with 2-door cab and rear-wheel drive; and a popular minivan from
2,940 to 3,862 pounds (31%).
---------------------------------------------------------------------------

e. Report by Tom Wenzel, LBNL, ``An Assessment of NHTSA's Report
`Relationships Between Fatality Risk, Mass, and Footprint in Model Year
2000-2007 Passenger Cars and LTVs'' ', 2011
    DOE contracted with Tom Wenzel of Lawrence Berkeley National
Laboratory to conduct an assessment of NHTSA's updated 2011 study of
the effect of mass and footprint reductions on U.S. fatality risk per
vehicle miles traveled, and to provide an analysis of the effect of
mass and footprint reduction on casualty risk per police-reported
crash, using independent data from thirteen states. The assessment has
been completed and reviewed by NHTSA and EPA staff, and a draft final
version is included in the docket of today's rulemaking; the separate
analysis of crash data from thirteen states will be completed and
included in the docket shortly. Both reports will be peer reviewed by
outside experts.
    The LBNL report replicates Kahane's analysis for NHTSA, using the
same data and methods, and in many cases using the same SAS programs.
The Wenzel report finds that although mass reduction in lighter (less
than 3,106 lbs) cars leads to a statistically significant 1.44%
increase in fatality risk per vehicle miles travelled (VMT), the
increase is small. He tests this result for sensitivity to changes in
specifications of the regression models and what data are used. In
addition Wenzel shows that there is a wide range in fatality rates by
vehicle model for models that have the same mass, even after accounting
for differences in drivers' age and gender, safety features installed,
and crash times and locations. This section summarizes the results of
the Wenzel assessment of the most recent NHTSA analysis.
    The LBNL report highlights the effect of the other driver, vehicle,
and crash control variables, in addition to the effect of mass and
footprint reduction, on risk. Some of the other variables NHTSA
included in its regression models have much larger effects on fatality
risk than mass or footprint reduction. For example, the models indicate
that a 100-lb increase in the mass of a lighter car results in a 1.44%
reduction in fatality risk; this is the largest estimated effect of
changes in vehicle mass, and the only one that is statistically
significant. For comparison this reduction in fatality risk could also
be achieved by a 13% increase in 4-door sedans equipped with ESC.
    The 1.44% increase in risk from reducing mass in the lighter cars
was

tested for sensitivity changes in the specification of, or the data
used in, the regression models. For example, using the current
distribution of crashes, rather than adjusting the distribution to that
expected after full adoption of ESC, reduces the effect to 1.18%;
excluding the calendar year variables from the model, which may be
weakening the modeled benefits of vehicle safety technologies, reduces
the effect to 1.39%; and including vehicle make in the model increases
the effect to 1.81%. The results also are sensitive to the selection of
data to include in the analysis: Excluding bad drivers increases the
effect to 2.03%, while excluding crashes involving alcohol or drugs
increases the effect to 1.66%, and including sports, police, and all-
wheel drive cars increases the effect to 1.64%. Finally, changing the
definition of risk also affects the result for lighter cars: Using the
number of fatalities per induced exposure crash reduces the effect to -
0.24% (that is, a 0.24% reduction in risk), while using the number of
fatal crashes (rather than total fatalities) per VMT increases the
effect to 1.84%. These sensitivity tests, except one, changed the
estimated coefficient by less than 1 percentage point, which is within
its statistical confidence bounds of 0.29 to 2.59 percent and may be
considered compatible with the baseline result. Using two or more
variables that are strongly correlated in the same regression model
(referred to as multicollinearity) can lead to inaccurate results.
However, the correlation between vehicle mass and footprint may not be
strong enough to cause serious concern. Experts suggest that a
correlation of greater than 0.60 (or a variance inflation factor of
2.5) raises concern about multicollinearity.\199\ The correlation
between vehicle mass and footprint ranges from over 0.80 for four-door
sedans, pickups, and SUVs, to about 0.65 for two-door cars and CUVs, to
0.26 for minivans; when pickups and SUVs are considered together, the
correlation between mass and footprint is 0.65. Wenzel notes that the
2011 NHTSA report recognizes that the ``near'' multicollinearity
between mass and footprint may not be strong enough to invalidate the
results from a regression model that includes both variables. In
addition, NHTSA included several analyses to address possible effects
of the near-multicollinearity between mass and footprint.
---------------------------------------------------------------------------

    \199\ Light-Duty Vehicle Greenhouse Gas Emission Standards and
Corporate Average Fuel Economy Standards; Final Rule, April 1, 2010,
Section II.G.3., page 139.
---------------------------------------------------------------------------

    First, NHTSA ran a sensitivity model specification, where footprint
is not held constant, but rather allowed to vary as mass varies (i.e.
NHTSA ran a regression model which includes mass but not footprint). If
the multicollinearity was so great that including both variables in the
same model gave misleading results, removing footprint from the model
could give mass coefficients five or more percentage points different
than keeping it in the model. NHTSA's sensitivity test indicates that
when footprint is allowed to vary with mass, the effect of mass
reduction on risk increases from 1.44% to 2.64% for lighter cars, and
from a non-significant 0.47% to a statistically-significant 1.94% for
heavier cars (changes of less than two percentage points); however, the
effect of mass reduction on light trucks is unchanged, and is still not
statistically significant for CUVs/minivans.
    Second, NHTSA conducted a stratification analysis of the effect of
mass reduction on risk by dividing vehicles into deciles based on their
footprint, and running a separate regression model for each vehicle and
crash type, for each footprint decile (3 vehicle types times 9 crash
types times 10 deciles equals 270 regressions). This analysis estimates
the effect of mass reduction on risk separately for vehicles with
similar footprint. The analysis indicates that mass reduction does not
consistently increase risk across all footprint deciles for any
combination of vehicle type and crash type. Mass reduction increases
risk in a majority of footprint deciles for 13 of the 27 crash and
vehicle combinations, but few of these increases are statistically
significant. On the other hand, mass reduction decreases risk in a
majority of footprint deciles for 9 of the 27 crash and vehicle
combinations; in some cases these risk reductions are large and
statistically significant.\200\ If reducing vehicle mass while
maintaining footprint inherently leads to an increase in risk, the
coefficients on mass reduction should be more consistently positive,
and with a larger R2, across the 27 vehicle/crash
combinations, than shown in the analysis. These findings are consistent
with the conclusion of the basic regression analyses, namely, that the
effect of mass reduction while holding footprint constant, if any, is
small.
---------------------------------------------------------------------------

    \200\ And in 5 of the 27 crash and vehicle combinations, mass
reduction increased risk in 5 deciles and decreased risk in 5
deciles.
---------------------------------------------------------------------------

    One limitation of using logistic regression to estimate the effect
of mass reduction on risk is that a standard statistic to measure the
extent to which the variables in the model explain the range in risk,
equivalent to the R2> statistic in a linear regression
model, does not exist. (SAS does generate a pseudo-R2 value
for logistic regression models; in almost all of the NHTSA regression
models this value is less than 0.10). For this reason LBNL conducted an
analysis of risk versus mass by vehicle model. LBNL used the results of
the NHTSA logistic regression model to predict the number of fatalities
expected after accounting for all vehicle, driver, and crash variables
included in the NHTSA regression model except for vehicle weight and
footprint. LBNL then plotted expected fatality risk per VMT by vehicle
model against the mass of each model, and analyzed the change in risk
as mass increases, as well as how much of the change in risk was
explained by all of the variables included in the model.
    The analysis indicates that, after accounting for all the
variables, risk does decrease as mass increases; however, risk and mass
are not strongly correlated, with the R2 ranging from 0.33
for CUVs to less than 0.15 for all other vehicle types (as shown in
Figure x). This means that, on average, risk decreases as mass
increases, but the variation in risk among individual vehicle models is
stronger than the trend in risk from light to heavy vehicles. For
fullsize (i.e. 3/4- and 1-ton) pickups, risk increases as mass
increases, with an R2 of 0.43, consistent with NHTSA's basic
regression results for the heavier LTVs (societal risk increases as
mass increases). LBNL also examined the relationship between residual
risk, that is the remaining unexplained risk after accounting for all
vehicle, driver and crash variables, and mass, and found similarly poor
correlations. This implies that the remaining factors not included in
the regression model that account for the observed range in risk by
vehicle model also are not correlated with mass. (LBNL found similar
results when the analysis compared risk to vehicle footprint.)
    Figure II-2 indicates that some vehicles on the road today have the
same, or lower, fatality rates than models that weigh substantially
more, and are substantially larger in terms of footprint. After
accounting for differences in driver age and gender, safety features
installed, and crash times and locations, there are numerous examples
of different models with similar weight and footprint yet widely
varying fatality rates. The variation of fatality rates among
individual models may reflect differences in vehicle

design, differences in the drivers who choose such vehicles (beyond
what can be explained by demographic variables such as age and gender),
and statistical variation of fatality rates based on limited data for
individual models. Differences in vehicle design can, and already do,
mitigate some safety penalties from reduced mass; this is consistent
with NHTSA's opinion that some of the changes in its regression results
between the 2003 study and the 2011 study are due to the redesign or
removal of certain smaller and lighter models of poor design.
[GRAPHIC] [TIFF OMITTED] TP01DE11.044

f. Based on this information, what do the agencies consider to be the
current state of statistical research on vehicle mass and safety?
    The agencies believe that statistical analysis of historical crash
data continues to be an informative and important tool in assessing the
potential safety impacts of the proposed standards. The effect of mass
reduction while maintaining footprint is a complicated topic and there
are open questions whether future designs will reduce the historical
correlation between weight and size. It is important to note that while
the updated database represents more current vehicles with technologies
more representative of vehicles on the road today, they still do not
fully represent what vehicles will be on the road in the 2017-2025
timeframe. The vehicles manufactured in the 2000-2007 timeframe were
not subject to footprint-based fuel economy standards. The agencies
expect that the attribute-based standards will likely facilitate the
design of vehicles such that manufacturers may reduce mass while
maintaining footprint. Therefore, it is possible that the analysis for
2000-2007 vehicles may not be fully representative of the vehicles that
will be on the road in 2017 and beyond.
    While we recognize that statistical analysis of historical crash
data may not be the only way to think about the future relationship
between vehicle mass and safety, we also recognize that other
assessment methods are also subject to uncertainties, which makes
statistical analysis of historical data an important starting point if
employed mindfully and recognized for how it can be useful and what its
limitations may be.
    NHTSA undertook the independent review of statistical studies and
held the mass-safety workshop in February 2011 in order to help the
agencies sort through the ongoing debates over what statistical
analysis of historical data is actually telling us. Previously, the
agencies have assumed that differences in results were due in part to
inconsistent databases; by creating the updated common database and
making it publicly available, we are hopeful that that aspect of the
problem has been resolved, and moreover, the UMTRI review suggested
that differences in data were probably less significant than the
agencies may have thought. Statistical analyses of historical crash
data should be examined for potential multicollinearity issues. The
agencies will continue to monitor issues with multicollinearity in our
analyses, and hope that outside researchers will do the same. And
finally, based on the findings of the independent review, the agencies
continue to be confident that Kahane's analysis is one of the best for
the purpose of analyzing potential safety effects of future CAFE and
GHG standards. UMTRI concluded that Kahane's approach is valid, and
Kahane has continued and refined that approach for the current
analysis. The NHTSA 2011 statistical fatality report finds
directionally similar but less statistically significant relationships
between vehicle mass, size, and footprint, as discussed above. Based on
these findings, the agencies believe that

in the future, fatalities due to mass reduction will be best reduced if
mass reduction is concentrated in the heaviest vehicles. NHTSA
considers part of the reason that more recent historical data shows a
dampened effect in the relationship between mass reduction and safety
is that all vehicles, including traditionally lighter ones, grew
heavier during that timeframe (2000s). As lighter vehicles might become
more prevalent in the fleet again over the next decade, it is possible
that the trend could strengthen again. On the other hand, extensive use
of new lightweight materials and optimized vehicle design may weaken
the relationship. Future updated analyses will be necessary to
determine how the effect of mass reduction on risk changes over time.
    Both agencies agree that there are several identifiable safety
trends already in place or expected to occur in the foreseeable future
that are not accounted for in the study, since they were not in effect
at the time that the vehicles in question were manufactured. For
example, there are two important new safety standards that have already
been issued and will be phasing in after MY 2008. FMVSS No. 126 (49 CFR
Sec.  571.126) requires electronic stability control in all new
vehicles by MY 2012, and the upgrade to FMVSS No. 214 (Side Impact
Protection, 49 CFR Sec.  571.214) will likely result in all new
vehicles being equipped with head-curtain air bags by MY 2014.
Additionally, we anticipate continued improvements in driver (and
passenger) behavior, such as higher safety belt use rates. All of these
may tend to reduce the absolute number of fatalities. On the other
hand, as crash avoidance technology improves, future statistical
analysis of historical data may be complicated by a lower number of
crashes. In summary, the agencies have relied on the coefficients in
the Kahane 2011 study for estimating the potential safety effects of
the proposed CAFE and GHG standards for MYs 2017-2025, based on our
assumptions regarding the amount of mass reduction that could be used
to meet the standards in a cost-effective way without adversely
affecting safety. Section E below discusses the methodology used by the
agencies in more detail; while the results of the safety effects
analysis are less significant than the results in the MY 2012-2016
final rule, the agencies still believe that any statistically
significant results warrant careful consideration of the assumptions
about appropriate levels of mass reduction on which to base future CAFE
and GHG standards, and have acted accordingly in developing the
proposed standards.
4. How do the agencies think technological solutions might affect the
safety estimates indicated by the statistical analysis?
    As mass reduction becomes a more important technology option for
manufacturers in meeting future CAFE and GHG standards, manufacturers
will invest more and more resources in developing increasingly
lightweight vehicle designs that meet their needs for manufacturability
and the public's need for vehicles that are also safe, useful,
affordable, and enjoyable to drive. There are many different ways to
reduce mass, as discussed in Chapter 3 of this TSD and in Sections II,
III, and IV of the preamble, and a considerable amount of information
is available today on lightweight vehicle designs currently in
production and that may be able to be put into production in the
rulemaking timeframe. Discussion of lightweight material designs from
NHTSA's workshop is presented below.
    Besides ``lightweighting'' technologies themselves, though, there
are a number of considerations when attempting to evaluate how future
technological developments might affect the safety estimates indicated
by the statistical analysis. As discussed in the first part of this
chapter, for example, careful changes in design and/or materials used
might mitigate some of the potential decrease in safety from mass
reduction--through improved distribution of crash pulse energy, etc.--
but these techniques can sometimes cause other problems, such as
increased crash forces on vehicle occupants that have to be mitigated,
or greater aggressivity against other vehicles in crashes.
Manufacturers may develop new and better restraints--air bags, seat
belts, etc.--to protect occupants in lighter vehicles in crashes, but
NHTSA's current safety standards for restraint systems are designed
based on the current fleet, not the yet-unknown future fleet. The
agency will need to monitor trends in the crash data to see whether
changes to the safety standards (or new safety standards) become
necessary. Manufacturers are also increasingly investigating a variety
of crash avoidance technologies--ABS, electronic stability control
(ESC), lane departure warnings, vehicle-to-vehicle (V2V)
communications--that, as they become more prevalent in the fleet, are
expected to reduce the number of overall crashes, and fatal, crashes.
Until these technologies are present in the fleet in greater numbers,
however, it will be difficult to assess whether they can mitigate the
observed relationship between vehicle mass and safety in the historical
data.
    Along with the California Air Resources Board (CARB), the agencies
have initiated several projects to estimate the maximum potential for
advanced materials and improved designs to reduce mass in the MY 2017-
2021 timeframe, while continuing to meeting safety regulations and
maintaining functionality of vehicles. Another NHTSA-sponsored study
will estimate the effects of these design changes on overall fleet
safety.
    A. NHTSA has awarded a contract to Electricore, with EDAG and
George Washington University (GWU) as subcontractors, to study the
maximum feasible amount of mass reduction for a mid-size car--
specifically, a Honda Accord. The study tore down a MY 2011 Honda
Accord, studied each component and sub-system, and then redesigned each
component and sub-system trying to maximize the amount of mass
reduction with technologies that are considered feasible for 200,000
units per year production volume during the time frame of this
rulemaking. Electricore and its sub-contractors are consulting industry
leaders and experts for each component and sub-system when deciding
which technologies are feasible. Electricore and its sub-contractors
are also building detailed CAD/CAE/powertrain models to validate
vehicle safety, stiffness, NVH, durability, drivability and powertrain
performance. For OEM-supplied parts, a detailed cost model is being
built based on a Technical Cost Modeling (TCM) approach developed by
the Massachusetts Institute of Technology (MIT) Materials Systems
Laboratory's research\201\ to estimate the costs to OEMs for
manufacturing parts. The cost will be broken down into each of the
operations involved in the manufacturing; for example, for a sheet
metal part, production costs will be estimated from the blanking of the
steel coil to the final operation to fabricate the component. Total
costs are then categorized into fixed cost, such as tooling, equipment,
and facilities; and variable costs such as labor, material, energy, and
maintenance. These costs will be assessed through an interactive
process between the product designer, manufacturing engineers, and cost

analysts. For OEM-purchased parts, the cost will be estimated by
consultation with experienced cost analysts and Tier 1 system
suppliers. This study will help to inform the agencies about the
feasible amount of mass reduction and the cost associated with it.
NHTSA intends to have this study completed and peer reviewed before
July 2012, in time for it to play an integral role in informing the
final rule.
---------------------------------------------------------------------------

    \201\ Frank Field, Randolph Kirchain and Richard Roth, Process
cost modeling: Strategic engineering and economic evaluation of
materials technologies, JOM Journal of the Minerals, Metals and
Materials Society, Volume 59, Number 10, 21-32. Available at http://msl.mit.edu/pubs/docs/Field_KirchainCM_StratEvalMatls.pdf (last
accessed Aug. 22, 2011).
---------------------------------------------------------------------------

    B. EPA has awarded a similar contract to FEV, with EDAG and Monroe
& Associates, Inc. as subcontractors, to study the maximum feasible
amount of mass reduction for a mid-size CUV (cross over vehicle)
specifically, a Toyota Venza. The study tears down a MY 2010 vehicle,
studies each component and sub-system, and then redesigns each
component and sub-system trying to maximize the amount of mass
reduction with technologies that are considered feasible for high
volume production for a 2017 MY vehicle. FEV in coordination with EDAG
is building detailed CAD/CAE/powertrain models to validate vehicle
safety, stiffness, NVH, durability, drivability and powertrain
performance to assess the safety of this new design. This study builds
upon the low development (20% mass reduction) design in the 2010 Lotus
Engineering study ``An Assessment of Mass Reduction Opportunities for a
2017-2020 Model Year Vehicle Program''. This study builds upon the low
development (20% mass reduction) design in the 2010 Lotus Engineering
study ``An Assessment of Mass Reduction Opportunities for a 2017-2020
Model Year Vehicle Program''. This study will undergo a peer review.
EPA intends to have this study completed and peer reviewed before July
2012, in time for it to play an integral role in informing the final
rule.
    C. California Air Resources Board (CARB) has awarded a contract to
Lotus Engineering, to study the maximum feasible amount of mass
reduction for a mid-size CUV (cross over vehicle) specifically, a
Toyota Venza. The study will concentrate on the Body-in-White and
closures in the high development design (40% mass reduction) in the
Lotus Engineering study cited above. The study will provide an updated
design with crash simulation, detailed costing and manufacturing
feasibility of these two systems for a MY2020 high volume production
vehicle. This study will undergo a peer review. EPA intends to have
this study completed and peer reviewed before July 2012, in time for it
to play an integral role in informing the final rule.
    D. NHTSA has contracted with George Washington University (GWU) to
build a fleet simulation model to study the impact and relationship of
light-weight vehicle design and injuries and fatalities. This study
will also include an evaluation of potential countermeasures to reduce
any safety concerns associated with lightweight vehicles. NHTSA will
include three light-weighted vehicle designs in this study: the one
from Electricore/EDAG/GWU mentioned above, one from Lotus Engineering
funded by California Air Resource Board for the second phase of the
study, evaluating mass reduction levels around 35 percent of total
vehicle mass, and two funded by EPA and the International Council on
Clean Transportation (ICCT). This study will help to inform the
agencies about the possible safety implications for light-weight
vehicle designs and the appropriate counter-measures,\202\ if
applicable, for these designs, as well as the feasible amounts of mass
reduction. All of these analyses are expected to be finished and peer-
reviewed before July 2012, in time to inform the final rule.
---------------------------------------------------------------------------

    \202\ Countermeasures could potentially involve improved front
end structure, knee bags, seat ramps, buckle pretensioners, and
others.
---------------------------------------------------------------------------

a. NHTSA workshop on vehicle mass, size and safety
    As stated above, in section C.2, on February 25, 2011, NHTSA hosted
a workshop on mass reduction, vehicle size, and fleet safety at the
Headquarters of the US Department of Transportation in Washington, DC.
The purpose of the workshop was to provide the agencies with a broad
understanding of current research in the field and provide stakeholders
and the public with an opportunity to weigh in on this issue. The
agencies also created a public docket to receive comments from
interested parties that were unable to attend. The presentations were
divided into two sessions that addressed the two expansive sets of
issues. The first session explored statistical evidence of the roles of
mass and size on safety, and is summarized in section C.2. The second
session explored the engineering realities of structural
crashworthiness, occupant injury and advanced vehicle design, and is
summarized here. The speakers in the second session included Stephen
Summers of NHTSA, Gregg Peterson of Lotus Engineering, Koichi Kamiji of
Honda, John German of the International Council on Clean Transportation
(ICCT), Scott Schmidt of the Alliance of Automobile Manufacturers, Guy
Nusholtz of Chrysler, and Frank Field of the Massachusetts Institute of
Technology.
    The second session explored what degree of weight reduction and
occupant protection are feasible from technical, economic, and
manufacturing perspectives. Field emphasized that technical feasibility
alone does not constitute feasibility in the context of vehicle mass
reduction. Sufficient material production capacity and viable
manufacturing processes are essential to economic feasibility. Both
Kamiji and German noted that both good materials and good designs will
be necessary to reduce fatalities. For example, German cited the
examples of hexagonally structured aluminum columns, such as used in
the Honda Insight, that can improve crash absorption at lower mass, and
of high-strength steel components that can both reduce weight and
improve safety. Kamiji made the point that widespread mass reduction
will reduce the kinetic energy of all crashes which should produce some
beneficial effect.
    Summers described NHTSA's plans for a model to estimate fleetwide
safety effects based on an array of vehicle-to-vehicle computational
crash simulations of current and anticipated vehicle designs. In
particular, three computational models of lightweight vehicles are
under development. They are based on current vehicles that have been
modified to substantially reduce mass. The most ambitious was the
``high development'' derivative of a Toyota Venza developed by Lotus
Engineering and discussed by Mr. Peterson. Its structure currently
contains about 75% aluminum, 12% magnesium, 8% steel, and 5% advanced
composites. Peterson expressed confidence that the design had the
potential to meet federal safety standards. Nusholtz emphasized that
computational crash simulations involving more advanced materials were
less reliable than those involving traditional metals such as aluminum
and steel.
    Nusholtz presented a revised data-based fleet safety model in which
important vehicle parameters were modeled based on trends from current
NCAP crash tests. For example, crash pulses and potential intrusion for
a particular size vehicle were based on existing distributions. Average
occupant deceleration was used to estimate injury risk. Through a range
of simulations of modified vehicle fleets, he was able to estimate the
net effects of various design strategies for lighter weight vehicles,
such as various scaling approaches for vehicle stiffness or intrusion.
The approaches were selected based on engineering requirements for
modified

vehicles. Transition from the current fleet was considered. He
concluded that protocols resulting in safer transitions (e.g., removing
more mass from heavier vehicles with appropriate stiffness scaling
according to a \3/2\ power law) were not generally consistent with
those that provide the greatest reduction in GHG production.
    German discussed several important points on the future of mass
reduction. Similar to Kahane's discussion of the difficulties of
isolating the impact of weight reduction, German stated that other
important variables, such as vehicle design and compatibility factors,
must be held constant in order for size or weight impacts to be
quantified in statistical analyses. He presented results that, compared
to driver, driving influences, and vehicle design influences, the
safety impacts of size and weight are small and difficult to quantify.
He noted that several scenarios, such as rollovers, greatly favored the
occupants of smaller and lighter cars once a crash occurred. He pointed
out that if size and design are maintained, lower weight should
translate into a lower total crash force. He thought that advanced
material designs have the potential to ``decouple'' the historical
correlation between vehicle size and weight, and felt that effective
design and driver attributes may start to dominate size and weight
issues in future vehicle models.
    Other presenters noted industry's perspective of the effect of
incentivizing weight reduction. Field highlighted the complexity of
institutional changes that may be necessitated by weight reduction,
including redesign of material and component supply chains and
manufacturing infrastructure. Schmidt described an industry perspective
on the complicated decisions that must be made in the face of
regulatory change, such as evaluating goals, gains, and timing.
    Field and Schmidt noted that the introduction of technical
innovations is generally an innate development process involving both
tactical and strategic considerations that balance desired vehicle
attributes with economic and technical risk. In the absence of
challenging regulatory requirements, a substantial technology change is
often implemented in stages, starting with lower volume pilot
production before a commitment is made to the infrastructure and supply
chain modifications necessary for inclusion on a high-volume production
model. Joining, damage characterization, durability, repair, and
significant uncertainty in final component costs are also concerns.
Thus, for example, the widespread implementation of high-volume
composite or magnesium structures might be problematic in the short or
medium term when compared to relatively transparent aluminum or high
strength steel implementations. Regulatory changes will affect how
these tradeoffs are made and these risks are managed.
    Koichi Kamiji presented data showing in increased use of high
strength steel in their Honda product line to reduced vehicle mass and
increase vehicle safety. He stated that mass reduction is clearly a
benefit in 42% of all fatal crashes because absolute energy is reduced.
He followed up with slides showing the application of certain optimized
it designs can improve safety even when controlling for weight and
size.
    A philosophical theme developed that explored the ethics of
consciously allowing the total societal harm associated with mass
reduction to approach the anticipated benefits of enhanced safety
technologies. Although some participants agreed that there may
eventually be specific fatalities that would not have occurred without
downsizing, many also agreed that safety strategies will have to be
adapted to the reality created by consumer choices, and that ``We will
be ok if we let data on what works--not wishful thinking--guide our
strategies.''
5. How have the agencies estimated safety effects for the proposed
standards?
a. What was the agencies' methodology for estimating safety effects for
the proposed standards?
    As explained above, the agencies consider the 2011 statistical
analysis of historical crash data by NHTSA to represent the best
estimates of the potential relationship between mass reduction and
fatality increases in the future fleet. This section discusses how the
agencies used NHTSA's 2011 analysis to calculate specific estimates of
safety effects of the proposed standards, based on the analysis of how
much mass reduction manufacturers might use to meet the proposed
standards.
    Neither the proposed CAFE/GHG standards nor the agencies' analysis
mandates mass reduction, or mandates that mass reduction occur in any
specific manner. However, mass reduction is one of the technology
applications available to the manufacturers and a degree of mass
reduction is used by both agencies' models to determine the
capabilities of manufacturers and to predict both cost and fuel
consumption/emissions impacts of improved CAFE/GHG standards. We note
that the amount of mass reduction selected for this rulemaking is based
on our assumptions about how much is technologically feasible without
compromising safety. While we are confident that manufacturers will
build safe vehicles, we cannot predict with certainty that they will
choose to reduce mass in exactly the ways that the agencies have
analyzed in response to the standards. In the event that manufacturers
ultimately choose to reduce mass and/or footprint in ways not analyzed
or anticipated by the agencies, the safety effects of the rulemaking
may likely differ from the agencies' estimates.
    NHTSA utilized the 2011 Kahane study relationships between weight
and safety, expressed as percent changes in fatalities per 100-pound
weight reduction while holding footprint constant. However, as
mentioned previously, there are several identifiable safety trends
already occurring, or expected to occur in the foreseeable future, that
are not accounted for in the study. For example, the two important new
safety standards that were discussed above for electronic stability
control and head curtain airbags, have already been issued and began
phasing in after MY 2008. The recent shifts in market shares from
pickups and SUVs to cars and CUVs may continue, or accelerate, if
gasoline prices remain high, or rise further. The growth in vehicle
miles travelled may continue to stagnate if the economy does not
improve, or gasoline prices remain high. And improvements in driver
(and passenger) behavior, such as higher safety belt use rates, may
continue. All of these will tend to reduce the absolute number of
fatalities in the future. The agency estimated the overall change in
fatalities by calendar year after adjusting for ESC, Side Impact
Protection, and other Federal safety standards and behavioral changes
projected through this time period. The smaller percent changes in risk
from mass reduction (from the 2011 NHTSA analysis), coupled with the
reduced number of baseline fatalities, results in smaller absolute
increases in fatalities than those predicted in the 2010 rulemaking.
    NHTSA examined the impacts of identifiable safety trends over the
lifetime of the vehicles produced in each model year. An estimate of
these impacts was contained in a previous

agency report.\203\ The impacts were estimated on a year-by-year basis,
but could be examined in a combined fashion. Using this method, we
estimate a 12.6 percent reduction in fatality levels between 2007 and
2020 for the combination of safety standards and behavioral changes
anticipated (ESC, head-curtain air bags, and increased belt use). Since
the same safety standards are taking effect in the same years, the
estimates derived from applying NHTSA fatality percentages to a
baseline of 2007 fatalities were thus multiplied by 0.874 to account
for changes that NHTSA believes will take place in passenger car and
light truck safety between the 2007 baseline on-road fleet used for
this particular safety analysis and year 2025.
---------------------------------------------------------------------------

    \203\ Countermeasures could potentially involve improved front
end structure, knee bags, seat ramps, buckle pretensioners, and
others.
    Blincoe, L. and Shankar, U., ``The Impact of Safety Standards
and Behavioral Trends on Motor Vehicle Fatality Rates,'' DOT HS 810
777, January 2007. See Table 4 comparing 2020 to 2007 (37,906/43,363
= 12.6% reduction (1-.126 = .874). Since 2008 was a recession year,
it does not seem appropriate to use that as a baseline. We believe
this same ratio should hold for this analysis which should compare
2025 to 2008. Thus, we are inclined to continue to use the same
ratio.
---------------------------------------------------------------------------

    To estimate the amount of mass reduction to apply in the rulemaking
analysis, the agencies considered fleet safety effects for mass
reduction. As previously discussed and shown in Table II-15, the Kahane
2011 study shows that applying mass reduction to CUVs and light duty
trucks will generally decrease societal fatalities, while applying mass
reduction to passenger cars will increase fatalities. The CAFE model
uses coefficients from the Kahane study along with the mass reduction
level applied to each vehicle model to project societal fatality
effects in each model year. NHTSA used the CAFE model and conducted
iterative modeling runs varying the maximum amount of mass reduction
applied to each subclass in order to identify a combination that
achieved a high level of overall fleet mass reduction while not
adversely affecting overall fleet safety. These maximum levels of mass
reduction for each subclass were then used in the CAFE model for the
rulemaking analysis. The agencies believe that mass reduction of up to
20 percent is feasible on light trucks, CUVs and minivans,\204\ but
that less mass reduction should be implemented on other vehicle types
to avoid increases in societal fatalities. For this proposal, NHTSA
used the mass reduction levels shown in Table II-15.
---------------------------------------------------------------------------

    \204\ When applying mass reduction, NHSTA capped the maximum
amount of mass reduction to 20 percent for any individual vehicle
class. The 20 percent cap is the maximum amount of mass reduction
the agencies believe to be feasible in MYs 2017-2025 time frame.
[GRAPHIC] [TIFF OMITTED] TP01DE11.045

    For the CAFE model, these percentages apply to a vehicle's total
weight, including the powertrain. Table II-16 shows the amount of mass
reduction in pounds for these percentage mass reduction levels for a
typical vehicle weight in each subclass.

[GRAPHIC] [TIFF OMITTED] TP01DE11.046

    After applying the mass reduction levels in the CAFE model, Table
II-17 shows the results of NHTSA's safety analysis separately for each
model year.\205\ These are estimated increases or decreases in
fatalities over the lifetime of the model year fleet. A positive number
means that fatalities are projected to increase, a negative number
(indicated by parentheses) means that fatalities are projected to
decrease. The results are significantly affected by the assumptions put
into the Volpe model to take more weight out of the heavy LTVs, CUVs,
and minivans than out of other vehicles. As the negative coefficients
only appear for LTVs greater than 4,594 lbs., CUVs, and minivans, a
statistically improvement in safety can only occur if more weight is
taken out of these vehicles than passenger cars or smaller light
trucks. Combining passenger car and light truck safety estimates for
the proposed standards results in an increase in fatalities over the
lifetime of the nine model years of MY 2017-2025 of 4 fatalities,
broken up into an increase of 61 fatalities in passenger cars and 56
decrease in fatalities in light trucks. NHTSA also analyzed the results
for different regulatory alternatives in Chapter IX of its PRIA; the
difference in the results by alternative depends upon how much weight
reduction is used in that alternative and the types and sizes of
vehicles that the weight reduction applies to.
---------------------------------------------------------------------------

    \205\ NHTSA has changed the definitions of a passenger car and
light truck for fuel economy purposes between the time of the Kahane
2003 analysis and this proposed rule. About 1.4 million 2 wheel
drive SUVs have been redefined as passenger cars instead of light
trucks. The Kahane 2011 analysis continues with the definitions used
in the Kahane 2003 analysis. Thus, there are different definitions
between Tables IX-1 and IX-2 (which use the old definitions) and
Table IX-3 (which uses the new definitions).

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

[GRAPHIC] [TIFF OMITTED] TP01DE11.047

    Using the same coefficients from the 2011 Kahane study, EPA used
the OMEGA model to conduct a similar analysis. After applying these
percentage increases to the estimated weight reductions per vehicle
size by model year assumed in the Omega model, Table II-18 shows the
results of EPA's safety analysis separately for each model year. These
are estimated increases or decreases in fatalities over the lifetime of
the model year fleet. A positive number means that fatalities are
projected to increase; a negative number means that fatalities are
projected to decrease. For details, see the EPA RIA Chapter 3.
[GRAPHIC] [TIFF OMITTED] TP01DE11.048

b. Why might the real-world effects be less than or greater than what
the agencies have calculated?
    As discussed above the ways in which future technological advances
could potentially mitigate the safety effects estimated for this
rulemaking: lightweight vehicles could be designed to be both stronger
and not more aggressive; restraint systems could be improved to deal
with higher crash pulses in lighter vehicles; crash avoidance
technologies could reduce the number of overall crashes; roofs could be
strengthened to improve safety

in rollovers. As also stated above, however, while we are confident
that manufacturers will strive to build safe vehicles, it will be
difficult for both the agencies and the industry to know with certainty
ahead of time how crash trends will change in the future fleet as
lightweighted vehicles become more prevalent. Going forward, we will
have to continue to monitor the crash data as well as changes in
vehicle weight relative to what we expect.
    Additionally, we note that the total amount of mass reduction used
in the agencies' analysis for this rulemaking were chosen based on our
assumptions about how much is technologically feasible without
compromising safety. Again, while we are confident that manufacturers
are motivated to build safe vehicles, we cannot predict with certainty
that they will choose to reduce mass in exactly the ways that the
agencies have analyzed in response to the standards. In the event that
manufacturers ultimately choose to reduce mass and/or footprint in ways
not analyzed by the agencies, the safety effects of the rulemaking may
likely differ from the agencies' estimates.
    The agencies acknowledge the proposal does not prohibit
manufacturers from redesigning vehicles to change wheelbase and/or
track width (footprint). However, as NHTSA explained in promulgating
MY2008-2011 light truck CAFE standards and MY2011 passenger car and
light truck CAFE standards, and as the agencies jointly explained in
promulgating MY2012-2016 CAFE and GHG standards, the agencies believes
such engineering changes are significant enough to be unattractive as a
measure to undertake solely to reduce compliance burdens. Similarly,
the agencies acknowledge that a manufacturer could, without actually
reengineering specific vehicles to increase footprint, shift production
toward those that perform well compared to their respective footprint-
based targets. However, NHTSA and, more recently NHTSA and EPA have
previously explained, because such production shifts would run counter
to market demands, they would also be competitively unattractive. Based
on this regulatory design, the analysis assumes this proposal will not
have either of the effects described above.
    As discussed in Chapter 2 of the Draft Joint TSD, the agencies note
that the standard is flat for vehicles smaller than 41 square feet and
that downsizing in this category could help achieve overall compliance,
if the vehicles are desirable to consumers. The agencies note that less
than 10 percent of MY2008 passenger cars were below 41 square feet, and
due to the overall lower level of utility of these vehicles, and the
engineering challenges involved in ensuring that these vehicles meet
all applicable federal motor vehicle safety standards (FMVSS), we
expect a significant increase in this segment of the market in the
future is unlikely. Please see Chapter 2 of the Draft Joint TSD for
additional discussion.
    We seek comment on the appropriateness of the overall analytic
assumption that the attribute-based aspect of the proposed standards
will have no effect on the overall distribution of vehicle footprints.
Notwithstanding the agencies current judgment that such deliberate
reengineering or production shift are unlikely as pure compliance
strategies, both agencies are considering the potential future
application of vehicle choice models, and anticipate that doing so
could result in estimates that market shifts induced by changes in
vehicle prices and fuel economy levels could lead to changes in fleet's
footprint distribution. However, neither agency is currently able to
include vehicle choice modeling in our analysis.
    As discussed in Chapter 2 of the Draft Joint TSD, the agencies note
that the standard is flat for vehicles smaller than 41 square feet and
that downsizing in this category could help achieve overall compliance,
if the vehicles are desirable to consumers. The agencies note that less
than 10 percent of MY2008 passenger cars were below 41 square feet, and
due to the overall lower level of utility of these vehicles, and the
engineering challenges involved in ensuring that these vehicles meet
all applicable federal motor vehicle safety standards (FMVSS), we
expect a significant increase in this segment of the market in the
future is unlikely. Please see Chapter 2 of the Draft Joint TSD for
additional discussion.
c. Do the agencies plan to make any changes in these estimates for the
final rule?
    As discussed above, the agencies have based our estimates of safety
effects due to the proposed standards on Kahane's 2011 report. That
report is currently undergoing peer review and is docketed for public
review;\206\ the peer review comments and response to peer review
comments, along with any revisions to the report in response to that
review, will also be docketed there. Depending on the results of the
peer review, our calculation of safety effects for the final rule will
also be revised accordingly. The agencies will also consider any
comments received on the proposed rule, and determine at that time
whether and how our estimates should be changed in response to those
comments. Additional studies published by the agencies or other
independent researchers as previously discussed will also be
considered, along with any other relevant information.
---------------------------------------------------------------------------

    \206\ Kahane, C. J. (2011). ``Relationships Between Fatality
Risk, Mass, and Footprint in Model Year 2000-2007 Passenger Cars and
LTVs,'', July 2011. The report is available in the NHTSA docket,
NHTSA-2010-0152. You can access the docket at http://www.regulations.gov/#!home by typing `NHTSA-2010-0152' where it says
``enter keyword or ID'' and then clicking on ``Search.''
---------------------------------------------------------------------------

III. EPA Proposal for MYs 2017-2025 Greenhouse Gas Vehicle Standards

A. Overview of EPA Rule

1. Introduction
    Soon after the completion of the successful model years (MYs) 2012-
2016 rulemaking in May 2010, the President, with support from the auto
manufacturers, requested that EPA and NHTSA work to extend the National
Program to MYs 2017-2025 light duty vehicles. The agencies were
requested to develop ``a coordinated national program under the CAA
(Clean Air Act) and the EISA (Energy Independence and Security Act of
2007) to improve fuel efficiency and to reduce greenhouse gas emissions
of passenger cars and light-duty trucks of model years 2017-2025.''
\207\ EPA's proposal grows directly out of our work with NHTSA and CARB
in developing such a continuation of the National Program. This
proposal provides important benefits to society and consumers in the
form of reduced emissions of greenhouse gases (GHGs), reduced
consumption of oil, and fuel savings for consumers, all at reasonable
costs. It provides industry with the important certainty and leadtime
needed to implement the technology changes that will achieve these
benefits, as part of a harmonized set of federal requirements. Acting
now to address the standards for MYs 2017-2025 will allow for the
important continuation of the National Program that started with MYs
2012-2016.
---------------------------------------------------------------------------

    \207\ The Presidential Memorandum is found at: http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards.
---------------------------------------------------------------------------

    EPA is proposing GHG emissions standards for light-duty vehicles,
light-duty trucks, and medium-duty passenger vehicles (hereafter light
vehicles) for MYs 2017 through 2025. These vehicle categories, which
include cars, sport utility vehicles, minivans, and pickup trucks used
for personal

transportation, are responsible for almost 60% of all U.S.
transportation related GHG emissions.
    If finalized, this proposal would be the second EPA rule to
regulate light vehicle GHG emissions under the Clean Air Act (CAA),
building upon the GHG emissions standards for MYs 2012-2016 that were
established in 2010,\208\ and the third rule to regulate GHG emissions
from the transportation sector.\209\ Combined with the standards
already in effect for MYs 2012-2016, the proposed standards would
result in MY 2025 light vehicles emitting approximately one-half of the
GHG emissions of MY 2010 vehicles and would represent the most
significant federal action ever taken to reduce GHG emissions (and
improve fuel economy) in the U.S.
---------------------------------------------------------------------------

    \208\ 75 FR 25324 (May 7, 2010).
    \209\ 76 FR 57106 (September 15, 2011) established GHG emission
standards for heavy-duty vehicles and engines for model years 2014-
2018.
---------------------------------------------------------------------------

    From a societal standpoint, the proposed GHG emissions standards
are projected to save approximately 2 billion metric tons of GHG
emissions and 4 billion barrels of oil over the lifetimes of those
vehicles sold in MYs 2017-2025. EPA estimates that fuel savings will
far outweigh higher vehicle costs, and that the net benefits to society
will be in the range of $311 billion (at 7% discount rate) to $421
billion (3% discount) over the lifetimes of those vehicles sold in MYs
2017-2025. Just in calendar year 2040 alone, after the on-road vehicle
fleet has largely turned over to vehicles sold in MY 2025 and later,
EPA projects GHG emissions savings of 462 million metric tons, oil
savings of 2.63 million barrels per day, and net benefits of $144
billion using the $22/ton CO2 social cost of carbon value.
    EPA estimates that these proposed standards will save consumers
money. Higher costs for new technology, sales taxes, and insurance will
add, on average in the first year, about $2100 for consumers who buy a
new vehicle in MY 2025. But those consumers who drive their MY 2025
vehicle for its entire lifetime will save, on average, $5200 (7%
discount rate) to $6600 (3% discount) in fuel savings, for a net
lifetime savings of $3000-$4400. For those consumers who purchase their
new MY 2025 vehicle with cash, the discounted fuel savings will offset
the higher vehicle cost in less than 4 years, and fuel savings will
continue for as long as the consumer owns the vehicle. Those consumers
that buy a new vehicle with a 5-year loan will benefit from a monthly
cash flow savings of $12 (or about $140 per year), on average, as the
monthly fuel savings more than offsets the higher monthly payment due
to the higher incremental vehicle cost.
    The proposed standards are designed to allow full consumer choice,
in that they are footprint-based, i.e., larger vehicles have higher
absolute GHG emissions targets and smaller vehicles have lower absolute
GHG emissions targets. While the GHG emissions targets do become more
stringent each year, the emissions targets have been selected to allow
compliance by vehicles of all sizes and with current levels of vehicle
attributes such as utility, size, safety, and performance. Accordingly,
these proposed standards are projected to allow consumers to choose
from the same mix of vehicles that are currently in the marketplace.
    Section I above provides a comprehensive overview of the joint EPA/
NHTSA proposal, including the history and rationale for a National
Program that allows manufacturers to build a single fleet of light
vehicles that can satisfy all federal and state requirements for GHG
emissions and fuel economy, the level and structure of the proposed GHG
emissions and corporate average fuel economy (CAFE) standards, the
compliance flexibilities proposed to be available to manufacturers, the
mid-term evaluation, and a summary of the costs and benefits of the GHG
and CAFE standards based on a ``model year lifetime analysis.''
    In this Section III, EPA provides more detailed information about
EPA's proposed GHG emissions standards. After providing an overview of
key information in this section (III.A), EPA discusses the proposed
standards (III.B); the vehicles covered by the standards, various
compliance flexibilities available to manufacturers, and a mid-term
evaluation (III.C); the feasibility of the proposed standards (III.D);
provisions for certification, compliance, and enforcement (III.E); the
reductions in GHG emissions projected for the proposed standards and
the associated effects of these reductions (III.F); the impact of the
proposal on non-GHG emissions and their associated effects (III.G); the
estimated cost, economic, and other impacts of the proposal (III.H);
and various statutory and executive order issues (III.I).
2. Why is EPA proposing this Rule?
a. Light Duty Vehicle Emissions Contribute to Greenhouse Gases and the
Threat of Climate Change
    Greenhouse gases (GHGs) are gases in the atmosphere that
effectively trap some of the Earth's heat that would otherwise escape
to space. GHGs are both naturally occurring and anthropogenic. The
primary GHGs of concern that are directly emitted by human activities
include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons,
perfluorocarbons, and sulfur hexafluoride.
    These gases, once emitted, remain in the atmosphere for decades to
centuries. They become well mixed globally in the atmosphere and their
concentrations accumulate when emissions exceed the rate at which
natural processes remove GHGs from the atmosphere. The heating effect
caused by the human-induced buildup of GHGs in the atmosphere is very
likely the cause of most of the observed global warming over the last
50 years. The key effects of climate change observed to date and
projected to occur in the future include, but are not limited to, more
frequent and intense heat waves, more severe wildfires, degraded air
quality, heavier and more frequent downpours and flooding, increased
drought, greater sea level rise, more intense storms, harm to water
resources, continued ocean acidification, harm to agriculture, and harm
to wildlife and ecosystems. A more in depth explanation of observed and
projected changes in GHGs and climate change, and the impact of climate
change on health, society, and the environment is included in Section
III.F below.
    Mobile sources represent a large and growing share of U.S. GHG
emissions and include light-duty vehicles, light-duty trucks, medium
duty passenger vehicles, heavy duty trucks, airplanes, railroads,
marine vessels and a variety of other sources. In 2007, all mobile
sources emitted 30% of all U.S. GHGs, and have been the source of the
largest absolute increase in U.S. GHGs since 1990. Transportation
sources, which do not include certain off highway sources such as farm
and construction equipment, account for 27% of U.S. GHG emissions, and
motor vehicles (CAA section 202(a)), which include light-duty vehicles,
light-duty trucks, medium-duty passenger vehicles, heavy-duty trucks,
buses, and motorcycles account for 23% of total U.S. GHGs.
    Light duty vehicles emit carbon dioxide, methane, nitrous oxide and
hydrofluorocarbons. Carbon dioxide (CO2) is the end product of fossil
fuel combustion. During combustion, the carbon stored in the fuels is
oxidized and emitted as CO2 and smaller amounts of other carbon
compounds. Methane (CH4) emissions are a function of the methane
content of the motor fuel, the amount of hydrocarbons passing
uncombusted through the

engine, and any post-combustion control of hydrocarbon emissions (such
as catalytic converters). Nitrous oxide (N2O) (and nitrogen
oxide (NOX)) emissions from vehicles and their engines are
closely related to air-fuel ratios, combustion temperatures, and the
use of pollution control equipment. For example, some types of
catalytic converters installed to reduce motor vehicle NOX,
carbon monoxide (CO) and hydrocarbon (HC) emissions can promote the
formation of N2O. Hydrofluorocarbons (HFC) are progressively
replacing chlorofluorocarbons (CFC) and hydrochlorofluorocarbons (HCFC)
in these vehicles' cooling and refrigeration systems as CFCs and HCFCs
are being phased out under the Montreal Protocol and Title VI of the
CAA. There are multiple emissions pathways for HFCs with emissions
occurring during charging of cooling and refrigeration systems, during
operations, and during decommissioning and disposal.
b. Basis for Action Under the Clean Air Act
    Section 202(a)(1) of the Clean Air Act (CAA) states that ``the
Administrator shall by regulation prescribe (and from time to time
revise) * * * standards applicable to the emission of any air pollutant
from any class or classes of new motor vehicles * * *, which in his
judgment cause, or contribute to, air pollution which may reasonably be
anticipated to endanger public health or welfare.'' The Administrator
has found that the elevated concentrations of a group of six GHGs in
the atmosphere may reasonably be anticipated to endanger public health
and welfare, and that emissions of GHGs from new motor vehicles and new
motor vehicle engines contribute to this air pollution.
    As a result of these findings, section 202(a) requires EPA to issue
standards applicable to emissions of that air pollutant, and authorizes
EPA to revise them from time to time. This preamble describes the
proposed revisions to the current standards to control emissions of CO2
and HFCs from new light-duty motor vehicles.\210\ For further
discussion of EPA's authority under section 202(a), see Section I.D. of
the preamble.
---------------------------------------------------------------------------

    \210\ EPA is not proposing to amend the substantive standards
adopted in the 2012-2016 light-duty vehicle rule for N2O
and CH4, but is proposing revisions to the options that
manufacturers have in meeting the N2O and CH4 standards, and to the
timeframe for manufacturers to begin measuring N2O emissions. See
Section III.B below.
---------------------------------------------------------------------------

c. EPA's Endangerment and Cause or Contribute Findings for Greenhouse
Gases Under Section 202(a) of the Clean Air Act
    On December 15, 2009, EPA published its findings that elevated
atmospheric concentrations of GHGs are reasonably anticipated to
endanger the public health and welfare of current and future
generations, and that emissions of GHGs from new motor vehicles
contribute to this air pollution. Further information on these findings
may be found at 74 FR 66496 (December 15, 2009) and 75 FR 49566 (Aug.
13, 2010).
3. What is EPA proposing?
a. Light-Duty Vehicle, Light-Duty Truck, and Medium-Duty Passenger
Vehicle Greenhouse Gas Emission Standards and Projected Emissions
Levels
    EPA is proposing tailpipe carbon dioxide (CO2) standards
for cars and light trucks based on the CO2 emissions-
footprint curves for cars and light trucks that are shown above in
Section I.B.3 and below in Section III.B. These curves establish
different CO2 emissions targets for each unique car and
truck footprint value. Generally, the larger the vehicle footprint, the
higher the corresponding vehicle CO2 emissions target.
Vehicle CO2 emissions will be measured over the EPA city and
highway tests. Under this proposal, various incentives and credits are
available for manufacturers to demonstrate compliance with the
standards. See Section I.B for a comprehensive overview of both the EPA
CO2 emissions-footprint standard curves and the various
compliance flexibilities that are proposed to be available to the
manufacturers in meeting the EPA tailpipe CO2 standards.
    EPA projects that the proposed tailpipe CO2 emissions-
footprint curves would yield a fleetwide average light vehicle
CO2 emissions compliance target level in MY 2025 of 163
grams per mile, which would represent an average reduction of 35
percent relative to the projected average light vehicle CO2
level in MY 2016. On average, car CO2 emissions would be
reduced by about 5 percent per year, while light truck CO2 emissions
would be reduced by about 3.5 percent per year from MY 2017 through
2021, and by about 5 percent per year from MY 2022 through 2025.
    The following three tables, Table III-1 through Table III-3,
summarize EPA's projections of what the proposed standards would mean
in terms of projected CO2 emissions reductions for passenger
cars, light trucks, and the overall fleet combining passenger cars and
light trucks for MYs 2017-2025. It is important to emphasize that these
projections are based on technical assumptions by EPA about various
matters, including the mix of cars and trucks, as well as the mix of
vehicle footprint values, in the fleet in varying years. It is possible
that the actual CO2 emissions values will be either higher
or lower than the EPA projections.
    In each of these tables, the column ``Projected CO2
Compliance Target'' represents our projected fleetwide average
CO2 compliance target value based on the proposed
CO2-footprint curve standards as well as the projected mixes
of cars and trucks and vehicle footprint levels. This Compliance Target
represents the projected fleetwide average of the projected standards
for the various manufacturers.
    The column(s) under ``Incentives'' represent the emissions impact
of the proposed multiplier incentive for EV/PHEV/FCVs and the proposed
pickup truck incentives. These incentives allow manufacturers to meet
their Compliance Targets with CO2 emissions levels slightly higher than
they would otherwise have to be, but do not reflect actual real-world
CO2 emissions reductions. As such they reduce the emissions
reductions that the CO2 standards would be expected to
achieve.
    The column ``Projected Achieved CO2'' is the sum of the
CO2 Compliance Target and the value(s) in the ``Incentive''
columns. This Achieved CO2 value is a better reflection of
the CO2 emissions benefits of the standards, since it
accounts for the incentive programs. One incentive that is not
reflected in these tables is the 0 gram per mile compliance value for
EV/PHEV/FCVs. The 0 gram per mile value accurately reflects the
tailpipe CO2 gram per mile achieved by these vehicles;
however, the use of this fuel does impact the overall GHG reductions
associated with the proposed standards due to fuel production and
distribution-related upstream GHG emissions which are projected to be
greater than the upstream GHG emissions associated with gasoline from
oil. The combined impact of the 0 gram per mile and multiplier
incentive for EV/PHEV/FCVs on overall program GHG emissions is
discussed in more detail below in Section III.C.2.
    The columns under ``Credits'' quantify the projected CO2
emissions credits that we project manufacturers will achieve through
improvements in air conditioner refrigerants and efficiency. These
credits reflect real world emissions reductions, so they do not raise
the levels of the Achieved CO2 values, but they do allow
manufacturers to comply with their compliance targets with 2-cycle test
CO2 emissions values

higher than otherwise. One other credit program that could similarly
affect the 2-cycle CO2 values is the off-cycle credit
program, but it is not included in this table due to the uncertainty
inherent in projecting the future use of these technologies. The off-
cycle credits, like A/C credits, reflect real world reductions, so they
would not change the CO2 Achieved values.
    The column ``Projected 2-cycle CO2'' is the projected fleetwide 2-
cycle CO2 emissions values that manufacturers would have to
achieve in order to be able to comply with the proposed standards. This
value is the sum of the projected fleetwide credit, incentive, and
Compliance Target values.\211\
---------------------------------------------------------------------------

    \211\ For MY 2016, the Temporary Leadtime Allowance Alternative
Standards are available to manufacturers. In the MYs 2012-2016 rule,
we estimated the impact of this credit in MY 2016 to be 0.1 gram/
mile. Due to the small magnitude, we have not included this in the
following tables for the MY 2016 base year.
[GRAPHIC] [TIFF OMITTED] TP01DE11.049

[GRAPHIC] [TIFF OMITTED] TP01DE11.050

[GRAPHIC] [TIFF OMITTED] TP01DE11.051

[GRAPHIC] [TIFF OMITTED] TP01DE11.052

[GRAPHIC] [TIFF OMITTED] TP01DE11.053

BILLING CODE 4910-59-C
    Table III-4 shows the projected real world CO2 emissions
and fuel economy values associated with the proposed CO2
standards. These real world estimates, similar to values shown on new
vehicle labels, reflect the fact that the way cars and trucks are
operated in the real world generally results in higher CO2
emissions and lower fuel economy than laboratory test results used to
determine compliance with the standards, which are performed under
tightly controlled conditions. There are many assumptions that must be
made for these projections, and real world CO2 emissions and
fuel economy performance can vary based on many factors.
    The real world tailpipe CO2 emissions projections in
Table III-4 are calculated starting with the projected 2-cycle
CO2 emissions values in Table III-1 through Table III-3,
subtracting the air conditioner efficiency credits, and then
multiplying by a factor of 1.25. The 1.25 factor is an approximation of
the ratio of real world CO2 emissions to 2-cycle test
CO2 emissions for the fleet in the

recent past. It is not possible to know the appropriate factor for
future vehicle fleets, as this factor will depend on many factors such
as technology performance, driver behavior, climate conditions, fuel
composition, etc. Issues associated with future projections of this
factor are discussed in TSD 4. Air conditioner efficiency credits were
subtracted from the 2-cycle CO2 emissions values as air
conditioning efficiency improvements will increase real world fuel
economy. The real world fuel economy value is calculated by dividing
8887 grams of CO2 per gallon of gasoline by the real world
tailpipe CO2 emissions value.
[GRAPHIC] [TIFF OMITTED] TP01DE11.054

    As discussed both in Section I and later in this Section III, EPA
either already has adopted or is proposing provisions for averaging,
banking, and trading of credits, that allow annual credits for a
manufacturer's over-compliance with its unique fleet-wide average
standard, carry-forward and carry-backward of credits, the ability to
transfer credits between a manufacturer's car and truck fleets, and
credit trading between manufacturers. EPA is proposing a one-time
carry-forward of any credits such that any credits generated in MYs
2010-2016 can be used through MY 2021. These provisions are not
expected to change the emissions reductions achieved by the standards,
but should significantly reduce the cost of achieving those reductions.
The tables above do not reflect the year to year impact of these
provisions. For example, EPA expects that many manufacturers may
generate credits by over complying with the standards for cars, and
transfer such credits to its truck fleet. Table III-1 (cars) and Table
III-2 (trucks) do not reflect such transfers. If on an industry wide
basis more credits are transferred from cars to trucks than vice versa,
you would expect to achieve greater reductions from cars than reflected
in Table III-1 (lower CO2 gram/miles values) and less
reductions from trucks than reflected in Table III-2 (higher
CO2 gram/mile values). Credit transfers between cars and
trucks would not be expected to change the results for the combined
fleet, reflected in Table III-3.
    The proposed rule would also exclude from coverage a limited set of
vehicles: emergency and police vehicles, and vehicles manufactured by
small businesses. As discussed in Section III.B below, these exclusions
have very limited impact on the total GHG emissions reductions from the
light-

duty vehicle fleet. We also do not anticipate significant impacts on
total GHG emissions reductions from the proposed provisions allowing
small volume manufacturers to petition EPA for alternative standards.
See Section III.B.5 below.
b. Environmental and Economic Benefits and Costs of EPA's Standards
i. Model Year Lifetime Analysis
    Section I.C provides a comprehensive discussion of the projected
benefits and costs associated with the proposed MYs 2017-2025 GHG and
CAFE standards based on a ``model year lifetime'' analysis, i.e., the
benefits and costs associated with the lifetime operation of the new
vehicles sold in these nine model years. It is important to note that
while the incremental vehicle costs associated with MY 2017 vehicles
will in fact occur in calendar year 2017, the benefits associated with
MY 2017 vehicles will be split among all the calendar years from 2017
through the calendar year during which the last MY 2017 vehicle would
be retired.
    Table III-5 provides a summary of the GHG emissions and oil savings
associated with the lifetime operation of all the vehicles sold in each
model year. Cumulatively, for the nine model years from 2017 through
2025, the proposed standards are projected to save approximately 2
billion metric tons of GHG emissions and 4 billion barrels of oil.
    Table III-6 provides a summary of the most important projected
economic impacts of the proposed GHG emissions standards based on this
model year lifetime analytical approach. These monetized dollar values
are all discounted to the first year of each model year, then summed up
across all model years. With a 3% discount rate, cumulative incremental
vehicle technology cost for MYs 2017-2025 vehicles is $140 billion,
fuel savings is $444 billion, other monetized benefits are $117
billion, and program net benefits are projected to be $421 billion.
Using a 7% discount rate, the projected program net benefits are $311
billion.
    As discussed previously, EPA recognizes that some of these same
benefits and costs are also attributable to the CAFE standard contained
in this joint proposal, although the GHG program achieves greater
reductions of both GHG emissions and petroleum. More details associated
with this model year lifetime analysis of the proposed GHG standards
are presented in Sections III.F and III.H.
[GRAPHIC] [TIFF OMITTED] TP01DE11.055

ii. Calendar Year Analysis
    In addition to the model year lifetime analysis projections
summarized above, EPA also performs a ``calendar year'' analysis that
projects the environmental and economic impacts associated with the
proposed tailpipe CO2 standards during specific calendar
years out to 2050. This calendar year approach reflects the timeframe
when the benefits would be achieved and the costs incurred. Because the
EPA tailpipe CO2 emissions standards will remain in effect
unless and until they are changed, the projected impacts in this
calendar year analysis beyond calendar year 2025 reflect vehicles sold
in model years after 2025 (e.g., most of the benefits in calendar year
2040 would be due to vehicles sold after MY 2025).
    Table III-7 provides a summary of the most important projected
benefits and costs of the proposed EPA GHG emissions standards based on
this calendar year analysis. In calendar year 2025, EPA projects GHG
savings of 151 million metric tons and oil savings of 0.83 million
barrels per day. These would grow to 547 million metric tons of GHG
savings and 3.12 million barrels of oil per day by calendar year 2050.
Program net benefits are projected to be $18 billion in calendar year
2025, growing to $198 billion in calendar year 2050. Program net
benefits over the 34-year period from 2017 through 2050 are projected
to have a net present value in 2012 of $600 billion (7% discount rate)
to $1.4 trillion (3% discount rate).
    More details associated with this calendar year analysis of the
proposed

GHG standards are presented in Sections III.F and III.H.
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TP01DE11.056

[GRAPHIC] [TIFF OMITTED] TP01DE11.057

[GRAPHIC] [TIFF OMITTED] TP01DE11.058

BILLING CODE 4910-59-C
iii. Consumer Analysis
    The model year lifetime and calendar year analytical approaches
discussed above aggregate the environmental and economic impacts across
the nationwide light vehicle fleet. EPA has also projected the average
impact of the proposed GHG standards on individual consumers who own
and drive MY 2025 light vehicles over their lifetimes.
    Table III-8 shows, on average, several key consumer impacts
associated with the proposed tailpipe CO2 standard for

MY 2025 vehicles. Some of these factors are dependent on the assumed
discount factors, and this table uses the same 3% and 7% discount
factors used throughout this preamble. EPA uses AEO2011 fuel price
projections of $3.25 per gallon in calendar year 2017, rising to $3.54
per gallon in calendar year 2025 and $3.85 per gallon in calendar year
2040.
    EPA projects that the new technology necessary to meet the proposed
MY 2025 standard would add, on average, an extra $1950 (including
markup) to the sticker price of a new MY 2025 light-duty vehicle.
Including higher vehicle sales taxes and first-year insurance costs,
the projected incremental first-year cost to the consumer is about
$2100 on average. The projected incremental lifetime vehicle cost to
the consumer, reflecting higher insurance premiums over the life of the
vehicle, is, on average, about $2200. For all of the consumers who
drive MY 2025 light-duty vehicles, the proposed standards are projected
to yield a net savings of $3000 (7% discount rate) to $4400 (3%
discount) over the lifetime of the vehicle, as the discounted lifetime
fuel savings of $5200-$6600 is 2.4 to 3 times greater than the $2200
incremental lifetime vehicle cost to the consumer.
    Of course, many vehicles are owned by more than one consumer. The
payback period and monthly cash flow approaches are two ways to
evaluate the economic impact of the MY 2025 standard on those new car
buyers who do not own the vehicle for its entire lifetime. Projected
payback periods of 3.7-3.9 years means that, for a consumer that buys a
new vehicle with cash, the discounted fuel savings for that consumer
would more than offset the incremental lifetime vehicle cost in 4
years. If the consumer owns the vehicle beyond this payback period, the
vehicle will save money for the consumer. For a consumer that buys a
new vehicle with a 5-year loan, the monthly cash flow savings of $12
(or about $140 per year) shows that the consumer would benefit
immediately as the monthly fuel savings more than offsets the higher
monthly payment due to the higher incremental first-year vehicle cost.
    The final entries in Table III-8 show the CO2 and oil
savings that would be associated with the MY 2025 vehicles on average,
both on a lifetime basis and in the first full year of operation. On
average, a consumer who owns a MY 2025 vehicle for its entire lifetime
is projected to emit 20 fewer metric tons of CO2 and consume
2200 fewer gallons of gasoline due to the proposed standards.
BILLING CODE 4910-59-P

[GRAPHIC] [TIFF OMITTED] TP01DE11.059

[GRAPHIC] [TIFF OMITTED] TP01DE11.060

BILLING CODE 4910-59-C
4. Basis for the GHG Standards Under Section 202(a)
    EPA has significant discretion under section 202(a) of the Act in
how to structure the standards that apply to the emission of the air
pollutant at issue here, the aggregate group of six GHGs, as well as to
the content of such standards. See generally 74 FR at 49464-65. EPA
statutory authority under section 202(a)(1) of the Clean Air Act (CAA)
is discussed in more detail in Section I.D of the preamble. In this
rulemaking, EPA is proposing a CO2 tailpipe emissions
standard that provides for credits based on reductions of HFCs, as the
appropriate way to issue standards applicable to emissions of the
single air pollutant, the aggregate group of six GHGs. EPA is not
proposing to change the methane and nitrous oxide standards already in
place (although EPA is proposing certain changes to the compliance
mechanisms for these standards as explained in Section III.B below).
EPA is not setting any standards for perfluorocarbons or sulfur
hexafluoride, as they are not emitted by motor vehicles. The following
is a summary of the basis for the proposed GHG standards under section
202(a), which is discussed in more detail in the following portions of
Section III.
    With respect to CO2 and HFCs, EPA is proposing
attribute-based light-duty car and truck standards that achieve large
and important emissions reductions of GHGs. EPA has evaluated the
technological feasibility of the standards, and the information and
analysis performed by EPA indicates that these standards are feasible
in the lead time provided. EPA and NHTSA have carefully evaluated the
effectiveness of individual technologies as well as the interactions
when technologies are combined. EPA projects that manufacturers will be
able to meet the standards by employing a wide variety of technologies
that are already commercially available. EPA's analysis also takes into
account certain flexibilities that will facilitate compliance. These
flexibilities include averaging, banking, and trading of various types
of credits. For a few very small volume manufacturers, EPA is proposing
to allow manufacturers to petition for alternative standards.
    EPA, as a part of its joint technology analysis with NHTSA, has
performed what we believe is the most comprehensive federal vehicle
technology analysis in history. We carefully considered the cost to
manufacturers of meeting the standards, estimating piece costs for all
candidate technologies, direct manufacturing costs, cost markups to
account for manufacturers' indirect costs, and manufacturer cost
reductions attributable to learning. In estimating manufacturer costs,
EPA took into account manufacturers' own practices such as making major
changes to vehicle technology packages during a planned redesign cycle.
EPA then projected the average cost across the industry to employ this
technology, as well as manufacturer-by-manufacturer costs. EPA
considers the per vehicle costs estimated by this analysis to be within
a reasonable range in light of the emissions reductions and benefits
achieved. EPA projects, for example, that the fuel savings over the
life of the vehicles will more than offset the increase in cost
associated with the technology used to meet the standards. As explained
in Section III.D.6 below, EPA has also investigated potential standards
both more and less stringent than those being proposed and has rejected
them. Less stringent standards would forego emission reductions which
are feasible, cost effective, and cost feasible, with short consumer
payback periods. EPA judges that the proposed standards are appropriate
and preferable to more stringent alternatives based largely on
consideration of cost--both to manufacturers and to consumers--and the
potential for overly aggressive penetration rates for advanced
technologies relative to the penetration rates seen in the proposed
standards, especially in the face of unknown degree of consumer
acceptance of both the increased costs and the technologies themselves.
    EPA has also evaluated the impacts of these standards with respect
to reductions in GHGs and reductions in oil usage. For the lifetime of
the model year 2017-2025 vehicles we estimate GHG reductions of
approximately 2 billion metric tons and fuel reductions of about 4
billion barrels of oil. These are important and significant reductions.
EPA has also analyzed a variety of other impacts of the standards,
ranging from the standards' effects on emissions of non-GHG pollutants,
impacts on noise, energy, safety and congestion. EPA has also
quantified the cost and benefits of the standards, to the extent
practicable. Our

analysis to date indicates that the overall quantified benefits of the
standards far outweigh the projected costs. We estimate the total net
social benefits (lifetime present value discounted to the first year of
the model year) over the life of MY 2017-2025 vehicles to be $421
billion with a 3% discount rate and $311 billion with a 7% discount
rate.
    Under section 202(a), EPA is called upon to set standards that
provide adequate lead-time for the development and application of
technology to meet the standards. EPA's standards satisfy this
requirement given the present existence of the technologies on which
the proposed rule is predicated and the substantial lead times afforded
under the proposal (which by MY2025 allow for multiple vehicle redesign
cycles and so affords opportunities for adding technologies in the most
cost efficient manner, see 75 FR at 25407). In setting the standards,
EPA is called upon to weigh and balance various factors, and to
exercise judgment in setting standards that are a reasonable balance of
the relevant factors. In this case, EPA has considered many factors,
such as cost, impacts on emissions (both GHG and non-GHG), impacts on
oil conservation, impacts on noise, energy, safety, and other factors,
and has where practicable quantified the costs and benefits of the
proposed rule. In summary, given the technical feasibility of the
standard, the cost per vehicle in light of the savings in fuel costs
over the lifetime of the vehicle, the very significant reductions in
emissions and in oil usage, and the significantly greater quantified
benefits compared to quantified costs, EPA is confident that the
standards are an appropriate and reasonable balance of the factors to
consider under section 202(a). See Husqvarna AB v. EPA, 254 F. 3d 195,
200 (DC Cir. 2001) (great discretion to balance statutory factors in
considering level of technology-based standard, and statutory
requirement ``to [give appropriate] consideration to the cost of
applying * * * technology'' does not mandate a specific method of cost
analysis); see also Hercules Inc. v. EPA, 598 F. 2d 91, 106 (DC Cir.
1978) (``In reviewing a numerical standard we must ask whether the
agency's numbers are within a zone of reasonableness, not whether its
numbers are precisely right''); Permian Basin Area Rate Cases, 390 U.S.
747, 797 (1968) (same); Federal Power Commission v. Conway Corp., 426
U.S. 271, 278 (1976) (same); Exxon Mobil Gas Marketing Co. v. FERC, 297
F. 3d 1071, 1084 (DC Cir. 2002) (same).
    EPA recognizes that most of the technologies that we are
considering for purposes of setting standards under section 202(a) are
commercially available and already being utilized to a limited extent
across the fleet, or will soon be commercialized by one or more major
manufacturers. The vast majority of the emission reductions that would
result from this rule would result from the increased use of these
technologies. EPA also recognizes that this rule would enhance the
development and commercialization of more advanced technologies, such
as PHEVs and EVs and strong hybrids as well. In this technological
context, there is no clear cut line that indicates that only one
projection of technology penetration could potentially be considered
feasible for purposes of section 202(a), or only one standard that
could potentially be considered a reasonable balancing of the factors
relevant under section 202(a). EPA therefore evaluated several
alternative standards, some more stringent than the promulgated
standards and some less stringent.
    See Section III.D.6 for EPA's analysis of alternative GHG emissions
standards.
5. Other Related EPA Motor Vehicle Regulations
a. EPA's Recent Heavy-Duty GHG Emissions Rulemaking
    EPA and NHTSA recently conducted a joint rulemaking to establish a
comprehensive Heavy-Duty National Program that will reduce greenhouse
gas emissions and fuel consumption for on-road heavy-duty vehicles
beginning in MY 2014 (76 FR 57106 (September 15, 2011)). EPA's final
carbon dioxide (CO2), nitrous oxide (N2O), and
methane (CH4) emissions standards, along with NHTSA's final
fuel consumption standards, are tailored to each of three regulatory
categories of heavy-duty vehicles: (1) Combination Tractors; (2) Heavy-
duty Pickup Trucks and Vans; and (3) Vocational Vehicles. The rules
include separate standards for the engines that power combination
tractors and vocational vehicles. EPA also set hydrofluorocarbon
standards to control leakage from air conditioning systems in
combination tractors and heavy-duty pickup trucks and vans.
    The agencies estimate that the combined standards will reduce
CO2 emissions by approximately 270 million metric tons and
save 530 million barrels of oil over the life of vehicles sold during
the 2014 through 2018 model years, providing $49 billion in net
societal benefits when private fuel savings are considered. See 76 FR
at 57125-27.
b. EPA's Plans for Further Standards for Light Vehicle Criteria
Pollutants and Gasoline Fuel Quality
    In the May 21, 2010 Presidential Memorandum, in addition to
addressing GHGs and fuel economy, the President also requested that EPA
examine its broader motor vehicle air pollution control program. The
President requested that ``[t]he Administrator of the EPA review for
adequacy the current nongreenhouse gas emissions regulations for new
motor vehicles, new motor vehicle engines, and motor vehicle fuels,
including tailpipe emissions standards for nitrogen oxides and air
toxics, and sulfur standards for gasoline. If the Administrator of the
EPA finds that new emissions regulations are required, then I request
that the Administrator of the EPA promulgate such regulations as part
of a comprehensive approach toward regulating motor vehicles.'' \214\
EPA is currently in the process of conducting an assessment of the
potential need for additional controls on light-duty vehicle non-GHG
emissions and gasoline fuel quality. EPA has been actively engaging in
technical conversations with the automobile industry, the oil industry,
nongovernmental organizations, the states, and other stakeholders on
the potential need for new regulatory action, including the areas that
are specifically mentioned in the Presidential Memorandum. EPA will
coordinate all future actions in this area with the State of
California.
---------------------------------------------------------------------------

    \214\ The Presidential Memorandum is found at: http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards.
---------------------------------------------------------------------------

    Based on this assessment, in the near future, EPA expects to
propose a separate but related program that would, in general, affect
the same set of new vehicles on the same timeline as would the proposed
light-duty GHG emissions standards. It would be designed to address air
quality problems with ozone and PM, which continue to be serious
problems in many parts of the country, and light-duty vehicles continue
to play a significant role.
    EPA expects that this related program, called ``Tier 3'' vehicle
and fuel standards, would among other things propose tailpipe and
evaporative standards to reduce non-GHG pollutants from light-duty
vehicles, including volatile organic compounds, nitrogen oxides,
particulate matter, and air toxics. EPA's intent, based on extensive
interaction to date with the automobile manufacturers and other
stakeholders, is to propose a Tier 3 program that would allow
manufacturers to proceed with

coordinated future product development plans with a full understanding
of the major regulatory requirements they will be facing over the long
term. This coordinated regulatory approach would allow manufacturers to
design their future vehicles so that any technological challenges
associated with meeting both the GHG and Tier 3 standards could be
efficiently addressed.
    It should be noted that under EPA's current regulations, GHG
emissions and CAFE compliance testing for gasoline vehicles is
conducted using a defined fuel that does not include any amount of
ethanol.\215\ If the certification test fuel is changed to some
ethanol-based fuel through a future rulemaking, EPA would be required
under EPCA to address the need for a test procedure adjustment to
preserve the level of stringency of the CAFE standards.\216\ EPA is
committed to doing so in a timely manner to ensure that any change in
certification fuel will not affect the stringency of future GHG
emission standards.
---------------------------------------------------------------------------

    \215\ See 40 CFR 86.113-94(a).
    \216\ EPCA requires that CAFE tests be determined from the EPA
test procedures in place as of 1975, or procedures that give
comparable results. 49 USC 32904(c).
---------------------------------------------------------------------------

B. Proposed Model Year 2017-2025 GHG Standards for Light-duty Vehicles,
Light-duty Trucks, and Medium duty Passenger Vehicles

    EPA is proposing new emissions standards to control greenhouse
gases (GHGs) from MY 2017 and later light-duty vehicles. EPA is
proposing new emission standards for carbon dioxide (CO2) on
a gram per mile (g/mile) basis that will apply to a manufacturer's
fleet of cars, and a separate standard that will apply to a
manufacturer's fleet of trucks. CO2 is the primary
greenhouse gas resulting from the combustion of vehicular fuels, and
the amount of CO2 emitted is directly correlated to the
amount of fuel consumed. EPA is proposing to conduct a mid-term
evaluation of the GHG standards and other requirements for MYs 2022-
2025, as further discussed in Section III.B.3 below.
    EPA is not proposing changes to the CH4 and
N2O emissions standards, but is proposing revisions to the
options that manufacturers have in meeting the CH4 and
N2O standards, and to the timeframe for manufacturers to
begin measuring N2O emissions. These proposed changes are
not intended to change the stringency of the CH4 and
N2O standards, but are aimed at addressing implementation
concerns regarding the standards.
    The opportunity to earn credits toward the fleet-wide average
CO2 standards for improvements to air conditioning systems
remains in place for MY 2017 and later, including improvements to
address both hydrofluorocarbon (HFC) refrigerant losses (i.e., system
leakage) and indirect CO2 emissions related to the air
conditioning efficiency and load on the engine. The CO2
standards proposed for cars and trucks take into account EPA's
projection of the average amount of credits expected to be generated
across the industry. EPA is proposing several revisions to the air
conditioning credits provisions, as discussed in Section III.C.1.
    The MY 2012-2016 Final Rule established several program elements
that remain in place, where EPA is not proposing significant changes.
The proposed standards described below would apply to passenger cars,
light-duty trucks, and medium-duty passenger vehicles (MDPVs). As an
overall group, they are referred to in this preamble as light-duty
vehicles or simply as vehicles. In this preamble section, passenger
cars may be referred to simply as ``cars'', and light-duty trucks and
MDPVs as ``light trucks'' or ``trucks.'' \217\
---------------------------------------------------------------------------

    \217\ GHG emissions standards would use the same vehicle
category definitions used for MYs 2012-2016 and as are used in the
CAFE program.
---------------------------------------------------------------------------

    EPA is not proposing changes to the averaging, banking, and trading
program elements, as discussed in Section III.B.4, with the exception
of our proposal for a one-time carry-forward of any credits generated
in MY 2010-2016 to be used anytime through MY2021. The previous
rulemaking also established provisions for MY 2016 and later FFVs,
where the emissions levels of these vehicles are based on tailpipe
emissions performance and the amount of alternative fuel used. These
provisions remain in place without change.
    Several provisions are being proposed that allow manufacturer's to
generate credits for use in complying with the standards or that
provide additional incentives for use of advanced technology. These
include credits for technology that reduces CO2 emissions
during off-cycle operation that is not reasonably accounted for by the
2-cycle tests used for compliance purposes. EPA is proposing various
changes to this program to streamline its use compared to the MYs 2012-
2016 program. These provisions are discussed in section III.C. In
addition, EPA is proposing the use of multipliers to provide an
incentive for the use of EVs, PHEVs, and FCVs, as well as a specified
gram/mile credit for full size pick-up trucks that meet various
efficiency performance criteria and/or include hybrid technology at a
minimum level of production volumes. These provisions are also
discussed in Section III.C. As discussed in those sections, while these
additional credit provisions do not change the level of the standards
proposed for cars and trucks, unlike the provisions for AC credits,
they all support the reasonableness of the standards proposed for MYs
2017-2025.
1. What Fleet-wide Emissions Levels Correspond to the CO2
Standards?
    EPA is proposing standards that are projected to require, on an
average industry fleet wide basis, 163 grams/mile of CO2 in
model year 2025. The level of 163 grams/mile CO2 would be
equivalent on a mpg basis to 54.5 mpg, if this level was achieved
solely through improvements in fuel efficiency.218 219 For
passenger cars, the proposed footprint curves call for reducing
CO2 by 5 percent per year on average from the model year
2016 passenger car standard through model year 2025. In recognition of
manufacturers' unique challenges in improving the GHG emissions of
full-size pickup trucks as we transition from the MY 2016 standards to
MY 2017 and later, while preserving the utility (e.g., towing and
payload capabilities) of those vehicles, EPA is proposing a lower
annual rate of improvement for light-duty trucks in the early years of
the program. For light-duty trucks, the footprint curves call for
reducing CO2 by 3.5 percent per year on average from the
model year 2016 truck standard through model year 2021. EPA is also
proposing to change the slopes of the CO2-footprint curves
for light-duty trucks from those in the 2012-2016 rule, in a manner
that effectively means that the annual rate of improvement for smaller
light-duty trucks in model years 2017 through 2021 would be higher than
3.5 percent, and the annual rate of improvement for larger light-duty
trucks over the same time period would be lower than 3.5 percent to
account for the unique challenges for improving the GHG of large light
trucks while maintaining cargo hauling and towing utility. For model
years 2022 through 2025, EPA is proposing a reduction of CO2
for light-

duty trucks of 5 percent per year on average starting from the model
year 2021 truck standard.
---------------------------------------------------------------------------

    \218\ In comparison, the MY 2016 CO2 standard is
projected to achieve a national fleet-wide average, covering both
cars and trucks, of 250 g/mile.
    \219\ Real-world CO2 is typically 25 percent higher
and real-world fuel economy is typically 20 percent lower than the
CO2 and CAFE values discussed here. The reference to
CO2 here refers to CO2 equivalent reductions,
as this level includes some reductions in emissions of greenhouse
gases other than CO2, from refrigerant leakage, as one
part of the AC related reductions.
---------------------------------------------------------------------------

    EPA's proposed standards include EPA's projection of average
industry wide CO2-equivalent emission reductions from A/C
improvements, where the proposed footprint curve is made more stringent
by an amount equivalent to this projection of A/C credits. This
projection of A/C credits builds on the projections from MYs 2012-2016,
with the increases in credits mainly due to the full penetration of low
GWP alternative refrigerant by MY 2021. The proposed car standards
would begin with MY 2017, with a generally linear increase in
stringency from MY 2017 through MY 2025 for cars. The truck standards
have a more gradual increase for MYs 2017-2020 then more rapidly in MY
2021. For MYs 2021-2025, the truck standards increase in stringency
generally in a linear fashion. EPA proposes to continue to have
separate standards for cars and light trucks, and to have identical
definitions of cars and trucks as NHTSA, in order to harmonize with
CAFE standards. The tables in this section below provide overall fleet
average levels that are projected for both cars and light trucks over
the phase-in period which is estimated to correspond with the proposed
standards. The actual fleet-wide average g/mi level that would be
achieved in any year for cars and trucks will depend on the actual
production for that year, as well as the use of the various credit and
averaging, banking, and trading provisions. For example, in any year,
manufacturers would be able to generate credits from cars and use them
for compliance with the truck standard, or vice versa. Such transfer of
credits between cars and trucks is not reflected in the table below. In
Section III.F, EPA discusses the year-by-year estimate of emissions
reductions that are projected to be achieved by the standards.
    In general, the proposed schedule of standards acts as a phase-in
to the MY 2025 standards, and reflects consideration of the appropriate
lead-time and engineering redesign cycles for each manufacturer to
implement the requisite emission reductions technology across its
product line. Note that MY 2025 is the final model year in which the
standards become more stringent. The MY 2025 CO2 standards
would remain in place for MY 2025 and later model years, until revised
by EPA in a future rulemaking. EPA estimates that, on a combined fleet-
wide national basis, the 2025 MY proposed standards would require a
level of 163 g/mile CO2. The derivation of the 163 g/mile
estimate is described in Section III.B.2. EPA has estimated the overall
fleet-wide CO2-equivalent emission (target) levels that
correspond with the proposed attribute-based standards, based on the
projections of the composition of each manufacturer's fleet in each
year of the program. Tables Table III-9 and Table III-10 provide these
target estimates for each manufacturer.
BILLING CODE 4910-59-P

[GRAPHIC] [TIFF OMITTED] TP01DE11.061

[GRAPHIC] [TIFF OMITTED] TP01DE11.062

[GRAPHIC] [TIFF OMITTED] TP01DE11.063

BILLING CODE 4910-59-C
    These estimates were aggregated based on projected production
volumes into the fleet-wide averages for cars, trucks, and the entire
fleet, shown in Table III-11.\220\ The combined fleet estimates are
based on the assumption of a fleet mix of cars and trucks that vary
over the MY 2017-2025 timeframe. This fleet mix distribution can be
found in Chapter 1 of the join TSD.
---------------------------------------------------------------------------

    \220\ Due to rounding during calculations, the estimated fleet-
wide CO2-equivalent levels may vary by plus or minus 1
gram.

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

[GRAPHIC] [TIFF OMITTED] TP01DE11.064

    As shown in Table III-11, fleet-wide CO2-equivalent
emission levels for cars under the approach are projected to decrease
from 213 to 144 grams per mile between MY 2017 and MY 2025. Similarly,
fleet-wide CO2-equivalent emission levels for trucks are
projected to decrease from 295 to 203 grams per mile. These numbers do
not include the effects of other flexibilities and credits in the
program.\221\ The estimated achieved values can be found in Chapter 3
of the Regulatory Impact Analysis (RIA).
---------------------------------------------------------------------------

    \221\ Nor do they reflect ABT.
---------------------------------------------------------------------------

    As noted above, EPA is proposing standards that would result in
increasingly stringent levels of CO2 control from MY 2017
though MY 2025. Applying the CO2 footprint curves applicable
in each model year to the vehicles (and their footprint distributions)
expected to be sold in each model year produces progressively more
stringent estimates of fleet-wide CO2 emission targets. The
standards achieve important CO2 emissions reductions through
the application of feasible control technology at reasonable cost,
considering the needed lead time for this program and with proper
consideration of manufacturer product redesign cycles. EPA has analyzed
the feasibility of achieving the proposed CO2 standards,
based on projections of the adoption of technology to reduce emissions
of CO2, during the normal redesign process for cars and
trucks, taking into account the effectiveness and cost of the
technology. The results of the analysis are discussed in detail in
Section III.D below and in the draft RIA. EPA also presents the overall
estimated costs and benefits of the car and truck proposed
CO2 standards in Section III.H. In developing the proposal,
EPA has evaluated the kinds of technologies that could be utilized by
the automobile industry, as well as the associated costs for the
industry and fuel savings for the consumer, the magnitude of the GHG
and oil reductions that may be achieved, and other factors relevant
under the CAA.
    With respect to the lead time and cost of incorporating technology
improvements that reduce GHG emissions, EPA places important weight on
the fact that the proposed rule provides a long planning horizon to
achieve the very challenging emissions standards being proposed, and
provides manufacturers with certainty when planning future products.
The time-frame and levels for the standards are expected to provide
manufacturers the time needed to develop and incorporate technology
that will achieve GHG reductions, and to do this as part of the normal
vehicle redesign process. Further discussing of lead time, redesigns
and feasibility can be found in Section III-D and Chapter 3 of the
joint TSD.
    In the MY 2012-2016 Final Rule, EPA established several provisions
which will continue to apply for the proposed MY2017-2025 standards.
Consistent with the requirement of CAA section 202(a)(1) that standards
be applicable to vehicles ``for their useful life,'' CO2
vehicle standards would apply for the useful life of the vehicle. Under
section 202(i) of the Act, which authorized the Tier 2 standards, EPA
established a useful life period of 10 years or 120,000

miles, whichever first occurs, for all light-duty vehicles and light-
duty trucks.\222\ This useful life was applied to the MY 2012-2016 GHG
standards and EPA is not proposing any changes to the useful life for
MYs 2017-2025. Also, as with MYs 2012-2016, EPA proposes that the in-
use emission standard would be 10% higher for a model than the emission
levels used for certification and compliance with the fleet average
that is based on the footprint curves. As with the MY2012-2016
standards, this will address issues of production variability and test-
to-test variability. The in-use standard is discussed in Section III.E.
Finally, EPA is not proposing any changes to the test procedures over
which emissions are measured and weighted to determine compliance with
the standards. These procedures are the Federal Test Procedure (FTP or
``city'' test) and the Highway Fuel Economy Test (HFET or ``highway''
test).
---------------------------------------------------------------------------

    \222\ See 65 FR 6698 (February 10, 2000).
---------------------------------------------------------------------------

2. What Are the Proposed CO2 Attribute-based Standards?
    As with the MY 2012-2016 standards, EPA is proposing separate car
and truck standards, that is, vehicles defined as cars have one set of
footprint-based curves for MY 2017-2025 and vehicles defined as trucks
have a different set for MY 2017-2025. In general, for a given
footprint the CO2 g/mi target for trucks would be less
stringent than for a car with the same footprint. EPA's approach for
establishing the footprint curves for model years 2017 and later,
including changes from the approach used for the MY2012-2016 footprint
curves, is discussed in Section II.C and Chapter 2 of the joint TSD.
The curves are described mathematically by a family of piecewise linear
functions (with respect to vehicle footprint) that gradually and
continually ramp down from the MY 2016 curve established in the
previous rule. As Section II.C describes, EPA has modified the curves
from 2016, particularly for trucks. To make this modification, we
wanted to ensure that starting from the 2016 curve, there is a gradual
transition to the new slopes and cut point (out to 74 sq ft from 66 sq
ft). The transition is also designed to prevent the curve from one year
from crossing the previous year's curve.
    Written in mathematic notation, the form of the proposed function
is as follows: \223\
---------------------------------------------------------------------------

    \223\ See proposed Regulatory text, which are the official
coefficients and equation. The information proposed here is a
summary version.

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

[GRAPHIC] [TIFF OMITTED] TP01DE11.065

[GRAPHIC] [TIFF OMITTED] TP01DE11.066

[GRAPHIC] [TIFF OMITTED] TP01DE11.067

    The car curves are largely similar to 2016 curve in slope. By
contrast, the MY 2017 and later truck curves are steeper relative to
the MY 2016 curve, but gradually flatten as a result of the
multiplicative increase of the standards. As a further change from the
MYs 2012-2016 rule, the truck curve does not reach the ultimate
cutpoint of 74 sq ft until 2022. The gap between the 2020 curve and the
2021 curve is indicative of design of the truck standards described
earlier, where a significant proportion of the increased stringency
over the first five years occurs between MY 2020 and MY 2021. Finally,
the gradual flattening of both the car and the trucks curves is
noticeable. For further discussion of these topics, please see Section
II.C and Chapter 2 of the joint TSD.

3. Mid-Term Evaluation
    Given the long time frame at issue in setting standards for MY2022-
2025 light-duty vehicles, and given NHTSA's obligation to conduct a
separate rulemaking in order to establish final standards for vehicles
for those model years, EPA and NHTSA will conduct a comprehensive mid-
term evaluation and agency decision-making as described below. Up to
date information will be developed and compiled for the evaluation,
through a collaborative, robust and transparent process, including
public notice and comment. The evaluation will be based on (1) A
holistic assessment of all of the factors considered by the agencies in
setting standards, including those set forth in the rule and other
relevant factors, and (2) the expected impact of those factors on the
manufacturers' ability to comply, without placing decisive weight on
any particular factor or projection. The comprehensive evaluation
process will lead to final agency action by both agencies.
    Consistent with the agencies' commitment to maintaining a single
national framework for regulation of vehicle emissions and fuel
economy, the agencies fully expect to conduct the mid-term evaluation
in close coordination with the California Air Resources Board (CARB).
Moreover, the agencies fully expect that any adjustments to the
standards will be made with the participation of CARB and in a manner
that ensures continued harmonization of state and Federal vehicle
standards.
    EPA will conduct a mid-term evaluation of the later model year
light-duty GHG standards (MY2022-2025). The evaluation will determine
whether those standards are appropriate under section 202(a) of the
Act. Under the regulations proposed today, EPA would be legally bound
to make a final decision, by April 1, 2018, on whether the MY 2022-2025
GHG standards are appropriate under section 202(a), in light of the
record then before the agency.
    EPA, NHTSA and CARB will jointly prepare a draft Technical
Assessment Report (TAR) to inform EPA's determination on the
appropriateness of the GHG standards and to inform NHTSA's rulemaking
for the CAFE standards for MYs 2022-2025. The TAR will examine the same
issues and underlying analyses and projections considered in the
original rulemaking, including technical and other analyses and
projections relevant to each agency's authority to set standards as
well as any relevant new issues that may present themselves. There will
be an opportunity for public comment on the draft TAR, and appropriate
peer review will be performed of underlying analyses in the TAR. The
assumptions and modeling underlying the TAR will be available to the
public, to the extent consistent with law.
    EPA will also seek public comment on whether the standards are
appropriate under section 202(a), e.g. comments to affirm or change the
GHG standards (either more or less stringent). The agencies will
carefully consider comments and information received and respond to
comments in their respective subsequent final actions.
    EPA and NHTSA will consult and coordinate in developing EPA's
determination on whether the MY 2022-2025 GHG standards are appropriate
under section 202(a) and NHTSA's NPRM.
    In making its determination, EPA will evaluate and determine
whether the MY2022-2025 GHG standards are appropriate under section
202(a) of the CAA based on a comprehensive, integrated assessment of
all of the results of the review, as well as any public comments
received during the evaluation, taken as a whole. The decision making
required of the Administrator in making that determination is intended
to be as robust and comprehensive as that in the original setting of
the MY2017-2025 standards.
    In making this determination, EPA will consider information on a
range of relevant factors, including but not limited to those listed in
the proposed rule and below:
    1. Development of powertrain improvements to gasoline and diesel
powered vehicles.
    2. Impacts on employment, including the auto sector.
    3. Availability and implementation of methods to reduce weight,
including any impacts on safety.
    4. Actual and projected availability of public and private charging
infrastructure for electric vehicles, and fueling infrastructure for
alternative fueled vehicles.
    5. Costs, availability, and consumer acceptance of technologies to
ensure compliance with the standards, such as vehicle batteries and
power electronics, mass reduction, and anticipated trends in these
costs.
    6. Payback periods for any incremental vehicle costs associated
with meeting the standards.
    7. Costs for gasoline, diesel fuel, and alternative fuels.
    8. Total light-duty vehicle sales and projected fleet mix.
    9. Market penetration across the fleet of fuel efficient
technologies.
    10. Any other factors that may be deemed relevant to the review.
    If, based on the evaluation, EPA decides that the GHG standards are
appropriate under section 202(a), then EPA will announce that final
decision and the basis for EPA's decision. The decision will be final
agency action which also will be subject to judicial review on its
merits. EPA will develop an administrative record for that review that
will be no less robust than that developed for the initial
determination to establish the standards. In the midterm evaluation,
EPA will develop a robust record for judicial review that is the same
kind of record that would be developed and before a court for judicial
review of the adoption of standards.
    Where EPA decides that the standards are not appropriate, EPA will
initiate a rulemaking to adopt standards that are appropriate under
section 202(a), which could result in standards that are either less or
more stringent. In this rulemaking EPA will evaluate a range of
alternative standards that are potentially effective and reasonably
feasible, and the Administrator will propose the alternative that in
her judgment is the best choice for a standard that is appropriate
under section 202(a).\224\ If EPA initiates a rulemaking, it will be a
joint rulemaking with NHTSA. Any final action taken by EPA at the end
of that rulemaking is also judicially reviewable.
---------------------------------------------------------------------------

    \224\ The provisions of CAA section 202(b)(1)(C) are not
applicable to any revisions of the greenhouse standards adopted in a
later rulemaking based on the mid-term evaluation. Section
202(b)(1)(C) refers to EPA's authority to revise ``any standard
prescribed or previously revised under this subsection,'' and
indicates that ``[a]ny revised standard'' shall require a reduction
of emissions from the standard that was previously applicable. These
provisions apply to standards that are adopted under subsection
202(b) of the Act and are later revised. These provisions are
limited by their terms to such standards, and do not otherwise limit
EPA's general authority under section 202(a) to adopt standards and
revise them ``from time to time.'' Since the greenhouse gas
standards are not adopted under subsection 202(b), section
202(b)(1)(C) does not apply to these standards or any subsequent
revision of these standards.
---------------------------------------------------------------------------

    The MY 2022-2025 GHG standards will remain in effect unless and
until EPA changes them by rulemaking.
    NHTSA intends to issue conditional standards for MYs 2022-2025 in
the LDV rulemaking being initiated this fall for MY2017 and later model
years. The CAFE standards for MYs 2022-2025 will be determined with
finality in a subsequent, de novo notice and comment rulemaking
conducted in full compliance with section 32902 of title 49 U.S.C. and
other applicable law.

Accordingly, NHTSA's development of its proposal in that later
rulemaking will include the making of economic and technology analyses
and estimates that are appropriate for those model years and based on
then-current information.
    Any rulemaking conducted jointly by the agencies or by NHTSA alone
will be timed to provide sufficient lead time for industry to make
whatever changes to their products that the rulemaking analysis deems
feasible based on the new information available. At the very latest,
the three agencies will complete the mid-term evaluation process and
subsequent rulemaking on the standards that may occur in sufficient
time to promulgate final standards for MYs 2022-2025 with at least 18
months lead time, but additional lead time may be provided.
    EPA understands that California intends to propose a mid-term
evaluation in its program that is coordinated with EPA and NHTSA and is
based on a similar set of factors as outlined in this Appendix A. The
rules submitted to EPA for a waiver under the CAA will include such a
mid-term evaluation. EPA understands that California intends to
continue promoting harmonized state and federal vehicle standards. EPA
further understands that California's 2017-2025 standards to be
submitted to EPA for a waiver under the Clean Air Act will deem
compliance with EPA greenhouse gas emission standards, even if amended
after 2012, as compliant with California's. Therefore, if EPA revises
it standards in response to the mid-term evaluation, California may
need to amend one or more of its 2022-2025 MY standards and would
submit such amendments to EPA with a request for a waiver, or for
confirmation that said amendments fall within the scope of an existing
waiver, as appropriate.
4. Averaging, Banking, and Trading Provisions for CO2
Standards
    In the MY 2012-2016 rule, EPA adopted credit provisions for credit
carry-back, credit carry-forward, credit transfers, and credit trading.
For EPA's purposes, these kinds of provisions are collectively termed
Averaging, Banking, and Trading (ABT), and have been an important part
of many mobile source programs under CAA Title II, both for fuels
programs as well as for engine and vehicle programs.\225\ As in the
MY2012-2016 program, EPA is proposing basically the same comprehensive
program for averaging, banking, and trading of credits which together
will help manufacturers in planning and implementing the orderly phase-
in of emissions control technology in their production, consistent with
their typical redesign schedules. ABT is important because it can help
to address many issues of technological feasibility and lead-time, as
well as considerations of cost. ABT is an integral part of the standard
setting itself, and is not just an add-on to help reduce costs. In many
cases, ABT resolves issues of cost or technical feasibility, allowing
EPA to set a standard that is numerically more stringent. The ABT
provisions are integral to the fleet averaging approach established in
the MY 2012-2016 rule. EPA is proposing to change the credit carry-
forward provisions as described below, but the program otherwise would
remain in place unchanged for model years 2017 and later.
---------------------------------------------------------------------------

    \225\ See 75 FR at 25412-413.
---------------------------------------------------------------------------

    As noted above, the ABT provisions consist primarily of credit
carry-back, credit carry-forward, credit transfers, and credit trading.
A manufacturer may have a deficit at the end of a model year after
averaging across its fleet using credit transfers between cars and
trucks--that is, a manufacturer's fleet average level may fail to meet
the required fleet average standard. Credit carry-back refers to using
credits to offset any deficit in meeting the fleet average standards
that had accrued in a prior model year. A deficit must be offset within
3 model years using credit carry-back provisions. After satisfying any
needs to offset pre-existing debits within a vehicle category,
remaining credits may be banked, or saved for use in future years. This
is referred to as credit carry-forward. The EPCA/EISA statutory
framework for the CAFE program includes a 5-year credit carry-forward
provision and a 3-year credit carry-back provision. In the MYs 2012-
2016 program, EPA chose to adopt 5-year credit carry-forward and 3-year
credit carry-back provisions as a reasonable approach that maintained
consistency between the agencies' provisions. EPA is proposing to
continue with this approach in this rulemaking. (A further discussion
of the ABT provisions can be found at 75 FR 25412-14 May 7, 2010).
    Although the credit carry-forward and carry-back provisions would
generally remain in place for MY 2017 and later, EPA is proposing to
allow all unused credits generated in MY 2010-2016 to be carried
forward through MY 2021. This amounts to the normal 5 year carry-
forward for MY 2016 and later credits but provides additional carry-
forward years for credits earned in MYs 2010-2015. Extending the life
for MY 2010-2015 credits would provide greater flexibility for
manufacturers in using the credits they have generated. These credits
would help manufacturers resolve lead-time issues they might face in
the model years prior to 2021 as they transition from the 2016
standards to the progressively more stringent standards for 2017 and
later. It also provides an additional incentive to generate credits
earlier, for example in MYs 2014 and 2015, because those credits may be
used through 2021, thereby encouraging the earlier use of additional
CO2 reducing technology.
    While this provision provides greater flexibility in how
manufacturers use credits they have generated, it would not change the
overall CO2 benefits of the National Program, as EPA does
not expect that any of the credits would have expired as they likely
would be used or traded to other manufacturers. EPA believes the
proposed approach provides important additional flexibility in the
early years of the new MY2017 and later standards. EPA requests
comments on the proposed approach for carrying over MY 2010-2015
credits through MY 2021.
    EPA is not proposing to allow MY 2009 early credits to be carried
forward beyond the normal 5 years due to concerns expressed during the
2012-2016 rulemaking that there may be the potential for large numbers
of credits that could be generated in MY 2009 for companies that are
over-achieving on CAFE and that some of these credits could represent
windfall credits.\226\ In response to these concerns, EPA placed
restrictions the use of MY 2009 credits (for example, MY 2009 credits
may not be traded) and does not believe expanding the use of MY 2009
credits would be appropriate. Under the MY 2012-2016 early credits
program, manufacturers have until the end of MY 2011 (reports must be
submitted by April 2012), when the early credits program ends, to
submit early credit reports. Therefore, EPA does not yet have
information on the amount of early MY2009 credits actually generated by
manufacturers to assess whether or not they could be viewed as
windfall. Nevertheless, because these concerns continue, EPA is
proposing not to extend the MY 2009 credit transfers past the existing
5-years limit.
---------------------------------------------------------------------------

    \226\ 75 FR at 25442. Moreover, as pointed out in the earlier
rulemaking, there can be no legitimate expectation that these 2009
MY credits could be used as part of a compliance strategy in model
years after 2014, and thus no reason to carry forward the credits
past 5 years due to action in reliance by manufacturers.
---------------------------------------------------------------------------

    Transferring credits refers to exchanging credits between the two
averaging sets, passenger cars and trucks, within a manufacturer. For

example, credits accrued by over-compliance with a manufacturer's car
fleet average standard could be used to offset debits accrued due to
that manufacturer not meeting the truck fleet average standard in a
given year. Finally, accumulated credits may be traded to another
manufacturer. In EPA's CO2 program, there are no limits on
the amount of credits that may be transferred or traded.
    The averaging, banking, and trading provisions are generally
consistent with those included in the CAFE program, with a few notable
exceptions. As with EPA's approach (except for the proposal discussed
above for a one-time extended carry-forward of MY2010-2016 credits),