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Proposed Rule

Proposed Rulemaking To Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards

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Information about this document as published in the Federal Register.

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AGENCY:

Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA).

ACTION:

Proposed rule.

SUMMARY:

EPA and NHTSA are issuing this joint proposal to establish a National Program consisting of new standards for light-duty vehicles that will reduce greenhouse gas emissions and improve fuel economy. This joint proposed rulemaking is consistent with the National Fuel Efficiency Policy announced by President Obama on May 19, 2009, responding to the country's critical need to address global climate change and to reduce oil consumption. EPA is proposing greenhouse gas emissions standards under the Clean Air Act, and NHTSA is proposing Corporate Average Fuel Economy standards under the Energy Policy and Conservation Act, as amended. These standards apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles, covering model years 2012 through 2016, and represent a harmonized and consistent National Program. Under the National Program, automobile manufacturers would be able to build a single light-duty national fleet that satisfies all requirements under both programs while ensuring that consumers still have a full range of vehicle choices.

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FOR FURTHER INFORMATION CONTACT:

Comments: Comments must be received on or before November 27, 2009. Under the Paperwork Reduction Act, comments on the information collection provisions must be received by the Office of Management and Budget (OMB) on or before October 28, 2009. See the SUPPLEMENTARY INFORMATION section on “Public Participation” for more information about written comments.

Hearings: NHTSA and EPA will jointly hold three public hearings on the following dates: October 21, 2009 in Detroit, Michigan; October 23, 2009 in New York, New York; and October 27, 2009 in Los Angeles, California. EPA and NHTSA will announce the addresses for each hearing location in a supplemental Federal Register Notice. The hearings will start at 9 a.m. local time and continue until everyone has had a chance to speak. See the SUPPLEMENTARY INFORMATION section on “Public Participation” for more information about the public hearings.

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ADDRESSES:

Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2009-0472 and/or NHTSA-2009-0059, by one of the following methods:

EPA: Environmental Protection Agency, EPA Docket Center (EPA/DC), Air and Radiation Docket, Mail Code 2822T, 1200 Pennsylvania Avenue, NW., Washington, DC 20460, Attention Docket ID No. EPA-HQ-OAR-2009-0472. In addition, please mail a copy of your comments on the information collection provisions to the Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), Attn: Desk Officer for EPA, 725 17th St., NW., Washington, DC 20503.

NHTSA: Docket Management Facility, M-30, U.S. Department of Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590.

  • Hand Delivery:

EPA: Docket Center, (EPA/DC) EPA West, Room B102, 1301 Constitution Ave., NW., Washington, DC, Attention Docket ID No. EPA-HQ-OAR-2009-0472. Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information.

NHTSA: West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m. Eastern Time, Monday through Friday, except Federal Holidays.

Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-2009-0472 and/or NHTSA-2009-0059. See the SUPPLEMENTARY INFORMATION section on “Public Participation” for more information about submitting written comments.

Public Hearing: NHTSA and EPA will jointly hold three public hearings on the following dates: October 21, 2009 in Detroit, Michigan; October 23, 2009 in New York, New York; and October 27, 2009 in Los Angeles, California. EPA and NHTSA will announce the addresses for each hearing location in a supplemental Federal Register Notice. See the SUPPLEMENTARY INFORMATION section on “Public Participation” for more information about the public hearings.

Docket: All documents in the dockets are listed in the www.regulations.gov index. Although listed in the index, some information is not publicly available, e.g., confidential business information (CBI) or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically in www.regulations.gov or in hard copy at the following locations: EPA: EPA Docket Center, EPA/DC, EPA West, Room 3334, 1301 Constitution Ave., NW., Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744. NHTSA: Docket Management Facility, M-30, U.S. Department of Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue, SE, Washington, DC 20590. The Docket Management Facility is open between 9 a.m. and 5 p.m. Eastern Time, Monday through Friday, except Federal holidays.

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FOR FURTHER INFORMATION CONTACT:

EPA: Tad Wysor, Office of Transportation and Air Quality, Assessment and Standards Division, Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor MI 48105; telephone number: 734-214-4332; fax number: 734-214-4816; e-mail address: wysor.tad@epa.gov, or Assessment and Standards Division Hotline; telephone number (734) 214-4636; e-mail address asdinfo@epa.gov. NHTSA: Rebecca Yoon, Office of Chief Counsel, National Highway Traffic Safety Administration, 1200 New Jersey Avenue, SE., Washington, DC 20590. Telephone: (202) 366-2992.

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SUPPLEMENTARY INFORMATION:

A. Does This Action Apply to Me?

This action affects companies that manufacture or sell new light-duty vehicles, light-duty trucks, and medium-duty passenger vehicles, as defined under EPA's CAA regulations,[1] Start Printed Page 49455and passenger automobiles (passenger cars) and non-passenger automobiles (light trucks) as defined under NHTSA's CAFE regulations.[2] Regulated categories and entities include:

CategoryNAICS codes AExamples of potentially regulated entities
Industry336111Motor vehicle manufacturers.
336112
Industry811112Commercial Importers of Vehicles and Vehicle Components.
811198
541514
A North American Industry Classification System (NAICS).

This list is not intended to be exhaustive, but rather provides a guide regarding entities likely to be regulated by this action. To determine whether particular activities may be regulated by this action, you should carefully examine the regulations. You may direct questions regarding the applicability of this action to the person listed in FOR FURTHER INFORMATION CONTACT.

B. Public Participation

NHTSA and EPA request comment on all aspects of this joint proposed rule. This section describes how you can participate in this process.

How Do I Prepare and Submit Comments?

In this joint proposal, there are many issues common to both EPA's and NHTSA's proposals. For the convenience of all parties, comments submitted to the EPA docket will be considered comments submitted to the NHTSA docket, and vice versa. An exception is that comments submitted to the NHTSA docket on the Draft Environmental Impact Statement will not be considered submitted to the EPA docket. Therefore, the public only needs to submit comments to either one of the two agency dockets. Comments that are submitted for consideration by one agency should be identified as such, and comments that are submitted for consideration by both agencies should be identified as such. Absent such identification, each agency will exercise its best judgment to determine whether a comment is submitted on its proposal.

Further instructions for submitting comments to either the EPA or NHTSA docket are described below.

EPA: Direct your comments to Docket ID No EPA-HQ-OAR-2009-0472. EPA's policy is that all comments received will be included in the public docket without change and may be made available online at www.regulations.gov, including any personal information provided, unless the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through www.regulations.gov or e-mail. The www.regulations.gov Web site is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through www.regulations.gov your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. For additional information about EPA's public docket visit the EPA Docket Center homepage at http://www.epa.gov/​epahome/​dockets.htm.

NHTSA: Your comments must be written and in English. To ensure that your comments are correctly filed in the Docket, please include the Docket number NHTSA-2009-0059 in your comments. Your comments must not be more than 15 pages long.[3] NHTSA established this limit to encourage you to write your primary comments in a concise fashion. However, you may attach necessary additional documents to your comments. There is no limit on the length of the attachments. If you are submitting comments electronically as a PDF (Adobe) file, we ask that the documents submitted be scanned using the Optical Character Recognition (OCR) process, thus allowing the agencies to search and copy certain portions of your submissions.[4] Please note that pursuant to the Data Quality Act, in order for the substantive data to be relied upon and used by the agencies, it must meet the information quality standards set forth in the OMB and Department of Transportation (DOT) Data Quality Act guidelines. Accordingly, we encourage you to consult the guidelines in preparing your comments. OMB's guidelines may be accessed at http://www.whitehouse.gov/​omb/​fedreg/​reproducible.html. DOT's guidelines may be accessed at http://www.dot.gov/​dataquality.htm.

Tips for Preparing Your Comments

When submitting comments, remember to:

  • Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).
  • Follow directions—The agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.
  • Explain why you agree or disagree, suggest alternatives, and substitute language for your requested changes.
  • Describe any assumptions and provide any technical information and/or data that you used.
  • If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.
  • Provide specific examples to illustrate your concerns, and suggest alternatives.Start Printed Page 49456
  • Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

Make sure to submit your comments by the comment period deadline identified in the DATES section above.

How Can I Be Sure That My Comments Were Received?

NHTSA: If you submit your comments by mail and wish Docket Management to notify you upon its receipt of your comments, enclose a self-addressed, stamped postcard in the envelope containing your comments. Upon receiving your comments, Docket Management will return the postcard by mail.

How Do I Submit Confidential Business Information?

Any confidential business information (CBI) submitted to one of the agencies will also be available to the other agency. However, as with all public comments, any CBI information only needs to be submitted to either one of the agencies' dockets and it will be available to the other. Following are specific instructions for submitting CBI to either agency.

EPA: Do not submit CBI to EPA through http://www.regulations.gov or e-mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD-ROM that you mail to EPA, mark the outside of the disk or CD-ROM as CBI and then identify electronically within the disk or CD-ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2.

NHTSA: If you wish to submit any information under a claim of confidentiality, you should submit three copies of your complete submission, including the information you claim to be confidential business information, to the Chief Counsel, NHTSA, at the address given above under FOR FURTHER INFORMATION CONTACT. When you send a comment containing confidential business information, you should include a cover letter setting forth the information specified in our confidential business information regulation.[5]

In addition, you should submit a copy from which you have deleted the claimed confidential business information to the Docket by one of the methods set forth above.

Will the Agencies Consider Late Comments?

NHTSA and EPA will consider all comments received before the close of business on the comment closing date indicated above under DATES. To the extent practicable, we will also consider comments received after that date. If interested persons believe that any new information the agency places in the docket affects their comments, they may submit comments after the closing date concerning how the agency should consider that information for the final rule. However, the agencies' ability to consider any such late comments in this rulemaking will be limited due to the time frame for issuing a final rule.

If a comment is received too late for us to practicably consider in developing a final rule, we will consider that comment as an informal suggestion for future rulemaking action.

How Can I Read the Comments Submitted by Other People?

You may read the materials placed in the docket for this document (e.g., the comments submitted in response to this document by other interested persons) at any time by going to http://www.regulations.gov. Follow the online instructions for accessing the dockets. You may also read the materials at the EPA Docket Center or NHTSA Docket Management Facility by going to the street addresses given above under ADDRESSES.

How Do I Participate in the Public Hearings?

NHTSA and EPA will jointly host three public hearings on the dates and locations described in the DATES and ADDRESSES sections above.

If you would like to present testimony at the public hearings, we ask that you notify the EPA and NHTSA contact persons listed under FOR FURTHER INFORMATION CONTACT at least ten days before the hearing. Once EPA and NHTSA learn how many people have registered to speak at the public hearing, we will allocate an appropriate amount of time to each participant, allowing time for lunch and necessary breaks throughout the day. For planning purposes, each speaker should anticipate speaking for approximately ten minutes, although we may need to adjust the time for each speaker if there is a large turnout. We suggest that you bring copies of your statement or other material for the EPA and NHTSA panels and the audience. It would also be helpful if you send us a copy of your statement or other materials before the hearing. To accommodate as many speakers as possible, we prefer that speakers not use technological aids (e.g., audio-visuals, computer slideshows). However, if you plan to do so, you must notify the contact persons in the FOR FURTHER INFORMATION CONTACT section above. You also must make arrangements to provide your presentation or any other aids to NHTSA and EPA in advance of the hearing in order to facilitate set-up. In addition, we will reserve a block of time for anyone else in the audience who wants to give testimony.

The hearing will be held at a site accessible to individuals with disabilities. Individuals who require accommodations such as sign language interpreters should contact the persons listed under FOR FURTHER INFORMATION CONTACT section above no later than ten days before the date of the hearing.

NHTSA and EPA will conduct the hearing informally, and technical rules of evidence will not apply. We will arrange for a written transcript of the hearing and keep the official record of the hearing open for 30 days to allow you to submit supplementary information. You may make arrangements for copies of the transcript directly with the court reporter.

Table of Contents

I. Overview of Joint EPA/NHTSA National Program

A. Introduction

1. Building Blocks of the National Program

2. Joint Proposal for a National Program

B. Summary of the Joint Proposal

C. Background and Comparison of NHTSA and EPA Statutory Authority

1. NHTSA Statutory Authority

2. EPA Statutory Authority

3. Comparing the Agencies' Authority

D. Summary of the Proposed Standards for the National Program

1. Joint Analytical Approach

2. Level of the Standards

3. Form of the Standards

E. Summary of Costs and Benefits for the Joint Proposal

1. Summary of Costs and Benefits of Proposed NHTSA CAFE Standards

2. Summary of Costs and Benefits of Proposed EPA GHG Standards

F. Program Flexibilities for Achieving Compliance

1. CO2/CAFE Credits Generated Based on Fleet Average Performance

2. Air Conditioning Credits

3. Flex-Fuel and Alternative Fuel Vehicle Credits

4. Temporary Lead-time Allowance Alternative Standards

5. Additional Credit Opportunities Under the CAA

G. Coordinated Compliance

H. ConclusionStart Printed Page 49457

II. Joint Technical Work Completed for This Proposal

A. Introduction

B. How Did NHTSA and EPA Develop the Baseline Market Forecast?

1. Why Do the Agencies Establish a Baseline Vehicle Fleet?

2. How Do the Agencies Develop the Baseline Vehicle Fleet?

3. How Is the Development of the Baseline Fleet for this Proposal Different From NHTSA's Historical Approach, and Why is This Approach Preferable?

4. How Does Manufacturer Product Plan Data Factor Into the Baseline Used in This Proposal?

C. Development of Attribute-Based Curve Shapes

D. Relative Car-Truck Stringency

E. Joint Vehicle Technology Assumptions

1. What Technologies Do the Agencies Consider?

2. How Did the Agencies Determine the Costs and Effectiveness of Each of These Technologies?

F. Joint Economic Assumptions

III. EPA Proposal for Greenhouse Gas Vehicle Standards

A. Executive Overview of EPA Proposal

1. Introduction

2. Why Is EPA Proposing This Rule?

3. What Is EPA Proposing?

4. Basis for the Proposed GHG Standards Under Section 202(a)

B. Proposed GHG Standards for Light-Duty Vehicles, Light-Duty Trucks, and Medium-Duty Passenger Vehicles

1. What Fleet-Wide Emissions Levels Correspond to the CO2 Standards?

2. What Are the CO2 Attribute-Based Standards?

3. Overview of How EPA's Proposed CO2 Standards Would Be Implemented for Individual Manufacturers

4. Averaging, Banking, and Trading Provisions for CO2 Standards

5. CO2 Temporary Lead-Time Allowance Alternative Standards

6. Proposed Nitrous Oxide and Methane Standards

7. Small Entity Deferment

C. Additional Credit Opportunities for CO2 Fleet Average Program

1. Air Conditioning Related Credits

2. Flex Fuel and Alternative Fuel Vehicle Credits

3. Advanced Technology Vehicle Credits for Electric Vehicles, Plug-in Hybrids, and Fuel Cells

4. Off-cycle Technology Credits

5. Early Credit Options

D. Feasibility of the Proposed CO2 Standards

1. How Did EPA Develop a Reference Vehicle Fleet for Evaluating Further CO2 Reductions?

2. What Are the Effectiveness and Costs of CO2-Reducing Technologies?

3. How Can Technologies Be Combined into “Packages” and What Is the Cost and Effectiveness of Packages?

4. Manufacturer's Application of Technology

5. How Is EPA Projecting That a Manufacturer Would Decide Between Options To Improve CO2 Performance To Meet a Fleet Average Standard?

6. Why Are the Proposed CO2 Standards Feasible?

7. What Other Fleet-Wide CO2 Levels Were Considered?

E. Certification, Compliance, and Enforcement

1. Compliance Program Overview

2. Compliance With Fleet-Average CO2 Standards

3. Vehicle Certification

4. Useful Life Compliance

5. Credit Program Implementation

6. Enforcement

7. Prohibited Acts in the CAA

8. Other Certification Issues

9. Miscellaneous Revisions to Existing Regulations

10. Warranty, Defect Reporting, and Other Emission-related Components Provisions

11. Light Vehicles and Fuel Economy Labeling

F. How Would This Proposal Reduce GHG Emissions and Their Associated Effects?

1. Impact on GHG Emissions

2. Overview of Climate Change Impacts From GHG Emissions

3. Changes in Global Mean Temperature and Sea-Level Rise Associated With the Proposal's GHG Emissions Reductions

4. Weight Reduction and Potential Safety Impacts

G. How Would the Proposal Impact Non-GHG Emissions and Their Associated Effects?

1. Upstream Impacts of Program

2. Downstream Impacts of Program

3. Health Effects of Non-GHG Pollutants

4. Environmental Effects of Non-GHG Pollutants

5. Air Quality Impacts of Non-GHG Pollutants

H. What Are the Estimated Cost, Economic, and Other Impacts of the Proposal?

1. Conceptual Framework for Evaluating Consumer Impacts

2. Costs Associated With the Vehicle Program

3. Cost per Ton of Emissions Reduced

4. Reduction in Fuel Consumption and Its Impacts

5. Impacts on U.S. Vehicle Sales and Payback Period

6. Benefits of Reducing GHG Emissions

7. Non-Greenhouse Gas Health and Environmental Impacts

8. Energy Security Impacts

9. Other Impacts

10. Summary of Costs and Benefits

I. Statutory and Executive Order Reviews

1. Executive Order 12866: Regulatory Planning and Review

2. Paperwork Reduction Act

3. Regulatory Flexibility Act

4. Unfunded Mandates Reform Act

5. Executive Order 13132 (Federalism)

6. Executive Order 13175 (Consultation and Coordination With Indian Tribal Governments)

7. Executive Order 13045: “Protection of Children From Environmental Health Risks and Safety Risks”

8. Executive Order 13211 (Energy Effects)

9. National Technology Transfer Advancement Act

10. Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations

J. Statutory Provisions and Legal Authority

IV. NHTSA Proposal for Passenger Car and Light Truck CAFE Standards for MYs 2012-2016

A. Executive Overview of NHTSA Proposal

1. Introduction

2. Role of Fuel Economy Improvements in Promoting Energy Independence, Energy Security, and a Low Carbon Economy

3. The National Program

4. Review of CAFE Standard Setting Methodology Per the President's January 26, 2009 Memorandum on CAFE Standards for MYs 2011 and Beyond

5. Summary of the Proposed MY 2012-2016 CAFE Standards

B. Background

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

2. NHTSA Issues Final Rule Establishing Attribute-Based CAFE Standards for MY 2008-2011 Light Trucks (March 2006)

3. Ninth Circuit Issues Decision re Final Rule for MY 2008-2011 Light Trucks (November 2007)

4. Congress Enacts Energy Security and Independence Act of 2007 (December 2007)

5. NHTSA Proposes CAFE Standards for MYs 2011-2015 (April 2008)

6. Ninth Circuit Revises Its Decision re Final Rule for MY 2008-2011 Light Trucks (August 2008)

7. NHTSA Releases Final Environmental Impact Statement (October 2008)

8. Department of Transportation Decides not to Issue MY 2011-2015 final Rule (January 2009)

9. The President Requests NHTSA to Issue Final Rule for MY 2011 Only (January 2009)

10. NHTSA Issues Final Rule for MY 2011 (March 2009)

11. Energy Policy and Conservation Act, as Amended by the Energy Independence and Security Act

C. Development and Feasibility of the Proposed Standards

1. How Was the Baseline Vehicle Fleet Developed?

2. How were the Technology Inputs Developed?

3. How Did NHTSA Develop the Economic Assumption Inputs?

4. How Does NHTSA Use the Assumptions in Its Modeling Analysis?

5. How Did NHTSA Develop the Shape of the Target Curves for the Proposed Standards?

D. Statutory Requirements

1. EPCA, as Amended by EISA

2. Administrative Procedure Act

3. National Environmental Policy Act

E. What Are the Proposed CAFE Standards?

1. Form of the Standards

2. Passenger Car Standards for MYs 2012-2016

3. Minimum Domestic Passenger Car Standards

4. Light Truck Standards

F. How Do the Proposed Standards Fulfill NHTSA's Statutory Obligations?Start Printed Page 49458

G. Impacts of the Proposed CAFE Standards

1. How Would These Proposed Standards Improve Fuel Economy and Reduce GHG Emissions for MY 2012-2016 Vehicles?

2. How Would These Proposed Standards Improve Fleet-Wide Fuel Economy and Reduce GHG Emissions Beyond MY 2016?

3. How Would These Proposed Standards Impact Non-GHG Emissions and Their Associated Effects?

4. What Are the Estimated Costs and Benefits of These Proposed Standards?

5. How Would These Proposed Standards Impact Vehicle Sales?

6. What Are the Consumer Welfare Impacts of These Proposed Standards?

7. What Are the Estimated Safety Impacts of These Proposed Standards?

8. What Other Impacts (Quantitative and Unquantifiable) Will These Proposed Standards Have?

H. Vehicle Classification

I. Compliance and Enforcement

1. Overview

2. How Does NHTSA Determine Compliance?

3. What Compliance Flexibilities Are Available under the CAFE Program and How Do Manufacturers Use Them?

4. Other CAFE Enforcement Issues—Variations in Footprint

J. Other Near-Term Rulemakings Mandated by EISA

1. Commercial Medium- and Heavy-Duty On-Highway Vehicles and Work Trucks

2. Consumer Information

K. Regulatory Notices and Analyses

1. Executive Order 12866 and DOT Regulatory Policies and Procedures

2. National Environmental Policy Act

3. Regulatory Flexibility Act

4. Executive Order 13132 (Federalism)

5. Executive Order 12988 (Civil Justice Reform)

6. Unfunded Mandates Reform Act

7. Paperwork Reduction Act

8. Regulation Identifier Number

9. Executive Order 13045

10. National Technology Transfer and Advancement Act

11. Executive Order 13211

12. Department of Energy Review

13. Plain Language

14. Privacy Act

I. Overview of Joint EPA/NHTSA National Program

A. Introduction

The National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) are each announcing proposed rules whose benefits would address the urgent and closely intertwined challenges of energy independence and security and global warming. These proposed rules call for a strong and coordinated Federal greenhouse gas and fuel economy program for passenger cars, light-duty-trucks, and medium-duty passenger vehicles (hereafter light-duty vehicles), referred to as the National Program. The proposed rules can achieve substantial reductions of greenhouse gas (GHG) emissions and improvements in fuel economy from the light-duty vehicle part of the transportation sector, based on technology that is already being commercially applied in most cases and that can be incorporated at a reasonable cost.

This joint notice is consistent with the President's announcement on May 19, 2009 of a National Fuel Efficiency Policy of establishing consistent, harmonized, and streamlined requirements that would reduce greenhouse gas emissions and improve fuel economy for all new cars and light-duty trucks sold in the United States.[6] The National Program holds out the promise of delivering additional environmental and energy benefits, cost savings, and administrative efficiencies on a nationwide basis that might not be available under a less coordinated approach. The proposed National Program also offers the prospect of regulatory convergence by making it possible for the standards of two different Federal agencies and the standards of California and other States to act in a unified fashion in providing these benefits. This would allow automakers to produce and sell a single fleet nationally. Thus, it may also help to mitigate the additional costs that manufacturers would otherwise face in having to comply with multiple sets of Federal and State standards. This joint notice is also consistent with the Notice of Upcoming Joint Rulemaking issued by DOT and EPA on May 19 [7] and responds to the President's January 26, 2009 memorandum on CAFE standards for model years 2011 and beyond,[8] the details of which can be found in Section IV of this joint notice.

1. Building Blocks of the National Program

The National Program is both needed and possible because the relationship between improving fuel economy and reducing CO2 tailpipe emissions is a very direct and close one. The amount of those CO2 emissions is essentially constant per gallon combusted of a given type of fuel. Thus, the more fuel efficient a vehicle is, the less fuel it burns to travel a given distance. The less fuel it burns, the less CO2 it emits in traveling that distance.[9] While there are emission control technologies that reduce the pollutants (e.g., carbon monoxide) produced by imperfect combustion of fuel by capturing or destroying them, there is no such technology for CO2. Further, while some of those pollutants can also be reduced by achieving a more complete combustion of fuel, doing so only increases the tailpipe emissions of CO2. Thus, there is a single pool of technologies for addressing these twin problems, i.e., those that reduce fuel consumption and thereby reduce CO2 emissions as well.

a. DOT's CAFE Program

In 1975, Congress enacted the Energy Policy and Conservation Act (EPCA), mandating that NHTSA establish and implement a regulatory program for motor vehicle fuel economy to meet the various facets of the need to conserve energy, including ones having energy independence and security, environmental and foreign policy implications. Fuel economy gains since 1975, due both to the standards and market factors, have resulted in saving billions of barrels of oil and avoiding billions of metric tons of CO2 emissions. In December 2007, Congress enacted the Energy Independence and Securities Act (EISA), amending EPCA to require substantial, continuing increases in fuel economy standards.

The CAFE standards address most, but not all, of the real world CO2 emissions because EPCA requires the use of 1975 passenger car test procedures under which vehicle air conditioners are not turned on during fuel economy testing.[10] Fuel economy is determined by measuring the amount of CO2 and other carbon compounds emitted from the tailpipe, not by attempting to measure directly the amount of fuel consumed during a vehicle test, a difficult task to accomplish with precision. The carbon content of the test fuel [11] is then used to calculate the amount of fuel that had to be consumed per mile in order to Start Printed Page 49459produce that amount of CO2. Finally, that fuel consumption figure is converted into a miles-per-gallon figure. CAFE standards also do not address the 5-8 percent of GHG emissions that are not CO2, i.e., nitrous oxide (N2 O), and methane (CH4) as well as emissions of CO2 and hydrofluorocarbons (HFCs) related to operation of the air conditioning system.

b. EPA's Greenhouse Gas Standards for Light-Duty Vehicles

Under the Clean Air Act EPA is responsible for addressing air pollutants from motor vehicles. On April 2, 2007, the U.S. Supreme Court issued its opinion in Massachusetts v. EPA,[12] a case involving a 2003 order of the Environmental Protection Agency (EPA) denying a petition for rulemaking to regulate greenhouse gas emissions from motor vehicles under section 202(a) of the Clean Air Act (CAA).[13] The Court held that greenhouse gases were air pollutants for purposes of the Clean Air Act and further held that the Administrator must determine whether or not emissions from new motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, or whether the science is too uncertain to make a reasoned decision. The Court further ruled that, in making these decisions, the EPA Administrator is required to follow the language of section 202(a) of the CAA. The Court rejected the argument that EPA cannot regulate CO2 from motor vehicles because to do so would de facto tighten fuel economy standards, authority over which has been assigned by Congress to DOT. The Court stated that “[b]ut that DOT sets mileage standards in no way licenses EPA to shirk its environmental responsibilities. EPA has been charged with protecting the public`s `health' and `welfare', a statutory obligation wholly independent of DOT's mandate to promote energy efficiency.” The Court concluded that “[t]he two obligations may overlap, but there is no reason to think the two agencies cannot both administer their obligations and yet avoid inconsistency.” [14] The Court remanded the case back to the Agency for reconsideration in light of its findings.[15]

EPA has since proposed to find that emissions of GHGs from new motor vehicles and motor vehicle engines cause or contribute to air pollution that may reasonably be anticipated to endanger public health and welfare.[16] This proposal represents the second phase of EPA's response to the Supreme Court's decision.

c. California Air Resources Board Greenhouse Gas Program

In 2004, the California Air Resources Board approved standards for new light-duty vehicles, which regulate the emission of not only CO2, but also other GHGs. Since then, thirteen States and the District of Columbia, comprising approximately 40 percent of the light-duty vehicle market, have adopted California's standards. These standards apply to model years 2009 through 2016 and require CO2 emissions for passenger cars and the smallest light trucks of 323 g/mi in 2009 and 205 g/mi in 2016, and for the remaining light trucks of 439 g/mi in 2009 and 332 g/mi in 2016. On June 30, 2009, EPA granted California's request for a waiver of preemption under the CAA.[17] The granting of the waiver permits California and the other States to proceed with implementing the California emission standards.

2. Joint Proposal for a National Program

On May 19, 2009, the Department of Transportation and the Environmental Protection Agency issued a Notice of Upcoming Joint Rulemaking to propose a strong and coordinated fuel economy and greenhouse gas National Program for Model Year (MY) 2012-2016 light duty vehicles.

B. Summary of the Joint Proposal

In this joint rulemaking, EPA is proposing GHG emissions standards under the Clean Air Act (CAA), and NHTSA is proposing Corporate Average Fuel Economy (CAFE) standards under the Energy Policy and Conservation Action of 1975 (EPCA), as amended by the Energy Independence and Security Act of 2007 (EISA). The intention of this joint rulemaking proposal is to set forth a carefully coordinated and harmonized approach to implementing these two statutes, in accordance with all substantive and procedural requirements imposed by law.

Climate change is widely viewed as the most significant long-term threat to the global environment. According to the Intergovernmental Panel on Climate Change, anthropogenic emissions of greenhouse gases are very likely (90 to 99 percent probability) the cause of most of the observed global warming over the last 50 years. The primary GHGs of concern are carbon dioxide (CO2), methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. Mobile sources emitted 31.5 percent of all U.S. GHG in 2006, and have been the fastest-growing source of U.S. GHG since 1990. Light-duty vehicles emit four GHGs—CO2, methane, nitrous oxide, and hydrofluorocarbons—and are responsible for nearly 60 percent of all mobile source GHGs. For Light-duty vehicles, CO2 emissions represent about 95 percent of all greenhouse emissions, and the CO2 emissions measured over the EPA tests used for fuel economy compliance represent over 90 percent of total light-duty vehicle greenhouse gas emissions.

Improving energy security by reducing our dependence on foreign oil has been a national objective since the first oil price shocks in the 1970s. Net petroleum imports now account for approximately 60 percent of U.S. petroleum consumption. World crude oil production is highly concentrated, exacerbating the risks of supply disruptions and price shocks. Tight global oil markets led to prices over $100 per barrel in 2008, with gasoline reaching as high as $4 per gallon in many parts of the U.S., causing financial hardship for many families. The export of U.S. assets for oil imports continues to be an important component of the U.S.' historically unprecedented trade deficits. Transportation accounts for about two-thirds of U.S. petroleum consumption. Light-duty vehicles account for about 60 percent of transportation oil use, which means that they alone account for about 40 percent of all U.S. oil consumption.

NHTSA and EPA have coordinated closely and worked jointly in developing their respective proposals. This is reflected in many aspects of this joint proposal. For example, the agencies have developed a comprehensive joint Technical Support Document (TSD) that provides a solid technical underpinning for each agency's modeling and analysis used to support their proposed standards. Also, to the extent allowed by law, the agencies have harmonized many elements of program design, such as the form of the standard (the footprint-based attribute curves), and the definitions used for cars and trucks. They have developed the same or similar compliance flexibilities, to the extent allowed and appropriate under their Start Printed Page 49460respective statutes, such as averaging, banking, and trading of credits, and have harmonized the compliance testing and test protocols used for purposes of the fleet average standards each agency is proposing. Finally, as discussed in Section I.C., under their respective statutes each agency is called upon to exercise its judgment and determine standards that are an appropriate balance of various relevant statutory factors. Given the common technical issues before each agency, the similarity of the factors each agency is to consider and balance, and the authority of each agency to take into consideration the standards of the other agency, both EPA and NHTSA are proposing standards that result in a harmonized National Program.

This joint proposal covers passenger cars, light-duty-trucks, and medium-duty passenger vehicles built in model years 2012 through 2016. These vehicle categories are responsible for almost 60 percent of all U.S. transportation-related GHG emissions. EPA and NHTSA expect that automobile manufacturers will meet these proposed standards by utilizing technologies that will reduce vehicle GHG emissions and improve fuel economy. Although many of these technologies are available today, the emissions reductions and fuel economy improvements proposed would involve more widespread use of these technologies across the light-duty vehicle fleet. These include improvements to engines, transmissions, and tires, increased use of start-stop technology, improvements in air conditioning systems (to the extent currently allowed by law), increased use of hybrid and other advanced technologies, and the initial commercialization of electric vehicles and plug-in hybrids.

The proposed National Program would result in approximately 950 million metric tons of total carbon dioxide equivalent emissions reductions and approximately 1.8 billion barrels of oil savings over the lifetime of vehicles sold in model years 2012 through 2016. In total, the combined EPA and NHTSA 2012-2016 standards would reduce GHG emissions from the U.S. light-duty fleet by approximately 21 percent by 2030 over the level that would occur in the absence of the National Program. These proposals also provide important energy security benefits, as light-duty vehicles are about 95 percent dependent on oil-based fuels. The benefits of the proposed National Program would total about $250 billion at a 3% discount rate, or $195 billion at a 7% discount rate. In the discussion that follows in Sections III and IV, each agency explains the related benefits for their individual standards.

Together, EPA and NHTSA estimate that the average cost increase for a model year 2016 vehicle due to the proposed National Program is less than $1,100. U.S. consumers who purchase their vehicle outright would save enough in lower fuel costs over the first three years to offset these higher vehicle costs. However, most U.S. consumers purchase a new vehicle using credit rather than paying cash and the typical car loan today is a five year, 60 month loan. These consumers would see immediate savings due to their vehicle's lower fuel consumption in the form of reduced monthly costs of $12-$14 per month throughout the duration of the loan (that is, the fuel savings outweigh the increase in loan payments by $12-$14 per month). Whether a consumer takes out a loan or purchases a new vehicle outright, over the lifetime of a model year 2016 vehicle, consumers would save more than $3,000 due to fuel savings. The average 2016 MY vehicle will emit 16 fewer metric tons of CO2 emissions during its lifetime.

This joint proposal also offers the prospect of important regulatory convergence and certainty to automobile companies. Absent this proposal, there would be three separate Federal and State regimes independently regulating light-duty vehicles to reduce fuel consumption and GHG emissions: NHTSA's CAFE standards, EPA's GHG standards, and the GHG standards applicable in California and other States adopting the California standards. This joint proposal would allow automakers to meet both the NHTSA and EPA requirements with a single national fleet, greatly simplifying the industry's technology, investment and compliance strategies. In addition, in a letter dated May 18, 2009, California stated that it “recognizes the benefit for the country and California of a National Program to address greenhouse gases and fuel economy and the historic announcement of United States Environmental Protection Agency (EPA) and National Highway Transportation Safety Administration's (NHTSA) intent to jointly propose a rule to set standards for both. California fully supports proposal and adoption of such a National Program.” To promote the National Program, California announced its commitment to take several actions, including revising its program for MYs 2012-2016 such that compliance with the Federal GHG standards would be deemed to be compliance with California's GHG standards. This would allow the single national fleet used by automakers to meet the two Federal requirements and to meet California requirements as well. This commitment was conditioned on several points, including EPA GHG standards that are substantially similar to those described in the May 19, 2009 Notice of Upcoming Joint Rulemaking. Many automakers and trade associations also announced their support for the National Program announced that day.[18] The manufacturers conditioned their support on EPA and NHTSA standards substantially similar to those described in that Notice. NHTSA and EPA met with many vehicle manufacturers to discuss the feasibility of the National Program. EPA and NHTSA are confident that these proposed GHG and CAFE standards, if finalized, would successfully harmonize both the Federal and State programs for MYs 2012-2016 and would allow our country to achieve the increased benefits of a single, nationwide program to reduce light-duty vehicle GHG emissions and reduce the country's dependence on fossil fuels by improving these vehicles' fuel economy.

A successful and sustainable automotive industry depends upon, among other things, continuous technology innovation in general, and low greenhouse gas emissions and high fuel economy vehicles in particular. In this respect, this proposal would help spark the investment in technology innovation necessary for automakers to successfully compete in both domestic and export markets, and thereby continue to support a strong economy.

While this proposal covers MYs 2012-2016, EPA and NHTSA anticipate the importance of seeking a strong, coordinated national program for light-duty vehicles in model years beyond 2016 in a future rulemaking.

Key elements of the proposal for a harmonized and coordinated program are the level and form of the GHG and CAFE standards, the available compliance mechanisms, and general implementation elements. These elements are outlined in the following sections.

C. Background and Comparison of NHTSA and EPA Statutory Authority

This section provides the agencies' respective statutory authorities under which CAFE and GHG standards are established.

1. NHTSA Statutory Authority

NHTSA establishes CAFE standards for passenger cars and light trucks for each model year under EPCA, as Start Printed Page 49461amended by EISA. EPCA mandates a motor vehicle fuel economy regulatory program to meet the various facets of the need to conserve energy, including ones having environmental and foreign policy implications. EPCA allocates the responsibility for implementing the program between NHTSA and EPA as follows: NHTSA sets CAFE standards for passenger cars and light trucks; EPA establishes the procedures for testing, tests vehicles, collects and analyzes manufacturers' data, and calculates the average fuel economy of each manufacturer's passenger cars and light trucks; and NHTSA enforces the standards based on EPA's calculations.

a. Standard Setting

We have summarized below the most important aspects of standard setting under EPCA, as amended by EISA.

For each future model year, EPCA requires that NHTSA establish standards at “the maximum feasible average fuel economy level that it decides the manufacturers can achieve in that model year,” based on the agency's consideration of four statutory factors: technological feasibility, economic practicability, the effect of other standards of the Government on fuel economy, and the need of the nation to conserve energy. EPCA does not define these terms or specify what weight to give each concern in balancing them; thus, NHTSA defines them and determines the appropriate weighting based on the circumstances in each CAFE standard rulemaking.[19]

For MYs 2011-2020, EPCA further requires that separate standards for passenger cars and for light trucks be set at levels high enough to ensure that the CAFE of the industry-wide combined fleet of new passenger cars and light trucks reaches at least 35 mpg not later than MY 2020.

i. Factors That Must Be Considered in Deciding the Appropriate Stringency of CAFE Standards

(1) Technological Feasibility

“Technological feasibility” refers to whether a particular method of improving fuel economy can be available for commercial application in the model year for which a standard is being established. Thus, the agency is not limited in determining the level of new standards to technology that is already being commercially applied at the time of the rulemaking. NHTSA has historically considered all types of technologies that improve real-world fuel economy, except those whose effects are not reflected in fuel economy testing. Principal among them are technologies that improve air conditioner efficiency because the air conditioners are not turned on during testing under existing test procedures.

(2) Economic Practicability

“Economic practicability” refers to whether a standard is one “within the financial capability of the industry, but not so stringent as to” lead to “adverse economic consequences, such as a significant loss of jobs or the unreasonable elimination of consumer choice.” [20] This factor is especially important in the context of current events, where the automobile industry is facing significantly adverse economic conditions, as well as significant loss of jobs. In an attempt to ensure the economic practicability of attribute-based standards, NHTSA considers a variety of factors, including the annual rate at which manufacturers can increase the percentage of its fleet that employs a particular type of fuel-saving technology, and cost to consumers. Consumer acceptability is also an element of economic practicability, one which is particularly difficult to gauge during times of frequently-changing fuel prices. NHTSA believes this approach is reasonable for the MY 2012-2016 standards in view of the facts before it at this time. NHTSA is aware, however, that facts relating to a variety of key issues in CAFE rulemaking are steadily evolving and seeks comments on the balancing of these factors in light of the facts available during the comment period.

At the same time, the law does not preclude a CAFE standard that poses considerable challenges to any individual manufacturer. The Conference Report for EPCA, as enacted in 1975, makes clear, and the case law affirms, “a determination of maximum feasible average fuel economy should not be keyed to the single manufacturer which might have the most difficulty achieving a given level of average fuel economy.” [21] Instead, NHTSA is compelled “to weigh the benefits to the nation of a higher fuel economy standard against the difficulties of individual automobile manufacturers.” Id. The law permits CAFE standards exceeding the projected capability of any particular manufacturer as long as the standard is economically practicable for the industry as a whole. Thus, while a particular CAFE standard may pose difficulties for one manufacturer, it may also present opportunities for another. The CAFE program is not necessarily intended to maintain the competitive positioning of each particular company. Rather, it is intended to enhance fuel economy of the vehicle fleet on American roads, while protecting motor vehicle safety and being mindful of the risk of harm to the overall United States economy.

(3) The Effect of Other Motor Vehicle Standards of the Government on Fuel Economy

“The effect of other motor vehicle standards of the Government on fuel economy,” involves an analysis of the effects of compliance with emission,[22] safety, noise, or damageability standards on fuel economy capability and thus on average fuel economy. In previous CAFE rulemakings, the agency has said that pursuant to this provision, it considers the adverse effects of other motor vehicle standards on fuel economy. It said so because, from the CAFE program's earliest years [23] until present, the effects of such compliance on fuel economy capability over the history of the CAFE program have been negative ones. For example, safety standards that have the effect of increasing vehicle weight lower vehicle fuel economy capability and thus decrease the level of average fuel economy that the agency can determine to be feasible.

In the wake of Massachusetts v. EPA and of EPA's proposed endangerment finding, granting of a waiver to California for its motor vehicle GHG standards, and its own proposal of GHG standards, NHTSA is confronted with the issue of how to treat those standards under the “other motor vehicle standards” provision. To the extent the GHG standards result in increases in fuel economy, they would do so almost exclusively as a result of inducing manufacturers to install the same types of technologies used by manufacturers in complying with the CAFE standards. The primary exception would involve increases in the efficiency of air conditioners.

Comment is requested on whether and in what way the effects of the California and EPA standards should be Start Printed Page 49462considered under the “other motor vehicle standards” provision or other provisions of EPCA in 49 U.S.C. 32902, consistent with NHTSA's independent obligation under EPCA/EISA to issue CAFE standards. The agency has already considered EPA's proposal and the harmonization benefits of the National Program in developing its own proposal.

(4) The Need of the United States To Conserve Energy

“The need of the United States to conserve energy” means “the consumer cost, national balance of payments, environmental, and foreign policy implications of our need for large quantities of petroleum, especially imported petroleum.” [24] Environmental implications principally include reductions in emissions of criteria pollutants and carbon dioxide. Prime examples of foreign policy implications are energy independence and security concerns.

(a) Fuel Prices and the Value of Saving Fuel

Projected future fuel prices are a critical input into the preliminary economic analysis of alternative CAFE standards, because they determine the value of fuel savings both to new vehicle buyers and to society. In this rule, NHTSA relies on fuel price projections from the U.S. Energy Information Administration's (EIA) Annual Energy Outlook (AEO) for this analysis. Federal government agencies generally use EIA's projections in their assessments of future energy-related policies.

(b) Petroleum Consumption and Import Externalities

U.S. consumption and imports of petroleum products impose costs on the domestic economy that are not reflected in the market price for crude petroleum, or in the prices paid by consumers of petroleum products such as gasoline. These costs include (1) higher prices for petroleum products resulting from the effect of U.S. oil import demand on the world oil price; (2) the risk of disruptions to the U.S. economy caused by sudden reductions in the supply of imported oil to the U.S.; and (3) expenses for maintaining a U.S. military presence to secure imported oil supplies from unstable regions, and for maintaining the strategic petroleum reserve (SPR) to provide a response option should a disruption in commercial oil supplies threaten the U.S. economy, to allow the United States to meet part of its International Energy Agency obligation to maintain emergency oil stocks, and to provide a national defense fuel reserve. Higher U.S. imports of crude oil or refined petroleum products increase the magnitude of these external economic costs, thus increasing the true economic cost of supplying transportation fuels above the resource costs of producing them. Conversely, reducing U.S. imports of crude petroleum or refined fuels or reducing fuel consumption can reduce these external costs.

(c) Air Pollutant Emissions

While reductions in domestic fuel refining and distribution that result from lower fuel consumption will reduce U.S. emissions of various pollutants, additional vehicle use associated with the rebound effect [25] from higher fuel economy will increase emissions of these pollutants. Thus, the net effect of stricter CAFE standards on emissions of each pollutant depends on the relative magnitudes of its reduced emissions in fuel refining and distribution, and increases in its emissions from vehicle use.

Fuel savings from stricter CAFE standards also result in lower emissions of CO2, the main greenhouse gas emitted as a result of refining, distribution, and use of transportation fuels. Lower fuel consumption reduces carbon dioxide emissions directly, because the primary source of transportation-related CO2 emissions is fuel combustion in internal combustion engines.

NHTSA has considered environmental issues, both within the context of EPCA and the National Environmental Policy Act, in making decisions about the setting of standards from the earliest days of the CAFE program. As courts of appeal have noted in three decisions stretching over the last 20 years,[26] NHTSA defined the “need of the Nation to conserve energy” in the late 1970s as including “the consumer cost, national balance of payments, environmental, and foreign policy implications of our need for large quantities of petroleum, especially imported petroleum.” [27] Pursuant to that view, NHTSA declined in the past to include diesel engines in determining the appropriate level of standards for passenger cars and for light trucks because particulate emissions from diesels were then both a source of concern and unregulated.[28] In 1988, NHTSA included climate change concepts in its CAFE notices and prepared its first environmental assessment addressing that subject.[29] It cited concerns about climate change as one of its reasons for limiting the extent of its reduction of the CAFE standard for MY 1989 passenger cars.[30] Since then, NHTSA has considered the benefits of reducing tailpipe carbon dioxide emissions in its fuel economy rulemakings pursuant to the statutory requirement to consider the nation's need to conserve energy by reducing fuel consumption.

ii. Other Factors Considered by NHTSA

NHTSA considers the potential for adverse safety consequences when in establishing CAFE standards. This practice is recognized approvingly in case law.[31] Under the universal or “flat” CAFE standards that NHTSA was previously authorized to establish, the primary risk to safety came from the possibility that manufacturers would respond to higher standards by building smaller, less safe vehicles in order to “balance out” the larger, safer vehicles that the public generally preferred to buy. Under the attribute-based standards being proposed in this action, that risk is reduced because building smaller vehicles tends to raise a manufacturer's overall CAFE obligation, rather than only raising its fleet average CAFE. However, even under attribute-based standards, there is still risk that manufacturers will rely on downweighting to improve their fuel economy (for a given vehicle at a given Start Printed Page 49463footprint target) in ways that may reduce safety.

In addition, the agency considers consumer demand in establishing new standards and in assessing whether already established standards remained feasible. In the 1980's, the agency relied in part on the unexpected drop in fuel prices and the resulting unexpected failure of consumer demand for small cars to develop in explaining the need to reduce CAFE standards for a several year period in order to give manufacturers time to develop alternative technology-based strategies for improving fuel economy.

iii. Factors That NHTSA Is Statutorily Prohibited From Considering in Setting Standards

EPCA provides that in determining the level at which it should set CAFE standards for a particular model year, NHTSA may not consider the ability of manufacturers to take advantage of several EPCA provisions that facilitate compliance with the CAFE standards and thereby reduce the costs of compliance.[32] As noted below in Section IV, manufacturers can earn compliance credits by exceeding the CAFE standards and then use those credits to achieve compliance in years in which their measured average fuel economy falls below the standards. Manufacturers can also increase their CAFE levels through MY 2019 by producing alternative fuel vehicles. EPCA provides an incentive for producing these vehicles by specifying that their fuel economy is to be determined using a special calculation procedure that results in those vehicles being assigned a high fuel economy level.

iv. Weighing and Balancing of Factors

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

Thus, EPCA does not mandate that any particular number be adopted when NHTSA determines the level of CAFE standards. Rather, any number within a zone of reasonableness may be, in NHTSA's assessment, the level of stringency that manufacturers can achieve. See, e.g., Hercules Inc. v. EPA, 598 F.2d 91, 106 (D.C. 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”).

v. Other Requirements Related to Standard Setting

The standards for passenger cars and those for light trucks must increase ratably each year. This statutory requirement is interpreted, in combination with the requirement to set the standards for each model year at the level determined to be the maximum feasible level that manufacturers can achieve for that model year, to mean that the annual increases should not be disproportionately large or small in relation to each other.

The standards for passenger cars and light trucks must be based on one or more vehicle attributes, like size or weight, that correlate with fuel economy and must be expressed in terms of a mathematical function. Fuel economy targets are set for individual vehicles and increase as the attribute decreases and vice versa. For example, size-based (i.e., size-indexed) standards assign higher fuel economy targets to smaller (and generally, but not necessarily, lighter) vehicles and lower ones to larger (and generally, but not necessarily, heavier) vehicles. The fleet-wide average fuel economy that a particular manufacturer is required to achieve depends on the size mix of its fleet, i.e., the proportion of the fleet that is small-, medium- or large-sized.

This approach can be used to require virtually all manufacturers to increase significantly the fuel economy of a broad range of both passenger cars and light trucks, i.e., the manufacturer must improve the fuel economy of all the vehicles in its fleet. Further, this approach can do so without creating an incentive for manufacturers to make small vehicles smaller or large vehicles larger, with attendant implications for safety.

b. Test Procedures for Measuring Fuel Economy

EPCA provides EPA with the responsibility for establishing CAFE test procedures. Current test procedures measure the effects of nearly all fuel saving technologies. The principal exception is improvements in air conditioning efficiency. By statutory law in the case of passenger cars and by administrative regulation in the case of light trucks, air conditioners are not turned on during fuel economy testing. See Section I.C.2 for details.

The fuel economy test procedures for light trucks could be amended through rulemaking to provide for air conditioner operation during testing and to take other steps for improving the accuracy and representativeness of fuel economy measurements. Comment is sought by the agencies regarding implementing such amendments beginning in MY 2017 and also on the more immediate interim alternative step of providing CAFE program credits under the authority of 49 U.S.C. 32904(c) for light trucks equipped with relatively efficient air conditioners for MYs 2012-2016. These CAFE credits would be earned by manufacturers on the same terms and under the same conditions as EPA is proposing to provide them under the CAA, and additional detail is on this request for comment for early CAFE credits is contained in Section IV of this preamble. Modernizing the passenger car test procedures, or even providing similar credits, would not be possible under EPCA as currently written.

c. Enforcement and Compliance Flexibility

EPA is responsible for measuring automobile manufacturers' CAFE so that NHTSA can determine compliance with the CAFE standards. When NHTSA finds that a manufacturer is not in compliance, it notifies the manufacturer. Surplus credits generated from the five previous years can be used to make up the deficit. The amount of credit earned is determined by multiplying the number of tenths of a mpg by which a manufacturer exceeds a standard for a particular category of automobiles by the total volume of automobiles of that category manufactured by the manufacturer for a given model year. If there are no (or not enough) credits available, then the manufacturer can either pay the fine, or submit a carry back plan to NHTSA. A carry back plan describes what the manufacturer plans to do in the Start Printed Page 49464following three model years to earn enough credits to make up for the deficit. NHTSA must examine and determine whether to approve the plan.

In the event that a manufacturer does not comply with a CAFE standard, even after the consideration of credits, EPCA provides for the assessing of civil penalties, unless, as provided below, the manufacturer has earned credits for exceeding a standard in an earlier year or expects to earn credits in a later year.[33] The Act specifies a precise formula for determining the amount of civil penalties for such a noncompliance. The penalty, as adjusted for inflation by law, is $5.50 for each tenth of a mpg that a manufacturer's average fuel economy falls short of the standard for a given model year multiplied by the total volume of those vehicles in the affected fleet (i.e., import or domestic passenger car, or light truck), manufactured for that model year. The amount of the penalty may not be reduced except under the unusual or extreme circumstances specified in the statute.

Unlike the National Traffic and Motor Vehicle Safety Act, EPCA does not provide for recall and remedy in the event of a noncompliance. The presence of recall and remedy provisions[34] in the Safety Act and their absence in EPCA is believed to arise from the difference in the application of the safety standards and CAFE standards. A safety standard applies to individual vehicles; that is, each vehicle must possess the requisite equipment or feature that must provide the requisite type and level of performance. If a vehicle does not, it is noncompliant. Typically, a vehicle does not entirely lack an item or equipment or feature. Instead, the equipment or features fails to perform adequately. Recalling the vehicle to repair or replace the noncompliant equipment or feature can usually be readily accomplished.

In contrast, a CAFE standard applies to a manufacturer's entire fleet for a model year. It does not require that a particular individual vehicle be equipped with any particular equipment or feature or meet a particular level of fuel economy. It does require that the manufacturer's fleet, as a whole, comply. Further, although under the attribute-based approach to setting CAFE standards fuel economy targets are established for individual vehicles based on their footprints, the vehicles are not required to comply with those targets. However, as a practical matter, if a manufacturer chooses to design some vehicles that fall below their target levels of fuel economy, it will need to design other vehicles that exceed their targets if the manufacturer's overall fleet average is to meet the applicable standard.

Thus, under EPCA, there is no such thing as a noncompliant vehicle, only a noncompliant fleet. No particular vehicle in a noncompliant fleet is any more, or less, noncompliant than any other vehicle in the fleet.

2. EPA Statutory Authority

Title II of the Clean Air Act (CAA) provides for comprehensive regulation of mobile sources, authorizing EPA to regulate emissions of air pollutants from all mobile source categories. Pursuant to these sweeping grants of authority, EPA considers such issues as technology effectiveness, its cost (both per vehicle, per manufacturer, and per consumer), the lead time necessary to implement the technology, and based on this the feasibility and practicability of potential standards; the impacts of potential standards on emissions reductions of both GHGs and non-GHGs; the impacts of standards on oil conservation and energy security; the impacts of standards on fuel savings by consumers; the impacts of standards on the auto industry; other energy impacts; as well as other relevant factors such as impacts on safety.

This proposal implements a specific provision from Title II, section 202(a).[35] Section 202(a)(1) of the Clean Air Act (CAA) states that “the Administrator shall by regulation prescribe (and from time to time revise) * * * standards applicable to the emission of any air pollutant from any class or classes of new motor vehicles * * *, which in his judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.” If EPA makes the appropriate endangerment and cause or contribute findings, then section 202(a) authorizes EPA to issue standards applicable to emissions of those pollutants.

Any standards under CAA section 202(a)(1) “shall be applicable to such vehicles * * * for their useful life.” Emission standards set by the EPA under CAA section 202(a)(1) are technology-based, as the levels chosen must be premised on a finding of technological feasibility. Thus, standards promulgated under CAA section 202(a) are to take effect only “after providing such period as the Administrator finds necessary to permit the development and application of the requisite technology, giving appropriate consideration to the cost of compliance within such period” (section 202(a)(2); see also NRDC v. EPA, 655 F.2d 318, 322 (D.C. Cir. 1981)). EPA is afforded considerable discretion under section 202(a) when assessing issues of technical feasibility and availability of lead time to implement new technology. Such determinations are “subject to the restraints of reasonableness”, which “does not open the door to `crystal ball' inquiry.” NRDC, 655 F.2d at 328, quoting International Harvester Co. v. Ruckelshaus, 478 F.2d 615, 629 (D.C. Cir. 1973). However, “EPA is not obliged to provide detailed solutions to every engineering problem posed in the perfection of the trap-oxidizer. In the absence of theoretical objections to the technology, the agency need only identify the major steps necessary for development of the device, and give plausible reasons for its belief that the industry will be able to solve those problems in the time remaining. The EPA is not required to rebut all speculation that unspecified factors may hinder `real world' emission control.” NRDC, 655 F.2d at 333-34. In developing such technology-based standards, EPA has the discretion to consider different standards for appropriate groupings of vehicles (“class or classes of new motor vehicles”), or a single standard for a larger grouping of motor vehicles (NRDC, 655 F.2d at 338).

Although standards under CAA section 202(a)(1) are technology-based, they are not based exclusively on technological capability. EPA has the discretion to consider and weigh various factors along with technological feasibility, such as the cost of compliance (see section 202(a)(2)), lead time necessary for compliance (section 202(a)(2)), safety (see NRDC, 655 F.2d at 336 n. 31) and other impacts on consumers, and energy impacts associated with use of the technology. See George E. Warren Corp. v. EPA, 159 F.3d 616, 623-624 (D.C. Cir. 1998) (ordinarily permissible for EPA to consider factors not specifically enumerated in the Act). See also Entergy Corp. v. Riverkeeper, Inc., 129 S.Ct. 1498, 1508-09 (2009) (congressional silence did not bar EPA from employing cost-benefit analysis under Clean Water Act absent some other clear indication that such analysis was prohibited; rather, silence indicated discretion to use or not use such an approach as the agency deems appropriate).

In addition, EPA has clear authority to set standards under CAA section 202(a) that are technology forcing when EPA considers that to be appropriate, but is Start Printed Page 49465not required to do so (as compared to standards set under provisions such as section 202(a)(3) and section 213(a)(3)). EPA has interpreted a similar statutory provision, CAA section 231, as follows:

While the statutory language of section 231 is not identical to other provisions in title II of the CAA that direct EPA to establish technology-based standards for various types of engines, EPA interprets its authority under section 231 to be somewhat similar to those provisions that require us to identify a reasonable balance of specified emissions reduction, cost, safety, noise, and other factors. See, e.g., Husqvarna AB v. EPA, 254 F.3d 195 (DC Cir. 2001) (upholding EPA's promulgation of technology-based standards for small non-road engines under section 213(a)(3) of the CAA). However, EPA is not compelled under section 231 to obtain the “greatest degree of emission reduction achievable” as per sections 213 and 202 of the CAA, and so EPA does not interpret the Act as requiring the agency to give subordinate status to factors such as cost, safety, and noise in determining what standards are reasonable for aircraft engines. Rather, EPA has greater flexibility under section 231 in determining what standard is most reasonable for aircraft engines, and is not required to achieve a “technology forcing” result.[36]

This interpretation was upheld as reasonable in NACAA v. EPA, (489 F.3d 1221, 1230 (D.C. Cir. 2007)). CAA section 202(a) does not specify the degree of weight to apply to each factor, and EPA accordingly has discretion in choosing an appropriate balance among factors. See Sierra Club v. EPA, 325 F.3d 374, 378 (D.C. Cir. 2003) (even where a provision is technology-forcing, the provision “does not resolve how the Administrator should weigh all [the statutory] factors in the process of finding the 'greatest emission reduction achievable’ ”). Also see Husqvarna AB v. EPA, 254 F. 3d 195, 200 (D.C. 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 (D.C. 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 (D.C. Cir. 2002) (same).

a. EPA's Testing Authority

Under section 203 of the CAA, sales of vehicles are prohibited unless the vehicle is covered by a certificate of conformity. EPA issues certificates of conformity pursuant to section 206 of the Act, based on (necessarily) pre-sale testing conducted either by EPA or by the manufacturer. The Federal Test Procedure (FTP or “city” test) and the Highway Fuel Economy Test (HFET or “highway” test) are used for this purpose. Compliance with standards is required not only at certification but throughout a vehicle's useful life, so that testing requirements may continue post-certification. Useful life standards may apply an adjustment factor to account for vehicle emission control deterioration or variability in use (section 206(a)).

Pursuant to EPCA, EPA is required to measure fuel economy for each model and to calculate each manufacturer's average fuel economy.[37] EPA uses the same tests—the FTP and HFET—for fuel economy testing. EPA established the FTP for emissions measurement in the early 1970s. In 1976, in response to the Energy Policy and Conservation Act (EPCA) statute, EPA extended the use of the FTP to fuel economy measurement and added the HFET.[38] The provisions in the 1976 regulation, effective with the 1977 model year, established procedures to calculate fuel economy values both for labeling and for CAFE purposes. Under EPCA, EPA is required to use these procedures (or procedures which yield comparable results) for measuring fuel economy for cars for CAFE purposes, but not for labeling purposes.[39] EPCA does not pose this restriction on CAFE test procedures for light trucks, but EPA does use the FTP and HFET for this purpose. EPA determines fuel economy by measuring the amount of CO2 and all other carbon compounds (e.g. total hydrocarbons (THC) and carbon monoxide (CO)), and then, by mass balance, calculating the amount of fuel consumed.

b. EPA Enforcement Authority

Section 207 of the CAA grants EPA broad authority to require manufacturers to remedy vehicles if EPA determines there are a substantial number of noncomplying vehicles. In addition, section 205 of the CAA authorizes EPA to assess penalties of up to $37,500 per vehicle for violations of various prohibited acts specified in the CAA. In determining the appropriate penalty, EPA must consider a variety of factors such as the gravity of the violation, the economic impact of the violation, the violator's history of compliance, and “such other matters as justice may require.” Unlike EPCA, the CAA does not authorize vehicle manufacturers to pay fines in lieu of meeting emission standards.

3. Comparing the Agencies' Authority

As the above discussion makes clear, there are both important differences between the statutes under which each agency is acting as well as several important areas of similarity. One important difference is that EPA's authority addresses various GHGs, while NHTSA's authority addresses fuel economy as measured under specified test procedures. This difference is reflected in this rulemaking in the scope of the two standards: EPA's proposal takes into account air conditioning related reductions, as well as proposed standards for methane and N2 O, but NHTSA's does not. A second important difference is that EPA is proposing certain compliance flexibilities, and takes those flexibilities into account in its technical analysis and modeling supporting its proposal. EPCA places certain limits on compliance flexibilities for CAFE, and expressly prohibits NHTSA from considering the impacts of the compliance flexibilities in setting the CAFE standard so that the manufacturers' election to avail themselves of the permitted flexibilities remains strictly voluntary.[40] The Clean Air Act, on the other hand, contains no such prohibition. These considerations result in some differences in the technical analysis and modeling used to support EPA's and NHTSA's proposed standards.

These differences, however, do not change the fact that in many critical ways the two agencies are charged with addressing the same basic issue of reducing GHG emissions and improving fuel economy. Given the direct relationship between emissions of CO2 and fuel economy levels, both agencies are looking at the same set of control technologies (with the exception of the air conditioning related technologies). The standards set by each agency will drive the kind and degree of penetration of this set of technologies across the vehicle fleet. As a result, each agency is trying to answer the same basic question—what kind and degree of technology penetration is necessary to achieve the agencies' objectives in the rulemaking time frame, given the Start Printed Page 49466agencies' respective statutory authorities?

In making the determination of what standards are appropriate under the CAA and EPCA, each agency is to exercise its judgment and balance many similar factors, such as the availability of technologies, the appropriate lead time for introduction of technology, and based on this the feasibility and practicability of their standards; the impacts of their standards on emissions reductions (of both GHGs and non-GHGs); the impacts of their standards on oil conservation; the impacts of their standards on fuel savings by consumers; the impacts of their standards on the auto industry; as well as other relevant factors such as impacts on safety. Conceptually, therefore, each agency is considering and balancing many of the same factors, and each agency is making a decision that at its core is answering the same basic question of what kind and degree of technology penetration is it appropriate to call for in light of all of the relevant factors. Finally, each agency has the authority to take into consideration impacts of the standards of the other agency. EPCA calls for NHTSA to take into consideration the effects of EPA's emissions standards on fuel economy capability (see 49 U.S.C. 32902 (f)), and EPA has the discretion to take into consideration NHTSA's CAFE standards in determining appropriate action under section 202(a). This is consistent with the Supreme Court's statement that EPA's mandate to protect public health and welfare is wholly independent from NHTSA's mandate to promote energy efficiency, but there is no reason to think the two agencies cannot both administer their obligations and yet avoid inconsistency. Massachusetts v. EPA, 549 U.S. 497, 532 (2007).

In this context, it is in the Nation's interest for the two agencies to work together in developing their respective proposed standards, and they have done so. For example, the agencies have committed considerable effort to develop a joint Technical Support Document that provides a technical basis underlying each agency's analyses. The agencies also have worked closely together in developing and reviewing their respective modeling, to develop the best analysis and to promote technical consistency. The agencies have developed a common set of attribute-based curves that each agency supports as appropriate both technically and from a policy perspective. The agencies have also worked closely to ensure that their respective programs will work in a coordinated fashion, and will provide regulatory compatibility that allows auto manufacturers to build a single national light-duty fleet that would comply with both the GHG and the CAFE standards. The resulting overall close coordination of the proposed GHG and CAFE standards should not be surprising, however, as each agency is using a jointly developed technical basis to address the closely intertwined challenges of energy security and climate change. As discussed above, in determining the standards to propose the agencies are called upon to weigh and balance various factors that are relevant under their respective statutory provisions. Each agency is to exercise its judgment and balance many similar factors, such as the availability of technologies, the appropriate lead time for introduction of technology, and based on this, the feasibility and practicability of their standards; and the impacts of their standards on the following: Emissions reductions (of both GHGs and non-GHGs); oil conservation; fuel savings by consumers; the auto industry; as well as other relevant factors such as safety. Conceptually, each agency is considering and balancing many of the same factors, and each agency is making a decision that at its core is answering the same basic question of what kind and degree of technology penetration is appropriate and required in light of all of the relevant factors. Each Administrator is called upon to exercise judgment and propose standards that the Administrator determines are a reasonable balance of these relevant factors.

As set out in detail in Sections III and IV of this notice, both EPA and NHTSA believe the agencies' proposals are fully justified under their respective statutory criteria. The proposed standards can be achieved within the lead time provided, based on a projected increased use of various technologies which in most cases are already in commercial application in the fleet to varying degrees. Detailed modeling of the technologies that could be employed by each manufacturer supports this initial conclusion. The agencies also carefully assessed the costs of the proposed rules, both for the industry as a whole and per manufacturer, as well as the costs per vehicle, and consider these costs to be reasonable and recoverable (from fuel savings). The agencies recognize the significant increase in the application of technology that the proposed standards would require across a high percentage of vehicles, which will require the manufacturers to devote considerable engineering and development resources before 2012 laying the critical foundation for the widespread deployment of upgraded technology across a high percentage of the 2012-2016 fleet. This clearly will be challenging for automotive manufacturers and their suppliers, especially in the current economic climate. However, based on all of the analyses performed by the agencies, our judgment is that it is a challenge that can reasonably be met.

The agencies also evaluated the impacts of these standards with respect to the expected reductions in GHGs and oil consumption and, found them to be very significant in magnitude. The agencies considered other factors such as the impacts on noise, energy, and vehicular congestion. The impact on safety was also given careful consideration. Moreover, the agencies quantified the various costs and benefits of the proposed standards, to the extent practicable. The agencies' analyses to date indicate that the overall quantified benefits of the proposed standards far outweigh the projected costs. All of these factors support the reasonableness of the proposed standards.

The agencies also evaluated alternatives which were less and more stringent than those proposed. Less stringent standards, however, would forego important GHG emission reductions and fuel savings that are technically achievable at reasonable cost in the lead time provided. In addition, less stringent GHG standards would not result in a harmonized National Program for the country. Based on California's letter of May 18, 2009, the GHG emission standards would not result in the State of California revising its regulations such that compliance with EPA's GHG standards would be deemed to be compliance with California's GHG standards for these model years. The substantial cost advantages associated with a single national program discussed at the outset of this section would then be foregone.

The agencies are not proposing any of the more stringent alternatives analyzed largely due to concerns over lead time and economic practicability. The proposed standards already require aggressive application of technologies, and more stringent standards which would require more widespread use (including more substantial implementation of advanced technologies such as strong hybrids) raise serious issues of adequacy of lead time, not only to meet the standards but to coordinate such significant changes with manufacturers' redesign cycles. At a time when the entire industry remains in an economically critical state, the agencies believe that it would be Start Printed Page 49467unreasonable to propose more stringent standards. Even in a case where economic factors were not a consideration, there are real-world time constraints which must be considered due to the short lead time available for the early years of this program, in particular for model years 2012 and 2013. The physical processes which the automotive industry must follow in order to introduce reliable, high quality products require certain minimums of time during the product development process. These include time needed for durability testing which requires significant mileage accumulation under a range of conditions (e.g., high and low temperatures, high altitude, etc.) in both real-world and laboratory conditions. In addition, the product development cycle includes a number of pre-production gateways on the manufacturing side at both the supplier level and at the automotive manufacturer level that are constrained by time. Thus adequate lead-time is an important factor that the agencies have taken into consideration in evaluating the proposed standards as well as the alternative standards.

As noted, both agencies also considered the overall costs of their respective proposed standards in relation to the projected benefits. The fact that the benefits are estimated to considerably exceed their costs supports the view that the proposed standards represent a reasonable balance of the relevant statutory factors. In drawing this conclusion, the agencies acknowledge the uncertainties and limitations of the analyses. For example, the analysis of the benefits is highly dependent on the estimated price of fuel projected out many years into the future. There is also significant uncertainty in the potential range of values that could be assigned to the social cost of carbon. There are a variety of impacts that the agencies are unable to quantify, such as non-market damages, extreme weather, socially contingent effects, or the potential for longer-term catastrophic events, or the impact on consumer choice. The agencies also note the need to consider factors such as the availability of technology within the lead time provided and many of the other factors discussed above. The cost-benefit analyses are one of the important things the agencies consider in making a judgment as to the appropriate standards to propose under their respective statutes. Consideration of the results of the cost-benefit analyses by the agencies, however, includes careful consideration of the limitations discussed above.

One important area where the two agencies' authorities are similar but not identical involves the transfer of credits between a single firm's car and truck fleets. EISA revised EPCA to allow for such credit transfers, but with a cap on the amount of CAFE credits which can be transferred between the car and truck fleets. 49 U.S.C. 32903(g)(3). Under CAA section 202(a), EPA is proposing to allow CO2 credit transfers between a single manufacturer's car and truck fleets, with no corresponding limits on such transfers. In general, the EPCA limit on CAFE credit transfers is not expected to have the practical effect of limiting the amount of CO2 emission credits manufacturers may be able to transfer under the CAA program, recognizing that manufacturers must comply with both the proposed CAFE standards and the proposed EPA standards. However, it is possible that in some specific circumstances the EPCA limit on CAFE credit transfers could constrain the ability of a manufacturer to achieve cost savings through unlimited use of GHG emissions credit transfers under the CAA program.

The agencies request comment on the impact of the EISA credit transfer caps on the implementation of the proposed CAFE and GHG standards, including whether it would impose such a constraint and the impacts of a constraint on costs, emissions, and fuel economy. In addition, the agencies invite comment on approaches that could assist in addressing this issue, recognizing the importance the agencies place on harmonization, and that would be consistent with their respective statutes. For example, any approach must be consistent with both the EISA transfer caps and the EPCA requirement to set annual CAFE standards at the maximum feasible average fuel economy level that NHTSA decides the manufacturers can achieve in that model year, based on the agency's consideration of the four statutory factors. Manufacturers should submit publicly available evidence supporting their position on this issue so that a well informed decision can be made and explained to the public.

D. Summary of the Proposed Standards for the National Program

1. Joint Analytical Approach

NHTSA and EPA have worked closely together on nearly every aspect of this joint proposal. The extent and results of this collaboration is reflected in the elements of the respective NHTSA and EPA proposals, as well as the analytical work contained in the Joint Technical Support Document (Joint TSD). The Joint TSD, in particular, describes important details of the analytical work that are shared, as well as any differences in approach. These includes the build up of the baseline and reference fleets, the derivation of the shape of the curve that defines the standards, a detailed description of the costs and effectiveness of the technology choices that are available to vehicle manufacturers, a summary of the computer models used to estimate how technologies might be added to vehicles, and finally the economic inputs used to calculate the impacts and benefits of the rules, where practicable. Some of these are highlighted below.

EPA and NHTSA have jointly developed attribute curve shapes that each agency is using for its proposed standards. Both agencies reviewed the shape of the attribute-based curve used for the model year 2011 CAFE standards. After a new and thorough analysis of current vehicle data and the comments received from previous two CAFE rules, the two agencies improved upon the constrained logistic curve and developed a similarly shaped piece-wise linear function. Further details of these functions can be found in Sections III and IV of this preamble as well as Chapter 2 of the Joint TSD.

A critical technical underpinning of each agency's proposal is the cost and effectiveness of the various control technologies. These are used to analyze the feasibility and cost of potential GHG and CAFE standards. The technical work reflected in the joint TSD is the culmination of over 3 years of literature research, consultation with experts, detailed computer simulations, vehicle tear-downs and engineering review, all of which will continue into the future as more data becomes available. To promote transparency, the vast majority of this information is collected from publically available sources, and can be found in the docket of this rule. Non-public (i.e., confidential manufacturer) information was used only to the limited extent it was needed to fill a data void. A detailed description of all of the technology information considered can be found in Chapter 3 of the Joint TSD (and for A/C, Chapter 2 of the EPA RIA).

This detailed technology data forms the inputs to computer models that each agency uses to project how vehicle manufacturers may add those technologies in order to comply with new standards. These are the OMEGA and Volpe models for EPA and NHTSA respectively. The Volpe model is Start Printed Page 49468tailored for NHTSA's EPCA and EISA needs, while the OMEGA model is tailored for EPA's CAA needs. In developing the National Program, EPA and NHTSA have worked closely to ensure that consistent and reasonable results are achieved from both models. This fruitful collaboration has resulted in the improvement of both approaches and now, far from being redundant, these models serve the purposes of the respective agencies while also maintaining an important validating role. The models and their inputs can also be found in the docket. Further description of the model and outputs can be found in Sections II and IV of this preamble, and Chapter 3 of the Joint TSD.

This comprehensive joint analytical approach has provided a sound and consistent technical basis for each agency in developing its proposed standards, which are summarized in the sections below.

2. Level of the Standards

In this notice, EPA and NHTSA are proposing two separate sets of standards, each under its respective statutory authorities. EPA is proposing national CO2 emissions standards for light-duty vehicles under section 202 (a) of the Clean Air Act. These standards would require these vehicles to meet an estimated combined average emissions level of 250 grams/mile of CO2 in model year 2016. NHTSA is proposing CAFE standards for passenger cars and light trucks under 49 U.S.C. 32902. These standards would require them to meet an estimated combined average fuel economy level of 34.1 mpg in model year 2016. The proposed standards for both agencies begin with the 2012 model year, with standards increasing in stringency through model year 2016. They represent a harmonized approach that will allow industry to build a single national fleet that will satisfy both the GHG requirements under the CAA and CAFE requirements under EPCA/EISA.

Given differences in their respective statutory authorities, however, the agencies' proposed standards include some important differences. Under the CO2 fleet average standard proposed under CAA section 202(a), EPA expects manufacturers to take advantage of the option to generate CO2-equivalent credits by reducing emissions of hydrofluorocarbons (HFCs) and CO2 through improvements in their air conditioner systems. EPA accounted for these reductions in developing its proposed CO2 standard. EPCA does not allow vehicle manufacturers to use air conditioning credits in complying with CAFE standards for passenger cars.[41] CO2 emissions due to air conditioning operation are not measured by the test procedure mandated by statute for use in establishing and enforcing CAFE standards for passenger cars. As a result, improvements in the efficiency of passenger car air conditioners would not be considered as a possible control technology for purposes of CAFE.

These differences regarding the treatment of air conditioning improvements (related to CO2 and HFC reductions) affect the relative stringency of the EPA standard and NHTSA standard. The 250 grams per mile of CO2 equivalent emissions limit is equivalent to 35.5 mpg [42] if the automotive industry were to meet this CO2 level all through fuel economy improvements. As a consequence of the prohibition against NHTSA's allowing credits for air conditioning improvements for purposes of passenger car CAFE compliance, NHTSA is proposing fuel economy standards that are estimated to require a combined (passenger car and light truck) average fuel economy level of 34.1 mpg by MY 2016.

NHTSA and EPA's proposed standards, like the standards NHTSA promulgated in March 2009 for model year 2011 (MY 2011), are expressed as mathematical functions depending on vehicle footprint. Footprint is one measure of vehicle size, and is determined by multiplying the vehicle's wheelbase by the vehicle's average track width.[43] The standards that must be met by the fleet of each manufacturer would be determined by computing the sales-weighted harmonic average of the targets applicable to each of the manufacturer's passenger cars and light trucks. Under these proposed footprint-based standards, the levels required of individual manufacturers depend, as noted above, on the mix of vehicles sold. NHTSA and EPA's respective proposed standards are shown in the tables below. It is important to note that the standards are the attribute-based curves proposed by each agency. The values in the tables below reflect the agencies' projection of the corresponding fleet levels that would result from these attribute-based curves.

As shown in Table I.D.2-1, NHTSA's proposed fleet-wide CAFE-required levels for passenger cars under the proposed standards are projected to increase from 33.6 to 38.0 mpg between MY 2012 and MY 2016. Similarly, fleet-wide CAFE levels for light trucks are projected to increase from 25.0 to 28.3 mpg. These numbers do not include the effects of other flexibilities and credits in the program. NHTSA has also estimated the average fleet-wide required levels for the combined car and truck fleets. As shown, the overall fleet average CAFE level is expected to be 34.1 mpg in MY 2016. These standards represent a 4.3 percent average annual rate of increase relative to the MY 2011 standards.[44]

Table I.D.2-1—Average Required Fuel Economy (mpg) Under Proposed CAFE Standards

2011-base20122013201420152016
Passenger Cars30.233.634.435.236.438.0
Light Trucks24.125.025.626.227.128.3
Combined Cars & Trucks27.329.830.631.432.634.1
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Accounting for the expectation that some manufacturers would continue to pay civil penalties rather than achieving required CAFE levels, and the ability to use FFV credits, NHTSA estimates that the proposed CAFE standards would lead to the following average achieved fuel economy levels, based on the projections of what each manufacturer's fleet will comprise in each year of the program: [45]

Table I.D.2-2—Projected Fleet-Wide Achieved CAFE Levels Under the Proposed Footprint-Based CAFE Standards (mpg)

20122013201420152016
Passenger Cars32.533.434.335.336.5
Light Trucks24.124.625.326.327.0
Combined Cars & Trucks28.729.630.431.632.7

NHTSA is also required by EISA to set a minimum fuel economy standard for domestically manufactured passenger cars in addition to the attribute-based passenger car standard. The minimum standard “shall be the greater of (A) 27.5 miles per gallon; or (B) 92 percent of the average fuel economy projected by the Secretary for the combined domestic and non-domestic passenger automobile fleets manufactured for sale in the United States by all manufacturers in the model year * * *.” [46]

Based on NHTSA's current market forecast, the agency's estimates of these minimum standards under the proposed MY 2012-2016 CAFE standards (and, for comparison, the final MY 2011 standard) are summarized below in Table I.D.2-3.[47] For eventual compliance calculations, the final calculated minimum standards will be updated to reflect any changes in the average fuel economy level required under the final standards.

Table I.D.2-3—Estimated Minimum Standard for Domestically Manufactured Passenger Cars Under Final MY 2011 and Proposed MY 2012-2016 CAFE Standards for Passenger Cars (mpg)

201120122013201420152016
28.030.931.632.433.534.9

EPA is proposing GHG emissions standards, and Table I.D.2-4 provides EPA's estimates of their projected overall fleet-wide CO2 equivalent emission levels.[48] The g/mi values are CO2 equivalent values because they include the projected use of A/C credits by manufacturers.

Table I.D.2-4—Projected Fleet-Wide Emissions Compliance Levels Under the Proposed Footprint-Based CO2 Standards (g/mi)

20122013201420152016
Passenger Cars261253246235224
Light Trucks352341332317302
Combined Cars & Trucks295286276263250

As shown in Table I.D.2-4, projected fleet-wide CO2 emission level requirements for cars under the proposed approach are projected to increase in stringency from 261 to 224 grams per mile between MY 2012 and MY 2016. Similarly, fleet-wide CO2 equivalent emission level requirements for trucks are projected to increase in stringency from 352 to 302 grams per mile. As shown, the overall fleet average CO2 level requirements are projected to be 250 g/mile in 2016.

EPA anticipates that manufacturers will take advantage of program flexibilities such as flex fueled vehicle credits, and car/truck credit trading. Due to the credit trading between cars and trucks, the estimated improvements in CO2 emissions are distributed differently than shown in Table I.D 2-4, where full manufacturer compliance is assumed. Table I.D.2-5 shows EPA projection of the achieved emission levels of the fleet for MY 2012 through 2016, which does consider the impact of car/truck credit transfer and the increase in emissions due to program flexibilities including flex fueled vehicle credits and the temporary leadtime allowance alternative standards. The use of optional air conditioning credits is considered both in this analysis of achieved levels and of the projected levels described above.. As can be seen in Table I.D.2-5, the projected achieved levels are slightly higher for model years 2012-2015 due to the projected use of the proposed flexibilities, but in model Start Printed Page 49470year 2016 the achieved value is projected to be 250 g/mi for the fleet.

Table I.D.2-5—Projected Fleet-Wide Achieved Emission Levels Under the Proposed Footprint-Based CO2 Standards (g/mi)

20122013201420152016
Passenger Cars264254245232220
Light Trucks365355346332311
Combined Cars & Trucks302291281267250

NHTSA's and EPA's technology assessment indicates there is a wide range of technologies available for manufacturers to consider in upgrading vehicles to reduce GHG emissions and improve fuel economy.[49] As noted, these include improvements to the engines such as use of gasoline direct injection and downsized engines that use turbochargers to provide performance similar to that of larger engines, the use of advanced transmissions, increased use of start-stop technology, improvements in tire performance, reductions in vehicle weight, increased use of hybrid and other advanced technologies, and the initial commercialization of electric vehicles and plug-in hybrids. EPA is also projecting improvements in vehicle air conditioners including more efficient as well as low leak systems. All of these technologies are already available today, and EPA's and NHTSA's assessment is that manufacturers would be able to meet the proposed standards through more widespread use of these technologies across the fleet.

With respect to the practicability of the standards in terms of lead time, during MYs 2012-2016 manufacturers are expected to go through the normal automotive business cycle of redesigning and upgrading their light-duty vehicle products, and in some cases introducing entirely new vehicles not on the market today. This proposal would allow manufacturers the time needed to incorporate technology to achieve GHG reductions and improve fuel economy during the vehicle redesign process. This is an important aspect of the proposal, as it avoids the much higher costs that would occur if manufacturers needed to add or change technology at times other than their scheduled redesigns. This time period would also provide manufacturers the opportunity to plan for compliance using a multi-year time frame, again consistent with normal business practice. Over these five model years, there would be an opportunity for manufacturers to evaluate almost every one of their vehicle model platforms and add technology in a cost effective way to control GHG emissions and improve fuel economy. This includes redesign of the air conditioner systems in ways that will further reduce GHG emissions.

Both agencies considered other standards as part of the rulemaking analyses, both more and less stringent than those proposed. EPA's and NHTSA's analysis of alternative standards are contained in Sections III and IV of this notice, respectively.

The CAFE and GHG standards described above are based on determining emissions and fuel economy using the city and highway test procedures that are currently used in the CAFE program. Both agencies recognize that these test procedures are not fully representative of real world driving conditions. For example EPA has adopted more representative test procedures that are used in determining compliance with emissions standards for pollutants other than GHGs. These test procedures are also used in EPA's fuel economy labeling program. However, as discussed in Section III, the current information on effectiveness of the individual emissions control technologies is based on performance over the two CAFE test procedures. For that reason EPA is proposing to use the current CAFE test procedures for the proposed CO2 standards and is not proposing to change those test procedures in this rulemaking. NHTSA, as discussed above, is limited by statute in what test procedures can be used for purposes of passenger car testing; however there is no such statutory limitation with respect to test procedures for trucks. However, the same reasons for not changing the truck test procedures apply for CAFE as well.

Both EPA and NHTSA are interested in developing programs that employ test procedures that are more representative of real world driving conditions, to the extent authorized under their respective statutes. This is an important issue, and the agencies intend to address it in the context of a future rulemaking to address standards for model year 2017 and thereafter. This could include a range of test procedure changes to better represent real-world driving conditions in terms of speed, acceleration, deceleration, ambient temperatures, use of air conditioners, and the like. With respect to air conditioner operation, EPA discusses the procedures it intends to use for determining emissions credits for controls on air conditioners in Section III. Comment is also invited in Section IV on the issue of providing air conditioner credits under 49 U.S.C. 32902 and/or 32904 for light-trucks in the model years covered by this proposal.

Finally, based on the information EPA developed in its recent rulemaking that updated its fuel economy labeling program to better reflect average real-world fuel economy, the calculation of fuel savings and CO2 emissions reductions obtained by the proposed CAFE and GHG standards includes adjustments to account for the difference between the fuel economy level measured in the CAFE test procedure and the fuel economy actually achieved on average under real world driving conditions. These adjustments are industry averages for the vehicles' performance as a whole, however, and are not a substitute for the information on effectiveness of individual control technologies that will be explored for purposes of a future GHG and CAFE rulemaking.

3. Form of the Standards

In this rule, NHTSA and EPA are proposing attribute-based standards for passenger cars and light trucks. NHTSA adopted an attribute standard based on vehicle footprint in its Reformed CAFE program for light trucks for model years 2008-2011,[50] and recently extended this approach to passenger cars in the CAFE rule for MY 2011 as required by EISA.[51] EPA and NHTSA are proposing vehicle footprint as the attribute for the GHG Start Printed Page 49471and CAFE standards. Footprint is defined as a vehicle's wheelbase multiplied by its track width—in other words, the area enclosed by the points at which the wheels meet the ground. The agencies believe that the footprint attribute is the most appropriate attribute on which to base the standards under consideration, as further discussed later in this notice and in Chapter 2 of the joint TSD.

Under the proposed footprint-based standards, each manufacturer would have a GHG and CAFE target unique to its fleet, depending on the footprints of the vehicle models produced by that manufacturer. A manufacturer would have separate footprint-based standards for cars and for trucks. Generally, larger vehicles (i.e., vehicles with larger footprints) would be subject to less stringent standards (i.e., higher CO2 grams/mile standards and lower CAFE standards) than smaller vehicles. This is because, generally speaking, smaller vehicles are more capable of achieving higher standards than larger vehicles. While a manufacturer's fleet average standard could be estimated throughout the model year based on projected production volume of its vehicle fleet, the standard to which the manufacturer must comply would be based on its final model year production figures. A manufacturer's calculation of fleet average emissions at the end of the model year would thus be based on the production-weighted average emissions of each model in its fleet.

In designing the footprint-based standards, the agencies built upon the footprint standard curves for passenger cars and light trucks used in the CAFE rule for MY 2011.[52] EPA and NHTSA worked together to design car and truck footprint curves that followed from logistic curves used in that rule. The agencies started by addressing two main concerns regarding the car curve. The first concern was that the 2011 car curve was relatively steep near the inflection point thus causing concern that small variations in footprint could produce relatively large changes in fuel economy targets. A curve that was directionally less steep would reduce the potential for gaming. The second issue was that the inflection point of the logistic curve was not centered on the distribution of vehicle footprints across the industries' fleet, thus resulting in a flat (universal or unreformed) standard for over half the fleet. The proposed car curve has been shifted and made less steep compared to the car curve adopted by NHTSA for 2011, such that it better aligns the sloped region with higher production volume vehicle models. Finally, both the car and truck curves are defined in terms of a constrained linear function for fuel consumption and, equivalently, a piece-wise linear function for CO2. NHTSA and EPA include a full discussion of the development of these curves in the joint TSD and a summary is found in Section II below. In addition, a full discussion of the equations and coefficients that define the curves is included in Section III for the CO2 curves and Section IV for the mpg curves. The following figures illustrate the standards. First Figure I.D.3-1 shows the fuel economy (mpg) car standard curve.

Under an attribute-based standard, every vehicle model has a performance target (fuel economy for the CAFE standards, and CO2 g/mile for the GHG emissions standards), the level of which depends on the vehicle's attribute (for this proposal, footprint). The manufacturers' fleet average performance is determined by the production-weighed [53] average (for CAFE, harmonic average) of those targets. NHTSA and EPA are proposing CAFE and CO2 emissions standards defined by constrained linear functions and, equivalently, piecewise linear functions.[54] As a possible option for future rulemakings, the constrained linear form was introduced by NHTSA in the 2007 NPRM proposing CAFE standards for MY 2011-2015.

NHTSA is proposing the attribute curves below for assigning a fuel economy level to an individual vehicle's footprint value, for model years 2012 through 2016. These mpg values would be production weighted to determine each manufacturer's fleet average standard for cars and trucks. Although the general model of the equation is the same for each vehicle category and each year, the parameters of the equation differ for cars and trucks. Each parameter also changes on an annual basis, resulting in the yearly increases in stringency. Figure I.D.3-1 below illustrates the passenger car CAFE standard curves for model years 2012 through 2016 while Figure I.D.3-2 below illustrates the light truck standard curves for model years 2012-2016. The MY 2011 final standards for cars and trucks, which are specified by a constrained logistic function rather than a constrained linear function, are shown for comparison.

Start Printed Page 49472

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EPA is proposing the attribute curves below for assigning a CO2 level to an individual vehicle's footprint value, for model years 2012 through 2016. These CO2 values would be production weighted to determine each manufacturer's fleet average standard for cars and trucks. Although the general model of the equation is the same for each vehicle category and each year, the parameters of the equation differ for cars and trucks. Each parameter also changes on an annual basis, resulting in the yearly increases in stringency. Figure I.D.3-3 below illustrates the CO2 car standard curves for model years 2012 through 2016 while Figure I.D.3-4 shows the CO2 truck standard curves for Model Years 2012-2016.

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NHTSA and EPA propose to use the same vehicle category definitions for determining which vehicles are subject to the car footprint curves versus the truck curve standards. In other words, a vehicle classified as a car under the NHTSA CAFE program would also be classified as a car under the EPA GHG program, and likewise for trucks. EPA and NHTSA are proposing to employ the same car and truck definitions for the MY 2012-2016 CAFE and GHG standards as those used in the CAFE program for the 2011 model year standards.[55] This proposed approach of using CAFE definitions allows EPA's Start Printed Page 49476proposed CO2 standards and the proposed CAFE standards to be harmonized across all vehicles. EPA is not changing the car/truck definition for the purposes of any other previous rule.

Generally speaking, a smaller footprint vehicle will have lower CO2 emissions relative to a larger footprint vehicle. A footprint-based CO2 standard can be relatively neutral with respect to vehicle size and consumer choice. All vehicles, whether smaller or larger, must make improvements to reduce CO2 emissions, and therefore all vehicles will be relatively more expensive. With the footprint-based standard approach, EPA and NHTSA believe there should be no significant effect on the relative distribution of different vehicle sizes in the fleet, which means that consumers will still be able to purchase the size of vehicle that meets their needs. Table I.D.3-1 illustrates the fact that different vehicle sizes will have varying CO2 emissions and fuel economy targets under the proposed standards.

Table I.D.3-1—Model Year 2016 CO2 and Fuel Economy Targets for Various MY 2008 Vehicle Types

Vehicle typeExample modelsExample model footprint (sq. ft.)CO2 emissions target (g/mi)Fuel economy target (mpg)
Example Passenger Cars
Compact carHonda Fit4021441.4
Midsize carFord Fusion4623737.3
Fullsize carChrysler 3005327032.8
Example Light-Duty Trucks
Small SUV4WD Ford Escape4426932.8
Midsize crossoverNissan Murano4928930.6
MinivanToyota Sienna5531328.2
Large pickup truckChevy Silverado6735824.7

E. Summary of Costs and Benefits for the Joint Proposal

This section summarizes the projected costs and benefits of the proposed CAFE and GHG emissions standards. These projections helped inform the agencies' choices among the alternatives considered and provide further confirmation that proposed standards fall within the spectrum of choices allowable under their respective statutory criteria. The costs and benefits projected by NHTSA to result from NHTSA's proposed CAFE standards are presented first, followed by those from EPA's analysis of the proposed GHG emissions standards.

The agencies recognize that there are uncertainties regarding the benefit and cost values presented in this proposal. Some benefits and costs are not quantified. The values of other benefits and costs could be too low or too high.

For several reasons, the estimates for costs and benefits presented by NHTSA and EPA, while consistent, are not directly comparable, and thus should not be expected to be identical. Most important, NHTSA and EPA's proposed standards would require slightly different fuel efficiency improvements. EPA's proposed GHG standard is more stringent in part due to its assumptions about manufacturers' use of air conditioning credits, which result from reductions in air conditioning-related emissions of HFCs and CO2. In addition, the proposed CAFE and GHG standards offer different program flexibilities, and the agencies' analyses differ in their accounting for these flexibilities (for example, FFVs etc.), primarily because NHTSA is statutorily prohibited from considering some flexibilities when establishing CAFE standards, while EPA is not. These differences contribute to differences in the agencies' respective estimates of costs and benefits resulting from the new standards.

Because EPCA prohibits NHTSA from considering the use of FFV credits when establishing CAFE standards, the agency's primary analysis of costs, fuel savings, and related benefits from imposing higher CAFE standards does not include them. However, EPCA does not prohibit NHTSA from considering the fact that manufacturers may pay civil penalties rather than complying with CAFE standards, and NHTSA's primary analysis accounts for some manufacturers' tendency to do so. In addition, NHTSA performed a supplemental analysis of the effect of FFV credits on benefits and costs from its proposed CAFE standards, to demonstrate the real-world impacts of FFVs, and the summary estimates presented in Section IV include these effects. Including the use of FFV credits reduces estimated per-vehicle compliance costs of the program. However, as shown below, including FFV credits does not significantly change the projected fuel savings and CO2 reductions, because FFV credits reduce the fuel economy levels that manufacturers achieve not only under the proposed standards, but also under the baseline MY 2011 CAFE standards.

Also, EPCA, as amended by EISA, allows manufacturers to transfer credits between their passenger car and light truck fleets. However, EPCA also prohibits NHTSA from considering manufacturers' ability to use CAFE credits when determining the stringency of the CAFE standards. Because of this prohibition, NHTSA's primary analysis does not account for the extent to which credit transfers might actually occur. For purposes of its supplemental analysis, NHTSA considered accounting for the fact that EPCA allows some transfer of CAFE credits between the passenger car and light truck fleets, but determined that in NHTSA's year-by-year analysis, manufacturers' likely credit transfers cannot be reasonably estimated at this time.[56]

Therefore, NHTSA's primary analysis shows the estimates the agency considered for purposes of establishing new CAFE standards, and its supplemental analysis including manufacturers' potential use of FFV credits currently reflects the agency's best estimate of the potential real-world effects of the proposed CAFE standards.Start Printed Page 49477

EPA made explicit assumptions about manufacturers' use of FFV credits under both the baseline and control alternatives, and its estimates of costs and benefits from the proposed GHG standards reflect these assumptions. However, under the proposed GHG standards, FFV credits would be available through MY 2015; starting in MY 2016, EPA proposes to allow FFV credits only based on a manfucturers's demonstration that the alternative fuel is actually being used in the vehicles and the actual GHG performance for the vehicle run on that alternative fuel.

EPA's analysis also assumes that manufacturers would transfer credits between their car and truck fleets in the MY 2011 baseline subject to the maximum value allowed by EPCA, and that unlimited car-truck credit transfers would occur under the proposed GHG standards. Including these assumptions in EPA's analysis increases the resulting estimates of fuel savings and reductions in GHG emissions, while reducing EPA's estimates of program compliance costs.

Finally, under the proposed EPA GHG program, there is no ability for a manufacturer to intentionally pay fines in lieu of meeting the standard. Under EPCA, however, vehicle manufacturers are allowed to pay fines as an alternative to compliance with applicable CAFE standards. NHTSA's analysis explicitly estimates the level of voluntary fine payment by individual manufacturers, which reduces NHTSA's estimates of both the costs and benefits of its proposed CAFE standards. In contrast, the CAA does not allow for fine payment in lieu of compliance with emission standards, and EPA's analysis of costs and benefits from its proposed standard thus assumes full compliance. This assumption results in higher estimates of fuel savings, reductions in GHG emissions, and manufacturers' compliance costs to sell fleets that comply with both NHTSA's proposed CAFE program and EPA's proposed GHG program.

In summary, the projected costs and benefits presented by NHTSA and EPA are not directly comparable, because the levels being proposed by EPA include air conditioning-related improvements in equivalent fuel efficiency and HFC reductions, because the assumptions incorporated in EPA's analysis regarding car-truck credit transfers, and because of the projection by EPA of complete compliance with the proposed GHG standards. It should also be expected that overall EPA's estimates of GHG reductions and fuel savings achieved by the proposed GHG standards will be slightly higher than those projected by NHTSA only for the CAFE standards because of the reasons described above. For the same reasons, EPA's estimates of manufacturers' costs for complying with the proposed passenger car and light trucks GHG standards are slightly higher than NHTSA's estimates for complying with the proposed CAFE standards.

1. Summary of Costs and Benefits of Proposed NHTSA CAFE Standards

Without accounting for the compliance flexibilities that NHTSA is prohibited from considering when determining the level of new CAFE standards, since manufacturers' decisions to use those flexibilities are voluntary, NHTSA estimates that these fuel economy increases would lead to fuel savings totaling 62 billion gallons throughout the useful lives of vehicles sold in MYs 2012-2016. At a 3% discount rate, the present value of the economic benefits resulting from those fuel savings is $158 billion.

The agency further estimates that these new CAFE standards would lead to corresponding reductions in CO2 emissions totaling 656 million metric tons (mmt) during the useful lives of vehicles sold in MYs 2012-2016. The present value of the economic benefits from avoiding those emissions is $16.4 billion, based on a global social cost of carbon value of $20 per metric ton,[57] although NHTSA estimated the benefits associated with five different values of a one ton GHG reduction ($5, $10, $20, $34, $56).[58] See Section II for a more detailed discussion of the social cost of carbon. It is important to note that NHTSA's CAFE standards and EPA's GHG standards will both be in effect, and each will lead to increases in average fuel economy and CO2 emissions reductions. The two agencies' standards together comprise the National Program, and this discussion of costs and benefits of NHTSA's CAFE standards does not change the fact that both the CAFE and GHG standards, jointly, are the source of the benefits and costs of the National Program.

Table I.E.1-1—NHTSA Fuel Saved (Billion Gallons) and CO2 Emissions Avoided (mmt) Under Proposed CAFE Standards (Without FFV Credits)

20122013201420152016Total
Fuel (b. gal.)4913161962
CO2 (mmt)4496137173206656

Considering manufacturers' ability to earn credit toward compliance by selling FFVs, NHTSA estimates very little change in incremental fuel savings and avoided CO2 emissions, assuming FFV credits would be used toward both the baseline and proposed standards:Start Printed Page 49478

Table I.E.1-2—NHTSA Fuel Saved (Billion Gallons) and CO2 Emissions Avoided (mmt) Under Proposed CAFE Standards (With FFV Credits)

20122013201420152016Total
Fuel (b. gal.)5812151959
CO2 (mmt)4990129167204639

NHTSA estimates that these fuel economy increases would produce other benefits both to drivers (e.g., reduced time spent refueling) and to the U.S. (e.g., reductions in the costs of petroleum imports beyond the direct savings from reduced oil purchases, as well as some disbenefits (e.g., increase traffic congestion) caused by drivers' tendency to travel more when the cost of driving declines (as it does when fuel economy increases). NHTSA has estimated the total monetary value to society of these benefits and disbenefits, and estimates that the proposed standards will produce significant net benefits to society. Using a 3% discount rate, NHTSA estimates that the present value of these benefits would total more than $200 billion over the useful lives of vehicles sold during MYs 2012-2016. More discussion regarding monetized benefits can be found in Section IV of this notice and in NHTSA's Regulatory Impact Analysis.

Table I.E.1-3—NHTSA Discounted Benefits ($Billion) Under Proposed CAFE Standards (Before FFV Credits, Using 3 Percent Discount Rate)

20122013201420152016Total
Passenger Cars7.617.024.431.238.7119.1
Light Trucks5.511.617.322.226.082.6
Combined13.128.741.853.464.7201.7

Using a 7% discount rate, NHTSA estimates that the present value of these benefits would total more than $159 billion over the same time period.

Table I.E.1-4—NHTSA Discounted Benefits ($Billion) Under Proposed Standards (Before FFV Credits, Using 7 Percent Discount Rate)

20122013201420152016Total
Passenger Cars6.013.619.525.031.195.3
Light Trucks4.39.113.517.420.464.6
Combined10.322.633.142.451.5159.8

NHTSA estimates that FFV credits could reduce achieved benefits by about 4.5%:

Table I.E.1-5a—NHTSA Discounted Benefits ($Billion) Under Proposed CAFE Standards (With FFV Credits, Using a 3 Percent Discount Rate)

20122013201420152016Total
Passenger Cars7.815.922.528.637.1111.9
Light Trucks6.110.215.922.126.380.5
Combined13.926.138.450.763.3192.5

Table I.E.1-5b—NHTSA Discounted Benefits ($Billion) Under Proposed CAFE Standards (With FFV Credits, Using a 7 Percent Discount Rate)

20122013201420152016Total
Passenger Cars6.212.718.023.029.889.6
Light Trucks4.77.912.417.320.663.0
Combined10.920.620.440.350.4152.5

NHTSA attributes most of these benefits—about $158 billion (at a 3% discount rate and excluding consideration of FFV credits), as noted above—to reductions in fuel consumption, valuing fuel (for societal purposes) at the future pre-tax prices projected in the Energy Information Administration's (EIA's) reference case forecast from Annual Energy Outlook (AEO) 2009. The Preliminary Regulatory Impact Analysis (PRIA) accompanying Start Printed Page 49479this proposed rule presents a detailed analysis of specific benefits of the proposed rule.

Table I.E.1-6—Summary of Benefits Fuel Savings and CO2 Emissions Reduction Due to the Proposed Rule (Before FFV Credits)

AmountMonetized value (discounted)
3% Discount rate7% Discount rate
Fuel savings61.6 billion gallons$158.0 billion$125.3 billion.
CO2 emissions reductions656 million metric tons (mmt)$16.4 billion$12.8 billion.

NHTSA estimates that the increases in technology application necessary to achieve the projected improvements in fuel economy will entail considerable monetary outlays. The agency estimates that incremental costs for achieving its proposed standards—that is, outlays by vehicle manufacturers over and above those required to comply with the MY 2011 CAFE standards—will total about $60 billion (i.e., during MYs 2012-2016).

Table I.E.1-7—NHTSA Incremental Technology Outlays ($Billion) Under Proposed CAFE Standards (Before FFV Credits)

20122013201420152016Total
Passenger Cars4.16.58.49.911.840.8
Light Trucks1.52.84.05.25.919.4
Combined5.79.312.515.117.660.2

NHTSA estimates that use of FFV credits could significantly reduce these outlays:

Table I.E.1-8—NHTSA Incremental Technology Outlays ($Billion) Under Proposed CAFE Standards (With FFV Credits)

20122013201420152016Total
Passenger Cars2.54.46.17.49.329.6
Light Trucks1.32.03.14.35.015.6
Combined3.76.39.211.714.245.2

The agency projects that manufacturers will recover most or all of these additional costs through higher selling prices for new cars and light trucks. To allow manufacturers to recover these increased outlays (and, to a much lesser extent, the civil penalties that some companies are expected to pay for noncompliance), the agency estimates that the proposed standards would lead to increases in average new vehicle prices ranging from $476 per vehicle in MY 2012 to $1,091 per vehicle in MY 2016:

Table I.E.1-9—NHTSA Incremental Increases in Average New Vehicle Costs ($) Under Proposed CAFE Standards (Before FFV Credits)

20122013201420152016
Passenger Cars5917358779791,127
Light Trucks2834606788821,020
Combined4766358069451,091

NHTSA estimates that use of FFV credits could significantly reduce these costs, especially in earlier model years:

Table I.E.1-10—NHTSA Incremental Increases in Average New Vehicle Costs ($) Under Proposed CAFE Standards (With FFV Credits)

20122013201420152016
Passenger Cars295448591695851
Light Trucks231347533758895
Start Printed Page 49480
Combined271411571716866

NHTSA estimates, therefore, that the total benefits of these proposed standards would be more than three times the magnitude of the corresponding costs. As a consequence, its proposed standards would produce net benefits of $142 billion at a 3 percent discount rate (with FFV credits, $147 billion) or $100 billion at a 7 percent discount rate over the useful lives of vehicles sold during MYs 2012-2016.

2. Summary of Costs and Benefits of Proposed EPA GHG Standards

EPA has conducted a preliminary assessment of the costs and benefits of the proposed GHG standards. Table I.E.2-1 shows EPA's estimated lifetime fuel savings and CO2 equivalent emission reductions for all vehicles sold in the model years 2012-2016. The values in Table I.E.2-1 are projected lifetime totals for each model year and are not discounted. As documented in DRIA Chapter 5, the potential credit transfer between cars and trucks may change the distribution of the fuel savings and GHG emission impacts between cars and trucks. As discussed above with respect to NHTSA's CAFE standards, it is important to note that NHTSA's CAFE standards and EPA's GHG standards will both be in effect, and each will lead to increases in average fuel economy and CO2 emissions reductions. The two agency's standards together comprise the National Program, and this discussion of costs and benefits of EPA's GHG standards does not change the fact that both the CAFE and GHG standards, jointly, are the source of the benefits and costs of the National Program.

Table I.E.2-1—EPA's Estimated 2012-2016 Model Year Lifetime Fuel Saved and GHG Emissions Avoided

20122013201420152016Total
CarsFuel (billion gallons)468111443
Fuel (billion barrels)0.10.10.20.30.31.0
CO2 EQ (mmt)517498137179539
Light TrucksFuel (billion gallons)24691233
Fuel (billion barrels)0.10.10.10.20.30.8
CO2 EQ (mmt)305177107143408
CombinedFuel (billion gallons)71014192676
Fuel (billion barrels)0.20.20.30.50.61.8
CO2 EQ (mmt)81125174244323947

Table I.E.2-2 shows EPA's estimated lifetime discounted benefits for all vehicles sold in model years 2012-2016. Although EPA estimated the benefits associated with five different values of a one ton GHG reduction ($5, $10, $20, $34, $56), for the purposes of this overview presentation of estimated benefits EPA is showing the benefits associated with one of these marginal values, $20 per ton of CO2, in 2007 dollars and 2007 emissions, in this joint proposal. Table I.E.2-2 presents benefits based on the $20 value. Section III.H presents the five marginal values used to estimate monetized benefits of GHG reductions and Section III.H presents the program benefits using each of the five marginal values, which represent only a partial accounting of total benefits due to omitted climate change impacts and other factors that are not readily monetized. These factors are being used on an interim basis while analysis is conducted to generate new estimates. The values in the table are discounted values for each model year throughout their projected lifetimes. The benefits include all benefits considered by EPA such as fuel savings, GHG reductions, PM benefits, energy security and other externalities such as reduced refueling and accidents, congestion and noise. The lifetime discounted benefits are shown for one of five different social cost of carbon (SCC) values considered by EPA. The values in Table I.E.2-2 do not include costs associated with new technology required to meet the proposal.

Table I.E.2-2—EPA's Estimated 2012-2016 Model Year Lifetime Discounted Benefits Assuming the $20/Ton SCC Value a

[$Billions of 2007 dollars]

Discount rateModel year
20122013201420152016Total
3%$20.4$31.7$44.9$63.7$87.2$248
715.824.734.949.367.7193
a The benefits include all benefits considered by EPA such as fuel savings, GHG reductions, PM benefits, energy security and other externalities such as reduced refueling and accidents, congestion and noise.
Start Printed Page 49481

Table I.E.2-3 shows EPA's estimated lifetime fuel savings, lifetime CO2 emission reductions, and the monetized net present values of those fuel savings and CO2 emission reductions. The gallons of fuel and CO2 emission reductions are projected lifetime values for all vehicles sold in the model years 2012-2016. The estimated fuel savings in billions of barrels and the GHG reductions in million metric tons of CO2 shown in Table I.E.2-3 are totals for the five model years throughout their projected lifetime and are not discounted. The monetized values shown in Table I.E.2-3 are the summed values of the discounted monetized-fuel savings and monetized-CO2 reductions for the five model years 2012-2016 throughout their lifetimes. The monetized values in Table I.E.2-3 reflect both a 3 percent and a 7 percent discount rate as noted.

Table I.E.2-3—EPA's Estimated 2012-2016 Model Year Lifetime Fuel Savings, CO2 Emission Reductions, and Discounted Monetized Benefits at a 3% Discount Rate

[Monetized values in 2007 dollars]

Amount$ value (billions)
Fuel savings1.8 billion barrels$193, 3% discount rate.
$151, 7% discount rate.
CO2 emission reductions (valued assuming $20/ton CO2 in 2007)947 MMT CO2 e$21.0, 3% discount rate.
$15.0, 7% discount rate.

Table I.E.2-4 shows EPA's estimated incremental technology outlays for cars and trucks for each of the model years 2012-2016. The total outlays are also shown. The technology outlays shown in Table I.E.2-4 are for the industry as a whole and do not account for fuel savings associated with the proposal.

Table I.E.2-4—EPA's Estimated Incremental Technology Outlays

[$Billions of 2007 dollars]

20122013201420152016Total
Cars$3.5$5.3$7.0$8.9$10.7$35.3
Trucks2.03.14.05.16.820.9
Combined5.48.410.913.917.556.1

Table I.E.2-5 shows EPA's estimated incremental cost increase of the average new vehicle for each model year 2012-2016. The values shown are incremental to a baseline vehicle and are not cumulative. In other words, the estimated increase for 2012 model year cars is $374 relative to a 2012 model year car absent the proposal. The estimated increase for a 2013 model year car is $531 relative to a 2013 model year car absent the proposal (not $374 plus $531).

Table I.E.2-5—EPA's Estimated Incremental Increase in Average New Vehicle Cost

[2007 Dollars per unit]

20122013201420152016
Cars$374$531$663$813$968
Trucks3585396828861,213
Combined3685346708381,050

F. Program Flexibilities for Achieving Compliance

EPA's and NHTSA's proposed programs provide compliance flexibility to manufacturers, especially in the early years of the National Program. This flexibility is expected to provide sufficient lead time for manufacturers to make necessary technological improvements and reduce the overall cost of the program, without compromising overall environmental and fuel economy objectives. The broad goal of harmonizing the two agencies' proposed standards includes preserving manufacturers' flexibilities in meeting the standards, to the extent appropriate and required by law. The following section provides an overview of the flexibility provisions the agencies are proposing.

1. CO2/CAFE Credits Generated Based on Fleet Average Performance

Under the NHTSA and EPA proposal the fleet average standards that apply to a manufacturer's car and truck fleets would be based on the applicable footprint-based curves. At the end of each model year, when production of the model year is complete, a production-weighted fleet average would be calculated for each averaging set (cars and trucks). Under this approach, a manufacturer's car and/or truck fleet that achieves a fleet average CO2/CAFE level better than the standard would generate credits. Conversely, if the fleet average CO2/CAFE level does not meet the standard the fleet would generate debits (also referred to as a shortfall).

Under the proposed program, a manufacturer whose fleet generates credits in a given model year would have several options for using those credits, including credit carry-back, credit carry-forward, credit transfers, Start Printed Page 49482and credit trading. These provisions exist in the MY 2011 CAFE program under EPCA and EISA, and similar provisions are part of EPA's Tier 2 program for light duty vehicle criteria pollutant emissions, as well as many other mobile source standards issued by EPA under the CAA. EPA is proposing that the manufacturer would be able to carry-back credits to offset any deficit that had accrued in a prior model year and was subsequently carried over to the current model year. EPCA already provides for this. EPCA restricts the carry-back of CAFE credits to three years and EPA is proposing the same limitation, in keeping with the goal of harmonizing both sets of proposed standards.

After satisfying any need to offset pre-existing deficits, remaining credits could be saved (banked) for use in future years. Under the CAFE program, EISA allows manufacturers to apply credits earned in a model year to compliance in any of the five subsequent model years.[59] EPA is also proposing, under the GHG program, to allow manufacturers to use these banked credits in the five years after the year in which they were generated (i.e., five years carry-forward).

EISA required NHTSA to establish by regulation a CAFE credits transferring program, which NHTSA established in a March 2009 final rule codified at 49 CFR part 536, to allow a manufacturer to transfer credits between its vehicle fleets to achieve compliance with the standards. For example, credits earned by over-compliance with a manufacturer's car fleet average standard could be used to offset debits incurred due to that manufacturer's not meeting the truck fleet average standard in a given year. EPA's Tier 2 program also provides for this type of credit transfer. For purposes of this NPRM, EPA proposes unlimited credit transfers across a manufacturer's car-truck fleet to meet the GHG standard. This is based on the expectation that this kind of credit transfer provision will allow the required GHG emissions reductions to be achieved in the most cost effective way, and this flexibility will facilitate the ability of the manufacturers to comply with the GHG standards in the lead time provided. Under the CAA, unlike under EISA, there is no statutory limitation on car-truck credit transfers. Therefore EPA is not proposing to constrain car-truck credit transfers as doing so would increase costs with no corresponding environmental benefit. For the CAFE program, however, EISA limits the amount of credits that may be transferred, and also prohibits the use of transferred credits to meet the statutory minimum level for the domestic car fleet standard.[60] These and other statutory limits would continue to apply to the determination of compliance with the CAFE standard.

Finally, EISA also allowed NHTSA to establish by regulation a CAFE credit trading program, which NHTSA established in the March 2009 final rule at 40 CFR Part 536, to allow credits to be traded (sold) to other vehicle manufacturers. EPA is also proposing to allow credit trading in the GHG program. These sorts of exchanges are typically allowed under EPA's current mobile source emission credit programs, although manufacturers have seldom made such exchanges. Under the NHTSA CAFE program, EPCA also allows these types of credit trades, although, as with transferred credits, traded credits may not be used to meet the minimum domestic car standards specified by statute.[61]

2. Air Conditioning Credits

Air conditioning (A/C) systems contribute to GHG emissions in two ways. Hydrofluorocarbon (HFC) refrigerants, which are powerful GHG pollutants, can leak from the A/C system. Operation of the A/C system also places an additional load on the engine, which results in additional CO2 tailpipe emissions. EPA is proposing an approach that allows manufacturers to generate credits by reducing GHG emissions related to A/C systems. Specifically, EPA is proposing a test procedure and method to calculate CO2 equivalent reductions for the full useful life on a grams/mile basis that can be used as credits in meeting the fleet average CO2 standards. EPA's analysis indicates this approach provides manufacturers with a highly cost-effective way to achieve a portion of GHG emissions reductions under the EPA program. EPA is estimating that manufacturers will on average take advantage of 11 g/mi GHG credit toward meeting the 250 g/mi by 2016 (though some companies may have more). EPA is also proposing to allow manufacturers to earn early A/C credits starting in MY 2009 through 2011, as discussed further in a later section.

Comment is also sought on the approach of providing CAFE credits under 49 U.S.C. 32904(c) for light trucks equipped with relatively efficient air conditioners for MYs 2012-2016. The agencies invite comment on allowing a manufacturer to generate additional CAFE credits from the reduction of fuel consumption through the application of air conditioning efficiency improvement technologies to trucks. Currently, the CAFE program does not induce manufacturers to install more efficient air conditioners because the air conditioners are not turned on during fuel economy testing. The agencies note that if such credits were adopted, it may be necessary to reflect them in the setting of the CAFE standards for light trucks for the same model years and invite comment on that issue.

3. Flex-Fuel and Alternative Fuel Vehicle Credits

EPCA authorizes an incentive under the CAFE program for production of dual-fueled or flexible-fuel vehicles (FFV) and dedicated alternative fuel vehicles. FFVs are vehicles that can run both on an alternative fuel and conventional fuel. Most FFVs are E-85 capable vehicles, which can run on either gasoline or a mixture of up to 85 percent ethanol and 15 percent gasoline. Dedicated alternative fuel vehicles are vehicles that run exclusively on an alternative fuel. EPCA was amended by EISA to extend the period of availability of the FFV incentive, but to begin phasing it out by annually reducing the amount of FFV incentive that can be used toward compliance with the CAFE standards.[62] EPCA does not premise the availability of the FFV credits on actual use of alternative fuel by an FFV vehicle. Under NHTSA's CAFE program, pursuant to EISA, after MY 2019, no FFV credits will be available for CAFE compliance.[63] For dedicated alternative fuel vehicles, there are no limits or phase-out of the credits. Consistent with the statute, NHTSA will continue to allow the use of FFV credits for purposes of compliance with the proposed standards until the end of the phase-out period.

For the GHG program, EPA is proposing to allow FFV credits in line with EISA limits only during the period from MYs 2012 to 2015. After MY 2015, EPA proposes to allow FFV credits only based on a manufacturer's demonstration that the alternative fuel is actually being used in the vehicles. EPA is seeking comments on how that demonstration could be made. EPA discusses this in more detail in Section III.C of the preamble.Start Printed Page 49483

4. Temporary Lead-Time Allowance Alternative Standards

Manufacturers with limited product lines may be especially challenged in the early years of the proposed program. Manufacturers with narrow product offerings may not be able to take full advantage of averaging or other program flexibilities due to the limited scope of the types of vehicles they sell. For example, some smaller volume manufacturers focus on high performance vehicles with higher CO2 emissions, above the CO2 emissions target for that vehicle footprint, but do not have other types of vehicles in their production mix with which to average. Often, these manufacturers pay fines under the CAFE program rather than meeting the applicable CAFE standard. EPA believes that these technological circumstances may call for a more gradual phase-in of standards so that manufacturer resources can be focused on meeting the 2016 levels.

EPA is proposing a temporary lead-time allowance for manufacturers who sell vehicles in the U.S. in MY 2009 whose vehicle sales in that model year are below 400,000 vehicles. EPA proposes that this allowance would be available only during the MY 2012-2015 phase-in years of the program. A manufacturer that satisfies the threshold criteria would be able to treat a limited number of vehicles as a separate averaging fleet, which would be subject to a less stringent GHG standard.[64] Specifically, a standard of 125 percent of the vehicle's otherwise applicable foot-print target level would apply to up to 100,000 vehicles total, spread over the four year period of MY 2012 through 2015. Thus, the number of vehicles to which the flexibility could apply is limited. EPA also is proposing appropriate restrictions on credit use for these vehicles, as discussed further in Section III. By MY 2016, these allowance vehicles must be averaged into the manufacturer's full fleet (i.e., they are no longer eligible for a different standard). EPA discusses this in more detail in Section III.B of the preamble.

5. Additional Credit Opportunities Under the CAA

EPA is proposing additional opportunities for early credits in MYs 2009-2011 through over-compliance with a baseline standard. The baseline standard would be set to be equivalent, on a national level, to the California standards. Potentially, credits could be generated by over-compliance with this baseline in one of two ways—over-compliance by the fleet of vehicles sold in California and the CAA section 177 States (i.e., those States adopting the California program), or over-compliance with the fleet of vehicles sold in the 50 States. EPA is also proposing early credits based on over-compliance with CAFE, but only for vehicles sold in States outside of California and the CAA section 177 States. Under the proposed early credit provisions, no early FFV credits would be allowed, except those achieved by over-compliance with the California program based on California's provisions that manufacturers demonstrate actual use of the alternative fuel. EPA's proposed early credits options are designed to ensure that there would be no double counting of early credits. Consistent with this paragraph, NHTSA notes, however, that credits for overcompliance with CAFE standards during MYs 2009-2011 will still be available for manufacturers to use toward compliance in future model years, just as before.

EPA is proposing additional credit opportunities to encourage the commercialization of advanced GHG/fuel economy control technologies, such as electric vehicles, plug-in hybrid electric vehicles, and fuel cell vehicles. These proposed advanced technology credits are in the form of a multiplier that would be applied to the number of vehicles sold, such that each eligible vehicle counts as more than one vehicle in the manufacturer's fleet average. EPA is also proposing to allow early advanced technology credits to be generated beginning in MYs 2009 through 2011.

EPA is also proposing an Option for manufacturers to generate credits for employing technologies that achieve GHG reductions that are not reflected on current test procedures. Examples of such “off-cycle” technologies might include solar panels on hybrids, adaptive cruise control, and active aerodynamics, among other technologies. EPA is seeking comments on the best ways to quantify such credits to ensure any off-cycle credits applied for by a manufacturer are verifiable, reflect real-world reductions, based on repeatable test procedures, and are developed through a transparent process allowing appropriate opportunities for public comment.

G. Coordinated Compliance

Previous NHTSA and EPA regulations and statutory provisions establish ample examples on which to develop an effective compliance program that achieves the energy and environmental benefits from CAFE and motor vehicle GHG standards. NHTSA and EPA are proposing a program that recognizes, and replicates as closely as possible, the compliance protocols associated with the existing CAA Tier 2 vehicle emission standards, and with CAFE standards. The certification, testing, reporting, and associated compliance activities closely track current practices and are thus familiar to manufacturers. EPA already oversees testing, collects and processes test data, and performs calculations to determine compliance with both CAFE and CAA standards. Under this proposed coordinated approach, the compliance mechanisms for both programs are consistent and non-duplicative. EPA will also apply the CAA authorities applicable to its separate in-use requirements in this program.

The proposed approach allows manufacturers to satisfy the new program requirements in the same general way they comply with existing applicable CAA and CAFE requirements. Manufacturers would demonstrate compliance on a fleet-average basis at the end of each model year, allowing model-level testing to continue throughout the year as is the current practice for CAFE determinations. The proposed compliance program design establishes a single set of manufacturer reporting requirements and relies on a single set of underlying data. This approach still allows each agency to assess compliance with its respective program under its respective statutory authority.

NHTSA and EPA do not anticipate any significant noncompliance under the proposed program. However, failure to meet the fleet average standards (after credit opportunities are exhausted) would ultimately result in the potential for penalties under both EPCA and the CAA. The CAA allows EPA considerable discretion in assessment of penalties. Penalties under the CAA are typically determined on a vehicle-specific basis by determining the number of a manufacturer's highest emitting vehicles that caused the fleet average standard violation. This is the same mechanism used for EPA's National Low Emission Vehicle and Tier 2 corporate average standards, and to date there have been no instances of noncompliance. CAFE penalties are specified by EPCA and would be assessed for the entire noncomplying fleet at a rate of $5.50 times the number of vehicles in the fleet, times the number of tenths of mpg by which the fleet average falls below the standard. In Start Printed Page 49484the event of a compliance action arising out of the same facts and circumstances, EPA could consider CAFE penalties when determining appropriate remedies for the EPA case.

H. Conclusion

This joint proposal by NHTSA and EPA represents a strong and coordinated National Program to achieve greenhouse gas emission reductions and fuel economy improvements from the light-duty vehicle part of the transportation sector. EPA's proposal for GHG standards under the Clean Air Act is discussed in Section III of this notice; NHTSA's proposal for CAFE standards under EPCA is discussed in Section IV. Each agency includes analyses on a variety of relevant issues under its respective statute, such as feasibility of the proposed standards, costs and benefits of the proposal, and effects on the economy, auto manufacturers, and consumers. This joint rulemaking proposal reflects a carefully coordinated and harmonized approach to developing and implementing standards under the two agencies' statutes and is in accordance with all substantive and procedural requirements required by law.

NHTSA and EPA believe that the MY 2012 through 2016 standards proposed would provide substantial reductions in emissions of GHGs and oil consumption, with significant fuel savings for consumers. The proposed program is technologically feasible at a reasonable cost, based on deployment of available and effective control technology across the fleet, and industry would have the opportunity to plan over several model years and incorporate the vehicle upgrades into the normal redesign cycles. The proposed program would result in enormous societal net benefits, including greenhouse gas emission reductions, fuel economy savings, improved energy security, and cost savings to consumers from reduced fuel utilization.

II. Joint Technical Work Completed for This Proposal

A. Introduction

In this section NHTSA and EPA discuss several aspects of the joint technical analyses the two agencies collaborated on which are common to the development of each agency's proposed standards. Specifically we discuss: The development of the baseline vehicle market forecast used by each agency, the development of the proposed attribute-based standard curve shapes, how the relative stringency between the car and truck fleet standards for this proposal was determined, which technologies the agencies evaluated and their costs and effectiveness, and which economic assumptions the agencies included in their analyses. The joint Technical Support Document (TSD) discusses the agencies' joint technical work in more detail.

B. How Did NHTSA and EPA Develop the Baseline Market Forecast?

1. Why Do the Agencies Establish a Baseline Vehicle Fleet?

In order to calculate the impacts of the EPA and NHTSA proposed regulations, it is necessary to estimate the composition of the future vehicle fleet absent these proposed regulations in order to conduct comparisons. EPA and NHTSA have developed a comparison fleet in two parts. The first step was to develop a baseline fleet based on model year 2008 data. The second step was to project that fleet into 2011-2016. This is called the reference fleet. The third step was to modify that 2011-2016 reference fleet such that it had sufficient technologies to meet the 2011 CAFE standards. This final “reference fleet” is the light duty fleet estimated to exist in 2012-2016 if these proposed rules are not adopted. Each agency developed a final reference fleet to use in its modeling. All of the agencies' estimates of emission reductions, fuel economy improvements, costs, and societal impacts are developed in relation to the respective reference fleets.

2. How Do the Agencies Develop the Baseline Vehicle Fleet?

EPA and NHTSA have based the projection of total car and total light truck sales on recent projections made by the Energy Information Administration (EIA). EIA publishes a long-term projection of national energy use annually called the Annual Energy Outlook. This projection utilizes a number of technical and econometric models which are designed to reflect both economic and regulatory conditions expected to exist in the future. In support of its projection of fuel use by light-duty vehicles, EIA projects sales of new cars and light trucks. Due to the state of flux of both energy prices and the economy, EIA published three versions of its 2009 Annual Energy Outlook. The Preliminary 2009 report was published early (in November 2008) in order to reflect the dramatic increase in fuel prices which occurred during 2008 and which occurred after the development of the 2008 Annual Energy Outlook. The official 2009 report was published in March of 2009. A third 2009 report was published a month later which reflected the economic stimulus package passed by Congress earlier this year. We use the sales projections of this latest report, referred to as the updated 2009 Annual Energy Outlook, here.

In their updated 2009 report, EIA projects that total light-duty vehicle sales will gradually recover from their currently depressed levels by roughly 2013. In 2016, car and light truck sales are projected to be 9.5 and 7.1 million units, respectively. While the total level of sales of 16.6 million units is similar to pre-2008 levels, the fraction of car sales is higher than that existing in the 2000-2007 timeframe. This presumably reflects the impact of higher fuel prices and that fact that cars tend to have higher levels of fuel economy than trucks. We note that EIA's definition of cars and trucks follows that used by NHTSA prior to the MY 2011 CAFE final rule published earlier this year. That recent CAFE rule, which established the MY 2011 standards, reclassified a number of 2-wheel drive sport utility vehicles from the truck fleet to the car fleet. This has the impact of shifting a considerable number of previously defined trucks into the car category. Sales projections of cars and trucks for all future model years can be found in the draft Joint TSD for this proposal.

In addition to a shift towards more car sales, sales of segments within both the car and truck markets have also been changing and are expected to continue to change in the future. Manufacturers are introducing more crossover models which offer much of the utility of SUVs but using more car-like designs. In order to reflect these changes in fleet makeup, EPA and NHTSA considered several available forecasts. After review EPA purchased and shared with NHTSA forecasts from two well-known industry analysts, CSM-Worldwide (CSM), and J.D. Powers. NHTSA and EPA decided to use the forecast from CSM, for several reasons. One, CSM agreed to allow us to publish the data, on which our forecast is based, in the public domain.[65] Two, it covered nearly all the timeframe of greatest relevance to this proposed rule (2012-2015 model years). Three, it provided projections of vehicle sales both by manufacturer and by market segment. Four, it utilized market segments similar to those used in the Start Printed Page 49485EPA emission certification program and fuel economy guide. As discussed further below, this allowed the CSM forecast to be combined with other data obtained by NHTSA and EPA. We also assumed that the breakdowns of car and truck sales by manufacturer and by market segment for 2016 model year and beyond were the same as CSM's forecast for 2015 calendar year. The changes between company market share and industry market segments were most significant from 2011-2014, while for 2014-2015 the changes were relatively small. Therefore, we assumed 2016 market share and market segments to be the same as for 2015. To the extent that the agencies have received CSM forecasts for 2016, we will consider using them for the final rule.

We then projected the CSM forecasts for relative sales of cars and trucks by manufacturer and by market segment on to the total sales estimates of the updated 2009 Annual Energy Outlook. Tables II.B.1-1 and II.B.1-2 show the resulting projections for the 2016 model year and compare these to actual sales which occurred in 2008 model year. Both tables show sales using the traditional or classic definition of cars and light trucks. Determining which classic trucks will be defined as cars using the revised definition established by NHTSA earlier this year and included in this proposed rule requires more detailed information about each vehicle model which is developed next.

Table II.B.2-1—Annual Sales of Light-Duty Vehicles by Manufacturer in 2008 and Estimated for 2016

CarsLight trucksTotal
2008 MY2016 MY2008 MY2016 MY2008 MY2016 MY
BMW291,796380,80461,324134,805353,120515,609
Chrysler537,808110,4381,119,397133,4541,657,205243,891
Daimler208,052235,20579,135109,917287,187345,122
Ford641,281990,7001,227,1071,713,3761,868,3882,704,075
General Motors1,370,2801,562,7911,749,2271,571,0373,119,5073,133,827
Honda899,4981,429,262612,281812,3251,511,7792,241,586
Hyundai270,293437,329120,734287,694391,027725,024
Kia145,863255,954135,589162,515281,452418,469
Mazda191,326290,010111,220112,837302,546402,847
Mitsubishi76,70149,69724,02810,872100,72960,569
Porsche18,90937,06418,79717,17537,70654,240
Nissan653,121985,668370,294571,7481,023,4151,557,416
Subaru149,370128,88549,21175,841198,581204,726
Suzuki68,72069,45245,93834,307114,658103,759
Tata9,59641,58455,58447,10565,18088,689
Toyota1,143,6961,986,8241,067,8041,218,2232,211,5003,205,048
Volkswagen290,385476,69926,99999,459317,384576,158
Total6,966,6959,468,3656,874,6697,112,68913,841,36416,581,055

Table II.B.2-2—Annual Sales of Light-Duty Vehicles by Market Segment in 2008 and Estimated for 2016

CarsLight trucks
2008 MY2016 MY2008 MY2016 MY
Full-Size Car730,355466,616Full-Size Pickup1,195,0731,475,881
Mid-Size Car1,970,4942,641,739Mid-Size Pickup598,197510,580
Small/Compact Car1,850,5222,444,479Full-Size Van33,384284,110
Mid-Size Van719,529615,349
Subcompact/Mini Car599,6431,459,138Mid-Size MAV *191,448158,930
Small MAV235,524289,880
Luxury Car1,057,8751,432,162Full-Size SUV*530,74890,636
Specialty Car754,5471,003,078Mid-Size SUV347,026110,155
Others3,25921,153Small SUV377,262124,397
Full-Size CUV *406,554319,201
Mid-Size CUV798,3351,306,770
Small CUV1,441,5891,866,580
Total Sales6,966,6959,468,3656,874,6697,152,470
* MAV—Multi-Activity Vehicle, SUV—Sport Utility Vehicle, CUV—Crossover Utility Vehicle.

The agencies recognize that CSM forecasts a very significant reduction in market share for Chrysler. This may be a result of the extreme uncertainty surrounding Chrysler in early 2009. The forecast from CSM used in this proposal is CSM's forecast from the 2nd quarter of 2009. CSM also provided to the agencies an updated forecast in the 3rd quarter of 2009, which we were unable to use for this proposal due to time constraints. However, we have placed a copy of the 3rd Quarter CSM forecast in the public docket for this rulemaking, and we will consider its use, and any further updates from CSM or other data received during the comment period when developing the analysis for the final rule.[66] CSM's forecast for Chrysler for the 3rd quarter of 2009 was significantly increased compared to the 2nd quarter, by nearly a factor of two Start Printed Page 49486increase in projected sales over the 2012-2015 time frame.

The forecasts obtained from CSM provided estimates of car and trucks sales by segment and by manufacturer, but not by manufacturer for each market segment. Therefore, we needed other information on which to base these more detailed market splits. For this task, we used as a starting point each manufacturer's sales by market segment from model year 2008. Because of the larger number of segments in the truck market, we used slightly different methodologies for cars and trucks.

The first step for both cars and trucks was to break down each manufacturer's 2008 sales according to the market segment definitions used by CSM. For example, we found that Ford's car sales in 2008 were broken down as shown in Table II.B.2-3:

Table II.B.2-3—Breakdown of Ford's 2008 Car Sales

Full-size cars76,762 units.
Mid-size cars170,399 units.
Small/Compact cars180,249 units.
Subcompact/Mini carsNone.
Luxury cars100,065 units.
Specialty cars110,805 units.

We then adjusted each manufacturer's sales of each of its car segments (and truck segments, separately) so that the manufacturer's total sales of cars (and trucks) matched the total estimated for each future model year based on EIA and CSM forecasts. For example, as indicated in Table II.B.2-1, Ford's total car sales in 2008 were 641,281 units, while we project that they will increase to 990,700 units by 2016. This represents an increase of 54.5 percent. Thus, we increased the 2008 sales of each Ford car segment by 54.5 percent. This produced estimates of future sales which matched total car and truck sales per EIA and the manufacturer breakdowns per CSM (and exemplified for 2016 in Table II.B.1-1). However, the sales splits by market segment would not necessarily match those of CSM (and exemplified for 2016 in Table II.B.2-2).

In order to adjust the market segment mix for cars, we first adjusted sales of luxury, specialty and other cars. Since the total sales of cars for each manufacturer were already set, any changes in the sales of one car segment had to be compensated by the opposite change in another segment. For the luxury, specialty and other car segments, it is not clear how changes in sales would be compensated. For example, if luxury car sales decreased, would sales of full-size cars increase, mid-size cars, etc.? Thus, any changes in the sales of cars within these three segments were assumed to be compensated for by proportional changes in the sales of the other four car segments. For example, for 2016, the figures in Table II.B.2-2 indicate that luxury car sales in 2016 are 1,432,162 units. Luxury car sales are 1,057,875 units in 2008. However, after adjusting 2008 car sales by the change in total car sales for 2016 projected by EIA and a change in manufacturer market share per CSM, luxury car sales increased to 1,521,892 units. Thus, overall for 2016, luxury car sales had to decrease by 89,730 units or 6 percent. We decreased the luxury car sales by each manufacturer by this percentage. The absolute decrease in luxury car sales was spread across sales of full-size, mid-size, compact and subcompact cars in proportion to each manufacturer's sales in these segments in 2008. The same adjustment process was used for specialty cars and the “other cars” segment defined by CSM.

A slightly different approach was used to adjust for changing sales of the remaining four car segments. Starting with full-size cars, we again determined the overall percentage change that needed to occur in future year full-size cars sales after (1) adjusting for total sales per EIA, (2) manufacturer sales mix per CSM and (3) adjustments in the luxury, specialty and other car segments, in order to meet the segment sales mix per CSM. Sales of each manufacturer's large cars were adjusted by this percentage. However, instead of spreading this change over the remaining three segments, we assigned the entire change to mid-size vehicles. We did so because, as shown in 2008, higher fuel prices tend to cause car purchasers to purchase smaller vehicles. We are using AEO 2009 for this analysis, which assumes fuel prices similar in magnitude to actual high fuel prices seen in the summer of 2008.[67] However, if a consumer had previously purchased a full-size car, we thought it unlikely that they would jump all the way to a subcompact. It seemed more reasonable to project that they would drop one vehicle size category smaller. Thus, the change in each manufacturer's sales of full-size cars was matched by an opposite change (in absolute units sold) in mid-size cars.

The same process was then applied to mid-size cars, with the change in mid-size car sales being matched by an opposite change in compact car sales. This process was repeated one more time for compact car sales, with changes in sales in this segment being matched by the opposite change in the sales of subcompacts. The overall result was a projection of car sales for 2012-2016 which matched the total sales projections of EIA and the manufacturer and segment splits of CSM. These sales splits can be found in Chapter 1 of the draft Joint Technical Support Document for this proposal.

As mentioned above, a slightly different process was applied to truck sales. The reason for this was we could not confidently project how the change in sales from one segment preferentially went to or came from another particular segment. Some trend from larger vehicles to smaller vehicles would have been possible. However, the CSM forecasts indicated large changes in total sport utility vehicle, multi-activity vehicle and cross-over sales which could not be connected. Thus, we applied an iterative, but straightforward process for adjusting 2008 truck sales to match the EIA and CSM forecasts.

The first three steps were exactly the same as for cars. We broke down each manufacturer's truck sales into the truck segments as defined by CSM. We then adjusted all manufacturers' truck segment sales by the same factor so that total truck sales in each model year matched EIA projections for truck sales by model year. We then adjusted each manufacturer's truck sales by segment proportionally so that each manufacturer's percentage of total truck sales matched that forecast by CSM. This again left the need to adjust truck sales by segment to match the CSM forecast for each model year.

In the fourth step, we adjusted the sales of each truck segment by a common factor so that total sales for that segment matched the combination of the EIA and CSM forecasts. For example, sales of large pickups across all manufacturers were 1,144,166 units in 2016 after adjusting total sales to match EIA's forecast and adjusting each manufacturer's truck sales to match CSM's forecast for the breakdown of sales by manufacturer. Applying CSM's forecast of the large pickup segment of truck sales to EIA's total sales forecast indicated total large pickup sales of 1,475,881 units. Thus, we increased each manufacturer's sales of large pickups by 29 percent. The same type of adjustment was applied to all the other truck segments at the same time. The result was a set of sales projections which matched EIA's total truck sales projection and CSM's market segment forecast. However, after this step, sales Start Printed Page 49487by manufacturer no longer met CSM's forecast. Thus, we repeated step three and adjusted each manufacturer's truck sales so that they met CSM's forecast. The sales of each truck segment (by manufacturer) were adjusted by the same factor. The resulting sales projection matched EIA's total truck sales projection and CSM's manufacturer forecast, but sales by market segment no longer met CSM's forecast. However, the difference between the sales projections after this fifth step was closer to CSM's market segment forecast than it was after step three. In other words, the sales projection was converging. We repeated these adjustments, matching manufacturer sales mix in one step and then market segment in the next for a total of 19 times. At this point, we were able to match the market segment splits exactly and the manufacturer splits were within 0.1% of our goal, which is well within the needs of this analysis.

The next step in developing the baseline fleet was to characterize the vehicles within each manufacturer-segment combination. In large part, this was based on the characterization of the specific vehicle models sold in 2008. EPA and NHTSA chose to base our estimates of detailed vehicle characteristics on 2008 sales for several reasons. One, these vehicle characteristics are not confidential and can thus be published here for careful review and comment by interested parties. Two, being actual sales data, this vehicle fleet represents the distribution of consumer demand for utility, performance, safety, etc.

We gathered most of the information about the 2008 vehicle fleet from EPA's emission certification and fuel economy database. The data obtained from this source included vehicle production volume, fuel economy, engine size, number of engine cylinders, transmission type, fuel type, etc. EPA's certification database does not include a detailed description of the types of fuel economy-improving/CO2-reducing technologies considered in this proposal. Thus, we augmented this description with publicly available data which includes more complete technology descriptions from Ward's Automotive Group.[68] In a few instances when required vehicle information was not available from these two sources (such as vehicle footprint), we obtained this information from publicly accessible Internet sites such as Motortrend.com and Edmunds.com.[69]

The projections of future car and truck sales described above apply to each manufacturer's sales by market segment. The EPA emissions certification sales data are available at a much finer level of detail, essentially vehicle configuration. As mentioned above, we placed each vehicle in the EPA certification database into one of the CSM market segments. We then totaled the sales by each manufacturer for each market segment. If the combination of EIA and CSM forecasts indicated an increase in a given manufacturer's sales of a particular market segment, then the sales of all the individual vehicle configurations were adjusted by the same factor. For example, if the Prius represented 30% of Toyota's sales of compact cars in 2008 and Toyota's sales of compact cars in 2016 was projected to double by 2016, then the sales of the Prius were doubled, and the Prius sales in 2016 remained 30% of Toyota's compact car sales.

NHTSA and EPA request comment on the methodology and data sources used for developing the baseline vehicle fleet for this proposal and the reasonableness of the results.

3. How Is the Development of the Baseline Fleet for This Proposal Different From NHTSA's Historical Approach, and Why Is This Approach Preferable?

NHTSA has historically based its analysis of potential new CAFE standards on detailed product plans the agency has requested from manufacturers planning to produce light vehicles for sale in the United States. Although the agency has not attempted to compel manufacturers to submit such information, most major manufacturers and some smaller manufacturers have voluntarily provided it when requested.

As in this and other prior rulemakings, NHTSA has requested extensive and detailed information regarding the models that manufacturers plan to offer, as well as manufacturers' estimates of the volume of each model they expect to produce for sale in the U.S. NHTSA's recent requests have sought information regarding a range of engineering and planning characteristics for each vehicle model (e.g., fuel economy, engine, transmission, physical dimensions, weights and capacities, redesign schedules), each engine (e.g., fuel type, fuel delivery, aspiration, valvetrain configuration, valve timing, valve lift, power and torque ratings), and each transmission (e.g., type, number of gears, logic).

The information that manufacturers have provided in response to these requests has varied in completeness and detail. Some manufacturers have submitted nearly all of the information NHTSA has requested, have done so for most or all of the model years covered by NHTSA's requests, and have closely followed NHTSA's guidance regarding the structure of the information. Other manufacturers have submitted partial information, information for only a few model years, and/or information in a structure less amenable to analysis. Still other manufacturers have not responded to NHTSA's requests or have responded on occasion, usually with partial information.

In recent rulemakings, NHTSA has integrated this information and estimated missing information based on a range of public and commercial sources (such as those used to develop today's market forecast). For unresponsive manufacturers, NHTSA has estimated fleet composition based on the latest-available CAFE compliance data (the same data used as part of the foundation for today's market forecast). NHTSA has then adjusted the size of the fleet based on AEO's forecast of the light vehicle market and normalized manufacturers' market shares based on the latest-available CAFE compliance data.

Compared to this approach, the market forecast the agencies have developed for this analysis has both advantages and disadvantages.

Most importantly, today's market forecast is much more transparent. The information sources used to develop today's market forecast are all either in the public domain or available commercially. Therefore, NHTSA and EPA are able to make public the market inputs actually used in the agencies' respective modeling systems, such that any reviewer may independently repeat and review the agencies' analyses. Previously, although NHTSA provided this type of information to manufacturers upon request (e.g., GM requested and received outputs specific to GM), NHTSA was otherwise unable to release market inputs and the most detailed model outputs (i.e., the outputs containing information regarding specific vehicle models) because doing so would violate requirements protecting manufacturers' confidential business information from disclosure.[70] Therefore, this approach provides much greater opportunity for the public to Start Printed Page 49488review every aspect of the agencies' analyses and comment accordingly.

Another significant advantage of today's market forecast is the agencies' ability to assess more fully the incremental costs and benefits of the proposed standards. In the past two years, NHTSA has requested and received three sets of future product plan submissions from the automotive companies, most recently this past spring. These submissions are intended to be the actual future product plans for the companies. In the most recent submission it is clear that many of the firms have been and are clearly planning for future CAFE standard increases for model years 2012 and later. The results for the product plans for many firms are a significant increase in their projected future application of fuel economy improvement technology. However, for the purposes of assessing the costs of the model year 2012-2016 standards the use of the product plans presents a difficulty, namely, how to assess the increased costs of the proposed future standards if the companies have already anticipated the future standards and the costs are therefore now part of the agencies' baseline. This is a real concern with the most recent product plans received from the companies, and is one of the reasons the agencies have decided not to use the recent product plans to define the baseline market data for assessing our proposed standards. The approach used for this proposal does not raise this concern, as the underlying data comes from model year 2008 production.[71]

In addition, by developing a baseline fleet from common sources, the agencies have been able to avoid some errors—perhaps related to interpretation of requests—that have been observed in past responses to NHTSA's requests. For example, while reviewing information submitted to support the most recent CAFE rulemaking, NHTSA staff discovered that one manufacturer had misinterpreted instructions regarding the specification of vehicle track width, leading to important errors in estimates of vehicle footprints. Although the manufacturer resubmitted the information with corrections, with this approach, the agencies are able to reduce the potential for such errors and inconsistencies by utilizing common data sources and procedures.

An additional advantage of the approach used for this proposal is a consistent projection of the change in fuel economy and CO2 emissions across the various vehicles from the application of new technology. In the past, company product plans would include the application of new fuel economy improvement technology for a new or improved vehicle model with the resultant estimate from the company of the fuel economy levels for the vehicle. However, companies did not always provide to NHTSA the detailed analysis which showed how they forecasted what the fuel economy performance of the new vehicle was—that is, whether it came from actual test data, from vehicle simulation modeling, from best engineering judgment or some other methodology. Thus, it was not possible for NHTSA to review the methodology used by the manufacturer, nor was it possible to review what approach the different manufacturers utilized from a consistency perspective. With the approach used for this proposal, the baseline market data comes from actual vehicles which have actual fuel economy test data—so there is no question what is the basis for the fuel economy or CO2 performance of the baseline market data as it is actual measured data.

Another advantage of today's approach is that future market shares are based on a forecast of what will occur in the future, rather than a static value. In the past, NHTSA has utilized a constant market share for each model year, based on the most recent year available, for example from the CAFE compliance data, that is, a forecast of the 2011-2015 time frame where company market shares do not change. In the approach used today, we have utilized the forecasts from CSM of how future market shares among the companies may change over time.[72]

The approach the agencies have taken in developing today's market forecast does, however, have some disadvantages. Most importantly, it produces a market forecast that does not represent some important changes likely to occur in the future.

Some of the changes not captured by today's approach are specific. For example, the agencies' current market forecast includes some vehicles for which manufacturers have announced plans for elimination or drastic production cuts such as the Chevrolet Trailblazer, the Chrysler PT Cruiser, the Chrysler Pacifica, the Dodge Magnum, the Ford Crown Victoria, the Hummer H2, the Mercury Sable, the Pontiac Grand Prix, and the Pontiac G5. These vehicle models appear explicitly in market inputs to NHTSA's analysis, and are among those vehicle models included in the aggregated vehicle types appearing in market inputs to EPA's analysis.

Conversely, the agencies' market forecast does not include some forthcoming vehicle models, such as the Chevrolet Volt, the Chevrolet Camaro, the Ford Fiesta and several publicly announced electric vehicles, including the announcements from Nissan. Nor does it include several MY 2009 or 2010 vehicles, such as the Honda Insight, the Hyundai Genesis and the Toyota Venza, as our starting point for vehicle definitions was Model Year 2008. Additionally, the market forecast does not account for publicly announced technology introductions, such as Ford's EcoBoost system, whose product plans specify which vehicles and how many are planned to have this technology. Were the agencies to rely on manufacturers' product plans (that were submitted), the market forecast would account for not only these specific examples, but also for similar examples that have not yet been announced publicly.

The agencies anticipate that including vehicles after MY 2008 would not significantly impact our estimates of the technology required to comply with the proposed standards. If they were included, these vehicles could make the standards appear to cost less relative to the reference case. First, the projections of sales by vehicle segment and manufacturer include these expected new vehicle models. Thus, to the extent that these new vehicles are expected to change consumer demand, they should be reflected in our reference case. While we are projecting the characteristics of the new vehicles with MY 2008 vehicles, the primary difference between the new vehicles and 2008 vehicles in the same vehicle segment is the use of additional CO2-reducing and fuel-saving technology. Both the NHTSA and EPA models add such technology to facilitate compliance with the proposed standards. Thus, our future projections of the vehicle fleet generally shift vehicle designs towards those of these newer vehicles. The advantage of our approach is that it helps clarify the costs of this proposal, as the cost of all fuel economy Start Printed Page 49489improvements beyond those required by the MY 2011 CAFE standards are being assigned to the proposal. In some cases, the new vehicles being introduced by manufacturers are actually in response to their anticipation of this rulemaking. Our approach prevents some of these technological improvements and their associated cost from being assumed in the baseline. Thus, the added technology will not be considered to be free for the purposes of this rule.

We note that, as a result of these issues, the market file may show sales volumes for certain vehicles during MYs 2012-2016 even though they will be discontinued before that time frame. Although the agencies recognize that these specific vehicles will be discontinued, we continue to include them in the market forecast because they are useful for representing successor vehicles that may appear in the rulemaking time frame to replace the discontinued vehicles in that market segment.

Other market changes not captured by today's approach are broader. For example, Chrysler Group LLC has announced plans to offer small- and medium-sized cars using Fiat powertrains. The product plan submitted by Chrysler includes vehicles that appear to reflect these plans. However, none of these specific vehicle models are included in the market forecast the agencies have developed starting with MY 2008 CAFE compliance data. The product plan submitted by Chrysler is also more optimistic with regard to Chrysler's market share during MYs 2012-2016 than the market forecast projected by CSM and used by the agencies for this proposal. Similarly, the agencies' market forecast does not reflect Nissan's plans regarding electric vehicles.

Additionally, some technical information that manufacturers have provided in product plans regarding specific vehicle models is, at least insofar as NHTSA and EPA have been able to determine, not available from public or commercial sources. While such gaps do not bear significantly on the agencies' analysis, the diversity of pickup configurations necessitated utilizing a sales-weighted average footprint value [73] for many manufacturers' pickups. Since our modeling only utilizes footprint in order to estimate each manufacturer's CO2 or fuel economy standard and all the other vehicle characteristics are available for each pickup configuration, this approximation has no practical impact on the projected technology or cost associated with compliance with the various standards evaluated. The only impact which could arise would be if the relative sales of the various pickup configurations changed, or if the agencies were to explore standards with a different shape. This would necessitate recalculating the average footprint value in order to maintain accuracy.

The agencies have carefully considered these advantages and disadvantages of using a market forecast derived from public and commercial sources rather than from manufacturers' product plans, and we believe that the advantages outweigh the disadvantages for the purpose of proposing standards for model years 2012-2016. NHTSA's inability to release confidential market inputs and corresponding detailed outputs from the CAFE model has raised serious concerns among many observers regarding the transparency of NHTSA's analysis, as well as related concerns that the lack of transparency might enable manufacturers to provide unrealistic information to try to influence NHTSA's determination of the maximum feasible standards. Although NHTSA does not agree with some observers' assertions that some manufacturers have deliberately provided inaccurate or otherwise misleading information, today's market forecast is fully open and transparent, and is therefore not subject to such concerns.

With respect to the disadvantages, the agencies are hopeful that manufacturers will, in the future, agree to make public their plans regarding model years that are very near, such as MY 2010 or perhaps MY 2011, so that this information can be considered for purposes of the final rule analysis and be available for the public. In any event, because NHTSA and EPA are releasing market inputs used in the agencies' respective analyses, manufacturers, suppliers, and other automobile industry observers and participant can submit comments on how these inputs should be improved, as can all other reviewers.

4. How Does Manufacturer Product Plan Data Factor into the Baseline Used in This Proposal?

In the Spring of 2009, many manufacturers submitted product plans in response to NHTSA's request that they do so.[74] NHTSA and EPA both have access to these plans, and both agencies have reviewed them in detail. A small amount of product plan data was used in the development of the baseline. The specific pieces of data are:

  • Wheelbase;
  • Track Width Front;
  • Track Width Rear;
  • EPS (Electric Power Steering);
  • ROLL (Reduced Rolling Resistance);
  • LUB (Advance Lubrication i.e., low weight oil);
  • IACC (Improved Electrical Accessories);
  • Curb Weight;
  • GVWR (Gross Vehicle Weight Rating)

The track widths, wheelbase, curb weight, and GVWR could have been looked up on the Internet (159 were), but were taken from the product plans when available for convenience. To ensure accuracy, a sample from each product plan was used as a check against the numbers available from Motortrend.com. These numbers will be published in the baseline file since they can be easily looked up on the Internet. On the other hand, EPS, ROLL, LUB, and IACC are difficult to determine without using manufacturer's product plans. These items will not be published in the baseline file, but the data has been aggregated into the EPA baseline in the technology effectiveness and cost effectiveness for each vehicle in a way that allows the baseline for the model to be published without revealing the manufacturers' data.

Considering both the publicly-available baseline used in this proposal and the product plans provided recently by manufacturers, however, it is possible that the latter could potentially be used to develop a more realistic forecast of product mix and vehicle characteristics of the near-future light-duty fleet. At the core of concerns about using company product plans are two concerns about doing so: (a) Uncertainty and possible inaccuracy in manufacturers' forecasts and (b) the transparency of using product plan data. With respect to the first concern, the Start Printed Page 49490agencies note that manufacturers' near-term forecasts (i.e., for model years two or three years into the future) should be less uncertain and more amenable to eventual retrospective analysis (i.e., comparison to actual sales) than manufacturers' longer-term forecasts (i.e., for model years more than five years into the future). With respect to the second concern, NHTSA has consulted with most manufacturers and believes that although few, if any, manufacturers would be willing to make public their longer-term plans, many responding manufacturers may be willing to make public their short-term plans. In a companion notice, NHTSA is seeking product plan information from manufacturers for MYs 2008 to 2020, and the agencies will also continue to consult with manufacturers regarding the possibility of releasing plans for MY 2010 and/or MY 2011 for purposes of developing and analyzing the final GHG and CAFE standards for MYs 2012-2016. The agencies are hopeful that manufacturers will agree to do so, and that NHTSA and EPA would therefore be able to use product plans in ways that might aid in increasing the accuracy of the baseline market forecast.

C. Development of Attribute-Based Curve Shapes

NHTSA and EPA are setting attribute-based CAFE and CO2 standards that are defined by a mathematical function for MYs 2012-2016 passenger cars and light trucks. EPCA, as amended by EISA, expressly requires that CAFE standards for passenger cars and light trucks be based on one or more vehicle attributes related to fuel economy, and be expressed in the form of a mathematical function.[75] The CAA has no such requirement, though in past rules, EPA has relied on both universal and attribute-based standards (e.g., for nonroad engines, EPA uses the attribute of horsepower). However, given the advantages of using attribute-based standards and given the goal of coordinating and harmonizing CO2 standards promulgated under the CAA and CAFE standards promulgated under EPCA, as expressed in the joint NOI, EPA is also proposing to issue standards that are attribute-based and defined by mathematical functions.

Under an attribute-based standard, every vehicle model has a performance target (fuel economy and GHG emissions for CAFE and GHG emissions standards, respectively), the level of which depends on the vehicle's attribute (for this proposal, footprint). The manufacturers' fleet average performance is determined by the production-weighed [76] average (for CAFE, harmonic average) of those targets. NHTSA and EPA are proposing CAFE and CO2 emissions standards defined by constrained linear functions and, equivalently, piecewise linear functions.[77] As a possible option for future rulemakings, the constrained linear form was introduced by NHTSA in the 2007 NPRM proposing CAFE standards for MY 2011-2015. Described mathematically, the proposed constrained linear function is defined according to the following formula: [78]

Where:

TARGET = the fuel economy target (in mpg) applicable to vehicles of a given footprint (FOOTPRINT, in square feet),

a = the function's upper limit (in mpg),

b = the function's lower limit (in mpg),

c = the slope (in gpm per square foot) of the sloped portion of the function,

d = the intercept (in gpm) of the sloped portion of the function (that is, the value the sloped portion would take if extended to a footprint of 0 square feet, and the MIN and MAX functions take the minimum and maximum, respectively, of the included values; for example, MIN (1,2) = 1, MAX (1,2) = 2, and MIN[MAX (1,2),3)] = 2.

Because the format is linear on a gallons-per-mile basis, not on a miles-per-gallon basis, it is plotted as fuel consumption below. Graphically, the constrained linear form appears as shown in Figure II.C.1-1.

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The specific form and stringency for each fleet (passenger cars and light trucks) and model year are defined through specific values for the four coefficients shown above.

EPA is proposing the equivalent equation below for assigning CO2 targets to an individual vehicle's footprint value. Although the general model of the equation is the same for each vehicle category and each year, the parameters of the equation differ for cars and trucks. Each parameter also changes on an annual basis, resulting in the yearly increases in stringency seen in the tables above. Described mathematically, EPA's proposed piecewise linear function is as follows:

Target = a, if x ≤ l

Target = cx + d, if l < x ≤ h

Target = b, if x > h

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In the constrained linear form applied by NHTSA, this equation takes the simplified form:

Target = MIN [MAX (c * x + d, a), b]

Where:

Target = the CO2 target value for a given footprint (in g/mi)

a = the minimum target value (in g/mi CO2)

b = the maximum target value (in g/mi CO2)

c = the slope of the linear function (in g/mi per sq ft CO2)

d = is the intercept or zero-offset for the line (in g/mi CO2)

x = footprint of the vehicle model (in square feet, rounded to the nearest tenth)

l & h are the lower and higher footprint limits or constraints or (“kinks”) or the boundary between the flat regions and the intermediate sloped line (in sq ft)

Graphically, piecewise linear form, like the constrained linear form, appears as shown in Figure II.C.1-2.

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As for the constrained linear form, the specific form and stringency for each fleet (passenger car and light trucks) and model year are defined through specific values for the four coefficients shown above.

For purposes of this rule, NHTSA and EPA developed the basic curve shapes using methods similar to those applied by NHTSA in fitting the curves defining the MY 2011 standards. The first step is defining the reference market inputs (in the form used by NHTSA's CAFE model) described in Section II.B of this preamble and in Chapter 1 of the joint TSD. However, because the baseline fleet is technologically heterogeneous, NHTSA used the CAFE model to develop a fleet to which nearly all the technologies discussed in Chapter 3 of the joint TSD [79] were applied, by taking the following steps: (1) Treating all manufacturers as unwilling to pay civil penalties rather than applying technology, (2) applying any technology at any time, irrespective of scheduled vehicle redesigns or freshening, and (3) ignoring “phase-in caps” that constrain the overall amount of technology that can be applied by the model to a given manufacturer's fleet. These steps helped to increase technological parity among vehicle models, thereby providing a better basis (than the baseline or reference fleets) for estimating the statistical relationship between vehicle size and fuel economy.

In fitting the curves, NHTSA also continued to apply constraints to limit the function's value for both the smallest and largest vehicles. Without a limit at the smallest footprints, the function—whether logistic or linear—can reach values that would be unfairly burdensome for a manufacturer that elects to focus on the market for small vehicles; depending on the underlying data, an unconstrained form could apply to the smallest vehicles targets that are simply unachievable. Limiting the function's value for the smallest vehicles ensures that the function remains technologically achievable at small footprints, and that it does not unduly burden manufacturers focusing on small vehicles. On the other side of the function, without a limit at the largest footprints, the function may provide no floor on required fuel economy. Also, the safety considerations that support the provision of a disincentive for downsizing as a compliance strategy apply weakly—if at all—to the very largest vehicles. Limiting the function's value for the largest vehicles leads to a function with an inherent absolute minimum level of performance, while remaining consistent with safety considerations.

Before fitting the sloped portion of the constrained linear form, NHTSA selected footprints above and below which to apply constraints (i.e., minimum and maximum values) on the function. For passenger cars, the agency noted that several manufacturers offer small and, in some cases, sporty coupes below 41 square feet, examples including the BMW Z4 and Mini, Saturn Sky, Honda Fit and S2000, Hyundai Tiburon, Mazda MX-5 Miata, Suzuki SX4, Toyota Yaris, and Volkswagen New Beetle. Because such vehicles represent a small portion (less than 10 percent) of the passenger car market, yet often have characteristics that could make it infeasible to achieve the very challenging targets that could apply in the absence of a constraint, NHTSA is proposing to “cut off” the linear portion of the passenger car function at 41 square feet. For consistency, the agency is proposing to do the same for the light truck function, although no light trucks are currently offered below 41 square feet. The agency further noted that above 56 square feet, the only passenger car model present in the MY 2008 fleet were four luxury vehicles with extremely low sales volumes—the Bentley Arnage and three versions of the Rolls Royce Phantom. NHTSA is therefore proposing to “cut off” the linear portion of the passenger car function at 56 square feet. Finally, the agency noted that although public information is limited regarding the sales volumes of the many different configurations (cab designs and bed sizes) of pickup trucks, most of the largest pickups (e.g., the Ford F-150, GM Sierra/Silverado, Nissan Titan, and Toyota Tundra) appear to fall just above 66 square feet in footprint. NHTSA is therefore proposing to “cut off” the linear portion of the light truck function at 66 square feet.

NHTSA and EPA seek comment on this approach to fitting the curves. We note that final decisions on this issue will play an important role in determining the form and stringency of the final CAFE and CO2 standards, the incentives those standards will provide (e.g., with respect to downsizing small vehicles), and the relative compliance burden faced by each manufacturer.

For purposes of the CAFE and CO2 standards proposed in this NPRM, NHTSA and EPA recognize that there is some possibility that low fuel prices during the years in which MY 2012-2016 vehicles are in service might lead to less than currently anticipated fuel savings and emissions reductions. One way to assure that emission reductions are achieved in fact is through the use of explicit backstops, fleet average standards established at an absolute level. For purposes of the CAFE program, EISA requires a backstop for domestically-manufactured passenger cars—a universal minimum, non-attribute-based standard of either “27.5 mpg or 92 percent of the average fuel economy projected by the Secretary of Transportation for the combined domestic and non-domestic passenger automobile fleets manufactured for sale in the United States by all manufacturers in the model year * * *,” whichever is greater.[80] In the MY 2011 final rule, the first rule setting standards since EISA added the backstop provision to EPCA, NHTSA considered whether the statute permitted the agency to set backstop standards for the other regulated fleets of imported passenger cars and light trucks. Although commenters expressed support both for and against a more permissive reading of EISA, NHTSA concluded in that rulemaking that its authority was likely limited to setting only the backstop standard that Congress expressly provided, i.e., the one for domestic passenger cars. A backstop, however, could be adopted under section 202(a) of the CAA assuming it could be justified under the relevant statutory criteria. EPA and NHTSA also note that the flattened portion of the car curve directionally addresses the issue of a backstop (i.e., a flat curve is itself a backstop). The agencies seek comment on whether backstop standards, or any other method within the agencies' statutory authority, should and can be implemented in order to guarantee a level of CO2 emissions reductions and fuel savings under the attribute-based standards.

Having developed a set of baseline data to which to fit the mathematical fuel consumption function, the initial values for parameters c and d were determined for cars and trucks separately. c and d were initially set at the values for which the average (equivalently, sum) of the absolute values of the differences was minimized between the “maximum technology” fleet fuel consumption (within the footprints between the upper and lower Start Printed Page 49494limits) and the straight line the function defined above at the same corresponding vehicle footprints. That is, c and d were determined by minimizing the average absolute residual, commonly known as the MAD (Mean Absolute Deviation) approach, of the corresponding straight line.

Finally, NHTSA calculated the values of the upper and lower values (a and b) based on the corresponding footprints discussed above (41 and 56 square feet for passenger cars, and 41 and 66 square feet for light trucks).

The result of this methodology is shown below in Figures II.A.2-2 and II.A.2-3 for passenger cars and light trucks, respectively. The fitted curves are shown with the underlying “maximum technology” passenger car and light truck fleets. For passenger cars, the mean absolute deviation of the sloped portion of the function was 14 percent. For trucks, the corresponding MAD was 10 percent.

Start Printed Page 49495

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The agencies used these functional forms as a starting point to develop mathematical functions defining the actual proposed standards as discussed above. The agencies then transposed these functions vertically (i.e., on a gpm or CO2 basis, uniformly downward) to produce the relative car and light truck standards described in the next section.

D. Relative Car-Truck Stringency

The agencies have determined, under their respective statutory authorities, that it is appropriate to propose fleetwide standards with the projected levels of stringency of 34.1 mpg or 250 g/mi (as well as the corresponding intermediate year fleetwide standards) for NHTSA and EPA respectively. To determine the relative stringency of passenger car and light truck standards, the agencies are concerned that increasing the difference between the car and truck standards (either by Start Printed Page 49497raising the car standards or lowering the truck standards) could encourage manufacturers to build fewer cars and more trucks, likely to the detriment of fuel economy and CO2 reductions.[81] In order to maintain consistent car/truck standards, the agencies applied a constant ratio between the estimated average required performance under the passenger car and light truck standards, in order to maintain a stable set of incentives regarding vehicle classification.

To calculate relative car-truck stringency in this proposal, the agencies explored a number of possible alternatives. In the interest of harmonization, the agencies agree to use the Volpe model in order to estimate stringencies at which net benefits would be maximized. Further details of the development of this scenario approach can be found in Section IV of this preamble as well as in NHTSA's PRIA and DEIS. NHTSA examined passenger car and light truck standards that would produce the proposed combined average fuel economy levels from Table I.B.2-2 above. NHTSA did so by shifting downward the curves that maximize net benefits, holding the relative stringency of passenger car and light truck standards constant at the level determined by maximizing net benefits, such that the average fuel economy required of passenger cars remains 34 percent higher than the average fuel economy required of light trucks. This methodology resulted in the average fuel economy levels for passenger cars and light trucks during MYs 2012-2016 as shown in Table I.D.2-1. The following chart illustrates this methodology of shifting the standards from the levels maximizing net benefits to the levels consistent with the combined fuel economy standards in this rule.

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After this analysis was completed, EPA examined two alternative approaches to determine whether they would lead to significantly different outcomes. First, EPA analyzed the relative stringencies using a 10-year payback analysis (with the OMEGA model). This analysis sets the relative stringencies if increased technology cost is to be paid back out of fuel savings over a 10-year period (assuming a 3% discount rate). Second, EPA also conducted a technology maximized analysis, which sets the relative stringencies if all technologies (with the exception of strong hybrids and diesels) are assumed to be utilized in the fleet. (This is the same methodology that was used to determine the curve shape as explained in the section above and in Chapter 2 of the joint TSD section). Start Printed Page 49499Compared to NHTSA's approach based on stringencies estimated to maximize net benefits, EPA staff found that these two other approaches produced very similar results to NHTSA's, i.e., similar ratios of car-truck relative stringency (the ratio being within a range of 1.34 to 1.37 relative stringency of the car to the truck fuel economy standard). EPA believes that this similarity supports the proposed relative stringency of the two standards.

The car and truck standards for EPA (Table I.D. 2-4 above) were subsequently determined by first converting the average required fuel economy levels to average required CO2 emission rates, and then applying the expected air conditioning credits for 2012-2016. These A/C credits are shown in the following table. Further details of the derivation of these factors can be found in Section III of this preamble or in the EPA RIA.

Table II.D.1-1 Expected Fleet A/C Credits (in CO2 Equivalent g/mi) From 2012-2016

Average technology penetration (percent)Average credit for carsAverage credit for trucksAverage credit for combined fleet
2012253.03.43.1
2013404.85.45.0
2014557.28.17.5
2015759.610.810.0
20168510.211.510.6

The agencies seek comment on the use of this methodology for apportioning the fleet stringencies to relative car and truck standards for 2012-2016.

E. Joint Vehicle Technology Assumptions

Vehicle technology assumptions, i.e., assumptions about their cost, effectiveness, and the rate at which they can be incorporated into new vehicles, are often very controversial as they have a significant impact on the levels of the standards. Agencies must, therefore, take great care in developing and justifying these assumptions. In developing technology inputs for MY 2012-2016 standards, the agencies reviewed the technology assumptions that NHTSA used in setting the MY 2011 standards and the comments that NHTSA received in response to its May 2008 Notice of Proposed Rulemaking. This review is consistent with the request by President Obama in his January 26 memorandum to DOT. In addition, the agencies reviewed the technology input estimates identified in EPA's July 2008 Advanced Notice of Proposed Rulemaking. The review of these documents was supplemented with updated information from more current literature, new product plans and from EPA certification testing.

As a general matter, the best way to derive technology cost estimates is to conduct real-world tear down studies. These studies break down each technology into its respective components, evaluate the costs of each component, and build up the costs of the entire technology based on the contribution of each component. As such, tear down studies require a significant amount of time and are very costly. EPA has begun conducting tear down studies to assess the costs of 4-5 technologies under a contract with FEV. To date, only two technologies (stoichiometeric gasoline direct injection and turbo charging with engine downsizing for a 4 cylinder engine to a 4 cylinder engine) have been evaluated. The agencies relied on the findings of FEV for estimating the cost of these technologies in this rulemaking—directly for the 4 cylinder engines, and extrapolated for the 6 and 8 cylinder engines. The agencies request comment on the use of these estimated costs from the FEV study. For the other technologies, because tear down studies were not yet available, the agencies decided to pursue, to the extent possible, the Bill of Materials (BOM) approach as outlined in NHTSA's MY 2011 final rule. A similar approach was used by EPA in the EPA 2008 Staff Technical Report. This approach was recommended to NHTSA by Ricardo, an international engineering consulting firm retained by NHTSA to aid in the analysis of public comments on its proposed standards for MYs 2011-2015 because of its expertise in the area of fuel economy technologies. A BOM approach is one element of the process used in tear down studies. The difference is that under a BOM approach, the build up of cost estimates is conducted based on a review of cost and effectiveness estimates for each component from available literature, while under a tear down study, the cost estimates which go into the BOM come from the tear down study itself. To the extent that the agencies departed from the MY 2011 CAFE final rule estimates, the agencies explained the reasons and provided supporting analyses. As tear down studies are concluded by FEV during the rulemaking process, the agencies will make them available in the joint rulemaking docket of this rulemaking. The agencies will consider these studies and any comments received on them, as practicable and appropriate, as well as any other new information pertinent to the rulemaking of which the agencies become aware, in developing technology cost assumptions for the final rule.

Similarly, the agencies followed a BOM approach for developing its effectiveness estimates, insofar as the BOM developed for the cost estimates helped to inform the appropriate effectiveness values derived from the literature review. The agencies supplemented the information with results from available simulation work and real world EPA certification testing.

The agencies would also like to note that per the Energy Independence and Security Act (EISA), the National Academies of Sciences is conducting an updated study to update Chapter 3 of the 2002 NAS Report, which outlines technology estimates. The update will take a fresh look at that list of technologies and their associated cost and effectiveness values.

The report is expected to be available on September 30, 2009. As soon as the update to the NAS Report is received, it will be placed in the joint rulemaking docket for the public's review and comment. Because this will occur during the comment period, the public is encouraged to check the docket regularly and provide comments on the updated NAS Report by the closing of the comment period of this notice. NHTSA and EPA will consider the updated NAS Report and any comments received, as practicable and appropriate, on it when considering revisions to the technology cost and effectiveness estimates for the final rule. Start Printed Page 49500Consideration of this report is consistent with the request by President Obama in his January 26 memorandum to DOT.

1. What Technologies Do the Agencies Consider?

The agencies considered over 35 vehicle technologies that manufacturers could use to improve the fuel economy and reduce CO2 emissions of their vehicles during MYs 2012-2016. The majority of the technologies described in this section are readily available, well known, and could be incorporated into vehicles once production decisions are made. Other technologies considered may not currently be in production, but are beyond the research phase and under development, and are expected to be in production in the next few years. These are technologies which can, for the most part, be applied both to cars and trucks, and which are capable of achieving significant improvements in fuel economy and reductions in CO2 emissions, at reasonable costs. The agencies did not consider technologies in the research stage because the leadtime available for this rule is not sufficient to move such technologies from research to production.

The technologies considered in the agencies' analysis are briefly described below. They fall into five broad categories: engine technologies, transmission technologies, vehicle technologies, electrification/accessory technologies, and hybrid technologies. For a more detailed description of each technology and their costs and effectiveness, we refer the reader to Chapter 3 of the joint TSD, Chapter III of NHTSA's PRIA, and Chapter 1 of EPA's DRIA. Technologies to reduce CO2 and HFC emissions from air conditioning systems are discussed in Section III of this preamble and in EPA's DRIA.

Types of engine technologies that improve fuel economy and reduce CO2emissions include the following:

  • Low-friction lubricants—low viscosity and advanced low friction lubricants oils are now available with improved performance and better lubrication. If manufacturers choose to make use of these lubricants, they would need to make engine changes and possibly conduct durability testing to accommodate the low-friction lubricants.
  • Reduction of engine friction losses—can be achieved through low-tension piston rings, roller cam followers, improved material coatings, more optimal thermal management, piston surface treatments, and other improvements in the design of engine components and subsystems that improve engine operation.
  • Conversion to dual overhead cam with dual cam phasing—as applied to overhead valves designed to increase the air flow with more than two valves per cylinder and reduce pumping losses.
  • Cylinder deactivation—deactivates the intake and exhaust valves and prevents fuel injection into some cylinders during light-load operation. The engine runs temporarily as though it were a smaller engine which substantially reduces pumping losses.
  • Variable valve timing—alters the timing of the intake valve, exhaust valve, or both, primarily to reduce pumping losses, increase specific power, and control residual gases.
  • Discrete variable valve lift—increases efficiency by optimizing air flow over a broader range of engine operation which reduces pumping losses. Accomplished by controlled switching between two or more cam profile lobe heights.
  • Continuous variable valve lift—is an electromechanically controlled system in which valve timing is changed as lift height is controlled. This yields a wide range of performance optimization and volumetric efficiency, including enabling the engine to be valve throttled.
  • Stoichiometric gasoline direct-injection technology—injects fuel at high pressure directly into the combustion chamber to improve cooling of the air/fuel charge within the cylinder, which allows for higher compression ratios and increased thermodynamic efficiency.
  • Combustion restart—can be used in conjunction with gasoline direct-injection systems to enable idle-off or start-stop functionality. Similar to other start-stop technologies, additional enablers, such as electric power steering, accessory drive components, and auxiliary oil pump, might be required.
  • Turbocharging and downsizing—increases the available airflow and specific power level, allowing a reduced engine size while maintaining performance. This reduces pumping losses at lighter loads in comparison to a larger engine.
  • Exhaust-gas recirculation boost—increases the exhaust-gas recirculation used in the combustion process to increase thermal efficiency and reduce pumping losses.
  • Diesel engines—have several characteristics that give superior fuel efficiency, including reduced pumping losses due to lack of (or greatly reduced) throttling, and a combustion cycle that operates at a higher compression ratio, with a very lean air/fuel mixture, relative to an equivalent-performance gasoline engine. This technology requires additional enablers, such as NOx trap catalyst after-treatment or selective catalytic reduction NOx after-treatment. The cost and effectiveness estimates for the diesel engine and aftertreatment system utilized in this proposal have been revised from the NHTSA MY 2011 CAFE final rule, and the agencies request comment on these diesel cost estimates.

Types of transmission technologies considered include:

  • Improved automatic transmission controls—optimizes shift schedule to maximize fuel efficiency under wide ranging conditions, and minimizes losses associated with torque converter slip through lock-up or modulation.
  • Six-, seven-, and eight-speed automatic transmissions—the gear ratio spacing and transmission ratio are optimized for a broader range of engine operating conditions.
  • Dual clutch or automated shift manual transmissions—are similar to manual transmissions, but the vehicle controls shifting and launch functions. A dual-clutch automated shift manual transmission uses separate clutches for even-numbered and odd-numbered gears, so the next expected gear is pre-selected, which allows for faster and smoother shifting.
  • Continuously variable transmission—commonly uses V-shaped pulleys connected by a metal belt rather than gears to provide ratios for operation. Unlike manual and automatic transmissions with fixed transmission ratios, continuously variable transmissions can provide fully variable transmission ratios with an infinite number of gears, enabling finer optimization of transmission torque multiplication under different operating conditions so that the engine can operate at higher efficiency.
  • Manual 6-speed transmission—offers an additional gear ratio, often with a higher overdrive gear ratio, than a 5-speed manual transmission.

Types of vehicle technologies considered include:

  • Low-rolling-resistance tires—have characteristics that reduce frictional losses associated with the energy dissipated in the deformation of the tires under load, therefore improving fuel economy and reducing CO2 emissions.
  • Low-drag brakes—reduce the sliding friction of disc brake pads on rotors when the brakes are not engaged because the brake pads are pulled away from the rotors.Start Printed Page 49501
  • Front or secondary axle disconnect for four-wheel drive systems—provides a torque distribution disconnect between front and rear axles when torque is not required for the non-driving axle. This results in the reduction of associated parasitic energy losses.
  • Aerodynamic drag reduction—is achieved by changing vehicle shape or reducing frontal area, including skirts, air dams, underbody covers, and more aerodynamic side view mirrors.
  • Mass reduction and material substitution— Mass reduction encompasses a variety of techniques ranging from improved design and better component integration to application of lighter and higher-strength materials. Mass reduction is further compounded by reductions in engine power and ancillary systems (transmission, steering, brakes, suspension, etc.). The agencies recognize there is a range of diversity and complexity for mass reduction and material substitution technologies and there are many techniques that automotive suppliers and manufacturers are using to achieve the levels of this technology that the agencies have modeled in our analysis for this proposal. The agencies seek comments on the methods, costs, and effectiveness estimates associated with mass reduction and material substitution techniques that manufacturers intend to employ for reducing fuel consumption and CO2 emissions during the rulemaking time frame.

Types of electrification/accessory and hybrid technologies considered include:

  • Electric power steering (EPS)—is an electrically-assisted steering system that has advantages over traditional hydraulic power steering because it replaces a continuously operated hydraulic pump, thereby reducing parasitic losses from the accessory drive.
  • Improved accessories (IACC)—may include high efficiency alternators, electrically driven (i.e., on-demand) water pumps and cooling fans. This excludes other electrical accessories such as electric oil pumps and electrically driven air conditioner compressors.
  • Air Conditioner Systems—These technologies include improved hoses, connectors and seals for leakage control. They also include improved compressors, expansion valves, heat exchangers and the control of these components for the purposes of improving tailpipe CO2 emissions as a result of A/C use. These technologies are covered separately in the EPA RIA.
  • 12-volt micro-hybrid (MHEV)—also known as idle-stop or start stop and commonly implemented as a 12-volt belt-driven integrated starter-generator, this is the most basic hybrid system that facilitates idle-stop capability. Along with other enablers, this system replaces a common alternator with a belt-driven enhanced power starter-alternator, and a revised accessory drive system.
  • Higher Voltage Stop-Start/Belt Integrated Starter Generator (BISG)—provides idle-stop capability and uses a high voltage battery with increased energy capacity over typical automotive batteries. The higher system voltage allows the use of a smaller, more powerful electric motor. This system replaces a standard alternator with an enhanced power, higher voltage, higher efficiency starter-alternator, that is belt driven and that can recover braking energy while the vehicle slows down (regenerative braking).
  • Integrated Motor Assist (IMA)/Crank integrated starter generator (CISG)—provides idle-stop capability and uses a high voltage battery with increased energy capacity over typical automotive batteries. The higher system voltage allows the use of a smaller, more powerful electric motor and reduces the weight of the wiring harness. This system replaces a standard alternator with an enhanced power, higher voltage, higher efficiency starter-alternator that is crankshaft mounted and can recover braking energy while the vehicle slows down (regenerative braking).
  • 2-mode hybrid (2MHEV)—is a hybrid electric drive system that uses an adaptation of a conventional stepped-ratio automatic transmission by replacing some of the transmission clutches with two electric motors that control the ratio of engine speed to vehicle speed, while clutches allow the motors to be bypassed. This improves both the transmission torque capacity for heavy-duty applications and reduces fuel consumption and CO2 emissions at highway speeds relative to other types of hybrid electric drive systems.
  • Power-split hybrid (PSHEV)— a hybrid electric drive system that replaces the traditional transmission with a single planetary gearset and a motor/generator. This motor/generator uses the engine to either charge the battery or supply additional power to the drive motor. A second, more powerful motor/generator is permanently connected to the vehicle's final drive and always turns with the wheels. The planetary gear splits engine power between the first motor/generator and the drive motor to either charge the battery or supply power to the wheels.
  • Plug-in hybrid electric vehicles (PHEV)—are hybrid electric vehicles with the means to charge their battery packs from an outside source of electricity (usually the electric grid). These vehicles have larger battery packs with more energy storage and a greater capability to be discharged. They also use a control system that allows the battery pack to be substantially depleted under electric-only or blended mechanical/electric operation.
  • Electric vehicles (EV)—are vehicles with all-electric drive and with vehicle systems powered by energy-optimized batteries charged primarily from grid electricity.

The cost estimates for the various hybrid systems have been revised from the estimates used in the MY 2011 CAFE final rule, in particular with respect to estimated battery costs. The agencies request comment on the hybrid cost estimates detailed in the draft Joint Technical Support Document.

2. How Did the Agencies Determine the Costs and Effectiveness of Each of These Technologies?

Building on NHTSA's estimates developed for the MY 2011 CAFE final rule and EPA's Advanced Notice of Proposed Rulemaking, which relied on the 2008 Staff Technical Report,[82] the agencies took a fresh look at technology cost and effectiveness values for purposes of the joint proposal under the National Program. For costs, the agencies reconsidered both the direct or “piece” costs and indirect costs of individual components of technologies. For the direct costs, the agencies followed a bill of materials (BOM) approach employed by NHTSA in NHTSA's MY 2011 final rule based on recommendation from Ricardo, Inc. EPA used a similar approach in the 2008 EPA Staff Technical Report. A bill of materials, in a general sense, is a list of components or sub-systems that make up a system—in this case, an item of fuel economy-improving technology. In order to determine what a system costs, one of the first steps is to determine its components and what they cost.

NHTSA and EPA estimated these components and their costs based on a number of sources for cost-related information. The objective was to use those sources of information considered to be most credible for projecting the costs of individual vehicle technologies. For example, while NHTSA and Ricardo engineers had relied considerably in the Start Printed Page 49502MY 2011 final rule on the 2008 Martec Report for costing contents of some technologies, upon further joint review and for purposes of the MY 2012-2016 standards, the agencies decided that some of the costing information in that report was no longer accurate due to downward trends in commodity prices since the publication of that report. The agencies reviewed, then revalidated or updated cost estimates for individual components based on new information. Thus, while NHTSA and EPA found that much of the cost information used in NHTSA's MY 2011 final rule and EPA's staff report was consistent to a great extent, the agencies, in reconsidering information from many sources,[83,84,85,86,87,88,89] revised several component costs of several major technologies: turbocharging with engine downsizing, mild and strong hybrids, diesels, stoichiometric gasoline direct injection fuel systems, and valve train lift technologies. These are discussed at length in the joint TSD and in NHTSA's PRIA.

For two technologies (stoichiometric gasoline direct injection and turbocharging with engine downsizing), the agencies relied, to the extent possible, on the tear down data available and scaling methodologies used in EPA's ongoing study with FEV. This study consists of complete system tear-down to evaluate technologies down to the nuts and bolts to arrive at very detailed estimates of the costs associated with manufacturing them.[90] The confidential information provided by manufacturers as part of their product plan submissions to the agencies or discussed in meetings between the agencies and the manufacturers and suppliers served largely as a check on publicly-available data.

For the other technologies, considering all sources of information and using the BOM approach, the agencies worked together intensively during the summer of 2009 to determine component costs for each of the technologies and build up the costs accordingly. Where estimates differ between sources, we have used engineering judgment to arrive at what we believe to be the best cost estimate available today, and explained the basis for that exercise of judgment.

Once costs were determined, they were adjusted to ensure that they were all expressed in 2007 dollars using a ratio of GDP values for the associated calendar years,[91] and indirect costs were accounted for using the new approach developed by EPA and explained in Chapter 3 of the draft joint TSD, rather than using the traditional Retail Price Equivalent (RPE) multiplier approach. A report explaining how EPA developed this approach can be found in the docket for this notice. NHTSA and EPA also reconsidered how costs should be adjusted by modifying or scaling content assumptions to account for differences across the range of vehicle sizes and functional requirements, and adjusted the associated material cost impacts to account for the revised content, although some of these adjustments may be different for each agency due to the different vehicle subclasses used in their respective models. In previous rulemakings, NHTSA has used the Producer Price Index (PPI) to adjust vehicle technology costs to consistent price levels, since the PPI measures the effects of cost changes that are specific to the vehicle manufacturing industry. For purposes of this NPRM, NHTSA and EPA chose to use the GDP deflator, which accounts for the effect of economy-wide price inflation on technology cost estimates, in order to express those estimates in comparable terms with forecasts of fuel prices and other economic values used in the analysis of costs and benefits from the proposed standards. Because it is specific to the automotive sector, the PPI tends to be highly volatile from year to year, reflecting rapidly changing balances between supply and demand for specific components, rather than longer-term trends in the real cost of producing a broad range of powertrain components. NHTSA and EPA seek comment on whether the agencies should use a GDP deflator or a PPI inflator for purposes of developing technology cost estimates for the final rule.

Regarding estimates for technology effectiveness, NHTSA and EPA also reexamined the estimates from NHTSA's MY 2011 final rule and EPA's ANPRM and 2008 Staff Technical Report, which were largely consistent with NHTSA's 2008 NPRM estimates. The agencies also reconsidered other sources such as the 2002 NAS Report, the 2004 NESCCAF report, recent CAFE compliance data (by comparing similar vehicles with different technologies against each other in fuel economy testing, such as a Honda Civic Hybrid versus a directly comparable Honda Civic conventional drive), and confidential manufacturer estimates of technology effectiveness. NHTSA and EPA engineers reviewed effectiveness information from the multiple sources for each technology and ensured that such effectiveness estimates were based on technology hardware consistent with the BOM components used to estimate costs. Together, they compared the multiple estimates and assessed their validity, taking care to ensure that common BOM definitions and other vehicle attributes such as performance, refinement, and drivability were taken into account. However, because the agencies' respective models employ different numbers of vehicle subclasses and use different modeling techniques to arrive at the standards, direct comparison of BOMs was somewhat more complicated. To address this and to confirm that the outputs from the different modeling techniques produced the same result, NHTSA and EPA developed mapping techniques, devising technology packages and mapping them to corresponding incremental technology estimates. This approach helped compare the outputs from the incremental modeling technique to those produced by the technology packaging approach to ensure results that are consistent and could be translated into the respective models of the agencies.

In general, most effectiveness estimates used in both the MY 2011 final rule and the 2008 EPA staff report were determined to be accurate and were carried forward without significant change into this proposal. When NHTSA and EPA's estimates for effectiveness diverged slightly due to Start Printed Page 49503differences in how agencies apply technologies to vehicles in their respective models, we report the ranges for the effectiveness values used in each model. While the agencies believe that the ideal estimates for the final rule would be based on tear down studies or BOM approach and subjected to a transparent peer-reviewed process, NHTSA and EPA are confident that the thorough review conducted, led to the best available conclusion regarding technology costs and effectiveness estimates for the current rulemaking and resulted in excellent consistency between the agencies' respective analyses for developing the CAFE and CO2 standards.

The agencies note that the effectiveness values estimated for the technologies considered in the modeling analyses may represent average values, and do not reflect the potentially-limitless spectrum of possible values that could result from adding the technology to different vehicles. For example, while the agencies have estimated an effectiveness of 0.5 percent for low friction lubricants, each vehicle could have a unique effectiveness estimate depending on the baseline vehicle's oil viscosity rating. Similarly, the reduction in rolling resistance (and thus the improvement in fuel economy and the reduction in CO2 emissions) due to the application of low rolling resistance tires depends not only on the unique characteristics of the tires originally on the vehicle, but on the unique characteristics of the tires being applied, characteristics which must be balanced between fuel efficiency, safety, and performance. Aerodynamic drag reduction is much the same—it can improve fuel economy and reduce CO2 emissions, but it is also highly dependent on vehicle-specific functional objectives. For purposes of this NPRM, NHTSA and EPA believe that employing average values for technology effectiveness estimates, as adjusted depending on vehicle subclass, is an appropriate way of recognizing the potential variation in the specific benefits that individual manufacturers (and individual vehicles) might obtain from adding a fuel-saving technology. However, the agencies seek comment on whether additional levels of specificity beyond that already provided would improve the analysis for the final rule, and if so, how those levels of specificity should be analyzed.

Chapter 3 of the draft Joint Technical Support Document contains a detailed description of our assessment of vehicle technology cost and effectiveness estimates. The agencies note that the technology costs included in this NPRM take into account only those associated with the initial build of the vehicle. The agencies seek comment on the additional lifetime costs, if any, associated with the implementation of advanced technologies including warranty costs, and maintenance and replacement costs such as replacement costs for low rolling resistance tires, low friction lubricants, and hybrid batteries, and maintenance on diesel aftertreatment components.

F. Joint Economic Assumptions

The agencies' preliminary analysis of alternative CAFE and GHG standards for the model years covered by this proposed rulemaking rely on a range of forecast information, economic estimates, and input parameters. This section briefly describes the agencies' preliminary choices of specific parameter values. These proposed economic values play a significant role in determining the benefits of both CAFE and GHG standards.

In reviewing these variables and the agency's estimates of their values for purposes of this NPRM, NHTSA and EPA reconsidered previous comments that NHTSA had received and reviewed newly available literature. As a consequence, the agencies elected to revise some economic assumptions and parameter estimates, while retaining others. Some of the most important changes, which are discussed in greater detail in the agencies' respective sections below, as well as in Chapter 4 of the joint TSD and in Chapter VIII of NHTSA's PRIA and Chapter 8 of EPA's DRIA, include significant revisions to the markup factors for technology costs; reducing the rebound effect from 15 to 10 percent; and revising the value of reducing CO2 emissions based on recent interagency efforts to develop estimates of this value for government-wide use. The agencies seek comment on the economic assumptions described below.

  • Costs of fuel economy-improving technologies—These estimates are presented in summary form above and in more detail in the agencies' respective sections of this preamble, in Chapter 3 of the joint TSD, and in the agencies' respective RIAs. The technology cost estimates used in this analysis are intended to represent manufacturers' direct costs for high-volume production of vehicles with these technologies and sufficient experience with their application so that all cost reductions due to “learning curve” effects have been fully realized. Costs are then modified by applying near-term indirect cost multipliers ranging from 1.11 to 1.64 to the estimates of vehicle manufacturers' direct costs for producing or acquiring each technology to improve fuel economy, depending on the complexity of the technology and the time frame over which costs are estimated.
  • Potential opportunity costs of improved fuel economy—This estimate addresses the possibility that achieving the fuel economy improvements required by alternative CAFE or GHG standards would require manufacturers to compromise the performance, carrying capacity, safety, or comfort of their vehicle models. If it did so, the resulting sacrifice in the value of these attributes to consumers would represent an additional cost of achieving the required improvements, and thus of manufacturers' compliance with stricter standards. Currently the agencies assume that these vehicle attributes do not change, and include the cost of maintaining these attributes as part of the cost estimates for technologies. However, it is possible that the technology cost estimates do not include adequate allowance for the necessary efforts by manufacturers to maintain vehicle performance, carrying capacity, and utility while improving fuel economy and reducing GHG emissions. While, in principle, consumer vehicle demand models can measure these effects, these models do not appear to be robust across specifications, since authors derive a wide range of willingness-to-pay values for fuel economy from these models, and there is not clear guidance from the literature on whether one specification is clearly preferred over another. Thus, the agencies seek comment on how to estimate explicitly the changes in vehicle buyers' welfare from the combination of higher prices for new vehicle models, increases in their fuel economy, and any accompanying changes in vehicle attributes such as performance, passenger- and cargo-carrying capacity, or other dimensions of utility.
  • The on-road fuel economy “gap”—Actual fuel economy levels achieved by light-duty vehicles in on-road driving fall somewhat short of their levels measured under the laboratory-like test conditions used by NHTSA and EPA to establish compliance with the proposed CAFE and GHG standards. The agencies use an on-road fuel economy gap for light-duty vehicles of 20 percent lower than published fuel economy levels. For example, if the measured CAFE fuel economy value of a light truck is 20 mpg, the on-road fuel economy actually achieved by a typical driver of that vehicle is expected to be 16 mpg Start Printed Page 49504(20*.80).[92] NHTSA previously used this estimate in its MY 2011 final rule, and the agencies confirmed it based on independent analysis for use in this NPRM.
  • Fuel prices and the value of saving fuel—Projected future fuel prices are a critical input into the preliminary economic analysis of alternative standards, because they determine the value of fuel savings both to new vehicle buyers and to society. The agencies relied on the most recent fuel price projections from the U.S. Energy Information Administration's (EIA) Annual Energy Outlook (AEO) for this analysis. Specifically, the agencies used the AEO 2009 (April 2009 release) Reference Case forecasts of inflation-adjusted (constant-dollar) retail gasoline and diesel fuel prices, which represent the EIA's most up-to-date estimate of the most likely course of future prices for petroleum products.[93]

EIA's Updated Reference Case reflects the effects of the American Reinvestment and Recovery Act of 2009, as well as the most recent revisions to the U.S. and global economic outlook. In addition, it also reflects the provisions of the Energy Independence and Security Act of 2007 (EISA), including the requirement that the combined mpg level of U.S. cars and light trucks reach 35 miles per gallon by model year 2020. Because this provision would be expected to reduce future U.S. demand for gasoline and other fuels, there is some concern about whether the AEO 2009 forecast of fuel prices already partly reflects the increases in CAFE standards considered in this rule, and thus whether it is suitable for valuing the projected reductions in fuel use. In response to this concern, the agencies note that EIA issued a revised version of AEO 2008 in June 2008, which modified its previous December 2007 Early Release of AEO 2008 to reflect the effects of the recently-passed EISA legislation.[94] The fuel price forecasts reported in EIA's Revised Release of AEO 2008 differed by less than one cent per gallon over the entire forecast period (2008-230) from those previously issued as part of its initial release of AEO 2008. Thus, the agencies are reasonably confident that the fuel price forecasts presented in AEO 2009 and used to analyze the value of fuel savings projected to result from this rule are not unduly affected by the CAFE provisions of EISA, and therefore do not cause a baseline problem. Nevertheless, the agencies request comment on the use of the AEO 2009 fuel price forecasts, and particularly on the potential impact of the EISA-mandated CAFE improvements on these projections.

  • Consumer valuation of fuel economy and payback period—In estimating the value of fuel economy improvements that would result from alternative CAFE and GHG standards to potential vehicle buyers, the agencies assume that buyers value the resulting fuel savings over only part of the expected lifetime of the vehicles they purchase. Specifically, we assume that buyers value fuel savings over the first five years of a new vehicle's lifetime, and that buyers discount the value of these future fuel savings using rates of 3% and 7%. The five-year figure represents the current average term of consumer loans to finance the purchase of new vehicles.
  • Vehicle sales assumptions— The first step in estimating lifetime fuel consumption by vehicles produced during a model year is to calculate the number that are expected to be produced and sold.[95] The agencies relied on the AEO 2009 Reference Case for forecasts of total vehicle sales, while the baseline market forecast developed by the agencies (see Section II.B) divided total projected sales into sales of cars and light trucks.
  • Vehicle survival assumptions— We then applied updated values of age-specific survival rates for cars and light trucks to these adjusted forecasts of passenger car and light truck sales to determine the number of these vehicles remaining in use during each year of their expected lifetimes.
  • Total vehicle use—We then calculated the total number of miles that cars and light trucks produced in each model year will be driven during each year of their lifetimes using estimates of annual vehicle use by age tabulated from the Federal Highway Administration's 2001 National Household Transportation Survey (NHTS),[96] adjusted to account for the effect on vehicle use of subsequent increases in fuel prices. In order to insure that the resulting mileage schedules imply reasonable estimates of future growth in total car and light truck use, we calculated the rate of growth in annual car and light truck mileage at each age that is necessary for total car and light truck travel to increase at the rates forecast in the AEO 2009 Reference Case. The growth rate in average annual car and light truck use produced by this calculation is approximately 1.1 percent per year.[97] This rate was applied to the mileage figures derived from the 2001 NHTS to estimate annual mileage during each year of the expected lifetimes of MY 2012-2016 cars and light trucks.[98]
  • Accounting for the rebound effect of higher fuel economy—The rebound effect refers to the fraction of fuel savings expected to result from an increase in vehicle fuel economy—particularly an increase required by the adoption of higher CAFE and GHG standards—that is offset by additional vehicle use. The increase in vehicle use occurs because higher fuel economy reduces the fuel cost of driving, typically the largest single component of the monetary cost of operating a vehicle, and vehicle owners respond to this reduction in operating costs by driving slightly more. For purposes of this NPRM, the agencies have elected to use a 10 percent rebound effect in their analyses of fuel savings and other benefits from higher standards.
  • Benefits from increased vehicle use—The increase in vehicle use from the rebound effect provides additional benefits to their owners, who may make more frequent trips or travel farther to reach more desirable destinations. This Start Printed Page 49505additional travel provides benefits to drivers and their passengers by improving their access to social and economic opportunities away from home. The benefits from increased vehicle use include both the fuel expenses associated with this additional travel, and the consumer surplus it provides. We estimate the economic value of the consumer surplus provided by added driving using the conventional approximation, which is one half of the product of the decline in vehicle operating costs per vehicle-mile and the resulting increase in the annual number of miles driven. Because it depends on the extent of improvement in fuel economy, the value of benefits from increased vehicle use changes by model year and varies among alternative standards.
  • The value of increased driving range—By reducing the frequency with which drivers typically refuel their vehicles, and by extending the upper limit of the range they can travel before requiring refueling, improving fuel economy and reducing GHG emissions thus provides some additional benefits to their owners. No direct estimates of the value of extended vehicle range are readily available, so the agencies' analysis calculates the reduction in the annual number of required refueling cycles that results from improved fuel economy, and applies DOT-recommended values of travel time savings to convert the resulting time savings to their economic value.[99] The agencies invite comment on the assumptions used in this analysis. Please see the Chapter 4 of the draft Joint TSD for details.
  • Added costs from congestion, crashes and noise—Although it provides some benefits to drivers, increased vehicle use associated with the rebound effect also contributes to increased traffic congestion, motor vehicle accidents, and highway noise. Depending on how the additional travel is distributed over the day and on where it takes place, additional vehicle use can contribute to traffic congestion and delays by increasing traffic volumes on facilities that are already heavily traveled during peak periods. These added delays impose higher costs on drivers and other vehicle occupants in the form of increased travel time and operating expenses, increased costs associated with traffic accidents, and increased traffic noise. The agencies rely on estimates of congestion, accident, and noise costs caused by automobiles and light trucks developed by the Federal Highway Administration to estimate the increased external costs caused by added driving due to the rebound effect.[100]
  • Petroleum consumption and import externalities—U.S. consumption and imports of petroleum products also impose costs on the domestic economy that are not reflected in the market price for crude petroleum, or in the prices paid by consumers of petroleum products such as gasoline. In economics literature on this subject, these costs include (1) higher prices for petroleum products resulting from the effect of U.S. oil import demand on the world oil price (“monopsony costs”); (2) the risk of disruptions to the U.S. economy caused by sudden reductions in the supply of imported oil to the U.S.; and (3) expenses for maintaining a U.S. military presence to secure imported oil supplies from unstable regions, and for maintaining the strategic petroleum reserve (SPR) to cushion against resulting price increases.[101] Reducing U.S. imports of crude petroleum or refined fuels can reduce the magnitude of these external costs. Any reduction in their total value that results from lower fuel consumption and petroleum imports represents an economic benefit of setting more stringent standards over and above the dollar value of fuel savings itself. The agencies do not include a value for monopsony costs in order to be consistent with their use of a global value for the social cost of carbon. Based on a recently-updated ORNL study, we estimate that each gallon of fuel saved that results in a reduction in U.S. petroleum imports (either crude petroleum or refined fuel) will reduce the expected costs of oil supply disruptions to the U.S. economy by $0.169 (2007$). The agencies do not include savings in budgetary outlays to support U.S. military activities among the benefits of higher fuel economy and the resulting fuel savings. Each gallon of fuel saved as a consequence of higher standards is anticipated to reduce total U.S. imports of crude petroleum or refined fuel by 0.95 gallons.[102]
  • Air pollutant emissions

Impacts on criteria air pollutant emissions—While reductions in domestic fuel refining and distribution that result from lower fuel consumption will reduce U.S. emissions of criteria pollutants, additional vehicle use associated with the rebound effect will increase emissions of these pollutants. Thus the net effect of stricter standards on emissions of each criteria pollutant depends on the relative magnitudes of reduced emissions from fuel refining and distribution, and increases in emissions resulting from added vehicle use. Criteria air pollutants emitted by vehicles and during fuel production include carbon monoxide (CO), hydrocarbon compounds (usually referred to as “volatile organic compounds,” or VOC), nitrogen oxides (NOX), fine particulate matter (PM2.5), and sulfur oxides (SOX). It is assumed that the emission rates (per mile) stay constant for future year vehicles.

○ EPA and NHTSA estimate the economic value of the human health benefits associated with reducing exposure to PM2.5 using a “benefit-per-ton” method. These PM2.5-related benefit-per-ton estimates provide the total monetized benefits to human health (the sum of reductions in premature mortality and premature morbidity) that result from eliminating one ton of directly emitted PM2.5, or one ton of a pollutant that contributes to secondarily-formed PM2.5 (such as NOX, SOX, and VOCs), from a specified source. Chapter 4.2.9 of the Technical Support Document that accompanies this proposal includes a description of these values.

Reductions in GHG emissions—Emissions of carbon dioxide and other greenhouse gases (GHGs) occur throughout the process of producing and distributing transportation fuels, as well as from fuel combustion itself. By reducing the volume of fuel consumed by passenger cars and light trucks, higher standards will thus reduce GHG emissions generated by fuel use, as well as throughout the fuel supply cycle. The agencies estimated the increases of GHGs other than CO2, including Start Printed Page 49506methane and nitrous oxide, from additional vehicle use by multiplying the increase in total miles driven by cars and light trucks of each model year and age by emission rates per vehicle-mile for these GHGs. These emission rates, which differ between cars and light trucks as well as between gasoline and diesel vehicles, were estimated by EPA using its recently-developed Motor Vehicle Emission Simulator (Draft MOVES 2009).[103] Increases in emissions of non-CO2 GHGs are converted to equivalent increases in CO2 emissions using estimates of the Global Warming Potential (GWP) of methane and nitrous oxide.

Economic value of reductions in CO2emissions—EPA and NHTSA assigned a dollar value to reductions in CO2 emissions using the marginal dollar value (i.e., cost) of climate-related damages resulting from carbon emissions, also referred to as “social cost of carbon” (SCC). The SCC is intended to measure the monetary value society places on impacts resulting from increased GHGs, such as property damage from sea level rise, forced migration due to dry land loss, and mortality changes associated with vector-borne diseases. Published estimates of the SCC vary widely as a result of uncertainties about future economic growth, climate sensitivity to GHG emissions, procedures used to model the economic impacts of climate change, and the choice of discount rates. EPA and NHTSA's coordinated proposals present a set of interim SCC values reflecting a Federal interagency group's interpretation of the relevant climate economics literature. Sections III.H and IV.C.3 provide more detail about SCC.

  • Discounting future benefits and costs—Discounting future fuel savings and other benefits is intended to account for the reduction in their value to society when they are deferred until some future date, rather than received immediately. The discount rate expresses the percent decline in the value of these benefits—as viewed from today's perspective—for each year they are deferred into the future. In evaluating the non-climate related benefits of the proposed standards, the agencies have employed discount rates of both 3 percent and 7 percent.

For the reader's reference, Table II.F.1-1 below summarizes the values used to calculate the impacts of each proposed standard. The values presented in this table are summaries of the inputs used for the models; specific values used in the agencies' respective analyses may be aggregated, expanded, or have other relevant adjustments. See the respective RIAs for details. The agencies seek comment on the economic assumptions presented in the table and discussed below.

In addition, the agencies have conducted a range of sensitivities and present them in their respective RIAs. For example, NHTSA has conducted a sensitivity analysis on several assumptions including (1) forecasts of future fuel prices, (2) the discount rate applied to future benefits and costs, (3) the magnitude of the rebound effect, (4) the value to the U.S. economy of reducing carbon dioxide emissions, (5) the monopsony effect, and (6) the reduction in external economic costs resulting from lower U.S. oil imports. This information is provided in NHTSA's PRIA. The agencies will consider additional sensitivities for the final rule as appropriate, including sensitivities on the markup factors applied to direct manufacturing costs to account for indirect costs (i.e., the Indirect Cost Markups (ICMs) which are discussed in Sections III and IV), and the learning curve estimates used in this analysis.

Table II.F.1-1—Economic Values for Benefits Computations (2007$)

Fuel Economy Rebound Effect10%
“Gap” between test and on-road MPG20%
Value of refueling time per ($ per vehicle-hour)24.64
Annual growth in average vehicle use1.1%
Fuel Prices (2012-50 average, $/gallon):
Retail gasoline price3.77
Pre-tax gasoline price3.40
Economic Benefits from Reducing Oil Imports ($/gallon):
“Monopsony” Component0.00
Price Shock Component0.17
Military Security Component0.00
Total Economic Costs ($/gallon)0.17
Emission Damage Costs (2020, $/ton or $/metric ton):
Carbon monoxide0
Volatile organic compounds (VOC)1,283
Nitrogen oxides (NOX)—vehicle use5,116
Nitrogen oxides (NOX)—fuel production and distribution5,339
Particulate matter (PM2.5)—vehicle use238,432
Particulate matter (PM2.5)—fuel production and distribution292,180
Sulfur dioxide (SO2)30,896
5
10
20
34
Carbon dioxide (CO2)56
Annual Increase in CO2 Damage Cost3%
External Costs from Additional Automobile Use ($/vehicle-mile):
Congestion0.054
Accidents0.023
Noise0.001
Total External Costs0.078
External Costs from Additional Light Truck Use ($/vehicle-mile):
Start Printed Page 49507
Congestion0.048
Accidents0.026
Noise0.001
Total External Costs0.075
Discount Rates Applied to Future Benefits3%, 7%

III. EPA Proposal for Greenhouse Gas Vehicle Standards

A. Executive Overview of EPA Proposal

1. Introduction

The Environmental Protection Agency (EPA) is proposing to establish greenhouse gas emissions standards for the largest sources of transportation greenhouse gases—light-duty vehicles, light-duty trucks, and medium-duty passenger vehicles (hereafter light vehicles). 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 greenhouse gas emissions. This action represents the first-ever proposal by EPA to regulate vehicle greenhouse gas emissions under the Clean Air Act (CAA) and would establish standards for model years 2012 and later light vehicles sold in the U.S.

EPA is proposing three separate standards. The first and most important is a set of fleet-wide average carbon dioxide (CO2) emission standards for cars and trucks. These standards are based on CO2 emissions-footprint curves, where each vehicle has a different CO2 emissions compliance target depending on its footprint value. Vehicle CO2 emissions would be measured over the EPA city and highway tests. The proposed standard allows for credits based on demonstrated improvements in vehicle air conditioner systems, including both efficiency and refrigerant leakage improvement, which are not captured by the EPA tests. The EPA projects that the average light vehicle tailpipe CO2 level in model year 2011 will be 326 grams per mile while the average vehicle tailpipe CO2 emissions compliance level for the proposed model year 2016 standard will be 250 grams per mile, an average reduction of 23 percent from today's CO2 levels.

EPA is also proposing standards that will cap tailpipe nitrous oxide (N2 O) and methane (CH4) emissions at 0.010 and 0.030 grams per mile, respectively. Even after adjusting for the higher relative global warming potencies of these two compounds, nitrous oxide and methane emissions represent less than one percent of overall vehicle greenhouse gas emissions from new vehicles. Accordingly, the goal of these two proposed standards is to limit any potential increases in the future and not to force reductions relative to today's low levels.

This proposal represents the second-phase of EPA's response to the Supreme Court's 2007 decision in Massachusetts v. EPA[104] which found that greenhouse gases were air pollutants for purposes of the Clean Air Act. The Court held that the Administrator must determine whether or not emissions from new motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, or whether the science is too uncertain to make a reasoned decision. The Court further ruled that, in make these decisions, the EPA Administrator is required to follow the language of section 202(a) of the CAA. The Court remanded the case back to the Agency for reconsideration in light of its finding.

The Administrator responded to the Court's remand by issuing two proposed findings under section 202(a) of the Clean Air Act.[105] First, the Administrator proposed to find that the science supports a positive endangerment finding that a mix of certain greenhouse gases in the atmosphere endangers the public health and welfare of current and future generations. This is referred to as the endangerment finding. Second, the Administrator proposed to find that the emissions of four of these gases—carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons—from new motor vehicles and new motor vehicle engines contribute to the atmospheric concentrations of these key greenhouse gases and hence to the threat of climate change. This is referred to as the cause and contribute finding. Finalizing this proposed light vehicle regulations is contingent upon EPA finalizing both the endangerment finding and cause or contribute finding. Sections III.B.1 through III.B.4 below provide more details on the legal and scientific bases for this proposal.

As discussed in Section I, this GHG proposal is part of a joint National Program such that a large majority of the projected benefits are achieved jointly with NHTSA's proposed CAFE rule which is described in detail in Section IV of this preamble. EPA's proposal projects total carbon dioxide emissions savings of nearly 950 million metric tons, and oil savings of 1.8 billion barrels over the lifetimes of the vehicles sold in model years 2012-2016. EPA projects net societal benefits of $192 billion at a 3 percent discount rate for these same vehicles, or $136 billion at a 7 percent discount rate (both values assume a $20/ton SCC value). Accordingly, these proposed light vehicle greenhouse gas emissions standards would make an important “first step” contribution as part of the National Program toward meeting long-term greenhouse gas emissions and import oil reduction goals, while providing important economic benefits as well.

2. Why is EPA Proposing this Rule?

This proposal addresses only light vehicles. EPA is addressing light vehicles as a first step in control of greenhouse gas emissions under the Clean Air Act for four reasons. First, light vehicles are responsible for almost 60% of all mobile source greenhouse gas emissions, a share three times larger than any other mobile source subsector, and represent about one-sixth of all U.S. greenhouse gas emissions. Second, technology exists that can be readily and cost-effectively applied to these vehicles to reduce greenhouse gas emissions in the near term. Third, EPA already has an existing testing and compliance program for these vehicles, refined since the mid-1970s for emissions certification and fuel economy compliance, which would require only minor modifications to accommodate greenhouse gas emissions regulations. Finally, this proposal is an important first step in responding to the Supreme Court's ruling in Massachusetts vs. EPA. In addition, EPA is currently evaluating controls for motor vehicles other than those covered Start Printed Page 49508by this proposal, and is reviewing seven petitions submitted by various States and organizations requesting that EPA use its Clean Air Act authorities to take action to reduce greenhouse gas emissions from aircraft (under § 231(a)(2)), ocean-going vessels (under § 213(a)(4)), and other nonroad engines and vehicle sources (also under § 213(a)(4)).

a. Light Vehicle Emissions Contribute to Greenhouse Gases and the Threat of Climate Change

Greenhouse gases are gases in the atmosphere that effectively trap some of the Earth's heat that would otherwise escape to space. Greenhouse gases are both naturally occurring and anthropogenic. The primary greenhouse gases of concern are directly emitted by human activities and include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.

These gases, once emitted, remain in the atmosphere for decades to centuries. Thus, they become well mixed globally in the atmosphere and their concentrations accumulate when emissions exceed the rate at which natural processes remove greenhouse gases from the atmosphere. The heating effect caused by the human-induced buildup of greenhouse gases in the atmosphere is very likely[106] 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 detailed explanation of observed and projected changes in greenhouse gases and climate change and its impact on health, society, and the environment is included in EPA's technical support document for the recently released Proposed Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act.[107]

Transportation sources represent a large and growing share of United States greenhouse gases and include automobiles, highway heavy duty trucks, airplanes, railroads, marine vessels and a variety of other sources. In 2006, all transportation sources emitted 31.5% of all U.S. greenhouse gases, and were the fastest-growing source of greenhouse gases in the U.S., accounting for 47% of the net increase in total U.S. greenhouse gas emissions from 1990-2006.[108] The only sector with larger greenhouse gas emissions was electricity generation which emitted 33.7% of all U.S. greenhouse gases.

Light vehicles emit four greenhouse gases: 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.[109] 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).[110] Nitrous oxide (N2 O) (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 emissions can promote the formation of N2 O.[111] Hydrofluorocarbons (HFC) emissions 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.[112]

b. Basis for Action Under 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.” As noted above, the Administrator has proposed to find that the air pollution of elevated levels of greenhouse gas concentrations may reasonably be anticipated to endanger public health and welfare.[113] The Administrator has proposed to define the air pollution to be the elevated concentrations of the mix of six GHGs: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2 O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). The Administrator has further proposed to find under CAA section 202(a) that CO2, methane, N2 O and HFC emissions from new motor vehicles and engines contribute to this air pollution. This preamble describes proposed standards that would control emissions of CO2, HFCs, nitrous oxide, and methane. Standards for these GHGs would only be finalized if EPA determines that the criteria have been met for endangerment by the air pollution, and that emissions of GHGs from new motor vehicles or engines “cause or contribute” to that air pollution. In that case, section 202(a) would authorize EPA to issue standards applicable to emissions of those pollutants. For further discussion of EPA's authority under section 202(a), see Section I.C.2 of the proposal.

There are a variety of other CAA Title II provisions that are relevant to standards established under section 202(a). As noted above, the standards are applicable to motor vehicles for their useful life. EPA has the discretion in determining what standard applies over the useful life. For example, EPA may set a single standard that applies both when the vehicles are new and throughout the useful life, or where appropriate may set a standard that varies during the term of useful life, such as a standard that is more stringent in the early years of the useful life and less stringent in the later years.Start Printed Page 49509

The standards established under CAA section 202(a) are implemented and enforced through various mechanisms. Manufacturers are required to obtain an EPA certificate of conformity with the section 202 regulations before they may sell or introduce their new motor vehicle into commerce, according to CAA section 206(a). The introduction into commerce of vehicles without a certificate of conformity is a prohibited act under CAA section 203 that may subject a manufacturer to civil penalties and injunctive actions (see CAA sections 204 and 205). Under CAA section 206(b), EPA may conduct testing of new production vehicles to determine compliance with the standards. For in-use vehicles, if EPA determines that a substantial number of vehicles do not conform to the applicable regulations then the manufacturer must submit and implement a remedial plan to address the problem (see CAA section 207(c)). There are also emissions-based warranties that the manufacturer must implement under CAA section 207(a).

c. EPA's Greenhouse Gas Proposal Under Section 202(a) Concerning Endangerment and Cause or Contribute Findings

EPA's Administrator recently signed a proposed action with two distinct findings regarding greenhouse gases under section 202(a) of the Clean Air Act. This action is called the Proposed Endangerment and Cause or Contribute Findings for Greenhouse Gases under the Clean Air Act (Endangerment Proposal).[114] The Administrator proposed an affirmative endangerment finding that the current and projected concentrations of a mix of six key greenhouse gases—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2 O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride(SF6)—in the atmosphere threaten the public health and welfare of current and future generations. She also proposed to find that the combined emissions of four of the gases—carbon dioxide, methane, nitrous oxide and hydrofluorocarbons from new motor vehicles and motor vehicle engines—contribute to the atmospheric concentrations of these greenhouse gases and therefore to the climate change problem.

Specifically, the Administrator proposed, after a thorough examination of the scientific evidence on the causes and impact of current and future climate change, to find that the science compellingly supports a positive finding that atmospheric concentrations of these greenhouse gases result in air pollution which may reasonably be anticipated to endanger both public health and welfare. In her proposed finding, the Administrator relied heavily upon the major findings and conclusions from the recent assessments of the U.S. Climate Change Science Program and the U.N. Intergovernmental Panel on Climate Change.[115] The Administrator proposed a positive endangerment finding after considering both observed and projected future effects of climate change, key uncertainties, and the full range of risks and impacts to public health and welfare occurring within the United States. In addition, the proposed finding noted that the evidence concerning risks and impacts occurring outside the U.S. provided further support for the proposed finding.

The key scientific findings supporting the proposed endangerment finding are that:

—Concentrations of greenhouse gases are at unprecedented levels compared to recent and distant past. These high concentrations are the unambiguous result of anthropogenic emissions and are very likely the cause of the observed increase in average temperatures and other climatic changes.

—The effects of climate change observed to date and projected to occur in the future include more frequent and intense heat waves, more severe wildfires, degraded air quality, heavier downpours and flooding, increasing drought, greater sea level rise, more intense storms, harm to water resources, harm to agriculture, and harm to wildlife and ecosystems. These impacts are effects on public health and welfare within the meaning of the Clean Air Act.

With regard to new motor vehicles and engines, the Administrator also proposed a finding that the combined emissions of four greenhouse gases—carbon dioxide, methane, nitrous oxide and hydrofluorocarbons—from new motor vehicles and engines contributes to this air pollution, i.e., the atmospheric concentrations of the mix of six greenhouse gases which create the threat of climate change and its impacts. Key facts supporting the proposed cause and contribute finding for on-highway vehicles regulated under section 202(a) of the Clean Air Act are that these sources are responsible for 24% of total U.S. greenhouse gas emissions, and more than 4% of total global greenhouse gas emissions.[116] The Administrator also considered whether emissions of each greenhouse gas individually, as a separate air pollutant, would contribute to this air pollution.

If the Administrator makes affirmative findings under section 202(a) on both endangerment and cause or contribute, then EPA is to issue standards “applicable to emission” of the air pollutant or pollutants that EPA finds causes or contributes to the air pollution that endangers public health and welfare. The Endangerment Proposal invited public comment on whether the air pollutant should be considered the group of GHGs, or whether each GHG should be treated as a separate air pollutant. Either way, the emissions standards proposed today would satisfy the requirements of section 202(a) as the Administrator has significant discretion in how to structure the standards that apply to the emission of the air pollutant or air pollutants at issue. For example, under either approach EPA would have the discretion under section 202(a) to adopt separate standards for each GHG, a single composite standard covering various gases, or any combination of these. In this rulemaking EPA is proposing separate standards for nitrous oxide and methane, and a CO2 standard that provides for credits based on reductions of HFCs, as the appropriate way to issue standards applicable to emissions of these GHGs.

3. What is EPA Proposing?

a. Proposed Light-Duty Vehicle, Light-Duty Truck, and Medium-Duty Passenger Vehicle Greenhouse Gas Emission Standards and Projected Compliance Levels

The CO2 emissions standards are by far the most important of the three standards and are the primary focus of this summary. EPA is proposing an attribute-based approach for the CO2 fleet-wide standard (one for cars and one for trucks), based on vehicle footprint as the attribute. These curves establish different CO2 emissions targets for each unique car and truck footprint. Generally, the larger the vehicle footprint, the higher the corresponding vehicle CO2 emissions target. Table III.A.3-1 shows the greenhouse gas standards for light vehicles that EPA is proposing for model years (MY) 2012 and later:Start Printed Page 49510

Table III.A.3-1—Proposed Industry-Wide Greenhouse Gas Emissions Standards

Standard/covered pollutantsForm of standardLevel of standardCreditsTest cycles
CO2 Standard 117: Tailpipe CO2Fleetwide average footprint CO2-curves for cars and trucksSee footprint—CO2 curves in Figure I.C-1 for cars and Figure I.C-2 for trucksCO2-e credits 118EPA 2-cycle (FTP and HFET test cycles), with separate mechanisms for A/C credits.119
N2 O Standard: Tailpipe N2 OCap per vehicle0.010 g/miNoneEPA FTP test.
CH4 Standard: Tailpipe CH4Cap per vehicle0.030 g/miNoneEPA FTP test.

One important flexibility associated with the proposed CO2 standard is the proposed option for manufacturers to obtain credits associated with improvements in their air conditioning systems. As will be discussed in greater detail in later sections, EPA is establishing test procedures and design criteria by which manufacturers can demonstrate improvements in both air conditioner efficiency (which reduces vehicle tailpipe CO2 by reducing the load on the engine) and air conditioner refrigerants (using lower global warming potency refrigerants and/or improving system design to reduce GHG emissions associated with leaks). Neither of these strategies to reduce GHG emissions from air conditioners would be reflected in the EPA FTP or HFET tests. These improvements would be translated to a g/mi CO2-equivalent credit that can be subtracted from the manufacturer's tailpipe CO2 compliance value. EPA expects a high percentage of manufacturers to take advantage of this flexibility to earn air conditioning-related credits for MY2012-2016 vehicles such that the average credit earned is about 11 grams per mile CO2-equivalent in 2016.

A second flexibility being proposed is CO2 credits for flexible and dual fuel vehicles, similar to the CAFE credits for such vehicles which allow manufacturers to gain up to 1.2 mpg in their overall CAFE ratings. The Energy Independence and Security Act of 2007 (EISA) mandated a phase-out of these flexible fuel vehicle CAFE credits beginning in 2015, and ending after 2019. EPA is proposing to allow comparable CO2 credits for flexible fuel vehicles through MY 2015, but for MY 2016 and beyond, EPA is proposing to treat flexible and dual fuel vehicles on a CO2-performance basis, calculating the overall CO2 emissions for flexible and dual fuel vehicles based on a fuel use-weighted average of the CO2 levels on gasoline and on a manufacturer's demonstrated actual usage of the alternative fuel in its vehicle fleet.

Table III.A.3-2 summarizes EPA projections of industry-wide 2-cycle CO2 emissions and fuel economy levels that would be achieved by manufacturer compliance with the proposed GHG standards for MY2012-2016.

For MY2011, Table III.A.3-2 uses the projected NHTSA compliance values for its MY2011 CAFE standards of 30.2 mpg for cars and 24.1 mpg for trucks, converted to an equivalent combined car and truck CO2 level of 325 grams per mile.[120] EPA believes this is a reasonable estimate with which to compare the proposed MY2012-2016 CO2 emission standards. Identifying the proper MY2011 estimate is complicated for many reasons, among them being the turmoil in the current automotive market for consumers and manufacturers, uncertain and volatile oil and gasoline prices, the ability of manufacturers to use flexible fuel vehicle credits to meet MY2011 CAFE standards, and the fact that most manufacturers have been surpassing CAFE standards (particularly the car standard) in recent years. Taking all of these considerations into account, EPA believes that the MY2011 projected CAFE compliance values, converted to CO2 emissions levels, represent a reasonable estimate.

Table III.A.3-2 shows projected industry-wide average CO2 emissions values. The Projected CO2 Emissions for the Footprint-Based Standard column shows the CO2 g/mi level corresponding with the footprint standard that must be met. It is based on the proposed CO2-footprint curves and projected footprint values, and will decrease each year to 250 grams per mile (g/mi) in MY2016. For MY2012-2015, the emissions impact of the projected utilization of flexible fuel vehicle (FFV) credits and the temporary lead-time allowance alternative standard (TLAAS, discussed below) are shown in the next two columns. Neither of these programs is proposed to be available in MY2016. The Projected CO2 Emissions column gives the CO2 emissions levels projected to be achieved given use of the flexible fuel credits and temporary lead-time allowance program. This column shows that, relative to the MY 2011 estimate, EPA projects that MY2016 CO2 emissions will be reduced by 23 percent over five years. The Projected A/C Credit column represents the industry wide average air conditioner credit manufacturers are expected to earn on an equivalent CO2 gram per mile basis in a given model year. In MY2016, the projected A/C credit of 10.6 g/mi represents 14 percent of the 75 g/mi CO2 emissions reductions associated with the proposed standards. The Projected 2-cycle CO2 Emissions column shows the projected CO2 emissions as measured over the EPA 2-cycle tests, which would allow compliance with the standard assuming utilization of the projected FFV, TLAAS, and A/C credits.Start Printed Page 49511

Table III.A.3-2—Projected Fleetwide CO2 Emissions Values (grams per mile)

Model yearProjected CO2 emissions for the footprint-based standardProjected FFV creditProjected TLAAS creditProjected CO2 emissionsProjected A/C creditProjected 2-cycle CO2 emissions
2011(325)(325)
201229560.33023.1305
20132865.70.22915.0296
20142765.40.22817.5289
20152634.10.126710.0277
20162500025010.6261

EPA is also proposing a series of flexibilities for compliance with the CO2 standard which are not expected to significantly affect the projected compliance and achieved values shown above, but which should significantly reduce the costs of achieving those reductions. These flexibilities include the ability to earn: annual credits for a manufacturer's over-compliance with its unique fleet-wide average standard, early credits from MY2009-2011, credits for early introduction of advanced technology vehicles, credit for “off-cycle” CO2 reductions not reflected in CO2/fuel economy tests, as well as the carry-forward and carry-backward of credits, the ability to transfer credits between a manufacturer's car and truck fleets, and a temporary lead-time allowance alternative standard (included in the tables above) that will permit manufacturers with less than 400,000 vehicles produced in MY 2009 to designate a fraction of their vehicles to meet a 25% higher CO2 standard for MY 2012-2015. All of these proposed flexibilities are discussed in greater detail in later sections.

EPA is also proposing caps on the tailpipe emissions of nitrous oxide (N2 O) and methane (CH4)—0.010 g/mi for N2 O and 0.030 g/mi for CH4—over the EPA FTP test. While N2 O and CH4 can be potent greenhouse gases on a relative mass basis, their emission levels from modern vehicle designs are extremely low and represent only about 1% of total light vehicle GHG emissions. These cap standards are designed to ensure that N2 O and CH4 emissions levels do not rise in the future, rather than to force reductions in the already low emissions levels. Accordingly, these standards are not designed to require automakers to make any changes in current vehicle designs, and thus EPA is not projecting any environmental or economic impacts associated with these proposed standards.

EPA has attempted to build on existing practice wherever possible in designing a compliance program for the proposed GHG standards. In particular, the program structure proposed will streamline the compliance process for both manufacturers and EPA by enabling manufacturers to use a single data set to satisfy both the new GHG and CAFE testing and reporting requirements. Timing of certification, model-level testing, and other compliance activities also follow current practices established under the Tier 2 and CAFE programs.

b. Environmental and Economic Benefits and Costs of EPA's Proposed Standards

In Table III.A.3-3 EPA presents estimated annual net benefits for the indicated calendar years. The table also shows the net present values of those benefits for the calendar years 2012-2050 using both a 3% and a 7% discount rate. As discussed previously, EPA recognizes that much of these same costs and benefits are also attributed to the proposed CAFE standard contained in this joint proposal.

Table III.A.3-3—Projected Quantifiable Benefits and Costs for Proposed CO2 Standard

[(In million 2007 $s) [Note: B = unquantified benefits]

2020203020402050NPV, 3%NPV, 7%
Quantified Annual Costs a−$25,100−$72,500−$105,700−$146,100−$1,287,600−$529,500
Benefits from Reduced GHG Emissions at each assumed SCC value:
SCC 5%1,2003,3005,7009,50069,20028,600
SCC 5% Newell-Pizer2,5006,60011,00019,000138,40057,100
SCC from 3% and 5%4,70012,00022,00036,000263,000108,500
SCC 3%8,20022,00038,00063,000456,900188,500
SCC 3% Newell-Pizer14,00036,00063,000100,000761,400314,200
Other Quantified Externalities
PM2. 5 Related Benefits bcd1,4003,0004,6006,70059,80026,300
Energy Security Impacts (price shock)2,3004,8006,2007,80085,80038,800
Reduced Refueling2,5004,9006,4008,00089,60041,000
Value of Increased Driving e4,90010,00013,60018,000184,70082,700
Accidents, Noise, Congestion−2,400−4,900−6,300−7,900−88,200−40,200
Quantified Net Benefits at each assumed SCC value:
SCC 5%35,00093,600135,900188,2001,688,500706,700
SCC 5% Newell-Pizer36,30096,900141,200197,7001,757,700735,200
SCC from 3% and 5%38,500102,300152,200214,7001,882,300786,600
Start Printed Page 49512
SCC 3%42,000112,300168,200241,7002,076,200866,600
SCC 3% Newell-Pizer47,800126,300193,200278,7002,380,700992,300
a Quantified annual costs are negative because fuel savings are included as negative costs (i.e., positive savings). Since the fuel savings outweigh the vehicle technology costs, the costs of as presented here are actually negative (i.e., they represent savings).
b Note that the co-pollutant impacts associated with the standards presented here do not include the full complement of endpoints that, if quantified and monetized, would change the total monetized estimate of rule-related impacts. Instead, the co-pollutant benefits are based on benefit-per-ton values that reflect only human health impacts associated with reductions in PM2. 5 exposure. Ideally, human health and environmental benefits would be based on changes in ambient PM2. 5 and ozone as determined by full-scale air quality modeling. However, EPA was unable to conduct a full-scale air quality modeling analysis in time for the proposal. EPA does intend to more fully capture the co-pollutant benefits for the analysis of the final standards.
c The PM2. 5-related benefits (derived from benefit-per-ton values) presented in this table are based on an estimate of premature mortality derived from the ACS study (Pope et al., 2002). If the benefit-per-ton estimates were based on the Six Cities study (Laden et al., 2006), the values would be approximately 145% (nearly two-and-a-half times) larger.
d The PM2. 5-related benefits (derived from benefit-per-ton values) presented in this table assume a 3% discount rate in the valuation of premature mortality to account for a twenty-year segmented cessation lag. If a 7% discount rate had been used, the values would be approximately 9% lower.
e Calculated using pre-tax fuel prices.

4. Basis for the Proposed GHG Standards Under Section 202(a)

EPA statutory authority under section 202(a)(1) of the Clean Air Act (CAA) is discussed in more detail in Section I.C.2. The following is a summary of the basis for the proposed 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 proposed 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's projection of the technology that would be used to comply with the proposed standards indicates that manufacturers will be able to meet the proposed standards by employing a wide variety of technology that is already commercially available and can be incorporated into their vehicle at the time of redesign. In addition to the use of the manufacturers' redesign cycle, EPA's analysis also takes into account certain flexibilities that will facilitate compliance especially in the early years of the program when potential lead time constraints are most challenging. These flexibilities include averaging, banking, and trading of various types of credits. For the industry as a whole, EPA's projections indicate that the proposed standards can be met using technology that will be available in the lead-time provided.

To account for additional lead-time concerns for various manufacturers of typically higher performance vehicles, EPA is proposing a Temporary Lead-time Allowance that will further facilitate compliance for limited volumes of such vehicles in the program's initial years. For a few very small volume manufacturers, EPA projects that manufacturers will likely comply using a combination of credits and technology.

EPA has also 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 standard practices such as making major changes to model 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 from this analysis to be well within a reasonable range in light of the emissions reductions and benefits received. 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.

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 2012-2016 vehicles we estimate GHG reductions of approximately 950 million metric tons CO2 eq. and fuel reductions of 1.8 billion barrels of oil. These are important and significant reductions that would be achieved by the proposed standards. 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 proposed standards, to the extent practicable. Our analysis to date indicates that the overall quantified benefits of the proposed standards far outweigh the projected costs. Utilizing a 3% discount rate and a $20 per ton social cost of carbon we estimate the total net social benefits over the life of the model year 2012-2016 vehicles is $192 billion, and the net present value of the net social benefits of the standards through the year 2050 is $1.9 trillion dollars. These values are estimated at $136 billion and $787 billion, respectively, using a 7% discount rate and the $20 per ton SCC value.

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 proposed standards satisfy this requirement, as discussed above. 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 rule. In summary, given the technical feasibility of the standard, the moderate cost per vehicle in light of the savings in fuel costs over the life time of the vehicle, the very significant reductions Start Printed Page 49513in emissions and in oil usage, and the significantly greater quantified benefits compared to quantified costs, EPA is confident that the proposed 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 (D.C. 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 (D.C. 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 (D.C. Cir. 2002) (same).

EPA recognizes that the vast majority of technology which we are considering for purposes of setting standards under section 202(a) is commercially available and already being utilized to a limited extent across the fleet. The vast majority of the emission reductions which would result from this proposed rule would result from the increased use of these technologies. EPA also recognizes that this proposed rule would enhance the development and limited use of more advanced technologies, such as PHEVs and EVs. 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 has therefore evaluated two sets of alternative standards, one more stringent than the proposed standards and one less stringent.

The alternatives are 4% per year increase in standards which would be less stringent than our proposal and a 6% per year increase in the standards which would be more stringent than our proposal. EPA is not proposing either of these. As discussed in Section III.D.7, the 4% per year compared to the proposal forgoes CO2 reductions which can be achieved at reasonable costs and are achievable by the industry within the rule's timeframe. The 6% per year alternative requires a significant increase in the projected required technology which may not be achievable in this timeframe due to the limited available lead time and the current difficult financial condition of the automotive industry. (See Section III.D.7 for a detailed discussion of why EPA is not proposing either of the alternatives.) EPA thus believes that it is appropriate to propose the CO2 standards discussed above. EPA invites comment on all aspects of this judgment, as well as comment on the alternative standards.

EPA is also proposing standards for N2 O and CH4. EPA has designed these standards to act as emission rate (i.e., gram per mile) caps and to avoid future increases in light duty vehicle emissions. As discussed in Section III.B.6, N2 O and CH4 emissions are already generally well controlled by current emissions standards, and EPA has not identified clear technological steps available to manufacturers today that would significantly reduce current emission levels for the vast majority of vehicles manufactured today (i.e., stoichiometric gasoline vehicles). However, for both N2 O and CH4, some vehicle technologies (and, for CH4, use of natural gas fuel) could potentially increase emissions of these GHGs in the future, and EPA believes it is important that this be avoided. EPA expects that, almost universally across current car and truck designs, manufacturers will be able to meet the “cap” standards with little if any technological improvements or cost. EPA has designed the level of the N2 O and CH4 standards with the intent that manufacturers would be able to meet them without the need for technological improvement; in other words, these emission standards are designed to be “anti-backsliding” standards.

B. Proposed GHG Standards for Light-Duty Vehicles, Light-Duty Trucks, and Medium-Duty Passenger Vehicles

EPA is proposing new emission standards to control greenhouse gases (GHGs) from light-duty vehicles. First, EPA is proposing emission standards for carbon dioxide (CO2) on a gram per mile (g/mile) basis that would apply to a manufacturer's fleet of cars, and a separate standard that would apply to a manufacturer's fleet of trucks. CO2 is the primary pollutant resulting from the combustion of vehicular fuels, and the amount of CO2 emitted is directly correlated to the amount of fuel consumed. Second, EPA is providing auto manufacturers with the opportunity to earn credits toward the fleet-wide average CO2 standards for improvements to air conditioning systems, including both hydrofluorocarbon (HFC) refrigerant losses (i.e., system leakage) and indirect CO2 emissions related to the increased load on the engine. Third, EPA is proposing separate emissions standards for two other GHG pollutants: Methane (CH4) and nitrous oxide (N2 O). CH4 and N2 O emissions relate closely to the design and efficient use of emission control hardware (i.e., catalytic converters). The standards for CH4 and N2 O would be set as a cap that would limit emissions increases and prevent backsliding from current emission levels. 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 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.” [121]

EPA is establishing a system of averaging, banking, and trading of credits integral to the fleet averaging approach, based on manufacturer fleet average CO2 performance, as discussed in Section III.B.4. This approach is similar to averaging, banking, and trading (ABT) programs EPA has established in other programs and is also similar to provisions in the CAFE program. In addition to traditional ABT credits based on the fleet emissions average, EPA is also proposing to include A/C credits as an aspect of the standards, as mentioned above. EPA is also proposing several additional credit provisions that apply only in the initial model years of the program. These include flex fuel vehicle credits, credits based on the use of advanced technologies, and generation of credits prior to model year 2012. The proposed A/C credits and additional credit opportunities are described in Section III.C. These credit programs would provide flexibility to manufacturers, which may be especially important during the early transition years of the program. EPA is also proposing to allow a manufacturer to carry a deficit into the future for a limited number of model years. A parallel provision, referred to as credit carry-back, is proposed as part of the CAFE program.

1. What Fleet-Wide Emissions Levels Correspond to the CO2 Standards?

The proposed attribute-based CO2 standards, if made final, are projected to achieve a national fleet-wide average, covering both light cars and trucks, of Start Printed Page 49514250 grams/mile of CO2 in model year (MY) 2016. This includes CO2-equivalent emission reductions from A/C improvements, reflected as credits in the standard. The standards would begin with MY 2012, with a generally linear increase in stringency from MY 2012 through MY 2016. EPA is proposing separate standards for cars and light trucks. 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 will 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 may generate credits from cars and use them for compliance with the truck standard. Such transfer of credits between cars and trucks is not reflected in the table below. In Section III.F, the year-by-year estimate of emissions reductions that are projected to be achieved by the proposed standards are discussed.

In general, the proposed schedule of standards acts as a phase-in to the MY 2016 standards, and reflects consideration of the appropriate lead-time for each manufacturer to implement the requisite emission reductions technology across its product line.[122] Note that 2016 is the final model year in which standards become more stringent. The 2016 CO2 standards would remain in place for 2017 and later model years, until revised by EPA in a future rulemaking.

EPA estimates that, on a combined fleet-wide national basis, the proposed 2016 MY standards would achieve a level of 250 g/mile CO2, including CO2-equivalent credits from A/C related reductions. The derivation of the 250 g/mile estimate is described in Section III.B.2.

EPA has estimated the overall fleet-wide CO2-equivalent emission 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 III.B.1-1 and III.B.1-2 provide these estimates for each manufacturer.[123]

Table III.B.1-1—Estimated Fleet CO2-Equivalent Levels Corresponding to the Proposed Standards for Cars

ManufacturerModel year
20122013201420152016
BMW265257249238227
Chrysler266259251242231
Daimler270263257245234
Ford266259251239228
General Motors266258250239228
Honda259251244232221
Hyundai260252244233221
Kia262253246235223
Mazda258250243231220
Mitsubishi255247240228217
Nissan263255247236225
Porsche242234227215204
Subaru252244237225214
Suzuki244236229217206
Tata286278271259248
Toyota257250242231220
Volkswagen254246239228217

Table III.B.1-2—Estimated Fleet CO2-Equivalent Levels Corresponding to the Proposed Standards for Light Trucks

ManufacturerModel year
20122013201420152016
BMW334324313298283
Chrysler349339329315300
Daimler346334323308293
Ford363352343329314
General Motors372361351337322
Honda333322311295280
Hyundai330320308293278
Kia341330319303288
Mazda321311300286271
Mitsubishi320310299284269
Nissan352341332318303
Porsche338327316301286
Subaru319308297282267
Suzuki324313301286271
Tata326316305289275
Toyota342332320305291
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Volkswagen344333322307292

These estimates were aggregated based on projected production volumes into the fleet-wide averages for cars and trucks (Table III.B.1-3).[124]

Table III.B.1-3—Estimated Fleet-wide CO2-Equivalent Levels Corresponding to the Proposed Standards

CarsTrucks
Model yearCO2 (g/mi)CO2 (g/mi)
2012261352
2013254341
2014245331
2015234317
2016 and later224303

As shown in Table III.B.1-3, fleet-wide CO2-equivalent emission levels for cars under the proposed approach are projected to decrease from 261 to 224 grams per mile between MY 2012 and MY 2016. Similarly, fleet-wide CO2-equivalent emission levels for trucks are projected to decrease from 352 to 303 grams per mile. These numbers do not include the effects of other flexibilities and credits in the program. The estimated achieved values can be found in Chapter 5 of the Draft Regulatory Impact Analysis (DRIA).

EPA has also estimated the average fleet-wide levels for the combined car and truck fleets. These levels are provided in Table III.B.1-4. As shown, the overall fleet average CO2 level is expected to be 250 g/mile in 2016.

Table III.B.1-4—Estimated Fleet-wide Combined CO2-Equivalent Levels Corresponding to the Proposed Standards

Combined car and truck
Model yearCO2 (g/mi)
2012295
2013286
2014276
2015263
2016250

As noted above, EPA is proposing standards that would result in increasingly stringent levels of CO2 control from MY 2012 though MY 2016—applying the CO2 footprint curves applicable in each model year to the vehicles expected to be sold in each model year produces fleet-wide annual reductions in CO2 emissions. As explained in Section III.D below and the relevant support documents, EPA believes that the proposed level of improvement achieves important CO2 emissions reductions through the application of feasible control technology at reasonable cost, considering the needed lead time for this program. EPA further believes that the proposed averaging, banking and trading provisions, as well as other credit-generating mechanisms, allow manufacturers further flexibilities which reduce the cost of the proposed CO2 standards and help to provide adequate lead time. EPA believes this approach is justified under section 202(a) of the Clean Air Act.

EPA has analyzed the feasibility under the CAA of achieving the proposed CO2 standards, based on projections of what actions manufacturers are expected to take to reduce emissions. The results of the analysis are discussed in detail in Section III.D below and in the DRIA. EPA also presents the estimated costs and benefits of the proposed car and truck 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 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 and NHTSA place important weight on the fact that during MYs 2012-2016 manufacturers are expected to redesign and upgrade their light-duty vehicle products (and in some cases introduce entirely new vehicles not on the market today). Over these five model years there would be an opportunity for manufacturers to evaluate almost every one of their vehicle model platforms and add technology in a cost-effective way to control GHG emissions and improve fuel economy. This includes redesign of the air conditioner systems in ways that will further reduce GHG emissions. The time-frame and levels for the proposed standards, as well as the ability to average, bank and trade credits and carry a deficit forward for a limited time, are expected to provide manufacturers the time needed to incorporate technology that will achieve GHG reductions, and to do this as part of the normal vehicle redesign process. This is an important aspect of the proposal, as it would avoid the much higher costs that would occur if manufacturers needed to add or change technology at times other than these scheduled redesigns. This time period would also provide manufacturers the opportunity to plan for compliance using a multi-year time frame, again in accord with their normal business practice.

Consistent with the requirement of CAA section 202(a)(1) that standards be applicable to vehicles “for their useful life,” EPA is proposing CO2 vehicle standards that 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 Tier 2 light-duty vehicles and light-duty trucks.[125] Tier 2 refers to EPA's standards for criteria pollutants such as NOX, HC, and CO. EPA is proposing new CO2 standards for the same group of vehicles, and therefore the Tier 2 useful life would apply for CO2 standards as well. The in-use emission standard will be 10% higher than the certification standard, to address issues of production variability and test-to-test variability. The in-use standard is discussed in Section III.E.

EPA is proposing to measure CO2 for certification and compliance purposes using the same test procedures currently used by EPA for measuring fuel economy. These procedures are the Federal Test Procedure (FTP or “city” test) and the Highway Fuel Economy Start Printed Page 49516Test (HFET or “highway” test).[126] This corresponds with the data used to develop the footprint-based CO2 standards, since the data on control technology efficiency was also developed in reference to these test procedures. Although EPA recently updated the test procedures used for fuel economy labeling, to better reflect the actual in-use fuel economy achieved by vehicles, EPA is not proposing to use these test procedures for the CO2 standards proposed here, given the lack of data on control technology effectiveness under these procedures.[127] As stated in Section I, EPA and NHTSA invite comments on potential amendments to the CAFE and GHG test procedures, including but not limited to air conditioner-related emissions, that could be implemented beginning in MY 2017.

EPA proposes to include hydrocarbons (HC) and carbon monoxide (CO) in its CO2 emissions calculations on a CO2-equivalent basis. It is well accepted that HC and CO are typically oxidized to CO2 in the atmosphere in a relatively short period of time and so are effectively part of the CO2 emitted by a vehicle. In terms of standard stringency, accounting for the carbon content of tailpipe HC and CO emissions and expressing it as CO2-equivalent emissions would add less than one percent to the overall CO2-equivalent emissions level. This will also ensure consistency with CAFE calculations since HC and CO are included in the “carbon balance” methodology that EPA uses to determine fuel usage as part of calculating vehicle fuel economy levels.

2. What Are the CO2 Attribute-Based Standards?

EPA proposes to use the same vehicle category definitions that are used in the CAFE program for the 2011 model year standards.[128] The CAFE vehicle category definitions differ slightly from the EPA definitions for cars and light trucks used for the Tier 2 program, as well as other EPA vehicle programs. Specifically, NHTSA's reconsideration of the CAFE program statutory language has resulted in many two-wheel drive SUVs under 6000 pounds gross vehicle weight being reclassified as cars under the CAFE program. The proposed approach of using CAFE definitions allows EPA's proposed CO2 standards and the proposed CAFE standards to be harmonized across all vehicles. In other words, vehicles would be subject to either car standards or truck standards under both programs, and not car standards under one program and trucks standards under the other.

EPA is proposing separate car and truck standards, that is, vehicles defined as cars have one set of footprint-based curves for MY 2012-2016 and vehicles defined as trucks have a different set for MY 2012-2016. In general, for a given footprint the CO2 g/mi target for trucks is less stringent then for a car with the same footprint.

EPA is not proposing a single fleet standard where all cars and trucks are measured against the same footprint curve for several reasons. First, some vehicles classified as trucks (such as pick-up trucks) have certain attributes not common on cars which attributes contribute to higher CO2 emissions—notably high load carrying capability and/or high towing capability. Due to these differences, it is reasonable to separate the light-duty vehicle fleet into two groups. Second, EPA would like to harmonize key program design elements of the GHG standards with NHTSA's CAFE program where it is reasonable to do so. NHTSA is required by statute to set separate standards for passenger cars and for non-passenger cars.

Finally, most of the advantages of a single standard for all light duty vehicles are also present in the two-fleet standards proposed here. Because EPA is proposing to allow unlimited credit transfer between a manufacturer's car and truck fleets, the two fleets can essentially be viewed as a single fleet when manufacturers consider compliance strategies. Manufacturers can thus choose on which vehicles within their fleet to focus GHG reducing technology and then use credit transfers as needed to demonstrate compliance, just as they would if there was a single fleet standard. The one benefit of a single light-duty fleet not captured by a two-fleet approach is that a single fleet prevents potential “gaming” of the car and truck definitions to try and design vehicles which are more similar to passenger cars but which may meet the regulatory definition of trucks. Although this is of concern to EPA, we do not believe at this time that concern is sufficient to outweigh the other reasons for proposing separate car and truck fleet standards. EPA requests comment on this approach.

For model years 2012 and later, EPA is proposing a series of CO2 standards that are described mathematically by a family of piecewise linear functions (with respect to vehicle footprint). The form of the function is as follows:

CO2 = a, if x ≤ l

CO2 = cx + d, if l < x ≤ h

CO2 = b, if x > h

Where:

CO2 = the CO2 target value for a given footprint (in g/mi)

a = the minimum CO2 target value (in g/mi)

b = the maximum CO2 target value (in g/mi)

c = the slope of the linear function (in g/mi per sq ft)

d = is the zero-offset for the line (in g/mi CO2)

x = footprint of the vehicle model (in square feet, rounded to the nearest tenth)

l & h are the lower and higher footprint limits, constraints, or the boundary (“kinks”) between the flat regions and the intermediate sloped line.

EPA's proposed parameter values that define the family of functions for the proposed CO2 fleetwide average car and truck standards are as follows:

Table III.B.2-1—Parameter Values for Cars

[For CO2 gram per mile targets]

Model yearabcdLower constraintUpper constraint
20122423134.7248.84156
20132343054.7240.84156
20142272974.7233.24156
20152152864.7222.04156
2016 and later2042754.7210.94156
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Table III.B.2-2—Parameter Values for Trucks

[For CO2 gram per mile targets]

Model yearabcdLower constraintUpper constraint
20122983994.04132.64166
20132873884.04121.64166
20142763774.04110.34166
20152613624.0495.24166
2016 and later2463474.0480.44166

The equations can be shown graphically for each vehicle category, as shown in Figures III.B.2-1 and III.B.2-2. These standards (or functions) decrease from 2012-2016 with a vertical shift. A more detailed description of the development of the attribute based standard can be found in Chapter 2 of the Draft Joint TSD. More background discussion on other alternative attributes and curves EPA explored can be found in the EPA DRIA. EPA recognizes that the CAA does not mandate that EPA use an attribute based standard, as compared to NHTSA's obligations under EPCA. The EPA believes that proposing a footprint-based program will harmonize EPA's proposed program and the proposed CAFE program as a single national program, resulting in reduced compliance complexity for manufacturers. EPA's reasons for proposing to use an attribute based standard are discussed in more detail in the Joint TSD. Comments are requested on this proposal to use the attribute-based approach for regulating tailpipe CO2 emissions.

Start Printed Page 49518

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3. Overview of How EPA's Proposed CO2 Standards Would Be Implemented for Individual Manufacturers

This section provides a brief overview of how EPA proposes to implement the CO2 standards. Section III.E explains EPA's proposed approach for certification and compliance in detail. EPA is proposing two kinds of standards—fleet average standards determined by a manufacturer's fleet profile of various models, and in-use standards that would apply to the various models that make up the manufacturer's fleet. Although this is similar in concept to the current light-duty vehicle Tier 2 program, there are Start Printed Page 49520important differences. In explaining EPA's proposal for the CO2 standards, it is useful to summarize how the Tier 2 program works.

Under Tier 2, manufacturers select a test vehicle prior to certification and test the vehicle and/or its emissions hardware to determine both its emissions performance when new and the emissions performance expected at the end of its useful life. Based on this testing, the vehicle is assigned to one of several specified bins of emissions levels, identified in the Tier 2 rule, and this bin level becomes the emissions standard for the test group the test vehicle represents. All of the vehicles in the group must meet the emissions level for that bin throughout their useful life. The emissions level assigned to the bin is also used in calculating the manufacturer's fleet average emissions performance.

Since compliance with the Tier 2 fleet average depends on actual test group sales volumes and bin levels, it is not possible to determine compliance at the time the manufacturer applies for and receives a certificate of conformity for a test group. Instead, at certification, the manufacturer demonstrates that the vehicles in the test group are expected to comply throughout their useful life with the emissions bin assigned to that test group, and makes a good faith demonstration that its fleet is expected to comply with the Tier 2 average when the model year is over. EPA issues a certificate for the vehicles covered by the test group based on this demonstration, and includes a condition in the certificate that if the manufacturer does not comply with the fleet average then production vehicles from that test group will be treated as not covered by the certificate to the extent needed to bring the manufacturer's fleet average into compliance with Tier 2.

EPA proposes to retain the Tier 2 approach of requiring manufacturers to demonstrate in good faith at the time of certification that models in a test group will meet applicable standards throughout useful life. EPA also proposes to retain the practice of conditioning certificates upon attainment of the fleet average standard. However, there are several important differences between a Tier 2 type of program and the CO2 standards program EPA is proposing. These differences and resulting modifications to certification are summarized below and are described in detail in Section III.E.

EPA is proposing to certify test groups as it does for Tier 2, with the CO2 emission results for the test vehicle as the initial or default standard for all of the models in the test group. However, manufacturers would later substitute test data for individual models in that test group, based on the model level fuel economy testing that typically occurs through the course of the model year. This model level data would then be used to assign a distinct certification level for that model, instead of the initial test group level. These model level results would then be used to calculate the fleet average after the end of production.[129] The option to substitute model level test data for the test group data is at the manufacturer's discretion, except they are required as under the CAFE test protocols to test, at a minimum, enough models to represent 90 percent of their production. The test group level would continue to apply for any model that is not covered by model level testing. A related difference is that the fleet average calculation for Tier 2 is based on test group bin levels and test group sales whereas under this proposal the CO2 fleet level would be based on a combination of test group and model-level emissions and model-level production. For the new CO2 standards, EPA is proposing to use production rather than sales in calculating the fleet average in order to more closely conform with CAFE, which is a production-based program. EPA does not expect any significant environmental effect because there is little difference between production and sales, and this will reduce the complexity of the program for manufacturers.

4. Averaging, Banking, and Trading Provisions for CO2 Standards

As explained above, a fleet average CO2 program for passenger cars and light trucks is proposed. EPA has implemented similar averaging programs for a range of motor vehicle types and pollutants, from the Tier 2 fleet average for NOX to motorcycle hydrocarbon (HC) plus oxides of nitrogen (NOX) emissions to NOX and particulate matter (PM) emissions from heavy-duty engines.[130] The proposed program would operate much like EPA's existing averaging programs in that manufacturers would calculate production-weighted fleet average emissions at the end of the model year and compare their fleet average with a fleet average standard to determine compliance. As in other EPA averaging programs, the Agency is also proposing a 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, using their typical redesign schedules.

Averaging, Banking, and Trading (ABT) of emissions credits has 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. 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 lead-time or technical feasibility, allowing EPA to set a standard that is either numerically more stringent or goes into effect earlier than could have been justified otherwise. This provides important environmental benefits at the same time it increases flexibility and reduces costs for the regulated industry.

This section discusses generation of credits by achieving a fleet average CO2 level that is lower than the manufacturer's CO2 fleet average standard. EPA is proposing a variety of additional ways credits may be generated by manufacturers. Section III.C describes these additional opportunities to generate credits in detail. EPA is proposing that credits could be earned through A/C system improvements beyond a specified baseline. Credits can also be generated by producing alternative fuel vehicles, by producing advanced technology vehicles including electric vehicles, plug-in hybrids, and fuel cell vehicles, and by using technologies that improve off-cycle emissions. In addition, EPA is proposing that early credits could be generated prior to the proposed program's MY 2012 start date. The credits would be used in calculating the fleet averages at the end of the model year, with the exception of early credits which would be tracked separately. These proposed credit generating opportunities are described below in Section III.C.

As explained earlier, manufacturers would determine the fleet average standard that would apply to their car fleet and the standard for their truck fleet from the applicable attribute-based curve. A manufacturer's credit or debit Start Printed Page 49521balance would be determined by comparing their fleet average with the manufacturer's CO2 standard for that model year. The standard would be calculated from footprint values on the attribute curve and actual production levels of vehicles at each footprint. A manufacturer would generate credits if its car or truck fleet achieves a fleet average CO2 level lower than its standard and would generate debits if its fleet average CO2 level is above that standard. At the end of the model year, each manufacturer would calculate a production-weighted fleet average for each averaging set, cars and trucks. A manufacturer's car or truck fleet that achieves a fleet average CO2 level lower than its standard would generate credits, and if its fleet average CO2 level is above that standard its fleet would generate debits.

EPA is proposing to account for the difference in expected lifetime vehicle miles traveled (VMT) between cars and trucks in order to preserve CO2 reductions when credits are transferred between cars and trucks. As directed by EISA, NHTSA accomplishes this in the CAFE program by using an adjustment factor that is applied to credits when they are transferred between car and truck compliance categories. The CAFE adjustment factor accounts for two different influences that can cause the transfer of car and truck credits (expressed in tenths of a mpg), if left unadjusted, to potentially negate fuel reductions. First, mpg is not linear with fuel consumption, i.e., a 1 mpg improvement above a standard will imply a different amount of actual fuel consumed depending on the level of the standard. Second, NHTSA's conversion corrects for the fact that the typical lifetime miles for cars is less than that for trucks, meaning that credits earned for cars and trucks are not necessarily equal. NHTSA's adjustment factor essentially converts credits into vehicle lifetime gallons to ensure preservation of fuel savings and the transfer credits on an equal basis, and then converts back to the statutorily required credit units of tenths of a mile per gallon. To convert to gallons NHTSA's conversion must take into account the expected lifetime mileage for cars and trucks. Because EPA is proposing standards that are expressed on a CO2 gram per mile basis, which is linear with fuel consumption, EPA's credit calculations do not need to account for the first issue noted above. However, EPA is proposing to account for the second issue by expressing credits when they are generated in total lifetime megagrams (metric tons), rather than through the use of conversion factors that would apply at certain times. In this way credits could be freely exchanged between car and truck compliance categories without adjustment. Additional detail regarding this approach, including a discussion of the vehicle lifetime mileage estimates for cars and trucks can be found in Section III.E.5. A discussion of the estimated vehicle lifetime miles traveled can be found in Chapter 4 of the draft Joint Technical Support Document. EPA requests comment on the proposed approach.

A manufacturer that generates credits in a given year and vehicle category could use those credits in essentially four ways, although with some limitations. These provisions are very similar to those of other EPA averaging, banking, and trading programs. These provisions have the potential to reduce costs and compliance burden, and support the feasibility of the standards being proposed in terms of lead time and orderly redesign by a manufacturer, thus promoting and not reducing the environmental benefits of the program.

First, the manufacturer would have to offset any deficit that had accrued in that averaging set in a prior model year and had been carried over to the current model year. In such a case, the manufacturer would be obligated to use any current model year credits to offset that deficit. This is referred to in the CAFE program as credit carry-back. EPA's proposed deficit carry-forward, or credit carry-back provisions are described further, below.

Second, after satisfying any needs to offset pre-existing deficits within a vehicle category, remaining credits could be banked, or saved for use in future years. EPA is proposing that credits generated in this program be available to the manufacturer for use in any of the five years after the year in which they were generated, consistent with the CAFE program under EISA. This is also referred to as a credit carry-forward provision. For other new emission control programs, EPA has sometimes initially restricted credit life to allow time for the Agency to assess whether the credit program is functioning as intended. When EPA first offered averaging and banking provisions in its light-duty emissions control program (the National Low Emission Vehicle Program), credit life was restricted to three years. The same is true of EPA's early averaging and banking program for heavy-duty engines. As these programs matured and were subsequently revised, EPA became confident that the programs were functioning as intended and that the standards were sufficiently stringent to remove the restrictions on credit life.

EPA is therefore acting consistently with our past practice in proposing to reasonably restrict credit life in this new program. The Agency believes, subject to consideration of public comment, that a credit life of five years represents an appropriate balance between promoting orderly redesign and upgrade of the emissions control technology in the manufacturer's fleet and the policy goal of preventing large numbers of credits accumulated early in the program from interfering with the incentive to develop and transition to other more advanced emissions control technologies. As discussed below in Section III.C, EPA is proposing that any early credits generated by a manufacturer, beginning as soon as MY 2009, would also be subject to the five-year credit carry-forward restriction based on the year in which they are generated. This would limit the effect of the early credits on the long-term emissions reductions anticipated to result from the proposed new standards.

Third, EPA is proposing to allow manufacturers to transfer 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's not meeting the truck fleet average standard in a given year. EPA believes that such cross-category use of credits by a manufacturer would provide important additional flexibility in the transition to emissions control technology without affecting overall emission reductions.

Finally, accumulated credits could be traded to another vehicle manufacturer. As with intra-company credit use, such inter-company credit trading would provide flexibility in the transition to emissions control technology without affecting overall emission reductions. Trading credits to another vehicle manufacturer would be a straightforward process between the two manufacturers, but could also involve third parties that could serve as credit brokers. Brokers would not own the credits at any time. These sorts of exchanges are typically allowed under EPA's current emission credit programs, e.g., the Tier 2 light-duty vehicle NOX fleet average standard and the heavy-duty engine NOX fleet average standards, although manufacturers have seldom made such exchanges. EPA seeks comment on enhanced reporting requirements or other methods that could help EPA assess validity of Start Printed Page 49522credits, especially those obtained from third-party credit brokers

If a manufacturer had a deficit at the end of a model year—that is, its fleet average level failed to meet the required fleet average standard—EPA proposes that the manufacturer could carry that deficit forward (also referred to credit carry-back) for a total of three model years after the model year in which that deficit was generated. As noted above, such a deficit carry-forward could only occur after the manufacturer applied any banked credits or credits from another averaging set. If a deficit still remained after the manufacturer had applied all available credits, and the manufacturer did not obtain credits elsewhere, the deficit could be carried over for up to three model years. No deficit could be carried into the fourth model year after the model year in which the deficit occurred. Any deficit from the first model year that remained after the third model year would thus constitute a violation of the condition on the certificate, which would constitute a violation of the Clean Air Act and would be subject to enforcement action.

In the Tier 2 rulemaking proposal, EPA proposed to allow deficits to be carried forward for one year. In their comments on that proposal, manufacturers argued persuasively that by the time they can tabulate their average emissions for a particular model year, the next model year is likely to be well underway and it is too late to make calibration, marketing, or production mix changes to adjust that year's credit generation. Based on those comments, in the Tier 2 final rule EPA finalized provisions that allowed the deficit to be carried forward for a total of three years. EPA continues to believe that three years is an appropriate amount of time that gives the manufacturers adequate time to respond to a deficit situation but does not create a lengthy period of prolonged non-compliance with the fleet average standards.[131] Subsequent EPA emission control programs that incorporate ABT provisions (e.g., the Mobile Source Air Toxics rule) have provided this three-year deficit carry-forward provision for this reason.[132]

The proposed averaging, banking, and trading provisions are generally consistent with those included in the CAFE program, with a few notable exceptions. As with EPA's proposed approach, CAFE allows five year carry-forward of credits and three year carry-back. Transfers of credits across a manufacturer's car and truck averaging sets are also allowed, but with limits established by EISA on the use of transferred credits. The amount of transferred credits that can be used in a year is limited, and transferred credits may not be used to meet the CAFE minimum domestic passenger car standard. CAFE allows credit trading, but again, traded credits cannot be used to meet the minimum domestic passenger car standard. EPA is not proposing these constraints on the use of transferred credits.

Additional details regarding the averaging, banking, and trading provisions and how EPA proposes to implement these provisions can be found in Section III.E.

5. CO2 Optional Temporary Lead-time Allowance Alternative Standards

EPA is proposing a limited and narrowly prescribed option, called the Temporary Lead-time Allowance Alternative Standards (TLAAS), to provide additional lead time for a certain subset of manufacturers. This option is designed to address two different situations where we project that more lead time is needed, based on the level of emissions control technology and emissions control performance currently exhibited by certain vehicles. One situation involves manufacturers who have traditionally paid CAFE fines instead of complying with the CAFE fleet average, and as a result at least part of their vehicle production currently has significantly higher CO2 and lower fuel economy levels than the industry average. More lead time is needed in the program's initial years to upgrade these vehicles to meet the aggressive CO2 emissions performance levels required by the proposal. The other situation involves manufacturers who have a limited line of vehicles and are unable to take advantage of averaging of emissions performance across a full line of production. For example, some smaller volume manufacturers focus on high performance vehicles with higher CO2 emissions, above the CO2 emissions target for that vehicle footprint, but do not have other types of vehicles in their production mix with which to average. Often, these manufacturers also pay fines under the CAFE program rather than meeting the applicable CAFE standard. Because voluntary non-compliance is impermissible for the GHG standards proposed under the CAA, both of these types of manufacturers need additional lead time to upgrade vehicles and meet the proposed standards. EPA is proposing an optional, temporary alternative standard, which is only slightly less stringent, and limited to the first four model years (2012—2015) of the National Program, so that these manufacturers can have sufficient lead time to meet the tougher MY 2016 GHG standards, while preserving consumer choice of vehicles during this time.

In MY 2016, the TLAAS option ends, and all manufacturers, regardless of size, and domestic sales volume, must comply with the same CO2 standards, while under the CAFE program companies would continue to be allowed to pay civil penalties in lieu of complying with the CAFE standards. However, because companies must meet both the CAFE standards and the EPA CO2 standards, the National Program will have the practical impact of providing a level playing field for all companies beginning in MY 2016—a situation which has never existed under the CAFE program. This option thereby results in more fuel savings and CO2 reductions than would be the case under the CAFE program.

EPA projects that the environmental impact of the proposed TLAAS program will be very small. If all companies eligible to use the TLAAS use it to the maximum extent allowed, total GHG emissions from the proposal will increase by less than 0.4% over the lifetime of the MY 2012-2016 vehicles. EPA believes the impact will be even smaller, as we do not expect all of the eligible companies to use this option, and we do not expect all companies who do use the program will use it to the maximum extent allowed, as we have included provisions which discourage companies from using the TLAAS any longer than it is needed.

EPA has structured the TLAAS option to provide more lead time in these kinds of situations, but to limit the program so that it would only be used in situations where these kinds of lead time concerns arise. Based on historic data on sales, EPA is using a specific historic U.S. sales volume as the best way to identify the subset of production that falls into this situation. Under the TLAAS, these manufacturers would be allowed to produce up to but no more than 100,000 vehicles that would be subject to a somewhat less stringent CO2 standard. This 100,000 volume is not an annual limit, but is an absolute limit for the total number of vehicles which can use the TLAAS program over the model years 2012-2015. Any additional production would be subject to the same standards as any other manufacturer. In addition, EPA is imposing a variety of restrictions on the use of the TLAAS program, discussed in more detail below, to ensure that only manufacturers who need more lead-time Start Printed Page 49523for the kinds of reasons noted above are likely to use the program. Finally, the program is temporary and expires at the end of MY 2015. A more complete discussion of the program is provided below. EPA believes the proposed program reasonably addresses a real world lead time constraint, and does it in a way that balances the need for more lead time with the need to minimize any resulting loss in potential emissions reductions. EPA invites comment as to whether its proposal is the best way to balance these concerns.

EPA proposes to establish a TLAAS for a specified subset of manufacturers. There are two types of companies who would make use of TLAAS—those manufacturers who have paid CAFE fines in recent years, and who need additional lead-time to incorporate the needed technology; and those companies who are not full-line manufacturers, who have a smaller range of models and vehicle types, who may need additional lead-time as well. This alternative standard would apply to manufacturers with total U.S. sales of less than 400,000 vehicles per year, using 2009 model year final sales numbers to determine eligibility for these alternative standards. EPA reviewed the sales volumes of manufacturers over the last few years, and determined that manufacturers below this level typically fit the characteristics discussed above, and manufacturers above this level did not. Thus, EPA chose this level because it functionally identifies the group of manufacturers described above, recognizing that there is nothing intrinsic in the sales volume itself that warrants this allowance. EPA was not able to identify any other objective criteria that would more appropriately identify the manufacturers and vehicle fleets described above.

EPA is proposing that manufacturers qualifying for TLAAS would be allowed to meet slightly less stringent standards for a limited number of vehicles for model years 2012-2015. Specifically, an eligible manufacturer could have a total of up to 100,000 units of cars and trucks combined over model years 2012-2015, and during those model years those vehicles would be subject to a standard 1.25 times the standard that would otherwise apply to those vehicles under the primary program. In other words, the footprint curves upon which the individual manufacturer standards for the TLAAS fleets are based would be less stringent by a factor of 1.25 for up to 100,000 of an eligible manufacturer's vehicles for model years 2012-2015. As noted, this approach seeks to balance the need to provide additional lead-time without reducing the environmental benefits of the proposed program. EPA believes that 100,000 units over four model years achieves an appropriate balance as the emissions impact is quite small, but does provide companies with some flexibility during MY 2012-2015. For example, for a manufacturer producing 400,000 vehicles per year, this would be a total of up to 100,000 vehicles out of a total production of up to 1.6 million vehicles over the four year period, or about 6 percent of total production.

Manufacturers with no U.S. sales in model year 2009 would not qualify for the TLAAS program. Manufacturers meeting the cut-point of 400,000 for MY 2009 but with U.S. directed production above 400,000 in any subsequent model years would remain eligible for the TLAAS program. Also, the total sales number applies at the corporate level, so if a corporation owns several vehicle brands the aggregate sales for the corporation would be used. These provisions would help prevent gaming of the provisions through corporate restructuring. Corporate ownership or control relationships would be based on determinations made under CAFE for model year 2009. In other words, corporations grouped together for purposes of meeting CAFE standards, would be grouped together for determining whether or not they are eligible under the 400,000 vehicle cut point.

EPA derived the 100,000 maximum unit set aside number based on a gradual phase-out schedule shown in Table III.B.5-1, below. However, individual manufacturers' situations will vary significantly and so EPA believes a flexible approach that allows manufacturers to use the allowance as they see fit during these model years would be most appropriate. As another example, an eligible manufacturer could also choose to apply the TLAAS program to an average of 25,000 vehicles per year, over the four-year period. Therefore, EPA is proposing that a total of 100,000 vehicles of an eligible manufacturer, with any combination of cars or trucks, could be subject to the alternative standard over the four year period without restrictions.

Table III.B.5-1—TLAAS Example Vehicle Production Volumes

Model year2012201320142015
Sales Volume40,00030,00020,00010,000

The TLAAS vehicles would be separate car and truck fleets for that model year and would be subject to the less stringent footprint-based standards of 1.25 times the primary fleet average that would otherwise apply. The manufacturer would determine what vehicles are assigned to these separate averaging sets for each model year. EPA is proposing that credits from the primary fleet average program can be transferred and used in the TLAAS program. Credits within the TLAAS program may also be transferred between the TLAAS car and truck averaging sets for use through 2015 when the TLAAS would end. However, credits generated under TLAAS would not be allowed to be transferred or traded to the primary program. Therefore, any unused credits under TLAAS would expire after model year 2015. EPA believes that this is necessary to limit the program to situations where it is needed and to prevent the allowance from being inappropriately transferred to the long-term primary program.

EPA is concerned that some manufacturers would be able to place relatively clean vehicles in the TLAAS to maximize TLAAS credits if credit use was unrestricted. However, any credits generated from the primary program that are not needed for compliance in the primary program, should be used to offset the TLAAS vehicles. EPA is thus proposing to restrict the use of banking and trading between companies of credits in the primary program in years in which the TLAAS is being used. For example, manufacturers using the TLAAS in MY 2012 could not bank credits in the primary program during MY 2012 for use in MY 2013 and later. No such restriction would be in place for years when the TLAAS is not being used. EPA also believes this provision is necessary to prevent credits from being earned simply by removing some high-emitting vehicles from the primary fleet. Absent this restriction, manufacturers would be able to choose to use the TLAAS for these vehicles and also be Start Printed Page 49524able to earn credits under the primary program that could be banked or traded under the primary program without restriction. EPA is proposing two additional restrictions regarding the use of the TLAAS by requiring that for any of the 2012-2015 model years for which an eligible manufacturer would like to use the TLAAS, the manufacturer must use two of the available flexibilities in the GHG program first in order to try and show compliance with the primary standard before accessing the TLAAS. Specifically, before using the TLAAS the manufacturer must: (1) use any banked emission credits from a previous model year; and, (2) use any available credits from the companies' car or truck fleet for the specific model year (i.e., use credit transfer from cars to trucks or from trucks to cars, that is, before using the TLAAS for either the car fleet or the truck fleet, make use of any available credit transfers first). EPA is requesting comments on all aspects of the proposed TLAAS program including comments on other provisions that might be needed to ensure that the TLAAS program is being used as intended and to ensure no gaming occurs.

Finally, EPA recognizes that there will be a wide range of companies within the eligible manufacturers with sales less than 400,000 vehicles in model year 2009. Some of these companies, while having relatively small U.S. sales volumes, are large global automotive firms, including companies such as Mercedes and Volkswagen. Other companies are significantly smaller niche firms, with sales volumes closer to 10,000 vehicles per year worldwide; an example of this type of firm is Aston Martin. EPA anticipates that there are a small number of such smaller volume manufacturers, which have claimed that they may face greater challenges in meeting the proposed standards due to their limited product lines across which to average. EPA requests comment on whether the proposed TLAAS program, as described above, provides sufficient lead-time for these smaller firms to incorporate the technology needed to comply with the proposed GHG standards.

6. Proposed Nitrous Oxide and Methane Standards

In addition to fleet-average CO2 standards, EPA is proposing separate per-vehicle standards for nitrous oxide (N2 O) and methane (CH4) emissions. Standards are being proposed that would cap vehicle N2 O and CH4 emissions at current levels. Our intention is to set emissions standards that act to cap emissions to ensure that future vehicles do not increase their N2 O and CH4 emissions above levels that would be allowed under the proposal.

EPA considered an approach of expressing each of these standards in common terms of CO2-equivalent emissions and combining them into a single standard along with CO2 and HFC emissions. California's “Pavley” program adopted such a CO2-equivalent emissions standards approach to GHG emissions in their program.[133] However, these pollutants are largely independent of one another in terms of how they are generated by the vehicle and how they are tested for during implementation. Potential control technologies and strategies for each pollutant also differ. Moreover, an approach that provided for averaging of these pollutants could undermine the stringency of the CO2 standards, as at this time we are proposing standards which “cap” N2 O and CH4 emissions, rather then proposing a level which is either at the industry fleet-wide average or which would result in reductions from these pollutants. It is possible that once EPA begins to receive more detailed information on the N2 O and CH4 performance of the new vehicle fleet as a result of this proposed rule (if it were to be finalized as proposed) that for a future action for model years 2017 and later EPA could consider a CO2-equivalent standard which would not result in any increases in GHG emissions due to the current lack of detailed data on N2 O and CH4 emissions performance. In addition, EPA seeks comment on whether a CO2-equivalent emissions standard should be considered for model years 2012 through 2016, and whether there are advantages or disadvantages to such an approach, including potential impacts on harmonization with CAFE standards.

Almost universally across current car and truck designs, both gasoline- and diesel-fueled, these emissions are relatively low, and our intent is to not require manufacturers to make technological improvements in order to reduce N2 O and CH4 at this time. However, it is important that future vehicle technologies or fuels do not result in increases in these emissions, and this is the intent of the proposed “cap” standards.

EPA requests comments on our approach to regulating N2 O and CH4 emissions including the appropriateness of “cap” standards as opposed to “technology-forcing” standards, the technical bases for the proposed N2 O and CH4 standards, the proposed test procedures, and timing. Specifically, EPA seeks comment on the appropriateness of the proposed levels of the N2 O and CH4 standards to accomplish our stated intent. In addition, EPA seeks comment on any additional emissions data on N2 O and CH4 from current technology vehicles.

a. Nitrous Oxide (N2 O) Exhaust Emission Standard

N2 O is a global warming gas with a high global warming potential.[134] It accounts for about 2.7% of the current greenhouse gas emissions from cars and light trucks. EPA is proposing a per-vehicle N2 O emission standard of 0.010 g/mi, measured over the traditional FTP vehicle laboratory test cycles. The standard would become effective in model year 2012 for all light-duty cars and trucks. Averaging between vehicles would not be allowed. The standard is designed to prevent increases in N2 O emissions from current levels, i.e. a no-backsliding standard.

N2 O is emitted from gasoline and diesel vehicles mainly during specific catalyst temperature conditions conducive to N2 O formation. Specifically, N2 O can be generated during periods of emission hardware warm-up when rising catalyst temperatures pass through the temperature window when N2 O formation potential is possible. For current Tier 2 compatible gasoline engines with conventional three-way catalyst technology, N2 O is not generally produced in significant amounts because the time the catalyst spends at the critical temperatures during warm-up is short. This is largely due to the need to quickly reach the higher temperatures necessary for high catalyst efficiency to achieve emission compliance of criteria pollutants. N2 O is a more significant concern with diesel vehicles, and potentially future gasoline lean-burn engines, equipped with advanced catalytic NOX emissions control systems. These systems can but need not be designed in a way that emphasizes efficient NOX control while allowing the formation of significant quantities of N2 O. Excess oxygen present in the exhaust during lean-burn conditions in diesel or lean-burn gasoline engines equipped with these advanced systems can favor N2 O formation if catalyst temperatures are not carefully controlled. Without Start Printed Page 49525specific attention to controlling N2 O emissions in the development of such new NOX control systems, vehicles could have N2 O emissions many times greater than are emitted by current gasoline vehicles.

EPA is proposing an N2 O emission standard that EPA believes would be met by current-technology gasoline vehicles at essentially no cost. As noted, N2 O formation in current catalyst systems occurs, but the emission levels are low, because the time the catalyst spends at the critical temperatures during warm-up when N2 O can form is short. At the same time, EPA believes that the proposed standard would ensure that the design of advanced NOX control systems, especially for future diesel and lean-burn gasoline vehicles, would control N2 O emission levels. While current NOX control approaches used on current Tier 2 diesel vehicles do not tend to form N2 O emissions, EPA believes that the proposed standards would discourage any new emission control designs that achieve criteria emissions compliance at the cost of increased N2 O emissions. Thus, the proposed standard would cap N2 O emission levels, with the expectation that current gasoline and diesel vehicle control approaches that comply with the Tier 2 vehicle emission standards for NOX would not increase their emission levels, and that the cap would ensure that future vehicle designs would appropriately control their emissions of N2 O. The proposed N2 O level is approximately two times the average N2 O level of current gasoline passenger cars and light-duty trucks that meet the Tier 2 NOX standards.[135] Manufacturers typically use design targets for NOX emission levels of about 50% of the standard, to account for in-use emissions deterioration and normal testing and production variability, and manufacturers are expected to utilize a similar approach for N2 O emission compliance. EPA is not proposing a more stringent standard for current gasoline and diesel vehicles because the stringent Tier 2 program and the associated NOX fleet average requirement already result in significant N2 O control, and does not expect current N2 O levels to rise for these vehicles. EPA requests comment on this technical assessment of current and potential future N2 O formation in cars and trucks.

While EPA believes that manufacturers will likely be able to acquire and install N2 O analytical equipment, the agency also recognizes that some companies may face challenges. Given the short lead-time for this rule, EPA proposes that manufacturers be able to apply for a certificate of conformity with the N2 O standard for model year 2012 based on a compliance statement based on good engineering judgment. For 2013 and later model years, manufacturers would need to submit measurements of N2 O for compliance purposes.

Diesel cars and light trucks with advanced emission control technology are in the early stages of development and commercialization. As this segment of the vehicle market develops, the proposed N2 O standard would require manufacturers to incorporate control strategies that minimize N2 O formation. Available approaches include using electronic controls to limit catalyst conditions that might favor N2 O formation and consider different catalyst formulations. While some of these approaches may have modest associated costs, EPA believes that they will be small compared to the overall costs of the advanced NOX control technologies already required to meet Tier 2 standards.

Vehicle emissions regulations do not currently require testing for N2 O, and most test facilities do not have equipment for its measurement. Manufacturers without this capability would need to acquire and install appropriate measurement equipment. However, EPA is proposing four N2 O measurement methods, all of which are commercially available today. EPA expects that most manufacturers would use photo-acoustic measurement equipment, which the Agency estimates would result in a one-time cost of about $50,000-$60,000 for each test cell that would need to be upgraded.

Overall, EPA believes that manufacturers of cars and light trucks, both gasoline and diesel, would meet the proposed standard without implementing any significantly new technologies, and there are not expected to be any significant costs associated with this proposed standard.

b. Methane (CH4) Exhaust Emission Standard

CH4 (or methane) is greenhouse gas with a high global warming potential.[136] It accounts for about 0.2% of the greenhouse gases from cars and light trucks.

EPA is proposing a CH4 emission standard of 0.030 g/mi as measured on the FTP, to apply beginning with model year 2012 for both cars and trucks. EPA believes that this level for the standard would be met by current gasoline and diesel vehicles, and would prevent large increases in future CH4 emissions in the event that alternative fueled vehicles with high methane emissions, like some past dedicated compressed natural gas (CNG) vehicles, become a significant part of the vehicle fleet. Currently EPA does not have separate CH4 standards because unlike other hydrocarbons it does not contribute significantly to ozone formation,[137] However CH4 emissions levels in the gasoline and diesel car and light truck fleet have nevertheless generally been controlled by the Tier 2 non-methane organic gases (NMOG) emission standards. However, without an emission standard for CH4, future emission levels of CH4 cannot be guaranteed to remain at current levels as vehicle technologies and fuels evolve.

The proposed standard would cap CH4 emission levels, with the expectation that current gasoline vehicles meeting the Tier 2 emission standards would not increase their levels, and that it would ensure that emissions would be addressed if in the future there are increases in the use of natural gas or any other alternative fuel. The level of the standard would generally be achievable through normal emission control methods already required to meet Tier 2 program emission standards for NMOG and EPA is therefore not attributing any cost to this part of this proposal. Since CH4 is produced in gasoline and diesel engines similar to other hydrocarbon components, controls targeted at reducing overall NMOG levels generally also work at reducing CH4 emissions. Therefore, for gasoline and diesel vehicles, the Tier 2 NMOG standards will generally prevent increases in CH4 emissions levels from today. CH4 from Tier 2 light-duty vehicles is relatively low compared to other GHGs largely due to the high effectiveness of previous National Low Emission Vehicle (NLEV) and current Tier 2 programs in controlling overall HC emissions.

The level of the proposed standard is approximately two times the average Tier 2 gasoline passenger cars and light-duty trucks level.[138] As with N2 O, this proposed level recognizes that manufacturers typically set emission design targets at about 50% of the standard. Thus, EPA believes the proposed standard would be met by Start Printed Page 49526current gasoline vehicles. Similarly, since current diesel vehicles generally have even lower CH4 emissions than gasoline vehicles, EPA believes that diesels would also meet the proposed standard. However, EPA also believes that to set a CH4 emission standard more stringent than the proposed standard could effectively make the Tier 2 NMOG standard more stringent.

In recent model years, a small number of cars and light trucks were sold that were designed for dedicated use of compressed natural gas (CNG) that met Tier 2 emission standards. While emission control designs on these recent dedicated CNG-fueled vehicles demonstrate CH4 control as effective as gasoline or diesel equivalent vehicles, CNG-fueled vehicles have historically produced significantly higher CH4 emissions than gasoline or diesel vehicles. This is because their CNG fuel is essentially methane and any unburned fuel that escapes combustion and not oxidized by the catalyst is emitted as methane. However, even if these vehicles meet the Tier 2 NMOG standard and appear to have effective CH4 control by nature of the NMOG controls, Tier 2 standards do not require CH4 control. While the proposed CH4 cap standard should not require any different emission control designs beyond what is already required to meet Tier 2 NMOG standards on a dedicated CNG vehicle, the cap will ensure that systems maintain the current level of CH4 control. EPA is not proposing more stringent CH4 standards because the same controls that are used to meet Tier 2 NMOG standards should result in effective CH4 control. Increased CH4 stringency beyond proposed levels could inadvertently result in increased Tier 2 NMOG stringency absent an emission control technology unique to CH4. Since CH4 is already measured under the current Tier 2 regulations (so that it may be subtracted to calculate non-methane hydrocarbons), the proposed standard would not result in additional testing costs. EPA requests comment on whether the proposed cap standard would result in any significant technological challenges for makers of CNG vehicles.

7. Small Entity Deferment

EPA is proposing to defer setting GHG emissions standards for small entities meeting the Small Business Administration (SBA) criteria of a small business as described in 13 CFR 121.201. EPA would instead consider appropriate GHG standards for these entities as part of a future regulatory action. This includes small entities in three distinct categories of businesses for light-duty vehicles: small volume manufacturers, independent commercial importers (ICIs), and alternative fuel vehicle converters. EPA has identified about 13 entities that fit the Small Business Administration (SBA) criterion of a small business. EPA estimates there are 2 small volume manufacturers, 8 ICIs, and 3 alternative fuel vehicle converters currently in the light-duty vehicle market. EPA estimates that these small entities comprise less than 0.1 percent of the total light-duty vehicle sales in the U.S., and therefore the proposed deferment will have a negligible impact on the GHG emissions reductions from the proposed standards. Further detail is provided in Section III.I.3, below.

To ensure that EPA is aware of which companies would be deferred, EPA is proposing that such entities submit a declaration to EPA containing a detailed written description of how that manufacturer qualifies as a small entity under the provisions of 13 CFR 121.201. Because such entities are not automatically exempted from other EPA regulations for light-duty vehicles and light-duty trucks, absent such a declaration, EPA would assume that the entity was subject to the greenhouse gas control requirements in this GHG proposal. The declaration would need to be submitted at time of vehicle emissions certification under the EPA Tier 2 program. Small entities are currently covered by a number of EPA motor vehicle emission regulations, and they routinely submit information and data on an annual basis as part of their compliance responsibilities. EPA expects that the additional paperwork burden associated with completing and submitting a small entity declaration to gain deferral from the proposed GHG standards would be negligible and easily done in the context of other routine submittals to EPA. However, EPA has accounted for this cost with a nominal estimate included in the Information Collection Request completed under the Paperwork Reduction Act. Additional information can be found in the Paperwork Reduction Act discussion in Section III.I.2.

C. Additional Credit Opportunities for CO2 Fleet Average Program

The standards being proposed represent a significant multi-year challenge for manufacturers, especially in the early years of the program. Section III.B.4 described EPA proposals for how manufacturers could generate credits by achieving fleet average CO2 emissions below the fleet average standard, and also how manufacturers could use credits to comply with standards. As described in Section III.B.4, credits could be carried forward five years, carried back three years, transferred between vehicle categories, and traded between manufacturers. The credits provisions proposed below would provide manufacturers with additional ways to earn credits starting in MY 2012. EPA is also proposing early credits provisions for the 2009-2011 model years, as described below in Section III.C.5.

The provisions proposed below would provide additional flexibility, especially in the early years of the program. This flexibility helps to address issues of lead-time or technical feasibility for various manufacturers and in several cases provides an incentive for promotion of technology pathways that warrant further development, whether or not they are an important or central technology on which critical features of this program are premised. EPA is proposing a variety of credit opportunities because manufacturers are not likely to be in a position to use every credit provision. EPA expects that manufacturers are likely to select the credit opportunities that best fit their future plans. EPA believes it is critical that manufacturers have options to ease the transition to the final MY 2016 standards. At the same time, EPA believes these credit programs must be designed in a way to ensure that they achieve emission reductions that achieve real-world reductions over the full useful life of the vehicle (or, in the case of FFV credits and Advanced Technology credits, to incentivize the introduction of those vehicle technologies) and are verifiable. In addition, EPA wants to ensure these credit programs do not provide an opportunity for manufacturers to earn “windfall” credits. EPA seeks comments on how to best ensure these objectives are achieved in the design of the credit programs. EPA requests comment on all aspects of these proposed credits provisions.

1. Air Conditioning Related Credits

EPA proposes that manufacturers be able to generate and use credits for improved air conditioner (A/C) systems in complying with the CO2 fleetwide average standards described above. EPA expects that most manufacturers will choose to utilize the A/C provisions as part of its compliance demonstration (and for this reason cost of compliance with A/C related emission reductions are assumed in the cost analysis). The A/C provisions are structured as credits, unlike the CO2 standards for which manufacturers will demonstrate Start Printed Page 49527compliance using 2-cycle tests (see Sections III.B and III.E.). Those tests do not measure either A/C leakage or tailpipe CO2 emissions attributable to A/C load (see Section III.C.1.b below describing proposed alternative test procedures for assessing tailpipe CO2 emission attributable to A/C engine load). Thus, it is a manufacturer's option to include A/C GHG emission reductions as an aspect of its compliance demonstration. Since this is an elective alternative, EPA is referring to the A/C part of the proposal as a credit.

EPA estimates that direct A/C GHG emissions—emissions due to the leakage of the hydrofluorocarbon refrigerant in common use today—account for 4.3% of CO2-equivalent GHGs from light-duty cars and trucks. This includes the direct leakage of refrigerant as well as the subsequent leakage associated with maintenance and servicing, and with disposal at the end of the vehicle's life. The emissions that are impacted by leakage reductions are the direct leakage and the maintenance and servicing. Together these are equivalent to CO2 emissions of approximately 13.6 g/mi per vehicle (this is 14.9 g/mi if end of life emissions are also included). EPA also estimates that indirect GHG emissions (additional CO2 emitted due to the load of the A/C system on the engine) account for another 3.9% of light-duty GHGs.[139] This is equivalent to CO2 emissions of approximately 14.2 g/mi per vehicle. The derivation of these figures can be found in the EPA DRIA.

EPA believes that it is important to address A/C direct and indirect emissions because the technologies that manufacturers will employ to reduce vehicle exhaust CO2 will have little or no impact on A/C related emissions. Without addressing A/C-related emissions, as vehicles become more efficient, the A/C related contribution will become a much larger portion of the overall vehicle GHG emissions.

Over 95% of the new cars and light trucks in the United States are equipped with A/C systems and, as noted, there are two mechanisms by which A/C systems contribute to the emissions of greenhouse gases: through leakage of refrigerant into the atmosphere and through the consumption of fuel to provide power to the A/C system. With leakage, it is the high global warming potential (GWP) of the current automotive refrigerant—R134a, with a GWP of 1430—that results in the CO2-equivalent impact of 13.6 g/mi.[140] Due to the high GWP of this HFC, a small leakage of the refrigerant has a much greater global warming impact than a similar amount of emissions of CO2 or other mobile source GHGs. Manufacturers can choose to reduce A/C leakage emissions by using leak-tight components. Also, manufacturers can largely eliminate the global warming impact of leakage emissions by adopting systems that use an alternative, low-GWP refrigerant.[141] The A/C system also contributes to increased CO2 emissions through the additional work required to operate the compressor, fans, and blowers. This additional work typically is provided through the engine's crankshaft, and delivered via belt drive to the alternator (which provides electric energy for powering the fans and blowers) and A/C compressor (which pressurizes the refrigerant during A/C operation). The additional fuel used to supply the power through the crankshaft necessary to operate the A/C system is converted into CO2 by the engine during combustion. This incremental CO2 produced from A/C operation can thus be reduced by increasing the overall efficiency of the vehicle's A/C system, which in turn will reduce the additional load on the engine from A/C operation.[142]

Manufacturers can make very feasible improvements to their A/C systems to address A/C system leakage and efficiency. EPA proposes two separate credit approaches to address leakage reductions and efficiency improvements independently. A proposed leakage reduction credit would take into account the various technologies that could be used to reduce the GHG impact of refrigerant leakage, including the use of an alternative refrigerant with a lower GWP. A proposed efficiency improvement credit would account for the various types of hardware and control of that hardware available to increase the A/C system efficiency. Manufacturers would be required to attest the durability of the leakage reduction and the efficiency improvement technologies over the full useful life of the vehicle.

EPA believes that both reducing A/C system leakage and increasing efficiency are highly cost-effective and technologically feasible. EPA expects most manufacturers will choose to use these A/C credit provisions, although some may not find it necessary to do so.

a. A/C Leakage Credits

The refrigerant used in vehicle A/C systems can get into the atmosphere by many different means. These refrigerant emissions occur from the slow leakage over time that all closed high pressure systems will experience. Refrigerant loss occurs from permeation through hoses and leakage at connectors and other parts where the containment of the system is compromised. The rate of leakage can increase due to deterioration of parts and connections as well. In addition, there are emissions that occur during accidents and maintenance and servicing events. Finally, there are end-of-life emissions if, at the time of vehicle scrappage, refrigerant is not fully recovered.

Because the process of refrigerant leakage has similar root causes as those that cause fuel evaporative emissions from the fuel system, some of the control technologies are similar (including hose materials and connections). There are however, some fundamental differences between the systems that require a different approach. The most notable difference is that A/C systems are completely closed systems, whereas the fuel system is not. Fuel systems are meant to be refilled as liquid fuel is consumed by the engine, while the A/C system ideally should never require “recharging” of the contained refrigerant. Thus it is critical that the A/C system leakages be kept to an absolute minimum. These emissions are typically too low to accurately measure in most current SHED chambers designed for fuel evaporative emissions measurement, especially for systems that are new or early in life. Therefore, if leakage emissions were to be measured directly, new measurement facilities would need to be built by the OEM manufacturers and very accurate new test procedures would need to be developed. Especially because there are indications that much of the industry is moving toward alternative refrigerants (post-2016 for most manufacturers), EPA is not proposing such a direct measurement approach to addressing refrigerant leakage.Start Printed Page 49528

Instead, EPA proposes that manufacturers demonstrate improvements in their A/C system designs and components through a design-based method. Manufacturers implementing systems expected to result in reduced refrigerant leakage would be eligible for credits that could then be used to meet their CO2 emission compliance requirements. The proposed “A/C Leakage Credit” provisions would generally assign larger credits to system designs that are expected to result in greater leakage reduction. In addition, EPA proposes that proportionately larger A/C Leakage Credits be available to manufacturers that substitute a lower-GWP refrigerant for the current R134a refrigerant.

Our proposed method for calculating A/C Leakage Credits is based closely on an industry-consensus leakage scoring method, described below. This leakage scoring method is correlated to experimentally-measured leakage rates from a number of vehicles using the different available A/C components. Under the proposed approach, manufacturers would choose from a menu of A/C equipment and components used in their vehicles in order to establish leakage scores which would characterize their A/C system leakage performance. The leakage score can be compared to expected fleetwide leakage rates in order to quantify improvements for a given A/C system. Credits would be generated from leakage reduction improvements that exceeded average fleetwide leakage rates.

EPA believes that the design-based approach would result in estimates of likely leakage emissions reductions that would be comparable to those that would eventually result from performance-based testing. At the same time, comments are encouraged on all developments that may lead to a robust, practical, performance-based test for measuring A/C refrigerant leakage emissions.

The cooperative industry and government Improved Mobile Air Conditioning (IMAC) program [143] has demonstrated that new-vehicle leakage emissions can be reduced by 50%. This program has shown that this level of improvement can be accomplished by reducing the number and improving the quality of the components, fittings, seals, and hoses of the A/C system. All of these technologies are already in commercial use and exist on some of today's systems.

EPA is proposing that a manufacturer wishing to earn A/C Leakage Credits would compare the components of its A/C system with a set of leakage-reduction technologies and actions that is based closely on that being developed through IMAC and the Society of Automotive Engineers (as SAE Surface Vehicle Standard J2727, August 2008 version). The J2727 approach is developed from laboratory testing of a variety of A/C related components, and EPA believes that the J2727 leakage scoring system generally represents a reasonable correlation with average real-world leakage in new vehicles. Like the IMAC approach, our proposed credit approach would associate each component with a specific leakage rate in grams per year identical to the values in J2727. A manufacturer choosing to claim Leakage Credits would sum the leakage values for an A/C system for a total A/C leakage score. EPA is proposing a formula for converting the grams-per-year leakage score to a grams-per-mile CO2 eq value, taking vehicle miles traveled (VMT) and the GWP of the refrigerant into account. This formula is:

Credit = (MaxCredit) * [1 − (LeakScore/AvgImpact) * (GWPRefrigerant/1430)]

Where:

MaxCredit is 12.6 and 15.7 g/mi CO2 eq for cars and trucks respectively. These become 13.8 and 17.2 for cars and trucks if alternative refrigerants are used since they get additional credits for end-of-life emissions reductions.

LeakScore is the leakage score of the A/C system as measured according to methods similar to the J2727 procedure in units of g/yr. The minimum score which is deemed feasible is fixed at 8.3 and 10.4 g/yr for cars and trucks respectively.

AvgImpact is the average impact of A/C leakage, which is 16.6 and 20.7 g/yr for cars and trucks respectively.

GWPRefrigerant is the global warming potential for direct radiative forcing of the refrigerant as defined by EPA (or IPCC).

All of the parameters and limits of the equation are derived in the EPA DRIA.

For systems using the current refrigerant, EPA proposes that these emission rates could at most be feasibly reduced by half, based on the conclusions of the IMAC study, and consideration of emission over the full life of the vehicle. (This latter point is discussed further in the DRIA.)

As discussed above, EPA recognizes that substituting an alternative refrigerant (one with a significantly lower global warming potential, GWP), would potentially be a very effective way to reduce the impact of all forms of refrigerant emissions, including maintenance, accidents, and vehicle scrappage. To address future GHG regulations in Europe and California, systems using alternative refrigerants—including HFO1234yf, with a GWP of 4—are under serious development and have been demonstrated in prototypes by A/C component suppliers. These alternative refrigerants have remaining cost, safety and feasibility hurdles for commercial applications.[144] However, the European Union has enacted regulations phasing in alternative refrigerants with GWP less than 150 starting in 2010, and the State of California proposed providing credits for alternative refrigerant use in its GHG rule.

Within the timeframe of 2012-2016, EPA is not expecting the use of low-GWP refrigerants to be widespread. However, EPA believes that these developments are promising, and have included in our proposed A/C Leakage Credit system provisions to account for the effective refrigerant reductions that could be expected from refrigerant substitution. The quantity of A/C Leakage Credits that would be available would be a function of the GWP of the alternative refrigerant, with the largest credits being available for refrigerants approaching a GWP of zero.[145] For a hypothetical alternative refrigerant with a GWP of 1, effectively eliminating leakage as a GHG concern, our proposed credit calculation method could result in maximum credits equal total average emissions, or credits of 13.4 and 17.8 g/mi CO2 eq for cars and trucks, respectively. This option is also captured in the equation above.

It is possible that alternative refrigerants could, without compensating action by the manufacturer, reduce the efficiency of the A/C system (see discussion of the A/C Efficiency Credit below.) However, EPA believes that manufacturers will have substantial incentives to design their systems to maintain the efficiency of the A/C system, therefore EPA is not accounting for any potential efficiency degradation.

EPA requests comment on all aspects of our proposed A/C Leakage Credit system.Start Printed Page 49529

b. A/C Efficiency Credits

EPA is proposing that manufacturers that make improvements in their A/C systems to increase efficiency and thus reduce CO2 emissions due to A/C system operation be eligible for A/C Efficiency Credits. As with A/C Leakage Credits, manufacturers could apply A/C Efficiency Credits toward compliance with their overall CO2 standards.

As mentioned above, EPA estimates that the CO2 emissions due to A/C related loads on the engine account for approximately 3.9% of total greenhouse gas emissions from passenger vehicles in the United States. Usage of A/C systems is inherently higher in hotter and more humid months and climates; however, vehicle owners may use their A/C systems all year round in all parts of the nation. For example, people commonly use A/C systems to cool and dehumidify the cabin air for passenger comfort on hot humid days, but they also use the systems to de-humidify cabin air to assist in defogging/de-icing the front windshield and side glass in cooler weather conditions for improved visibility. A more detailed discussion of seasonal and geographical A/C usage rates can be found in the DRIA.

Most of the additional load on the engine from A/C system operation comes from the compressor, which pumps the refrigerant around the system loop. Significant additional load on the engine may also come from electric or hydraulic fans, which are used to move air across the condenser, and from the electric blower, which is used to move air across the evaporator and into the cabin. Manufacturers have several currently-existing technology options for improving efficiency, including more efficient compressors, fans, and motors, and systems controls that avoid over-chilling the air (and subsequently re-heating it to provide the desired air temperature with an associated loss of efficiency). For vehicles equipped with automatic climate-control systems, real-time adjustment of several aspects of the overall system (such as engaging the full capacity of the cooling system only when it is needed, and maximizing the use of recirculated air) can result in improved efficiency. Table III.C.1-1 below lists some of these technologies and their respective efficiency improvements.

As with the A/C Leakage Credit program, EPA is interested in performance-based standards (or credits) based on measurement procedures whenever possible. While design-based assessments of expected emissions can be a reasonably robust way of quantifying emission improvements, these approaches have inherent shortcomings, as discussed for the case of A/C leakage above. Design-based approaches depend on the quality of the data from which they are calibrated, and it is possible that apparently proper equipment may function less effectively than expected. Therefore, while the proposal uses a design-based menu approach to quantify improvements in A/C efficiency, it is also proposed to begin requiring manufacturers to confirm that technologies applying for Efficiency Credits are measurably improving system efficiency.

EPA believes that there is a more critical need for a test procedure to quantify A/C Efficiency Credits than for Leakage Credits, for two reasons. First, the efficiency gains for various technologies are more difficult to quantify using a design-based program (like the SAEJ2727-based procedure used to generate Leakage Credits). Second, while leakage may disappear as a significant source of GHG emissions if a shift toward alternate refrigerants develops, no parallel factor exists in the case of efficiency improvements. EPA is thus proposing to phase-in a performance-based test procedure over time beginning in 2014, as discussed below. In the interim, EPA proposes a design-based “menu” approach for estimating efficiency improvements and, thus, quantifying A/C Efficiency Credits.

For model years 2012 and 2013, EPA proposes that a manufacturer wishing to generate A/C Efficiency Credits for a group of its vehicles with similar A/C systems would compare several of its vehicle A/C-related components and systems with a “menu” of efficiency-related technology improvements (see Table III.C.1-1 below). Based on the technologies the manufacturer chooses, an A/C Efficiency Credit value would be established. This design-based approach would recognize the relationships and synergies among efficiency-related technologies. Manufacturers could receive credit based on the technologies they chose to incorporate in their A/C systems and the associated credit value for each technology. The total A/C Efficiency Credit would be the total of these values, up to a maximum feasible credit of 5.7 g/mi CO2 eq. This would be the maximum improvement from current average efficiencies for A/C systems (see the DRIA for a full discussion of our derivation of the proposed reductions and credit values for individual technologies and for the maximum total credit available). Although the total of the individual technology credit values may exceed 5.7 g/mi CO2 eq, synergies among the technologies mean that the values are not additive, and thus A/C Efficiency credit could not exceed 5.7 g/mi CO2 eq.

The EPA requests comment on adjusting the A/C efficiency credit to account for potential decreases (or increases) in efficiency when using an alternative refrigerant by using the change in the coefficient of performance. The effects may include the impact of a secondary loop system (including the incremental effect on tailpipe CO2 emissions that the added weight of such a system would incur).

Table III.C.1-1 Efficiency-Improving A/C Technologies and Credits

Technology descriptionEstimated reduction in A/C CO2 emissions (percent)A/C Efficiency credit (g/mi CO2)
Reduced reheat, with externally-controlled, variable-displacement compressor301.7
Reduced reheat, with externally-controlled, fixed-displacement or pneumatic variable-displacement compressor201.1
Default to recirculated air whenever ambient temperature is greater than 75 °F301.7
Blower motor and cooling fan controls which limit waste energy (e.g. pulse width modulated power controller)150.9
Electronic expansion valve201.1
Improved evaporators and condensers (with system analysis on each component indicating a COP improvement greater than 10%, when compared to previous design)201.1
Oil Separator100.6
Start Printed Page 49530

For model years 2014 and later, EPA proposes that manufacturers seeking to generate A/C Efficiency Credits would need to use a specific performance test to confirm that the design changes were also improving A/C efficiency. Manufacturers would need to perform an A/C CO2 Idle Test for each A/C system (family) for which it desired to generate Efficiency Credits. Manufacturers would need to demonstrate at least a 30% improvement over current average efficiency levels to qualify for credits. Upon qualifying on the Idle Test, the manufacturer would be eligible to use the menu approach above to quantify the credits it would earn.

The proposed A/C CO2 Idle Test procedure, which EPA has designed specifically to measure A/C CO2 emissions, would be performed while the vehicle engine is at idle. This proposed laboratory idle test would be similar to the idle carbon monoxide (CO) test that was once a part of EPA vehicle certification. The test would determine the additional CO2 generated at idle when the A/C system is operated. The A/C CO2 Idle Test would be run with and without the A/C system cooling the interior cabin while the vehicle's engine is operating at idle and with the system under complete control of the engine and climate control system

The proposed A/C CO2 Idle Test is similar to that proposed in April 2009 for the Mandatory GHG Reporting Rule, with several improvements. These improvements include tighter restrictions on test cell temperatures and humidity levels in order to more closely control the loads from operation of the A/C system. EPA also made additional refinements to the required in-vehicle blower fan settings for manually controlled systems to more closely represent “real world” usage patterns. These details can be found in the DRIA and the regulations.

The design of the A/C CO2 Idle Test represents a balancing of the need for performance tests whenever possible to ensure the most accurate quantification of efficiency improvements, with practical concerns for testing burden and facility requirements. EPA believes that the proposed Idle Test adds to the robust quantification of A/C credits that will result in real-world efficiency improvements and reductions in A/C-related CO2 emissions. EPA is proposing that the Idle Test be required in order to qualify for A/C Efficiency Credits beginning in 2014 to allow sufficient time for manufacturers to make the necessary facilities improvements and to establish a comfort level with the test.

EPA also considered a more comprehensive testing approach to quantifying A/C CO2 emissions that could be somewhat more technically robust, but would require more test time and test facility improvements for many manufacturers. This approach would be to adapt an existing test procedure, the Supplemental Federal Test Procedure (SFTP) for A/C operation, called the SC03, in specific ways for it to function as a tool to evaluate A/C CO2 emissions. The potential test method is described in some detail here, and EPA encourages comment on how this type of test might or might not accomplish the goals of robust performance-based testing and reasonable test burdens.

EPA designed the SC03 test to measure criteria pollutants under severe air conditioning conditions not represented in the FTP and Highway Fuel Economy Tests. EPA did not specifically design the SC03 to measure incremental reductions in CO2 emissions from more efficient A/C technologies. For example, due to the severity of the SC03 test environmental conditions and the relatively short duration of the SC03 cycle, it is difficult for the A/C system to achieve a stabilized interior cabin condition that reflects incremental improvements. Many potential efficiency improvements in the A/C components and controls (i.e., automatic recirculation and heat exchanger fan control) are specifically measured only during stabilized conditions, and therefore become difficult or impossible to measure and quantify during this test. In addition, SC03 testing is also somewhat constrained and costly due to limited number of test facilities currently capable of performing testing under the required environmental conditions.

One value of using the SC03 as the basis for a new test to quantify A/C-related efficiency improvements would be the significant degree of control of test cell ambient conditions. The load placed on an A/C system, and thus the incremental CO2 emissions, are highly dependent on the ambient conditions in the test cell, especially temperature and humidity, as well as simulated solar load. Thus, as with the proposed Idle Test, a new SC03-based test would need to accurately and reliably control these conditions. (This contrasts with FTP testing for criteria pollutants, which does not require precise control of cell conditions because test results are generally much less sensitive to changes in cell temperature or humidity).

However, for the purpose of quantifying A/C system efficiency improvements, EPA believes a test cell temperature less severe than the 95°F required by the SC03 would be appropriate. A cell temperature of 85°F would better align the initial cooling phase (“pull-down”) as well as the stabilized phase of A/C operation with real-world driving conditions.

Another value of an SC03-based test would be the opportunity to create operating conditions for vehicle A/C systems that in some ways would better simulate “real world” operation than either the proposed Idle Test or the current SC03. The SC03 test cycle, roughly 10 minutes in length, has a similar average speed, maximum speed, and percentage of time at idle as the FTP. However, since the SC03 test cycle was designed principally to measure criteria pollutants under maximum A/C load conditions, it is not long enough to allow temperatures in the passenger cabin to consistently stabilize. EPA believes that once the pull-down phase has occurred and cabin temperatures have dropped dramatically to a suitable interior comfort level, additional test cycle time would be needed to measure how efficiently the A/C system operates under stabilized conditions.

To capture the A/C operation during stabilized operation, EPA would consider adding two phases to the SC03 test of roughly 10 minutes each. Each additional phase would simply be repeats of the SC03 drive cycle, with two exceptions. During the second phase, the A/C system would now be operating at cabin temperature at or approaching a stabilized condition. During the third phase, the A/C system would be turned off. The purpose of the third phase would be to establish the base CO2 emissions with no A/C loads on the engine, which would provide a baseline for the incremental CO2 due to A/C use. EPA would likely weight the CO2 g/mi results for the first and second phases of the test as follows: 50% for phase 1, and 50% for phase 2. From this average CO2 the methodology would subtract the CO2 result from phase 3, yielding an incremental CO2 (in g/mi) due to A/C use.

EPA expects to continue working with industry, the California Air Resources Board, and other stakeholders to move toward increasingly robust performance tests for A/C and may include such changes in this final rule. EPA requests comment on all aspects of our proposed A/C Efficiency Credits program.

c. Interaction With Title VI Refrigerant Regulations

Title VI of the Clean Air Act deals with the protection of stratospheric ozone. Section 608 establishes a comprehensive program to limit emissions of certain ozone-depleting Start Printed Page 49531substances (ODS). The rules promulgated under section 608 regulate the use and disposal of such substances during the service, repair or disposal of appliances and industrial process refrigeration. In addition, section 608 and the regulations promulgated under it, prohibit knowingly venting or releasing ODS during the course of maintaining, servicing, repairing or disposing of an appliance or industrial process refrigeration equipment. Section 609 governs the servicing of motor vehicle air conditioners (MVACs). The regulations promulgated under section 609 (40 CFR part 82, subpart B) establish standards and requirements regarding the servicing of MVACs. These regulations include establishing standards for equipment that recovers and recycles or only recovers refrigerant (CFC-12, HFC 134a, and for blends only recovers) from MVACs; requiring technician training and certification by an EPA-approved organization; establishing recordkeeping requirements; imposing sales restrictions; and prohibiting the venting of refrigerants. Section 612 requires EPA to review substitutes for class I and class II ozone depleting substances and to consider whether such substitutes will cause an adverse effect to human health or the environment as compared with other substitutes that are currently or potentially available. EPA promulgated regulations for this program in 1992 and those regulations are located at 40 CFR part 82, subpart G. When reviewing substitutes, in addition to finding them acceptable or unacceptable, EPA may also find them acceptable so long as the user meets certain use conditions. For example, all motor vehicle air conditioning system must have unique fittings and a uniquely colored label for the refrigerant being used in the system.

EPA views this proposed rule as complementing these Title VI programs, and not conflicting with them. To the extent that manufacturers choose to reduce refrigerant leakage in order to earn A/C Leakage Credits, this would dovetail with the Title VI section 609 standards which apply to maintenance events, and to end-of-vehicle life disposal. In fact, as noted, a benefit of the proposed A/C credit provisions is that there should be fewer and less impactive maintenance events for MVACs, since there will be less leakage. In addition, the credit provisions would not conflict (or overlap) with the Title VI section 609 standards. EPA also believes the menu of leak control technologies proposed today would complement the section 612 requirements, because these control technologies would help ensure that R134a (or other refrigerants) would be used in a manner that further minimizes potential adverse effects on human health and the environment.

2. Flex Fuel and Alternative Fuel Vehicle Credits

As described in this section, EPA is proposing credits for flexible-fuel vehicles (FFVs) and alternative fuel vehicles starting in the 2012 model year. FFVs are vehicles that can run both on an alternative fuel and conventional fuel. Most FFVs are E-85 vehicles, which can run on a mixture of up to 85 percent ethanol and gasoline. Dedicated alternative fuel vehicles are vehicles that run exclusively on an alternative fuel (e.g., compressed natural gas). EPCA includes an incentive under the CAFE program for production of dual-fueled vehicles or FFVs, and dedicated alternative fuel vehicles.[146] EPCA's provisions were amended by the EISA to extend the period of availability of the FFV credits, but to begin phasing them out by annually reducing the amount of FFV credits that can be used in demonstrating compliance with the CAFE standards.[147] EPCA does not premise the availability of the FFV credits on actual use of alternative fuel. Under EPCA, after MY 2019 no FFV credits will be available for CAFE compliance.[148] Under EPCA, for dedicated alternative fuel vehicles, there are no limits or phase-out. EPA is proposing that FFV and Alternative Fuel Vehicle Credits be calculated as a part of the calculation of a manufacturer's overall fleet average fuel economy and fleet average carbon-related exhaust emissions (§ 600.510-12).

EPA is not proposing to include electric vehicles (EVs) or plug-in hybrid electric vehicles (PHEVs) in these flex fuel and alternative fuel provisions. These vehicles would be covered by the proposed advanced technology vehicle credits provisions described in Section III.C.3, so including them here would lead to a double counting of credits.

a. Model Year 2012—2015 Credits

i. FFVs

For the GHG program, EPA is proposing to allow FFV credits corresponding to the amounts allowed by the amended EPCA only during the period from MYs 2012 to 2015. (As discussed below in Section III.E., EPA is proposing that CAFE-based FFV credits would not be permitted as part of the early credits program.) Several manufacturers have already taken the availability of FFV credits into account in their near-term future planning for CAFE and this reliance indicates that these credits need to be considered in considering adequacy of lead time for the CO2 standards. EPA thus believes that allowing these credits, in the near term, would help provide adequate lead time for manufacturers to implement the new multi-year standards, but that for the longer term there is adequate lead time without the use of such credits. This will also tend to harmonize the GHG and the CAFE program during these interim years. As discussed below, EPA is proposing for MY 2016 and later that manufacturers would not receive FFV credits unless they reliably estimate the extent the alternative fuel is actually being used by vehicles in order to count the alternative fuel use in the vehicle's CO2 emissions level determination.

As with the CAFE program, EPA proposes to base credits on the assumption that the vehicles would operate 50% of the time on the alternative fuel and 50% of the time on conventional fuel, resulting in CO2 emissions that are based on an arithmetic average of alternative fuel and conventional fuel CO2 emissions.[149] The measured CO2 emissions on the alternative fuel would be multiplied by a 0.15 volumetric conversion factor which is included in the CAFE calculation as provided by EPCA. Through this mechanism a gallon of alternative fuel is deemed to contain 0.15 gallons of fuel. EPA is proposing to take the same approach for 2012-2015 model years. For example, for a flexible-fuel vehicle that emitted 330 g/mi CO2 operating on E-85 and 350 g/mi CO2 operating on gasoline, the resulting CO2 level to be used in the manufacturer's fleet average calculation would be:

EPA understands that by using the CAFE approach—including the 0.15 factor—the CO2 emissions value for the vehicle is calculated to be significantly lower than it actually would be otherwise, even if the vehicle were assumed to operate on the alternative fuel at all times. This represents a “credit” being provided to FFVs.Start Printed Page 49532

EPA notes also that the above equation and example are based on an FFV that is an E-85 vehicle. EPCA, as amended by EISA, also establishes the use of this approach, including the 0.15 factor, for all alternative fuels, not just E-85.[150] The 0.15 factor is used for B-20 (20 percent biofuel and 80 percent diesel) FFVs. EPCA also establishes this approach, including the 0.15 factor, for gaseous-fueled FFVs such as a vehicle able to operate on gasoline and CNG.[151] (For natural gas FFVs, EPCA establishes a factor of 0.823 gallons of fuel for every 100 cubic feet a natural gas used to calculate a gallons equivalent.) [152] The EISA statute's use of the 0.15 factor in this way provides a similar regulatory treatment across the various types of alternative fuel vehicles. EPA also proposes to use the 0.15 factor for all FFVs in keeping with the goal of not disrupting manufacturers' near-term compliance planning. EPA, in any case, expects the vast majority of FFVs to be E-85 vehicles, as is the case today.

The FFV credit limits for CAFE are 1.2 mpg for model years 2012-2014 and 1.0 mpg for model year 2015.[153] In CO2 terms, these CAFE limits translate to declining CO2 credit limits over the four model years, as the CAFE standards increase in stringency (as the CAFE standard increases numerically, the limit becomes a smaller fraction of the standard). EPA proposes credit limits shown in Table III.C.2-1 based on the proposed average CO2 standards for cars and trucks. These have been calculated by comparing the average proposed CAFE standards with and without the FFV credits, converted to CO2. EPA requests comments on this proposed approach.

Table III.C.2-1—FFV CO2 Standard Credit Limits (g/mile)

Model yearCarsTrucks
20129.817.9
20139.317.1
20148.916.3
20156.912.6

EPA also requests comments on basing the calculated CO2 credit limit on the individual manufacturer standards calculated from the footprint curves. For example, if a manufacturer's 2012 car standard was 260 g/mile, the credit limit in CO2 terms would be 9.5 g/mile and if it were 270 g/mile the limit would be 10.2 g/mile. This approach would be somewhat more complex and would mean that the FFV CO2 credit limits would vary by manufacturer as their footprint based standards vary. However, it would more closely track CAFE FFV credit limits.

ii. Dedicated Alternative Fuel Vehicles

EPA proposes to calculate CO2 emissions from dedicated alternative fuel vehicles for MY 2012—2015 by measuring the CO2 emissions over the test procedure and multiplying the results by the 0.15 conversion factor described above. For example, for a dedicated alternative fuel vehicle that would achieve 330 g/mi CO2 while operating on alcohol (ethanol or methanol), the effective CO2 emissions of the vehicle for use in determining the vehicle's CO2) emissions would be calculated as follows:

CO2 = 330 × 0.15 = 49.5 g/mi

b. Model Years 2016 and Later

i. FFVs

For 2016 and later model years, EPA proposes to treat FFVs similarly to conventional fueled vehicles in that FFV emissions would be based on actual CO2 results from emission testing on the alternative fuel. The manufacturer would also be required to demonstrate that the alternative fuel is actually being used in the vehicles. The manufacturer would need to establish the ratio of operation that is on the alternative fuel compared to the conventional fuel. The ratio would be used to weight the CO2 emissions performance over the 2-cycle test on the two fuels. The 0.15 conversion factor would no longer be included in the CO2 emissions calculation. For example, for a flexible-fuel vehicle that emitted 300 g/mi CO2 operating on E-85 ten percent of the time and 350 g/mi CO2 operating on gasoline ninety percent of the time, the CO2 emissions for the vehicles to be used in the manufacturer's fleet average would be calculated as follows:

CO2 = (300 × 0.10) + (350 × 0.90)= 345 g/mi

The most complex part of this approach is to establish what data are needed for a manufacturer to accurately demonstrate use of the alternative fuel. One option EPA is considering is establishing a rebuttable presumption using a “top-down” approach based on national E-85 fuel use to assign credits to FFVs sold by manufacturers under this program. For example, national E-85 volumes and national FFV sales could be used to prorate E-85 use by manufacturer sales volumes and FFVs already in-use. EPA would conduct an analysis of vehicle miles travelled (VMT) by year for all FFVs using its emissions inventory MOVES model. Using the VMT ratios and the overall E-85 sales, E-85 usage could be assigned to each vehicle. This method would account for the VMT of new FFVs and FFVs already in the existing fleet using VMT data in the model. The model could then be used to determine the ratio of E-85 and gasoline for new vehicles being sold. Fluctuations in E-85 sales and FFV sales would be taken into account to adjust the credits annually. EPA believes this is a reasonable way to apportion E-85 use across the fleet.

If manufacturers decided not to use EPA's assigned credits based on the top-down analysis, they would have a second option of presenting their own data for consideration as the basis for credits. Manufacturers have suggested demonstrations using vehicle on-board data gathering through the use of on-board sensors and computers. California's program allows FFV credits based on FFV use and envisioned manufacturers collecting fuel use data from vehicles in fleets with on-site refueling. Any approach must reasonably ensure that no CO2 emissions reductions anticipated under the program are lost.

EPA proposes that manufacturers would need to present a statistical analysis of alternative fuel usage data collected on actual vehicle operation. EPA is not attempting to specify how the data is collected or the amount of data needed. However, the analysis must be based on sound statistical methodology. Uncertainty in the analysis must be accounted for in a way that provides reasonable certainty that the program does not result in loss of emissions reductions. EPA requests comment on how this demonstration could reasonably be made.

EPA recognizes that under EPCA FFV credits are entirely phased-out of the CAFE program by MY 2020, and apply in the prior years with certain limitations, but without a requirement that the manufacturers demonstrate actual use of the alternative fuel. Under this proposal EPA would treat FFV credits the same as under EPCA for model years 2012-2015, but would apply a different approach starting with model year 2016. Unlike EPCA, CAA section 202(a) does not mandate that EPA treat FFVs in a specific way. Instead EPA is required to exercise its own judgment and determine an appropriate approach that best promotes the goals of this CAA section. Under these circumstances, EPA proposes to treat FFVs for model years 2012-2015 the same as under EPCA, for the lead time reasons described above. Starting Start Printed Page 49533with model year 2016, EPA believes the appropriate approach is to ensure that emissions reduction credits are based upon a demonstration that emissions reductions have been achieved, to ensure the credits are for real reductions instead of reductions that have not likely occurred. This will promote the environmental goals of this proposal. At the same time, the ability to generate credits upon a demonstration of usage of the alternative fuel will provide an actual incentive to see that such fuels are used. Under the EPCA credit provision, there is an incentive to produce FFVs but no actual incentive to ensure that the alternative fuels are used. GHG and energy security benefits are only achieved if the alternative fuel is actually used, and EPA's approach will now provide such an incentive. This approach will promote greater use of renewable fuels, as compared to a situation where there is a credit but no usage requirement. This is also consistent with the agency's overall commitment to the expanded use of renewable fuels. Therefore EPA is not proposing to phase-out the FFV program for MYs 2016 and later but instead to base the program on real-world reductions (i.e., actual vehicle CO2 emissions levels based on actual use of the two fuels, without the 0.15 conversion factor specified under EISA). Based on existing certification data, E-85 FFV CO2 emissions are typically about 5 percent lower on E-85 than CO2 emissions on 100 percent gasoline. However, currently there is little incentive to optimize CO2 performance for vehicles when running on E-85. EPA believes the above approach would provide such an incentive to manufacturers and that E-85 vehicles could be optimized through engine redesign and calibration to provide additional CO2 reductions. EPA requests comments on the above.

ii. Dedicated Alternative Fuel Vehicles

EPA proposes that for model years 2016 and later dedicated alternative fuel vehicles, CO2 would be measured over the 2-cycle test in order to be included in a manufacturer's fleet average CO2 calculations. As noted above, this is different than CAFE methodology which provides a methodology for calculating a petroleum-based mpg equivalent for alternative fuel vehicles so they can be included in CAFE. However, because CO2 can be measured directly from alternative fuel vehicles over the test procedure, EPA believes this is the simplest and best approach since it is consistent with all other vehicle testing under the proposed CO2 program.

3. Advanced Technology Vehicle Credits for Electric Vehicles, Plug-in Hybrids, and Fuel Cells

EPA is proposing additional credit opportunities to encourage the early commercialization of advanced vehicle powertrains, including electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell vehicles. These technologies have the potential for more significant reductions of GHG emissions than any technology currently in commercial use, and EPA believes that encouraging early introduction of such technologies will help to enable their wider use in the future, promoting the technology-based emission reduction goals of section 202(a)(1) of the Clean Air Act.

EPA proposes that these advanced technology credits would take the form of a multiplier that would be applied to the number of vehicles sold such that they would count as more than one vehicle in the manufacturer's fleet average. These advanced technology vehicles would then count more heavily when calculating fleet average CO2 levels. The multiplier would not be applied when calculating the manufacturer's foot-print-based standard, only when calculating the manufacturer's fleet average levels. EPA proposes to use a multiplier in the range of 1.2 to 2.0 for all EVs, PHEVs, and fuel cell vehicles produced from MY 2012 through MY 2016. EPA proposes that starting in MY 2017, the multiplier would no longer be used. As described in Section III.C.5, EPA is also proposing to allow early advanced technology vehicle credits to be generated for model years 2009-2011. EPA requests comment on the level of the multiplier and whether it should be the same value for each of these three technologies. Further, if EPA determines that a multiplier of 2.0, or another level near the higher end of this range, is appropriate for the final rule, EPA requests comment on whether the multiplier should be phased down over time, such as: 2.0 for MY 2009 through MY 2012, 1.8 in MY 2013, 1.6 in MY 2014, 1.4 in MY 2015, and 1.2 in MY 2016 (i.e., the multiplier could phase-down by 0.2 per year). In addition, EPA requests comment on whether or not it would be appropriate to differentiate between EVs and PHEVs for advanced technology credits. Under such an approach, PHEVs could be provided a lesser multiplier compare to EVs. Also, the PHEV multiplier could be prorated based on the equivalent electric range (i.e., the extent to which the PHEV operates on average as an EV) of the vehicle in order to incentivize battery technology development. This approach would give more credits to “stronger” PHEV technology.

EPA has provided this type of credit previously, in the Tier 2 program. This approach provides an incentive for manufacturers to prove out ultra-clean technology during the early years of the program. In Tier 2, early credits for Tier 2 vehicles certified to the very cleanest bins (equivalent to California's standards for super ultra low emissions vehicles (SULEVs) and zero emissions vehicles (ZEVs)) had a multiplier of 1.5 or 2.0.[154] The multiplier range of 1.2 to 2.0 being proposed for GHGs is consistent with the Tier 2 approach. EPA believes it is appropriate to provide incentives to manufacturers to produce vehicles with very low emissions levels and that these incentives may help pave the way for greater and/or more cost effective emission reductions from future vehicles. EPA would like to finalize an approach which appropriately balances the benefits of encouraging advanced technologies with the overall environmental reductions of the proposed standards as a whole.

As with other vehicles, CO2 for these vehicles would be determined as part of vehicle certification, based on emissions over the 2-cycle test procedures, to be included in the fleet average CO2 levels.

For electric vehicles, EPA proposes that manufacturers would include them in the average with CO2 emissions of zero grams/mile both for early credits, and for the MY 2012-2016 time frame. Similarly, EPA proposes to include as zero grams/mile of CO2 the electric portion of PHEVs (i.e., when PHEVs are operating as electric vehicles) and fuel cell vehicles. EPA recognizes that for each EV that is sold, in reality the total emissions off-set relative to the typical gasoline or diesel powered vehicle is not zero, as there is a corresponding increase in upstream CO2 emissions due to an increase in the requirements for electric utility generation. However, for the time frame of this proposed rule, EPA is also interested in promoting very advanced technologies such as EVs which offer the future promise of significant reductions in GHG emissions, in particular when coupled with a broader context which would include reductions from the electricity generation. For the California Paley 1 program, California assigned EVs a CO2 performance value of 130 g/mile, which was intended to represent the average CO2 emissions required to charge an EV using representative CO2 values for the California electric utility grid. For this Start Printed Page 49534proposal, EPA is assigning an EV a value of zero g/mile, which should be viewed as an interim solution for how to account for the emission reduction potential of this type of vehicle, and may not be the appropriate long-term approach. EPA requests comment on this proposal and whether alternative approaches to address EV emissions should be considered, including approaches for considering the lifecycle emissions from such advanced vehicle technologies.

The criteria and definitions for what vehicles qualify for the multiplier are provided in Section III.E. As described in Section III.E, EPA is proposing definitions for EVs, PHEVs, and fuel cell vehicles to ensure that only credible advanced technology vehicles are provided credits.

EPA requests comments on the proposed approach for advanced technology vehicle credits.

4. Off-Cycle Technology Credits

EPA is proposing an optional credit opportunity intended to apply to new and innovative technologies that reduce vehicle CO2 emissions, but for which the CO2 reduction benefits are not captured over the 2-cycle test procedure used to determine compliance with the fleet average standards (i.e., “off-cycle”). Eligible innovative technologies would be those that are relatively newly introduced in one or more vehicle models, but that are not yet implemented in widespread use in the light-duty fleet. EPA will not approve credits for technologies that are not innovative or novel approaches to reducing greenhouse gas emissions. Further, any credits for these off-cycle technologies must be based on real-world GHG reductions not captured on the current 2-cycle tests and verifiable test methods, and represent average U.S. driving conditions.

Similar to the technologies used to reduce A/C system indirect CO2 emissions such as compressor efficiency improvements, eligible technologies would not be active during the 2-cycle test and therefore the associated improvements in CO2 emissions would not be captured. EPA will not consider technologies to be eligible for these credits if the technology has a significant impact on CO2 emissions over the FTP and HFET tests. Because these technologies are not nearly so well developed and understood, EPA is not prepared to require their utilization to meet the CO2 standards. However, EPA is aware of some emerging and innovative technologies and concepts in various stages of development with CO2 reduction potential that might not be adequately captured on the FTP or HFET, and that some of these technologies might merit some additional CO2 credit for the manufacturer. Examples include solar panels on hybrids or electric vehicles, adaptive cruise control, and active aerodynamics. EPA believes it would be appropriate to provide an incentive to encourage the introduction of these types of technologies and that a credit mechanism is an effective way to do this. This optional credit opportunity would be available through the 2016 model year.

EPA is proposing that manufacturers quantify CO2 reductions associated with the use of the off-cycle technologies such that the credits could be applied on a g/mile equivalent basis, as is proposed for A/C system improvements. Credits would have to be based on real additional reductions of CO2 emissions and would need to be quantifiable and verifiable with a repeatable methodology. Such submissions of data should be submitted to EPA subject to public scrutiny. EPA proposes that the technologies upon which the credits are based would be subject to full useful life compliance provisions, as with other emissions controls. Unless the manufacturer can demonstrate that the technology would not be subject to in-use deterioration over the useful life of the vehicle, the manufacturer would have to account for deterioration in the estimation of the credits in order to ensure that the credits are based on real in-use emissions reductions over the life of the vehicle.

As discussed below, EPA is proposing a two-tiered process for demonstrating the CO2 reductions of an innovative and novel technology with benefits not captured by the FTP and HFET test procedures. First, a manufacturer would determine whether the benefit of the technology could be captured using the 5-cycle methodology currently used to determine fuel economy label values. EPA established the 5-cycle test methods to better represent real-world factors impacting fuel economy, including higher speeds and more aggressive driving, colder temperature operation, and the use of air conditioning. If this determination is affirmative, the manufacturer would follow the protocol laid out below and in the proposed regulations. If the manufacturer finds that the technology is such that the benefit is not adequately captured using the 5-cycle approach, then the manufacturer would have to develop a robust methodology, subject to EPA approval, to demonstrate the benefit and determine the appropriate CO2 gram per mile credit.

a. Technology Demonstration Using EPA 5-Cycle Methodology

As noted above, the CO2 reduction benefit of some innovative technologies could be demonstrated using the 5-cycle approach currently used for EPA's fuel economy labeling program. The 5-cycle methodology was finalized in EPA's 2006 fuel economy labeling rule,[155] which provides a more accurate fuel economy label estimate to consumers starting with 2008 model year vehicles. In addition to the FTP and HFET test procedures, the 5-cycle approach folds in the test results from three additional test procedures to determine fuel economy. The additional test cycles include cold temperature operation, high temperature, high humidity and solar loading, and aggressive and high-speed driving; thus these tests could be used to demonstrate the benefit of a technology that reduces CO2 over these types of driving and environmental conditions. Using the test results from these additional test cycles collectively with the 2-cycle data provides a more precise estimate of the average fuel economy and CO2 emissions of a vehicle for both the city and highway independently. A significant benefit of using the 5-cycle methodology to measure and quantify the CO2 reductions is that the test cycles are properly weighted for the expected average U.S. operation, meaning that the test results could be used without further adjustments.

The use of these supplemental cycles may provide a method by which technologies not demonstrated on the baseline 2-cycles can be quantified. The cold temperature FTP can capture new technologies that improve the CO2 performance of vehicles during colder weather operation. These improvements may be related to warm-up of the engine or other operation during the colder temperature. An example of such a new, innovative technology is a waste heat capture device that provides heat to the cabin interior, enabling additional engine-off operation during colder weather not previously enabled due to heating and defrosting requirements. The additional engine-off time would result in additional CO2 reductions that otherwise would not have been realized without the heat capture technology.

While A/C credits for efficiency improvements will largely be captured in the A/C credits proposal through the credit menu of known efficiency improving components and controls, Start Printed Page 49535certain new technologies may be able to use the high temperatures, humidity, and solar load of the SC03 test cycle to accurately measure their impact. An example of a new technology may be a refrigerant storage device that accumulates pressurized refrigerant during driving operation or uses recovered vehicle kinetic energy during deceleration to pressurize the refrigerant. Much like the waste heat capture device used in cold weather, this device would also allow additional engine-off operation while maintaining appropriate vehicle interior occupant comfort levels. SC03 test data measuring the relative impact of innovative A/C-related technologies could be applied to the 5-cycle equation to quantify the CO2 reductions of the technology. Another example is glazed windows. This reflects sunlight away from the cabin so that the energy required to stabilize the cabin air to a comfortable level is decreased. The impact of these windows may be measureable on an SC03 test (with and without the window option).

The US06 cycle may be used to capture innovative technologies designed to reduce CO2 emissions during higher speed and more aggressive acceleration conditions, but not reflected on the 2-cycle tests. An example of this is an active aerodynamic technology. This technology recognizes the benefits of reduced aerodynamic drag at higher speeds and makes changes to the vehicle at those speeds. The changes may include active front or grill air deflection devices designed to redirect frontal airflow. Certain active suspension devices designed primarily to reduce aerodynamic drag by lowering the vehicle at higher speeds may also be measured on the US06 cycle. To properly measure these technologies on the US06, the vehicle would require unique load coefficients with and without the technologies. The different load coefficient (properly weighted for the US06 cycle) could effectively result in reduced vehicle loads at the higher speeds when the technologies are active. Similar to the previously discussed cycles, the results from the US06 test with and without the technology could then use the 5-cycle methodology to quantify CO2 reductions.

If the 5-cycle procedures can be used to demonstrate the innovative technology, then the process would be relatively simple. The manufacturer would simply test vehicles with and without the technology installed or operating and compare results. All 5-cycles would be tested with the technology enabled and disabled, and the test results would be used to calculate a combined city/highway CO2 value with the technology and without the technology. These values would be compared to determine the amount of the credit; the combined city/highway CO2 value with the technology operating would be subtracted from the combined city/highway CO2 value without the technology operating to determine the gram per mile CO2 credit. It is likely that multiple tests of each of the five test procedures would need to be performed in order to achieve the necessary strong degree of statistical significance of the credit determination results. This would have to be done for each model type for which a credit was being sought, unless the manufacturer could demonstrate that the impact of the technology was independent of the vehicle configuration on which it was installed. In this case, EPA may consider allowing the test to be performed on an engine family basis or other grouping. At the end of the model year, the manufacturer would determine the number of vehicles produced subject to each credit amount and report that to EPA in the final model year report. The gram per mile credit value determined with the 5-cycle comparison testing would be multiplied by the total production of vehicles subject to that value to determine the total number of credits.

b. Alternative Off-Cycle Credit Methodologies

In cases where the benefit of a technological approach to reducing CO2 emissions can not be adequately represented using existing test cycles, EPA will work with and advise manufacturers in developing test procedures and analytical approaches to estimate the effectiveness of the technology for the purpose of generating credits. Clearly the first step should be a thorough assessment of whether the 5-cycle approach can be used, but if the manufacturer finds that the 5-cycle process is fundamentally inadequate for the specific technology being considered by the manufacturer, then an alternative approach may be developed and submitted to EPA for approval. The demonstration program should be robust, verifiable, and capable of demonstrating the real-world emissions benefit of the technology with strong statistical significance.

The CO2 benefit of some technologies may be able to be demonstrated with a modeling approach, using engineering principles. An example would be where a roof solar panel is used to charge the on-board vehicle battery. The amount of potential electrical power that the panel could supply could be modeled for average U.S. conditions and the units of electrical power translated to equivalent fuel energy or annualized CO2 emission rate reduction from the captured solar energy. The CO2 reductions from other technologies may be more challenging to quantify, especially if they are interactive with the driver, geographic location, environmental condition, or other aspect related to operation on actual roads. In these cases, manufacturers might have to design extensive on-road test programs. Any such on-road testing programs would need to be statistically robust and based on average U.S. driving conditions, factoring in differences in geography, climate, and driving behavior across the U.S.

Whether the approach involves on-road testing, modeling, or some other analytical approach, the manufacturer would be required to present a proposed methodology to EPA. EPA would approve the methodology and credits only if certain criteria were met. Baseline emissions and control emissions would need to be clearly demonstrated over a wide range of real world driving conditions and over a sufficient number of vehicles to address issues of uncertainty with the data. Data would need to be on a vehicle model-specific basis unless a manufacturer demonstrated model specific data was not necessary. Approval of the approach to determining a CO2 benefit would not imply approval of the results of the program or methodology; when the testing, modeling, or analyses are complete the results would likewise be subject to EPA review and approval. EPA believes that manufacturers could work together to develop testing, modeling, or analytical methods for certain technologies, similar to the SAE approach used for A/C refrigerant leakage credits.

EPA requests comments on the proposed approach for off-cycle emissions credits, including comments on how best to structure the program. EPA particularly requests comments on how the case-by-case approach to assessing off-cycle innovative technology credits could best be designed, including ways to ensure the verification of real-world emissions benefits and to ensure transparency in the process of reviewing manufacturer's proposed test methods.

5. Early Credit Options

EPA is proposing to allow manufacturers to generate early credits in model years 2009-2011. As described below, credits could be generated through early additional fleet average CO2 reductions, early A/C system improvements, early advanced Start Printed Page 49536technology vehicle credits, and early off-cycle credits. As with other credits, early credits would be subject to a five year carry-forward limit based on the model year in which they are generated. Early credits could also be transferred between vehicle categories (e.g., between the car and truck fleet) or traded among manufacturers without limits. The agencies note that CAFE credits earned in MYs prior to MY 2011 will still be available to manufacturers for use in the CAFE program in accordance with applicable regulations.

EPA is not proposing certification, compliance, or in-use requirements for vehicles generating early credits. MY 2009 would be complete and MY 2010 would be well underway by the time the rule is promulgated. This would make certification, compliance, and in-use requirements unworkable. As discussed below, manufacturers would be required to submit an early credits report to EPA for approval no later than the time they submit their final CAFE report for MY 2011. This report would need to include details on all early credits the manufacturer generates, why the credits are bona fide, how they are quantified, and how they can be verified.

As a general principle, EPA believes these early credit programs must be designed in a way to ensure that they are capturing real-world reductions. In addition, EPA wants to ensure these credit programs do not provide an opportunity for manufacturers to earn “windfall” credits that do not result in actual, surplus CO2 emission reductions. EPA seeks comments on how to best ensure these objectives are achieved in the design of the early credit program options.

a. Credits Based on Early Fleet Average CO2 Reductions

EPA is proposing opportunities for early credit generation in MYs 2009-2011 through over-compliance with a fleet average CO2 baseline established by EPA. EPA is proposing four pathways for doing so. Manufacturers would select one of the four paths for credit generation for the entire three year period and could not switch between pathways for different model years. For two pathways, the baseline would be set by EPA to be equivalent to the California standards for the relevant model year. Generally, manufacturers that over-comply with those CARB standards would earn credits. Two additional pathways, described below, would include credits based on over-compliance with CAFE standards in States that have not adopted the California standards.

Pathway 1 would be to earn credits by over-complying with the California equivalent baseline over the manufacturer's fleet of vehicles sold nationwide. Pathway 2 would be for manufacturers to generate credits against the baseline only for the fleet of vehicles sold in California and the CAA section 177 States.[156] This approach would include any CAA 177 States as of the date of promulgation of the Final Rule in this proceeding. Manufacturers would be required to include both cars and trucks in the program. Under Pathways 1 and 2, EPA proposes that manufacturers would be required to cover any deficits incurred against the baseline levels established by EPA during the three year period 2009-2011 before credits could be carried forward into the 2012 model year. For example, a deficit in 2011 would have to be subtracted from the sum of credits earned in 2009 and 2010 before any credits could be applied to 2012 (or later) model year fleets. EPA is proposing this provision to help ensure the early credits generated under this program are consistent with the credits available under the California program during these model years.

Table III.C.5-1 provides the California equivalent baselines EPA proposes to use as the basis for CO2 credit generation under the California-based pathways. These are the California GHG standards for the model years shown, with a 2.0 g/mile adjustment to account for the exclusion of N2 O and CH4, which are included in the California GHG standards, but not included in the credits program. Manufacturers would generate CO2 credits by achieving fleet average CO2 levels below these baselines. As shown in the table, the California-based early credit pathways are based on the California vehicle categories. Also, the California-based baseline levels are not footprint-based, but universal levels that all manufacturers would use. Manufacturers would need to achieve fleet levels below those shown in the table in order to earn credits.

Table III.C.5-1—California Equivalent Baselines CO2 Emissions Levels for Early Credit Generation

Model yearPassenger cars and light trucks with an LVW of 0-3,750 lbsLight trucks with a LVW of 3,751 or more and a GVWR of up to 8,500 lbs plus medium-duty passenger vehicles
2009321437
2010299418
2011265388

EPA proposes that manufacturers using Pathways 1 or 2 above would use year end car and truck sales in each category. Although production data is used for the program starting in 2012, EPA is proposing to use sales data for the early credits program in order to apportion vehicles by State. This is described further below. Manufacturers would calculate actual fleet average emissions over the appropriate vehicle fleet, either for vehicles sold nationwide for Pathway 1, or California plus 177 States sales for Pathway 2. Early CO2 credits would be based on the difference between the baseline shown in the table above and the actual fleet average emissions level achieved. Any early A/C credits generated by the manufacturer, described below in Section III.C.5.b, would be included in the fleet average level determination. In model year 2009, the California CO2 standards for cars (321 g/mi CO2) are only slightly more stringent than the 2009 CAFE car standard of 27.5 mpg, which is approximately equivalent to 323 g/mi CO2, and the California light-truck standard (437 g/mi CO2) is less stringent than the equivalent CAFE standard, recognizing that there are some differences between the way the California program and the CAFE Start Printed Page 49537program categorize vehicles. Under the proposed option, manufacturers would have to show that they over comply over the entire three model year time period, not just the 2009 model year, to generate early credits under either Pathways 1, 2 or 3. A manufacturer cannot use credits generated in model year 2009 unless they offset any debits from model years 2010 and 2011. EPA expects that the requirement to over comply over the entire time period covering these three model years should mean that the credits that are generated are real and are in excess of what would have otherwise occurred. However, because of the circumstances involving the 2009 model year, in particular for companies with significant truck sales, there is some concern that under Pathways 1, 2, and 3, there is a potential for a large number of credits generated in 2009 against the California standard, in particular for a number of companies who have significantly over-achieved on CAFE in recent model years. EPA wants to avoid a situation where, contrary to expectation, some part of the early credits generated by a manufacturer are in fact not excess, where companies could trade such credits to other manufacturers, risking a delay in the addition of new technology across the industry from the 2012 and later EPA CO2 standards. For this reason, EPA requests comment on the merits of prohibiting the trading of model year 2009 generated early credits between firms.

In addition, for Pathways 1 and 2, EPA proposes that manufacturers may also include alternative compliance credits earned per the California alternative compliance program.[157] These alternative compliance credits are based on the demonstrated use of alternative fuels in flex fuel vehicles. As with the California program, the credits would be available beginning in MY 2010. Therefore, these early alternative compliance credits would be available under EPA's program for the 2010 and 2011 model years. FFVs would otherwise be included in the early credit fleet average based on their emissions on the conventional fuel. This would not apply to EVs and PHEVs. The emissions of EVs and PHEVs would be determined as described in Section III.E. Manufacturers could choose to either include their EVs and PHEVs in one of the four pathways described in this section or under the early advanced technology emissions credits described below, but not both due to issues of credit double counting.

EPA is also proposing two additional early credit pathways manufacturers could select. Pathways 3 and 4 incorporate credits based on over-compliance with CAFE standards for vehicles sold outside of California and CAA 177 States in MY 2009-2011. Pathway 3 would allow manufacturers to earn credits as under Pathway 2, plus earn CAFE-based credits in other States. Credits would not be generated for cars sold in California and CAA 177 States unless vehicle fleets in those States are performing better than the standards which otherwise would apply in those States, i.e. the baselines shown in Table III.C.5-1 above.

Pathway 4 would be for manufacturers choosing to forego California-based early credits entirely and earn only CAFE-based credits outside of California and CAA 177 States. EPA proposes that manufacturers would not be able to include FFV credits under the CAFE-based early credit pathways since those credits do not automatically reflect actual reductions in CO2 emissions.

The proposed baselines for CAFE-based early pathways are provided in Table III.C.5-2 below. They are based on the CAFE standards for the 2009-2011 model years. For CAFE standards in 2009-2011 model years that are footprint-based, the baseline would vary by manufacturer. Footprint-based standards are in effect for the 2011 model year CAFE standards.[158] Additionally, for Reform CAFE truck standards, footprint standards are optional for the 2009-2010 model years. Where CAFE footprint-based standards are in effect, manufacturers would calculate a baseline using the footprints and sales of vehicles outside of California and CAA 177 States. The actual fleet CO2 performance calculation would also only include the vehicles sold outside of California and CAA 177 States, and as mentioned above, may not include FFV credits.

Table III.C.5-2—CAFE Equivalent Baselines CO2 Emissions Levels for Early Credit Generation

Model yearCarsTrucks
2009323381.*
2010323376.*
2011Footprint-based standardFootprint-based standard.
* Would be footprint-based standard for manufacturers selecting footprint option under CAFE.

For the CAFE-based pathways, EPA proposes to use the NHTSA car and truck definitions that are in place for the model year in which credits are being generated. EPA understands that the NHTSA definitions change starting in the 2011 model year, and would therefore change part way through the early credits program. EPA further recognizes that MDPVs are not part of the CAFE program until the 2011 model year, and therefore would not be part of the early credits calculations for 2009-2010 under the CAFE-based pathways.

Pathways 2 through 4 involve splitting the vehicle fleet into two groups, vehicles sold in California and CAA 177 States and vehicles sold outside of these States. This approach would require a clear accounting of location of vehicle sales by the manufacturer. EPA believes it will be reasonable for manufacturers to accurately track sales by State, based on its experience with the National Low Emissions Vehicle (NLEV) Program. NLEV required manufacturers to meet separate fleet average standards for vehicles sold in two different regions of the country.[159] As with NLEV, the determination would be based on where the completed vehicles are delivered as a point of first sale, which in most cases would be the dealer.[160]

As noted above, EPA proposes that manufacturers choosing to generate early credits would select one of the four pathways for the entire early credits program and would not be able to switch among them. EPA proposes that manufacturers would submit their early credits report when they submit their final CAFE report for MY 2011 (which is required to be submitted no Start Printed Page 49538later than 90 days after the end of the model year). Manufacturers would have until then to decide which pathway to select. This would give manufacturers enough time to determine which pathway works best for them. This timing may be necessary in cases where manufacturers earn credits in MY 2011 and need time to assess data and prepare an early credits submittal for final EPA approval.

The table below provides a summary of the four fleet average-based CO2 early credit pathways EPA is proposing. As noted above, EPA is concerned with potential “windfall” credits and is seeking comments on how to best ensure the objective of achieving surplus, real-world reductions is achieved in the design of the credit programs. In addition, EPA requests comments on the merits of each of these pathways. Specifically, EPA requests comment on whether or not any of the pathways could be eliminated to simplify the program without diminishing its overall flexibility. For example, Pathway 2 may not be particularly useful to manufacturers if the California/177 State and overall national fleets are projected to be similar during these model years. EPA also requests comment on proposed program implementation structure and provisions.

Table III.C.5-3—Summary of Proposed Early Fleet Average CO2 Credit Pathways

Common Elements—Manufacturers would select a pathway. Once selected, may not switch among pathways.
—All credits subject to 5 year carry-forward restrictions.
—For Pathways 2-4, vehicles apportioned by State based on point of first sale.
Pathway 1: California-based Credits for National Fleet.—Manufacturers earn credits based on fleet average emissions compared with California equivalent baseline set by EPA.
—Based on nationwide CO2 sales-weighted fleet average.
—Based on use of California vehicle categories.
—FFV alternative compliance credits per California program may be included.
—Once in the program, manufacturers must make up any deficits that are incurred prior to 2012 in order to carry credits forward to 2012 and later.
Pathway 2: California-based Credits for vehicles sold in California plus CAA 177 States—Same as Pathway 1, but manufacturers only includes vehicles sold in California and CAA 177 States in the fleet average calculation.
Pathway 3: Pathway 2 plus CAFE-based Credits outside of California plus CAA 177 States—Manufacturer earns credits as provided by Pathway 2: California-based credits for vehicles sold in California plus CAA 177 States, plus:
—CAFE-based credits allowed for vehicles sold outside of California and CAA 177 States.
—For CAFE-based credits, manufacturers earn credits based on fleet average emissions compared with baseline set by EPA.
—CAFE-based credits based on NHTSA car and truck definitions.
—FFV credits not allowed to be included for CAFE-based credits.
Pathway 4: Only CAFE-based Credits outside of California plus CAA 177 States—Manufacturer elects to only earn CAFE-based credits for vehicles sold outside of California and CAA 177 States. Earns no California and 177 State credits.
—For CAFE-based credits, manufacturers earn credits based on fleet average emissions compared with baseline set by EPA.
—CAFE-based credits based on NHTSA car and truck definitions.
—FFV credits not allowed to be included for CAFE-based credits.

b. Early A/C Credits

EPA proposes that manufacturers could earn early A/C credits in MYs 2009-2011 using the same A/C system design-based EPA provisions being proposed for MYs commencing in 2012, as described in Section III.C.1, above. Manufacturers would be able to earn early A/C CO2-equivalent credits by demonstrating improved A/C system performance, for both direct and indirect emissions. To earn credits for vehicles sold in California and CAA 177 States, the vehicles would need to be included in one of the California-based early credit pathways described above in III.C.5.a. EPA is proposing this constraint in order to avoid credit double counting with the California program in place in those States, which also allows A/C system credits in this time frame. Manufacturers would fold the A/C credits into the fleet average CO2 calculations under the California-based pathway. For example, the MY 2009 California-based program car baseline would be 321 g/mile (see Table III.C.5-1). If a manufacturer under Pathway 1 had a MY 2009 car fleet average CO2 level of 320 g/mile and then earned an additional 9 g/mile CO2-equivalent A/C credit, the manufacturers would earn a total of 10 g/mile of credit. Vehicles sold outside of California and 177 States would be eligible for the early A/C credits whether or not the manufacturers participate in other aspects of the early credits program.

c. Early Advanced Technology Vehicle Credits

EPA is proposing to allow early advanced technology vehicle credits for sales of EVs, PHEVs, and fuel cell vehicles. To avoid double-counting, manufacturers would not be allowed to generate advanced technology credits for vehicles they choose to include in Pathways 1 through 4 described in III.C.5.a, above. EPA proposes to use a similar methodology to that proposed for MYs 2012 and later, as described in Section III.C.3, above. EPA proposes to use a multiplier in the range of 1.2 to 2.0 for all eligible vehicles (i.e., EVs, PHEVs, and fuel cells). Manufacturers, however, would track the number of these vehicles sold in the model years 2009—2011, and the emissions level of the vehicles, rather than a CO2 credit. When a manufacturer chooses to use the vehicle credits to comply with 2012 or later standards, the vehicle counts including the multiplier would be folded into the CO2 fleet average. For example, if a manufacturer sells 1,000 EVs in MY 2011, and if the final multiplier level were 2.0, the manufacturer would apply the multiplier of 2.0 and then be able to include 2,000 vehicles at 0 g/mile in their MY 2012 fleet to decrease the fleet average for that model year. As with other early credits, these early advanced technology vehicle credits would be tracked by model year (2009, 2010, or 2011) and would be subject to 5 year carry-forward restrictions. Again, Start Printed Page 49539manufacturers would not be allowed to include the EVs, PHEVs, or fuel cell vehicles in the early credit pathways discussed above in Section III.C.5.a, otherwise the vehicles would be double counted. As discussed in Section III.C.3, EPA is requesting comment on a multiplier in the range of 1.2 to 2.0, including a potential phase-down in the multiplier by model year 2016, if a multiplier near the higher end of this range is determined for the final rule. This request for comment also extends to the potential for early advance technology vehicle credits. EPA is also requesting comment on the appropriate gram/mile metric for EVs and fuel cellvehicles, as well as for the EV-only contribution for a PHEV.

d. Early Off-Cycle Credits

EPA's proposed off-cycle innovative technology credit provisions are provided in Section III.C.4. EPA requests comment on beginning these credits in the 2009-2011 time frame, provided manufacturers are able to make the necessary demonstrations outlined in Section III.C.4, above.

D. Feasibility of the Proposed CO2 Standards

This proposal is based on the need to obtain significant GHG emissions reductions from the transportation sector, and the recognition that there are cost-effective technologies to achieve such reductions in the 2012-2016 time frame. As in many prior mobile source rulemakings, the decision on what standard to set is largely based on the effectiveness of the emissions control technology, the cost and other impacts of implementing the technology, and the lead time needed for manufacturers to employ the control technology. The standards derived from assessing these issues are also evaluated in terms of the need for reductions of greenhouse gases, the degree of reductions achieved by the standards, and the impacts of the standards in terms of costs, quantified benefits, and other impacts of the standards. The availability of technology to achieve reductions and the cost and other aspects of this technology are therefore a central focus of this rulemaking.

EPA is taking the same basic approach in this rulemaking, although the technological problems and solutions involved in this rulemaking differ in some ways from prior mobile source rulemakings. Here, the focus of the emissions control technology is on reducing CO2 and other greenhouse gases. Vehicles combust fuel to perform two basic functions: (1) Transport the vehicle, its passengers and its contents, and (2) operate various accessories during the operation of the vehicle such as the air conditioner. Technology can reduce CO2 emissions by either making more efficient use of the energy that is produced through combustion of the fuel or reducing the energy needed to perform either of these functions.

This focus on efficiency calls for looking at the vehicle as an entire system. In addition to fuel delivery, combustion, and aftertreatment technology, any aspect of the vehicle that affects the need to produce energy must also be considered. For example, the efficiency of the transmission system, which takes the energy produced by the engine and transmits it to the wheels, and the resistance of the tires to rolling both have major impacts on the amount of fuel that is combusted while operating the vehicle. The braking system, the aerodynamics of the vehicle, and the efficiency of accessories, such as the air conditioner, all affect how much fuel is combusted.

In evaluating vehicle efficiency, we have excluded fundamental changes in vehicles' size and utility. For example, we did not evaluate converting minivans and SUVs to station wagons, converting vehicles with four wheel drive to two wheel drive, or reducing headroom in order to lower the roofline and reduce aerodynamic drag. We have limited our assessment of technical feasibility and resultant vehicle cost to technologies which maintain vehicle utility as much as possible. Manufacturers may decide to alter the utility of the vehicles which they sell in response to this rule. Assessing the societal cost of such changes is very difficult as it involves assessing consumer preference for a wide range of vehicle features.

This need to focus on the efficient use of energy by the vehicle as a system leads to a broad focus on a wide variety of technologies that affect almost all the systems in the design of a vehicle. As discussed below, there are many technologies that are currently available which can reduce vehicle energy consumption. These technologies are already being commercially utilized to a limited degree in the current light-duty fleet. These technologies include hybrid technologies that use higher efficiency electric motors as the power source in combination with or instead of internal combustion engines. While already commercialized, hybrid technology continues to be developed and offers the potential for even greater efficiency improvements. Finally, there are other advanced technologies under development, such as lean burn gasoline engines, which offer the potential of improved energy generation through improvements in the basic combustion process. In addition, the available technologies are not limited to powertrain improvements but also include mass reduction, electrical system efficiencies, and aerodynamic improvements.

The large number of possible technologies to consider and the breadth of vehicle systems that are affected mean that consideration of the manufacturer's design and production process plays a major role in developing the proposed standards. Vehicle manufacturers typically develop many different models by basing them on a limited number of vehicle platforms. The platform typically consists of a common vehicle architecture and structural components. This allows for efficient use of design and manufacturing resources. Given the very large investment put into designing and producing each vehicle model, manufacturers typically plan on a major redesign for the models approximately every 5 years. At the redesign stage, the manufacturer will upgrade or add all of the technology and make most other changes supporting the manufacturer's plans for the next several years, including plans related to emissions, fuel economy, and safety regulations.

This redesign often involves a package of changes designed to work together to meet the various requirements and plans for the model for several model years after the redesign. This often involves significant engineering, development, manufacturing, and marketing resources to create a new product with multiple new features. In order to leverage this significant upfront investment, manufacturers plan vehicle redesigns with several model years of production in mind. Vehicle models are not completely static between redesigns as limited changes are often incorporated for each model year. This interim process is called a refresh of the vehicle and generally does not allow for major technology changes although more minor ones can be done (e.g., small aerodynamic improvements, valve timing improvements, etc). More major technology upgrades that affect multiple systems of the vehicle thus occur at the vehicle redesign stage and not in the time period between redesigns.

As discussed below, there are a wide variety of CO2 reducing technologies involving several different systems in the vehicle that are available for consideration. Many can involve major changes to the vehicle, such as changes to the engine block and cylinder heads, redesign of the transmission and its Start Printed Page 49540packaging in the vehicle, changes in vehicle shape to improve aerodynamic efficiency and the application of aluminum in body panels to reduce mass. Logically, the incorporation of emissions control technologies would be during the periodic redesign process. This approach would allow manufacturers to develop appropriate packages of technology upgrades that combine technologies in ways that work together and fit with the overall goals of the redesign. It also allows the manufacturer to fit the process of upgrading emissions control technology into its multi-year planning process, and it avoids the large increase in resources and costs that would occur if technology had to be added outside of the redesign process.

This proposed rule affects five years of vehicle production, model years 2012-2016. Given the now-typical five year redesign cycle, nearly all of a manufacturer's vehicles will be redesigned over this period. However, this assumes that a manufacturer has sufficient lead time to redesign the first model year affected by this proposed rule with the requirements of this proposed rule in mind. In fact, the lead time available for model year 2012 is relatively short. The time between a likely final rule and the start of 2013 model year production is likely to be just over two years. At the same time, manufacturer product plans indicate that they are planning on introducing many of the technologies EPA projects could be used to show compliance with the proposed CO2 standards in both 2012 and 2013. In order to account for the relatively short lead time available prior to the 2012 and 2013 model years, albeit mitigated by their existing plans, EPA has factored this reality into how the availability is modeled for much of the technology being considered for model years 2012-2016 as a whole. If the technology to control greenhouse gas emissions is efficiently folded into this redesign process, then EPA projects that 85 percent of each manufacturer's sales will be able to be redesigned with many of the CO2 emission reducing technologies by the 2016 model year, and as discussed below, to reduce emissions of HFCs from the air conditioner.

In determining the level of this first ever GHG emissions standard under the CAA for light-duty vehicles, EPA proposes to use an approach that accounts for and builds on this redesign process. This provides the opportunity for several control technologies to be incorporated into the vehicle during redesign, achieving significant emissions reductions from the model at one time. This is in contrast to what would be a much more costly approach of trying to achieve small increments of reductions over multiple years by adding technology to the vehicle piece by piece outside of the redesign process.

As described below, the vast majority of technology required by this proposal is commercially available and already being employed to a limited extent across the fleet. The vast majority of the emission reductions which would result from this proposed rule would result from the increased use of these technologies. EPA also believes that this proposed rule would encourage the development and limited use of more advanced technologies, such as PHEVs and EVs.

In developing the proposed standard, EPA built on the technical work performed by the State of California during its development of its statewide GHG program. EPA began by evaluating a nationwide CAA standard for MY 2016 that would require the levels of technology upgrade, across the country, which California standards would require for the subset of vehicles sold in California under Pavley 1. In essence, EPA evaluated the stringency of the California Pavley 1 program but for a national standard. As mentioned above, and as described in detail in Section II.C of this preamble and Chapter 3 of the Joint TSD, one of the important technical documents included in EPA and NHTSA's assessment of vehicle technology effectiveness and costs was the 2004 NESCCAF report which was the technical foundation for California's Pavley 1 standard. However, in order to evaluate the impact of standards with similar stringency on a national basis to the California program EPA chose not to evaluate the specific California standards for several reasons. First, California's standards are universal standards (one for cars and one for trucks), while EPA is proposing attribute-based standards using vehicle footprint. Second, California's definitions of what vehicles are classified as cars and which are classified as trucks are different from those used by NHTSA for CAFE purposes and different from EPA's proposed classifications in this notice (which harmonizes with the CAFE definitions). In addition, there has been progress in the refinement of the estimation of the effectiveness and cost estimation for technologies which can be applied to cars and trucks since the California analysis in 2004 which could lead to different relative stringencies between cars and trucks than what California determined for its Pavley 1 program. There have also been improvements in the fuel economy and CO2 performance of the actual new vehicle fleet since California's 2004 analysis which EPA wanted to reflect in our current assessment. For these reasons, EPA developed an assessment of an equivalent national new vehicle fleet-wide CO2 performance standards for model year 2016 which would result in the new vehicle fleet in the State of California having CO2 performance equal to the performance from the California Pavley 1 standards. This assessment is documented in Chapter 3.1 of the DRIA. The results of this assessment predicts that a national light-duty vehicle fleet which adopts technology that achieves performance of 250 g/mile CO2 for model year 2016 would result in vehicles sold in California that would achieve the CO2 performance equivalent to the Pavley 1 standards.

EPA then analyzed a level of 250 g/mi CO2 in 2016 using the OMEGA model, and the car and truck footprint curves relative stringency discussed in Section II to determine what technology would be needed to achieve a fleet wide average of 250 g/mi CO2. As discussed later in this section we believe this level of technology application to the light-duty vehicle fleet can be achieved in this time frame, that such standards will produce significant reductions in GHG emissions, and that the costs for both the industry and the costs to the consumer are reasonable. EPA also developed standards for the model years 2012 through 2015 that lead up to the 2016 level.

EPA's independent technical assessment of the technical feasibility of the proposed MY2012-2016 standards is described below. EPA has also evaluated a set of alternative standards for these model years, one that is more stringent than the proposed standards and one that is less stringent. The technical feasibility of these alternative standards is discussed at the end of this section.

Evaluating the feasibility of these standards primarily includes identifying available technologies and assessing their effectiveness, cost, and impact on relevant aspects of vehicle performance and utility. The wide number of technologies which are available and likely to be used in combination requires a more sophisticated assessment of their combined cost and effectiveness. An important factor is also the degree that these technologies are already being used in the current vehicle fleet and thus, unavailable for use to improve energy efficiency beyond current levels. Finally, the challenge for manufacturers to design the technology Start Printed Page 49541into their products, and the appropriate lead time needed to employ the technology over the product line of the industry must be considered.

Applying these technologies efficiently to the wide range of vehicles produced by various manufacturers is a challenging task. In order to assist in this task, EPA has developed a computerized model called the Optimization Model for reducing Emissions of Greenhouse gases from Automobiles (OMEGA) model. Broadly, the model starts with a description of the future vehicle fleet, including manufacturer, sales, base CO2 emissions, footprint and the extent to which emission control technologies are already employed. For the purpose of this analysis, over 200 vehicle platforms were used to capture the important differences in vehicle and engine design and utility of future vehicle sales of roughly 16 million units in the 2016 timeframe. The model is then provided with a list of technologies which are applicable to various types of vehicles, along with their cost and effectiveness and the percentage of vehicle sales which can receive each technology during the redesign cycle of interest. The model combines this information with economic parameters, such as fuel prices and a discount rate, to project how various manufacturers would apply the available technology in order to meet various levels of emission control. The result is a description of which technologies are added to each vehicle platform, along with the resulting cost. While OMEGA can apply technologies which reduce CO2 emissions and HFC refrigerant emissions associated with air conditioner use, this task is currently handled outside of the OMEGA model. The model can be set to account for various types of compliance flexibilities, such as FFV credits.

EPA invites comment on all aspects of this feasibility assessment. Both the OMEGA model and its inputs have been placed in the docket to this proposed rule and available for review.

The remainder of this section describes the technical feasibility analysis in greater detail. Section III.D.1 describes the development of our projection of the MY 2012-2016 fleet in the absence of this proposed rule. Section III.D.2 describes our estimates of the effectiveness and cost of the control technologies available for application in the 2012-2016 timeframe. Section III.D.3 combines these technologies into packages likely to be applied at the same time by a manufacturer. In this section, the overall effectiveness of the technology packages vis-à-vis their effectiveness when combined individually is described. Section III.D.4 describes the process which manufacturers typically use to apply new technology to their vehicles. Section III.D.5 describes EPA's OMEGA model and its approach to estimating how manufacturers would add technology to their vehicles in order to comply with CO2 emission standards. Section III.D.6 presents the results of the OMEGA modeling, namely the level of technology added to manufacturers' vehicles and its cost. Section III.D.7 discusses the feasibility of the alternative 4-percent-per-year and 6-percent-per-year standards. Further detail on all of these issues can be found in EPA and NHTSA's draft Joint Technical Support Document as well as EPA's draft Regulatory Impact Analysis.

1. How Did EPA Develop a Reference Vehicle Fleet for Evaluating Further CO2 Reductions?

In order to calculate the impacts of this proposed regulation, it is necessary to project the GHG emissions characteristics of the future vehicle fleet absent this proposed regulation. This is called the “reference” fleet. EPA developed this reference fleet by determining the characteristics of a specific model year (in this case, 2008) of vehicles, called the baseline fleet, and then projecting what changes if any would be made to these vehicles to comply with the MY2011 CAFE standards. Thus, the MY 2008 fleet is our “baseline fleet,” and the projection of the baseline to MY 2011-2016 is called the “reference fleet.”

EPA used 2008 model year vehicles as the basis for its baseline fleet. 2008 model year is the most recent model year for which data is publicly available. Sources of data for the baseline include the EPA vehicle certification data, Ward's Automotive Group data, Motortrend.com, Edmunds.com, manufacturer product plans, and other sources to a lesser extent (such as articles about specific vehicles) revealed from Internet search engine research. EPA then projects this fleet out to the 2016 MY, taking into account factors such as changes in overall sales volume. Section II.B describes the development of the EPA reference fleet, and further details can be found in Section II.B of this preamble and Chapter 1 of the Draft Joint TSD.

The light-duty vehicle market is currently in a state of flux due to the volatility in fuel prices over the past several years and the current economic downturn. These factors have changed the relative sales of the various types of light-duty vehicles marketed, as well as total sales volumes. EPA and NHTSA desire to account for these changes to the degree possible in our forecast of the make-up of the future vehicle fleet. EPA wants to include improvements in fuel economy associated with the existing CAFE program. It is possible that manufacturers could increase fuel economy beyond the level of the 2011 MY CAFE standards for marketing purposes. However, it is difficult to separate fuel economy improvements in those years for marketing purposes from those designed to facilitate compliance with anticipated CAFE or CO2 emission standards. Thus, EPA limits fuel economy improvements in the reference fleet to those projected to result from the existing CAFE standards. The addition of technology to the baseline fleet so that it complies with the MY 2011 CAFE standards is described later in Section III.D.4, as this uses the same methodology used to project compliance with the proposed CO2 emission standards. In summary, the reference fleet represents vehicle characteristics and sales in the 2012 and later model years absent this proposed rule. Technology is then added to these vehicles in order to reduce CO2 emissions to achieve compliance with the proposed CO2 standards. EPA did not factor in any changes to vehicle characteristics or sales in projecting manufacturers' compliance with this proposal.

After the reference fleet is created, the next step aggregates vehicle sales by a combination of manufacturer, vehicle platform, and engine design. As discussed in Section III.D.4 below, manufacturers implement major design changes at vehicle redesign and tend to implement these changes across a vehicle platform. Because the cost of modifying the engine depends on the valve train design (such as SOHC, DOHC, etc.), the number of cylinders and in some cases head design, the vehicle sales are broken down beyond the platform level to reflect relevant engine differences. The vehicle groupings are shown in Table III.D.1-1.Start Printed Page 49542

Table III.D.1-1—Vehicle Groupings a

Vehicle descriptionVehicle typeVehicle descriptionVehicle type
Large SUV (Car) V8+ OHV13Subcompact Auto I41
Large SUV (Car) V6 4v16Large Pickup V8+ DOHC19
Large SUV (Car) V6 OHV12Large Pickup V8+ SOHC 3v14
Large SUV (Car) V6 2v SOHC9Large Pickup V8+ OHV13
Large SUV (Car) I4 and I57Large Pickup V8+ SOHC10
Midsize SUV (Car) V6 2v SOHC8Large Pickup V6 DOHC18
Midsize SUV (Car) V6 S/DOHC 4v5Large Pickup V6 OHV12
Midsize SUV (Car) I47Large Pickup V6 SOHC 2v11
Small SUV (Car) V6 OHV12Large Pickup I4 S/DOHC7
Small SUV (Car) V6 S/DOHC4Small Pickup V6 OHV12
Small SUV (Car) I43Small Pickup V6 2v SOHC8
Large Auto V8+ OHV13Small Pickup I47
Large Auto V8+ SOHC10Large SUV V8+ DOHC17
Large Auto V8+ DOHC, 4v SOHC6Large SUV V8+ SOHC 3v14
Large Auto V6 OHV12Large SUV V8+ OHV13
Large Auto V6 SOHC 2/3v5Large SUV V8+ SOHC10
Midsize Auto V8+ OHV13Large SUV V6 S/DOHC 4v16
Midsize Auto V8+ SOHC10Large SUV V6 OHV12
Midsize Auto V7+ DOHC, 4v SOHC6Large SUV V6 SOHC 2v9
Midsize Auto V6 OHV12Large SUV I4/7
Midsize Auto V6 2v SOHC8Midsize SUV V6 OHV12
Midsize Auto V6 S/DOHC 4v5Midsize SUV V6 2v SOHC8
Midsize Auto I43Midsize SUV V6 S/DOHC 4v5
Compact Auto V7+ S/DOHC6Midsize SUV I4 S/DOHC7
Compact Auto V6 OHV12Small SUV V6 OHV12
Compact Auto V6 S/DOHC 4v4Minivan V6 S/DOHC16
Compact Auto I57Minivan V6 OHV12
Compact Auto I42Minivan I47
Subcompact Auto V8+ OHV13Cargo Van V8+ OHV13
Subcompact Auto V8+ S/DOHC6Cargo Van V8+ SOHC10
Subcompact Auto V6 2v SOHC8Cargo Van V6 OHV12
Subcompact Auto I5/V6 S/DOHC 4v4
a I4 = 4 cylinder engine, I5 = 5 cylinder engine, V6, V7, and V8 = 6, 7, and 8 cylinder engines, respectively, DOHC = Double overhead cam, SOHC = Single overhead cam, OHV = Overhead valve, v = number of valves per cylinder, “/” = and, “+” = or larger.

As mentioned above, the second factor which needs to be considered in developing a reference fleet against which to evaluate the impacts of this proposed rule is the impact of the 2011 MY CAFE standards, which were published earlier this year. Since the vehicles which comprise the above reference fleet are those sold in the 2008 MY, when coupled with our sales projections, they do not necessarily meet the 2011 MY CAFE standards.

The levels of the 2011 MY CAFE standards are straightforward to apply to future sales fleets, as is the potential fine-paying flexibility afforded by the CAFE program (i.e., $55 per mpg of shortfall). However, projecting some of the compliance flexibilities afforded by EISA and the CAFE program are less clear. Two of these compliance flexibilities are relevant to EPA's analysis: (1) The credit for FFVs, and (2) the limit on the transferring of credits between car and truck fleets. The FFV credit is limited to 1.2 mpg in 2011 and EISA gradually reduces this credit, to 1.0 mpg in 2015 and eventually to zero in 2020. In contrast, the limit on car truck transfer is limited to 1.0 mpg in 2011, and EISA increases this to 1.5 mpg beginning in 2015 and then to 2.0 mpg beginning in 2020. The question here is whether to hold the 2011 MY CAFE provisions constant in the future or incorporate the changes in the FFV credit and car-truck credit trading limits contained in EISA.

EPA decided to hold the 2011 MY limits on FFV credit and car-truck credit trading constant in projecting the fuel economy and CO2 emission levels of vehicles in our reference case. This approach treats the changes in the FFV credit and car-truck credit trading provisions consistently with the other EISA-mandated changes in the CAFE standards themselves. All EISA provisions relevant to 2011 MY vehicles are reflected in our reference case fleet, while all post-2011 MY provisions are not. Practically, relative to the alternative, this increases both the cost and benefit of the proposed standards. In our analysis of this proposed rule, any quantified benefits from the presence of FFVs in the fleet are not considered. Thus, the only impact of the FFV credit is to reduce onroad fuel economy. By assuming that the FFV credit stays at 1.2 mpg in the future absent this rule, the assumed level of onroad fuel economy that would occur absent this proposal is reduced. As this proposal eliminates the FFV credit starting in 2016, the net result is to increase the projected level of fuel savings from our proposed standards. Similarly, the higher level of FFV credit reduces projected compliance cost for manufacturers to meet the 2011 MY standards in our reference case. This increases the projected cost of meeting the proposed 2012 and later standards.

As just implied, EPA needs to project the technology (and resultant costs) required for the 2008 MY vehicles to comply with the 2011 MY CAFE standards in those cases where they do not automatically do so. The technology and costs are projected using the same methodology that projects compliance with the proposed 2012 and later CO2 standards. The description of this process is described in the following four sections.

A more detailed description of the methodology used to develop these sales projections can be found in the Draft Joint TSD. Detailed sales projections by model year and manufacturer can also be found in the TSD. EPA requests comments on both Start Printed Page 49543the methodology used to develop the reference fleet, as well as the characteristics of the reference fleet.

2. What Are the Effectiveness and Costs of CO2-Reducing Technologies?

EPA and NHTSA worked together to jointly develop information on the effectiveness and cost of the CO2-reducing technologies, and fuel economy-improving technologies, other than A/C related control technologies. This joint work is reflected in Chapter 3 of the Draft Joint TSD and in Section II of this preamble. A summary of the effectiveness and cost of A/C related technology is contained here. For more detailed information on the effectiveness and cost of A/C related technology, please refer to Section III.C of this preamble and Chapter 2 of EPA's DRIA.

A/C improvements are an integral part of EPA's technology analysis and have been included in this section along with the other technology options. While discussed in Section III.C as a credit opportunity, air conditioning-related improvements are included in Table III.D.2-1.because A/C improvements are a very cost-effective technology at reducing CO2 (or CO2-equivalent) emissions. EPA expects most manufacturers will choose to use AC improvement credit opportunities as a strategy for meeting compliance with the CO2 standards. Note that the costs shown in Table III.D.2-1 do not include maintenance savings that would be expected from the new AC systems. Further, EPA does not include AC-related maintenance savings in our cost and benefit analysis presented in Section III.H. EPA discusses the likely maintenance savings in Chapter 2 of the DRIA and requests comment on that discussion because we may include maintenance savings in the final rule and would like to have the best information available in order to do so. The EPA approximates that the level of the credits earned will increase from 2012 to 2016 as more vehicles in the fleet are redesigned. The penetrations and average levels of credit are summarized in Table III.D.2-2, though the derivation of these numbers (and the breakdown of car vs. truck credits) is described in the DRIA. As demonstrated in the IMAC study (and described in Section III.C as well as the DRIA), these levels are feasible and achievable with technologies that are available and cost-effective today.

These improvements are categorized as either leakage reduction, including use of alternative refrigerants, or system efficiency improvements. Unlike the majority of the technologies described in this section, A/C improvements will not be demonstrated in the test cycles used to quantify CO2 reductions in this proposal. As described earlier, for this analysis A/C-related CO2 reductions are handled outside of OMEGA model and therefore their CO2 reduction potential is expressed in grams per mile rather than a percentage used by the OMEGA model. See Section III.C for the method by which potential reductions are calculated or measured. Further discussion of the technological basis for these improvements is included in Chapter 2 of the DRIA.

Table III.D.2-1—Total CO2 Reduction Potential and 2016 Cost for A/C Related Technologies for All Vehicle Classes

[Costs in 2007 dollars]

CO2 reduction potentialIncremental compliance costs
A/C refrigerant leakage reduction7.5 g/mi 161$17
A/C efficiency improvements5.7 g/mi53

Table III.D.2-2 A/C Related Tech- nology Penetration and Credit Levels Expected To Be Earned

Technology penetration (Percent)Average credit over entire fleet
2012253.1
2013405.0
2014607.5
20158010.0
20168510.6

3. How Can Technologies Be Combined into “Packages” and What Is the Cost and Effectiveness of Packages?

Individual technologies can be used by manufacturers to achieve incremental CO2 reductions. However, as mentioned in Section III.D.1, EPA believes that manufacturers are more likely to bundle technologies into “packages” to capture synergistic aspects and reflect progressively larger CO2 reductions with additions or changes to any given package. In addition, manufacturers would typically apply new technologies in packages during model redesigns—which occur once roughly every five years—rather than adding new technologies one at a time on an annual or biennial basis. This way, manufacturers can more efficiently make use of their redesign resources and more effectively plan for changes necessary to meet future standards.

Therefore, the approach taken here is to group technologies into packages of increasing cost and effectiveness. EPA determined that 19 different vehicle types provided adequate representation to accurately model the entire fleet. This was the result of analyzing the existing light duty fleet with respect to vehicle size and powertrain configurations. All vehicles, including cars and trucks, were first distributed based on their relative size, starting from compact cars and working upward to large trucks. Next, each vehicle was evaluated for powertrain, specifically the engine size, I4, V6, and V8, and finally by the number of valves per cylinder. Note that each of these 19 vehicle types was mapped into one of the five classes of vehicles mentioned in Section III.D.2. While the five classes provide adequate representation for the cost basis associated with most technology application, they do not adequately account for all existing vehicle attributes such as base vehicle powertrain configuration and mass reduction. As an example, costs and effectiveness estimates for engine friction reduction for the small car class were used to represent cost and effectiveness for three vehicle types: Subcompact cars, compact cars, and small multi-purpose vehicles (MPV) equipped with a 4-cylinder engine, however the mass reduction associated for each of these vehicle types was based on the vehicle type sales-weighted average. In another example, a vehicle type for V8 single overhead cam 3-valve engines was created to properly account for the incremental cost in moving to a dual overhead cam 4-valve Start Printed Page 49544configuration. Note also that these 19 vehicle types span the range of vehicle footprints—smaller footprints for smaller vehicles and larger footprints for larger vehicles—which serve as the basis for the standards proposed in this rule. A complete list of vehicles and their associated vehicle types is shown above in Table III.D.1-1.

Within each of the 19 vehicle types multiple technology packages were created in increasing technology content and, hence, increasing effectiveness. Important to note is that the effort in creating the packages attempted to maintain a constant utility for each package as compared to the baseline package. As such, each package is meant to provide equivalent driver-perceived performance to the baseline package. The initial packages represent what a manufacturer will most likely implement on all vehicles, including low rolling resistance tires, low friction lubricants, engine friction reduction, aggressive shift logic, early torque converter lock-up, improved electrical accessories, and low drag brakes.[162] Subsequent packages include advanced gasoline engine and transmission technologies such as turbo/downsizing, GDI, and dual-clutch transmission. The most technologically advanced packages within a segment included HEV, PHEV and EV designs. The end result being a list of several packages for each of 19 different vehicle types from which a manufacturer could choose in order to modify its fleet such that compliance could be achieved.

Before using these technology packages as inputs to the OMEGA model, the cost and effectiveness for the package was calculated. The first step—mentioned briefly above—was to apply the scaling class for each technology package and vehicle type combination. The scaling class establishes the cost and effectiveness for each technology with respect to the vehicle size or type. The Large Car class was provided as an example in Section III.D.2. Additional classes include Small Car, Minivan, Small Truck, and Large Truck and each of the 19 vehicle types was mapped into one of those five classes. In the next step, the cost for a particular technology package, was determined as the sum of the costs of the applied technologies. The final step, determination of effectiveness, requires greater care due to the synergistic effects mentioned in Section III.D.2. This step is described immediately below.

Usually, the benefits of the engine and transmission technologies can be combined multiplicatively. For example, if an engine technology reduces CO2 emissions by five percent and a transmission technology reduces CO2 emissions by four percent, the benefit of applying both technologies is 8.8 percent (100%−(100%−4%) * (100%−5%)). In some cases, however, the benefit of the transmission-related technologies overlaps with many of the engine technologies. This occurs because the primary goal of most of the transmission technologies is to shift operation of the engine to more efficient locations on the engine map. Some of the engine technologies have the same goal, such as cylinder deactivation. In order to account for this overlap and avoid over-estimating emissions reduction effectiveness, EPA has developed a set of adjustment factors associated with specific pairs of engine and transmission technologies.

The various transmission technologies are generally mutually exclusive. As such, the effectiveness of each transmission technology generally supersedes each other. For example, the 9.5-14.5 percent reduction in CO2 emissions associated with the automated manual transmission includes the 4.5-6.5 percent benefit of a 6-speed automatic transmission. Exceptions are aggressive shift logic and early torque converter lock-up. The former can be applied to any vehicle and the latter can be applied to any vehicle with an automatic transmission.

EPA has chosen to use an engineering approach known as the lumped-parameter technique to determine these adjustment factors. The results from this approach were then applied directly to the vehicle packages. The lumped-parameter technique is well documented in the literature, and the specific approach developed by EPA is detailed in Chapter 3 of the Draft Joint TSD.

Table III.D.3-1 presents several examples of the reduction in the effectiveness of technology pairs. A complete list and detailed discussion of these synergies is presented in Chapter 3 of the Draft Joint TSD.

Table III.D.3-1—Reduction in Effectiveness for Selected Technology Pairs

Engine technologyTransmission technologyReduction in combined effectiveness (percent)
Intake cam phasing5 speed automatic0.5
Coupled cam phasing5 speed automatic0.5
Coupled cam phasingAggressive shift logic0.5
Cylinder deactivation5 speed automatic1.0
Cylinder deactivationAggressive shift logic0.5

Table III.D.3-2 presents several examples of the CO2-reducing technology vehicle packages used in the OMEGA model for the large car class. Similar packages were generated for each of the 19 vehicle types and the costs and effectiveness estimates for each of those packages are discussed in detail in Chapter 3 of the Draft Joint TSD.Start Printed Page 49545

Table III.D.3-2—CO2 Reducing Technology Vehicle Packages for a Large Car Effectiveness and Costs in 2016

[Costs in 2007 dollars]

Engine technologyTransmission technologyAdditional technologyCO2 reductionPackage cost
3.3L V64 speed automaticNoneBaseline
3.0L V6 + GDI + CCP6 speed automatic3% Mass Reduction17.9%$1,022
3.0L V6 + GDI + CCP + Deac6 speed automatic5% Mass Reduction20.61,280
3.0L V6 + GDI + CCP + Deac6 speed DCT10% Mass Reduction Start-Stop34.22,108
2.2L I4 + GDI + Turbo + DCP6 speed DCT10% Mass Reduction Start-Stop34.32,245

4. Manufacturers' Application of Technology

Vehicle manufacturers often introduce major product changes together, as a package. In this manner the manufacturers can optimize their available resources, including engineering, development, manufacturing and marketing activities to create a product with multiple new features. In addition, manufacturers recognize that a vehicle will need to remain competitive over its intended life, meet future regulatory requirements, and contribute to a manufacturer's CAFE requirements. Furthermore, automotive manufacturers are largely focused on creating vehicle platforms to limit the development of entirely new vehicles and to realize economies of scale with regard to variable cost. In very limited cases, manufacturers may implement an individual technology outside of a vehicle's redesign cycle. In following with these industry practices, EPA has created a set of vehicle technology packages that represent the entire light duty fleet.

EPA has historically allowed manufacturers of new vehicles or nonroad equipment to phase in available emission control technology over a number of years. Examples of this are EPA's Tier 2 program for cars and light trucks and its 2007 and later PM and NOX emission standards for heavy-duty vehicles. In both of these rules, the major modifications expected from the rules were the addition of exhaust aftertreatment control technologies. Some changes to the engine were expected as well, but these were not expected to affect engine size, packaging or performance. The CO2 reduction technologies described above potentially involve much more significant changes to car and light truck designs. Many of the engine technologies involve changes to the engine block and heads. The transmission technologies could change the size and shape of the transmission and thus, packaging. Improvements to aerodynamic drag could involve body design and therefore, the dies used to produce body panels. Changes of this sort potentially involve new capital investment and the obsolescence of existing investment.

At the same time, vehicle designs are not static, but change in major ways periodically. The manufacturers' product plans indicate that vehicles are usually redesigned every 5 years on average. Vehicles also tend to receive a more modest “refresh” between major redesigns, as discussed above. Because manufacturers are already changing their tooling, equipment and designs at these times, further changes to vehicle design at these times involve a minimum of stranded capital equipment. Thus, the timing of any major technological changes is projected to coincide with changes that manufacturers would already tend to be making to their vehicles. This approach effectively avoids the need to quantify any costs associated with discarding equipment, tooling, emission and safety certification, etc. when CO2-reducing equipment is incorporated into a vehicle.

This proposed rule affects five years of vehicle production, model years 2012-2016. Given the now-typical five-year redesign cycle, nearly all of a manufacturer's vehicles will be redesigned over this period. However, this assumes that a manufacturer has sufficient lead time to redesign the first model year affected by this proposed rule with the requirements of this proposed rule in mind. In fact, the lead time available for model year 2012 is relatively short. The time between a likely final rule and the start of 2013 model year production is likely to be just over two years. At the same time, the manufacturer product plans indicate that they are planning on introducing many of the technologies projected to be required by this proposed rule in both 2012 and 2013. In order to account for the relatively short lead time available prior to the 2012 and 2013 model years, albeit mitigated by their existing plans, EPA projects that only 85 percent of each manufacturer's sales will be able to be redesigned with major CO2 emission-reducing technologies by the 2016 model year. Less intrusive technologies can be introduced into essentially all a manufacturer's sales. This resulted in three levels of technology penetration caps, by manufacturer. Common technologies (e.g., low friction lubes, aerodynamic improvements) had a penetration cap of 100%. More advanced powertrain technologies (e.g., stoichiometric GDI, turbocharging) had a penetration cap of 85%. The most advanced technologies considered in this analysis (e.g., diesel engines, as well as IMA, powersplit and 2-mode hybrids) had a 15% penetration cap.

5. How Is EPA Projecting That a Manufacturer Would Decide Between Options To Improve CO2 Performance To Meet a Fleet Average Standard?

There are many ways for a manufacturer to reduce CO2-emissions from its vehicles. A manufacturer can choose from a myriad of CO2 reducing technologies and can apply one or more of these technologies to some or all of its vehicles. Thus, for a variety of levels of CO2 emission control, there are an almost infinite number of technology combinations which produce the desired CO2 reduction. EPA has created a new vehicle model, the Optimization Model for Emissions of Greenhouse gases from Automobiles (OMEGA) in order to make a reasonable estimate of how manufacturers will add technologies to vehicles in order to meet a fleet-wide CO2 emissions level. EPA has described OMEGA's specific methodologies and algorithms in a memo to the docket for this rulemaking (Docket EPA-HQ-OAR-2009-0472).

The OMEGA model utilizes four basic sets of input data. The first is a description of the vehicle fleet. The key pieces of data required for each vehicle are its manufacturer, CO2 emission level, fuel type, projected sales and footprint. The model also requires that Start Printed Page 49546each vehicle be assigned to one of the 19 vehicle types, which tells the model which set of technologies can be applied to that vehicle. (For a description of how the 19 vehicle types were created, reference Section III.D.3.) In addition, the degree to which each vehicle already reflects the effectiveness and cost of each available technology must also be input. This avoids the situation, for example, where the model might try to add a basic engine improvement to a current hybrid vehicle. Except for this type of information, the development of the required data regarding the reference fleet was described in Section III.D.1 above and in Chapter 1 of the Draft Joint TSD.

The second type of input data used by the model is a description of the technologies available to manufacturers, primarily their cost and effectiveness. Note that the five vehicle classes are not explicitly used by the model, rather the costs and effectiveness associated with each vehicle package is based on the associated class. This information was described in Sections III.D.2 and III.D.3 above as well as Chapter 3 of the Draft Joint TSD. In all cases, the order of the technologies or technology packages for a particular vehicle type is determined by the model user prior to running the model. Several criteria can be used to develop a reasonable ordering of technologies or packages. These are described in the Draft Joint TSD.

The third type of input data describes vehicle operational data, such as annual scrap rates and mileage accumulation rates, and economic data, such as fuel prices and discount rates. These estimates are described in Section II.F above, Section III.H below and Chapter 4 of the Draft Joint TSD.

The fourth type of data describes the CO2 emission standards being modeled. These include the CO2 emission equivalents of the 2011 MY CAFE standards and the proposed CO2 standards for 2016. As described in more detail below, the application of A/C technology is evaluated in a separate analysis from those technologies which impact CO2 emissions over the 2-cycle test procedure. Thus, for the percent of vehicles that are projected to achieve A/C related reductions, the CO2 credit associated with the projected use of improved A/C systems is used to adjust the proposed CO2 standard which would be applicable to each manufacturer to develop a target for CO2 emissions over the 2-cycle test which is assessed in our OMEGA modeling.

As mentioned above for the market data input file utilized by OMEGA, which characterizes the vehicle fleet, our modeling must and does account for the fact that many 2008 MY vehicles are already equipped with one or more of the technologies discussed in Section III.D.2 above. Because of the choice to apply technologies in packages, and 2008 vehicles are equipped with individual technologies in a wide variety of combinations, accounting for the presence of specific technologies in terms of their proportion of package cost and CO2 effectiveness requires careful, detailed analysis. The first step in this analysis is to develop a list of individual technologies which are either contained in each technology package, or would supplant the addition of the relevant portion of each technology package. An example would be a 2008 MY vehicle equipped with variable valve timing and a 6-speed automatic transmission. The cost and effectiveness of variable valve timing would be considered to be already present for any technology packages which included the addition of variable valve timing or technologies which went beyond this technology in terms of engine related CO2 control efficiency. An example of a technology which supplants several technologies would be a 2008 MY vehicle which was equipped with a diesel engine. The effectiveness of this technology would be considered to be present for technology packages which included improvements to a gasoline engine, since the resultant gasoline engines have a lower CO2 control efficiency than the diesel engine. However, if these packages which included improvements also included improvements unrelated to the engine, like transmission improvements, only the engine related portion of the package already present on the vehicle would be considered. The transmission related portion of the package's cost and effectiveness would be allowed to be applied in order to comply with future CO2 emission standards.

The second step in this process is to determine the total cost and CO2 effectiveness of the technologies already present and relevant to each available package. Determining the total cost usually simply involves adding up the costs of the individual technologies present. In order to determine the total effectiveness of the technologies already present on each vehicle, the lumped parameter model described above is used. Because the specific technologies present on each 2008 vehicle are known, the applicable synergies and dis-synergies can be fully accounted for.

The third step in this process is to divide the total cost and CO2 effectiveness values determined in step 2 by the total cost and CO2 effectiveness of the relevant technology packages. These fractions are capped at a value of 1.0 or less, since a value of 1.0 causes the OMEGA model to not change either the cost or CO2 emissions of a vehicle when that technology package is added.

As described in Section III.D.3 above, technology packages are applied to groups of vehicles which generally represent a single vehicle platform and which are equipped with a single engine size (e.g., compact cars with four cylinder engine produced by Ford). These groupings are described in Table III.D.1-1. Thus, the fourth step is to combine the fractions of the cost and effectiveness of each technology package already present on the individual 2008 vehicles models for each vehicle grouping. For cost, percentages of each package already present are combined using a simple sales-weighting procedure, since the cost of each package is the same for each vehicle in a grouping. For effectiveness, the individual percentages are combined by weighting them by both sales and base CO2 emission level. This appropriately weights vehicle models with either higher sales or CO2 emissions within a grouping. Once again, this process prevents the model from adding technology which is already present on vehicles, and thus ensures that the model does not double count technology effectiveness and cost associated with complying with the 2011 MY CAFE standards and the proposed CO2 standards.

Conceptually, the OMEGA model begins by determining the specific CO2 emission standard applicable for each manufacturer and its vehicle class (i.e., car or truck). Since the proposed rule allows for averaging across a manufacturer's cars and trucks, the model determines the CO2 emission standard applicable to each manufacturer's car and truck sales from the two sets of coefficients describing the piecewise linear standard functions for cars and trucks in the inputs, and creates a combined car-truck standard. This combined standard considers the difference in lifetime VMT of cars and trucks, as indicated in the proposed regulations which would govern credit trading between these two vehicle classes. For both the 2011 CAFE and 2016 CO2 standards, these standards are a function of each manufacturer's sales of cars and trucks and their footprint values. When evaluating the 2011 MY CAFE standards, the car-truck trading was limited to 1.2 mpg. When evaluating the proposed CO2 standards, the OMEGA model was run only for MY 2016. OMEGA is designed to evaluate technology addition over a complete Start Printed Page 49547redesign cycle and 2016 represents the final year of a redesign cycle starting with the first year of the proposed CO2 standards, 2012. Estimates of the technology and cost for the interim model years are developed from the model projections made for 2016. This process is discussed in Chapter 6 of EPA's DRIA to this proposed rule. When evaluating the 2016 standards using the OMEGA model, the proposed CO2 standard which manufacturers would otherwise have to meet to account for the anticipated level of A/C credits generated was adjusted. On an industry wide basis, the projection shows that manufacturers would generate 11 g/mi of A/C credit in 2016. Thus, the 2016 CO2 target for the fleet evaluated using OMEGA was 261 g/mi instead of 250 g/mi.

The cost of the improved A/C systems required to generate the 11 g/mi credit was estimated separately. This is consistent with our proposed A/C credit procedures, which would grant manufacturers A/C credits based on their total use of improved A/C systems, and not on the increased use of such systems relative to some base model year fleet. Some manufacturers may already be using improved A/C technology. However, this represents a small fraction of current vehicle sales. To the degree that such systems are already being used, EPA is over-estimating both the cost and benefit of the addition of improved A/C technology relative to the true reference fleet to a small degree.

The model then works with one manufacturer at a time to add technologies until that manufacturer meets its applicable standard. The OMEGA model can utilize several approaches to determining the order in which vehicles receive technologies. For this analysis, EPA used a “manufacturer-based net cost-effectiveness factor” to rank the technology packages in the order in which a manufacturer would likely apply them. Conceptually, this approach estimates the cost of adding the technology from the manufacturer's perspective and divides it by the mass of CO2 the technology will reduce. One component of the cost of adding a technology is its production cost, as discussed above. However, it is expected that new vehicle purchasers value improved fuel economy since it reduces the cost of operating the vehicle. Typical vehicle purchasers are assumed to value the fuel savings accrued over the period of time which they will own the vehicle, which is estimated to be roughly five years. It is also assumed that consumers discount these savings at the same rate as that used in the rest of the analysis (3 or 7 percent). Any residual value of the additional technology which might remain when the vehicle is sold is not considered. The CO2 emission reduction is the change in CO2 emissions multiplied by the percentage of vehicles surviving after each year of use multiplied by the annual miles travelled by age, again discounted to the year of vehicle purchase.

Given this definition, the higher priority technologies are those with the lowest manufacturer-based net cost-effectiveness value (relatively low technology cost or high fuel savings leads to lower values). Because the order of technology application is set for each vehicle, the model uses the manufacturer-based net cost-effectiveness primarily to decide which vehicle receives the next technology addition. Initially, technology package #1 is the only one available to any particular vehicle. However, as soon as a vehicle receives technology package #1, the model considers the manufacturer-based net cost-effectiveness of technology package #2 for that vehicle and so on. In general terms, the equation describing the calculation of manufacturer-based cost effectiveness is as follows:

Where:

ManufCostEff = Manufacturer-Based Cost Effectiveness (in dollars per kilogram CO2),

TechCost = Marked up cost of the technology (dollars),

PP = Payback period, or the number of years of vehicle use over which consumers value fuel savings when evaluating the value of a new vehicle at time of purchase,

dFSi = Difference in fuel consumption due to the addition of technology times fuel price in year i,

dCO2 = Difference in CO2 emissions due to the addition of technology

VMTi = product of annual VMT for a vehicle of age i and the percentage of vehicles of age i still on the road,

1- Gap = Ratio of onroad fuel economy to two-cycle (FTP/HFET) fuel economy

EPA describes the technology ranking methodology and manufacturer-based cost effectiveness metric in greater detail in a technical memo to the Docket for this proposed rule (Docket EPA-HQ-OAR-2009-0472).

When calculating the fuel savings, the full retail price of fuel, including taxes is used. While taxes are not generally included when calculating the cost or benefits of a regulation, the net cost component of the manufacturer-based net cost-effectiveness equation is not a measure of the social cost of this proposal, but a measure of the private cost, (i.e., a measure of the vehicle purchaser's willingness to pay more for a vehicle with higher fuel efficiency). Since vehicle operators pay the full price of fuel, including taxes, they value fuel costs or savings at this level, and the manufacturers will consider this when choosing among the technology options.

This definition of manufacturer-based net cost-effectiveness ignores any change in the residual value of the vehicle due to the additional technology when the vehicle is five years old. As discussed in Chapter 1of the DRIA, based on historic used car pricing, applicable sales taxes, and insurance, vehicles are worth roughly 23% of their original cost after five years, discounted to year of vehicle purchase at 7% per annum. It is reasonable to estimate that the added technology to improve CO2 level and fuel economy would retain this same percentage of value when the vehicle is five years old. However, it is less clear whether first purchasers, and thus, manufacturers would consider this residual value when ranking technologies and making vehicle purchases, respectively. For this proposal, this factor was not included in our determination of manufacturer-based net cost-effectiveness in the analyses performed in support of this proposed rule. Comments are requested on the benefit of including an increase Start Printed Page 49548in the vehicle's residual value after five years in the calculation of effective cost.

The values of manufacturer-based net cost-effectiveness for specific technologies will vary from vehicle to vehicle, often substantially. This occurs for three reasons. First, both the cost and fuel-saving component cost, ownership fuel-savings, and lifetime CO2 effectiveness of a specific technology all vary by the type of vehicle or engine to which it is being applied (e.g., small car versus large truck, or 4-cylinder versus 8-cylinder engine). Second, the effectiveness of a specific technology often depends on the presence of other technologies already being used on the vehicle (i.e., the dis-synergies. Third, the absolute fuel savings and CO2 reduction of a percentage an incremental reduction in fuel consumption depends on the CO2 level of the vehicle prior to adding the technology. Chapter 1 of the DRIA of this proposed rule contains further detail on the values of manufacturer-based net cost-effectiveness for the various technology packages.

EPA requests comment on the use of manufacturer-based net cost-effectiveness to rank CO2 emission reduction technologies in the context of evaluating alternative fleet average standards for this rule. EPA believes this manufacturer-based net cost-effectiveness metric is appropriate for ranking technology in this proposed program because it considers effectiveness values that may vary widely among technology packages when determining the order of technology addition. Comments are requested on this option and on any others thought to be appropriate.

6. Why Are the Proposed CO2 Standards Feasible?

The finding that the proposed standards would be technically feasible is based primarily on two factors. One is the level of technology needed to meet the proposed standards. The other is the cost of this technology. The focus is on the proposed standards for 2016, as this is the most stringent standard and requires the most extensive use of technology.

With respect to the level of technology required to meet the standards, EPA established technology penetration caps. As described in Section III.D.4, EPA used two constraints to limit the model's application of technology by manufacturer. The first was the application of common fuel economy enablers such as low rolling resistance tires and transmission logic changes. These were allowed to be used on all vehicles and hence had no penetration cap. The second constraint was applied to most other technologies and limited their application to 85% with the exception of the most advanced technologies (e.g., powersplit and 2-mode hybrids) whose application was limited to 15%.

EPA used the OMEGA model to project the technology (and resultant cost) required for manufacturers to meet the current 2011 MY CAFE standards and the proposed 2016 MY CO2 emission standards. Both sets of standards were evaluated using the OMEGA model. The 2011 MY CAFE standards were applied to cars and trucks separately with the transfer of credits from one category to the other allowed up to an increase in fuel economy of 1.0 mpg. Chrysler, Ford and General Motors are assumed to utilize FFV credits up to the maximum of 1.2 mpg for both their car and truck sales. Nissan is assumed to utilize FFV credits up to the maximum of 1.2 mpg for only their truck sales. The use of any banked credits from previous model years was not considered. The modification of the reference fleet to comply with the 2011 CAFE standards through the application of technology by the OMEGA model is the final step in creating the final reference fleet. This final reference fleet forms the basis for comparison for the model year 2016 standards.

Table III.D.6-1 shows the usage level of selected technologies in the 2008 vehicles coupled with 2016 sales prior to projecting their compliance with the 2011 MY CAFE standards. These technologies include converting port fuel-injected gasoline engines to direct injection (GDI), adding the ability to deactivate certain engine cylinders during low load operation (Deac), adding a turbocharger and downsizing the engine (Turbo), increasing the number of transmission speeds to 6 or, converting automatic transmissions to dual-clutch automated manual transmissions (Dual-Clutch Trans), adding 42 volt start-stop capability (Start-Stop), and converting a vehicle to a intermediate or strong hybrid design. This last category includes three current hybrid designs: integrated motor assist (IMA), power-split (PS) and 2-mode hybrids.

Table III.D.6-1—Penetration of Technology in 2008 Vehicles With 2016 Sales: Cars and Trucks

[Percent of sales]

GDIGDI+ deacGDI+ turboDiesel6 Speed or CV transDual clutch transStart-stopHybrid
BMW6.70.00.00.098.80.80.00.1
Chrysler0.00.00.00.027.90.00.00.0
Daimler6.20.00.06.274.711.40.00.0
Ford0.60.00.00.028.10.00.00.0
General Motors3.30.00.00.013.70.00.10.1
Honda1.20.00.00.04.20.00.02.1
Hyundai0.00.00.00.04.90.00.00.0
Kia0.00.00.00.00.90.00.00.0
Mazda11.80.00.00.037.10.00.00.0
Mitsubishi0.00.00.00.076.10.00.00.1
Nissan17.70.00.00.033.30.00.00.0
Porsche0.00.00.00.03.90.00.00.0
Subaru0.00.00.00.029.00.00.00.0
Suzuki0.00.00.00.0100.00.00.00.0
Tata0.00.00.00.00.00.00.00.0
Toyota7.50.00.00.030.60.00.012.8
Volkswagen52.20.00.00.182.810.90.00.0
Overall6.40.00.00.127.10.60.02.8
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As can be seen, all of these technologies except for the direct injection gasoline engines with either cylinder deactivation or turbocharging and downsizing, were already being used on some 2008 MY vehicles. High speed transmissions were the most prevalent, with some manufacturers (e.g., BMW, Suzuki) using them on essentially all of their vehicles. Both Daimler and VW equip many of their vehicles with automated manual transmissions, while VW makes extensive use of direct injection gasoline engine technology. Toyota has converted a significant percentage of its 2008 vehicles to strong hybrid design.

Table III.D.6-2 shows the usage level of the same technologies in the reference case fleet after projecting their compliance with the 2011 MY CAFE standards. Except for mass reduction, the figures shown represent the percentages of each manufacturer's sales which are projected to be equipped with the indicated technology. For mass reduction, the overall mass reduction projected for that manufacturer's sales is shown. The last row in Table III.D.6-2 shows the increase in projected technology penetration due to compliance with the 2011 MY CAFE standards. The results of DOT's Volpe Modeling were used to project that all manufacturers would comply with the 2011 MY standards in 2016 without the need to pay fines, with one exception. This exception was Porsche in the case of their car fleet. When projecting Porsche's compliance with the 2011 MY CAFE standard for cars, the car fleet was assumed to achieve a CO2 emission level of 293.2 g/mi instead of the required 285.2 g/mi level (30.3 mpg instead of 31.2 mpg).

Table III.D.6-2—Penetration of Technology Under 2011 MY CAFE Standards in 2016 Sales: Cars and Trucks

[Percent of sales]

GDIGDI+ deacGDI+ turbo6 Speed or CV transDual clutch transStart-stopHybridMass reduction (percent)
BMW7.311.10.086.311.111.10.10.5
Chrysler0.00.00.027.90.00.00.00.0
Daimler16.410.314.345.836.024.60.00.9
Ford0.60.00.028.10.00.00.00.0
General Motors3.30.00.013.70.00.10.10.0
Honda1.20.00.04.20.00.02.10.0
Hyundai0.00.00.04.90.00.00.00.0
Kia0.00.00.00.90.00.00.00.0
Mazda11.80.00.037.10.00.00.00.0
Mitsubishi0.02.20.076.02.22.20.10.0
Nissan17.70.00.033.30.00.00.00.0
Porsche0.025.023.20.048.237.10.01.2
Subaru0.00.00.029.00.00.00.00.0
Suzuki4.50.00.0100.00.00.00.00.0
Tata14.560.90.014.560.960.90.02.6
Toyota7.50.00.030.60.00.012.80.0
Volkswagen51.26.911.860.829.618.70.00.3
Overall6.71.20.825.42.62.02.80.1
Increase over 2008 MY0.31.20.8−1.72.02.00.00.0

As can be seen, the 2011 MY CAFE standards, when evaluated on an industry wide basis, require only a modest increase in the use of these technologies. Higher speed automatic transmission use actually decreases due to conversion of these units to more efficient designs such as automated manual transmissions and hybrids. However, the impact of the 2011 MY CAFE standards is much greater on selected manufacturers, particularly BMW, Daimler, Porsche, Tata (Jaguar/Land Rover) and VW. All of these manufacturers are projected to increase their use of advanced direct injection gasoline engine technology, advanced transmission technology, and start-stop technology. It should be noted that these manufacturers have traditionally paid fines under the CAFE program. However, with higher fuel prices and the lead-time available by 2016, these manufacturers would likely find it in their best interest to improve their fuel economy levels instead of continuing to pay fines (again with the exception of Porsche cars). While not shown, no gasoline engines were projected to be converted to diesel technology.

This 2008 baseline fleet, modified to meet 2011 standards, becomes our “reference” case. This is the fleet by which the control program (or 2016 rule) will be compared. Thus, it is also the fleet that would be assumed to exist in the absence of this rule. No air conditioning improvements are assumed for model year 2011 vehicles. The average CO2 emission levels of this reference fleet vary slightly from 2012-2016 due to small changes in the vehicle sales by market segments and manufacturer. CO2 emissions from cars range from 282-284 g/mi, while those from trucks range from 382-384 g/mi. CO2 emissions from the combined fleet range from 316-320. These estimates are described in greater detail in Section 5.3.2.2 of the DRIA.

Conceptually, both EPA and NHTSA perform the same projection in order to develop their respective reference fleets. However, because the two agencies use two different models to modify the baseline fleet to meet the 2011 CAFE standards, the technology added will be slightly different. The differences, however, are small since most manufacturers do not require a lot of additional technology to meet the 2011 standards.

EPA then used the OMEGA model once again to project the level of technology needed to meet the proposed 2016 CO2 emission standards. Using the results of the OMEGA model, every manufacturer was projected to be able to meet the proposed 2016 standards with the technology described above except for four: BMW, VW, Porsche and Tata due to the OMEGA cap on technology penetration by manufacturer. For these manufacturers, the results presented below are those with the fully allowable Start Printed Page 49550application of technology and not for the technology projected to enable compliance with the proposed standards. Described below are a number of potential feasible solutions for how these companies can achieve compliance. The overall level of technology needed to meet the proposed 2016 standards is shown in Table III.D.6-3. As discussed above, all manufacturers are projected to improve the air conditioning systems on 85% of their 2016 sales.

Table III.D.6-3—Penetration of Technology for Proposed 2016 CO2 Standards: Cars and Trucks

[Percent of sales]

GDIGDI+ deacGDI+ turbo6 Speed auto transDual clutch transStart-stopHybridMass reduction
BMW43547157171145
Chrysler5128337515106
Daimler34439117372135
Ford29391319676706
General Motors3426713555505
Honda241210222222
Hyundai283143434303
Kia37057353503
Mazda5421631434304
Mitsubishi652722666606
Nissan2926534575615
Porsche73649107070154
Subaru464140645104
Suzuki66589696904
Tata4810147070156
Toyota3720303316132
Volkswagen92658127270154
Overall30181019494544
Increase over 2011 CAFE24179−7464314

As can be seen, the overall average reduction in vehicle weight is projected to be 4%. This reduction varies across the two vehicle classes and vehicle base weight. For cars below 2,950 pounds curb weight, the average reduction is 2.3% (62 pounds), while the average was 4.4% (154 pounds) for cars above 2,950 curb weight. For trucks below 3,850 pounds curb weight, the average reduction is 3.5% (119 pounds), while it was 4.5% (215 pounds) for trucks above 3,850 curb weight. Splitting trucks at a higher weight, for trucks below 5,000 pounds curb weight, the average reduction is 3.3% (140 pounds), while it was 6.7% (352 pounds) for trucks above 5,000 curb weight.

The levels of requisite technologies differ significantly across the various manufacturers. Therefore, several analyses were performed to ascertain the cause. Because the baseline case fleet consists of 2008 MY vehicle designs, these analyses were focused on these vehicles, their technology and their CO2 emission levels.

Comparing CO2 emissions across manufacturers is not a simple task. In addition to widely varying vehicle styles, designs, and sizes, manufacturers have implemented fuel efficient technologies to varying degrees, as indicated in Table III.D.6-1. The projected levels of requisite technology to enable compliance with the proposed 2016 standards shown in Table III.D.6-3 account for two of the major factors which can affect CO2 emissions: (1) Level of technology already being utilized and (2) vehicle size, as represented by footprint.

For example, the fuel economy of a manufacturer's 2008 vehicles may be relatively high because of the use of advanced technology. This is the case with Toyota's high sales of their Prius hybrid. However, the presence of this technology in a 2008 vehicle eliminates the ability to significantly reduce CO2 further through the use of this technology. In the extreme, if a manufacturer were to hybridize a high level of its sales in 2016, it doesn't matter whether this technology was present in 2008 or whether it would be added in order to comply with the standards. The final level of hybrid technology would be the same. Thus, the level at which technology is present in 2008 vehicles does not explain the difference in requisite technology levels shown in Table III.D.6-3.

Similarly, the proposed CO2 emission standards adjust the required CO2 level according to a vehicle's footprint, requiring lower absolute emission levels from smaller vehicles. Thus, just because a manufacturer produces larger vehicles than another manufacturer does not explain the differences seen in Table III.D.6-3.

In order to remove these two factors from our comparison, the EPA lumped parameter model described above was used to estimate the degree to which technology present on each 2008 MY vehicle in our reference fleet was improving fuel efficiency. The effect of this technology was removed and each vehicle's CO2 emissions were estimated as if it utilized no additional fuel efficiency technology beyond the baseline. The differences in vehicle size were accounted for by determining the difference between the sales-weighted average of each manufacturer's “no technology” CO2 levels to their required CO2 emission level under the proposed 2016 standards. The industry-wide difference was subtracted from each manufacturer's value to highlight which manufacturers had lower and higher than average “no technology” emissions. The results are shown in Figure III.D.6-1.

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As can be seen in Table III.D.6-3 the manufacturers projected to require the greatest levels of technology also show the highest offsets relative to the industry. The greatest offset shown in Figure III.D.6-1 is for Tata's trucks (Land Rover). These vehicles are estimated to have 100 g/mi greater CO2 emissions than the average 2008 MY truck after accounting for differences in the use of fuel saving technology and footprint. The lowest adjustment is for Subaru's trucks, which have 50 g/mi CO2 lower emissions than the average truck.

While this comparison confirms the differences in the technology penetrations shown in Table III.D.6-3, it does not yet explain why these differences exist. Two well known factors affecting vehicle fuel efficiency are vehicle weight and performance. The footprint-based form of the proposed CO2 standard accounts for most of the difference in vehicle weight seen in the 2008 MY fleet. However, even at the same footprint, vehicles can have varying weights. Higher performing vehicles also tend to have higher CO2 emissions over the two-cycle test procedure. So manufacturers with higher average performance levels will tend to have higher average CO2 emissions for any given footprint.

The impact of these two factors on each manufacturer's “no technology” CO2 emissions was estimated. First, the “no technology” CO2 emissions levels were statistically analyzed to determine the average impact of weight and the ratio of horsepower to weight on CO2 emissions. Both factors were found to be statistically significant at the 95 percent confidence level. Together, they explained over 80 percent of the variability in vehicles' CO2 emissions for cars and over 70 percent for trucks. These relationships were then used to adjust each vehicle's “no technology” CO2 emissions to the average weight for its footprint value and to the average horsepower to weight ratio of either the car or truck fleet. The comparison was repeated as shown in Figure III.D.6-1. The results are shown in Figure III.D.6-2.

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First, note that the scale in Figure III.D.6-2 is much smaller by a factor of 3 than that in Figure III.D.6-1. In other words, accounting for differences in vehicle weight (at constant footprint) and performance dramatically reduces the differences in various manufacturers' CO2 emissions. Most of the manufacturers with high offsets in Figure III.D.6-1 now show low or negative offsets. For example, BMW's and VW's trucks show very low CO2 emissions. Tata's emissions are very close to the industry average. Daimler's vehicles are no more than 10 g/mi above the average for the industry. This analysis indicates that the primary reasons for the differences in technology penetrations shown for the various manufacturers in Table III.D.6-3 are weight and performance. EPA has not determined why some manufacturers' vehicle weight is relatively high for its footprint value, or whether this weight provides additional utility for the consumer. Performance is more Start Printed Page 49554straightforward. Some consumers desire high performance and some manufacturers orient their sales towards these consumers. However, the cost in terms of CO2 emissions is clear. Producing relatively heavy or high performance vehicles increases CO2 emissions and will require greater levels of technology in order to meet the proposed CO2 standards.

As can be seen from Table III.D.6-3 above, widespread use of several technologies is projected due to the proposed standards. The vast majority of engines are projected to be converted to direct injection, with some of these engines including cylinder deactivation or turbocharging and downsizing. More than 60 percent of all transmissions are projected to be either high speed automatic transmissions or dual-clutch automated manual transmissions. More than one third of the fleet is projected to be equipped with 42 volt start-stop capability. This technology was not utilized in 2008 vehicles, but as discussed above, promises significant fuel efficiency improvement at a moderate cost.

EPA foresees no significant technical or engineering issues with the projected deployment of these technologies across the fleet, with their incorporation being folded into the vehicle redesign process. All of these technologies are commercially available now. The automotive industry has already begun to convert its port fuel-injected gasoline engines to direct injection. Cylinder deactivation and turbocharging technologies are already commercially available. As indicated in Table III.D.6-1, high speed transmissions are already widely used. However, while more common in Europe, automated manual transmissions are not currently used extensively in the U.S. Widespread use of this technology would require significant capital investment but does not present any significant technical or engineering issues. Start-stop systems also represent a significant challenge because of the complications involved in a changeover to a higher voltage electrical architecture. However, with appropriate capital investments (which are captured in the costs), these technology penetration rates are achievable within the timeframe of this rule. While most manufacturers have some plans for these systems, our projections indicate that their use may exceed 35 percent of sales, with some manufacturers requiring higher levels.

Most manufacturers would not have to hybridize any vehicles due to the proposed standards. The hybrids shown for Toyota are projected to be sold even in the absence of the proposed standards. However the relatively high hybrid penetrations (15%) projected for BMW, Daimler, Porsche, Tata and Volkswagen deserve further discussion. These manufacturers are all projected by the OMEGA model to utilize the maximum application of full hybrids allowed by our model in this time frame, which is 15 percent.

As discussed in the EPA DRIA, a 2016 technology penetration rate of 85% is projected for the vast majority of available technologies, however, for full hybrid systems the projection shows that given the available lead-time full hybrids can only be applied to approximately 15% of a manufacturer's fleet. This number of course can vary by manufacturer.

While the hybridization levels of BMW, Daimler, Porsche, Tata and Volkswagen are relatively high, the sales levels of these five manufacturers are relatively low. Thus, industry-wide, hybridization reaches only 8 percent, compared with 3 percent in the reference case. This 8 percent level is believed to be well within the capability of the hybrid component industry by 2016. Thus, the primary challenge for these five companies would be at the manufacturer level, redesigning a relatively large percentage of sales to include hybrid technology. The proposed TLAAS provisions will provide significant aid to these manufacturers in pre-2016 compliance, since all qualified companies are expected to be able to take advantage of these provisions. By 2016, it is likely that these manufacturers would also be able to change vehicle characteristics which currently cause their vehicles to emit much more CO2 than similar sized vehicles produced by other manufacturers. These factors may include changes in model mix, further lightweighting, downpowering, electric and/or plug-in hybrid vehicles, or downsizing (our current baseline fleet assumes very little change in footprint from 2012-2016), as well as technologies that may not be included in our packages. Also, companies may have technology penetration rates of less costly technologies (listed in the above tables) greater than 85%, and they may also be able to apply hybrid technology to more than 15 percent of their fleet (as the 15% for hybrid technology is an industry average). For example, a switch to a low GWP alternative refrigerant in a large fraction of a fleet can replace many other much more costly technologies, but this option is not captured in the modeling. In addition, these manufacturers can also take advantage of flexibilities, such as early credits for air conditioning and trading with other manufacturers. The EPA expects that there will be certain high volume manufacturers that will earn a significant amount of early GHG credits starting in 2009 and 2010 that will expire 5 years later, by 2014 and 2015, unused. The EPA believes that these manufacturers will be willing to sell these expiring credits to manufacturers with whom there is no direct competition. Furthermore, some of these manufacturers have also stated either publicly or in confidential discussions with EPA that they will be able to comply with 2016 standards. Because of the confidential nature of this information sharing, EPA is unable to capture these packages specifically in our modeling. The following companies have all submitted letters in support of the national program, including the 2016 MY levels discussed above: BMW, Chrysler, Daimler, Ford, GM, Honda, Mazda, Toyota, and Volkswagen. This supports the view that the emissions reductions needed to achieve the standards are technically and economically feasible for all these companies, and that EPA's projection of non-compliance for four of the companies is based on an inability of our model to fully account for the full flexibilities of the EPA program as well as the potentially unique technology approaches or new product offerings which these manufactures are likely to employ.

In addition, manufacturers do not need to apply technology exactly according to our projections. Our projections simply indicate one path which would achieve compliance. Those manufacturers whose vehicles are heavier and higher performing than average in particular have additional options to facilitate compliance and reduce their technological burden closer to the industry average. These options include decreasing the mass of the vehicles and/or decreasing the power output of the engines. Finally, EPA allows compliance to be shown through the use of emission credits obtained from other manufacturers. Especially for the lower volume sales of some manufacturers that could be one component of an effective compliance strategy, reducing the technology that needs to be employed on their vehicles.

For the vast majority of light-duty cars and trucks, manufacturers have available to them a range of technologies that are currently commercially available and can feasibly be employed in their vehicles by MY 2016. Our modeling projects widespread use of these technologies as a technologically feasible approach to complying with the proposed standards.Start Printed Page 49555

In sum, EPA believes that the emissions reductions called for by the proposed standards are technologically feasible, based on projections of widespread use of commercially available technology, as well as use by some manufacturers of other technology approaches and compliance flexibilities not fully reflected in our modeling.

EPA also projected the cost associated with these projections of technology penetration. Table III.D.6-4 shows the cost of technology in order for manufacturers to comply with the 2011 MY CAFE standards, as well as those associated with the proposed 2016 CO2 emission standards. The latter costs are incremental to those associated with the 2011 MY standards and also include $60 per vehicle, on average, for the cost of projected use of improved air-conditioning systems.[163]

Table III.D.6-4—Cost of Technology per Vehicle in 2016 ($2007)

2011 MY CAFE standardsProposed 2016 CO2 standards
CarsTrucksAllCarsTrucksAll
BMW$319$479$361$1,701$1,665$1,691
Chrysler7125591,3311,5051,408
Daimler4316324951,6311,3571,543
Ford282111091,4351,4851,457
General Motors28136739691,7821,311
Honda000606695633
Hyundai076147391,680907
Kia04887411,177812
Mazda0009461,030958
Mitsubishi963221231,0671,2631,090
Nissan01961,0131,1941,064
Porsche5351,0747061,5496661,268
Subaru64100779031,3291,057
Suzuki992311331,0931,2631,137
Tata6911,5741,1611,270674952
Toyota000600436546
Volkswagen2697583541,6269491,509
Overall47141789681,2141,051

As can be seen, the industry average cost of complying with the 2011 MY CAFE standards is quite low, $78 per vehicle. The range of costs across manufacturers is quite large, however. Honda, Mazda and Toyota are projected to face no cost, while Daimler, Porsche and Tata face costs of at least $495 per vehicle. As described above, these last three manufacturers face such high costs to meet even the 2011 MY CAFE standards due to both their vehicles' weight per unit footprint and performance. Also, these cost estimates apply to sales in the 2016 MY. These three manufacturers, as well as others like Volkswagen, may choose to pay CAFE fines prior to this or even in 2016.

As shown in the last row of Table III.D.6-4, the average cost of technology to meet the proposed 2016 standards for cars and trucks combined relative to the 2011 MY CAFE standards is $1051 per vehicle. The projection shows that the average cost for cars would be slightly lower than that for trucks. Toyota and Honda show projected costs significantly below the average, while BMW, Porsche, Tata and Volkswagen show significantly higher costs. On average, the $1051 per vehicle cost is significant, representing roughly 5% of the total cost of a new vehicle. However, as discussed below, the fuel savings associated with the proposed standards exceeds this cost significantly.

While the CO2 emission compliance modeling using the OMEGA model focused on the proposed 2016 MY standards, EPA believes that the proposed standards for 2012-2015 would also be feasible. As discussed above, EPA believes that manufacturers develop their vehicle designs with several model years in view. Generally, the technology estimated above for 2016 MY vehicles represents the technology which would be added to those vehicles which are being redesigned in 2012-2015. The proposed CO2 standards for 2012-2016 reduce CO2 emissions at a fairly steady rate. Thus, manufacturers which redesign their vehicles at a fairly steady rate will automatically comply with the interim standard as they plan for compliance in 2016.

Manufacturers which redesign much fewer than 20% of their sales in the early years of the proposed program would face a more difficult challenge, as simply implementing the “2016 MY” technology as vehicles are redesigned may not enable compliance in the early years. However, even in this case, manufacturers would have several options to enable compliance. One, they could utilize the proposed debit carry-forward provisions described above. This may be sufficient alone to enable compliance through the 2012-2016 MY time period, if their redesign schedule exceeds 20% per year prior to 2016. If not, at some point, the manufacturer might need to increase their use of technology beyond that projected above in order to generate the credits necessary to balance the accrued debits. For most manufacturers representing the vast majority of U.S. sales, this would simply mean extending the same technology to a greater percentage of sales. The added cost of this in the later years of the program would be balanced by lower costs in the earlier years. Two, the manufacturer could buy credits from another manufacturer. As indicated above, several manufacturers are projected to require less stringent technology than the average. These manufacturers would be in a position to provide credits at a reasonable technology cost. Thus, EPA believes the proposed standards for 2012-2016 would be feasible.

7. What Other Fleet-Wide CO2 Levels Were Considered?

Two alternative sets of CO2 standards were considered. One set would reduce Start Printed Page 49556CO2 emissions at a rate of 4 percent per year. The second set would reduce CO2 emissions at a rate of 6 percent per year. The analysis of these standards followed the exact same process as described above for the proposed standards. The only difference was the level of CO2 emission standards. The footprint-based standard coefficients of the car and truck curves for these two alternative control scenarios were discussed above. The resultant CO2 standards in 2016 for each manufacturer under these two alternative scenarios and under the proposal are shown in Table III.D.7-1.

Table III.D.7-1—Overall Average CO2 Emission Standards by Manufacturer in 2016

4% per yearProposed6% per year
BMW245241222
Chrysler266262241
Daimler257253233
Ford270266245
General Motors272268247
Honda243239219
Hyundai235231212
Kia237234215
Mazda231227208
Mitsubishi226223204
Nissan251247227
Porsche234230210
Subaru237233213
Suzuki227223203
Tata267263241
Toyota247243223
Volkswagen233230211
Overall254250230

Tables III.D.7-2 and III.D.7-3 show the technology penetration levels for the 4 percent per year and 6 percent per year standards in 2016.

Table III.D.7-2—Technology Penetration—4% per Year CO2 Standards in 2016: Cars and Trucks Combined

GDIGDI+ deacGDI+ turbo6 Speed auto transDual clutch transStart-stopHybridMass reduction (%)
BMW4%35%47%15%71%71%14%5
Chrysler4725333484805
Daimler34439117372135
Ford33321323616105
General Motors3325719484805
Honda20106191922
Hyundai272122393903
Kia31041343402
Mazda3421610434303
Mitsubishi652728606006
Nissan3422240515115
Porsche73649107070154
Subaru4641410544603
Suzuki725215636304
Tata4810147070156
Toyota252030335131
Volkswag