVs).
EPA would provide the incentive for the GHG program under EPA's CAA
authority and the incentive for the CAFE program under EPA's EPCA
authority. EPA's GHG and NHTSA's CAFE proposed standards are set at
levels that take into account this flexibility as an incentive for the
introduction of advanced technology. This provides the opportunity to
begin to transform the most challenging category of vehicles in terms
of the penetration of advanced technologies, which, if successful at
incentivizing these ``game changing technologies,'' should allow
additional opportunities to successfully achieve the higher levels of
truck stringencies in MYs 2022-2025.
    EPA is proposing that access to this credit and fuel consumption
improvement value be conditioned on a minimum penetration of the
technology in a manufacturer's full size pickup truck fleet, and is
proposing criteria for a full size pickup truck (e.g., minimum bed size
and minimum towing or payload capability). EPA is proposing that mild
HEV pickup trucks would be eligible for a per vehicle credit of 10 g/mi
\57\ during MYs 2017-2021 if the technology is used on a minimum
percentage of a company's full size pickups, beginning with at least
30% of a company's full size pickup production in 2017 and ramping up
to at least 80% in MY 2021. Strong HEV pickup trucks would be eligible
for a 20 g/mi per \58\ vehicle credit during MYs 2017-2025 if the
technology is used on at least 10% of the company's full size pickups.
These volume thresholds are being proposed in order to encourage rapid
penetration of these technologies in this vehicle segment. EPA and
NHTSA are proposing specific definitions of mild and strong HEV pickup
trucks.
---------------------------------------------------------------------------

    \57\ 0.001125 gallon/mile.
    \58\ 0.00225 gallon/mile.
---------------------------------------------------------------------------

    Because there are other technologies besides mild and strong
hybrids which can significantly reduce GHG emissions and fuel
consumption in pickup trucks, EPA is also proposing a performance-based
incentive CO2 emissions credit and equivalent fuel
consumption improvement value for full size pickup trucks that achieve
a significant CO2 reduction below/fuel economy improvement
above the applicable target. This would be available for vehicles
achieving significant CO2 reductions/fuel economy
improvements through the use of technologies other than hybrid drive
systems. EPA is proposing that eligible pickup trucks achieving 15
percent below their applicable CO2 target would receive a 10
g/mi credit, and those achieving 20 percent below their target would
receive a 20 g/mi credit. The 10 g/mi performance-based credit would be
available for MYs 2017 to 2021 and a vehicle meeting the requirements
would receive the credit until MY 2021 unless its CO2 level
increases. The 20 g/mi performance-based credit would be available for
a maximum of 5 years within the model years of 2017 to 2025, provided
the CO2 level does not increase for those vehicles earning
the credit. The credits would begin in the model year of the eligible
vehicle's introduction, and could not extend past MY 2021 for the 10 g/
mi credit and MY 2025 for the 20 g/mi credit.
    To avoid double-counting, the same vehicle would not receive credit
under both the HEV and the performance based approaches.
5. Mid-Term Evaluation
    Given the long time frame at issue in setting standards for MYs
2022-2025, and given NHTSA's obligation to conduct a separate
rulemaking in order to establish final standards for vehicles for those
model years, EPA and NHTSA are proposing a comprehensive mid-term
evaluation and agency decision-making process. As part of this
undertaking, both NHTSA and EPA will develop and compile up-to-date
information for the evaluation, through a collaborative, robust and
transparent process, including public notice and comment. The
evaluation will be based on (1) a holistic assessment of all of the
factors considered by the agencies in setting standards, including
those set forth in the rule and other relevant factors, and (2) the
expected impact of those factors on the manufacturers' ability to
comply, without placing decisive weight on any particular factor or
projection. The comprehensive evaluation process will lead to final
agency action by both agencies.
    Consistent with the agencies' commitment to maintaining a single
national framework for regulation of vehicle emissions and fuel
economy, the agencies fully expect to conduct the mid-term evaluation
in close coordination with the California Air Resources Board (CARB).
Moreover, the agencies fully expect that any adjustments to the GHG
standards will be made with the participation of CARB and in a manner
that ensures continued harmonization of state and federal vehicle
standards.
    Further discussion of the mid-term evaluation can be found in
section III and IV of the proposal.

6. Coordinated Compliance
    The MYs 2012-2016 final rules established detailed and
comprehensive regulatory provisions for compliance and enforcement
under the GHG and CAFE programs. These provisions remain in place for
model years beyond MY 2016 without additional action by the agencies
and EPA and NHTSA are not proposing any significant modifications to
them. In the MYs 2012-2016 final rule, NHTSA and EPA established a
program that recognizes, and replicates as closely as possible, the
compliance protocols associated with the existing CAA Tier 2 vehicle
emission standards, and with earlier model year CAFE standards. The
certification, testing, reporting, and associated compliance activities
established for the GHG program closely track those in previously
existing programs and are thus familiar to manufacturers. EPA already
oversees testing, collects and processes test data, and performs
calculations to determine compliance with both CAFE and CAA standards.
Under this coordinated approach, the compliance mechanisms for both
programs are consistent and non-duplicative. EPA also applies the CAA
authorities applicable to its separate in-use requirements in this
program.
    The compliance approach allows manufacturers to satisfy the GHG
program requirements in the same general way they comply with
previously existing applicable CAA and CAFE requirements. Manufacturers
will demonstrate compliance on a fleet-average basis at the end of each
model year, allowing model-level testing to continue throughout the
year as is the current practice for CAFE determinations. The compliance
program design includes a single set of manufacturer reporting
requirements and relies on a single set of underlying data. This
approach still allows each agency to assess compliance with its
respective program under its respective statutory authority. The
program also addresses EPA enforcement in cases of noncompliance.
7. Additional Program Elements
a. Treatment of Compressed Natural Gas (CNG), Plug-in Hybrid Electric
Vehicles (PHEVs), and Flexible Fuel Vehicles (FFVs)
    EPA is proposing that CO2 compliance values for plug-in
hybrid electric vehicles (PHEVs) and bi-fuel compressed natural gas
(CNG) vehicles will be based on estimated use of the alternative fuels,
recognizing that, once a consumer has paid several thousand dollars to
be able to use a fuel that is considerably cheaper than gasoline, it is
very likely that the consumer will seek to use the cheaper fuel as much
as possible. Accordingly, for CO2 emissions compliance, EPA
is proposing to use the Society of Automotive Engineers ``utility
factor'' methodology (based on vehicle range on the alternative fuel
and typical daily travel mileage) to determine the assumed percentage
of operation on gasoline and percentage of operation on the alternative
fuel for both PHEVs and bi-fuel CNG vehicles, along with the
CO2 emissions test values on the alternative fuel and
gasoline.
    EPA is proposing to account for E85 use by flexible fueled vehicles
(FFVs) as in the existing MY 2016 and later program, based on actual
usage of E85 which represents a real-world reduction attributed to
alternative fuels. Unlike PHEV and bi-fuel CNG vehicles, there is not a
significant cost differential between an FFV and a conventional
gasoline vehicle and historically consumers have only fueled these
vehicles with E85 a very small percentage of the time.
    In the CAFE program for MYs 2017-2019, the fuel economy of dual
fuel vehicles will be determined in the same manner as specified in the
MY 2012-2016 rule, and as defined by EISA. Beginning in MY 2020, EISA
does not specify how to measure the fuel economy of dual fuel vehicles,
and EPA is proposing under its EPCA authority to use the ``utility
factor'' methodology for PHEV and CNG vehicles described above to
determine how to proportion the fuel economy when operating on gasoline
or diesel fuel and the fuel economy when operating on the alternative
fuel. For FFVs, EPA is proposing to use the same methodology as it uses
for the GHG program to determine how to proportion the fuel economy,
which would be based on actual usage of E85. EPA is proposing to
continue to use Petroleum Equivalency Factors and the 0.15 divisor used
in the MY 2012-2016 rule for the alternative fuels, however with no cap
on the amount of fuel economy increase allowed. This issue is discussed
further in Section III.B.10.
b. Exclusion of Emergency and Police Vehicles
    Under EPCA, manufacturers are allowed to exclude emergency vehicles
from their CAFE fleet \59\ and all manufacturers have historically done
so. In the MYs 2012-2016 program, EPA's GHG program applies to these
vehicles. However, after further consideration of this issue, EPA is
proposing the same type of exclusion provision for these vehicles for
MY 2012 and later because of the unique features of vehicles designed
specifically for law enforcement and emergency purposes, which have the
effect of raising their GHG emissions and calling into question the
ability of manufacturers to sufficiently reduce the emissions from
these vehicles without compromising necessary vehicle features or
dropping vehicles from their fleets.
---------------------------------------------------------------------------

    \59\ 49 U.S.C. 32902(e).
---------------------------------------------------------------------------

c. Small Businesses and Small Volume Manufacturers
    EPA is proposing provisions to address two categories of smaller
manufacturers. The first category is small businesses as defined by the
Small Business Administration (SBA). For vehicle manufacturers, SBA's
definition of small business is any firm with less than 1,000
employees. As with the MYs 2012-2016 program, EPA is proposing to
continue to exempt small businesses from the GHG standards, for any
company that meets the SBA's definition of a small business. EPA
believes this exemption is appropriate given the unique challenges
small businesses would face in meeting the GHG standards, and since
these businesses make up less than 0.1% of total U.S. vehicle sales,
and there is no significant impact on emission reductions.
    EPA's proposal also addresses small volume manufacturers, with U.S.
annual sales of less than 5,000 vehicles. Under the MYs 2012-2016
program, these small volume manufacturers are eligible for an exemption
from the CO2 standards. EPA is proposing to bring small
volume manufacturers into the CO2 program for the first time
starting in MY 2017, and allow them to petition EPA for alternative
standards.
    EPCA provides NHTSA with the authority to exempt from the generally
applicable CAFE standards manufacturers that produce fewer than 10,000
passenger cars worldwide in the model year each of the two years prior
to the year in which they seek an exemption.\60\ If NHTSA exempts a
manufacturer, it must establish an alternate standard for that
manufacturer for that model year, at the level that the agency decides
is maximum feasible for that manufacturer. The exemption and
alternative standard apply only if the exempted manufacturer also
produces fewer than 10,000 passenger cars

worldwide in the year for which the exemption was granted.
---------------------------------------------------------------------------

    \60\ 49 U.S.C. 32902(d). Implementing regulations may be found
in 49 CFR part 525.
---------------------------------------------------------------------------

    Further, the Temporary Lead-time Allowance Alternative Standards
(TLAAS) provisions included in EPA's MYs 2012-2016 program for
manufacturers with MY 2009 U.S. sales of less than 400,000 vehicles
ends after MY 2015 for most eligible manufacturers.\61\ EPA is not
proposing to extend or otherwise replace the TLAAS provisions for the
proposed MYs 2017-2025 program. However, EPA is inviting comment on
whether this or some other form of flexibility is warranted for lower
volume, limited line manufacturers, as further discussed in Section
III.B.8. With the exception of the small businesses and small volume
manufacturers discussed above, the proposed MYs 2017-2025 standards
would apply to all manufacturers.
---------------------------------------------------------------------------

    \61\ TLAAS ends after MY 2016 for manufacturers with MY 2009
U.S. sales of less than 50,000 vehicles.
---------------------------------------------------------------------------

C. Summary of Costs and Benefits for the Proposed National Program

    This section summarizes the projected costs and benefits of the
proposed CAFE and GHG emissions standards. These projections helped
inform the agencies' choices among the alternatives considered and
provide further confirmation that the proposed standards are
appropriate under their respective statutory authorities. The costs and
benefits projected by NHTSA to result from these CAFE standards are
presented first, followed by those from EPA's analysis of the GHG
emissions standards. The agencies recognize that there are
uncertainties regarding the benefit and cost values presented in this
proposal. Some benefits and costs are not quantified. The value of
other benefits and costs could be too low or too high.
    For several reasons, the estimates for costs and benefits presented
by NHTSA and EPA, while consistent, are not directly comparable, and
thus should not be expected to be identical. Most important, NHTSA and
EPA's standards would require slightly different fuel efficiency
improvements. EPA's proposed GHG standard is more stringent in part due
to its assumptions about manufacturers' use of air conditioning leakage
credits, which result from reductions in air conditioning-related
emissions of HFCs. NHTSA is proposing standards at levels of stringency
that assume improvements in the efficiency of air conditioning systems,
but that do not account for reductions in HFCs, which are not related
to fuel economy or energy conservation. In addition, the CAFE and GHG
standards offer somewhat different program flexibilities and
provisions, and the agencies' analyses differ in their accounting for
these flexibilities (examples include the treatment of EVs, dual-fueled
vehicles, and civil penalties), primarily because NHTSA is statutorily
prohibited from considering some flexibilities when establishing CAFE
standards,\62\ while EPA is not. These differences contribute to
differences in the agencies' respective estimates of costs and benefits
resulting from the new standards. Nevertheless, it is important to note
that NHTSA and EPA have harmonized the programs as much as possible,
and this proposal to continue the National Program would result in
significant cost and other advantages for the automobile industry by
allowing them to manufacture one fleet of vehicles across the U.S.,
rather than comply with potentially multiple state standards that may
occur in the absence of the National Program.
---------------------------------------------------------------------------

    \62\ See 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

    In summary, the projected costs and benefits presented by NHTSA and
EPA are not directly comparable, because the levels being proposed by
EPA include air conditioning-related improvements in HFC reductions,
and because of the projection by EPA of complete compliance with the
proposed GHG standards, whereas NHTSA projects some manufacturers will
pay civil penalties as part of their compliance strategy, as allowed by
EPCA. It should also be expected that overall EPA's estimates of GHG
reductions and fuel savings achieved by the proposed GHG standards will
be slightly higher than those projected by NHTSA only for the CAFE
standards because of the same reasons described above. For the same
reasons, EPA's estimates of manufacturers' costs for complying with the
proposed passenger car and light truck GHG standards are slightly
higher than NHTSA's estimates for complying with the proposed CAFE
standards.
1. Summary of Costs and Benefits for the Proposed NHTSA CAFE Standards
    In reading the following section, we note that tables are
identified as reflecting ``estimated required'' values and ``estimated
achieved'' values. When establishing standards, EPCA allows NHTSA to
only consider the fuel economy of dual-fuel vehicles (for example, FFVs
and PHEVs) when operating on gasoline, and prohibits NHTSA from
considering the use of dedicated alternative fuel vehicle credits
(including for example EVs), credit carry-forward and carry-back, and
credit transfer and trading. NHTSA's primary analysis of costs, fuel
savings, and related benefits from imposing higher CAFE standards does
not include them. However, EPCA does not prohibit NHTSA from
considering the fact that manufacturers may pay civil penalties rather
than comply with CAFE standards, and NHTSA's primary analysis accounts
for some manufacturers' tendency to do so. The primary analysis is
generally identified in tables throughout this document by the term
``estimated required CAFE levels.''
    To illustrate the effects of the flexibilities and technologies
that NHTSA is prohibited from including in its primary analysis, NHTSA
performed a supplemental analysis of these effects on benefits and
costs of the proposed CAFE standards that helps to demonstrate the
real-world impacts. As an example of one of the effects, including the
use of FFV credits reduces estimated per-vehicle compliance costs of
the program, but does not significantly change the projected fuel
savings and CO2 reductions, because FFV credits reduce the
fuel economy levels that manufacturers achieve not only under the
proposed standards, but also under the baseline MY 2016 CAFE standards.
As another example, including the operation of PHEV vehicles on both
electricity and gasoline, and the expected use of EVs for compliance
may raise the fuel economy levels that manufacturers achieve under the
proposed standards. The supplemental analysis is generally identified
in tables throughout this document by the term ``estimated achieved
CAFE levels.''
    Thus, NHTSA's primary analysis shows the estimates the agency
considered for purposes of establishing new CAFE standards, and its
supplemental analysis including manufacturer use of flexibilities and
advanced technologies currently reflects the agency's best estimate of
the potential real-world effects of the proposed CAFE standards.
    Without accounting for the compliance flexibilities and advanced
technologies that NHTSA is prohibited from considering when determining
the maximum feasible level of new CAFE standards, since manufacturers'
decisions to use those flexibilities and technologies are voluntary,
NHTSA estimates that the required fuel economy increases would lead to
fuel savings totaling 173 billion gallons throughout the lives of
vehicles sold in MYs 2017-2025. At a 3 percent discount rate, the
present value of the economic benefits resulting from those fuel

savings is $451 billion; at a 7 percent private discount rate, the
present value of the economic benefits resulting from those fuel
savings is $358 billion.
    The agency further estimates that these new CAFE standards would
lead to corresponding reductions in CO2 emissions totaling
1.8 billion metric tons during the lives of vehicles sold in MYs 2017-
2025. The present value of the economic benefits from avoiding those
emissions is $49 billion, based on a global social cost of carbon value
of $22 per metric ton (in 2010, and growing thereafter).\63\ It is
important to note that NHTSA's CAFE standards and EPA's GHG standards
will both be in effect, and each will lead to increases in average fuel
economy and CO2 reductions. The two agencies standards
together comprise the National Program, and this discussion of the
costs and benefits of NHTSA's CAFE standards does not change the fact
that both the CAFE and GHG standards, jointly, are the source of the
benefits and costs of the National Program. All costs are in 2009
dollars.
---------------------------------------------------------------------------

    \63\ NHTSA also estimated the benefits associated with three
more estimates of a one ton GHG reduction in 2009 ($5, $36, and
$67), which will likewise grow thereafter. See Section II for a more
detailed discussion of the social cost of carbon.
    \64\ The ``Earlier'' column shows benefits that NHTSA forecasts
manufacturers will implement in model years prior to 2017 that are
in response to the proposed MY 2017-2025 standards. The CAFE model
forecasts that manufactures will implement some technologies, and
achieve benefits during vehicle redesigns that occur prior to MY
2017 in order to comply with MY 2017 and later standards in a cost
effective manner.
[GRAPHIC] [TIFF OMITTED] TP01DE11.011

[GRAPHIC] [TIFF OMITTED] TP01DE11.012

    Considering manufacturers' ability to employ compliance
flexibilities and advanced technologies for meeting the standards,
NHTSA estimates the following for fuel savings and avoided
CO2 emissions, assuming FFV credits

would be used toward both the baseline and final standards:
[GRAPHIC] [TIFF OMITTED] TP01DE11.013

NHTSA estimates that the fuel economy increases resulting from the
proposed standards would produce other benefits both to drivers (e.g.,
reduced time spent refueling) and to the U.S. as a whole (e.g.,
reductions in the costs of petroleum imports beyond the direct savings
from reduced oil purchases),\65\ as well as some disbenefits (e.g.,
increased traffic congestion) caused by drivers' tendency to travel
more when the cost of driving declines (as it does when fuel economy
increases). NHTSA has estimated the total monetary value to society of
these benefits and disbenefits, and estimates that the proposed
standards will produce significant net benefits to society. Using a 3
percent discount rate, NHTSA estimates that the present value of these
benefits would total more than $515 billion over the lives of the
vehicles sold during MYs 2017-2025; using a 7 percent discount rate,
more than $419 billion. More discussion regarding monetized benefits
can be found in Section IV of this notice and in NHTSA's PRIA. Note
that the benefit calculation in the following tables includes the
benefits of reducing CO2 emissions,\66\ but not the benefits
of reducing other GHG emissions.
---------------------------------------------------------------------------

    \65\ We note, of course, that reducing the amount of fuel
purchased also reduces tax revenue for the Federal and state/local
governments. NHTSA discusses this issue in more detail in Chapter
VIII of the PRIA.
    \66\ CO2 benefits for purposes of these tables are
calculated using the $22/ton SCC values. Note that the net present
value of reduced GHG emissions is calculated differently from other
benefits. The same discount rate used to discount the value of
damages from future emissions (SCC at 5, 3, and 2.5 percent) is used
to calculate net present value of SCC for internal consistency.

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

[GRAPHIC] [TIFF OMITTED] TP01DE11.014

    Considering manufacturers' ability to employ compliance
flexibilities and advanced technologies for meeting the standards,
NHTSA estimates the present value of these benefits would be reduced as
follows:

[GRAPHIC] [TIFF OMITTED] TP01DE11.015

    NHTSA attributes most of these benefits (about $451 billion at a 3
percent discount rate, or about $358 billion at a 7 percent discount
rate, excluding consideration of compliance flexibilities and advanced
technologies for meeting the standards) to reductions in fuel
consumption, valuing fuel (for societal purposes) at the future pre-tax
prices projected in the Energy Information Administration's (EIA)
reference case forecast from the Annual Energy Outlook (AEO) 2011.
NHTSA's PRIA accompanying this proposal

presents a detailed analysis of specific benefits of the rule.
[GRAPHIC] [TIFF OMITTED] TP01DE11.016

    NHTSA estimates that the increases in technology application
necessary to achieve the projected improvements in fuel economy will
entail considerable monetary outlays. The agency estimates that the
incremental costs for achieving the proposed CAFE standards--that is,
outlays by vehicle manufacturers over and above those required to
comply with the MY 2016 CAFE standards--will total about $157 billion
(i.e., during MYs 2017-2025).
[GRAPHIC] [TIFF OMITTED] TP01DE11.017

    However, NHTSA estimates that manufacturers employing compliance
flexibilities and advanced technologies to meet the standards could
significantly reduce these outlays:
[GRAPHIC] [TIFF OMITTED] TP01DE11.018

    NHTSA projects that manufacturers will recover most or all of these
additional costs through higher selling prices for new cars and light
trucks. To allow manufacturers to recover these increased outlays (and,
to a much less extent, the civil penalties that some manufacturers are
expected to pay for non-compliance), the agency estimates that the
standards would lead to increase in average new vehicle prices ranging
from $161 per vehicle in MY 2017 to $1876 per vehicle in MY 2025:
[GRAPHIC] [TIFF OMITTED] TP01DE11.019

    And as before, NHTSA estimates that manufacturers employing
compliance flexibilities and advanced technologies to meet the
standards could significantly reduce these increases.
[GRAPHIC] [TIFF OMITTED] TP01DE11.020

    NHTSA estimates, therefore, that the total benefits of these
proposed CAFE standards will be more than 2.5 times the magnitude of
the corresponding costs. As a consequence, the proposed CAFE standards
would produce net benefits of $358 billion at a 3 percent discount rate
(with compliance flexibilities, $355 billion), or $262 billion at a 7
percent discount rate (with compliance flexibilities, $264 billion),
over the useful lives of the vehicles sold during MYs 2017-2025.
2. Summary of Costs and Benefits for the Proposed EPA GHG Standards
    EPA has analyzed in detail the costs and benefits of the proposed
GHG standards. Table I-17 shows EPA's estimated lifetime discounted
cost, fuel savings, and benefits for all vehicles projected to be sold
in model years 2017-2025. The benefits include impacts such as climate-
related economic benefits from reducing emissions of CO2
(but not other GHGs), reductions in energy security externalities
caused by U.S. petroleum consumption and imports, the value of certain
health benefits, the value of additional driving attributed to the
rebound effect, the value of reduced refueling time needed to fill up a
more

fuel efficient vehicle. The analysis also includes economic impacts
stemming from additional vehicle use, such as the economic damages
caused by accidents, congestion and noise. Note that benefits depend on
estimated values for the social cost of carbon (SCC), as described in
Section III.H.
BLLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TP01DE11.021

[GRAPHIC] [TIFF OMITTED] TP01DE11.022

BLLING CODE 4910-59-C
    Table I-18 shows EPA's estimated lifetime fuel savings and
CO2 equivalent emission reductions for all vehicles sold in
the model years 2017-2025. The values in Table I-18 are projected
lifetime totals for each model year and are not discounted. As
documented in EPA's draft RIA, the potential credit transfer between
cars and trucks may change the distribution of the fuel savings and GHG
emission impacts between cars and trucks. As discussed above with
respect to NHTSA's CAFE standards, it is important to note that NHTSA's
CAFE standards and EPA's GHG standards will both be in effect, and each
will lead to increases in average fuel economy and reductions in
CO2 emissions. The two agencies' standards together comprise
the National Program, and this discussion of costs and benefits of
EPA's proposed GHG standards does not change the fact that both the
proposed CAFE and GHG standards, jointly, are the source of the
benefits and costs of the National Program. In general though, in
addition to the added GHG benefit of HFC reductions from the EPA
program, the fuel savings benefit are also somewhat higher than that
from CAFE, primarily because of the possibility of paying civil
penalties in lieu of applying technology in NHTSA's program, which is
required by EPCA.
BILLING CODE 4910-59-P

[GRAPHIC] [TIFF OMITTED] TP01DE11.023

BILLING CODE 4910-59-C
    Table I-19 shows EPA's estimated lifetime discounted benefits for
all vehicles sold in model years 2017-2025. Although EPA estimated the
benefits

associated with four different values of a one ton GHG reduction ($5,
$22 $36, $67 in CY 2010 and in 2009 dollars), for the purposes of this
overview presentation of estimated benefits EPA is showing the benefits
associated with one of these marginal values, $22 per ton of
CO2, in 2009 dollars and 2010 emissions. Table I-19 presents
benefits based on the $22 value. Section III.H presents the four
marginal values used to estimate monetized benefits of GHG reductions
and Section III.H presents the program benefits using each of the four
marginal values, which represent only a partial accounting of total
benefits due to omitted climate change impacts and other factors that
are not readily monetized. The values in the table are discounted
values for each model year of vehicles throughout their projected
lifetimes. The benefits include all benefits considered by EPA such as
GHG reductions, PM benefits, energy security and other externalities
such as reduced refueling time and accidents, congestion and noise. The
lifetime discounted benefits are shown for one of four different social
cost of carbon (SCC) values considered by EPA. The values in Table I-19
do not include costs associated with new technology required to meet
the GHG standard and they do not include the fuel savings expected from
that technology.

[GRAPHIC] [TIFF OMITTED] TP01DE11.024

    Table I-20 shows EPA's estimated lifetime fuel savings, lifetime
CO2 emission reductions, and the monetized net present
values of those fuel savings and CO2 emission reductions.
The fuel savings and CO2 emission reductions are projected
lifetime values for all vehicles sold in the model years 2017-2025. The
estimated fuel savings in billions of gallons and the GHG reductions in
million metric tons of CO2 shown in Table I-20 are totals
for the nine model years throughout their projected lifetime and are
not discounted. The monetized values shown in Table I-20 are the summed
values of the discounted monetized fuel savings and monetized
CO2 reductions for the model years 2017-2025 vehicles
throughout their lifetimes. The monetized values in Table I-20 reflect

both a 3 percent and a 7 percent discount rate as noted.
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TP01DE11.025

BILLING CODE 4910-59-C
    Table I-21 shows EPA's estimated incremental and total technology
outlays for cars and trucks for each of the model years 2017-2025. The
technology outlays shown in Table I-21 are for the industry as a whole
and do not account for fuel savings associated with the program. Table
I-22 shows EPA's estimated incremental cost increase of the average new
vehicle for each model year 2017-2025. The values shown are incremental
to a baseline vehicle and are not cumulative. In other words, the
estimated increase for 2017 model year cars is $194 relative to a 2017
model year car meeting the MY 2016 standards. The estimated increase

for a 2018 model year car is $353 relative to a 2018 model year car
meeting the MY 2016 standards (not $194 plus $353).
[GRAPHIC] [TIFF OMITTED] TP01DE11.026

D. Background and Comparison of NHTSA and EPA Statutory Authority

    This section provides the agencies' respective statutory
authorities under which CAFE and GHG standards are established.
1. NHTSA Statutory Authority
    NHTSA establishes CAFE standards for passenger cars and light
trucks for each model year under EPCA, as amended by EISA. EPCA
mandates a

motor vehicle fuel economy regulatory program to meet the various
facets of the need to conserve energy, including the environmental and
foreign policy implications of petroleum use by motor vehicles. EPCA
allocates the responsibility for implementing the program between NHTSA
and EPA as follows: NHTSA sets CAFE standards for passenger cars and
light trucks; EPA establishes the procedures for testing, tests
vehicles, collects and analyzes manufacturers' data, and calculates the
individual and average fuel economy of each manufacturer's passenger
cars and light trucks; and NHTSA enforces the standards based on EPA's
calculations.
a. Standard Setting
    We have summarized below the most important aspects of standard
setting under EPCA, as amended by EISA. For each future model year,
EPCA requires that NHTSA establish separate passenger car and light
truck standards at ``the maximum feasible average fuel economy level
that it decides the manufacturers can achieve in that model year,''
based on the agency's consideration of four statutory factors:
technological feasibility, economic practicability, the effect of other
standards of the Government on fuel economy, and the need of the nation
to conserve energy. EPCA does not define these terms or specify what
weight to give each concern in balancing them; thus, NHTSA defines them
and determines the appropriate weighting that leads to the maximum
feasible standards given the circumstances in each CAFE standard
rulemaking.\67\ For MYs 2011-2020, EPCA further requires that separate
standards for passenger cars and for light trucks be set at levels high
enough to ensure that the CAFE of the industry-wide combined fleet of
new passenger cars and light trucks reaches at least 35 mpg not later
than MY 2020. For model years after 2020, standards need simply be set
at the maximum feasible level.
---------------------------------------------------------------------------

    \67\ See Center for Biological Diversity v. NHTSA, 538 F.3d.
1172, 1195 (9th Cir. 2008) (``The EPCA clearly requires the agency
to consider these four factors, but it gives NHTSA discretion to
decide how to balance the statutory factors--as long as NHTSA's
balancing does not undermine the fundamental purpose of the EPCA:
energy conservation.'').
---------------------------------------------------------------------------

    Because EPCA states that standards must be set for ``* * *
automobiles manufactured by manufacturers,'' and because Congress
provided specific direction on how small-volume manufacturers could
obtain exemptions from the passenger car standards, NHTSA has long
interpreted its authority as pertaining to setting standards for the
industry as a whole. Prior to this NPRM, some manufacturers raised with
NHTSA the possibility of NHTSA and EPA setting alternate standards for
part of the industry that met certain (relatively low) sales volume
criteria--specifically, that separate standards be set so that
``intermediate-size,'' limited-line manufacturers do not have to meet
the same levels of stringency that larger manufacturers have to meet
until several years later. NHTSA seeks comment on whether or how EPCA,
as amended by EISA, could be interpreted to allow such alternate
standards for certain parts of the industry.
i. Factors That Must Be Considered in Deciding the Appropriate
Stringency of CAFE Standards
(1) Technological Feasibility
    ``Technological feasibility'' refers to whether a particular method
of improving fuel economy can be available for commercial application
in the model year for which a standard is being established. Thus, the
agency is not limited in determining the level of new standards to
technology that is already being commercially applied at the time of
the rulemaking, a consideration which is particularly relevant for a
rulemaking with a timeframe as long as the present one. For this
rulemaking, NHTSA has considered all types of technologies that improve
real-world fuel economy, including air-conditioner efficiency, due to
EPA's proposal to allow generation of fuel consumption improvement
values for CAFE purposes based on improvements to air-conditioner
efficiency that improves fuel efficiency.
(2) Economic Practicability
    ``Economic practicability'' refers to whether a standard is one
``within the financial capability of the industry, but not so stringent
as to'' lead to ``adverse economic consequences, such as a significant
loss of jobs or the unreasonable elimination of consumer choice.'' \68\
The agency has explained in the past that this factor can be especially
important during rulemakings in which the automobile industry is facing
significantly adverse economic conditions (with corresponding risks to
jobs). Consumer acceptability is also an element of economic
practicability, one which is particularly difficult to gauge during
times of uncertain fuel prices.\69\ In a rulemaking such as the present
one, looking out into the more distant future, economic practicability
is a way to consider the uncertainty surrounding future market
conditions and consumer demand for fuel economy in addition to other
vehicle attributes. In an attempt to ensure the economic practicability
of attribute-based standards, NHTSA considers a variety of factors,
including the annual rate at which manufacturers can increase the
percentage of their fleet that employ a particular type of fuel-saving
technology, the specific fleet mixes of different manufacturers, and
assumptions about the cost of the standards to consumers and consumers'
valuation of fuel economy, among other things.
---------------------------------------------------------------------------

    \68\ 67 FR 77015, 77021 (Dec. 16, 2002).
    \69\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F.2d
1322 (D.C. Cir. 1986) (Administrator's consideration of market
demand as component of economic practicability found to be
reasonable); Public Citizen v. NHTSA, 848 F.2d 256 (Congress
established broad guidelines in the fuel economy statute; agency's
decision to set lower standard was a reasonable accommodation of
conflicting policies).
---------------------------------------------------------------------------

    It is important to note, however, that the law does not preclude a
CAFE standard that poses considerable challenges to any individual
manufacturer. The Conference Report for EPCA, as enacted in 1975, makes
clear, and the case law affirms, ``a determination of maximum feasible
average fuel economy should not be keyed to the single manufacturer
which might have the most difficulty achieving a given level of average
fuel economy.'' \70\ Instead, NHTSA is compelled ``to weigh the
benefits to the nation of a higher fuel economy standard against the
difficulties of individual automobile manufacturers.'' \71\ The law
permits CAFE standards exceeding the projected capability of any
particular manufacturer as long as the standard is economically
practicable for the industry as a whole. Thus, while a particular CAFE
standard may pose difficulties for one manufacturer, it may also
present opportunities for another. NHTSA has long held that the CAFE
program is not necessarily intended to maintain the competitive
positioning of each particular company. Rather, it is intended to
enhance the fuel economy of the vehicle fleet on American roads, while
protecting motor vehicle safety and being mindful of the risk to the
overall United States economy.
---------------------------------------------------------------------------

    \70\ CEI-I, 793 F.2d 1322, 1352 (D.C. Cir. 1986).
    \71\ Id.
---------------------------------------------------------------------------

(3) The Effect of Other Motor Vehicle Standards of the Government on
Fuel Economy
    ``The effect of other motor vehicle standards of the Government on
fuel economy,'' involves an analysis of the effects of compliance with
emission,

safety, noise, or damageability standards on fuel economy capability
and thus on average fuel economy. In previous CAFE rulemakings, the
agency has said that pursuant to this provision, it considers the
adverse effects of other motor vehicle standards on fuel economy. It
said so because, from the CAFE program's earliest years \72\ until
present, the effects of such compliance on fuel economy capability over
the history of the CAFE program have been negative ones. For example,
safety standards that have the effect of increasing vehicle weight
lower vehicle fuel economy capability and thus decrease the level of
average fuel economy that the agency can determine to be feasible.
---------------------------------------------------------------------------

    \72\ 42 FR 63184, 63188 (Dec. 15, 1977). See also 42 FR 33534,
33537 (Jun. 30, 1977).
---------------------------------------------------------------------------

    In the wake of Massachusetts v. EPA and of EPA's endangerment
finding, granting of a waiver to California for its motor vehicle GHG
standards, and its own establishment of GHG standards, NHTSA is
confronted with the issue of how to treat those standards under EPCA/
EISA, such as in the context of the ``other motor vehicle standards''
provision. To the extent the GHG standards result in increases in fuel
economy, they would do so almost exclusively as a result of inducing
manufacturers to install the same types of technologies used by
manufacturers in complying with the CAFE standards.
    Comment is requested on whether and in what way the effects of the
California and EPA standards should be considered under EPCA/EISA,
e.g., under the ``other motor vehicle standards'' provision, consistent
with NHTSA's independent obligation under EPCA/EISA to issue CAFE
standards. The agency has already considered EPA's proposal and the
harmonization benefits of the National Program in developing its own
proposal.
(4) The Need of the United States To Conserve Energy
    ``The need of the United States to conserve energy'' means ``the
consumer cost, national balance of payments, environmental, and foreign
policy implications of our need for large quantities of petroleum,
especially imported petroleum.'' \73\ Environmental implications
principally include reductions in emissions of carbon dioxide and
criteria pollutants and air toxics. Prime examples of foreign policy
implications are energy independence and security concerns.
---------------------------------------------------------------------------

    \73\ 42 FR 63184, 63188 (1977).
---------------------------------------------------------------------------

(5) Fuel Prices and the Value of Saving Fuel
    Projected future fuel prices are a critical input into the
preliminary economic analysis of alternative CAFE standards, because
they determine the value of fuel savings both to new vehicle buyers and
to society, which is related to the consumer cost (or rather, benefit)
of our need for large quantities of petroleum. In this rule, NHTSA
relies on fuel price projections from the U.S. Energy Information
Administration's (EIA) most recent Annual Energy Outlook (AEO) for this
analysis. Federal government agencies generally use EIA's projections
in their assessments of future energy-related policies.
(6) Petroleum Consumption and Import Externalities
    U.S. consumption and imports of petroleum products impose costs on
the domestic economy that are not reflected in the market price for
crude petroleum, or in the prices paid by consumers of petroleum
products such as gasoline. These costs include (1) Higher prices for
petroleum products resulting from the effect of U.S. oil import demand
on the world oil price; (2) the risk of disruptions to the U.S. economy
caused by sudden reductions in the supply of imported oil to the U.S.;
and (3) expenses for maintaining a U.S. military presence to secure
imported oil supplies from unstable regions, and for maintaining the
strategic petroleum reserve (SPR) to provide a response option should a
disruption in commercial oil supplies threaten the U.S. economy, to
allow the United States to meet part of its International Energy Agency
obligation to maintain emergency oil stocks, and to provide a national
defense fuel reserve. Higher U.S. imports of crude oil or refined
petroleum products increase the magnitude of these external economic
costs, thus increasing the true economic cost of supplying
transportation fuels above the resource costs of producing them.
Conversely, reducing U.S. imports of crude petroleum or refined fuels
or reducing fuel consumption can reduce these external costs.
(7) Air Pollutant Emissions
    While reductions in domestic fuel refining and distribution that
result from lower fuel consumption will reduce U.S. emissions of
various pollutants, additional vehicle use associated with the rebound
effect \74\ from higher fuel economy will increase emissions of these
pollutants. Thus, the net effect of stricter CAFE standards on
emissions of each pollutant depends on the relative magnitudes of its
reduced emissions in fuel refining and distribution, and increases in
its emissions from vehicle use. Fuel savings from stricter CAFE
standards also result in lower emissions of CO2, the main
greenhouse gas emitted as a result of refining, distribution, and use
of transportation fuels. Reducing fuel consumption reduces carbon
dioxide emissions directly, because the primary source of
transportation-related CO2 emissions is fuel combustion in
internal combustion engines.
---------------------------------------------------------------------------

    \74\ The ``rebound effect'' refers to the tendency of drivers to
drive their vehicles more as the cost of doing so goes down, as when
fuel economy improves.
---------------------------------------------------------------------------

    NHTSA has considered environmental issues, both within the context
of EPCA and the National Environmental Policy Act, in making decisions
about the setting of standards from the earliest days of the CAFE
program. As courts of appeal have noted in three decisions stretching
over the last 20 years,\75\ NHTSA defined the ``need of the Nation to
conserve energy'' in the late 1970s as including ``the consumer cost,
national balance of payments, environmental, and foreign policy
implications of our need for large quantities of petroleum, especially
imported petroleum.'' \76\ In 1988, NHTSA included climate change
concepts in its CAFE notices and prepared its first environmental
assessment addressing that subject.\77\ It cited concerns about climate
change as one of its reasons for limiting the extent of its reduction
of the CAFE standard for MY 1989 passenger cars.\78\ Since then, NHTSA
has considered the benefits of reducing tailpipe carbon dioxide
emissions in its fuel economy rulemakings pursuant to the statutory
requirement to consider the nation's need to conserve energy by
reducing fuel consumption.
---------------------------------------------------------------------------

    \75\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 n. 12
(D.C. Cir. 1986); Public Citizen v. NHTSA, 848 F.2d 256, 262-3 n. 27
(D.C. Cir. 1988) (noting that ``NHTSA itself has interpreted the
factors it must consider in setting CAFE standards as including
environmental effects''); and Center for Biological Diversity v.
NHTSA, 538 F.3d 1172 (9th Cir. 2007).
    \76\ 42 FR 63184, 63188 (Dec. 15, 1977) (emphasis added).
    \77\ 53 FR 33080, 33096 (Aug. 29, 1988).
    \78\ 53 FR 39275, 39302 (Oct. 6, 1988).
---------------------------------------------------------------------------

ii. Other Factors Considered by NHTSA
    NHTSA considers the potential for adverse safety consequences when
establishing CAFE standards. This practice is recognized approvingly in
case law.\79\ Under the universal or ``flat''

CAFE standards that NHTSA was previously authorized to establish, the
primary risk to safety came from the possibility that manufacturers
would respond to higher standards by building smaller, less safe
vehicles in order to ``balance out'' the larger, safer vehicles that
the public generally preferred to buy. Under the attribute-based
standards being proposed in this action, that risk is reduced because
building smaller vehicles tends to raise a manufacturer's overall CAFE
obligation, rather than only raising its fleet average CAFE. However,
even under attribute-based standards, there is still risk that
manufacturers will rely on down-weighting to improve their fuel economy
(for a given vehicle at a given footprint target) in ways that may
reduce safety.\80\
---------------------------------------------------------------------------

    \79\ As the United States Court of Appeals pointed out in
upholding NHTSA's exercise of judgment in setting the 1987-1989
passenger car standards, ``NHTSA has always examined the safety
consequences of the CAFE standards in its overall consideration of
relevant factors since its earliest rulemaking under the CAFE
program.'' Competitive Enterprise Institute v. NHTSA (CEI I), 901
F.2d 107, 120 at n.11 (D.C. Cir. 1990).
    \80\ For example, by reducing the mass of the smallest vehicles
rather than the largest, or by reducing vehicle overhang outside the
space measured as ``footprint,'' which results in less crush space.
---------------------------------------------------------------------------

iii. Factors That NHTSA Is Statutorily Prohibited From Considering in
Setting Standards
    EPCA provides that in determining the level at which it should set
CAFE standards for a particular model year, NHTSA may not consider the
ability of manufacturers to take advantage of several EPCA provisions
that facilitate compliance with the CAFE standards and thereby reduce
the costs of compliance. Specifically, in determining the maximum
feasible level of fuel economy for passenger cars and light trucks,
NHTSA cannot consider the fuel economy benefits of ``dedicated''
alternative fuel vehicles (like battery electric vehicles or natural
gas vehicles), must consider dual-fueled automobiles to be operated
only on gasoline or diesel fuel, and may not consider the ability of
manufacturers to use, trade, or transfer credits.\81\ This provision
limits, to some extent, the fuel economy levels that NHTSA can find to
be ``maximum feasible''--if NHTSA cannot consider the fuel economy of
electric vehicles, for example, NHTSA cannot set a standards predicated
on manufacturers' usage of electric vehicles to meet the standards.
---------------------------------------------------------------------------

    \81\ 49 U.S.C. 32902(h). We note, as discussed in greater detail
in Section IV, that NHTSA interprets 32902(h) as reflecting
Congress' intent that statutorily-mandated compliance flexibilities
remain flexibilities. When a compliance flexibility is not
statutorily mandated, therefore, or when it ceases to be available
under the statute, we interpret 32902(h) as no longer binding the
agency's determination of the maximum feasible levels of fuel
economy. For example, when the manufacturing incentive for dual-
fueled automobiles under 49 U.S.C. 32905 and 32906 expires in MY
2019, there is no longer a flexibility left to protect per 32902(h),
so NHTSA considers the calculated fuel economy of plug-in hybrid
electric vehicles for purposes of determining the maximum feasible
standards in MYs 2020 and beyond.
---------------------------------------------------------------------------

iv. Weighing and Balancing of Factors
    NHTSA has broad discretion in balancing the above factors in
determining the average fuel economy level that the manufacturers can
achieve. Congress ``specifically delegated the process of setting * * *
fuel economy standards with broad guidelines concerning the factors
that the agency must consider.'' \82\ The breadth of those guidelines,
the absence of any statutorily prescribed formula for balancing the
factors, the fact that the relative weight to be given to the various
factors may change from rulemaking to rulemaking as the underlying
facts change, and the fact that the factors may often be conflicting
with respect to whether they militate toward higher or lower standards
give NHTSA discretion to decide what weight to give each of the
competing policies and concerns and then determine how to balance
them--``as long as NHTSA's balancing does not undermine the fundamental
purpose of the EPCA: energy conservation,'' \83\ and as long as that
balancing reasonably accommodates ``conflicting policies that were
committed to the agency's care by the statute.'' \84\ Thus, EPCA does
not mandate that any particular number be adopted when NHTSA determines
the level of CAFE standards.
---------------------------------------------------------------------------

    \82\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, at 1341
(D.C. Cir. 1986).
    \83\ CBD v. NHTSA, 538 F.3d at 1195 (9th Cir. 2008).
    \84\ Id.
---------------------------------------------------------------------------

v. Other Requirements Related to Standard Setting
    The standards for passenger cars and for light trucks must increase
ratably each year through MY 2020.\85\ This statutory requirement is
interpreted, in combination with the requirement to set the standards
for each model year at the level determined to be the maximum feasible
level that manufacturers can achieve for that model year, to mean that
the annual increases should not be disproportionately large or small in
relation to each other.\86\ Standards after 2020 must simply be set at
the maximum feasible level.\87\
---------------------------------------------------------------------------

    \85\ 49 U.S.C. 32902(b)(2)(C).
    \86\ See 74 FR 14196, 14375-76 (Mar. 30, 2009).
    \87\ 49 U.S.C. 32902(b)(2)(B).
---------------------------------------------------------------------------

    The standards for passenger cars and light trucks must also be
based on one or more vehicle attributes, like size or weight, which
correlate with fuel economy and must be expressed in terms of a
mathematical function.\88\ Fuel economy targets are set for individual
vehicles and increase as the attribute decreases and vice versa. For
example, footprint-based standards assign higher fuel economy targets
to smaller-footprint vehicles and lower ones to larger footprint-
vehicles. The fleetwide average fuel economy that a particular
manufacturer is required to achieve depends on the footprint mix of its
fleet, i.e., the proportion of the fleet that is small-, medium-, or
large-footprint.
---------------------------------------------------------------------------

    \88\ 49 U.S.C. 32902(b)(3).
---------------------------------------------------------------------------

    This approach can be used to require virtually all manufacturers to
increase significantly the fuel economy of a broad range of both
passenger cars and light trucks, i.e., the manufacturer must improve
the fuel economy of all the vehicles in its fleet. Further, this
approach can do so without creating an incentive for manufacturers to
make small vehicles smaller or large vehicles larger, with attendant
implications for safety.
b. Test Procedures for Measuring Fuel Economy
    EPCA provides EPA with the responsibility for establishing
procedures to measure fuel economy and to calculate CAFE. Current test
procedures measure the effects of nearly all fuel saving technologies.
EPA is considering revising the procedures for measuring fuel economy
and calculating average fuel economy for the CAFE program, however, to
account for four impacts on fuel economy not currently included in
these procedures--increases in fuel economy because of increases in
efficiency of the air conditioning system; increases in fuel economy
because of technology improvements that achieve ``off-cycle'' benefits;
incentives for use of certain hybrid technologies in a significant
percentage of pickup trucks; and incentives for achieving fuel economy
levels in a significant percentage pickup trucks that exceeds the
target curve by specified amounts, in the form of increased values
assigned for fuel economy. NHTSA has taken these proposed changes into
account in determining the proposed fuel economy standards. These
changes would be the same as program elements that are part of EPA's
greenhouse gas performance

standards, discussed in Section III.B.10. As discussed below, these
three elements would be implemented in the same manner as in the EPA's
greenhouse gas program--a vehicle manufacturer would have the option to
generate these fuel economy values for vehicle models that meet the
criteria for these elements and to use these values in calculating
their fleet average fuel economy. This proposed revision to CAFE
calculation is discussed in more detail in Sections III and IV below.
c. Enforcement and Compliance Flexibility
    NHTSA determines compliance with the CAFE standards based on
measurements of automobile manufacturers' CAFE from EPA. If a
manufacturer's passenger car or light truck CAFE level exceeds the
applicable standard for that model year, the manufacturer earns credits
for over-compliance. The amount of credit earned is determined by
multiplying the number of tenths of a mpg by which a manufacturer
exceeds a standard for a particular category of automobiles by the
total volume of automobiles of that category manufactured by the
manufacturer for a given model year. As discussed in more detail in
Section IV.I, credits can be carried forward for 5 model years or back
for 3, and can also be transferred between a manufacturer's fleets or
traded to another manufacturer.
    If a manufacturer's passenger car or light truck CAFE level does
not meet the applicable standard for that model year, NHTSA notifies
the manufacturer. The manufacturer may use ``banked'' credits to make
up the shortfall, but if there are no (or not enough) credits
available, then the manufacturer has the option to submit a ``carry
back plan'' to NHTSA. A carry back plan describes what the manufacturer
plans to do in the following three model years to earn enough credits
to make up for the shortfall through future over-compliance. NHTSA must
examine and determine whether to approve the plan.
    In the event that a manufacturer does not comply with a CAFE
standard, even after the consideration of credits, EPCA provides for
the assessing of civil penalties.\89\ The Act specifies a precise
formula for determining the amount of civil penalties for such a
noncompliance. The penalty, as adjusted for inflation by law, is $5.50
for each tenth of a mpg that a manufacturer's average fuel economy
falls short of the standard for a given model year multiplied by the
total volume of those vehicles in the affected fleet (i.e., import or
domestic passenger car, or light truck), manufactured for that model
year. The amount of the penalty may not be reduced except under the
unusual or extreme circumstances specified in the statute, which have
never been exercised by NHTSA in the history of the CAFE program.
---------------------------------------------------------------------------

    \89\ EPCA does not provide authority for seeking to enjoin
violations of the CAFE standards.
---------------------------------------------------------------------------

    Unlike the National Traffic and Motor Vehicle Safety Act, EPCA does
not provide for recall and remedy in the event of a noncompliance. The
presence of recall and remedy provisions \90\ in the Safety Act and
their absence in EPCA is believed to arise from the difference in the
application of the safety standards and CAFE standards. A safety
standard applies to individual vehicles; that is, each vehicle must
possess the requisite equipment or feature that must provide the
requisite type and level of performance. If a vehicle does not, it is
noncompliant. Typically, a vehicle does not entirely lack an item or
equipment or feature. Instead, the equipment or features fails to
perform adequately. Recalling the vehicle to repair or replace the
noncompliant equipment or feature can usually be readily accomplished.
---------------------------------------------------------------------------

    \90\ 49 U.S.C. 30120, Remedies for defects and noncompliance.
---------------------------------------------------------------------------

    In contrast, a CAFE standard applies to a manufacturer's entire
fleet for a model year. It does not require that a particular
individual vehicle be equipped with any particular equipment or feature
or meet a particular level of fuel economy. It does require that the
manufacturer's fleet, as a whole, comply. Further, although under the
attribute-based approach to setting CAFE standards fuel economy targets
are established for individual vehicles based on their footprints, the
individual vehicles are not required to meet or exceed those targets.
However, as a practical matter, if a manufacturer chooses to design
some vehicles that fall below their target levels of fuel economy, it
will need to design other vehicles that exceed their targets if the
manufacturer's overall fleet average is to meet the applicable
standard.
    Thus, under EPCA, there is no such thing as a noncompliant vehicle,
only a noncompliant fleet. No particular vehicle in a noncompliant
fleet is any more, or less, noncompliant than any other vehicle in the
fleet.
2. EPA Statutory Authority
    Title II of the Clean Air Act (CAA) provides for comprehensive
regulation of mobile sources, authorizing EPA to regulate emissions of
air pollutants from all mobile source categories. Pursuant to these
sweeping grants of authority, EPA considers such issues as technology
effectiveness, its cost (both per vehicle, per manufacturer, and per
consumer), the lead time necessary to implement the technology, and
based on this the feasibility and practicability of potential
standards; the impacts of potential standards on emissions reductions
of both GHGs and non-GHGs; the impacts of standards on oil conservation
and energy security; the impacts of standards on fuel savings by
consumers; the impacts of standards on the auto industry; other energy
impacts; as well as other relevant factors such as impacts on safety
    Pursuant to Title II of the Clean Air Act, EPA has taken a
comprehensive, integrated approach to mobile source emission control
that has produced benefits well in excess of the costs of regulation.
In developing the Title II program, the Agency's historic, initial
focus was on personal vehicles since that category represented the
largest source of mobile source emissions. Over time, EPA has
established stringent emissions standards for large truck and other
heavy-duty engines, nonroad engines, and marine and locomotive engines,
as well. The Agency's initial focus on personal vehicles has resulted
in significant control of emissions from these vehicles, and also led
to technology transfer to the other mobile source categories that made
possible the stringent standards for these other categories.
    As a result of Title II requirements, new cars and SUVs sold today
have emissions levels of hydrocarbons, oxides of nitrogen, and carbon
monoxide that are 98-99% lower than new vehicles sold in the 1960s, on
a per mile basis. Similarly, standards established for heavy-duty
highway and nonroad sources require emissions rate reductions on the
order of 90% or more for particulate matter and oxides of nitrogen.
Overall ambient levels of automotive-related pollutants are lower now
than in 1970, even as economic growth and vehicle miles traveled have
nearly tripled. These programs have resulted in millions of tons of
pollution reduction and major reductions in pollution-related deaths
(estimated in the tens of thousands per year) and illnesses. The net
societal benefits of the mobile source programs are large. In its
annual reports on federal regulations, the Office of Management and
Budget reports that many of EPA's mobile source emissions standards
typically have projected benefit-to-cost ratios of 5:1 to 10:1 or more.
Follow-up studies show that long-term compliance costs to the industry
are typically lower than the

cost projected by EPA at the time of regulation, which result in even
more favorable real world benefit-to-cost ratios.\91\ Pollution
reductions attributable to Title II mobile source controls are critical
components to attainment of primary National Ambient Air Quality
Standards, significantly reducing the national inventory and ambient
concentrations of criteria pollutants, especially PM2.5 and ozone. See
e.g. 69 FR 38958, 38967-68 (June 29, 2004) (controls on non-road diesel
engines expected to reduce entire national inventory of PM2.5 by 3.3%
(86,000 tons) by 2020). Title II controls have also made enormous
reductions in air toxics emitted by mobile sources. For example, as a
result of EPA's 2007 mobile source air toxics standards, the cancer
risk attributable to total mobile source air toxics will be reduced by
30% in 2030 and the risk from mobile source benzene (a leukemogen) will
be reduced by 37% in 2030. (reflecting reductions of over three hundred
thousand tons of mobile source air toxic emissions) 72 FR 8428, 8430
(Feb. 26, 2007).
---------------------------------------------------------------------------

    \91\ OMB, 2011. 2011 Report to Congress on the Benefits and
Costs of Federal Regulations and Unfunded Mandates on State, Local,
and Tribal Entities. Office of Information and Regulatory Affairs.
June. http://www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/2011_cba_report.pdf. Web site accessed on October 11,
2011.
---------------------------------------------------------------------------

    Title II emission standards have also stimulated the development of
a much broader set of advanced automotive technologies, such as on-
board computers and fuel injection systems, which are the building
blocks of today's automotive designs and have yielded not only lower
pollutant emissions, but improved vehicle performance, reliability, and
durability.
    This proposal implements a specific provision from Title II,
section 202(a).\92\ Section 202(a)(1) of the Clean Air Act (CAA) states
that ``the Administrator shall by regulation prescribe (and from time
to time revise) * * * standards applicable to the emission of any air
pollutant from any class or classes of new motor vehicles * * *, which
in his judgment cause, or contribute to, air pollution which may
reasonably be anticipated to endanger public health or welfare.'' If
EPA makes the appropriate endangerment and cause or contribute
findings, then section 202(a) authorizes EPA to issue standards
applicable to emissions of those pollutants.
---------------------------------------------------------------------------

    \92\ 42 U.S.C. 7521 (a)
---------------------------------------------------------------------------

    Any standards under CAA section 202(a)(1) ``shall be applicable to
such vehicles * * * for their useful life.'' Emission standards set by
the EPA under CAA section 202(a)(1) are technology-based, as the levels
chosen must be premised on a finding of technological feasibility.
Thus, standards promulgated under CAA section 202(a) are to take effect
only ``after providing such period as the Administrator finds necessary
to permit the development and application of the requisite technology,
giving appropriate consideration to the cost of compliance within such
period'' (section 202 (a)(2); see also NRDC v. EPA, 655 F. 2d 318, 322
(DC Cir. 1981)). EPA is afforded considerable discretion under section
202(a) when assessing issues of technical feasibility and availability
of lead time to implement new technology. Such determinations are
``subject to the restraints of reasonableness'', which ``does not open
the door to `crystal ball' inquiry.'' NRDC, 655 F. 2d at 328, quoting
International Harvester Co. v. Ruckelshaus, 478 F. 2d 615, 629 (DC Cir.
1973). However, ``EPA is not obliged to provide detailed solutions to
every engineering problem posed in the perfection of the trap-oxidizer.
In the absence of theoretical objections to the technology, the agency
need only identify the major steps necessary for development of the
device, and give plausible reasons for its belief that the industry
will be able to solve those problems in the time remaining. The EPA is
not required to rebut all speculation that unspecified factors may
hinder `real world' emission control.'' NRDC, 655 F. 2d at 333-34. In
developing such technology-based standards, EPA has the discretion to
consider different standards for appropriate groupings of vehicles
(``class or classes of new motor vehicles''), or a single standard for
a larger grouping of motor vehicles (NRDC, 655 F. 2d at 338).
    Although standards under CAA section 202(a)(1) are technology-
based, they are not based exclusively on technological capability. EPA
has the discretion to consider and weigh various factors along with
technological feasibility, such as the cost of compliance (see section
202(a) (2)), lead time necessary for compliance (section 202(a)(2)),
safety (see NRDC, 655 F. 2d at 336 n. 31) and other impacts on
consumers,\93\ and energy impacts associated with use of the
technology. See George E. Warren Corp. v. EPA, 159 F.3d 616, 623-624
(DC Cir. 1998) (ordinarily permissible for EPA to consider factors not
specifically enumerated in the Act).
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    \93\ Since its earliest Title II regulations, EPA has considered
the safety of pollution control technologies. See 45 Fed. Reg.
14,496, 14,503 (1980). (``EPA would not require a particulate
control technology that was known to involve serious safety
problems. If during the development of the trap-oxidizer safety
problems are discovered, EPA would reconsider the control
requirements implemented by this rulemaking'').
---------------------------------------------------------------------------

    In addition, EPA has clear authority to set standards under CAA
section 202(a) that are technology forcing when EPA considers that to
be appropriate, but is not required to do so (as compared to standards
set under provisions such as section 202(a)(3) and section 213(a)(3)).
EPA has interpreted a similar statutory provision, CAA section 231, as
follows:

    While the statutory language of section 231 is not identical to
other provisions in title II of the CAA that direct EPA to establish
technology-based standards for various types of engines, EPA
interprets its authority under section 231 to be somewhat similar to
those provisions that require us to identify a reasonable balance of
specified emissions reduction, cost, safety, noise, and other
factors. See, e.g., Husqvarna AB v. EPA, 254 F.3d 195 (DC Cir. 2001)
(upholding EPA's promulgation of technology-based standards for
small non-road engines under section 213(a)(3) of the CAA). However,
EPA is not compelled under section 231 to obtain the ``greatest
degree of emission reduction achievable'' as per sections 213 and
202 of the CAA, and so EPA does not interpret the Act as requiring
the agency to give subordinate status to factors such as cost,
safety, and noise in determining what standards are reasonable for
aircraft engines. Rather, EPA has greater flexibility under section
231 in determining what standard is most reasonable for aircraft
engines, and is not required to achieve a ``technology forcing''
result.\94\
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    \94\ 70 FR 69664, 69676, November 17, 2005.

    This interpretation was upheld as reasonable in NACAA v. EPA, (489
F.3d 1221, 1230 (DC Cir. 2007)). CAA section 202(a) does not specify
the degree of weight to apply to each factor, and EPA accordingly has
discretion in choosing an appropriate balance among factors. See Sierra
Club v. EPA, 325 F.3d 374, 378 (DC Cir. 2003) (even where a provision
is technology-forcing, the provision ``does not resolve how the
Administrator should weigh all [the statutory] factors in the process
of finding the `greatest emission reduction achievable' ''). Also see
Husqvarna AB v. EPA, 254 F. 3d 195, 200 (DC Cir. 2001) (great
discretion to balance statutory factors in considering level of
technology-based standard, and statutory requirement ``to [give
appropriate] consideration to the cost of applying * * * technology''
does not mandate a specific method of cost analysis); see also Hercules
Inc. v. EPA, 598 F. 2d 91, 106 (DC Cir. 1978) (``In reviewing a
numerical standard we must ask whether the agency's numbers are within
a zone of reasonableness, not

whether its numbers are precisely right''); Permian Basin Area Rate
Cases, 390 U.S. 747, 797 (1968) (same); Federal Power Commission v.
Conway Corp., 426 U.S. 271, 278 (1976) (same); Exxon Mobil Gas
Marketing Co. v. FERC, 297 F. 3d 1071, 1084 (DC Cir. 2002) (same).
a. EPA's Testing Authority
    Under section 203 of the CAA, sales of vehicles are prohibited
unless the vehicle is covered by a certificate of conformity. EPA
issues certificates of conformity pursuant to section 206 of the Act,
based on (necessarily) pre-sale testing conducted either by EPA or by
the manufacturer. The Federal Test Procedure (FTP or ``city'' test) and
the Highway Fuel Economy Test (HFET or ``highway'' test) are used for
this purpose. Compliance with standards is required not only at
certification but throughout a vehicle's useful life, so that testing
requirements may continue post-certification. Useful life standards may
apply an adjustment factor to account for vehicle emission control
deterioration or variability in use (section 206(a)).
    Pursuant to EPCA, EPA is required to measure fuel economy for each
model and to calculate each manufacturer's average fuel economy.\95\
EPA uses the same tests--the FTP and HFET--for fuel economy testing.
EPA established the FTP for emissions measurement in the early 1970s.
In 1976, in response to the Energy Policy and Conservation Act (EPCA)
statute, EPA extended the use of the FTP to fuel economy measurement
and added the HFET.\96\ The provisions in the 1976 regulation,
effective with the 1977 model year, established procedures to calculate
fuel economy values both for labeling and for CAFE purposes. Under
EPCA, EPA is required to use these procedures (or procedures which
yield comparable results) for measuring fuel economy for cars for CAFE
purposes, but not for labeling purposes.\97\ EPCA does not pose this
restriction on CAFE test procedures for light trucks, but EPA does use
the FTP and HFET for this purpose. EPA determines fuel economy by
measuring the amount of CO2 and all other carbon compounds
(e.g. total hydrocarbons (THC) and carbon monoxide (CO)), and then, by
mass balance, calculating the amount of fuel consumed. EPA's proposed
changes to the procedures for measuring fuel economy and calculating
average fuel economy are discussed in section III.B.10.
---------------------------------------------------------------------------

    \95\ See 49 U.S.C. 32904(c).
    \96\ See 41 FR 38674 (Sept. 10, 1976), which is codified at 40
CFR part 600.
    \97\ See 49 U.S.C. 32904(c).
---------------------------------------------------------------------------

b. EPA Enforcement Authority
    Section 207 of the CAA grants EPA broad authority to require
manufacturers to remedy vehicles if EPA determines there are a
substantial number of noncomplying vehicles. In addition, section 205
of the CAA authorizes EPA to assess penalties of up to $37,500 per
vehicle for violations of various prohibited acts specified in the CAA.
In determining the appropriate penalty, EPA must consider a variety of
factors such as the gravity of the violation, the economic impact of
the violation, the violator's history of compliance, and ``such other
matters as justice may require.'' Unlike EPCA, the CAA does not
authorize vehicle manufacturers to pay fines in lieu of meeting
emission standards.
c. Compliance
    EPA oversees testing, collects and processes test data, and
performs calculations to determine compliance with both CAA and CAFE
standards. CAA standards apply not only at the time of certification
but also throughout the vehicle's useful life, and EPA is accordingly
is proposing in-use standards as well as standards based on testing
performed at time of production. See section III.E. Both the CAA and
EPCA provide for penalties should manufacturers fail to comply with
their fleet average standards, but, unlike EPCA, there is no option for
manufacturers to pay fines in lieu of compliance with the standards.
Under the CAA, penalties are typically determined on a vehicle-specific
basis by determining the number of a manufacturer's highest emitting
vehicles that cause the fleet average standard violation. Penalties
under Title II of the CAA are capped at $25,000 per day of violation
and apply on a per vehicle basis. CAA section 205 (a).
d. Test Procedures
    EPA establishes the test procedures under which compliance with
both the CAA GHG standards and the EPCA fuel economy standards are
measured. EPA's testing authority under the CAA is flexible, but
testing for fuel economy for passenger cars is by statute is limited to
the Federal Test procedure (FTP) or test procedures which provide
results which are equivalent to the FTP. 49 USC section 32904 and
section III.B, below. EPA developed and established the FTP in the
early 1970s and, after enactment of EPCA in 1976, added the Highway
Fuel Economy Test to be used in conjunction with the FTP for fuel
economy testing. EPA has also developed tests with additional cycles
(the so-called 5-cycle test) which test is used for purposes of fuel
economy labeling and is also used in the EPA program for extending off-
cycle credits under both the light-duty and (along with NHTSA) heavy-
duty vehicle GHG programs. See 75 FR at 25439; 76 FR at 57252. In this
rule, EPA is proposing to retain the FTP and HFET for purposes of
testing the fleetwide average standards, and is further proposing
modifications to the N2O measurement test procedures and the A/C
CO2 efficiency test procedures EPA initially adopted in the
2012-2016 rule.
3. Comparing the Agencies' Authority
    As the above discussion makes clear, there are both important
differences between the statutes under which each agency is acting as
well as several important areas of similarity. One important difference
is that EPA's authority addresses various GHGs, while NHTSA's authority
addresses fuel economy as measured under specified test procedures and
calculated by EPA. This difference is reflected in this rulemaking in
the scope of the two standards: EPA's proposal takes into account
reductions of direct air conditioning emissions, as well as proposed
standards for methane and N2O, but NHTSA's does not, because
these things do not relate to fuel economy. A second important
difference is that EPA is proposing certain compliance flexibilities,
such as the multiplier for advanced technology vehicles, and takes
those flexibilities into account in its technical analysis and modeling
supporting its proposal. EPCA specifies a number of particular
compliance flexibilities for CAFE, and expressly prohibits NHTSA from
considering the impacts of those statutory compliance flexibilities in
setting the CAFE standard so that the manufacturers' election to avail
themselves of the permitted flexibilities remains strictly
voluntary.\98\ The Clean Air Act, on the other hand, contains no such
prohibition. These considerations result in some differences in the
technical analysis and modeling used to support EPA's and NHTSA's
proposed standards.
---------------------------------------------------------------------------

    \98\ 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

    Another important area where the two agencies' authorities are
similar but not identical involves the transfer of credits between a
single firm's car and truck fleets. EISA revised EPCA to allow for such
credit transfers, but placed a cap on the amount of CAFE credits which
can be transferred between the car and

truck fleets. 49 U.S.C. 32903(g)(3). Under CAA section 202(a), EPA is
proposing to continue to allow CO2 credit transfers between
a single manufacturer's car and truck fleets, with no corresponding
limits on such transfers. In general, the EISA limit on CAFE credit
transfers is not expected to have the practical effect of limiting the
amount of CO2 emission credits manufacturers may be able to
transfer under the CAA program, recognizing that manufacturers must
comply with both the proposed CAFE standards and the proposed EPA
standards. However, it is possible that in some specific circumstances
the EPCA limit on CAFE credit transfers could constrain the ability of
a manufacturer to achieve cost savings through unlimited use of GHG
emissions credit transfers under the CAA program.
    These differences, however, do not change the fact that in many
critical ways the two agencies are charged with addressing the same
basic issue of reducing GHG emissions and improving fuel economy. The
agencies are looking at the same set of control technologies (with the
exception of the air conditioning leakage-related technologies). The
standards set by each agency will drive the kind and degree of
penetration of this set of technologies across the vehicle fleet. As a
result, each agency is trying to answer the same basic question--what
kind and degree of technology penetration is necessary to achieve the
agencies' objectives in the rulemaking time frame, given the agencies'
respective statutory authorities?
    In making the determination of what standards are appropriate under
the CAA and EPCA, each agency is to exercise its judgment and balance
many similar factors. NHTSA's factors are provided by EPCA:
technological feasibility, economic practicability, the effect of other
motor vehicle standards of the Government on fuel economy, and the need
of the United States to conserve energy. EPA has the discretion under
the CAA to consider many related factors, such as the availability of
technologies, the appropriate lead time for introduction of technology,
and based on this the feasibility and practicability of their
standards; the impacts of their standards on emissions reductions (of
both GHGs and non-GHGs); the impacts of their standards on oil
conservation; the impacts of their standards on fuel savings by
consumers; the impacts of their standards on the auto industry; as well
as other relevant factors such as impacts on safety. Conceptually,
therefore, each agency is considering and balancing many of the same
concerns, and each agency is making a decision that at its core is
answering the same basic question of what kind and degree of technology
penetration is it appropriate to call for in light of all of the
relevant factors in a given rulemaking, for the model years concerned.
Finally, each agency has the authority to take into consideration
impacts of the standards of the other agency. EPCA calls for NHTSA to
take into consideration the effects of EPA's emissions standards on
fuel economy capability (see 49 U.S.C. 32902 (f)), and EPA has the
discretion to take into consideration NHTSA's CAFE standards in
determining appropriate action under section 202(a). This is consistent
with the Supreme Court's statement that EPA's mandate to protect public
health and welfare is wholly independent from NHTSA's mandate to
promote energy efficiency, but there is no reason to think the two
agencies cannot both administer their obligations and yet avoid
inconsistency. Massachusetts v. EPA, 549 U.S. 497, 532 (2007).
    In this context, it is in the Nation's interest for the two
agencies to continue to work together in developing their respective
proposed standards, and they have done so. For example, the agencies
have committed considerable effort to develop a joint Technical Support
Document that provides a technical basis underlying each agency's
analyses. The agencies also have worked closely together in developing
and reviewing their respective modeling, to develop the best analysis
and to promote technical consistency. The agencies have developed a
common set of attribute-based curves that each agency supports as
appropriate both technically and from a policy perspective. The
agencies have also worked closely to ensure that their respective
programs will work in a coordinated fashion, and will provide
regulatory compatibility that allows auto manufacturers to build a
single national light-duty fleet that would comply with both the GHG
and the CAFE standards. The resulting overall close coordination of the
proposed GHG and CAFE standards should not be surprising, however, as
each agency is using a jointly developed technical basis to address the
closely intertwined challenges of energy security and climate change.
    As set out in detail in Sections III and IV of this notice, both
EPA and NHTSA believe the agencies' proposals are fully justified under
their respective statutory criteria. The proposed standards are
feasible in each model year within the lead time provided, based on the
agencies' projected increased use of various technologies which in most
cases are already in commercial application in the fleet to varying
degrees. Detailed modeling of the technologies that could be employed
by each manufacturer supports this initial conclusion. The agencies
also carefully assessed the costs of the proposed rules, both for the
industry as a whole and per manufacturer, as well as the costs per
vehicle, and consider these costs to be reasonable during the
rulemaking time frame and recoverable (from fuel savings). The agencies
recognize the significant increase in the application of technology
that the proposed standards would require across a high percentage of
vehicles, which will require the manufacturers to devote considerable
engineering and development resources before 2017 laying the critical
foundation for the widespread deployment of upgraded technology across
a high percentage of the 2017-2025 fleet. This clearly will be
challenging for automotive manufacturers and their suppliers,
especially in the current economic climate, and given the stringency of
the recently-established MYs 2012-2016 standards. However, based on all
of the analyses performed by the agencies, our judgment is that it is a
challenge that can reasonably be met.
    The agencies also evaluated the impacts of these standards with
respect to the expected reductions in GHGs and oil consumption and,
found them to be very significant in magnitude. The agencies considered
other factors such as the impacts on noise, energy, and vehicular
congestion. The impact on safety was also given careful consideration.
Moreover, the agencies quantified the various costs and benefits of the
proposed standards, to the extent practicable. The agencies' analyses
to date indicate that the overall quantified benefits of the proposed
standards far outweigh the projected costs. All of these factors
support the reasonableness of the proposed standards. See section III
(proposed GHG standards) and section IV (proposed CAFE standards) for a
detailed discussion of each agency's basis for its selection of its
proposed standards.
    The fact that the benefits are estimated to considerably exceed
their costs supports the view that the proposed standards represent an
appropriate balance of the relevant statutory factors. In drawing this
conclusion, the agencies acknowledge the uncertainties and limitations
of the analyses. For example, the analysis of the benefits is highly
dependent on the estimated price of fuel projected out many years into
the future. There is also significant uncertainty in the potential

range of values that could be assigned to the social cost of carbon.
There are a variety of impacts that the agencies are unable to
quantify, such as non-market damages, extreme weather, socially
contingent effects, or the potential for longer-term catastrophic
events, or the impact on consumer choice. The cost-benefit analyses are
one of the important things the agencies consider in making a judgment
as to the appropriate standards to propose under their respective
statutes. Consideration of the results of the cost-benefit analyses by
the agencies, however, includes careful consideration of the
limitations discussed above.

II. Joint Technical Work Completed for This Proposal

A. Introduction

    In this section, NHTSA and EPA discuss several aspects of their
joint technical analyses. These analyses are common to the development
of each agency's standards. Specifically we discuss: the development of
the vehicle market forecast used by each agency for assessing costs,
benefits, and effects, the development of the attribute-based standard
curve shapes, the technologies the agencies evaluated and their costs
and effectiveness, the economic assumptions the agencies included in
their analyses, a description of the air conditioning and off-cycle
technology (credit) programs, as well as the effects of the proposed
standards on vehicle safety. The Joint Technical Support Document (TSD)
discusses the agencies' joint technical work in more detail.
    The agencies have based today's proposal on a very significant body
of data and analysis that we believe is the best information currently
available on the full range of technical and other inputs utilized in
our respective analyses. As noted in various places throughout this
preamble, the draft Joint TSD, the NHTSA preliminary RIA, and the EPA
draft RIA, we expect new information will become available between the
proposal and final rulemaking. This new information will come from a
range of sources: some is based on work the agencies have underway
(e.g., work on technology costs and effectiveness, potentially updating
our baseline year from model year 2008 to model year 2010); other
sources are those we expect to be released by others (e.g., the Energy
Information Agency's Annual Energy Outlook, which is published each
year, and the most recent available version of which we expect to use
for the final rule); and other information that will likely come from
the public comment process. The agencies intend to evaluate all such
new information as it becomes available, and where appropriate to
update their analysis based on such information for purposes of the
final rule. In addition, the agencies may make new information and/or
analyses available in the agencies' respective public dockets for this
rulemaking prior to the final rule, where that is appropriate, in order
to facilitate public comment. We encourage all stakeholders to
periodically check the two agencies' dockets between the proposal and
final rules for any potential new docket submissions from the agencies.

B. Developing the Future Fleet for Assessing Costs, Benefits, and
Effects

1. Why did the agencies establish a baseline and reference vehicle
fleet?
    In order to calculate the impacts of the EPA and NHTSA regulations,
it is necessary to estimate the composition of the future vehicle fleet
absent these regulations, to provide a reference point relative to
which costs, benefits, and effects of the regulations are assessed. As
in the 2012-2016 light duty vehicle rulemaking, EPA and NHTSA have
developed this comparison fleet in two parts. The first step was to
develop a baseline fleet based on model year 2008 data. This baseline
includes vehicle sales volumes, GHG/fuel economy performance, and
contains a listing of the base technologies on every 2008 vehicle sold.
The second step was to project that baseline fleet volume into model
years 2017-2025. The vehicle volumes projected out to MY 2025 is
referred to as the reference fleet volumes. The third step was to
modify that MY 2017-2025 reference fleet such that it reflects
technology manufacturers could apply if MY 2016 standards are extended
without change through MY 2025.\99\ Each agency used its modeling
system to develop a modified or final reference fleet, or adjusted
baseline, for use in its analysis of regulatory alternatives, as
discussed below and in Chapter 1 of the EPA draft RIA. All of the
agencies' estimates of emission reductions, fuel economy improvements,
costs, and societal impacts are developed in relation to the respective
reference fleets. This section discusses the first two steps,
development of the baseline fleet and the reference fleet.
---------------------------------------------------------------------------

    \99\ EPA's MY 2016 GHG standards under the CAA continue into the
future until they are changed. While NHTSA must actively promulgate
standards in order for CAFE standards to extend past MY 2016, the
agency has, as in all recent CAFE rulemakings, defined a no-action
(i.e., baseline) regulatory alternative as an indefinite extension
of the last-promulgated CAFE standards for purposes of the main
analysis of the standards in this preamble.
---------------------------------------------------------------------------

    EPA and NHTSA used a transparent approach to developing the
baseline and reference fleets, largely working from publicly available
data. Because both input and output sheets from our modeling are
public, stakeholders can verify and check EPA's and NHTSA's modeling,
and perform their own analyses with these datasets.\100\
---------------------------------------------------------------------------

    \100\ EPA's Omega Model and input sheets are available at http://www.epa.gov/oms/climate/models.htm; DOT/NHTSA's CAFE Compliance and
Effects Modeling System (commonly known as the ``Volpe Model'') and
input and output sheets are available at http://www.nhtsa.gov/fuel-economy.
---------------------------------------------------------------------------

2. How Did the Agencies Develop the Baseline Vehicle Fleet?
    NHTSA and EPA developed a baseline fleet comprised of model year
2008 data gathered from EPA's emission and fuel economy database. This
baseline fleet was originally developed by EPA and NHTSA for the 2012-
2016 final rule, and was updated for this proposal.\101\ The new fleet
has the model year 2008 vehicle's volumes and attributes along with the
addition of projected volumes from 2017 to 2025. It also has some
expanded footprint data for pickup trucks that was needed for a more
detailed analysis of the truck curve.
---------------------------------------------------------------------------

    \101\ Further discussion of the development of the 2008 baseline
fleet for the MY2012-2016 rule can be found at 75 Fed. Reg. 25324,
25349 (May 7, 2010).
---------------------------------------------------------------------------

    In this proposed rulemaking, the agencies are again choosing to use
model year 2008 vehicle data to be the basis of the baseline fleet, but
for different reasons than in the 2012-2016 final rule. Model year 2008
is now the most recent model year for which the industry had normal
sales. Model year 2009 data is available, but the agencies believe that
model year was disrupted by the economic downturn and the bankruptcies
of both General Motors and Chrysler resulting in a significant
reduction in the number of vehicles sold by both companies and the
industry as a whole. These abnormalities led the agencies to conclude
that 2009 data was not representative for projecting the future fleet.
Model Year 2010 data was not complete because not all manufacturers
have yet submitted it to EPA, and was thus not available in time for it
to be used for this proposal. Therefore, the agencies chose to use
model year 2008 again as the baseline since it was the latest complete
representative and transparent data set available. However, the
agencies will consider using Model Year 2010 for the final rule, based
on availability and an

analysis of the data representativeness. To the extent the MY 2010 data
becomes available during the comment period the agencies will place a
copy of this data in our respective dockets. We request comments on the
relative merits of using MY 2008 and MY 2010 data, and whether one
provides a better foundation than the other for purposes of using such
data as the foundation for a market forecast extending through MY 2025.
    The baseline fleet reflects all fuel economy technologies in use on
MY 2008 light duty vehicles. The 2008 emission and fuel economy
database included data on vehicle production volume, fuel economy,
engine size, number of engine cylinders, transmission type, fuel type,
etc., however it did not contain complete information on technologies.
Thus, the agencies relied on publicly available data like the more
complete technology descriptions from Ward's Automotive Group.\102\ In
a few instances when required vehicle information (such as vehicle
footprint) was not available from these two sources, the agencies
obtained this information from publicly accessible internet sites such
as Motortrend.com and Edmunds.com.\103\ A description of all of the
technologies used in modeling the 2008 vehicle fleet and how it was
constructed are available in Chapter 1 of the Joint Draft TSD.
---------------------------------------------------------------------------

    \102\ Note that WardsAuto.com is a fee-based service, but all
information is public to subscribers.
    \103\ Motortrend.com and Edmunds.com are free, no-fee internet
sites.
---------------------------------------------------------------------------

    Footprint data for the baseline fleet came mainly from internet
searches, though detailed information about the pickup truck footprints
with volumes was not available online. Where this information was
lacking, the agencies used manufacturer product plan data for 2008
model year to find out the correct number footprint and distribution of
footprints. The footprint data for pickup trucks was expanded from the
original data used in the previous rulemaking. The agencies obtained
this footprint data from MY 2008 product plans submitted by the various
manufacturers, which can be made public at this time because by now all
MY 2008 vehicle models are already in production, which makes footprint
data about them essentially public information. A description of
exactly how the agencies obtained all the footprints is available in
Chapter 1 of the TSD.
3. How Did the Agencies Develop the Projected MY 2017-2025 Vehicle
Reference Fleet?
    As in the 2012-2016 light duty vehicle rulemaking, EPA and NHTSA
have based the projection of total car and total light truck sales for
MYs 2017-2025 on projections made by the Department of Energy's Energy
Information Administration (EIA). See 75 FR at 25349. EIA publishes a
mid-term projection of national energy use called the Annual Energy
Outlook (AEO). This projection utilizes a number of technical and
econometric models which are designed to reflect both economic and
regulatory conditions expected to exist in the future. In support of
its projection of fuel use by light-duty vehicles, EIA projects sales
of new cars and light trucks. EIA published its Early Annual Energy
Outlook for 2011 in December 2010. EIA released updated data to NHTSA
in February (Interim AEO). The final release of AEO for 2011 came out
in May 2011, but by that time EPA/NHTSA had already prepared modeling
runs for potential 2017-2025 standards using the interim data release
to NHTSA. EPA and NHTSA are using the interim data release for this
proposal, but intend to use the newest version of AEO available for the
FRM.
    The agencies 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 projected compliance with CAFE and GHG
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 (i.e., we analyze the effects of the proposed
rules assuming manufacturers will not change fleet composition as a
compliance strategy, as opposed to changes that might happen due to
market forces), the Interim AEO 2011-projected shift in passenger car
market share as a result of required fuel economy improvements creates
a circularity. Therefore, for the current analysis, the agencies
developed a new projection of passenger car and light truck sales
shares by running scenarios from the Interim AEO 2011 reference case
that first deactivate the above-mentioned sales-volume shifting
methodology and then hold post-2017 CAFE standards constant at MY 2016
levels. As discussed in Chapter 1 of the agencies' joint Technical
Support Document, incorporating these changes reduced the NEMS-
projected passenger car share of the light vehicle market by an average
of about 5% during 2017-2025.
    In the AEO 2011 Interim data, EIA projects that total light-duty
vehicle sales will gradually recover from their currently depressed
levels by around 2013. In 2017, car sales are projected to be 8.4
million (53 percent) and truck sales are projected to be 7.3 million
(47 percent). Although the total level of sales of 15.8 million units
is similar to pre-2008 levels, the fraction of car sales is projected
to be higher than that existing in the 2000-2007 timeframe. This
projection reflects the impact of assumed higher fuel prices. Sales
projections of cars and trucks for future model years can be found in
Chapter 1 of the joint TSD.
    In addition to a shift towards more car sales, sales of segments
within both the car and truck markets have been changing and are
expected to continue to change. Manufacturers are introducing more
crossover utility vehicles (CUVs), which offer much of the utility of
sport utility vehicles (SUVs) but use more car-like designs. The AEO
2011 report does not, however, distinguish such changes within the car
and truck classes. In order to reflect these changes in fleet makeup,
EPA and NHTSA used CSM Worldwide (CSM) as they did in the 2012-2016
rulemaking analysis. EPA and NHTSA believe that CSM is the best source
available for a long range forecast for 2017-2025, though when EPA and
NHTSA contacted several forecasting firms none of them offered
comparably-detailed forecasting for that time frame. NHTSA and EPA
decided to use the forecast from CSM for several reasons presented in
the Joint TSD chapter I.
    The long range forecast from CSM Worldwide is a custom forecast
covering the years 2017-2025 which the agencies purchased from CSM in
December of 2009. CSM provides quarterly sales forecasts for the
automotive industry, and updates their data on the industry quarter.
For the public's reference, a copy of CSM's long range forecast has
been placed in the docket for this rulemaking.\104\ EPA and NHTSA hope
to purchase and use an updated forecast,

whether from CSM or other appropriate sources, before the final
rulemaking. To the extent that such a forecast becomes available during
the comment period the agencies will place a copy in our respective
dockets.
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    \104\ The CSM Sales Forecast Excel file (``CSM North America
Sales Forecasts 2017-2025 for the Docket'') is available in the
docket (Docket EPA-HQ-OAR-2010-0799).
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    The next step was to project the CSM forecasts for relative sales
of cars and trucks by manufacturer and by market segment onto the total
sales estimates of AEO 2011. Table II-1 and Table II-2 show the
resulting projections for the reference 2025 model year and compare
these to actual sales that occurred in the baseline 2008 model year.
Both tables show sales using the traditional definition of cars and
light trucks.
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    As mentioned previously, NHTSA has changed the definition of a
truck for 2011 model year and beyond. The new definition has moved some
2 wheel drive SUVs and CUVs to the car category. Table II-3 shows the
different volumes for car and trucks based on the new and old NHTSA
definition. The table shows the difference in 2008, 2021, and 2025 to
give a feel for how the change in definition changes the car/truck
split.
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    The CSM forecast provides estimates of car and truck sales by
segment and by manufacturer separately. The forecast was broken up into
two tables. One table with manufacturer volumes by year and the other
with vehicle segments percentages by year. Table II-4 and Table II-5
are examples of the data received from CSM. The task of estimating
future sales using these tables is complex. We used the same
methodology as in the previous rulemaking. A detailed description of
how the projection process was done is found in Chapter 1 of the TSD.
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    The overall result was a projection of car and truck sales for
model years 2017-2025--the reference fleet--which matched the total
sales projections of the AEO forecast and the manufacturer and segment
splits of the CSM forecast. These sales splits are shown in Table II-6
below.
[GRAPHIC] [TIFF OMITTED] TP01DE11.033

    Given publicly- and commercially-available sources that can be made
equally transparent to all reviewers, the forecast described above
represents the agencies' best technical judgment regarding the likely
composition direction of the fleet. EPA and NHTSA recognize that it is
impossible to predict with certainty how manufacturers' product
offerings and sales volumes will evolve through MY 2025 under baseline
conditions--that is, without further changes in standards after MY
2016. The agencies have not developed alternative market forecasts to
examine corresponding sensitivity of analytical results discussed
below, and have not varied the market forecast when conducting
probabilistic uncertainty analysis discussed in NHTSA's preliminary
Regulatory Impact Analysis. The agencies invite comment regarding
alternative methods or projections to inform forecasts of the future
fleet at the level of specificity and technical completeness required
by the agencies' respective modeling systems.
    The final step in the construction of the final reference fleet
involves applying additional technology to individual vehicle models--
that is, technology beyond that already present in MY 2008--reflecting
already-promulgated standards through MY 2016, and reflecting the
assumption that MY 2016 standards would apply through MY 2025. A
description of the agencies' modeling work to develop their respective
final reference (or adjusted baseline) fleets appear below in Sections
III and IV of this preamble.

C. Development of Attribute-Based Curve Shapes

1. Why are standards attribute-based and defined by a mathematical
function?
    As in the MYs 2012-2016 CAFE/GHG rules, and as NHTSA did in the MY
2011 CAFE rule, NHTSA and EPA are proposing to set attribute-based CAFE
and CO2 standards that are defined by a mathematical
function. EPCA, as amended by EISA, expressly requires that CAFE
standards for passenger cars and light trucks be based on one or more
vehicle attributes related to fuel economy, and be expressed in the
form of a mathematical function.\105\ The CAA has no such requirement,
although such an approach is permissible under section 202 (a) and EPA
has used the attribute-based approach in issuing standards under
analogous provisions of the CAA (e.g., criteria pollutant standards for
non-road diesel engines using engine size as the attribute,\106\ in the
recent GHG standards for heavy duty pickups and vans using a work
factor attribute,\107\ and in the MYs 2012-2016 GHG rule itself which
used vehicle footprint as the attribute). Public comments on the MYs
2012-2016 rulemaking widely supported attribute-based standards for
both agencies' standards.
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    \105\ 49 U.S.C. 32902(a)(3)(A).
    \106\ 69 FR 38958 (June 29, 2004).
    \107\ 76 FR 57106, 57162-64, (Sept. 15, 2011).
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    Under an attribute-based standard, every vehicle model has a
performance target (fuel economy and CO2 emissions for CAFE
and CO2 emissions standards, respectively), the level of
which depends on the vehicle's attribute (for this proposal, footprint,
as discussed below). Each manufacturers' fleet average standard is
determined by the production-weighted \108\ average (for CAFE, harmonic
average) of those targets.
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    \108\ Production for sale in the United States.
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    The agencies believe that an attribute-based standard is preferable
to a single-industry-wide average standard in the context of CAFE and
CO2 standards for several reasons. First, if the shape is
chosen properly, every manufacturer is more likely to be required to
continue adding more fuel efficient technology each year across their
fleet, because the stringency of the compliance obligation will depend
on the particular product mix of each manufacturer. Therefore a maximum
feasible attribute-based standard will tend to require greater fuel
savings and CO2 emissions reductions overall than would a
maximum feasible flat standard (that is, a single mpg or CO2
level applicable to every manufacturer).
    Second, depending on the attribute, attribute-based standards
reduce the incentive for manufacturers to respond to CAFE and
CO2 standards in ways harmful to safety.\109\ Because each
vehicle model has its own target (based on the attribute chosen),
properly fitted attribute-based standards provide little, if any,
incentive to build smaller vehicles simply to meet a fleet-wide
average, because the smaller vehicles will be subject to more stringent
compliance targets.\110\
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    \109\ The 2002 NAS Report described at length and quantified the
potential safety problem with average fuel economy standards that
specify a single numerical requirement for the entire industry. See
2002 NAS Report at 5, finding 12. Ensuing analyses, including by
NHTSA, support the fundamental conclusion that standards structured
to minimize incentives to downsize all but the largest vehicles will
tend to produce better safety outcomes than flat standards.
    \110\ Assuming that the attribute is related to vehicle size.
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    Third, attribute-based standards provide a more equitable
regulatory framework for different vehicle manufacturers.\111\ A single
industry-wide average standard imposes disproportionate cost burdens
and compliance difficulties on the manufacturers that need to change
their product plans to meet the standards, and puts no obligation on
those manufacturers that have no need to change their plans. As
discussed above, attribute-based standards help to spread the
regulatory cost burden for fuel economy more broadly across all of the
vehicle manufacturers within the industry.
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    \111\ Id. at 4-5, finding 10.
---------------------------------------------------------------------------

    Fourth, attribute-based standards better respect economic
conditions and consumer choice, as compared to single-value standards.
A flat, or single value standard, encourages a certain vehicle size
fleet mix by creating incentives for manufacturers to use vehicle
downsizing as a compliance strategy. Under a footprint-based standard,
manufacturers are required to invest in technologies that improve the
fuel economy of the vehicles they sell rather than shifting the product
mix, because reducing the size of the vehicle is generally a less
viable compliance strategy given that smaller vehicles have more
stringent regulatory targets.
2. What attribute are the agencies proposing to use, and why?
    As in the MYs 2012-2016 CAFE/GHG rules, and as NHTSA did in the MY
2011 CAFE rule, NHTSA and EPA are proposing to set CAFE and
CO2 standards that are based on vehicle footprint, which has
an observable correlation to fuel economy and emissions. There are
several policy and technical reasons why NHTSA and EPA believe that
footprint is the most appropriate attribute on which to base the
standards, even though some other vehicle attributes (notably curb
weight) are better correlated to fuel economy and emissions.
    First, in the agencies' judgment, from the standpoint of vehicle
safety, it is important that the CAFE and CO2 standards be
set in a way that does not encourage manufacturers to respond by
selling vehicles that are in any way less safe. While NHTSA's research
of historical crash data also indicates that reductions in vehicle mass
that are accompanied by reductions in vehicle footprint tend to
compromise vehicle safety, footprint-based standards provide an
incentive to use advanced lightweight materials and structures that
would be discouraged by weight-based

standards, because manufacturers can use them to improve a vehicle's
fuel economy and CO2 emissions without their use necessarily
resulting in a change in the vehicle's fuel economy and emissions
targets.
    Further, although we recognize that weight is better correlated
with fuel economy and CO2 emissions than is footprint, we
continue to believe that there is less risk of ``gaming'' (changing the
attribute(s) to achieve a more favorable target) by increasing
footprint under footprint-based standards than by increasing vehicle
mass under weight-based standards--it is relatively easy for a
manufacturer to add enough weight to a vehicle to decrease its
applicable fuel economy target a significant amount, as compared to
increasing vehicle footprint. We also continue to agree with concerns
raised in 2008 by some commenters on the MY 2011 CAFE rulemaking that
there would be greater potential for gaming under multi-attribute
standards, such as those that also depend on weight, torque, power,
towing capability, and/or off-road capability. The agencies agree with
the assessment first presented in NHTSA's MY 2011 CAFE final rule \112\
that the possibility of gaming is lowest with footprint-based
standards, as opposed to weight-based or multi-attribute-based
standards. Specifically, standards that incorporate weight, torque,
power, towing capability, and/or off-road capability in addition to
footprint would not only be more complex, but by providing degrees of
freedom with respect to more easily-adjusted attributes, they could
make it less certain that the future fleet would actually achieve the
average fuel economy and CO2 reduction levels projected by
the agencies.
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    \112\ See 74 FR at 14359 (Mar. 30, 2009).
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    The agencies recognize that based on economic and consumer demand
factors that are external to this rule, the distribution of footprints
in the future may be different (either smaller or larger) than what is
projected in this rule. However, the agencies continue to believe that
there will not be significant shifts in this distribution as a direct
consequence of this proposed rule. The agencies also recognize that
some international attribute-based standards use attributes other than
footprint and that there could be benefits for a number of
manufacturers if there was greater international harmonization of fuel
economy and GHG standards for light-duty vehicles, but this is largely
a question of how stringent standards are and how they are tested and
enforced. It is entirely possible that footprint-based and weight-based
systems can coexist internationally and not present an undue burden for
manufacturers if they are carefully crafted. Different countries or
regions may find different attributes appropriate for basing standards,
depending on the particular challenges they face--from fuel prices, to
family size and land use, to safety concerns, to fleet composition and
consumer preference, to other environmental challenges besides climate
change. The agencies anticipate working more closely with other
countries and regions in the future to consider how to address these
issues in a way that least burdens manufacturers while respecting each
country's need to meet its own particular challenges.
    The agencies continue to find that footprint is the most
appropriate attribute upon which to base the proposed standards, but
recognizing strong public interest in this issue, we seek comment on
whether the agencies should consider setting standards for the final
rule based on another attribute or another combination of attributes.
If commenters suggest that the agencies should consider another
attribute or another combination of attributes, the agencies
specifically request that the commenters address the concerns raised in
the paragraphs above regarding the use of other attributes, and explain
how standards should be developed using the other attribute(s) in a way
that contributes more to fuel savings and CO2 reductions
than the footprint-based standards, without compromising safety.
3. What mathematical functions have the agencies previously used, and
why?
a. NHTSA in MY 2008 and MY 2011 CAFE (constrained logistic)
    For the MY 2011 CAFE rule, NHTSA estimated fuel economy levels
after normalization for differences in technology, but did not make
adjustments to reflect other vehicle attributes (e.g., power-to-weight
ratios).\113\ Starting with the technology adjusted passenger car and
light truck fleets, NHTSA used minimum absolute deviation (MAD)
regression without sales weighting to fit a logistic form as a starting
point to develop mathematical functions defining the standards. NHTSA
then identified footprints at which to apply minimum and maximum values
(rather than letting the standards extend without limit) and transposed
these functions vertically (i.e., on a gpm basis, uniformly downward)
to produce the promulgated standards. In the preceding rule, for MYs
2008-2011 light truck standards, NHTSA examined a range of potential
functional forms, and concluded that, compared to other considered
forms, the constrained logistic form provided the expected and
appropriate trend (decreasing fuel economy as footprint increases), but
avoided creating ``kinks'' the agency was concerned would provide
distortionary incentives for vehicles with neighboring footprints.\114\
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    \113\ See 74 FR 14196, 14363-14370 (Mar. 30, 2009) for NHTSA
discussion of curve fitting in the MY 2011 CAFE final rule.
    \114\ See 71 FR 17556, 17609-17613 (Apr. 6, 2006) for NHTSA
discussion of ``kinks'' in the MYs 2008-2011 light truck CAFE final
rule (there described as ``edge effects''). A ``kink,'' as used
here, is a portion of the curve where a small change in footprint
results in a disproportionally large change in stringency.
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b. MYs 2012-2016 Light Duty GHG/CAFE (constrained/piecewise linear)
    For the MYs 2012-2016 rules, NHTSA and EPA re-evaluated potential
methods for specifying mathematical functions to define fuel economy
and GHG standards. The agencies concluded that the constrained logistic
form, if applied to post-MY 2011 standards, would likely contain a
steep mid-section that would provide undue incentive to increase the
footprint of midsize passenger cars.\115\ The agencies judged that a
range of methods to fit the curves would be reasonable, and used a