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

    NHTSA calculated 92 percent of the final projected passenger car
standards as the minimum standard, which for MY 2011 is 27.8. The final
calculated minimum standards will be updated to reflect any changes in
the projected passenger car standards.
    In CBD v NHTSA, the Ninth Circuit agreed with the agency that EPCA,
as it was then written, did not explicitly require the adoption of a
backstop, i.e., a minimum CAFE standard that is fixed. A fixed minimum
standard is one that does not change in response to changes in a
manufacturer's vehicle mix.
    The Court said, however, that the issue was not whether the
adoption was expressly required, but whether it was arbitrary and
capricious for the agency to decline to adopt a backstop. The Court
said that Congress was silent in EPCA on this issue. The Court
concluded that it was arbitrary and capricious for the agency to
decline to adopt a backstop because it did not, in the view of the
Court, address the statutory factors for determining the maximum
feasible level of average fuel economy. The Court remanded the matter
back to NHTSA to reconsider the issue under the appropriate standard.
    NHTSA explained in the NPRM that it believes that it considered and
discussed the express statutory factors such as technological
feasibility and economic practicability and related factors such as
safety in deciding not to adopt a backstop. The agency stated that
further discussion is not warranted because Congress has spoken
directly on this issue since the Ninth Circuit's decision by enacting
EISA. Congress expressly mandated that CAFE standards for automobiles
be attribute-based and they must adjust in response to changes in
vehicle mix. NHTSA suggested that this mandate precludes the agency
from adopting a fixed minimum standard, except in the one case in which
Congress mandated a fixed and flat \470\ minimum standard for domestic
passenger cars--not in the cases of nondomestic passenger cars or light
trucks.
---------------------------------------------------------------------------

    \470\ A flat standard is one that requires each manufacturer to
achieve the same numerical level of CAFE.
---------------------------------------------------------------------------

    Given the requirement for attribute-based standards and the limited
express exception to that requirement, NHTSA tentatively concluded in
the NPRM that had Congress intended backstops to be established for
either of the other two compliance categories, it would have required
them. Absent explicit statutory language that provides the agency
authority to set flat standards, the agency suggested that the setting
of a supplementary minimum flat standard for the other two compliance
categories would be contrary to the requirement to set an attribute-
based standard under EISA.
    The agency noted, however, that the curve of an attribute-based
standard has several features that limit backsliding, some of which
NHTSA added as it refined the Volpe model for the purpose of this
rulemaking, and some of which (such as the lower asymptote, which
serves as a backstop) are inherent in the logistic function. NHTSA
stated that it believed that these features help address the concern
that has been expressed regarding the possibility of vehicle upsizing
without compromising the benefits of reform. NHTSA also noted that the
35 mpg requirement in and of itself serves as a backstop, because the
agency must set the standards high enough to ensure that the average
fuel economy level of the combined car and light fleet is making steady
progress toward and achieves the statutory requirement of at least 35
mpg by 2020. NHTSA explained that if the agency finds that this
requirement might not be achieved, it will consider setting standards
for model years 2016 through 2020 early enough and in any event high
enough to ensure reaching the 35 mpg requirement.
    The Attorneys General, Sierra Club et al., UCS, and ACEEE opposed
NHTSA's view not to adopt a backstop for imported passenger cars and
light trucks and argued that the agency must adopt backstop standards,
while AIAM and NADA supported the agency's decision. The Attorneys
General argued that because Congress had not changed the definition of
``maximum feasible fuel economy,'' NHTSA remained ``obligated'' by the
Ninth Circuit opinion to consider a backstop for those additional
fleets. The Attorneys General stated that the possibility that
attribute-based standards ``will cause a `race to the bottom' '' still
existed, and that the agency must therefore consider a backstop.
    Sierra Club et al. also argued that NHTSA had misinterpreted
Congress' intent in EISA. Sierra Club stated that Congressman Markey's
extended remarks inserted into the Congressional Record were clear
evidence of Congress' intent with regard to the backstop. Sierra Club
also argued that a September 2007 letter from the United Auto Workers
to Speaker Nancy Pelosi and Majority Leader Harry Reid, which suggested
that the domestic minimum passenger car standard was intended to
protect jobs in the U.S., was evidence that ``the provision in EISA is
tied to employment, not oil conservation.'' Sierra Club concluded that
NHTSA is not precluded from adopting backstop standards for imported
passenger cars and light trucks, and is required to do so by the Ninth
Circuit opinion. Sierra Club additionally cited EPA's ANPRM, which it
stated indicates that EPA will pursue an ``environmental backstop.''
    UCS agreed that the 35-in-2020 requirement is a kind of backstop,
and that the ratable-increase requirement between MY 2011 and 2020 is
an ``implied'' backstop, but nevertheless argued that NHTSA should
implement a regulated backstop for the other fleets. UCS commented that
``the same concerns of the Ninth Circuit court persist,'' because
``there is no mechanism to ensure the market does not undermine [the
proposed] standards.'' UCS stated that this could occur because ``if
maximum feasible fuel economy levels are found to exceed 35 mpg, the
legislated minimum will not ensure those levels (and, thus, maximum
feasible energy savings) are achieved.''
    ACEEE commented that the lower asymptote is not an adequate
backstop, because the lower asymptote in 2015 resulted in ``a combined
value of 27.5 mpg, assuming a 48% sales share for cars,'' which ACEEE
said ``is scarcely higher than today's combined standard and certainly
does not constitute ratable progress toward achieving 35 mpg in 2020.''
ACEEE argued that the lower asymptotes could not guarantee that ``oil
savings from the CAFE program will not fall short of the savings
anticipated with the passage of the law.'' ACEEE stated that to ensure
ratable progress toward an average of at least 35 mpg in 2020 and to
mitigate ``the dangers of upsizing and otherwise gaming the
standards,'' NHTSA should commit to ``mid-course corrections'' between
MY 2011 and 2020 as necessary.
    In contrast, AIAM supported NHTSA's decision not to adopt a

backstop for imported passenger cars and light trucks. AIAM argued that
a backstop for those fleets would ``defeat the purpose of the attribute
format by limiting the flexibility of manufacturers to respond to
shifts in market demand,'' and that the lower asymptote ``provides a
disincentive to upsizing of vehicles [in that footprint range], since
the standard would become increasingly difficult to meet.'' AIAM also
suggested that a backstop would not likely increase fuel savings since
consumers appear to be moving away from large cars and trucks.
    While NADA agreed with NHTSA regarding the clarity of Congress'
decision not to adopt backstops, it also argued that NHTSA ``should not
attempt to artificially create backstops'' through the lower asymptotes
of the car and light truck curves. NADA stated that NHTSA should
instead ``let the curves end in conformance with the largest vehicle's
footprint.''
    NHTSA respectfully disagrees with the characterization raised by
the Attorneys General and other commenters that it ``did not consider''
a backstop in the NPRM. As made clear by the NPRM and as discussed
above, the opposite is true. The agency also respectfully disagrees
with UCS' characterization of the Ninth Circuit CBD opinion as it
concerns the backstop issue. As discussed in the NPRM, Congress'
enactment of EISA addressed the backstop issue by clearly specifying a
flat minimum standard for domestic passenger cars, and by not clearly
specifying a flat minimum standard for imported passenger cars and
light trucks. Congress was aware of this issue from the 2006 light
truck final rule and the CBD decision, but expressly required a
backstop for only one fleet of vehicles.
    NHTSA notes the very limited nature of EISA's legislative history
with regard to the backstop issue. No Senate, House, or conference
reports were created during the legislative process that culminated in
EISA. The floor statements during Congressional consideration of EISA
are also sparse. In any event, however, floor statements, regardless of
who made them, are entitled to less weight than conference reports
because, in the views of many courts, they do not represent statements
on the final terms of a bill agreed to by both houses. See, e.g., In re
Burns, 887 F.2d 1541 (11th Cir. 1989), in which the Court of Appeals
was called upon to interpret provisions of the Bankruptcy Act which
were arguably ambiguous. The Court noted that ``[w]hatever degree of
solicitude is due to legislative history materials in the usual cast,
`[s]trict adherence to the language and structure of the Act is
particularly appropriate where, as here, a statute is the result of a
series of carefully crafted compromises.' '' Id. at 1545 (citing
Community for Creative Non-Violence v. Reid, 490 U.S. 730, n. 14
(1989)). ``Accordingly, the best indicators of congressional intent in
this narrow instance are the language and structure of the Code itself,
not the accompanying statements of legislators that carry the potential
for reclaiming that which was yielded in the actual drafting
compromise.'' Id. See also In re Kelly, 841 F.2d 908, 913 n. 3 (9th
Cir. 1988) (``Stray comments by individual legislators, not otherwise
supported by statutory language or committee reports, cannot be
attributed to the full body that voted on the bill. The opposite
inference is far more likely.'')
    Here, there are no floor statements to provide guidance on the
backstop issue. Rather, various members, including Representative
Markey, inserted material into the Congressional Record after floor
action. There is no indication that the material inserted into the
record was raised, debated, or otherwise before the full House or
Senate during floor consideration. Materials inserted by members after
congressional action are not indicative of congressional intent.
Instead, ``[t]he intent of Congress as a whole is more apparent from
the words of the statute itself than from a patchwork record of
statements inserted by individual legislators and proposals that may
never have been adopted by a committee, much less an entire legislative
body--a truth which gives rise to `the strong presumption that Congress
expresses its intent through the language it chooses.' '' Sigmon Coal
Co., Inc. v. Apfel, 226 F.3d 291, 304-05 (4th Cir 2000) (quoting INS v.
Cardoza-Fonseca, 480 U.S. 421, 432 n. 12 (1987)), aff'd sub. nom.,
Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 438 (2002). The Supreme
Court in Sigmon similarly held that ``[f]loor statements from two
Senators cannot amend the clear and unambiguous language of a
statute.'' Guided by the Supreme Court's guidance on this issue, ``[w]e
see no reason to give greater weight to the views of two Senators than
to the collective votes of both Houses, which are memorialized in the
unambiguous statutory text.'' 534 U.S. at 457. ``We are not aware of
any case * * * in which we have given authoritative weight to a single
passage of legislative history that is in no way anchored in the text
of the statute.'' Shannon v. United States, 512 U.S. 573, 583 (1994).
    The agency disagrees that there is any indication that the
September 2007 UAW letter to Speaker Pelosi and Majority Leader Reid,
relied upon by the Sierra Club, constitutes the legislative intent for
including the EISA backstop requirement for domestically-manufactured
passenger cars in addition to meeting the standards set by NHTSA, i.e.,
tied to employment concerns and not energy conservation. The UAW's
letter, by itself and without any supporting statement or information
in the legislative history, cannot reasonably be presumed to constitute
that the intent of the backstop was employment.
    Thus, consistent with applicable case law, NHTSA must interpret the
words of EISA itself. NHTSA continues to believe that the 35 mpg
requirement of EISA is an inherent backstop, as UCS noted in its
comments. NHTSA also agrees with the ACEEE comment insofar as the
agency will continue to monitor manufacturer progress toward meeting
the required fuel economy stringencies. The agency must set the
standards high enough to ensure that the average fuel economy level of
the combined car and light truck fleet is increasing ratably toward and
achieves the statutory requirement of at least 35 mpg by 2020. If the
agency finds that this requirement might not be achieved, it will
consider setting standards for model years up to and including MY 2020
early enough and in any event high enough to ensure reaching the 35 mpg
requirement.
    However, NHTSA disagrees with the AIAM comments that a backstop
standard would defeat the purpose of the attribute-based CAFE system by
limiting the flexibility of manufacturers to respond to shifts in
market demand. NHTSA also disagrees with NADA's comment that, beyond
Congress explicitly enacting a backstop for domestically-manufactured
passenger cars at 27.5 mpg or 92 percent of the industry-wide domestic
passenger car fleet in any given model year, whichever is higher, the
agency cannot impose additional anti-backsliding measures. EPCA
requires the agency to balance the four statutory factors when
determining maximum feasible CAFE standards, and the agency has
considered these factors--particularly the need of the nation to
conserve energy--in deciding whether to adopt additional measures that
operate as ``backstops.'' Thus, in balancing the four EPCA factors
under 49 U.S.C. Sec.  32902(f), the agency has adopted in these
standards additional measures which operate as ``backstops'' applicable
to all CAFE-regulated vehicles. First, as set forth in Section VI
above, the MY 2011 curves have features that limit backsliding, some of
which were added by NHTSA as the agency refined and

modified the Volpe model for purposes of this rulemaking. Second, the
lower asymptote, which serves as a backstop, is inherent in the
logistic function. While the agency respectfully disagrees with ACEEE's
comment regarding the sufficiency of the lower asymptote as a backstop,
as discussed above, it is not the only ``backstop'' embodied in this
rule.
    In having considered carefully the comments to the NPRM, however,
NHTSA nonetheless accepts at least the possibility that Congress'
silence in EISA regarding backstops for imported passenger cars and
light trucks could be reasonably interpreted as permissive rather than
restrictive. For purposes of the MY 2011 standards, however, and upon
consideration of the entire record, NHTSA declines to adopt
``backstops'' beyond that set forth in this section. The ``race to the
bottom'' feared by commenters seems unlikely as a result of the MY 2011
standards, particularly given the lack of lead time available to
manufacturers to change their MY 2011 vehicles and the public's
apparently growing preference for smaller vehicles. Moreover, the
backstop and anti-backsliding mechanisms described above not only
address the ``race to the bottom'' concern, but are also consistent
with the attribute-based approach of Reformed CAFE. NHTSA continues to
believe that backstop standards for imported passenger cars and light
trucks are neither legally required nor necessary at this time to
ensure fuel savings. However, the agency will continue to monitor
manufacturers' product plans and CAFE compliance, and will revisit the
backstop issue in subsequent rulemakings if it becomes necessary to
ensure that expected fuel savings are ultimately realized.

D. Combined Fleet Performance

    The combined industry wide average fuel economy (in mpg) levels for
both cars and light trucks, if each manufacturer just met its
obligations under the final ``optimized'' standards for MY 2011, would
be 27.3 mpg, or 325.5 grams CO2 per mile. This represents an
increase of approximately 7.9 percent over the previous model year's
standards.

E. Costs and Benefits of Final Standards

1. Benefits
    NHTSA estimates that the final standard for MY 2011 passenger cars
would save approximately 0.5 billion gallons of fuel and prevent 4.3
million metric tons of tailpipe CO2 emissions over the
lifetime of the passenger cars sold during that model year, compared to
the fuel savings and emissions reductions that would occur if the
standards remained at the adjusted baseline (i.e., the higher of
manufacturer's plans and the manufacturer's required level of average
fuel economy for MY 2010).
    NHTSA also estimates that the value of the total benefits of the
final standard for MY 2011 passenger cars would be $1.03 billion \471\
over the lifetime of the vehicles manufactured in that model year. This
estimate of societal benefits includes direct impacts from lower fuel
consumption as well as externalities, and also reflects offsetting
societal costs resulting from the rebound effect. Direct benefits to
consumers, including fuel savings, consumer surplus from additional
driving, and reduced refueling time, account for 88 percent ($1.0
billion) of the $1.1 billion in gross \472\ consumer benefits resulting
from increased passenger car CAFE. Petroleum market externalities
account for roughly 10 percent ($0.1 billion). Environmental
externalities, i.e., reduction of air pollutants, account for roughly 2
percent ($0.03 billion), about 31 percent ($0.01 billion) of which is
the result of greenhouse gas (primarily CO2) reduction.
Increased congestion, noise and accidents from increased driving will
offset approximately $0.1 billion of the $1.1 billion in consumer
benefits, leaving net consumer benefits of $1.0 billion.
---------------------------------------------------------------------------

    \471\ The $1.0 billion estimate is based on a 7 percent discount
rate for valuing future impacts. NHTSA estimated stringencies that
would maximize net societal benefits using both 7 percent and 3
percent discount rates. For the reader's reference, total consumer
benefits for passenger car CAFE improvements total $2.6 billion
using a 3 percent discount rate.
    \472\ Gross consumer benefits are benefits measured prior to
accounting for the negative impacts of the rebound effect. They
include fuel savings, consumer surplus from additional driving,
reduced refueling time, reduced petroleum market externalities,
reduced criteria pollutants, and reduced greenhouse gas production.
Negative impacts from the rebound effect include added congestion,
noise, and crash costs due to additional driving.
---------------------------------------------------------------------------

    The following table sets out the relative dollar value of the
various benefits of this rulemaking on a per gallon saved basis and
averaging across the passenger car and light truck fleets:
---------------------------------------------------------------------------

    \473\ Based on a value of $2.00 per ton of carbon dioxide. At a
value of $33.00 per ton of carbon dioxide, the benefit per gallon of
reducing in CO2 emissions would be $0.29; and at a value
of $80.00 per ton of carbon dioxide, the benefit per gallon would be
$0.71. However, to calculate the gross and net benefits per gallon
of fuel saved using global SCC values, one would need to remove
monopsony costs, which would make the value per gallon of
``Reduction in Oil Import Externalities'' equal to $0.11.

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

[GRAPHIC] [TIFF OMITTED] TR30MR09.085

    NHTSA further estimates that the final standard for light trucks
would save approximately 0.42 billion gallons of fuel and prevent 4.03
million metric tons of tailpipe CO2 emissions over the
lifetime of the light trucks sold during MY 2011, compared to the fuel
savings and emissions reductions that would occur if the standards
remained at the adjusted baseline.
    For light trucks, NHTSA estimates that the value of the total
benefits of the final MY 2011 standard would be $0.92 billion \474\
over the lifetime of the light trucks sold in that year. This estimate
of societal benefits includes direct impacts from lower fuel
consumption as well as externalities and also reflects offsetting
societal costs resulting from the rebound effect. Direct benefits to
consumers, including fuel savings, consumer surplus from additional
driving, and reduced refueling time, account for 88 percent ($0.9
billion) of the $1.0 billion in gross consumer benefits resulting from
increased light truck CAFE. Petroleum market externalities account for
roughly 10 percent ($0.1 billion). Environmental externalities, i.e.,
reduction of air pollutants, account for roughly 2 percent ($0.02
billion), about 32 percent of which is the result of greenhouse gas
(primarily CO2) reduction ($0.01 billion). Increased
congestion, noise and accidents from increased driving will offset
roughly $0.07 billion of the $1.0 billion in consumer benefits, leaving
net consumer benefits of $0.9 billion.
---------------------------------------------------------------------------

    \474\ The $0.9 billion estimate is based on a 7 percent discount
rate for valuing future impacts. NHTSA estimated stringencies that
would maximize net societal benefits using both 7 percent and 3
percent discount rates. For the reader's reference, total consumer
benefits for light truck CAFE improvements are $1.2 billion under a
3 percent discount rate.
---------------------------------------------------------------------------

2. Costs
    The total costs for manufacturers just complying with the standard
for MY 2011 passenger cars would be approximately $0.5 billion,
compared to the costs they would incur if the standard remained at the
adjusted baseline. The resulting vehicle price increases to buyers of
MY 2011 passenger cars would be recovered or paid back \475\ in
additional fuel savings in an average of 4.4 years (average 2011 per
car price increase, excluding civil penalties owed by manufacturers
estimated to owe them, was $64), assuming fuel prices ranging from
$2.97 per gallon in 2016 to $3.62 per gallon in 2030.\476\
---------------------------------------------------------------------------

    \475\ See Section V.B.5 above for discussion of payback period.
    \476\ The fuel prices (shown here in 2006 dollars) used to
calculate the length of the payback period are those projected
(Annual Energy Outlook 2008, final release) by the Energy
Information Administration over the life of the MY 2011-2015 light
trucks, not current fuel prices.
---------------------------------------------------------------------------

    The total costs for manufacturers just complying with the standard
for MY 2011 light trucks would be approximately $0.65 billion, compared
to the costs they would incur if the standard remained at the adjusted
baseline. The resulting vehicle price increases to buyers of MY 2011
light trucks would be paid back in additional fuel savings in an
average of 7.7 years (average 2011 per truck price increase, excluding
civil penalties owed by manufacturers estimated to owe them, is $126)
assuming fuel prices ranging from $2.97 to $3.62 per gallon.
[GRAPHIC] [TIFF OMITTED] TR30MR09.086

Comparison of estimated benefits to estimated costs

    The table below compares the incremental benefits and costs for the
car and light truck CAFE standards, in millions of dollars.

    [GRAPHIC] [TIFF OMITTED] TR30MR09.087

The average annual per vehicle cost increases are shown in the FRIA.

F. Environmental Impacts of Final Standards

    On October 17, 2008, the EPA published a Notice of Availability of
NHTSA's Final Environmental Impact Statement (FEIS), which, as required
by the National Environmental Policy Act (NEPA), 42 U.S.C. 4321 et
seq., analyzed the potential environmental impacts of alternative CAFE
standards being considered by the agency. 73 FR 61859. In response to
comments on the DEIS, the FEIS, among other things, analyzed how the
agency's alternatives were affected by variations in certain economic
assumptions. The agency carefully considered and analyzed each of the
individual economic assumptions to determine which assumptions most
accurately represent future economic conditions. For a discussion of
the economic assumptions relied on by the agency in this final rule,
see Section V.
    The economic assumptions used by the agency in this final rule
correspond to the ``Mid-2'' Scenario set of assumption analyzed in the
FEIS. See FEIS Sec.  2.2. The Optimized Alternative utilizing the Mid-2
Scenario economic assumptions, which were prompted in part by public
comments, falls within the spectrum of alternatives set forth in the
DEIS and the FEIS, and all relevant environmental impacts associated
with the Optimized Alternative have been considered by NHTSA. The
environmental impacts calculated to result under the Optimized
Alternative utilizing the Mid-2 Scenario economic assumptions were
presented in Appendix B of the FEIS, and discussed in Chapters 3 and 4
of the FEIS. The tables that follow in this section were developed from
the tables provided in Appendix B of the FEIS.
    As discussed in Section XVI of this Final Rule, the FEIS evaluates
the aggregate environmental impacts associated with each alternative
for a five-year period (i.e., the environmental impacts that would
result if MY 2011-2015 passenger cars and light trucks met the higher,
proposed CAFE standards for those years). However, the impacts
resulting from this Final Rule, covering MY 2011 alone, fall within the
spectrum of environmental impacts analyzed in the FEIS under the
Optimized Alternative, Mid-2 Scenario.
    This section presents selected consequences that would be
associated with the final CAFE standards for MY 2011 passenger cars and
light trucks (i.e., the Optimized Alternative, Mid-2 Scenario CAFE
standards for MY 2011). These consequences include the effects of the
MY 2011 standards on fuel consumption and associated emissions of
greenhouse gases, as well as on emissions of criteria and hazardous air
pollutants. Environmental impacts associated with the final CAFE
standards for MY 2011 passenger cars and light trucks remain aggregated
for MYs 2011-2015, and are reported in the FEIS. See Chapter 3, Chapter
4 and Appendix B of the FEIS. The aggregate impacts analyzed in the
FEIS remain relevant, since the MY 2011 impacts associated with the
CAFE standards fall within the spectrum of those aggregated impacts.
    Table IX.F-1 shows the estimated impact of the final CAFE standards
for MY 2011 on fuel consumption by passenger cars and light trucks
during selected years from 2020 to 2060. Because the estimates of fuel
consumption shown in the table assume that the CAFE standards
established for MY 2011 would apply to all subsequent model years
produced over this period, the proportion of the U.S. fleet consisting
of cars and light trucks that met the MY 2011 CAFE standards would
increase over the time period it spans. The table reports total fuel
consumption for passenger cars and light trucks, including both
gasoline and diesel, under the No Action Alternative (Baseline) and
under the final standards chosen by the agency (the Optimized
Alternative). The impact of the chosen standards on future fuel
consumption by cars and light trucks is measured by the reduction from
its level under the No Action or Baseline alternative that is projected
to occur with the final standard in effect.

[GRAPHIC] [TIFF OMITTED] TR30MR09.088

    A more informative measure of the impact of the final MY 2011 CAFE
standards than the reductions in fuel use during any specific future
year is their effect on cumulative fuel consumption by the U.S. car and
light truck fleet over an extended future period. This is because the
reduction in cumulative fuel consumption over the future that results
from higher CAFE standards determines their impact on total GHG
emissions, the accumulation of these gases in the earth's atmosphere,
and any resulting impact on the global climate. Table IX.F-2 projects
future fuel use by U.S. passenger cars and light trucks under the
Baseline or No Action alternative and the final CAFE standards for MY
2011, and shows the reductions in fuel use that will result from
adopting the MY 2011 standards. As with the estimates of fuel
consumption reported in the previous table, those shown in Table IX.F-2
assume that the MY 2011 CAFE standards would also apply to subsequent
model years. The fuel savings shown in the table grow not only as they
are estimated for progressively longer time spans, but also because an
increasing fraction of cars and light trucks in service during future
years consists of models that meet the higher CAFE standards adopted
beginning with MY 2011.
[GRAPHIC] [TIFF OMITTED] TR30MR09.089

    NHTSA analyzed the air quality consequences of alternative CAFE
standards by estimating total emissions of each criteria air pollutant
and mobile source air toxic (MSAT) attributable to passenger cars and
light trucks under each alternative, and assessing the changes in
emissions of each pollutant from their Baseline levels that would occur
under alternative standards. Emissions of these pollutants include
those that occur while vehicles are being operated (``tailpipe''
emissions), as well as emissions that occur throughout the processes of
producing and distributing fuel (``upstream'' emissions).\477\ Because
improving fuel economy results in an increase in the number of miles
passenger cars and light trucks are driven (the ``rebound'' effect),
tailpipe emissions of each pollutant are projected to increase by
progressively larger amounts under alternatives that require higher
fuel economy levels. In contrast, each action alternative reduces the
volume of fuel that must be supplied, thus reducing emissions
throughout the fuel production and distribution process.
---------------------------------------------------------------------------

    \477\ In the case of volatile organic compounds (VOC), emissions
from vehicle operation also include evaporative emissions that occur
when vehicles are parked or stored, and while they are being
refueled at retail stations. Emissions from vehicle operation are
estimated by multiplying the total number of miles that cars and
light trucks are driven annually by emissions factors for each
pollutant, measured in grams of pollutant emitted per mile traveled.
Emissions from fuel production and distribution are estimated by
multiplying the total volume of fuel consumed by cars and light
trucks by emissions per gallon during each phase of fuel supply,
including petroleum extraction and transportation, fuel refining,
storage, and distribution to retail outlets.
---------------------------------------------------------------------------

    The net effect of each alternative is equal to the increase in
tailpipe emissions resulting from added rebound-effect driving, minus
the reduction in upstream emissions resulting from the lower volume of
fuel that must be supplied. Although the relative magnitude of these
two effects differs among individual pollutants, the reduction in
upstream emissions of most (but not all) pollutants outweighs the
increase in tailpipe emissions, leading to a net reduction in their
total emissions. Similarly, the net reduction in total emissions of
each pollutant is usually--although not always--larger for alternatives
that require higher fuel economy levels. For further explanation of the
air quality methodology, see FEIS Sec.  3.3.2.
    Table IX.F-3 reports nationwide emissions of criteria air
pollutants from passenger cars and light trucks (including both
tailpipe and upstream emissions) under the Baseline alternative for
selected years, and compares these to emissions levels expected to
result from the final CAFE standards for MY 2011.\478\ As the table
shows, total emissions of each criteria pollutant are projected to
decline as a consequence of the final MY 2011 CAFE standards, as
reductions in upstream emissions due to the lower volume of fuel
production and distribution more than offset any increases in tailpipe
emissions resulting from additional driving.
---------------------------------------------------------------------------

    \478\ Unlike GHGs, criteria and hazardous air pollutants are
relatively short-lived; thus their concentrations in the atmosphere
and the resulting impacts on human health depend primarily on
emissions during the immediate period being analyzed, rather than on
their cumulative emissions over an extended period.
[GRAPHIC] [TIFF OMITTED] TR30MR09.090

    In addition to their effects on emissions of criteria air
pollutants, the final CAFE standards for MY 2011 are expected to affect
emissions of some hazardous air pollutants (also known as mobile source
air toxics, or MSATs) from fuel production and use. The MSATs included
in this analysis are acetaldehyde, acrolein, benzene, 1,3-butadiene,
diesel particulate matter (DPM), and formaldehyde, which EPA and the
Federal Highway Administration have identified as the MSATs of primary
concern for assessing the environmental impacts of motor vehicle use.
    Table IX.F-4 reports total nationwide emissions of these air toxics
by passenger cars and light trucks during selected future years under
the Baseline or No Action alternative, as well as with the final MY
2011 CAFE standards in effect. As in the previous analyses of GHG and
criteria air pollutant emissions, these estimates assume that the MY
2011 CAFE standards for cars and light trucks would also apply to
subsequent model years. The table shows that emissions of acetaldehyde,
benzene, 1,3-butadiene, DPM, and formaldehyde during future years would
decline from their Baseline levels with the final CAFE standards for MY
2011 in effect. In contrast, emissions of acrolein are projected to
increase slightly during some future years from their levels under the
Baseline alternative with the final MY 2011 CAFE standards in
effect.\479\ For additional detail on this analysis see FEIS Sec.
3.3.3; Chapter 5.
---------------------------------------------------------------------------

    \479\ The projected increases in future emissions of acrolein
may result from the agency's inability to obtain ``upstream''
emission factors for this pollutant, which prevented it from
estimating the reduction in acrolein emissions resulting from lower
fuel production and distribution. It is possible that if the agency
had been able to do so, lower acrolein emissions during fuel
production and distribution would have more than offset the increase
in emissions from fuel use by cars and light trucks, causing total
acrolein emissions to decline.
[GRAPHIC] [TIFF OMITTED] TR30MR09.091

    The declines in future emissions of criteria air pollutants and
MSATs resulting from the final MY 2011 CAFE standards would be expected
to reduce the adverse health effects stemming from population exposure
to harmful accumulations of these pollutants. In the Final EIS, the
agency presented a detailed analysis of the air quality and health
effects of reductions in population exposure to criteria air pollutants
and MSATs projected to result from alternative CAFE standards for MY
2011-2015. That analysis suggested that significant reductions in
adverse health effects and economic damages caused by exposure to these
pollutants (primarily PM2.5, the largest known contributor
to adverse health effects) could result if higher CAFE standards were
adopted for model years 2011 through 2020. See Sec.  <IP_ADDRESS>.2 of the
FEIS for a description of NHTSA's approach to providing these
quantitative estimates of adverse health effects of conventional health
pollutants associated with the final CAFE standards.
    NHTSA's Final EIS also presented a detailed analysis of the
potential effects of alternative car and light truck CAFE standards for
MY 2011-2015 on the global climate. This analysis first estimated the
effects of alternative increases in CAFE standards on fuel consumption
and resulting emissions of greenhouse gases (GHG) over an extended
future period beginning when those standards would take effect. Next,
the agency projected the extent to which these projected reductions in
GHG emissions might lower future atmospheric concentrations of GHGs.
Finally, the agency utilized a widely-recognized global climate
modeling system, known as MAGICC (Model for the Assessment of
Greenhouse-gas Induced Climate Change), to simulate the consequences of
reduced GHG concentrations for future increases in global mean surface
temperatures and the projected future rise in sea levels, and
approximated the likely consequences of these developments for regional
precipitation patterns. For additional discussion of the FEIS climate
analysis, see FEIS Sec.  3.4 and 4.4.
    The agency's analysis demonstrated that small but potentially
important beneficial effects on the pace and extent of future climate
change were likely to result from the long-term reductions in GHG
emissions that would result from adopting higher CAFE standards for
model years 2011 through 2015, particularly if increases in CAFE
standards continued through model year 2020.

X. Other Fuel Economy Standards Required by EISA

    In the NPRM, NHTSA explained that it is not promulgating standards
for commercial medium- and heavy-duty on-highway vehicles or work
trucks as part of this rule, because Congress was clear in EISA that
several steps were necessary before such a rulemaking could begin.
Section 103 of EISA added the following definitions to 49 U.S.C.
32901(a) for these vehicles:

 ``Commercial medium- and heavy-duty on-highway vehicle''
means an on-highway vehicle with a gross vehicle weight rating of
10,000 pounds or more; and
 ``Work truck'' means a vehicle that--
    (A) is rated at between 8,500 and 10,000 pounds gross vehicle
weight; and
    (B) is not a medium-duty passenger vehicle (as defined in 40 CFR
86.1803-01, as in effect on the date of EISA's enactment).

EISA added a new provision to 49 U.S.C. 32902 requiring DOT, in
consultation with DOE and EPA, to examine the fuel efficiency of these
vehicles and determine the appropriate test procedures and
methodologies for measuring the fuel efficiency of these vehicles, as
well as the appropriate metric for measuring and expressing their fuel
efficiency performance and the range of factors that affect their fuel
efficiency. This study would need to be performed within 1 year of the
publication of the NAS study required by section 108 of EISA.\480\
---------------------------------------------------------------------------

    \480\ 49 U.S.C. 32902(k)(1). The NAS study is currently underway
as of the publication of this final rule.
---------------------------------------------------------------------------

    Then, within two years of the completion of the study, DOT, in
consultation with DOE and EPA, would need to undertake rulemaking to

determine * * * how to implement a commercial medium- and heavy-duty
on-highway vehicle and work truck fuel efficiency improvement
program designed to achieve the maximum feasible improvement, and
shall adopt and implement appropriate test methods, measurement
metrics, fuel economy standards, and compliance and enforcement
protocols that are appropriate, cost-effective, and technologically
feasible for commercial medium- and heavy-duty on-highway vehicles
and work trucks.\481\
---------------------------------------------------------------------------

    \481\ 49 U.S.C. 32902(k)(2).

EISA also requires a four-year lead time for fuel economy standards
promulgated under this section, and would allow separate standards to
be prescribed for different classes of vehicles.\482\
---------------------------------------------------------------------------

    \482\ 49 U.S.C. 32902(k)(2) and (3).
---------------------------------------------------------------------------

    NHTSA received relatively few comments on this issue, perhaps not
surprising since it is essentially concerned with a future rulemaking.
Two commenters disagreed with NHTSA's characterization of Section 102
of EISA ``mandating'' or ``requiring'' that NHTSA develop CAFE
standards for commercial medium- and heavy-duty on-highway vehicles and
work trucks. Both Cummins, Inc. and EMA commented that NHTSA should
change terminology used in footnotes 38 and 41 of the NPRM suggesting
that CAFE standards were ``mandated'' for these vehicles. Both
commenters argued that Congress did not necessarily have CAFE-type
standards in mind for these vehicles in Section 102, as evidenced by
the fact that Congress required a NAS study to be followed by another
study by DOT in consultation with EPA and DOE. The commenters stated
that Section 102 simply requires that NHTSA eventually implement a
``fuel efficiency improvement program'' with ``fuel economy
standards,'' but not necessarily CAFE standards. As Cummins argued,
because the ``truck sector has no broadly accepted metric for measuring
fuel efficiency,'' ``there could be major unintended consequences'' if
NHTSA implemented ``a CAFE-like system that regulates by a miles per
gallon metric,'' because such a system ``could improve fuel economy but
cause overall worse fuel efficiency by promoting multiple smaller
trucks to do the same work that one does today.'' Cummins and EMA
stated that NHTSA should therefore remove all terminology in the final
rule suggesting that NHTSA would apply the ``CAFE system'' to
commercial medium- and heavy-duty on-highway vehicles and work trucks.
    Agency response: NHTSA disagrees with Cummins and EMA that CAFE
standards for commercial medium- and heavy-duty on-highway vehicles and
work trucks were not mandated by Section 102 of EISA. Congress was
clear in Section 102 that, following completion of the required NAS and
agency studies, NHTSA must engage in rulemaking to subject these
vehicles to average fuel economy standards under EPCA and EISA, as the
commenters recognized. Whether or not the precise contours of those
standards are the same as the attribute-based average fuel economy
standards established for passenger cars and light trucks, they will
still be average fuel economy standards for fleets of particular
vehicles. NHTSA sees no reason not to call these ``corporate average
fuel economy'' or ``CAFE'' standards, and does not believe that such
term connotes any pre-judgment on the part of the agency with respect
to the outcomes of the required studies or eventual regulations.
    NHTSA also received comments from NACAA and the Wisconsin DNR
stating that CAFE standards should be applied

to all passenger cars and light trucks up to 10,000 pounds GVWR.
Wisconsin DNR argued that extending the standards to these vehicles
would ``capture the full range of non-commercial passenger vehicles.''
    Agency response: NHTSA explained in the NPRM that all four-wheeled
motor vehicles with a gross vehicle weight rating of 10,000 pounds or
less will be subject to the CAFE standards beginning in MY 2011, with
the exception of commercial medium- and heavy-duty on-highway vehicles
and work trucks, as discussed above. This follows up on NHTSA's
statements in the 2006 final rule setting CAFE standards for MY 2008-
2011 light trucks, where the agency said that it would begin regulating
medium-duty passenger vehicles (MDPVs) under the light truck CAFE
standards in MY 2011. MDPVs have been included in the final rule
standards, although they make up a very small percentage (less than 1
percent) of light trucks in that model year.

XI. Vehicle Classification

    Vehicle classification, for purposes of the CAFE program, refers to
whether NHTSA considers a vehicle to be a passenger automobile or light
truck, and thus subject to either the passenger automobile or the light
truck standards. NHTSA created regulatory definitions for passenger
automobiles and light trucks, found at 49 CFR part 523, to guide the
agency and manufacturers in determining which vehicles are which.
    As NHTSA explained in the NPRM, the statutory language is clear
that some vehicles must be passenger automobiles (cars) and some must
be non-passenger automobiles (light trucks). Passenger automobiles were
defined in EPCA as ``any automobile (other than an automobile capable
of off-highway operation) which the Secretary [i.e., NHTSA] decides by
rule is manufactured primarily for use in the transportation of not
more than 10 individuals.'' EPCA Sec.  501(2), 89 Stat. 901.
    Thus, under EPCA, there are two general groups of automobiles that
qualify as non-passenger automobiles or light trucks: (1) those defined
by NHTSA in its regulations as other than passenger automobiles due to
their having not been manufactured ``primarily'' for transporting up to
ten individuals; and (2) those expressly excluded from the passenger
category by statute due to their capability for off-highway operation,
regardless of whether they were manufactured primarily for passenger
transportation. NHTSA's classification rule directly tracks those two
broad groups of non-passenger automobiles in subsections (a) and (b),
respectively, of 49 CFR 523.5.
    In the NPRM, NHTSA took a fresh look at the regulatory definitions
in light of its desire to ensure clarity in how vehicles are
classified, the passage of EISA, and the Ninth Circuit's decision in
CBD. NHTSA explained the origin of the current definitions of passenger
automobiles and light trucks by tracing them back through the history
of the CAFE program, and did not propose to change the definitions
themselves at that time, because the agency tentatively concluded that
doing so would not lead to increased fuel savings. The NPRM did,
however, propose to tighten the coverage of its regulatory definition
of ``light truck'' to ensure that, starting in MY 2011, 2WD versions of
SUVs are no longer classified as off-highway capable light trucks under
49 CFR 523.5(b), simply because the SUV also comes in a 4WD version.
This tightening of NHTSA's definitions will, as explained below, have
significant impacts on fuel savings and preventing increased emission
of carbon dioxide.

A. Summary of Comments

    NHTSA received a number of comments on the vehicle classification
issue from a range of organizations. Many commenters (including the
Alliance, GM, Ford, and Toyota) supported the clarification in the NPRM
concerning how 2WD vehicles should be classified. These commenters
sought clarification that the change in how these 2WD vehicles are
classified would become effective in MY 2011 and not earlier. Others
(Nissan, NADA, and AIAM) questioned NHTSA's position on that issue,
arguing that 2WD vehicles should be classified in the same way as 4WD
versions of the same model. Some (Alliance, Ford, Toyota, and the
Sierra Club) noted that moving large numbers of 2WD vehicles from the
light truck category to the passenger category may have a significant
impact on the stringency of the curves, and that the NPRM curves did
not reflect this impact.
    Several commenters (Public Citizen, Honda, UCS, CBD, and Sierra
Club) argued that the rule's classification definitions needed to be
revised. The commenters relied on several arguments: first, that the
current definitions did not comport with the Ninth Circuit's opinion in
CBD (which directed NHTSA either to ``revise its regulatory definitions
of passenger automobile and light trucks or provide a valid reason for
not doing so'') and do not reflect the fact that many light trucks are
used as passenger vehicles; second, that they were not ratified by
Congress in EISA; third, they do not ensure that some vehicles that
these commenters believe should be classified as passenger cars are in
fact classified as such; and fourth, that they allow manufacturers to
``game'' the definitions by making minor changes to vehicles to obtain
a light truck classification and thus, a lower fuel economy target. One
commenter (GM) urged NHTSA to define ``base form'' (a term used in a
1981 interpretation concerning the classification of 2WD vehicles) and
``model type,'' contending that these new definitions would help
clarify how certain vehicles should be classified. NHTSA responds to
these comments below.

B. Response to Comments

1. This Rule Substantially Tightens NHTSA's Vehicle Classification
Definitions
(a) Under Sec.  523.5(b), Only Vehicles That Actually Have 4WD Will Be
Classified as 4WD Vehicles
    As proposed in the NPRM, NHTSA has tightened the coverage of its
regulatory definition of ``light truck'' to ensure that 2 wheel drive
(2WD) versions of an SUV are not classified as light trucks under 49
CFR Sec.  523.5(b) simply because the SUV also comes in a 4WD version.
In order to be properly classifiable as a light truck under Part 523, a
2WD SUV must either be over 6,000 lbs GVWR and meet 4 out of 5 ground
clearance characteristics to make it off-highway capable under Sec.
523.5(b), or meet one of the functional characteristics under Sec.
523.5(a) (e.g., greater cargo carrying capacity than passenger carrying
capacity). In other words, a 2WD vehicle of 6,000 lbs GVWR or less,
even if it has a sufficient number of clearance characteristics, cannot
be considered off-highway capable. This is based on the plain meaning
of Sec.  523.5(b) (which refers to a vehicle that ``has'' 4WD) and the
statute (49 U.S.C. 32901(a)(18)(b) speaks of a vehicle that ``is a 4-
wheel drive automobile''). No change in the regulatory definition is
needed. The clarification accomplishes NHTSA's purpose. This
clarification, which the vehicle manufacturers largely supported,
resulted in the re-classification of approximately 1.5 million 2WD SUVs
from light trucks to passenger cars in MY 2011. The result of this re-
classification is an increase of 0.3 mpg in the combined passenger car
and light truck standards for MY 2011.
    As noted above, several commenters agreed with NHTSA's
clarification on the 2WD vehicles but asked for

assurance that it would be applied only to MY 2011 and later
production. The Alliance commented that it agreed that NHTSA's vehicle
classification ``regulations are consistent with congressional intent
as expressed by EPCA and EISA,'' and that it did ``not object to
NHTSA's interpretations and its proposed regulatory revisions to 49 CFR
Part 523, provided that these are effective with the 2011 model year.''
The Alliance argued that this would help avoid ``the need to reexamine
and re-issue standards for 2009 and 2010 model years,'' which the
Alliance stated had been ``developed based on a data set with 4x2
utilities included in the truck fleet.'' Ford agreed, arguing that
reclassifying 2WD SUVs for MYs 2008-2010 would ``make it more difficult
for many manufacturers to meet the light truck standards (as well as
the car standards) and would amount to an improper increase in the
stringency of the MY 2008-2010 standards.'' NHTSA hereby clarifies that
its intention is that its clarification on the treatment of 2WD
vehicles under Sec.  523.5(b) become effective with regard to MY 2011
vehicles. Applying that treatment earlier would require the agency to
change the standards for those model years, which the agency is
statutorily prevented from doing later than 18 months before the start
of the model year to which the amended standard applies, if the
standards would be more stringent.\483\
---------------------------------------------------------------------------

    \483\ 49 U.S.C. 32902 (g)(2).
---------------------------------------------------------------------------

    Some commenters noted that this clarification, although thoroughly
discussed in the NPRM, was not reflected in the stringency curves of
the proposed standard. NHTSA believes that its announced intention to
apply this clarification in the final rule was adequate notice to all
concerned that the stringency levels of the final rule would reflect
the concomitant movement of many 2WD vehicles from the light truck to
the passenger car fleet. Commenters who are manufacturers had every
opportunity to analyze how the change might affect their fleets and
comment accordingly. In the period since issuance of the NPRM, NHTSA
has had the opportunity to evaluate new manufacturer product plans in
order to analyze the full impact of the clarification on the standard.
As noted above, this change has resulted in an increase in the
standards and fuel savings for MY 2011. The final curves for passenger
cars and light trucks reflect this change.
    Nissan disagreed with NHTSA's proposal to classify certain 2WD SUVs
as passenger cars, offering the following basic arguments: (1) That
NHTSA has always interpreted and set standards with 2WD SUVs as light
trucks, even in the MY 2008-2011 CAFE rule (as evidenced, for example,
by the CAFE reporting requirements that specify that a manufacturer
must indicate whether a light truck has 4WD--Nissan argued that that
presumed that some light trucks did not); (2) that NHTSA's 1981
interpretation states that vehicle classification is determined by the
base vehicle; (3) that classifying 2WD SUVs as light trucks because
they also come in 4WD is consistent with EPA emissions test procedures
which describe equipment as ``optional'' if a manufacturer expects less
than one-third of the models sold to be equipped with it;\484\ and (4)
that NHTSA must provide notice and comment before changing the
standards.
---------------------------------------------------------------------------

    \484\ Thus, according to Nissan, if less than one-third of the
``variants'' of an SUV sold are 2WD, those 2WD variants are properly
classified along with the 4WD ``base'' vehicle.
---------------------------------------------------------------------------

    With regard to Nissan's comment that NHTSA has always interpreted
and set standards with 2WD SUVs as light trucks, even in the MY 2008-
2011 CAFE rule, NHTSA has never stated that 2WD SUVs are necessarily
light trucks simply because they also come in 4WD, and in fact has
stated to the contrary. As early as 1980, in the final rule
promulgating light truck CAFE standards for MYs 1983-1985, NHTSA
responded to a comment from GM requesting a change to the regulatory
definitions to ensure that 2WD SUVs may be classified as light trucks
even if their GVWR fell below 6,000 pounds. NHTSA stated that, ``Under
the agency's current regulations in 49 CFR Part 523, such a change in
the vehicle's GVWR would result in their being classified as passenger
automobiles.'' Although NHTSA's technical analysis for the 1980 final
rule ``treat[ed] 4x2 utility vehicles * * * as light trucks, consistent
with the classification of current vehicles,'' NHTSA expressly
cautioned that ``this treatment should not be interpreted as a
statement by the agency that all future designs of 4x2 utility vehicles
* * * will continue to be classified as light trucks.'' \485\ NHTSA
also stated as much in a 1981 letter of interpretation, discussed in
greater detail below. Thus, in response to Nissan's comment, while
NHTSA has previously set standards with 2WD SUVs as light trucks, the
agency has long held that 2WD SUVs are not inherently light trucks, and
that the definitions could be tightened in the future. The fact that
the reporting requirements include ``4WD (yes/no)'' does not, as Nissan
suggests, indicate that 2WD SUVs may be light trucks under Sec.
523.5(b) if their GVWR is less than 6,000 pounds.
---------------------------------------------------------------------------

    \485\ 45 FR 81593, 81599-60 (Dec. 11, 1980).
---------------------------------------------------------------------------

    Nissan's comments focus on how it believes NHTSA has construed and
applied its definitions in the past. But Nissan does not make an
argument that NHTSA's reading of its own rules, as proposed in the
NPRM, is not a reasonable reading of those rules. In fact, NHTSA
believes that it is reasonable to read a rule (Sec.  523.5(b)(1)(i))
that refers to a vehicle that ``has 4-wheel drive'' as encompassing
only vehicles that have 4WD. The same is true with regard to the
statute (49 U.S.C. 32901(a)(18)(B)), which speaks of a vehicle that
``is a 4-wheel drive automobile.'' NHTSA merely intends to read the
rule and statute according to their plain meaning.
    NHTSA also disagrees that the November 1981 letter of
interpretation indicates that vehicle classification is always
determined by the base vehicle. In that letter, NHTSA used the term
``base vehicle'' for classifying vehicles under Sec.  523.5(a), not
Sec.  523.5(b). NHTSA has never used the term ``base vehicle'' to
describe a vehicle as off-highway capable and thus properly
classifiable under Sec.  523.5(b). A vehicle either is or is not off-
highway capable--the fact that the vehicle may also come in 4WD does
not make the 2WD version off-highway capable.
    With regard to Nissan's comment about EPA emissions test procedures
describing equipment as ``optional'' if a manufacturer expects less
than one-third of the models sold to be equipped with it, NHTSA has
examined EPA's regulations and remains unconvinced that 2WD would be
the kind of ``optional'' equipment covered. EPA regulations describe
``optional'' equipment as an ``item'' that could add weight or
influence emissions in the test. If anything was ``optional''
equipment, then, it would appear to be the presence of 4WD, which both
adds weight to a vehicle and causes it to emit more pollution, compared
to 2WD.\486\ NHTSA would of course defer to EPA's interpretation of its
own regulations, but does not find Nissan's argument convincing for
purposes of this rulemaking.
---------------------------------------------------------------------------

    \486\ See, e.g., 40 CFR 86.1832-01.
---------------------------------------------------------------------------

    And finally, with regard to Nissan's comment that the agency was
reclassifying 2WD SUVs without providing notice and comment, NHTSA
disagrees--these changes have been made with full notice, as provided
in the NPRM, and an opportunity for comment, and are appropriate and
timely revisions to NHTSA's application

of Part 523. In the NPRM, NHTSA specifically sought comment on the
proposed changes to the vehicle classification system and whether
further changes were appropriate.
    AIAM also disagreed with NHTSA's proposal to classify certain 2WD
SUVs as passenger cars. AIAM stated that larger 2WD SUVs had originally
been classifiable as light trucks per the statutory off-highway
definition, but that over time ``smaller, more fuel efficient versions
of SUVs were offered in the U.S. market.'' AIAM thus suggested that
NHTSA should classify ``all SUVs in the same category and provide lead-
time for manufacturers before the new criteria take effect,'' as NHTSA
had done for minivans and the ``three row'' requirement in its 2006
rule on light truck standards. In response, the agency notes that a
vehicle's fuel economy capability has no bearing on its proper
classification as a passenger car or as a light truck. NHTSA believes
that the lead time between when the final rule standards are
promulgated and when the revised definitions take effect (MY 2011)
should be sufficient for manufacturers, particularly given the
increasing consumer preference for higher fuel economy vehicles and
NHTSA's announced intention to move in this direction in the NPRM.
    In summary, NHTSA believes its clarification of how, starting with
MY 2011, it will apply Sec.  523.5(b) to 2WD vehicles of 6,000 lbs or
less GVWR constitutes a reasonable and significant tightening of its
definitions related to vehicle classification. As a result, in MY 2011,
approximately 1.5 million vehicles formerly classified as light trucks
will be classified as passenger automobiles, which will produce an
average increase of 0.3 mpg in the combined passenger car and light
truck standards in those years.
(b) The Final Rule Amends Sec.  523.5(a)(4) To Prevent Gaming That
Might Jeopardize Fuel Savings Created by NHTSA's Clarified Position on
2WD Vehicles
    In explaining in the NPRM (73 FR 24459) that 2WD SUVs would no
longer be classifiable as light trucks simply because a version is also
available in 4WD, NHTSA noted that, alternatively, a 2WD automobile may
properly be classified as a light truck under Sec.  523.5(a)(4) if it
provides ``greater cargo-carrying than passenger-carrying volume.'' In
that context, NHTSA mentioned a 1981 letter of interpretation to
GM.\487\ The 1981 letter stated that ``two-wheel drive utility vehicles
which are truck derivatives and which, in base form, have greater
cargo-carrying volume than passenger-carrying volume should be
classified as light trucks for fuel economy purposes.'' NHTSA stated in
the NPRM that ``base form'' means ``the version of the vehicle sold as
`standard,' without optional equipment installed, and does not include
a version that would meet the cargo volume criterion only if `delete
options' were exercised to remove standard equipment.'' NHTSA gave the
example of a base vehicle that comes equipped with a standard second-
row seat, which the agency stated could not be classified as a light
truck simply on the basis that the purchaser has an option to delete
that second-row seat.\488\
---------------------------------------------------------------------------

    \487\ See http://www.nhtsa.dot.gov/cars/rules/interps/gm/81/
nht81-3.36.html (last accessed September 23, 2008) for the full text
of the letter of interpretation to GM.
    \488\ 73 FR 24459, fn. 207 (May 2, 2008).
---------------------------------------------------------------------------

    In its comments, GM urged NHTSA to incorporate the definition of
``base form'' into Part 523. However, it is possible that a literal
application of the 1981 letter's definition of ``base form'' could
result in gaming of the classification system. For example, with regard
to a particular vehicle, a manufacturer could describe as optional a
second-row seat that is in fact an item that the manufacturer expects
to install in nearly every vehicle of that model. In fact, even with
regard to a vehicle that has long come equipped with a second-row seat
as standard equipment, the manufacturer could suddenly describe that
seat as optional. Even if most, or even all, vehicles of that model
continued to be sold with second-row seats, the manufacturer's mere
description of the seat as optional could, if the manufacturer's
description of the vehicle's ``base form'' were the only consideration,
allow the manufacturer to argue that the vehicle is a light truck
because its base form has greater cargo-carrying than passenger-
carrying volume.
    The vehicles described by GM in the 1981 correspondence have little
relation to the 2WD SUVs of today. To the best of the agency's
knowledge, most 2WD SUVs are routinely offered with a standard full
bench or pair of captain's chairs in the second row. Additionally, far
fewer 2WD SUVs manufactured today are based on a truck chassis. To
permit a manufacturer to continue to sell 2WD SUVs with second-row
seats and consider them light trucks merely because the manufacturer
has decided to list those seats as an option rather than as a standard
feature of the base vehicle would be to stand the November 1981
interpretation on its head. That interpretation was intended to prevent
gaming of the ``greater cargo-carrying volume'' category of light
trucks by limiting it to vehicles where carrying cargo was clearly the
primary function for which the vehicle was designed. We cannot permit
that interpretation to be used to produce the precisely opposite
result, i.e., to categorize 2WD vehicles that are primarily designed to
be sold with a second-row seat for passengers as light trucks merely
because the manufacturer suddenly labels the second-row seat as an
option.
    Therefore, in response to comments and consistent with Congress'
intent in EISA, starting with MY 2011, 2WD SUVs (including crossovers
that are 2WD) may only be properly classified as light trucks under
Sec.  523.5(a)(4) if they are, like cargo vans, designed and sold
primarily to serve a cargo-carrying function. The final rule amends
that section to say: ``Provide, as sold to the first retail purchaser,
greater cargo-carrying than passenger-carrying volume, such as in a
cargo van; if a vehicle is sold with a second-row seat, its cargo-
carrying volume is determined with that seat installed, regardless of
whether the manufacturer has described that seat as optional.'' In
light of this clarifying rule text, there is no need at this time to
provide a definition for ``base form.'' The manufacturer must
categorize its vehicles based upon the vehicle attributes when it is
sold. If a cargo van is manufactured as such with no rear seating and
is sold in that configuration then it can be considered a light truck
under Sec.  523.5(a)(4). If the same vehicle is sold with rear seating,
it cannot be a truck under Sec.  523.5(a)(4). GM's HHR provides an
example of this concept. The HHR is available and sold in a ``panel''
version with no rear seating and a passenger version with rear seating.
The panel version if actually sold that way can be a light truck under
Sec.  523.5(a)(4); the passenger version, when sold with rear seating,
cannot be a truck under Sec.  523.5(a)(4) even if the manufacturer were
to label that seating as optional.
    Thus, through interpretation and changes to the rule text, NHTSA
has significantly tightened the definitions governing which vehicles
may be classified as light trucks. 2WD SUVs of 6,000 lbs or less GVWR
may no longer be properly classified as light trucks under Sec.
523.5(b) simply because they also come in 4WD. Additionally, 2WD SUVs
may not be properly classified as light trucks simply because a
manufacturer asserts that their base form has no back seat and thus
would ``provide greater cargo-carrying than

passenger-carrying volume'' according to Sec.  523.5(a)(4).
2. Especially as Tightened by This Rule, NHTSA's Classification
Definitions Are More Difficult To Game Than Commenters Suggest
    As described above, this final rule effectuates significant changes
in NHTSA's definitions and their interpretation that will substantially
reduce any opportunities to game those definitions. NHTSA disagrees
with the commenters' argument that the standards allow manufacturers to
``game'' the definitions by making minor changes to vehicles to obtain
a light truck classification and thus, a lower fuel economy target.
    Several commenters, including Sierra Club et al., UCS, and Honda
commented that manufacturers are ``gaming'' the existing definitions by
making changes to passenger cars in order to classify them as light
trucks and obtain the benefit of lower fuel economy targets. UCS
suggested that the ``loophole'' is a function of both the statutory
requirement to set separate standards for passenger cars and light
trucks, which ``accommodat[es] an industry interest in having non-
passenger vehicles held to less stringent fuel economy standards than
passenger vehicles of the same attribute,'' and of NHTSA's ``equating
SUVs, minivans, crossovers and even some station wagons with non-
passenger vehicles.'' UCS argued that ``The association of these
categories has allowed automakers to tweak passenger vehicle
characteristics in order to have them classified as light trucks that
are held to lower fuel economy standards.'' The Sierra Club stated that
the current definitions are being abused, with manufacturers
classifying as light trucks ``obvious examples [of] many sedans and
station wagons, such as the Chrysler PT Cruiser, Dodge Magnum, and the
Subaru Outback sedan,'' as well as ``SUVs and minivans [which] are
advertised, sold, and used as passenger vehicles.'' Sierra Club argued
that the attribute-based system, under which manufacturers are subject
to standards based on their fleet mix, encourages further gaming, as
evidenced by the ``surge in `crossover' vehicles that are more car-like
and intended as passenger vehicles but are still classified as non-
passenger vehicles and can therefore meet a lower fuel economy than
cars.'' Honda stated that NHTSA should change the light truck
definitions because ``the current system is much too easy to game,
which creates competitive impacts and diverts limited engineering
resources to figuring out how to game the latest rules instead of
improving fuel economy,'' and ``in the long run, * * * will also
encourage shifting sales towards vehicles classified as light trucks
and cause increases in real world fuel consumption.''
    In response to the above comments, NHTSA notes that separate
standards for passenger cars and light trucks are a statutory
requirement under EISA. NHTSA believes, as explained elsewhere in this
notice, that that requirement extends to setting the target curves for
the passenger car fleet based only on the passenger cars, and the
target curves for the light truck fleet based only on the light trucks.
NHTSA does not believe that it has the authority to combine the fleets
for the purposes of setting the standards.
    Moreover, with regard to ``crossovers'' and commenters' examples of
``many sedans and station wagons'' being classified as light trucks,
the agency notes that as a result of the tightened implementation of
our vehicle definitions, many crossovers are in fact now properly
classified as passenger cars. To the extent that crossovers are not
classified as passenger cars, it is, we believe, only because they
either (1) have 4WD and meet 4 out of 5 ground clearance
characteristics; (2) are over 6,000 lbs GVWR and meet 4 out of 5 ground
clearance characteristics; or (3) have three rows of seats and the
capability to expand cargo-carrying volume through folding or removing
seats.
    Of the specific examples of the PT Cruiser, the Dodge Magnum, and
the Subaru Outback sedan, NHTSA believes that manufacturers currently
classify these vehicles as light trucks either because they come in
four-wheel drive and have the required ground clearance, or because
their rear seats may be easily removed to create a flat, floor level
surface that increases cargo-carrying capacity. After MY 2011, vehicles
may only be classified as light trucks on the basis of permitting
expanded use of the vehicle for cargo-carrying purposes if they have
three rows of standard designated seating positions that fold flat or
are removable. As currently designed, the PT Cruiser and the Magnum do
not meet this requirement, so NHTSA would likely classify these
vehicles as passenger cars as well. If the Outback sedan does in fact
have 4WD (or AWD) and meet the required ground clearance
characteristics, NHTSA is required by EPCA and EISA to consider it a
light truck, regardless of its body shape.
    Finally, NHTSA believes that minor changes are not sufficient, and
that fairly major changes would be necessary in order to reclassify a
passenger car as a light truck. To make a 2WD SUV a light truck, for
example, manufacturers would need either to add a third row of seats to
it (and otherwise meet the requirements for expanded cargo space)
convert it to 4WD, or raise its GVWR over 6,000 lbs and ensure that it
met 4 out of the 5 ground clearance characteristics. These changes are
not minor, and likely can be made only every few years at the time of
one of the periodic vehicle redesigns. Additionally, the minor benefit
to be gained in terms of a lower target must be balanced against
consumer demand. In a time of high gas prices and increasing consumer
interest in high fuel economy vehicles, it seems unlikely to NHTSA that
manufacturers would take the risk of turning passenger cars into light
trucks solely to obtain the slightly lower light truck target standard.
3. Additional Changes in NHTSA's Classification Definitions Would Not
Result in Greater Fuel Savings and Lower CO2 Emissions
    We have explained above the recategorization of 2WD vehicles that
will result from NHTSA's tightening of its classification definitions.
NHTSA considered whether recategorization of additional vehicles
through further changes to its classification definitions would result
in additional fuel economy improvements and therefore lower emissions
of carbon dioxide. One of the concerns underlying the Ninth Circuit's
decision in CBD was the potential impact of vehicle categorization on
the ultimate fuel economy for light trucks. The commenters, too, were
concerned about this in general. NHTSA has considered this issue
carefully. In 2006, when NHTSA issued its MY 2008-2011 light truck fuel
economy rule, and in 2007, when the Ninth Circuit issued its initial
opinion in CBD concerning that 2006 light truck rule, EISA had not been
enacted. Under EPCA as it then existed, the passenger car standard was
a flat 27.5 mpg average requirement. Re-classifying light trucks (which
had a standard far below 27.5 mpg) as passenger cars, in the flat pre-
EISA world, intuitively would have resulted in their having to meet a
higher standard, or in the manufacturers' having to build more small,
lightweight vehicles in order to balance out former light trucks newly
subject to the higher passenger standard, and could have resulted in
more fuel savings. This assumption may no longer be correct, because
such a recategorization could now result in lower standards for
passenger automobiles.

    In EISA, Congress made both the passenger car and light truck
standards attribute-based, which means that the fuel economy target
curves for each standard are a function of the fleet subject to that
standard. In developing the curves that determine fuel economy targets
for each vehicle footprint, NHTSA fits the curve based in part on the
sizes (footprint) and fuel economy levels (given the estimated effects
of adding fuel-saving technologies) of the vehicles in each regulatory
class. Consider, for example, a small SUV typically classified as a
light truck, and assume that the small SUV gets relatively good fuel
economy for a truck. Moving the small SUV out of the truck fleet may
reduce the overall average fuel economy level required of light trucks,
because the vehicles remaining in that regulatory class will be the
larger ones that have relatively lower fuel economy. Averaging their
capabilities will result in a lower target than if the small SUV in
question remained in the light truck fleet. Moving the SUV into the
passenger car fleet may either boost or lower the average fuel economy
level required of passenger cars, depending on how the size and
potential fuel economy of the given SUV compares to those of the
vehicles that were already classified as passenger cars.
    NHTSA's analysis indicates that the direction and magnitude of the
net effects of vehicle re-classification depend on the composition of
the fleet and the specific nature of the change in classification. As
shown in Figure XI-1, assigning 2WD SUVs and those vehicles that do not
meet the third row requirement to the passenger car fleet would add to
the passenger car fleet a set of vehicles (labeled ``PC Formerly
Classified as LT'') with fuel economy levels that are generally (though
not universally) in the same range as those of passenger cars of
similar footprint. However, further reassigning to the passenger car
fleet minivans and vehicles that do meet the third row requirement, as
commenters appear to suggest, would add to the passenger car fleet a
set of vehicles (labeled ``LT Reassigned to PC under Alternative
Definition'') with fuel economy levels that are generally (though not
universally) lower than those of passenger cars of similar footprint.
Figure XI-2 shows how the composition of the light truck fleet is
affected by such shifts. Reassigning either the smaller or larger group
of vehicles to the passenger car fleet removes from the light truck
fleet vehicles that are generally (though not universally) smaller and
more efficient than the vehicles that remain in the light truck fleet.
    In contrast, a number of commenters, including CBD, Sierra Club et
al., and UCS, did not address NHTSA's discussion and commented that
NHTSA should revise the definitions of passenger car and light truck in
accordance with the Ninth Circuit's opinion, generally for the purpose
of increasing fuel savings. Honda also commented that NHTSA should
revise its definitions to be consistent with that opinion. None of
those commenters specified precisely which vehicles should be
reclassified as passenger cars instead of light trucks.
[GRAPHIC] [TIFF OMITTED] TR30MR09.092

[GRAPHIC] [TIFF OMITTED] TR30MR09.093

    The following table shows how, for MY 2011, reclassifying 2WD SUVs
by virtue of NHTSA's tightened classification decisions changed average
required CAFE levels, and how additionally reclassifying minivans and
vehicles that do not meet the third row requirement would have changed
average required CAFE levels. The overall averages reflect changes in
the size of each fleet under each approach to vehicle classification,
again bearing in mind that ``Alternative Definition'' in the tables
refers to moving all light trucks that meet the 3-rows criterion of
Sec.  523.5(a)(5)(ii) into the passenger car fleet.
[GRAPHIC] [TIFF OMITTED] TR30MR09.094

    Similarly, the next table shows how these changes in vehicle
classification affected the amount of fuel consumed over the useful
lives of vehicles in the MY 2011 fleet.
[GRAPHIC] [TIFF OMITTED] TR30MR09.095

    As discussed above, in the context of the MY 2011 passenger car and
light truck standards, moving about 1.5 million 2WD SUVs from the light
truck to the passenger car fleet results in an average increase of 0.3
mpg in the combined passenger car and light truck standards for MY
2011. However, specific fleet differences are such that this change
leads to increases in lifetime fuel consumption and carbon dioxide
emissions of about 0.03 billion gallons and 0.06 million metric tons,
respectively, than under standards that would apply under the former
definitions.\489\ This is due to the fact that the reassignment of
vehicles changed the shapes of the passenger car and light truck target
curves, which caused different results for different manufacturers
depending on their fleet mixes. Although the overall combined average
required fuel economy increases by 0.3 mpg, the overall average
achieved fuel economy decreases very slightly (by about 0.009 mpg),
such that total fuel consumption and emissions are very slightly
higher, as noted. This occurs because for both Ford and General Motors,
the reassignment of vehicles causes the planned CAFE levels of these
manufacturers' light truck fleets to fall by 0.7 mpg (Ford) and 0.8 mpg
(General Motors), but causes the corresponding required CAFE to fall by
only 0.3 mpg, and causes the corresponding achieved CAFE levels to fall
by 1.2 mpg (Ford) and 0.8 mpg (General Motors).\490\
---------------------------------------------------------------------------

    \489\ NHTSA's analysis of the effects of then-pending MY 2011-
2015 standards, documented in the October 2008 EIS, indicated that
the reclassification reflected in today's final rule would reduce
the total lifetime fuel consumption and carbon dioxide emissions (p.
10-229) of vehicles sold during this period.
    \490\ We note that in both cases, NHTSA's analysis did not
identify a set of technologies that enabled these manufacturers to
attain the required light truck CAFE levels.
---------------------------------------------------------------------------

    It is possible, as some industry commenters suggested, that
manufacturers will respond to the tightening of the definition by
ceasing to build 2WD versions of SUVs, which could reduce fuel savings.
However, NHTSA expects that manufacturer decisions will be driven in
much greater measure by consumer demand than by NHTSA's regulatory
definitions. In this era of high gasoline prices and increasing
consumer interest in high fuel economy vehicles, NHTSA believes that
there will still be demand for 2WD SUVs, whether they are classified
for CAFE purposes as passenger cars or as light trucks.\491\
---------------------------------------------------------------------------

    \491\ Of course, the agency recognizes that if manufacturers do
cease to build and sell 2WD SUVs in response to this tightening of
the definition, fuel savings would likely decrease relative to
NHTSA's estimates in this final rule.
---------------------------------------------------------------------------

    Nevertheless, going further and reclassifying other light trucks as
passenger cars, as some commenters would have NHTSA do, would change
the form and stringency of the curves for the maximum feasible
standards. It would reduce the overall average required CAFE level by
an average of 0.1 mpg MY 2011 and reduce lifetime fuel and carbon
dioxide savings by about 0.13 billion gallons and 0.64 million metric
tons, respectively.\492\ Accordingly, EPCA and EISA's overarching
purpose of energy conservation would not be better fulfilled by further
changing the vehicle classifications.
---------------------------------------------------------------------------

    \492\ The October 2008 EIS also indicates that for the analysis
of the effects of then-pending MY 2011-2015 standards, the
reclassification of minivans and 2WD SUVs with 3 rows would reduce
overall average required CAFE levels by an average of 0.4 mpg during
MYs 2011-2015, raising total lifetime fuel consumption and carbon
dioxide emissions (p. 10-231) of vehicles sold during this period.
---------------------------------------------------------------------------

4. The Vehicle Classification Definitions Embodied in This Final Rule
Are Consistent With NHTSA's Statutory Authority and Respond to the
Ninth Circuit's Opinion
    Some commenters (Public Citizen, Sierra Club, CBD) argued broadly
that the standards do not reflect the fact that many light trucks are
used as passenger vehicles, and that, therefore, more of them should be
classified as passenger cars. NHTSA discussed at length in the NPRM
that the fact that vehicles are used for personal transportation does
not make them passenger cars for purposes of CAFE. The commenters'
argument overlooks the statutory definition of passenger automobile.
Passenger automobiles were defined in EPCA as ``any automobile (other
than an automobile capable of off-highway operation) which the
Secretary [i.e., NHTSA] decides by rule is manufactured primarily for
use in the transportation of not more than 10 individuals.'' EPCA Sec.
501(2), 89 Stat. 901. The statute does not employ the word ``used.'' If
Congress had wanted all vehicles used to transport passengers to be
classified as passenger automobiles, it would have said ``used
primarily'' in EPCA, instead of ``manufactured primarily.'' The
definition of ``passenger automobile'' itself excludes two types of
passenger-carrying vehicles: (1) Vehicles capable of off-highway
operation regardless of whether they transport any number of
passengers, and (2) vehicles manufactured primarily to transport more
than 10 passengers. This indicates that Congress envisioned from the
start of the program that some vehicles would be used for passenger
transportation but, for fuel economy purposes, not be classified as
passenger automobiles. Congress also authorized NHTSA to define, by
rule, those vehicles ``manufactured primarily'' for carrying 10 or
fewer passengers, indicating that Congress also envisioned that other
passenger-carrying vehicles would be excluded from the definition if
manufactured primarily for another purpose.
    NHTSA refers readers to the discussion in the NPRM at 73 FR 24458-
24461 (May 2, 2008) for additional information on this issue. See
further the discussion of EPCA's legislative history in the proposal
and final rule establishing NHTSA's vehicle definition regulation. 41
FR 55368, 55369-55371, December 20, 1976, and 42 FR 38362, 38365-38367,
July 28, 1977. That discussion, and not the incorrect and anomalous
description of it in a preliminary notice published by the agency in
late 2003 (68 FR 74908, 74926, December 29, 2003), represents the
agency's historical position.
    NHTSA also explained in the NPRM that in EISA Congress specifically
addressed the vehicle classification issue. It redefined
``automobile,'' added a definition of ``commercial medium- and heavy-
duty on-highway vehicle,'' defined ``non-passenger automobile'' and
defined ``work truck.'' Significantly, it did not change other
definitions and its new definition of ``non-passenger automobile,''
which is most relevant in this context, in no way contradicted how
NHTSA has long construed that term. In enacting EISA, Congress
demonstrated its full awareness of how NHTSA classifies vehicles for
fuel economy purposes and chose not to alter those classifications.
That strongly suggests Congressional approval of the agency's 30-year
approach to vehicle classification.
    Moreover, Congress has given clear direction that overall
objectives must be obtained regardless of vehicle classification. EISA
adds a significant requirement to EPCA--the combined car and light
truck fleet must achieve at least 35 mpg in the 2020 model year. Thus,
regardless of whether the entire fleet is classified as cars or light
trucks, or any proportion of each, the result must still be a fleet
performance of at least 35 mpg in 2020. This suggests that Congress did
not want to spend additional time on the subject of whether vehicles
are cars or light trucks. Instead, Congress focused on mandating fuel
economy performance, regardless of classifications.
    A number of commenters, including Sierra Club, UCS, and Honda,
disagreed

with the idea that Congress had expressed approval of NHTSA's
classification system through its changes in EISA. The commenters
argued instead that Congress's failure to address NHTSA's definitions
for passenger car and light truck could just as well represent
Congress's agreement with the Ninth Circuit's opinion in CBD, which
found NHTSA's failure to revise its definitions or adequately explain
its decision not to revise them to be arbitrary and capricious. UCS
referred to Representative Edward Markey's (D-MA) extended comments on
the Senate amendments to H.R. 6, which he submitted to the
Congressional Record upon EISA's passage, and in which he stated that

    Section 106 is intended to clarify that Title I does not impact
fuel economy standards or the standard-setting process for vehicles
manufactured before model year 2011. This section is not intended to
codify, or otherwise support or reject, any standards applying
before model year 2011, and is not intended to reverse, supersede,
overrule, or in any way limit the November 15, 2007 decision of the
U.S. Court of Appeals for the Ninth Circuit in Center for Biological
Diversity v. National Highway Traffic Safety Administration (No. 06-
71891).\493\
---------------------------------------------------------------------------

    \493\ See, e.g., Representative Markey's insertions at 153 CONG.
REC. H14253 (editor's note) and H14444 (daily ed. Dec. 6, 2007)
(statement of Cong. Markey).

Sierra Club and UCS argued that Rep. Markey's extended remarks indicate
that Congress did not intend to nullify the decision of the Ninth
Circuit. Honda also argued that ``If [Congress] did not agree with the
court order, they would have addressed it in EISA.''
    NHTSA has carefully considered the discussion of this issue in the
extension of remarks by Rep. Markey. No Senate, House, or conference
reports were created during the legislative process that culminated in
EISA. The floor statements during Congressional consideration of EISA
are also sparse. In any event, however, floor statements, regardless of
who made them, are entitled to less weight than conference reports
(even if they existed here) because they may not represent statements
on the final terms of a bill agreed to by both houses.\494\ Various
members, including Representative Markey, also inserted material into
the Congressional Record after floor debate. Materials inserted by
members after congressional action are not indicative of congressional
intent.\495\
---------------------------------------------------------------------------

    \494\ See, e.g., In re Burns, 887 F.2d 1541 (11th Cir. 1989).
See also In re Kelly, 841 F.2d 908, 913 n. 3 (9th Cir. 1988)
(``Stray comments by individual legislators, not otherwise supported
by statutory language or committee reports, cannot be attributed to
the fully body that voted on the bill. The opposite inference is far
more likely.'')
    \495\ See, e.g., Sigmon Coal Co., Inc. v. Apfel, 226 F.3d 291,
304-05 (4th Cir 2000) (quoting INS v. Cardoza-Fonseca, 480 U.S. 421,
432 n. 12 (1987)), aff'd sub. nom., Barnhart v. Sigmon Coal Co.,
Inc., 534 U.S. 438 (2002), and Shannon v. United States, 512 U.S.
573, 583 (1994).
---------------------------------------------------------------------------

    Regardless of the weight that might be accorded to Rep. Markey's
remarks, Congress did not amend the definition of ``passenger
automobile'' or direct the agency to amend the definition of that term
in the agency's classification regulation, and Rep. Markey's remarks do
not contradict, much less address, these points.
    Moreover, even if Congress' intent was not to disturb the Ninth
Circuit's decision with regard to vehicle classification, NHTSA's
action is responsive to the Court's concerns and consistent with the
Court's decision. The court said, ``Thus, we remand to NHTSA to revise
its regulatory definitions of passenger automobile and light truck or
provide a valid reason for not doing so.'' 538 F.3d at 1209. In
reaching its conclusion, the court stated that NHTSA had failed to
follow a NAS recommendation that NHTSA ``tighten'' its definition of
light truck, ``a step EPA has already taken for emissions standards
purposes.'' Id. The court did not indicate specifically how it thought
NHTSA should change its definitions or what would constitute a valid
reason for not doing so.
    As explained at length above, NHTSA has, since the court's
decision, made significant changes in how it applies its light truck
definition and, in this final rule, in one aspect of the definition
itself. In order to be classified as off-highway capable, a vehicle
weighing 6,000 lbs GVWR or less must actually have 4WD. And, only
vehicles actually manufactured and sold without second-row seats will
be considered as having greater cargo-carrying volume than passenger-
carrying volume. The first change has resulted in moving approximately
1.5 million vehicles from the light truck category to the passenger
category in the years covered by this rule, which raises the MY 2011
combined standards by 0.3 mpg. The second change will help prevent any
gaming of the tightened definition based on a manufacturer's arbitrary
declaration of what constitutes a vehicle's ``base form.'' These
changes constitute a very significant tightening of NHTSA's vehicle
classification standards, which is what the court indicated was
necessary. Moreover, the agency has also explained above in great
detail why further changes to its definitions would not improve, and
would in fact weaken, the fuel economy standards and accompanying fuel
savings.
    With regard to the argument that EPA's definitions are ``tighter''
than NHTSA's, NHTSA notes that this is not an apt comparison for
several reasons. First, the NAS Report and the Ninth Circuit are
referring to EPA's Tier 2 criteria pollutant emissions requirements for
mobile sources.\496\ These requirements are different from the CAFE
requirements. The effect of having more light trucks on the roads (and
thus wanting to limit their classification as light trucks) is greater
for criteria pollutant emissions purposes than for CAFE purposes.
---------------------------------------------------------------------------

    \496\ NAS Report at 88; CBD, 538 F.3d at 1209.
---------------------------------------------------------------------------

    Second, EPA continues to use the same definitions as NHTSA does for
CAFE purposes.\497\ Even though EPA has changed its definitions for
Tier 2 purposes, the effect of those changes was to move only four
vehicle models--the Chrysler PT Cruiser, the Chevrolet HHR, the Honda
Element, and the Dodge Magnum--whose combined production is currently
less than 250,000 per year (less than 20 percent of the number of
vehicles reclassified as a result of our tightening the implementation
of our vehicle definitions). As discussed above, none of these vehicles
currently come in 4WD or meet the 3-row fold-flat requirement, so as
currently designed, starting in MY 2012, NHTSA would likely classify
these vehicles as passenger cars as well.
---------------------------------------------------------------------------

    \497\ See 40 CFR Part 600.002-93.
---------------------------------------------------------------------------

    And third, after MY 2009, EPA will have no distinction between
passenger cars and light trucks for Tier 2 purposes--all vehicles will
be subject to the same standard. In summary, EPA's action has little
relevance to vehicle classification for CAFE purposes. This is proved
by the fact that EPA ultimately intends to do away with the distinction
between passenger car requirements and light truck requirements in Tier
2, an option that EPCA would not permit NHTSA to implement for CAFE.
    Accordingly, NHTSA believes that the vehicle classification
standards and clarification of those standards embodied in this final
rule are consistent with Congress's directives in EPCA and EISA, and
respond to the Ninth Circuit's decision with regard to vehicle
classification.

XII. Flexibility Mechanisms and Enforcement

    This section addresses comments received on the enforcement aspects
of the flexibility mechanisms provided by EPCA and EISA for
manufacturers in

complying with the CAFE standards. These mechanisms include payment of
civil penalties or fines; trade, transfer, and application of credits
earned for over-compliance; and the manufacturing incentive for dual-
fueled automobiles. Section VII.C.5 above addresses comments received
with respect to how these flexibility mechanisms interact with the
standard-setting process. Additionally, although this section does not
repeat NHTSA's overview in the NPRM of the CAFE enforcement program,
because no comments were received on it, NHTSA refers interested
readers to the discussion in that document at 73 FR 24461 (May 2,
2008).

A. NHTSA's Request for Comment Regarding Whether the Agency Should
Consider Raising the Civil Penalty for CAFE Non-Compliance

    In the NPRM, NHTSA explained that the civil penalty for failing to
comply with a CAFE standard, as adjusted for inflation by law,\498\ 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. NHTSA has collected $772.9 million in total penalties
as of January 16, 2009.
---------------------------------------------------------------------------

    \498\ Federal Civil Penalties Inflation Adjustment Act of 1990,
28 U.S.C. 2461 note, as amended by the Debt Collection Improvement
Act of 1996, Pub. L. 104-134, 110 Stat. 1320, Sec.  31001(s).
---------------------------------------------------------------------------

    NHTSA also explained that EPCA authorizes increasing the civil
penalty up to $10, exclusive of inflationary adjustments, if NHTSA
decides that the increase in the penalty--
    (i) Will result in, or substantially further, substantial energy
conservation for automobiles in model years in which the increased
penalty may be imposed; and
    (ii) Will not have a substantial deleterious impact on the economy
of the United States, a State, or a region of a State.\499\
---------------------------------------------------------------------------

    \499\ 49 U.S.C. 32912(c).
---------------------------------------------------------------------------

    NHTSA explained that it did not intend to change the penalty in
this rulemaking, but sought comment on whether it should initiate a
proceeding to consider raising the civil penalty, since it recognized
that paying penalties could be a less expensive way for manufacturers
to comply with CAFE standards than by applying technology or by buying
credits from other manufacturers.
    GM, Ferrari, Porsche, Volkswagen, Mercedes, and NADA commented that
NHTSA should not raise fines and should not initiate rulemaking to
consider doing so, because doing so would not substantially improve
energy conservation. All manufacturers who commented on this issue took
exception with what they considered to be NHTSA's characterization in
the NPRM that manufacturers were choosing to pay penalties as a
strategic decision instead of adding fuel saving technology to their
vehicles. Ferrari, Porsche, Volkswagen, and Mercedes generally argued
that because of the nature of their products, increasing fines would
not improve their vehicles' fuel economy performance, due to the
demands of the market for luxury performance vehicles. Volkswagen and
Mercedes both stated that they had already employed many if not all of
the technologies considered by NHTSA in the NPRM, and that higher
penalties thus would be no incentive for them to apply more technology.
Porsche and Mercedes argued that raising penalties would only serve to
punish ``niche manufacturers'' offering a limited line of vehicles.
    Mercedes also argued that NHTSA had suggested in the NPRM that an
increase in civil penalties would be ameliorated by the new regulation
permitting credit trading, because Mercedes anticipated that the credit
trading market would not likely be very robust.
    NADA commented that it is ``premature'' to initiate proceedings to
raise the civil penalties, because ``While historically a few
manufacturers have found paying civil penalties to be substantially
less expensive than installing fuel saving technologies, no evidence
exists to suggest that vehicle manufacturers that have never paid a
fine will choose to do so rather than attempt to comply with the 2011-
2015 standards.'' NADA argued that NHTSA should only initiate
rulemaking to increase penalties when it ``can show that vehicle
manufacturers are electing to pay fines as an alternative to investing
in fuel saving technologies.''
    In contrast, UCS and ACEEE commented that NHTSA should raise fines
in order to compel manufacturers to add more fuel economy-improving
technologies to their vehicles. UCS commented that because the NPRM
indicated that ``a significant number of manufacturers will opt for
civil penalties over compliance with fuel economy requirements,'' thus,
``Increasing the civil penalty would ensure the benefits are actually
realized.'' UCS stated that the penalty has been $5 since EPCA was
enacted in 1975, and argued that ``inflation has devalued that
penalty'' over time, such that ``A fine of equivalent value today would
need to be more than $20 per 0.1 mpg.'' \500\ UCS argued that NHTSA
should ``use existing authority to increase the CAFE noncompliance
civil penalty from $5 to $10 per 0.1 mpg,'' in order to increase its
effectiveness in light of the ``escalating economic and environmental
importance of energy conservation.''
---------------------------------------------------------------------------

    \500\ UCS cited http://data.bls.gov/cgi-bin/cpicalc.pl, stating
``Comparison between 1975 and 2008.''
---------------------------------------------------------------------------

    ACEEE also commented that NHTSA should consider raising the
penalty. Although ACEEE recognized that historically ``the incentive to
meet CAFE has been for some manufacturers far greater than the avoided
cost of CAFE fines, because those companies, or their shareholders,
attach great importance to complying with all applicable laws,'' it
argued that ``DaimlerChrysler's payment of substantial fines for MY
2006 may signal increased willingness on the part of manufacturers to
fall short of CAFE standards, even if this means incurring fines.''
Thus, since even NHTSA recognized that paying penalties may be less
expensive than applying technologies to meet CAFE standards, ACEEE
concluded that NHTSA should consider raising the penalty.
    Agency response: NHTSA will take these comments into consideration
in deciding whether to initiate rulemaking to raise the civil penalty
for CAFE non-compliance. However, NHTSA wishes to respond to three
points raised by commenters at this time. First, as discussed in the
NPRM, the CAFE penalty was raised to $5.50 by application of an act of
Congress, effective in model year 1998, to account for inflation, and
prior to that was $5 since 1975 as stated by UCS. Second, in contrast
to Mercedes' comments, NHTSA never suggested in the NPRM that it would
consider raising penalties because of the additional compliance
flexibility allowed by the credit transfer and trading programs. NHTSA
may only raise penalties if doing so would ``result in, or
substantially further, substantial energy conservation,'' as
established by statute. With regard to the manufacturers who argued
that their fleet mix forces them to pay penalties, NHTSA would like to
clarify that under the attribute-based Reformed CAFE system, each
manufacturer has its own required fuel economy level based on its
particular mix of vehicles. NHTSA will continue to review the statutory
criteria (i.e., whether increased penalties would substantially further
energy conservation and the likely economic effects of higher
penalties) in deciding whether to initiate rulemaking to raise

the civil penalty for CAFE non-compliance.

B. CAFE Credits

    As discussed in the NPRM, the ability to earn and apply credits has
existed since EPCA's original enactment,\501\ but the potential for
trading credits, i.e., selling credits to other manufacturers or buying
credits from them, was first raised in the 2002 NAS Report. NAS found
that
---------------------------------------------------------------------------

    \501\ The credit provision (currently codified at 49 U.S.C.
32903) was originally section 508 of EPCA's Public Law version.

    Changing the current CAFE system to one featuring tradable fuel
economy credits and a ``cap'' on the price of these credits appears
to be particularly attractive. It would provide incentives for all
manufacturers, including those that exceed the fuel economy targets,
to continually increase fuel economy, while allowing manufacturers
flexibility to meet consumer preferences.\502\
---------------------------------------------------------------------------

    \502\ NAS Report, Finding 11, at 113.

However, as also discussed in the NPRM, Congress did not grant NHTSA
authority to implement credit trading and transfer programs \503\ until
the passage of EISA in December 2007. Section 104 of EISA not only gave
NHTSA authority to implement credit trading and transfer programs, but
also extended the carry-forward period for credits from 3 to 5 years.
---------------------------------------------------------------------------

    \503\ ``Trading'' refers to movement of credits between the
earning manufacturer and another entity. ``Transfer'' refers to
application of a manufacturer's credits to one of its fleets other
than the fleet in which the credits were earned.
---------------------------------------------------------------------------

    In the NPRM, NHTSA proposed a new Part 536 setting up these two
credit programs, and sought comment generally on (1) whether the agency
had correctly interpreted Congress' intent; (2) whether there were any
ways to improve the proposed credit trading and transferring systems
consistent with EISA and Congress' intent that the agency might have
overlooked; and (3) whether any of the aspects of the programs proposed
by the agency were either inconsistent with EISA and Congress' intent
or the rest of the CAFE regulations, or were otherwise unworkable.
    NHTSA received a number of comments on the proposed Part 536, which
the agency has divided by issue below.
Comments Regarding Credits Generally
Who may be credit holders?
    NHTSA stated in the NPRM that although only manufacturers may earn
credits and apply them toward compliance, NHTSA would allow credits to
be purchased or traded by both manufacturers and non-manufacturers in
order to facilitate greater flexibility in the credit market.
    NHTSA received comments regarding this proposed decision from AIAM,
NADA, and the Wisconsin DNR, all of which were in favor of the
decision, and generally stated that the additional flexibility in the
credit market would facilitate and improve the market for credits. NADA
cautioned that it did not believe the market would be particularly
robust due to competitive concerns, but did suggest that the market
would be enhanced by allowing non-manufacturers to purchase and sell
credits.
    Agency response: Comments favored the decision to allow non-
manufacturers to be credit holders, and because NHTSA continues to
believe that this broad definition of ``credit holders'' best serves
the purposes of the credit trading program, this definition will be
maintained in the final rule.
When a manufacturer has a shortfall, should NHTSA automatically apply
oldest credits first or transfer credits to make up that shortfall?
    In the proposed Sec.  536.5, NHTSA proposed to manage some aspects
of credit use by manufacturers automatically. For example, NHTSA would
debit credits automatically from a manufacturer if the manufacturer
fell below the standard in a compliance category, beginning with the
oldest credits held by the manufacturer in that compliance category,
transferring the oldest available credits in other categories if
necessary, and notifying the manufacturer of its need to purchase
additional credits, develop a carry-back plan, or pay fines if there
were still insufficient credits to achieve compliance.\504\ NHTSA was
silent in the preamble with respect to its rationale for this proposal.
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    \504\ Proposed Sec.  536.5(d), at 73 FR 24485 (May 2, 2008).
---------------------------------------------------------------------------

    The Alliance, AIAM, Toyota, and Ford commented on NHTSA's proposal
to use a manufacturer's oldest credits first and to transfer credits
automatically if the manufacturer did not have sufficient credits in
the original compliance category to make up the shortfall. The
commenters generally argued that NHTSA was unduly restricting
manufacturers' flexibility to manage credits at their own discretion,
and that such a proposal was inconsistent with EISA.
    The Alliance argued that the ``automatic transfer is inconsistent
with the history of NHTSA's administration of the CAFE program and
EISA,'' stating that ``Congress intended for the manufacturer to manage
its own credits'' as ``acknowledged in the NPRM.'' The Alliance
suggested that NHTSA's explanation in the NPRM that manufacturers
should instruct NHTSA which credits to transfer when it wanted to
transfer credits indicated that the agency recognized manufacturers'
right to control credit transfers. The Alliance argued that ``A
manufacturer facing a shortfall in a given fleet should retain the
flexibility to manage that shortfall as it sees fit, including filing a
carryback plan, acquiring traded credits or by a combination of various
actions.''
    AIAM agreed that NHTSA's approach of debiting oldest credits first
``should be followed in most cases,'' but commented that in cases where
``a manufacturer prefers to use available credits from some other
compliance category or time period first, NHTSA should, upon request by
the manufacturer, provide the manufacturer that flexibility.'' AIAM
suggested that manufacturers might ``wish to preserve credits in a
particular category and year to enhance trading opportunities or to
comply with inter-category credit transfer limitations.'' AIAM also
stated that ``nothing in [EISA] * * * mandates that manufacturers must
use available credits in any particular order.''
    Toyota also commented that EISA did not specify a particular order
in which credits should be applied, and argued that NHTSA should
maximize flexibility in manufacturers' use of credits and allow
manufacturers to make their own decisions unless they made decisions
inconsistent with the law or unless there was ``some clear reason'' to
restrict flexibility.
    Ford argued that NHTSA's proposal to transfer credits automatically
to make up manufacturer shortfalls was ``inconsistent with EISA,''
because the statutory language with regard to the credit transfer
program was permissive, stating that the Secretary of Transportation
shall establish a regulation to ``allow'' manufacturers to transfer
credits and apply them to different compliance categories in order to
achieve compliance. Ford suggested that the automatic transfer of
credits by NHTSA would interfere with manufacturers' flexibility to
decide how to manage a shortfall. For example, Ford argued, a
manufacturer may prefer to submit a carry-back plan rather than to
transfer surplus credit to another category, and EISA did not give
NHTSA the discretion to interfere in the manufacturer's decision in
that regard.
    Agency response: NHTSA did not intend to allocate credits without
allowing the manufacturer an opportunity to comment. NHTSA agrees

with the commenters that manufacturers must ultimately be responsible
for how their shortfalls are addressed, and has revised the regulatory
text accordingly.
    EPCA originally stated, with regard to conventional carry-forward/
carry-back credits, that application of credits was to occur
automatically (``shall apply'') if a manufacturer was short of the
average fuel economy required and had credits available. The
application of those credits offset any penalty to be paid by the
manufacturer. 49 U.S.C. 32903(d). EISA did not change that provision.
However, EISA did introduce the two new credit programs for transfers
and trades.
    In the past, NHTSA developed carry-forward plans for manufacturers
automatically if carry-forward credits existed, and submitted the plan
to the manufacturer so that it could comment on the proposed allocation
plan. Only if no carry-forward credits were available would NHTSA ask
the manufacturer to submit a carry-back plan or to pay a fine.
    Upon further review the agency has decided that Congress clearly
intended to give the manufacturer an opportunity to comment before any
application of credits occurs. See 49 U.S.C. 32903(d). Accordingly, we
have revised the text so that instead of NHTSA allocating credits
automatically, a manufacturer with credits available will be required
to submit a credit allocation plan to offset its confirmed shortfall.
NHTSA will require manufacturers to submit a plan whenever NHTSA is
informed by EPA that a manufacturer has not met the CAFE standards in a
particular compliance category. An enforcement action will be initiated
each time the agency receives notification from EPA that a standard has
not been met. An enforcement letter will be sent to the responsible
manufacturer identifying available credits and requesting that a credit
allocation plan be submitted or penalty be paid. NHTSA will review and
accept plans as received and allocate credits accordingly.
Should credits be denominated in mpg or in gallons for purposes of
transfers and trades?
    49 U.S.C. 32903(c) indicates that Congress intended credits to be
denominated in tenths of a mpg, but 49 U.S.C. 32903(f) states that
total oil savings must be preserved when trading credits. Because there
is no similar caution that total oil savings must be preserved when
transferring credits, NHTSA proposed in the NPRM to denominate credits
in mpg rather than in gallons, but the agency also sought comment on
whether transferred credits should be denominated in gallons to ensure
that no transfers resulted in any loss of fuel savings. When using the
terms ``denominating credits in gallons,'' the agency meant that
credits be adjusted to preserve total oil savings as specified for
credit trades in Sec.  32903(f). Section Sec.  32903(c) defines credits
as the number of tenths of a mile per gallon the average fuel economy
of a fleet exceeds the standard times the number of vehicles in that
manufacturer's fleet. Therefore, credits should always be denominated
in miles per gallon. In the comments below, those who argue that
credits should be denominated in mpg are opposing any adjustment to
credit transfers to prevent losses in fuel savings.
    The Alliance, AIAM, NADA, and Toyota commented that NHTSA should
denominate credits in mpg. The commenters generally argued that because
Sec.  32903(c) indicates that credits are to be denominated in tenths
of mpg, and because Congress did not specify in EISA that oil savings
must be preserved in credit transfers, the agency should not attempt to
read anything into the statute that is not plainly there. AIAM also
stated that, ``Using different units for transferred credits and other
credits, as mentioned by the agency, would create unnecessary confusion
and could create accounting problems.'' Toyota argued that ``Since
Congress specified the application of an adjustment factor for traded
credits but did not specify such a requirement for transferred credits,
the clear intent of Congress is that it intended transferred credits to
be calculated in the same manner as carryforward/carryback credits.''
    Honda and EDF commented that NHTSA should denominate credits in
gallons rather than in mpg. Honda stated that ``trading MPG will erode
the total fuel/GHG reductions, which is not appropriate,'' and argued
that EISA did not prohibit trading credits in gallons instead of mpg,
because it simply addresses the maximum increase that manufacturers may
obtain from transferred credits, not the maximum decrease.
    EDF commented that denominating credits in gallons instead of mpg
``would be a more straightforward and simple way for the Agency to
ensure that total oil savings are preserved in trading, banking and
borrowing of CAFE credits,'' and would also ``maximize the
environmental integrity of the program.'' EDF stated that NHTSA had
correctly identified the risk that ``increasing fuel economy by one mpg
at a higher fuel economy level results in less oil savings (and
therefore less reductions in GHGs) than increasing fuel economy by one
mpg at a lower fuel economy level.'' EDF argued that in order to
promote the need of the nation to conserve energy, ``Expressing CAFE
credits in gallons of fuel saved, rather than in mpg, would be a
natural, and less confusing, way to present the oil saving benefits
from exceeding the standard (or the `oil-saving-deficit' as a result of
non-compliance).''
    Agency response: From the discussion above, it is clear that
credits must be denominated in mpg per Sec.  32903(c)(1). The question
is whether all credits, traded and transferred, should be adjusted to
preserve fuel oil savings. As discussed, Sec.  32903(c) states that
credits are earned in tenths of a mile per gallon; Sec.  32903(d) and
(e) refer to applying credits on a mile per gallon basis, Sec.
32903(f) states that total oil savings must be preserved only when
credits are traded. There is no other clear expression of congressional
intent in the text of the statute suggesting that NHTSA would have
authority to adjust transferred credits, even in the interest of
preserving oil savings. However, the goal of the CAFE program is energy
conservation; ultimately the U.S. would reap a greater benefit from
ensuring that fuel oil savings are preserved for both trades and
transfers. Furthermore, accounting for traded credits differently than
for transferred credits does add unnecessary burden on program
enforcement. Thus, NHTSA will adjust credits both when they are traded
and when they are transferred so that no loss in fuel savings occurs.
Comments Regarding Carry-Forward/Carry-Back Credits
When should EISA's extension of the carry-forward period from 3 to 5
years take effect?
    When Congress changed the carry-forward period from 3 to 5 years in
EISA, it did not clearly specify to which credits that change was to
apply. EISA's effective date was December 20, 2007, and NHTSA has
historically defined the model year as beginning on October 1 of the
previous calendar year (thus, the agency would define MY 2008 as
beginning on October 1, 2007).\505\ In the NPRM, NHTSA concluded that
because EISA was enacted in the middle of MY 2008, the best
interpretation of when the extension of the carry-forward period should
take effect was to apply it only

to vehicles manufactured in or after MY 2009. Interpreting the change
as applying to all subsequent MY 2008 vehicles would have required the
agency to find some way to prorate the change in credit lifespan, which
the agency concluded would present considerable administrative
difficulty, especially given that credits are denominated by year of
origin and not month and year of origin. Thus, the agency added
regulatory text stating that credits earned in MY 2008 or before had a
3-year carry-forward lifespan, and credits earned in MY 2009 or later
had a 5-year carry-forward lifespan.
---------------------------------------------------------------------------

    \505\ See Letter of Interpretation to William Shapiro of Volvo
Cars, Jan. 13, 2000, available at http://isearch.nhtsa.gov/files/
18644KWII.ogms.html (last accessed Sept. 18, 2008), and Letter of
Interpretation to William F. Canever of Ford Motor Company, Oct. 22,
1990, available at http://isearch.nhtsa.gov/files/2741y.html (last
accessed Sept. 18, 2008).
---------------------------------------------------------------------------

    AIAM, Toyota, Chrysler, and NADA commented on this issue, and all
argued that Congress intended the 5-year carry-forward provision to be
effective concurrent with EISA's effective date. AIAM stated that it
believed that any credits earned and not expired as of the effective
date of EISA, including MY 2005-2007 credits, must be available for use
in any of the five following model years. AIAM argued that if Congress
had intended the 5-year carry-forward period to begin in MY 2009, it
would have included such a limitation, as it included the provision
disallowing transfers of credits earned before MY 2011. AIAM thus
concluded that to maximize flexibility in use of credits,
``enhancements to the credit system mandated by Congress must be made
effective immediately, except where Congress has specified otherwise.''
    Toyota also commented that because Congress included an express
start date for credit transfers, it must have intended that the 5-year
carry-forward provision be effective on EISA's effective date. Toyota
argued that Congress did address which credits could be used for 5-year
carry-forward plans by stating in 49 U.S.C. Sec.  32903(a) that when a
manufacturer earns credits under this section, those ``credits may be
applied to--
    (1) Any of the 3 consecutive model years immediately before the
model year for which the credits are earned; and
    (2) to the extent not used by paragraph (1) of this subsection, any
of the 5 consecutive model years immediately after the model year for
which the credits are earned. (Toyota's emphasis)
    Toyota argued that Congress thus ``clearly identifies the credits
that are available for the 5-year carry-forward provision as being
those that are not applied to the 3-year carry-back provision,'' and
that Congress put no other limitation on when the 5-year carry-forward
credits may be used. Toyota concluded that because the intent of
Congress is clear in the statutory language, the agency has no room for
interpretation under Chevron.
    NADA also commented that ``Credit system changes set out in EISA
should take effect immediately, except as otherwise specified.'' NADA
argued that even though the transfer provisions ``may not take effect
until MY 2011, any existing and future earned credits should
immediately be available for the new five year carry-forward period and
for trading.''
    Chrysler also commented that because Congress had chosen to put
specific effective dates in some credit provisions but not in the
carry-forward provision, the 5-year carry-forward provision must be
applicable to MY 2008 credits. Chrysler argued that NHTSA's arguments
regarding the difficulty of prorating MY 2008 credits were unavailing,
because NHTSA could simply apply the 5-year carry-forward provision to
all credits earned in MY 2008 and after. Chrysler further argued that
NHTSA has ``not felt it necessary to pro-rate credits (or penalties)
when transfers of ownership take place, instead assigning the full
year's credits (or penalties) to a single manufacturer, as agreed to
among the parties involved.'' Chrysler also stated that ``when carry-
forward/carry-back credits were extended from 1 to 3 years as a result
of the Automobile Fuel Efficiency Act of 1980 * * * NHTSA did not see
any need to pro-rate credits. Instead, the agency's final rule [ ] had
an immediate effective date.'' Chrysler suggested that if the agency is
determined to prorate the MY 2008 credits, ``it can simply divide the
number of days after enactment but before October 1, 2009 (which is 285
days) by 365 and then multiply the credits earned in MY 2008 by the
resultant (0.781).''
    Agency response: NHTSA has decided to revise the implementation of
the 5 year carry-forward allowance by changing the effective date from
MY 2009 to MY 2008. As discussed, because EISA was enacted in the
middle of MY 2008, NHTSA concluded in the NPRM that the best
interpretation of this change in lifespan was to apply it only to
vehicles manufactured in or after MY 2009, because the alternative of
finding some way to prorate the change in lifespan presented
considerable administrative difficulties.
    However, 49 U.S.C. 32903(b)(2) specifies that credits are available
to a manufacturer at the end of the model year in which earned. Due to
the fact that the MY 2008 credits were not finalized when EISA became
effective, the agency agrees that it is reasonable to begin the 5-year
carry-forward provision in MY 2008. The agency does not believe that
this provision should be applied to all unexpired credits (MYs 2005-
2007) as suggested by AIAM, but only to those credits that are actually
earned in MY 2008 or after.
Can carry-forward/carry-back credits not acquired by trade or transfer
be used to meet the minimum domestic passenger car standard?
    Through EISA, Congress clearly intended to limit the use of traded
or transferred credits by manufacturers in order to achieve compliance
with the minimum domestic passenger car standards specified in Section
102(b)(4). See Section 104(a)(4), codified (in relevant part) at 49
U.S.C. Sec.  32903(f)(2) and (g)(4), respectively. In NHTSA's proposed
regulatory text, the agency included these prohibitions, and also
stated as follows:

    If a manufacturer's average fuel economy level for domestically
manufactured passenger cars is lower than both the attribute-based
standard and the minimum standard, then the difference between the
attribute-based standard and the minimum standard may be relieved by
the use of credits, but the difference between the minimum standard
and the manufacturer's actual fuel economy level may not be relieved
by credits and will be subject to penalties.\506\
---------------------------------------------------------------------------

    \506\ 73 FR 24487 (May 2, 2008); proposed section 49 CFR
536.9(d).

NHTSA did not explain its reasoning in the NPRM for this provision,
which prompted comments from a number of companies, including the
Alliance, Chrysler, Ford, GM, and Toyota.
    The commenters stated that the proposed Sec.  536.9(d) improperly
prevents manufacturers from employing carry-back and carry-forward
credits to meet the minimum domestic passenger car standard. The
commenters argued that Congress only explicitly prohibited the use of
traded and transferred credits to meet the minimum domestic passenger
car standard, but did not explicitly prohibit the use of originating
manufacturer carry-forward/-back credits, and that therefore NHTSA
should not assume that Congress intended more than it expressly stated.
The commenters further stated that NHTSA was unduly and unnecessarily
restricting manufacturers' flexibility in using credits to meet the
standards, when the purpose of the carry-forward/carry-back allowances
was to maximize flexibility.
    Chrysler further argued that although ``NHTSA may have assumed that
the use of the word minimum [in EISA Sec.  102(b)(4)] might imply that
the actual

level of the standard each year may be attained to ensure compliance,''