[Federal Register Volume 70, Number 167 (Tuesday, August 30, 2005)]
[Proposed Rules]
[Pages 51414-51466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-17006]
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Part II
Department of Transportation
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National Highway Traffic Safety Administration
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49 CFR Parts 523, 533, and 537
49 CFR Part 533
Light Trucks, Average Fuel Economy; Model Years 2008-2011; Proposed
Rules
Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 /
Proposed Rules
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Parts 523, 533 and 537
[Docket No. 2005-22223]
RIN 2127-AJ61
Average Fuel Economy Standards for Light Trucks; Model Years
2008-2011
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This notice proposes to reform the structure of the corporate
average fuel economy (CAFE) program for light trucks and proposes to
establish higher CAFE standards for model year (MY) 2008-2011 light
trucks. Reforming the CAFE program would enable it to achieve larger
fuel savings while enhancing safety and preventing adverse economic
consequences.
During a transition period of MYs 2008-2010, manufacturers may
comply with CAFE standards established under the reformed structure
(Reformed CAFE) or with standards established in the traditional way
(Unreformed CAFE). This will permit manufacturers to gain experience
with the Reformed CAFE standards. In MY 2011, all manufacturers would
be required to comply with a Reformed CAFE standard.
The reform is based on vehicle size. Under Reformed CAFE, fuel
economy standards are restructured so that they are based on a measure
of vehicle size called ``footprint,'' the product of multiplying a
vehicle's wheelbase by its track width. Vehicles would be divided into
footprint categories, each representing a different range of footprint.
A target level of average fuel economy is proposed for each footprint
category, with smaller footprint light trucks expected to achieve more
fuel economy and larger ones, less. Each manufacturer would still be
required to comply with a single overall average fuel economy level for
each model year of production. A particular manufacturer's compliance
obligation for a model year is calculated as the harmonic average of
the fuel economy targets in each size category, weighted by the
distribution of manufacturer's production volumes across the size
categories.
The proposed Unreformed CAFE standards are: 22.5 miles per gallon
(mpg) for MY 2008, 23.1 mpg for MY 2009, and 23.5 mpg for MY 2010. The
Reformed CAFE standards for those model years would be set at levels
intended to ensure that the industry-wide costs of the Reformed
standards are roughly equivalent to the industry-wide costs of the
Unreformed CAFE standards in those model years. For MY 2011, the
Reformed CAFE standard would be set at the level that maximizes net
benefits, accounting for unquantified benefits and costs. We believe
that all of the proposed standards would be set at the maximum feasible
level, while accounting for technological feasibility, economic
practicability and other relevant factors.
Since a manufacturer's compliance obligation for a model year under
Reformed CAFE depends in part on its actual production in that model
year, the obligation cannot be calculated with absolute precision until
the final production figures for that model year become known. However,
a manufacturer could calculate its obligation with a reasonably high
degree of accuracy in advance of that model year, based on its product
plans for the year. Prior to and during the model year, the
manufacturer would be able to track all of the key variables in the
formula used for calculating the obligation (e.g., distribution of
production among the categories and vehicle fuel economy). This notice
publishes estimates of the compliance obligations, by manufacturer, for
MYs 2008-2011 under Reformed CAFE, using the fuel economy targets
proposed by NHTSA and the product plans submitted to NHTSA by the
manufacturers in response to a request for product plans published in
December 2003.
This rulemaking is mandated by the Energy Policy and Conservation
Act (EPCA), which was enacted in the aftermath of the energy crisis
created by the oil embargo of 1973-74. The concerns about energy
security and the effects of energy prices and supply on national
economic well-being that led to the enactment of EPCA remain alive
today. Sustained growth in the demand for oil worldwide, coupled with
tight crude oil supplies, is the driving force behind the sharp price
increases seen over the past several years. Increasingly, the oil
consumed in the U.S. originates in countries with political and
economic situations that raise concerns about future oil supply and
prices.
We recognize that financial difficulties currently exist in the
motor vehicle industry and that a substantial number of job losses have
been announced recently at large full-line manufacturers. Accordingly,
we have carefully balanced the cost of the rule with the benefits of
conservation. We believe that, compared to Unreformed CAFE, Reformed
CAFE would enhance overall fuel savings while providing vehicle makers
the flexibility they need to respond to changing market conditions.
Reformed CAFE would also provide a more equitable regulatory framework
by creating a level-playing field for manufacturers, regardless of
whether they are full-line or limited-line manufacturers. We are
particularly encouraged that Reformed CAFE would reduce the adverse
safety risks generated by the Unreformed CAFE program. The transition
from the Unreformed to the Reformed system would begin soon, but ample
lead time is provided before Reformed CAFE takes full effect in MY
2011.
We recognize also that our proposals were derived from analyses of
information from a variety of sources, including the product plans
submitted by the manufacturers in early 2004. We fully anticipate that
the manufacturers will respond to this proposal by providing revised
plans that reflect events since then. We will evaluate the revised
plans, the public comments, and other information and analysis in
selecting the most appropriate standards for MYs 2008-2011.
DATES: Comments must be received on or before November 22, 2005. We
have provided more than the normal 60-day comment period because of the
complexity of this rulemaking. However, because of that complexity, the
necessity for ensuring sufficient time for careful analysis of the
public comments and other available information, and for meeting the
April 1, 2006 statutory deadline for issuing a final rule on the CAFE
standard for MY 2008, extensions of the comment due date will not be
possible. To ensure the agency's consideration of their comments, the
public should submit them to the agency not later than the comment due
date.
ADDRESSES: You may submit comments by any of the following methods:
Web site: http://dms.dot.gov. Follow the instructions for
submitting comments on the DOT electronic docket site.
Fax: 1-202-493-2251.
Mail: Docket Management Facility; U.S. Department of
Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401,
Washington, DC 20590-001.
Hand Delivery: Room PL-401 on the plaza level of the
Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9
a.m. and 5 p.m., Monday through Friday, except Federal Holidays.
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Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting
comments.
Instructions: All submissions must include the agency name and
docket number or Regulatory Identification Number (RIN) for this
rulemaking. For detailed instructions on submitting comments and
additional information on the rulemaking process, see the Request for
Comments heading of the Supplementary Information section of this
document. Note that all comments received will be posted without change
to http://dms.dot.gov, including any personal information provided.
Please see the Privacy Act heading under Rulemaking Analyses and
Notices.
Docket: For access to the docket to read background documents or
comments received, go to http://dms.dot.gov at any time or to Room PL-
401 on the plaza level of the Nassif Building, 400 Seventh Street, SW.,
Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays.
FOR FURTHER INFORMATION CONTACT: For technical issues, call Ken Katz,
Lead Engineer, Fuel Economy Division, Office of International Policy,
Fuel Economy, and Consumer Programs, at (202) 366-0846, facsimile (202)
493-2290, electronic mail [email protected]. For legal issues, call
Stephen Wood or Christopher Calamita of the Office of the Chief
Counsel, at (202) 366-2992, or e-mail them at [email protected] or
[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive summary
A. Our proposal
B. Energy demand and supply and the value of conservation
II. Background
A. 1974 DOT/EPA report to Congress on potential for motor
vehicle fuel economy improvements
B. Energy Policy and Conservation Act of 1975
C. 1979-2002 light truck standards
D. 2001 National Energy Policy
E. 2002 NAS study of CAFE reform
F. 2002 request for comments on NAS study
G. 2003 final rule establishing MY 2005-2007 light truck
standards
H. 2003 comprehensive plans for addressing vehicle rollover and
compatibility
I. 2003 ANPRM
1. Need for reform
2. Reform options
J. Recent developments
1. Factors underscoring need for reform
2. Reports updating fuel economy potential
III. The Unreformed CAFE proposal for MYs 2008-2010
A. Baseline for determining manufacturer capabilities in MYs
2008-2010
1. General Motors
2. Ford
3. DaimlerChrysler
4. Other manufacturers
B. Selection of proposed Unreformed CAFE standards--process for
determining maximum feasible levels
C. Technologically feasible additions to baseline
D. Economic practicability and other economic issues
1. Costs
2. Benefits
3. Comparison of estimated costs to estimated benefits
4. Uncertainty
IV. The Reformed CAFE proposal for MYs 2008-2011
A. Proposed approach to reform
1. Establishment of footprint categories
2. Targets
a. Overview of target selection process
b. Industry-wide considerations in selecting the targets
c. Relative position of the targets
d. Level of the targets
3. Standards and required CAFE levels for individual
manufacturers
4. Why this approach to reform and not another?
a. Step-function vs. continuous function
b. Categories and targets vs. classes and standards
c. Footprint vs. shadow or weight
d. Reformed standard vs. Reformed standard plus backstop
5. Benefits of reform
a. Increased energy savings
b. Reduced incentive to respond to the CAFE program in ways
harmful to safety
i. Reduces incentive to offer smaller vehicles and to reduce
vehicle size
ii. Effectively reduces the difference between car and light
truck CAFE standards
c. More equitable regulatory framework
d. More responsive to market changes
B. Authority for proposed reform
C. Comparison of estimated costs to estimated benefits
1. Costs
2. Benefits
3. Uncertainty
D. Proposed standards
V. Implementation of options
A. Choosing the Reformed or Unreformed CAFE system
B. Application of credits between compliance options
VII. Impact of other Federal Motor Vehicle Standards
A. Federal Motor Vehicle Safety Standards
1. FMVSS 138, tire pressure monitoring system
2. FMVSS 202, head restraints
3. FMVSS 208, occupant crash protection
4. FMVSS 214, side impact protection
5. FMVSS 301, fuel system integrity
6. Cumulative weight impacts of the FMVSSs
B. Federal Motor Vehicle Emissions Standards
1. Tier 2 requirements
2. Onboard vapor recovery
3. California Air Resources Board LEV II
C. Impacts on manufacturers' baselines
VIII. Need for nation to conserve energy
IX. Applicability of the CAFE standards
A. MDPVs
B. ``Flat-floor'' provision
X. Rulemaking analyses and notices
A. Executive Order 12866 and DOT Regulatory Policies and
Procedures
B. National Environmental Policy Act
C. Regulatory Flexibility Act
D. Executive Order 13132 Federalism
E. Executive Order 12988 (Civil Justice Reform)
F. Unfunded Mandates Reform Act
G. Paperwork Reduction Act
H. Regulation Identifier Number (RIN)
I. Executive Order 13045
J. National Technology Transfer and Advancement Act
K. Executive Order 13211
L. Department of Energy review
M. Plain language
N. Privacy Act
XI. Comments
I. Executive Summary
A. Our Proposal
This proposal is part of a continuing effort by the Department of
Transportation to reform the structure of the CAFE regulatory program
so that it achieves higher fuel savings while enhancing safety and
preventing adverse economic consequences. We have previously set forth
our concerns about the way in which the current CAFE program operates
and sought comment on approaches to reforming the CAFE program. We have
also previously increased light truck CAFE standards, from the
``frozen'' level of 20.7 mpg applicable from MY 1996 through MY 2004,
to a level of 22.2 mpg applicable to MY 2007. In adopting those
increased standards, we noted that we were limited in our ability to
make further increases without reforming the program.
This notice proposes to reform the structure of the CAFE program
for light trucks based on vehicle size and proposes to establish higher
CAFE standards for MY 2008-2011 light trucks. Reforming the CAFE
program would enable it to achieve larger fuel savings while enhancing
safety and preventing adverse economic consequences.
During a transition period of MYs 2008-2010, manufacturers may
comply with CAFE standards established under the reformed structure
(Reformed CAFE) or with standards established in the traditional way
(Unreformed CAFE). This will permit manufacturers to gain experience
with the Reformed CAFE standards. The Reformed CAFE standards for those
model years would
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be set at levels intended to ensure that the industry-wide cost of
those standards are roughly equivalent to the industry-wide cost of the
Unreformed CAFE standards for those model years. The additional
leadtime provided by the transition period would aid, for example,
those manufacturers that would, for the first time, face a binding CAFE
constraint and be required to make fuel economy improvements beyond
those that they planned on their own to make.
In MY 2011, all manufacturers would be required to comply with a
Reformed CAFE standard. The Reformed CAFE standard for that model year
would be set at the level that maximizes net benefits.
The Unreformed standards for MYs 2008-2010 are set with particular
regard to the capabilities of and impacts on the ``least capable'' full
line manufacturer (i.e., one that produces a wide variety of types and
sizes of vehicles) with a significant share of the market. A single
CAFE level, applicable to each manufacturer, is established for each
model year.
The Unreformed CAFE standards for MYs 2008-2010 would be:
MY 2008: 22.5 mpg
MY 2009: 23.1 mpg
MY 2010: 23.5 mpg
We estimate that these standards could save 5.4 billion gallons of
fuel over the lifetime of the vehicles sold during those model years,
compared to the savings that would occur if the standards remained at
the MY 2007 level of 22.2 mpg.
The Reformed CAFE approach to establishing light truck CAFE
standards has the potential of providing even greater fuel savings.
Under Reformed CAFE, each manufacturer's required level of CAFE would
be based on target levels of average fuel economy set for vehicles of
various size categories. The categories would be defined by vehicle
``footprint''--the product of the average track width (the distance
between the centerline of the tires on the same axle) and wheelbase
(basically, the distance between the centers of the axles). The target
values would reflect the technological and economic capabilities of the
industry within each of the footprint categories. The target for a
given size category would be the same for all manufacturers, regardless
of differences in their overall fleet mix. Compliance would be
determined by comparing a manufacturer's harmonically averaged fleet
fuel economy in a model year with a required fuel economy level
calculated using the manufacturer's actual production levels and the
category targets.
The range of targets for each model year would be as follows:
MY 2008: From 26.8 mpg for the smallest vehicles to 20.4 mpg for
the largest;
MY 2009: From 27.4 mpg for the smallest vehicles to 21.0 mpg for
the largest;
MY 2010: From 27.8 mpg for the smallest vehicles to 20.8 mpg for
the largest;
MY 2011: From 28.4 mpg for the smallest vehicles to 21.3 mpg for
the largest.
The standards based on these targets would save approximately 10.0
billion gallons of fuel over the lifetime of the vehicles sold during
those four model years, compared to the savings that would occur if the
standards remained at the MY 2007 level of 22.2 mpg. The Reformed
standards for MYs 2008-2010 would save 650 million more gallons of fuel
than the Unreformed standards for those years. As noted above, the
Reformed standard for MY 2011 would be the first Reformed standard set
at the level that maximizes net benefits. It would save an additional
4.1 billion gallons of fuel.
If all manufacturers complied with the Reformed CAFE standards, the
total costs would be approximately $6.2 billion for MYs 2008-2011,
compared to the costs they would incur if the standards remained at the
MY 2007 level of 22.2 mpg. The resulting vehicle price increases to
buyers of MY 2008 light trucks would be paid back\1\ in additional fuel
savings in an average of 37 months and to buyers of MY 2011 light
trucks in an average of 47 months, assuming fuel prices ranging from
$1.51 to $1.58 per gallon.\2\ We estimate that the total benefits under
the Unreformed CAFE standards for MYs 2008-2010 plus the Reformed CAFE
standard for MY 2011 would be approximately $7.0 billion, and under the
Reformed CAFE standards for MYs 2008-2011 would be approximately $7.5
billion.
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\1\ The payback period represents the length of time required
for a vehicle buyer to recoup the higher cost of purchasing a more
fuel-efficient vehicle through savings in fuel use. When a more
stringent CAFE standard requires a manufacturer to improve the fuel
economy of some of its vehicle models, the manufacturer's added
costs for doing so are reflected in higher prices for these models.
While buyers of these models pay higher prices to purchase these
vehicles, their improved fuel economy lowers their owners' costs for
purchasing fuel to operate them. Over time, buyers thus recoup the
higher purchase prices they pay for these vehicles in the form of
savings in outlays for fuel. The length of time required to repay
the higher cost of buying a more fuel-efficient vehicle is referred
to as the buyer's ``payback period.''
The length of this payback period depends on the initial
increase in a vehicle's purchase price, the improvement in its fuel
economy, the number of miles it is driven each year, and the retail
price of fuel. We calculated payback periods using the fuel economy
improvement and average price increase for each manufacturer's
vehicles estimated to result from the proposed standard, the U.S.
Energy Information Administration's forecast of future retail
gasoline prices, and estimates of the number of miles light trucks
are driven each year as they age developed from U.S. Department of
Transportation data. Energy Information Administration, Annual
Energy Outlook 2005 (AEO 2005), Table 100, http://www.eia.doe.gov/oiaf/aeo/supplement/index.html; and U.S. Department of
Transportation, 2001 National Household Travel Survey, http://nhts.ornl.gov/2001/index.shtml. Under these assumptions, payback
periods ranged from as short as 22 months to as long as 48 months,
averaging 35 months for the seven largest manufacturers of light
trucks.
\2\ The fuel prices used to calculate the length of the payback
periods are those expected over the life of the MY 2008-2011 light
trucks, not the current fuel prices. Those future fuel prices were
obtained from the AEO 2005.
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We have tentatively determined that the proposed standards under
both Unreformed CAFE and Reformed CAFE represent the maximum feasible
fuel economy level for each system. In reaching this conclusion, we
have balanced the express statutory factors and other relevant
considerations, such as safety concerns, effects on employment and the
need for flexibility to transition to a Reformed CAFE program that can
achieve greater fuel savings in a more economically efficient way.
The Reformed CAFE approach incorporates several important elements
of reform suggested by the National Academy of Sciences in its 2002
report (Effectiveness and Impact of Corporate Average Fuel Economy
(CAFE) Standards). The agency believes that the Reformed CAFE approach
has four basic advantages over the Unreformed CAFE approach.
First, Reformed CAFE will enlarge energy savings. The energy-saving
potential of Unreformed CAFE is limited because only a few full-line
manufacturers are required to make improvements. In effect, the
capabilities of these full-line manufacturers, whose offerings include
larger and heavier light trucks, constrain the stringency of the
uniform, industry-wide standard. As a result, the Unreformed CAFE
standard is generally set below the capabilities of limited-line
manufacturers, who sell predominantly lighter and smaller light trucks.
Under Reformed CAFE, which accounts for size differences in product
mix, virtually all light-truck manufacturers would be required to
improve the fuel economy of their vehicles. Thus, Reformed CAFE will
continue to require full-line manufacturers to improve the overall fuel
economy of their fleets, while also
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requiring limited-line manufacturers to enhance the fuel economy of the
vehicles they sell.
Second, Reformed CAFE will offer enhanced safety. The vehicle
manufacturers constrained by Unreformed CAFE standards are encouraged
to pursue the following compliance strategies that entail safety risks:
downsizing of vehicles, design of some vehicles to permit
classification as ``light trucks'' for CAFE purposes, and offering
smaller and lighter vehicles to offset sales of larger and heavier
vehicles. The adverse safety effects of downsizing and downweighting
have already been documented in the CAFE program for passenger cars.
When a manufacturer designs a vehicle to permit its classification as a
light truck, it may increase the vehicle's propensity to roll over.
Reformed CAFE is designed to lessen each of these safety risks.
Downsizing of vehicles is discouraged under Reformed CAFE since smaller
vehicles are expected to achieve greater fuel economy. Moreover,
Reformed CAFE lessens the incentive to design smaller vehicles to
achieve a ``light truck'' classification, since small light trucks
would be regulated at roughly the same degree of stringency as
passenger cars.
Third, Reformed CAFE provides a more equitable regulatory framework
for different vehicle manufacturers. Under Unreformed CAFE, the cost
burdens and compliance difficulties have been imposed primarily on the
full-line manufacturers who have large sales volumes at the larger and
heavier end of the light-truck fleet. Reformed CAFE spreads the
regulatory cost burden for fuel economy more broadly across vehicle
manufacturers within the industry.
Fourth, Reformed CAFE is more market-oriented because it more fully
respects economic conditions and consumer choice. Reformed CAFE does
not force vehicle manufacturers to adjust fleet mix toward smaller
vehicles unless that is what consumers are demanding. As the industry's
sales volume and mix changes in response to economic conditions (e.g.,
gasoline prices and household income) and consumer preferences (e.g.,
desire for seating capacity or hauling capability), the level of CAFE
required of manufacturers under Reformed CAFE will, at least partially,
adjust automatically to these changes. Accordingly, Reformed CAFE may
reduce the need for the agency to revisit previously established
standards in light of changed market conditions, a difficult process
that undermines regulatory certainty for the industry. In the mid-
1980's, for example, the agency relaxed several Unreformed CAFE
standards because fuel prices fell more than had been expected when
those standards were established and, as a result, consumer demand for
small vehicles with high fuel economy did not materialize as expected.
By moving to a more market-oriented system, the agency may also be able
to pursue more multi-year rulemakings that span larger time frames than
the agency has attempted in the past.
The agency is also issuing, along with this notice, a notice
requesting updated product plan information and other data to assist in
developing a final rule. We recognize that the manufacturer product
plans relied upon in developing this proposal--those plans received in
early 2004 in response to a 2003 request for information--may already
be outdated in some respects. We fully expect that manufacturers have
revised those plans to reflect subsequent developments.
We solicit comment on all aspects of this proposal. In particular,
we solicit comment on (1) whether the proposed levels of maximum
feasible CAFE reflect an appropriate balancing of the explicit
statutory factors and other relevant factors, (2) whether CAFE reform
should be designed based on size categories or as a continuous
function, (3) whether the reform should be based on a single size
attribute or whether adjustments should also be made for attributes
such as towing capability and cargo hauling capability, and (4) whether
the three-year transition period is necessary or whether it can be
reduced to achieve a more rapid transition to the Reformed CAFE system.
Other specific areas where we request comments are identified elsewhere
in this preamble and in the Preliminary Regulatory Impact Analysis
(PRIA). Based on public comments and other information, including new
data and analysis, and updated product plans, the standards adopted in
the final rule could well be different.
B. Energy demand and supply and the value of conservation
Many of the concerns about energy security and the effects of
energy prices and supply on national economic well-being that led to
the enactment of EPCA in 1975 persist today.\3\ The demand for oil is
steadily growing in the U.S. and around the world. By 2025, U.S. demand
for oil is expected to increase 40 percent and world oil demand is
expected to increase by nearly 60 percent. Most of these increases
would occur in the transportation sector. To meet this projected
increase in world demand, worldwide productive capacity would have to
increase by more than 44 million barrels per day over current levels.
OPEC producers are expected to supply nearly 60 percent of the
increased production. By 2025, nearly 70 percent of the oil consumed in
the U.S. would be imported oil. Strong growth in the demand for oil
worldwide, coupled with tight crude oil supplies, is the driving force
behind the sharp price increases seen over the past four years.
Increasingly, the oil consumed in the U.S. originates in countries with
political and economic situations that raise concerns about future oil
supply and prices.
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\3\ The sources of the figures in this section can be found
below in section VIII, ``Need for Nation to conserve energy.''
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Energy is an essential input to the U.S. economy and having a
strong economy is essential to maintaining and strengthening our
national security. Conserving energy, especially reducing the nation's
dependence on petroleum, benefits the U.S. in several ways. Reducing
total petroleum use decreases our economy's vulnerability to oil price
shocks. Reducing dependence on oil imports from regions with uncertain
conditions enhances our energy security and can reduce the flow of oil
profits to certain states now hostile to the U.S. Reducing the growth
rate of oil use will help relieve pressures on already strained
domestic refinery capacity, decreasing the likelihood of future product
price volatility.
II. Background
A. 1974 DOT/EPA report to Congress on potential for motor vehicle fuel
economy improvements
In 1974, the Department of Transportation (DOT) and Environmental
Protection Agency (EPA) submitted to Congress a report entitled
``Potential for Motor Vehicle Fuel Economy Improvement'' (1974
Report).\4\ This report was prepared in compliance with Section 10 of
the Energy Supply and Environmental Coordination Act of 1974, Public
Law 93-319 (the Act). The Act directed EPA and DOT to report on the
practicability of a production-weighted fuel economy improvement
standard of 20 percent for new motor vehicles in the 1980 time frame.
As required by Section 10 of the Act, the report included an assessment
of the technological challenges of meeting any such standard, including
lead times involved, the test procedures required to determine
compliance, the economic
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costs and benefits, the enforcement means, the effect on energy and
other resources, and the relationship of safety and emission standards
to CAFE.
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\4\ The 1974 report is available in the docket for this
rulemaking.
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In the 1974 Report, DOT/EPA said that performance standards
regulating fuel economy could take either of two modes: A production-
weighted average standard for each manufacturer's entire fleet of
vehicles or a fuel economy standard tailored to individual classes of
vehicles. They identified three forms that a production-weighted
standard could take:
A common standard (e.g., 16.8 mpg for all manufacturers);
A standard stated as a uniform per cent improvement (e.g.,
20% improvement for each manufacturer); or
A variable standard based on the costs or potential to
improve for each manufacturer.
(1974 Report, p. 77)
As to standards for individual classes, they identified two
different forms:
A standard stated as uniform quantity of improvement
(e.g., 2.8 mpg for all classes); or
A variable standard based on the potential to improve each
class.
(1974 Report, p. 77-78)
DOT/EPA concluded in the 1974 Report that a production-weighted
standard establishing one uniform specific fuel economy average for all
manufacturers would, if sufficiently stringent to have the needed
effect, impact most heavily on manufacturers who have lower fuel
economy, while not requiring manufacturers of current vehicles with
better fuel economy to maintain or improve their performance. (1974
Report, p. 12) Production-weighted standards specifically tailored to
each manufacturer would eliminate some inequities, but were considered
to be difficult to administer fairly. (Ibid.)
B. Energy Policy and Conservation Act of 1975
Congress enacted the Energy Policy and Conservation Act (EPCA Pub.
L. 94-163) during the aftermath of the energy crisis created by the oil
embargo of 1973-74. The Act established an automobile fuel economy
regulatory program by adding Title V, ``Improving Automotive
Efficiency,'' to the Motor Vehicle Information and Cost Savings Act.
Title V has been amended from time to time and codified without
substantive change as Chapter 329 of title 49, United States Code.
Chapter 329 provides for the issuance of average fuel economy standards
for passenger automobiles and separate standards for automobiles that
are not passenger automobiles (light trucks).
For the purposes of the CAFE statute, ``automobiles'' include any
``4-wheeled vehicle that is propelled by fuel (or by alternative fuel)
manufactured primarily for use on public streets, roads, and highways
(except a vehicle operated only on a rail line), and rated at not more
than 6,000 pounds gross vehicle weight.'' They also include any such
vehicle rated at between 6,000 and 10,000 pounds gross vehicle weight
(GVWR) if the Secretary decides by regulation that an average fuel
economy standard for the vehicle is feasible, and that either such a
standard will result in significant energy conservation or the vehicle
is substantially used for the same purposes as a vehicle rated at not
more than 6000 pounds GVWR.
In 1978, NHTSA published a final rule in which we determined that
standards for vehicles rated between 6000 and 8500 pounds GVWR are
feasible, that such standards will result in significant energy
conservation on a per-vehicle basis and that those vehicles are used
for substantially the same purposes as vehicles rated at not more than
6000 pounds GVWR (March 23, 1978; 43 FR 11995, at 11997). Vehicles
rated at between 6000 and 8500 pounds GVWR first became subject to the
CAFE standards in MY 1980.
The CAFE standards set a minimum performance requirement in terms
of an average number of miles a vehicle travels per gallon of gasoline
or diesel fuel. Individual vehicles and models are not required to meet
the mileage standard. Instead, each manufacturer must achieve a
harmonically averaged level of fuel economy for all specified vehicles
manufactured by a manufacturer in a given MY. The statute distinguishes
between ``passenger automobiles'' and ``non-passenger automobiles.'' We
generally refer to non-passenger automobiles as light trucks.
In enacting EPCA, Congress made a clear and specific choice about
the structure of the average fuel economy standard for passenger cars.
After considering the variety of approaches presented in the 1974
Report, Congress established a common statutory CAFE standard
applicable to each manufacturer's fleet of passenger automobiles. The
Secretary of Transportation has the authority to change the standard if
it no longer represents the ``maximum feasible'' standard consistent
with the criteria set forth in the statute. Pursuant to that authority,
the Secretary amended the passenger car standard with regard to MYs
1986-1989 to address situations in which, despite manufacturers' good
faith compliance plans, market conditions rendered the statutory
standard impracticable and infeasible. Since 1990, the CAFE standard
for passenger automobiles has been 27.5 mpg and compliance is
determined in accordance with detailed procedures set forth in Section
32904(a) and (b).
Congress was considerably less decided and prescriptive with
respect to what sort of standards and procedures should be established
for light trucks. It neither made a clear choice among the approaches
(or among the forms of those approaches) identified in the 1974 Report
nor precluded the selection of any of those approaches or forms.
Further, it did not establish by statute a CAFE standard for light
trucks. Instead, Congress provided the Secretary with a choice of
establishing a form of a production-weighted average standard for each
manufacturer's entire fleet of light trucks, as suggested in the 1974
Report, or a form of production-weighted standards for classes of light
trucks. Congress directed the Secretary to establish maximum feasible
CAFE standards applicable to each manufacturer's light truck fleet, or
alternatively, to classes of light trucks, and to establish them at
least 18 months prior to the start of each model year. When determining
a ``maximum feasible level of fuel economy,'' the Secretary is directed
to balance factors including the nation's need to conserve energy,
technological feasibility, economic practicability and the impact of
other motor vehicle standards on fuel economy.
Manufacturers are required to provide a series of fuel economy
reports to both the EPA and NHTSA. NHTSA requires manufacturers to
provide pre-model year and mid-model year reports. See 49 CFR part 537.
The reports to NHTSA must include, in part, vehicle model fuel economy
values as calculated under the EPA regulations, projected sales
volumes, and actual sales volumes as available. A manufacturer must
supply similar information to the EPA at the end of a model year, along
with actual production volumes so that its fleet wide average fuel
economy can be calculated. The EPA then certifies these reports and
submits them to NHTSA so that we may determine a manufacturer's
compliance with the CAFE standards.
C. 1979-2002 light truck standards
NHTSA established the first light truck CAFE standards for MY 1979
and applied them to light trucks with a GVWR up to 6,000 pounds (March
14, 1977; 42 FR 13807). Beginning with MY 1980, NHTSA raised this GVWR
ceiling to 8,500 pounds. For MYs 1979-1981, the agency established
separate standards for two-wheel drive (2WD)
[[Page 51419]]
and four-wheel drive (4WD) light trucks without a ``combined'' standard
reflecting the combined capabilities of 2WD and 4WD light trucks.
Manufacturers that produced both 2WD vehicles and 4WD vehicles could,
however, decide to treat them as a single fleet and comply with the 2WD
standard.
Beginning with MY 1982, NHTSA established a combined standard
reflecting the combined capabilities of 2WD and 4WD light trucks, plus
optional 2WD and 4WD standards. After MY 1991, NHTSA dropped the
optional 2WD and 4WD standards. During MYs 1980-1995, NHTSA also
separated the ``captive imports'' \5\ of U.S. light truck manufacturers
from their other truck models in determining compliance with CAFE
standards.
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\5\ ``Captive import'' means, with respect to a light truck, one
which is not domestically manufactured but which is imported by a
manufacturer whose principal place of business is the United States.
49 CFR 533.4(b)(2).
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Since the agency sets standards at the maximum feasible level of
average fuel economy, as required by EPCA, and since the agency's
determinations about the maximum feasible level of average fuel economy
in future model years are highly dependent on projections about the
state of technology and market conditions in those years, NHTSA twice
found it necessary to reduce a light truck standard when it received
new information relating to the agency's past projections. In 1979, the
agency reduced the MY 1981 2WD standard after Chrysler demonstrated
that there were smaller than expected fuel economy benefits from
various technological improvements and larger than expected adverse
impacts from other federal vehicle standards and test procedures
(December 31 1979; 44 FR 77199).
In 1984, the agency reduced the MY 1985 light truck standards to
the following levels: Combined standard-19.5 mpg, 2WD standard-19.7 mpg
and 4WD standard-18.9 mpg (October 22, 1984; 49 FR 41250). The agency
concluded that market demand for light truck performance, as reflected
in engine mix and axle ratio usage, had not materialized as anticipated
when the agency initially established the MY 1985 standards. The agency
said that this resulted from lower than anticipated fuel prices. The
agency concluded that the only actions then available to manufacturers
to improve their fuel economy levels for MY 1986 would have involved
product restrictions likely resulting in significant adverse economic
impacts. The reduction of the MY 1985 standard was upheld by the U.S.
Circuit Court of Appeals for the District of Columbia. Center for Auto
Safety v. NHTSA, 793 F.2d 1322 (D.C. Cir. 1986) (rejecting the
contention that the agency gave impermissible weight to the effects of
shifts in consumer demand toward larger, less fuel-efficient trucks on
the fuel economy levels manufacturers could achieve).\6\
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\6\ NHTSA similarly found it necessary on occasion to reduce the
passenger car CAFE standards in response to new information. The
agency reduced the MY 1986 passenger car standard because a
continuing decline in gasoline prices prevented a projected shift in
consumer demand toward smaller cars and smaller engines and because
the only actions available to manufacturers to improve their fuel
economy levels for MY 1986 would have involved product restrictions
likely resulting in significant adverse economic impacts. (October
4, 1985; 40 FR 40528) This action was upheld in Public Citizen vs.
NHTSA, 848 F.2d 256 (D.C. Cir. 1988). NHTSA also reduced the MY
1987-88 passenger car standards (October 6, 1986; 51 FR 35594) and
MY 1989 passenger car standard (October 6, 1988; 53 FR 39275) for
similar reasons.
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In 1994, the agency departed from its usual past practice of
considering light truck standards for one or two model years at a time
and published an Advance Notice of Proposed Rulemaking (ANPRM) in the
Federal Register outlining NHTSA's intention to set standards for some,
or all, of MYs 1998-2006 (59 FR 16324; April 6, 1994).
On November 15, 1995, the Department of Transportation and Related
Agencies Appropriations Act for FY 1996 was enacted. Pub. L. 104-50.
Section 330 of that Act provided:
None of the funds in this Act shall be available to prepare,
propose, or promulgate any regulations * * * prescribing corporate
average fuel economy standards for automobiles * * * in any model
year that differs from standards promulgated for such automobiles
prior to enactment of this section.
Pursuant to that Act, we then issued a final rule limited to MY 1998,
setting the light truck CAFE standard for that year at 20.7 mpg, the
same level as the standard we had set for MY 1997 (61 FR 14680; April
3, 1996).
On September 30, 1996, the Department of Transportation and Related
Agencies Appropriations Act for FY 1997 was enacted (Pub. L. 104-205).
Section 323 of that Act included the same limitation on appropriations
regarding the CAFE standards contained in Section 330 of the FY 1996
Appropriations Act. The agency followed the same process as the prior
year and established a MY 1999 light truck CAFE standard of 20.7 mpg,
the same level as the standard that had been set for MYs 1997 and 1998.
Because the same limitation on the setting of CAFE standards was
included in the Appropriations Acts for each of FYs 1998-2001, the
agency followed that same procedure during those fiscal years.
While the Department of Transportation and Related Agencies
Appropriations Act for FY 2001 (Pub. L. 106-346) contained a
restriction on CAFE rulemaking identical to that contained in prior
appropriation acts, the conference committee report for that Act
directed NHTSA to fund a study by the NAS to evaluate the effectiveness
and impacts of CAFE standards (H. Rep. No. 106-940, at p. 117-118).
In a letter dated July 10, 2001, following the release of the
President's National Energy Policy, Secretary of Transportation Mineta
asked the House and Senate Appropriations Committees to lift the
restriction on the agency spending funds for the purposes of improving
CAFE standards. The Department of Transportation and Related Agencies
Appropriations Act for FY 2002 (Pub. L. 107-87), which was enacted on
December 18, 2001, did not contain a provision restricting the
Secretary's authority to prescribe fuel economy standards.
D. 2001 National Energy Policy
The National Energy Policy,\7\ released in May 2001, stated that
``(a) fundamental imbalance between supply and demand defines our
nation's energy crisis'' and that ``(t)his imbalance, if allowed to
continue, will inevitably undermine our economy, our standard of
living, and our national security.'' The National Energy Policy was
designed to promote dependable, affordable and environmentally sound
energy for the future. The Policy envisions a comprehensive long-term
strategy that uses leading edge technology to produce an integrated
energy, environmental and economic policy. It set forth five specific
national goals: ``modernize conservation, modernize our energy
infrastructure, increase energy supplies, accelerate the protection and
improvement of the environment, and increase our nation's energy
security.''
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\7\ http://www.whitehouse.gov/energy/National-Energy-Policy.pdf
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The National Energy Policy included recommendations regarding the
path that the Administration's energy policy should take and included
specific recommendations regarding vehicle fuel economy and CAFE. It
recommended that the President direct the Secretary of Transportation
to--
--Review and provide recommendations on establishing CAFE standards
with due consideration of the National Academy of Sciences study
released (in prepublication
[[Page 51420]]
form) in July 2001. Responsibly crafted CAFE standards should
increase efficiency without negatively impacting the U.S. automotive
industry. The determination of future fuel economy standards must
therefore be addressed analytically and based on sound science.
--Consider passenger safety, economic concerns, and disparate impact
on the U.S. versus foreign fleet of automobiles.
--Look at other market-based approaches to increasing the national
average fuel economy of new motor vehicles.
E. 2002 NAS Study of CAFE Reform
In response to direction from Congress, NAS published a lengthy
report in 2002 entitled ``Effectiveness and Impact of Corporate Average
Fuel Economy (CAFE) Standards.'' \8\
---------------------------------------------------------------------------
\8\ The NAS submitted its preliminary report to the Department
of Transportation in July 2001 and released its final report in
January 2002.
---------------------------------------------------------------------------
The report concludes that the CAFE program has clearly contributed
to increased fuel economy and that it was appropriate to consider
further increases in CAFE standards. (NAS, p. 3 (Finding 1)) It cited
not only the value of fuel savings, but also adverse consequences
(i.e., externalities) associated with high levels of petroleum
importation and use that are not reflected in the price of petroleum
(e.g., the adverse impact on energy security). The report further
concluded that technologies exist that could significantly reduce fuel
consumption by passenger cars and light truck fuels within 15 years,
while maintaining vehicle size, weight, utility and performance. (NAS,
p. 3 (Finding 5)) Light duty trucks were said to offer the greatest
potential for reducing fuel consumption. (NAS, p. 4 (Finding 5)) The
report also noted that vehicle development cycles--as well as future
economic, regulatory, safety and consumer preferences--would influence
the extent to which these technologies could lead to increased fuel
economy in the U.S. market. To assess the economic trade-offs
associated with the introduction of existing and emerging technologies
to improve fuel economy, the NAS conducted what it called a ``cost-
efficient analysis''--``that is, the committee [that authored the
report] identified packages of existing and emerging technologies that
could be introduced over the next 10 to 15 years that would improve
fuel economy up to the point where further increases in fuel economy
would not be reimbursed by fuel savings.'' (NAS, p. 4 (Finding 6))
Recognizing the many trade-offs that must be considered in setting
fuel economy standards, the report took no position on what CAFE
standards would be appropriate for future years. It noted,
``(s)election of fuel economy targets will require uncertain and
difficult trade-offs among environmental benefits, vehicle safety,
cost, oil import dependence, and consumer preferences.''
The report found that, to minimize financial impacts on
manufacturers, and on their suppliers, employees, and consumers,
sufficient lead-time (consistent with normal product life cycles)
should be given when considering increases in CAFE standards. The
report stated that there are advanced technologies that could be
employed, without negatively affecting the automobile industry, if
sufficient lead-time were provided to the manufacturers.
The report expressed concerns about increasing the standards under
the CAFE program as currently structured. While raising CAFE standards
under the existing structure would reduce fuel consumption, doing so
under alternative structures ``could accomplish the same end at lower
cost, provide more flexibility to manufacturers, or address inequities
arising from the present'' structure. (NAS, pp. 4-5 (Finding 10)) \9\
Further, almost all of the committee that authored the report,
including the committee's safety specialists, said, ``to the extent
that the size and weight of the fleet have been constrained by CAFE
requirements * * * those requirements have caused more injuries and
fatalities on the road than would otherwise have occurred.'' (NAS, p.
29) Specifically, they noted: ``the downweighting and downsizing that
occurred in the late 1970s and early 1980s, some of which was due to
CAFE standards, probably resulted in an additional 1300 to 2600 traffic
fatalities in 1993.'' (NAS, p. 3 (Finding 2))
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\9\ The report noted the following about the concept of equity:
Potential Inequities
The issue of equity or inequity is subjective. However, one
concept of equity among manufacturers requires equal treatment of
equivalent vehicles made by different manufacturers. The current
CAFE standards fail this test. If one manufacturer was positioned in
the market selling many large passenger cars and thereby was just
meeting the CAFE standard, adding a 22-mpg car (below the 27.5-mpg
standard) would result in a financial penalty or would require
significant improvements in fuel economy for the remainder of the
passenger cars. But, if another manufacturer was selling many small
cars and was significantly exceeding the CAFE standard, adding a 22-
mpg vehicle would have no negative consequences.
(NAS, p. 102).
---------------------------------------------------------------------------
To address those structural problems, the report suggested various
possible reforms.\10\ The report found that the ``CAFE program might be
improved significantly by converting it to a system in which fuel
targets depend on vehicle attributes.'' (NAS, p. 5 (Finding 12)) The
report noted
\10\ In assessing and comparing possible reforms, the report
urged consideration of the following factors:
Fuel use responses encouraged by the policy,
Effectiveness in reducing fuel use,
Minimizing costs of fuel use reduction,
Other potential consequences
--Distributional impacts
--Safety
--Consumer satisfaction
--Mobility
--Environment
--Potential inequities, and
Administrative feasibility.
(NAS, p. 94).
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One such system would make the fuel economy target dependent on
vehicle weight, with lower fuel consumption targets set for lighter
vehicles and higher targets for heavier vehicles, up to some maximum
weight, above which the target would be weight-independent. Such a
system would create incentives to reduce the variance in vehicle
weights between large and small vehicles, thus providing for overall
vehicle safety. It has the potential to increase fuel economy with
fewer negative effects on both safety and consumer choice. Above the
maximum weight, vehicles would need additional advanced fuel economy
technology to meet the targets. The committee believes that although
such a change is promising, it requires more investigation than was
possible in this study.
(NAS, p. 5 (Finding 12))
The report noted further that under an attribute-based approach,
the required CAFE levels could vary among the manufacturers based on
the distribution of their product mix:
Attribute-Based Fuel Economy Targets
The government could change the way that fuel economy targets
for individual vehicles are assigned. The current CAFE system sets
one target for all passenger cars (27.5 mpg) and one target for all
light-duty trucks (20.7 mpg). Each manufacturer must meet a sales-
weighted average (more precisely, a harmonic mean * * *) of these
targets. However, targets could vary among passenger cars and among
trucks, based on some attribute of these vehicles such as weight,
size, or load-carrying capacity. In that case a particular
manufacturer's average target for passenger cars or for trucks would
depend upon the fractions of vehicles it sold with particular levels
of these attributes. For example, if weight were the criterion, a
manufacturer that sells mostly light vehicles would have to achieve
higher average fuel economy than would a manufacturer that sells
mostly heavy vehicles.
(NAS, p. 87)
Based on these findings, the report recommended
Consideration should be given to designing and evaluating an
approach with fuel economy targets that are dependent on
[[Page 51421]]
vehicle attributes, such as vehicle weight, that inherently
influence fuel use. Any such system should be designed to have
minimal adverse safety consequences.
(NAS, p. 6, (Recommendation 3))
In February 2002, Secretary Mineta asked Congress ``to provide the
Department of Transportation with the necessary authority to reform the
CAFE program, guided by the NAS report's suggestions.''
F. 2002 Request for Comments on NAS Study
On February 7, 2002, we issued a Request for Comments (RFC) (67 FR
5767; Docket No. 2002-11419) seeking data on which we could base an
analysis of manufacturer capability for the purpose of determining the
appropriate CAFE standards to set for light trucks for upcoming model
years, beginning with MY 2005. We also sought comments on possible
reforms to the CAFE program, as it applies to both passenger cars and
light trucks, to protect passenger safety, advance fuel-efficient
technologies, and obtain the benefits of market-based approaches.
While we have considered the comments, the original RFC was quite
general and the comments received tended to focus on concerns with the
current program or the generic admonishment against CAFE reform--and
not on specific potential options. A more detailed summary of comments
can be found in the advanced notice of proposed rulemaking (2003 ANPRM)
published on December 29, 2003 (68 FR 74908; Docket No. 2003-16128).
G. 2003 Final Rule Establishing MY 2005-2007 Light Truck Standards
On April 7, 2003, the agency published a final rule establishing
light truck CAFE standards for MYs 2005-2007: 21.0 mpg for MY 2005,
21.6 mpg for MY 2006, and 22.2 mpg for MY 2007 (68 FR 16868; Docket No.
2002-11419; Notice 3). The agency determined that these levels are the
maximum feasible CAFE levels for light trucks for those model years,
balancing the express statutory factors and other included or relevant
considerations such as the impact of the standard on motor vehicle
safety and employment. NHTSA estimated that the fuel economy increases
required by the standards for MYs 2005-2007 would generate
approximately 3.6 billion gallons of gasoline savings over the 25-year
lifetime of the affected vehicles.
In establishing the standards, the agency analyzed cost-effective
technological improvements that could be made to the product offerings
planned by the manufacturers. The agency's projection of CAFE
capability was based on the manufacturers' most recently submitted
product plans and technological improvements we determined to be
appropriate and feasible within the time frame. In the final rule, we
stated that we did not believe the final rule will necessitate, nor did
we believe it will result in, any ``mix shifting,'' e.g., decreasing
the production volumes of vehicles that are heavier or larger and thus
have relatively low fuel economy and increasing the production volumes
of lighter or smaller vehicles, which might result in significant
employment and/or average weight reductions were it to occur.
We further expressed our belief that the final rule for MYs 2005-
2007 will neither necessitate nor induce manufacturers to make
reductions in vehicle weight that will adversely affect the overall
safety of people traveling on the roads of America. Indeed, as the NAS
report noted, there are many technological means that are available to
manufacturers for improving fuel economy and are much more cost-
effective than weight reduction through materials substitution.
Accordingly, we did not rely on weight reduction.
We recognized in the final rule that the standard established for
MY 2007 could be a challenge for General Motors. We recognized further
that, between the issuance of the final rule and the last (MY 2007) of
the model years for which standards were being established, there was
more time than in previous light truck CAFE rulemakings for significant
changes to occur in external factors capable of affecting the
achievable levels of CAFE. These external factors include fuel prices
and the demand for vehicles with advanced fuel saving technologies,
such as hybrid electric and advanced diesel vehicles. We said that
changes in these factors could lead to higher or lower levels of CAFE,
particularly in MY 2007. Recognizing that it may be appropriate to re-
examine the MY 2007 standard in light of any significant changes in
those factors, the agency reaffirms its plans to monitor the compliance
efforts of the manufacturers.
H. 2003 comprehensive plans for addressing vehicle rollover and
compatibility
In September 2002, NHTSA completed a thorough examination of the
opportunities for significantly improving vehicle and highway safety
and announced the establishment of interdisciplinary teams to formulate
comprehensive plans for addressing the four most promising problem
areas.\11\ Based on the work of the teams, the agency issued detailed
reports analyzing each of the problem areas and recommending
coordinated strategies that, if implemented effectively, will lead to
significant improvements in safety.
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\11\ A fifth problem area was announced in 2004, improving
traffic safety data.
---------------------------------------------------------------------------
Two of the problems areas are vehicle rollover and vehicle
compatibility. The reports on those areas identify a series of vehicle,
roadway and behavioral strategies for addressing the problems.\12\
Among the vehicle strategies, both reports identified reform of the
CAFE program as one of the steps that needed to be taken to reduce
those problems:
\12\ See http://www-nrd.nhtsa.dot.gov/vrtc/ca/capubs/IPTRolloverMitigationReport/; http://www-nrd.nhtsa.dot.gov/departments/nrd-11/aggressivity/IPTVehicleCompatibilityReport/.
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The current structure of the CAFE system can provide an
incentive to manufacturers to downweight vehicles, increase
production of vehicle classes that are more susceptible to rollover
crashes, and produce a less homogenous fleet mix. As a result, CAFE
is critical to the vehicle compatibility and rollover problems.
(a) Highlights of Current Program
In its final rule setting new CAFE standards for MY 2005-2007
light trucks, NHTSA stated that it intends to examine possible
reforms to the CAFE system, including those recommended in the
National Academy of Sciences' CAFE report.
(b) Proposed Initiatives
Consistent with its statutory authority, the agency plans to
address issues relating to the structure, operation and effects of
potential changes to the CAFE system and CAFE standards. In taking
this broad view, the agency recognizes that the regulation of the
(sic) fuel economy can have substantial effects on vehicle safety,
the composition of the light vehicle fleet, the economic well-being
of the automobile industry and, of course, our nation's energy
security.
(c) Expected Program Outcomes
It is NHTSA's goal to identify and implement reforms to the CAFE
system that will facilitate improvements in fuel economy without
compromising motor vehicle safety or American jobs. * * *
* * * NHTSA intends to examine the safety impacts, both positive
and negative, that may result from any modifications to CAFE as it
now exists. Regardless of the root causes, it is clear that the
downsizing of vehicles that occurred during the first decade of the
CAFE program had serious safety consequences. Changes to the
existing system are likely to have equally significant impacts.
NHTSA is determined to ensure that these impacts are positive.
I. 2003 ANPRM
On December 29, 2003, the agency published an ANPRM seeking comment
on various issues relating to reforming the CAFE program (68 FR 74908;
Docket
[[Page 51422]]
No. 2003-16128).\13\ The agency sought comment on possible enhancements
to the program that would assist in further fuel conservation, while
protecting motor vehicle safety and the economic vitality of the
automobile industry. The agency indicated that it was particularly
interested in structural reform. This document, while not espousing any
particular form of reform, sought more specific input than the 2002 RFC
on various options aimed at adapting the CAFE program to today's
vehicle fleet and needs.
---------------------------------------------------------------------------
\13\ On the same date, we also published a request for comments
seeking manufacturer product plan information for MYs 2008-2012 to
assist the agency in analyzing possible reforms to the CAFE program
which are discussed in a companion notice published today. (68 FR
74931) The agency sought information that would help it assess the
effect of these possible reforms on fuel economy, manufacturers,
consumers, the economy, motor vehicle safety and American jobs.
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1. Need for reform
The 2003 ANPRM discussed the principal criticisms of the current
CAFE program that led the agency to explore light truck CAFE reform (68
FR 74908, at 74910-13. First, the energy-saving potential of the CAFE
program is hampered by the current regulatory structure. The Unreformed
approach to CAFE does not distinguish between the various market
segments of light trucks, and therefore does not recognize that some
vehicles designed for classification purposes as light trucks may
achieve fuel economy similar to that of passenger cars. The Unreformed
CAFE approach instead applies a single standard to the light truck
fleet as a whole, encouraging manufacturers to offer small light trucks
that will offset the larger vehicles that get lower fuel economy. A
CAFE system that more closely links fuel economy standards to the
various market segments reduces the incentive to design vehicles that
are functionally similar to passenger cars but classified as light
trucks.
Second, because weight strongly affects fuel economy, the current
light truck CAFE program encourages vehicle manufacturers to reduce
weight in their light truck offerings to achieve greater fuel
economy.\14\ As the NAS report and a more recent NHTSA study have
found, downweighting of the light truck fleet, especially those trucks
in the low and medium weight ranges, creates more safety risk for
occupants of light trucks and all motorists combined.\15\
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\14\ Manufacturers can reduce weight without changing the
fundamental structure of the vehicle by using lighter materials or
eliminating available equipment or options. In contrast, reducing
vehicle size, and particularly footprint, generally entails an
alteration of the basic architecture of the vehicle.
\15\ However, both studies also suggest that if downweighting is
concentrated on the heaviest light trucks in the fleet there would
be no net safety impact, and there might even be a small fleet-wide
safety benefit. There is substantial uncertainty about the curb
weight cut-off above which this would occur.
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Third, the agency noted the adverse economic impacts that might
result from steady future increases in the stringency of CAFE standards
under the current regulatory structure. Rapid increases in the light
truck CAFE standard could have serious adverse economic consequences.
The vulnerability of full-line firms to tighter CAFE standards does not
arise primarily from poor fuel economy ratings within weight classes,
i.e., from less extensive use of fuel economy improving technologies.
As explained in the 2003 ANPRM, their overall CAFE averages are low
compared to manufacturers that produce more relatively light vehicles
because their sales mixes service a market demand for bigger and
heavier vehicles capable of more demanding utilitarian functions. An
attribute-based (weight and/or size) system could avoid disparate
impacts on full-line manufacturers that could result from a sustained
increase in CAFE standards.
2. Reform options
In discussing potential changes, the agency focused primarily on
structural improvements to the current CAFE program authorized under
the current statutory authority, and secondarily on definitional
changes to the current vehicle classification system and whether to
include vehicles between 8,500 to 10,000 lbs. GVWR.
The ANRPM discussed two structural reforms. The first reform
divided light trucks into two or more classes based on vehicle
attributes. The second was an attribute-based ``continuous-function''
system, such as that discussed in the NAS report. We chose various
measures of vehicle weight and/or size to illustrate the possible
design of an attribute-based system. However, we also sought comment as
to the merits of using other vehicle attributes as the basis of an
attribute-based system.
The 2003 ANPRM also presented two potential options under which
vehicles with a GVWR of up to 10,000 lbs. could be included under the
CAFE program, were the agency to make the requisite determinations to
include them. One option would be to include vehicles defined by EPA as
medium duty passenger vehicles (65 FR 6698, 6749-50, 6851-6852) for use
in the CAFE program. This definition would essentially make SUVs and
passenger vans between 8,500 and 10,000 lbs. GVWR subject to CAFE,
while continuing to exclude most medium- and heavy-duty pickups and
most medium- and heavy-duty cargo vans that are primarily used for
agricultural and commercial purposes. A second option would be to make
all vehicles between 8,500 and 10,000 lbs GVWR subject to CAFE
standards.
Through the 2003 ANPRM, the agency intended to begin a public
discussion on potential ways, within current statutory authority, to
improve the CAFE program to better achieve our public policy
objectives. The agency set forth a number of possible concepts and
measures, and invited the public to present additional concepts. The
agency expressed interest in any suggestions toward revamping the CAFE
program in such a way as to enhance overall fuel economy while
protecting occupant safety and the economic vitality of the auto
market.
The agency also discussed and sought comment on the classification
of vehicles as passenger cars or light trucks. As suggested in numerous
of the comments, we are proposing only to clarify the applicability of
the flat floor provision to vehicles with folding seats. See section
IX.B below. We are not otherwise changing those classification
regulations at this time in part because we believe an orderly
transition to Reformed CAFE could not be accomplished if we
simultaneously change which vehicles are included in the light truck
program and because, as applied in MY 2011, Reformed CAFE is likely to
reduce the incentive to produce vehicles classified as light trucks
instead of as passenger cars. We may revisit the definitional issues as
appropriate in the future.
J. Recent developments
1. Factors underscoring need for reform
Since our ANPRM was published in 2003, there have been two
important complicating factors that underscore the need for CAFE
reform. One factor is the fiscal problems reported by General Motors
and Ford, while the other is the recent surge in gasoline prices, a
development that may be exacerbating the financial challenges faced by
both companies.
The two largest, full-line light-truck manufacturers, General
Motors and Ford, have reported serious financial difficulties. The
investment community has downgraded the bonds of both companies.
Further, both companies have announced significant layoffs and other
actions to improve their financial
[[Page 51423]]
condition. While these financial problems did not give rise to the
Administration's CAFE reform initiative, the financial risks now faced
by these companies, including their workers and suppliers, underscore
the importance to full-line vehicle manufacturers of establishing an
equitable CAFE regulatory framework.
There has also been a sharp and sustained surge in gasoline prices
since our last light truck final rule in April 2003 and the December
2003 ANPRM on CAFE reform. According to the Energy Information
Administration (EIA), the retail price for gasoline in April 2003 was
$1.59 per gallon and in December 2003 was $1.48 per gallon.\16\ The
weekly U.S. retail price for the week of August 15, 2005 was $2.55 per
gallon.\17\
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\16\ See http://tonto.eia.doe.gov/oog/info/gdu/gaspump.html.
\17\ See http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_home_page.html and http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp.
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Although the surge of gasoline prices highlights the need for both
more energy supplies and intensified conservation efforts, it is
important to recognize that CAFE standards for MYs 2008-2011 should not
be based on current gasoline prices. They should be based on our best
forecast of what average real gasoline prices will be in the U.S.
during the years that these vehicles will be used by consumers: the 26-
year period beginning in 2008 and extending almost to 2040.\18\ Since
miles of travel tend to be concentrated in the early years of a
vehicle's lifetime, the projected gasoline price in the 2008-2020
period is particularly relevant for this rulemaking.
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\18\ To calculate the fuel savings for the light trucks
manufactured in a model year, we consider the savings over a 26-year
period. The number of light trucks manufactured during each model
year that remains in service during each subsequent calendar year is
estimated by applying estimates of the proportion of light trucks
surviving to each age up to 26 years (see Table VIII-2 in the PRIA).
At the end of 26 years, the proportion of light trucks remaining in
service falls below 10 percent.
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When we issued the April 2003 final rule for MY 2005-2007 light
truck CAFE, we based the final economic assessment of that rule on
estimated gasoline prices at the pump that ranged from $1.37 per gallon
in 2005 to $1.46 per gallon in 2030 (based on year 2000 prices). Those
prices, which are set forth year by year in our April 2003 Final
Economic Assessment (Docket No. 11419-18358, page VIII-7), were based
on the Energy Information Administration's ``Annual Energy Outlook
2003.''
The PRIA for this proposed rule has been based on projected
gasoline prices from the more recent Annual Energy Outlook 2005
(AEO2005) (published in 2004 before the recent price rises), which
projected gasoline prices ranging from $1.51 to $1.58 per gallon.\19\
These are the most current long-term forecasts for gasoline prices
available from EIA at this time. EIA has, however, issued revised
short-term forecasts that project gasoline prices remaining above $2
through late 2006, significantly higher than what was projected in
AEO2005. Further, we note that in its August ``International Energy
Outlook 2005,'' EIA's reference case for future oil prices ``has
adopted the Annual Energy Outlook 2005 (AEO2005) October futures case,
which has an assumption of higher prices than the AEO2005 reference
case and now appears to be a more likely projection for oil prices.''
During the rulemaking, we will continue to consult with EIA and other
experts on projections of likely gasoline prices over the anticipated
lifetime of light trucks sold in MYs 2008-2011, including the
development of gasoline price projections for EIA's Annual Energy
Outlook 2006 (AEO2006). EIA will be issuing AEO2006, with revised long-
term forecasts, in November 2005. We are seeking public comment on the
appropriate gasoline price forecast to use in the final rule, including
consideration of the AEO2006 forecast.
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\19\ http://www.eia.doe.gov/oiaf/aeo/index.html.
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2. Reports updating fuel economy potential
Additionally, the agency has placed in the docket for this notice a
2005 document, prepared under the auspices of the Department of Energy
(DOE) for NHTSA, updating the estimates of light-truck fuel economy
potential and costs in the 2001 NAS report, ``Effectiveness and Import
of Corporate Average Fuel Economy (CAFE) Standards. The agency seeks
comments on this document. After having this document peer reviewed,
the agency will place the peer reviewers' reports in the docket for
public comment.
We note that the introduction of the 2005 DOE document states that
that document does not address the costs and benefits of hybrid and
diesel technology because these matters have been documented in a 2004
Energy and Environmental Analysis, Inc. (EEA) study for the DOE. The
title of that study is ``Future Potential of Hybrid and Diesel
Powertrains in the U.S. Light-Duty Vehicle Market.''\20\ The agency has
placed that study in the docket and seeks comments on it as well.
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\20\ See http://www-cta.ornl.gov/cta/Publications/pdf/ORNL_TM_2004_181_HybridDiesel.pdf.
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III. The Unreformed CAFE proposal for MYs 2008-2010
As part of our Reformed CAFE proposal, we have crafted a transition
period in which manufacturers have the option of complying with either
the Reformed or the Unreformed CAFE systems. During the transition
period, the requirements under the Reformed CAFE systems are linked to
those of the Unreformed system. The Reformed CAFE standards for MYs
2008-2010 would be set at levels intended to ensure that the industry-
wide cost of the Reformed standards are roughly equivalent to the
industry-wide cost of the Unreformed CAFE standards in those model
years. This approach has several important advantages. If the
Unreformed standards are judged to be economically practicable and
since the Reformed standards spread the cost burden across the industry
to a greater extent, equalizing the costs between the two systems
ensures that the Reformed standards will be within the realm of
economic practicability. Further, this approach promotes an orderly and
effective transition to the Reformed CAFE system since experience will
be gained prior to MY 2011. In this section, we describe how we
developed the Unreformed CAFE standards.
In developing this proposal for Unreformed CAFE standards, we first
analyzed the data submitted by the manufacturers using the same type of
analyses we employed in establishing light truck CAFE standards for MYs
2005-2007. We determined which manufacturers have a significant share
of the light truck market, analyzed data to determine the CAFE
``baseline'' for each of those companies, and then conducted a manual
engineering analysis (the Stage Analysis)--in conjunction with a
computer-based engineering analysis (the Volpe Analysis)--to determine
what technologies each company with a significant share of the market
could use to enhance its overall fleet fuel economy average.\21\
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\21\ The ``Stage'' Analysis primarily involved application of
the agency's engineering judgment and expertise about possible
adjustments to the detailed product plans submitted by
manufacturers. The methodology of the Volpe model was described in
detail in the NPRM and Final Rule establishing light truck CAFE
standards for MYs 2005-2007. The model has been updated and refined,
but remains fundamentally the same. The updated model has been peer
reviewed. The model documentation, including a description of the
input assumptions and process, as well as peer review reports, will
be made available in the rulemaking docket for this notice. The
agency will respond to the reports, and the public comments on those
reports, at the time of the final rule.
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[[Page 51424]]
Giving particular regard to the capabilities of the least capable
manufacturer with a significant share of the market, we have
tentatively determined the maximum feasible fuel economy levels for MYs
2008-2010. In doing so, we took into account the four statutory factors
(the nation's need to conserve energy, technological feasibility,
economic practicability (including employment consequences) and the
impact of other regulations on fuel economy) as well as other included
or relevant considerations such as the need to protect against adverse
safety consequences.
As noted above, we have tentatively determined that the following
fuel economy standards for MYs 2008-2010 are the maximum feasible
levels under the Unreformed approach to light truck CAFE:
MY 2008--22.5 mpg
MY 2009--23.1 mpg
MY 2010--23.5 mpg
A. Baseline for determining manufacturer capabilities in MYs 2008-2010
In evaluating the manufacturers' fuel economy capabilities for MYs
2008-2010, we analyzed manufacturers' projections of their CAFE and
their underlying product plans and considered what, if any, additional
actions the manufacturers could take to improve their fuel economy. In
order to determine the fuel economy capabilities of manufacturers
during MYs 2008-2010, we first determined the manufacturers' fuel
economy baselines for those years. That is, we determined the fuel
economy levels that manufacturers are planning to achieve in those
years, given the level of the CAFE standards that they were required to
comply with in MY 2007. We relied upon the information submitted by
manufacturers in response to the December 29, 2003 request for product
plans and any additional manufacturer updates, to determine those
plans.
For those manufacturers that did not submit information for those
model years, we relied on data from the latest model year for which
information from the manufacturers is available. To the extent that
additional public information was available regarding the MY 2008-2010
product plans, we incorporated that information into the baselines for
those manufacturers.
We note that although manufacturers may receive credit toward their
CAFE compliance by placing alternative fuel vehicles into the market
through MY 2008, the statute prohibits us from taking such benefits
into consideration in determining the maximum feasible fuel economy
standard (49 U.S.C. 32902(h)). Accordingly, the baselines and
projections do not reflect those credits.
1. General Motors
General Motors' share of the light truck market for MY 2004 was
31.8 percent. In its submission of MY 2008-2010 product plans, General
Motors projected that, based on those plans, its light truck fleet
would achieve a CAFE level of 21.2 mpg for MY 2008, 21.3 mpg for MY
2009, and 21.3 mpg for MY 2010. Its plans were based on sales of GMC,
Chevrolet, Pontiac, Buick, Cadillac, Hummer, SAAB, and Saturn
vehicles.\22\
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\22\ The agency does not consider the overall fleet fuel economy
projection for a manufacturer to be entitled to confidential
treatment, whether derived from our own analysis or provided by the
manufacturer. The agency has consistently published this information
in all prior rulemakings establishing CAFE standards. See for
example, 68 FR 16868; April 7, 2003, 67 FR 77015; December 16, 2002,
59 FR 16312; April 6, 1994, and 53 FR 11074; April 5, 1988.
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2. Ford
Ford Motor Company controlled 25.7 percent of the light truck
market in the U.S. in MY 2004. Ford projected that its light truck
fleet would achieve a CAFE level of 21.6 mpg for MY 2008, 22.0 mpg for
MY 2009 mpg, and 22.3 mpg for MY 2010. Its data were based on sales of
Ford branded vehicles, as well as Lincoln, Mercury, Mazda, Land Rover
and Volvo branded vehicles.
3. DaimlerChrysler
DaimlerChrysler controlled 19.8 percent of the U.S. light truck
market in MY 2004. DaimlerChrysler submitted product plans for MYs
2008-2010, and projected that its light truck fleet would achieve a
CAFE level of 21.9 mpg for MY 2008, 22.3 mpg for MY 2009, and 22.3 mpg
for MY 2010. Its data were based on sales of Chrysler, Jeep, Dodge,
Mercedes, Mitsubishi, Smart\23\, and Sprinter brand vehicles.
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\23\ The agency notes that some vehicles and vehicle lines that
were included in a manufacturer's product plan ultimately may not be
produced. However, the agency relies on the product plans as
submitted. Further, if any vehicles are dropped, they are expected
to constitute a small percentage of a manufacturer's fleet and have
minimal impact on a manufacturer's projected capabilities.
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4. Other manufacturers
Of the remaining manufacturers, Nissan and Hyundai (including Kia)
provided information regarding sales and fuel economy projections for
their vehicles through MY 2010.
The balance of the remaining manufacturers did not provide any MY
2008-2010 information.\24\ For these manufacturers (Toyota, Honda,
Subaru, Isuzu, Suzuki, BMW, Porsche, and Volkswagen), we relied on
manufacturer information from the latest model year for which it was
available, and publicly available information regarding their MY 2008-
2010 product plans. Toyota, Honda, and Subaru provided fuel economy
projections for MYs 2005-2007. The projected levels of fuel economy
provided by Toyota and Honda would comply with the CAFE standard for MY
2007. Accordingly, we used those projected levels for each of MYs 2008-
2010. Subaru's submission was supplemented by publicly available
information regarding its future vehicle fleet to arrive at its MY
2008-2010 baselines.
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\24\ In the past, these manufacturers have generally not
provided such information since they have either chosen to pay civil
penalties instead of complying with the CAFE standards or had fleet
fuel economy averages far enough above the standards that it was not
necessary for them to make additional improvements in fuel economy.
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Isuzu, Suzuki, BMW, Porsche, and Volkswagen did not submit any
response. For Isuzu and Suzuki's baselines, we used the latest year for
which we had product data (MY 2005) and combined those data with
publicly available information regarding Isuzu and Suzuki's future
product plans. Further, since all of the light trucks produced by Isuzu
and Suzuki are sister vehicles to General Motors vehicles, we were able
to determine the technical details for those vehicles. BMW, Porsche,
and Volkswagen previously paid fines in lieu of complying with the MY
2002 and 2003 light truck CAFE standards. The agency assumes that
because of that past history and their low light truck production
volumes, BMW, Porsche, and Volkswagen will continue to pay fines
instead of bringing their fleets into compliance. Therefore, we relied
on the fuel economy levels from MY 2005 in projecting the baseline for
these three manufacturers.
Table 1 provides the baseline values for manufacturers other than
General Motors, Ford, and DaimlerChrysler:
[[Page 51425]]
Table 1.--Baseline Values for Manufacturers Other Than General Motors,
Ford and DaimlerChrysler
[In mpg]
------------------------------------------------------------------------
MY 2008 MY 2009 MY 2010
------------------------------------------------------------------------
Toyota................................. 22.9 22.9 22.9
Honda.................................. 24.4 24.4 24.4
Nissan................................. 20.7 20.8 21.2
Hyundai................................ 21.8 23.2 22.8
Subaru................................. 25.7 26.2 26.2
BMW.................................... 21.3 21.3 21.3
Porsche................................ 16.8 16.8 16.8
Isuzu.................................. 20.4 20.2 20.1
Suzuki................................. 21.9 21.9 21.9
Volkswagen............................. 18.8 18.8 18.8
------------------------------------------------------------------------
B. Selection of Proposed Unreformed CAFE Standards--Process for
Determining Maximum Feasible Levels
We have tentatively concluded that the proposed standards for the
Unreformed CAFE system are technologically feasible and economically
practicable for those manufacturers with a substantial share of the
light truck market (General Motors, Ford, and DaimlerChrysler), are
capable of being met without substantial product restrictions, and will
enhance the ability of the nation to conserve fuel and reduce its
dependence on foreign oil.
In determining the maximum feasible fuel economy level, we are
required to consider the four statutory factors and are permitted to
consider additional societal considerations. The agency has
historically included the potential for adverse safety consequences
when deciding upon a maximum feasible level.\25\ The overarching
principle that emerges from the enumerated factors and the court-
sanctioned practice of considering safety and links them together is
that CAFE standards should be set at a level that will achieve the
greatest amount of fuel savings without leading to adverse economic or
other societal consequences.
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\25\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F. 2d
1322 (D.C. Cir. 1986) (Administrator's consideration of market
demand as component of economic practicability found to be
reasonable); Public Citizen 848 F.2d 256 (Congress established broad
guidelines in the fuel economy statute; agency's decision to set
lower standard was a reasonable accommodation of conflicting
policies). As the United States Court of Appeals pointed out in
upholding NHTSA's exercise of judgment in setting the 1987-1989
passenger car standards, ``NHTSA has always examined the safety
consequences of the CAFE standards in its overall consideration of
relevant factors since its earliest rulemaking under the CAFE
program.'' Competitive Enterprise Institute v. NHTSA (CEI I), 901
F.2d 107, 120 at n.11 (D.C. Cir. 1990).
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As discussed in many past fuel economy notices, the legislative
history of EPCA explicitly states that NHTSA is to take industry-wide
considerations into account in determining the maximum feasible CAFE
levels, and not necessarily base its determination on any particular
company's asserted or projected abilities. This means that CAFE
standards will not necessarily be set at the precise level that is
associated with the plans of the ``least capable manufacturer'' with a
substantial share of the market or that is projected by the agency for
that manufacturer. (For a discussion of the industry-wide
considerations and the origins of the ``least capable manufacturer''
concept, see section IV.A.2.b below.)
It means further that we must take particular care in considering
the statutory factors with regard to these manufacturers--weighing
their asserted capabilities, product plans and economic conditions
against agency projections of their capabilities, the need for the
nation to conserve energy and the effect of other regulations
(including motor vehicle safety and emissions regulations) and other
public policy objectives.
This approach is consistent with the Conference Report on the
legislation enacting the CAFE statute:
Such determination [of maximum feasible average fuel economy
level] should take industry-wide considerations into account. For
example, a determination of maximum feasible average fuel economy
should not be keyed to the single manufacturer that might have the
most difficulty achieving a given level of average fuel economy.
Rather, the Secretary must weigh the benefits to the nation of a
higher average fuel economy standard against the difficulties of
individual manufacturers. Such difficulties, however, should be
given appropriate weight in setting the standard in light of the
small number of domestic manufacturers that currently exist and the
possible implications for the national economy and for reduced
competition association [sic] with a severe strain on any
manufacturer.
S. Rep. No. 94-516, 94th Congress, 1st Sess. 154-155 (1975).
The agency has historically assessed whether a potential CAFE
standard is economically practicable in terms of whether the standard
is one ``within the financial capability of the industry, but not so
stringent as to threaten substantial economic hardship for the
industry.'' \26\ See, e.g., Public Citizen, 848 F.2d at 264. In
essence, in determining the maximum feasible level of CAFE, the agency
assesses what is technologically feasible for manufacturers to achieve
without leading to adverse economic consequences, such as a significant
loss of jobs or the unreasonable elimination of consumer choice.
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\26\ In adopting this interpretation in the final rule
establishing the MY 1981-1984 fuel economy standards for passenger
cars (June 30, 1977; 42 FR 33534, at 33536-7), the Department
rejected several more restrictive interpretations. One was that the
phrase means that the standards are statutorily required to be cost-
beneficial. The Department pointed out that Congress had rejected a
manufacturer-sponsored amendment to the Act that would have required
standards to be set at a level at which benefits were commensurate
with costs. It also dismissed the idea that economic practicability
should limit standards to free market levels that would be achieved
with no regulation.
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At the same time, the law does not preclude a CAFE standard that
poses considerable challenges to any individual manufacturer. The
Conference Report 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.'' CAS, 793 F.2d at
1338-9. Instead, the agency is compelled ``to weigh the benefits to the
nation of a higher fuel economy standard against the difficulties of
individual automobile manufacturers.'' Id. The statute permits the
imposition of reasonable, ``technology forcing'' challenges on any
individual manufacturer, but does not contemplate standards that will
result in ``severe'' economic hardship by forcing
[[Page 51426]]
reductions in employment affecting the overall motor vehicle
industry.\27\
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\27\ In the past, the agency has set CAFE standards above its
estimate of the capabilities of a manufacturer with less than a
substantial, but more than a de minimus, share of the market. See,
e.g., CAS, 793 F.2d at 1326 (noting that the agency set the MY 1982
light truck standard at a level that might be above the capabilities
of Chrysler, based on the conclusion that the energy benefits
associated with the higher standard would outweigh the harm to
Chrysler, and further noting that Chrysler had 10-15 percent market
share while Ford had 35 percent market share). On other occasions,
the agency reduced an established CAFE standard to address
unanticipated market conditions that rendered the standard
unreasonable and likely to lead to severe economic consequences. 49
FR 41250, 50 FR 40528, 53 FR 39275; see Public Citizen, 848 F.2d at
264.
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As a first step toward ensuring that the CAFE levels selected as
the maximum feasible levels under Unreformed CAFE will not lead to
adverse consequences, we reviewed in detail the confidential product
plans provided by the manufacturers with a substantial share of the
light truck market (General Motors, Ford and DaimlerChrysler) and
assessed their technological capabilities to go beyond those plans. By
doing so, we are able to determine tentatively the extent to which each
can enhance their fuel economy performance using technology.
C. Technologically Feasible Additions to Baseline
The agency has analyzed potential technological improvements to the
product offerings for each manufacturer with a substantial share of the
light truck market and for the remaining light truck manufacturers.\28\
Under the Unreformed system, we focused on General Motors, Ford, and
DaimlerChrysler as the manufacturers with substantial shares of the
light truck market. We also conducted analyses of the potential for the
other manufacturers to achieve fuel economy levels above their
baselines.
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\28\ A more detailed discussion of these issues is contained in
the agency's PRIA, which has been placed in the docket for this
notice. Some of the information included in the PRIA, including the
details of manufacturers' future product plans, has been determined
by the Agency to be confidential business information the release of
which could cause competitive harm. The public version of the PRIA
omits the confidential information. The PRIA discusses in detail the
fuel economy enhancing technologies expected to be available during
the MY 2008-2010 time period.
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For the purpose of analyzing the potential technological
improvements, we applied a three-stage engineering analysis that we
relied upon in previous light truck fuel economy rulemakings (Stage
Analysis).
At each stage of that analysis, we added technologies based on our
engineering judgment and expertise about possible adjustments to the
detailed product plans submitted in response to the 2003 request for
product plans. Our decision whether and when to add a technology
reflected our consideration of the practicability of applying a
specific technology and the necessity for lead-time in its application.
The agency recognized that vehicle manufacturers must have
sufficient lead time to incorporate changes and new features into their
vehicles. Further, in making its lead time determinations, the agency
considered the fact that vehicle manufacturers follow design cycles
when introducing or significantly modifying a product. In addition to
considering lead time, the agency added technologies in a cost-
minimizing fashion. That is, it generally first added technologies that
were most cost-effective.
In evaluating which technologies to apply, and the sequence in
which to apply them, we followed closely the NAS report. The NAS report
estimated the incremental benefits and the incremental costs of
technologies that may be applicable to actual vehicles of different
classes and intended uses (see NAS p. 40).\29\ The NAS report also
identified what it called ``cost-efficient technology packages,'' i.e.,
combinations of technologies that would result in fuel economy
improvements sufficient to cover the purchase price increases that such
technologies would require (see NAS p. 64).
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\29\ Additionally, as noted above, the agency has placed in the
docket for this notice a document, prepared under the auspices of
the U.S. Department of Energy for NHTSA, that updates the estimates
of light-truck fuel economy potential in the 2001 National Academy
of Sciences (NAS) report, ``Effectiveness and Impact of Corporate
Average Fuel Economy (CAFE) Standards.''
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The Stage I analysis includes technologies that manufacturers state
as being available for use by MY 2008 or earlier, but are choosing not
to use them in their product plans. Many of these technologies are
currently being used in today's light duty truck fleet. These
technologies include non-powertrain applications such as low rolling
resistance tires, low friction lubricants, aerodynamic drag reduction,
and electric power steering pumps.
The Stage II analysis includes two major categories of
technological improvements to the manufacturer's fleets, the timing of
which is tied as nearly as possible to planned model change and engine
introduction years. The first of these categories is transmission
improvements, which consists of the introduction and expanded use of 5-
speed and 6-speed transmissions and continuously variable transmissions
(CVTs). The application of CVTs was restricted to vehicles that are not
designed for rugged off-road applications and/or the need to haul heavy
loads, such as smaller unibody SUVs. The second category was engine
improvements, and consisted of gradually upgrading all light truck
engines to include multi-valve overhead camshafts, introducing engines
with more than 2-valves per cylinder, applying variable valve timing/
variable valve lift and timing to multi-valve overhead camshaft
engines, and applying cylinder deactivation to 6- and 8-cylinder
engines.
The Stage III analysis included projections of the potential CAFE
increase that could result from the application of diesel engines and
hybrid powertrains to some products. Both diesel engines and hybrid
powertrains appear in several manufacturers plans within the MY 2008-
2010 timeframe, and other manufacturers have publicly indicated that
they are looking seriously into both technologies.
Some of the technologies considered under the Stage Analysis have
been used in production for over a decade; e.g., engine friction
reduction and low friction lubricants. Some have only recently been
incorporated in light trucks; e.g., 5-speed and 6-speed automatic
transmissions and variable valve timing. Others have been under
development for a number of years, but have not yet been produced in
significant quantity for an extended period of time (e.g., cylinder
deactivation, variable valve lift and timing, CVT, integrated starter
generator, and hybrid drive trains).
Our analysis included the possibility of limited vehicle weight
reduction for vehicles over 5,000 lbs. curb weight where we determined
that weight reduction would not reduce overall safety and would be a
cost effective choice.\30\ We determined that reducing the weight of
these vehicles would not reduce overall safety. The Kahane study found
that the net safety effect of removing 100 pounds from a light truck is
zero for light trucks with a curb weight greater than 3,900 lbs.\31\
However, given the significant statistical uncertainty around that
figure, we
[[Page 51427]]
assumed a confidence bound of approximately 1,000 lbs. and used 5,000
lbs. as the threshold for considering weight reduction.\32\ We used
weight reduction primarily in conjunction with a planned vehicle
redesign or freshening and sometimes in concert with a reduction in
aerodynamic drag.
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\30\ The amount of projected weight reduction was two percent
for light trucks with a curb weight between 5,000 and 6,000 lbs and
up to four percent for light trucks with a curb weight over 6,000
lbs.
\31\ Kahane, Charles J., PhD, Vehicle Weight, Fatality Risk and
Crash Compatibility of Model Year 1991-99 Passenger Cars and Light
Trucks, October 2003. DOT HS 809 662. Page 161. Docket No. NHTSA-
2003-16318 (http://www.nhtsa.dot.gov/cars/rules/regrev/evaluate/pdf/809662.pdf).
\32\ See the discussion of ``Effect of Weight and Performance
Reductions on Light Truck Fuel Economy'' in Chapter V of the PRIA.
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Further, our Stage Analysis does not apply technologies where it is
not technically sensible to do so. For instance, we estimate that
replacing an overhead valve engine with a multi-valve overhead camshaft
engine of the same displacement and replacing a 4-speed automatic
transmission with a 5- or 6-speed automatic transmission offer about
the same potential level of improvement. One of them may be more
attractive to a particular manufacturer because of its cost, ease of
manufacturing, or the model lines to which it would apply.
The technologically feasible fuel economy levels determined under
the Stage Analysis were then input into the Volpe model. The Volpe
model uses a technology application algorithm developed by Volpe Center
staff to apply technologies to manufacturers' baselines in order to
achieve the fuel economy levels produced under the Stage Analysis. This
algorithm systematically applies consistent cost and performance
assumptions to the entire industry, as well as consistent assumptions
regarding economic decision-making by manufacturers. Technologies were
selected and applied in order of ``effective cost,'' (total cost - fine
reduction - fuel savings value) / (number of affected vehicles).\33\
This formula is a private cost concept, i.e., it looks at costs to the
manufacturer. It is used to predict how a manufacturer would sequence
the addition of technologies to meet a given standard.
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\33\ In the current model year, the system begins by carrying
over any technologies applied in the preceding model year, based on
commonality of engines and transmissions, as well as any identified
predecessor/successor relationships among vehicle models. At each
subsequent step toward compliance by a given manufacturer in the
current model year, the system considers all engines, transmissions,
and vehicles produced by the manufacturer and all technologies that
may be applied to those engines, transmissions, and vehicles, where
the applicability of technologies is governed by a number of
constraints related to engineering and product planning. The system
selects the specific application of a technology (i.e., the
application of a given technology to a given engine, transmission,
vehicle model, or group of vehicle models) that yields the lowest
``effective cost'', which the system calculates by taking (1) the
cost (retail price equivalent) to apply the technology times the
number of affected vehicles, and subtracting (2) the reduction of
civil penalties achieved by applying the technology, and subtracting
(3) the estimated value to vehicle buyers of the reduction in fuel
outlays achieved by applying the technology, and dividing the sum of
these components by the number of affected vehicles.
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The level of fuel economy improvement resulting from the Stage
Analysis provides the basis for the proposed Unreformed CAFE standards.
The Volpe model was then used to estimate benefits and costs. The Volpe
model is given, as an input, the level of fuel economy improvement and
then proceeds to analyze what technologies can be added to meet the
standard determined by the Stage Analysis. Although similar, the two
analyses do not apply exactly the same technologies. Both are merely
ways of achieving the given standard, not predictions of how
manufacturers will actually meet it. As explained below in the section
on economic practicability and other economic issues, additional
analysis was performed to ensure that the proposed Unreformed CAFE
standards are economically practicable for the industry.
In its submission, General Motors described a variety of
technologies that could be used to improve fuel economy. For each such
technology, General Motors included its estimated fuel economy benefit,
the basis for that estimate, whether the benefit was direct or
interactive, a description of how the technology works and how it
increases fuel economy, when the technology would be available for use,
its potential applications, where it is currently employed in General
Motors' light truck fleets, where the technology could potentially be
used, risks in employing the technology, and potential impacts on
noise, vibration and harshness (NVH), safety, emissions, cargo and
towing capacity.
The agency relied on these descriptions in determining which
technologies General Motors could employ in its fleet during MYs 2008-
2010.\34\ To assess the fuel economy impacts of these technologies, we
used either the NAS report's mid-range numbers \35\ or, when General
Motors submitted higher numbers for a particular technology, we used
General Motors' numbers.
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\34\ The determination of technology application that could be
employed by a specific manufacturer was based on confidential
information provided by each manufacturer. The nature of this
confidential information would become apparent from listing the
technologies applied by the agency and therefore our discussion in
the public document is of a general nature.
\35\ The NAS report (p. 42) assessed the fuel consumption impact
of technologies applicable to light trucks, including emerging
technologies. For most of these technologies, the NAS report
presented a range of potential fuel consumption improvement
attributable to each technology.
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As a result of the Stage Analysis, we have tentatively concluded
that, for MYs 2008-2010, General Motors is the least capable of the
manufacturers that have a significant share of the light truck market.
To ensure that the proposed Unreformed CAFE improvements would not lead
to economically severe consequences for the industry, we have given
particular regard to General Motors' projected capabilities when
balancing the statutory factors to arrive at the proposed standards.
We note that when we established the light truck CAFE standards for
MYs 2005-2007, we set the standard for MY 2007 at a level somewhat
beyond that we had determined technologically achievable by General
Motors, then also the ``least capable manufacturer.'' We will carefully
review the updated product plans that we anticipate General Motors will
submit and will review the projections for General Motors' capability
when deciding upon final light truck standards for these model years.
As directed by law, we will balance all the statutory factors, as well
as our concern for motor vehicle safety, before conclusively
determining the appropriate level of light truck CAFE standards for MYs
2008-2010.
Ford and DaimlerChrysler each submitted information similar to that
provided by General Motors. The agency engaged in the same type of
analysis in assessing the potential fuel economy capabilities for those
manufacturers. The agency also engaged in the same type of analysis in
assessing the potential fuel economy capabilities for Honda, Hyundai,
Nissan and Toyota, although the information provided by those companies
was less detailed than that of DaimlerChrysler, Ford and General
Motors.
Upon reviewing the product plans and making adjustments as
described--and balancing the nation's need to conserve energy with what
is technologically feasible, economically practicable and unlikely to
produce adverse consequences--we have tentatively determined that the
following light truck CAFE standards are the maximum feasible fuel
economy levels achievable:
MY 2008-22.5.
MY 2009-23.1.
MY 2010-23.5.
D. Economic Practicability and Other Economic Issues
As explained above, the agency has historically reviewed whether a
CAFE standard is economically practicable in
[[Page 51428]]
terms of whether the standard is one ``within the financial capability
of the industry, but not so stringent as to threaten substantial
economic hardship for the industry.'' See, e.g., Public Citizen, 848
F.2d at 264. In the Stage Analysis, technologies are applied to project
fuel economy levels that would be technologically feasible for a
manufacturer. When considering economic practicability, the agency
reviews whether technologically feasible levels may lead to adverse
economic consequences, such as a significant loss of sales or the
unreasonable elimination of consumer choice. The agency must ``weigh
the benefits to the nation of a higher fuel economy standard against
the difficulties of individual automobile manufacturers.'' CAS, 793
F.2d at 1332.
The agency has estimated not only the anticipated costs that would
be borne by General Motors, Ford, DaimlerChrysler, Honda, Hyundai,
Nissan and Toyota to comply with the standards under the Unreformed
CAFE system, but also the significance of the societal benefits
anticipated to be achieved through fuel savings and other economic
benefits from reduced petroleum use. In regard to economic impacts on
manufacturers and societal benefits, we have relied on the Volpe model
to determine a probable range of costs and benefits.
The Volpe model was used to evaluate the standards initially
produced under the Stage Analysis in order to estimate their overall
economic impact as measured in terms of increases in new vehicle prices
on a manufacturer-wide, industry-wide, and average per-vehicle basis.
Like the Stage Analysis, the Volpe model relies on the detailed product
plans submitted by manufacturers, as well as available data relating to
manufacturers that had not submitted detailed information. The Volpe
model is used to trace the incremental steps (and their associated
costs) that a manufacturer would take toward achieving the standards
initially suggested by the Stage Analysis.
Based on the Stage and Volpe analyses, we have concluded that these
standards would not significantly affect employment or competition, and
that--while challenging--they are achievable within the framework
described above, and that they would benefit society considerably. For
this analysis, we have where possible translated the benefits into
dollar values and compared those values to our estimated costs for this
proposed rule.
1. Costs
In order to comply with the proposed Unreformed CAFE standards, we
estimate the average incremental cost per vehicle to be $56 for MY
2008, $130 for MY 2009, and $185 for MY 2010. The total incremental
cost (the cost necessary to bring the corporate average fuel economy
for light trucks from 22.2 mpg (the standard for MY 2007) to the
proposed standards) is estimated to be $528 million for MY 2008, $1,244
million for MY 2009, and $1,798 million for MY 2010.
Our cost estimates for the proposed standards under the Unreformed
CAFE system were based on the application of technologies and the
resulting costs to individual manufacturers. We assumed that
manufacturers would apply technologies on a cost-effectiveness basis
(as described above). More specifically, within the range of values
anticipated for each technology, we selected the most plausible cost
impacts and fuel consumption impacts during the model years under
consideration.
Using the estimated costs and fuel savings for the different
technologies, the agency then examined the projections provided by
different manufacturers for their light truck fleet fuel economy for
MYs 2008-2010. Although the details of the projections by individual
manufacturers are confidential, present fuel economy performance
indicates that some manufacturers would, if their planned fleets remain
unchanged, be able to meet the proposed standards without significant
expenditures. Other manufacturers would need to expend significantly
more effort than that called for in their product plans to meet the
proposed standards.
Some manufacturers might achieve more fuel savings than others
using similar technologies on a vehicle-by-vehicle basis due to
differences in vehicle weight and other technologies present. However,
this analysis assumes an equal impact from specific technologies for
all manufacturers and vehicles. The technologies were ranked based on
the cost per percentage point improvement in fuel consumption and
applied where available to each manufacturer's fleet in their order of
rank. The complete list of the technologies and the agency's estimates
of cost and associated fuel savings can be found in the PRIA.
The level of additional expenditure necessary beyond already
planned investment varies for each individual manufacturer. We based
expenditures on cost estimates we developed for various technologies
that are both available to and technologically feasible for
manufacturers within the time frame covered by this NPRM.
Our cost analysis recognizes the importance of the competitive
market. We believe that the standards proposed under the Unreformed
CAFE system will not limit the availability of vehicles that consumers
need and want. We believe that the standards established in this final
rule will not result in noticeable changes to power-to-weight ratios,
towing capacity or cargo and passenger hauling ability. In short, the
standards will not affect the utility of available vehicles and
therefore should not conflict with consumer preferences.
2. Benefits
In the PRIA, the agency analyzes the economic and environmental
benefits of the proposed Unreformed CAFE standards by estimating fuel
savings over the lifetime of each model year (approximately 26 years).
Benefit estimates include both the benefits to consumers in terms of
reduced fuel use and other savings such as the reduced externalities
generated by the importing, refining and consuming of petroleum
products.
The benefits of the proposed increases in the Unreformed CAFE
standards are estimated to be $64 per vehicle for MY 2008, $142 per
vehicle for MY 2009, and $206 per vehicle for MY 2010. The total value
of these benefits is estimated to be $605 million for MY 2008, $1,366
million for MY 2009 and $2,007 million for MY 2010, based on fuel
prices ranging from $1.51 to $1.58 per gallon. (See the discussion of
current fuel prices vs. the fuel prices during the lifetime of the MY
2008-2010 light trucks in section II.J. Recent developments, above.)
3. Comparison of estimated costs to estimated benefits
Table 2 compares the incremental costs and benefits for the
Unreformed CAFE standards.
[[Page 51429]]
Table 2.--Comparison of Incremental Costs and Benefits for the Proposed
Unreformed CAFE Standards
(In millions)
------------------------------------------------------------------------
MY 2008 MY 2009 MY 2010
------------------------------------------------------------------------
Total incremental costs*............... $528 $1,244 $1,798
Total incremental benefits*............ $605 $1,366 $2,007
------------------------------------------------------------------------
* Relative to the 22.2 mpg standard for MY 2007.
These estimates are provided as present values determined by
applying a 7 percent discount rate to the future impacts. In the PRIA,
we also use a 3 percent discount rate for discounting benefits and
costs, and request comment on what discount rates are appropriate for
this rulemaking, including 3, 7, and 10 percent (see Section VIII in
the PRIA for a more detailed discussion). To the extent possible, we
translated impacts other than direct fuel savings into dollar values
and then factored them into our cumulative estimates. We obtained
forecasts of light truck sales for future years from AEO2005. Based on
these forecasts, NHTSA estimated that approximately 9,480,200 light
trucks would be sold in MY 2008. For MYs 2009 and 2010, we estimated
9,613,100 and 9,754,000 light truck sales, respectively.
We calculated the reduced fuel consumption of MY 2008-2010 light
trucks by comparing their consumption under the proposed standards for
those years to the consumption they would have if the MY 2007 CAFE
standard of 22.2 mpg remained in effect during those years. First, the
estimated fuel consumption of MY 2008-2010 light trucks was determined
by dividing the total number of miles driven during the vehicles'
remaining lifetime by the fuel economy level they were projected to
achieve under the 22.2 mpg standard.
Then, we assumed that if these same light trucks were produced to
comply with higher CAFE standards for those years, their total fuel
consumption during each future calendar year would equal the total
number of miles driven (including the increased number of miles driven
because of the ``rebound effect,'' the tendency of drivers to respond
to increases in fuel economy in the same manner as they respond to
decreases in fuel prices, i.e., by driving more),\36\ divided by the
higher fuel economy they would achieve as a result of that standard.
The fuel savings during each future year that would result from the
higher CAFE standard is the difference between each model year's fuel
use and the fuel use that would occur if the MY 2007 standard remained
in effect. This analysis results in estimated lifetime fuel savings of
0.8 billion, 1.9 billion, and 2.7 billion gallons for MYs 2008, 2009,
and 2010, respectively.
---------------------------------------------------------------------------
\36\ As described in detail in the PRIA, we use a 20% rebound
effect based on a thorough review of the literature. We are
nonetheless aware that there is ongoing research in this area, and
will continue to assess this assumption in light of new evidence.
---------------------------------------------------------------------------
Finally, we assessed the present value of each year's fuel savings
by multiplying the total number of gallons saved by the forecast fuel
prices for that year and applying a 7 percent discount rate. (As noted
above, we also used a 3 percent discount rate in the PRIA.) Fuel price
forecasts were obtained from EIA's Annual Energy Outlook 2005 and
adjusted to exclude state and local taxes. This analysis resulted in
values for estimated lifetime fuel savings of $938 million, $2,114
million, and $3,092 million under the proposed Unreformed CAFE
standards for MY 2008, 2009, and 2010, respectively, based on fuel
prices ranging from $1.51 to $1.58 per gallon.
In the PRIA, we also analyze other effects of the proposed
standards, e.g., the impact on vehicle and refinery emissions, gasoline
tanker truck emissions, and the rebound effect. Our analysis indicates
that the MY 2008 standard would result in a net reduction of criteria
pollutants with a present value of $15.5 million. For MY 2009, this net
reduction would have a present value of $34.8 million and for MY 2010
the net reduction of criteria pollutants would have a present value of
$52.1 million. We calculate per mile emission rates using EPA's Mobile
6.2 motor vehicle emissions factor model, and monetized changes in
total emission levels for criteria pollutants associated with gasoline
production, distribution, and combustion.\37\ We also discuss non-
monetized effects.
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\37\ The criteria pollutants used for the agency's analysis are
carbon monoxide, volatile organic compounds, nitrogen oxides, fine
particulate matter, and sulfur dioxide. Tailpipe emissions from
light trucks are predicted to increase under this rulemaking due to
the rebound effect, while emissions from refineries and gasoline
tanker trucks are predicted to decrease due to a reduction in
gasoline consumption.
---------------------------------------------------------------------------
A more detailed explanation of our analysis is provided in the PRIA
and the draft Environmental Assessment.
4. Uncertainty
The agency recognizes that science does not permit precise
estimates of benefits and costs. NHTSA performed a probabilistic
uncertainty analysis to examine the degree of uncertainty in the costs
and benefits. Factors examined included technology costs, technology
effectiveness in improving fuel economy, fuel prices, the value of oil
import externalities, and the rebound effect. This analysis employed
Monte Carlo simulation techniques to examine the range of possible
variation in these factors. The analysis indicates that the agency is
highly certain that the social benefits of the proposed CAFE levels
will exceed their costs for all 3 model years of Unreformed standards
included in the proposal.
We solicit comment on whether proposed levels of maximum feasible
CAFE reflect an appropriate balancing of the statutory and other
relevant factors. Based on those comments and other information,
including additional data and analysis, the standards adopted in the
final rule could well be different.
IV. The Reformed CAFE Proposal for MYs 2008-2011
We are proposing to establish Reformed standards for MYs 2008-2011.
As noted above, manufacturers would have a choice of complying with
either Unreformed standards or Reformed standards during the transition
period spanning MYs 2008-2010. The transition process should assist the
agency in learning about the industry's experiences with Reformed CAFE
and determining the best approach in future rulemakings.
A. Proposed Approach to Reform
The structure of Reformed CAFE for each model year would have three
basic elements--
(1)--Six footprint \38\ categories of vehicles.
---------------------------------------------------------------------------
\38\ Footprint is an aspect of vehicle size--the product of
multiplying a vehicle's wheelbase by its average track width.
---------------------------------------------------------------------------
(2)--A target level of average fuel economy for each footprint
category, as expressed by a step function. (The step or ``staircase''
nature of the function can be seen in Figure 2 below.)
[[Page 51430]]
(3)--a Reformed CAFE standard based on the harmonic production-
weighted average of the fuel economy targets for each category.
The required level of CAFE for a particular manufacturer for a
model year would be calculated after inserting the following data into
the standard for that model year: That manufacturer's actual total
production and its production in each footprint category for that model
year.\39\ The calculation of the required level would be made by
dividing the manufacturer's total production for the model year by the
sum of the six fractions (one for each category) obtained by dividing
the manufacturer's production in a category by the category's target.
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\39\ Since the calculation of a manufacturer's required level of
average fuel economy for a particular model year would require
knowing the final production figures for that model year, the final
formal calculation of that level would not occur until after those
figures are submitted by the manufacturer to EPA. That submission
would not, of course, be made until after the end of that model
year.
---------------------------------------------------------------------------
1. Distribution into footprint categories
Initially, the agency has made a preliminary determination to place
light trucks up to 8,500 lbs. GVWR into six categories based on vehicle
footprint. As discussed more fully below, the agency chose vehicle
footprint as the best potential attribute to use as the basis of a
Reformed CAFE program because it is an attribute which would best
assure consistency in vehicle design and structure between model years,
is consistent with our safety concerns, and may encourage the
development and availability of light-weight materials whose use might
advance fuel economy and preserve or maybe even enhance safety.
The six categories were defined after placing planned light truck
production onto a distribution plot by footprint. We then sought to
place the category boundaries generally at points indicating low volume
immediately to the left and high volume immediately to the right. Our
intent in doing so was to avoid providing an incentive to increase
vehicle size in order to move a model into a category with a lower
target. We sought to create a reasonable number of categories that
would also combine, to the extent practicable, similar vehicle types
into the same category structures.\40\
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\40\ Our effort to do so explains why the boundary between
categories 4 and 5 is between integers. The agency chose a non-
integer boundary for this boundary because, in doing so, it kept
vehicles with the same nameplate and utility within the same
grouping.
---------------------------------------------------------------------------
Our preliminary assessment of the categories is based on the
product plan information available to us when devising this proposal.
These categories may change based upon our review of updated product
plans received in response to this NPRM.
Figure 1 provides the distribution of projected MY 2008-2010
aggregate sales for the industry:
BILLING CODE 4910-59-P
[[Page 51431]]
[GRAPHIC] [TIFF OMITTED] TP30AU05.003
BILLING CODE 4910-59-C
In determining the number and location of categories, the agency
used its best judgment applying the considerations set forth above. The
agency has made the preliminary determination to establish 6 categories
for purposes of this rulemaking, based on vehicle footprint, as shown
in Table 2:
[[Page 51432]]
Table 2.--Proposed Footprint Categories
----------------------------------------------------------------------------------------------------------------
Footprint categories 1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
Range of vehicle footprint (sq. <= 43.0 > 43.0-47.0 > 47.0-52.0 > 52.0-56.5 > 56.5-65.0 > 65.0
ft.).............................
----------------------------------------------------------------------------------------------------------------
In future rulemakings, the agency may adjust the footprint
categories if necessary to better represent the fleets projected for
the model years covered.
2. Targets
For each of MYs 2008-2011, the agency established a target average
fuel economy level for each of the six footprint categories. The CAFE
standard would be the harmonic production-weighted average of those
targets. Thus, the average fuel economy of a manufacturer's vehicles in
any particular footprint category need not meet the target for that
footprint category. However, to the extent a manufacturer's vehicles
fall short of the target in any footprint category, that shortfall
would need to be offset by exceeding the target in one or more other
footprint categories.
a. Overview of target selection process
We used a three-phase process for determining targets that
represent the social optimum for the manufacturers as a group:
In phase one, we applied technologies to the fleet of each of the
seven largest manufacturers individually until we reached the point at
which the marginal cost of adding technology equaled the marginal
benefit of that technology for that manufacturer. We then placed the
modified fleets into the categories.\41\
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\41\ The seven manufacturers are General Motors, Ford,
DaimlerChrysler, Toyota, Honda, Hyundai and Nissan. We did not
include four additional manufacturers that sell light trucks--
Volkswagen, BMW, Porsche and Subaru--because the first three
historically have paid civil penalties in lieu of selling a
compliant fleet of light trucks and Subaru's market share is
considerably smaller than any other company in this market.
Together, the seven largest manufacturers account for approximately
95 percent of the market.
Looking at each manufacturer in this group of manufacturers,
instead of just the least capable manufacturer as under Unreformed
CAFE, provides us with a much fuller, more robust, and
representative, understanding and estimate of industry-wide
capabilities.
---------------------------------------------------------------------------
In phase two, for each category, we determined the position of the
targets relative to each other and a temporary level of the targets by
calculating the average CAFE of those of the seven largest
manufacturers that had vehicles in that category.
In phase three, we determined the proposed level of the targets by
simultaneously adjusting all of the targets upward or downward by a
uniform increment of fuel consumption until we reached the level at
which the marginal cost of adding technology to meet that level equaled
the marginal benefit of that technology for the seven largest
manufacturers, as a group.
This process for determining targets was based on the application
of technology under the Volpe model. Unlike the Unreformed CAFE system,
the Stage Analysis was not used.
b. Industry-wide considerations in selecting the targets
An Unreformed CAFE standard specifies a ``one size fits all''
(uniform) level of CAFE that applies to each manufacturer and is set
with particular regard to the lowest projected level of CAFE among the
manufacturers that have a significant share of the market. The
manufacturer with the lowest projected CAFE level has typically been
referred to as the ``least capable'' manufacturer.
As noted above, in selecting the Reformed CAFE targets, we looked
at the seven largest manufacturers, instead of focusing primarily on
the least capable manufacturer, because under Reformed CAFE, it is
unnecessary to set standards with particular regard to the capabilities
of a single manufacturer in order to ensure that the standards are
technologically feasible and economically practicable for all
manufacturers with a significant share of the market. This is true both
fleet wide and within any individual category of vehicles.
We note that the term ``least capable'' manufacturer is something
of a misnomer since a manufacturer's projected level of CAFE is
determined by two factors: the extent to which small or large vehicles
predominate in the manufacturer's planned production mix, and the type
and amount of fuel saving technologies that the manufacturer is deemed
capable of applying. Two manufacturers may apply the same type and
amount of fuel saving technologies to their fleets, yet have differing
CAFE levels, if the proportions of small vehicles and large vehicles in
each manufacturer's fleet are not identical. Thus, a full line
manufacturer may have a lower overall CAFE than a manufacturer
concentrating its production in the smaller footprint categories, even
though the former manufacturer has applied as much (or more) technology
as the latter manufacturer.
We have set the Unreformed standards with particular regard to the
``least capable'' manufacturer in response to the direction in the
conference report on the CAFE statute language to consider industry-
wide considerations, but not necessarily base the standards on the
manufacturer with the greatest compliance difficulties. By focusing
primarily on the least capable manufacturer with a significant share of
the market, this approach has ensured that the standards are
technologically feasible and economically practicable for all or most
of the manufacturers with a significant share of the market. If a
standard is technologically feasible and economically practicable for
the ``least capable'' manufacturer, it can be presumed to be so for the
``more capable'' manufacturers. Together, the manufacturers with a
significant share of the market represented a very substantial majority
of the light trucks manufactured and thus were deemed to represent
``industry-wide considerations.''
However, this approach limits the amount of fuel saving possible
under Unreformed CAFE. In the Unreformed system, the agency is
constrained by the least capable manufacturer to a much larger degree
than in the Reformed system. Since the Unreformed system is a uniform,
one-size-fits-all standard, the least capable manufacturer is the one
that specializes primarily in larger light trucks. Even though these
vehicles may be efficient, they have low fuel economy. The Unreformed
standard is set relative to the baseline fuel economy of the least
capable manufacturer. This means that other manufacturers making
smaller vehicles are not required to make improvements in order to
comply because their vehicles get higher fuel economy yet may not be
very efficient. The Reformed system takes manufacturer fleet mix into
account and requires everyone to improve fuel economy by mandating
similar levels of efficiency.
There is only one way under Unreformed CAFE of requiring the ``more
capable'' manufacturers with a significant share of the market, i.e.,
those with projected levels of CAFE higher than the level projected for
the ``least capable'' manufacturer, to apply more fuel saving
technologies than they
[[Page 51433]]
were already planning to apply. That way would be for the agency to set
a standard above the capabilities of the ``least capable''
manufacturer.
There is no need under Reformed CAFE to set the standards with
particular regard to the capabilities of the ``least capable''
manufacturer. Indeed, it would often be difficult to identify which
manufacturer should be deemed the ``least capable'' manufacturer under
Reformed CAFE. The ``least capable'' manufacturer approach was simply a
way of implementing the guidance in the conference report in the
specific context of Unreformed CAFE.
This proposal would change the context. The very structure of
Reformed CAFE standards makes it unnecessary to continue to use that
particular approach in order to be responsive to guidance in the
conference report. Instead of specifying a common level of CAFE, a
Reformed CAFE standard specifies a variable level of CAFE that varies
based on the production mix of each manufacturer. By basing the level
required for an individual manufacturer on that manufacturer's own mix,
a Reformed CAFE standard in effect recognizes and accommodates
differences in production mix between full- and part-line
manufacturers, and between manufacturers that concentrate on small
vehicles and those that concentrate on large ones.
There is an additional reason for ceasing to use the ``least
capable'' manufacturer approach. There would be relatively limited
added fuel savings under Reformed CAFE if we continued to use the
``least capable'' manufacturer approach even though there ceased to be
a need to use it. (This reasoning is very similar to the reasoning the
agency used under Unreformed CAFE when we rejected the suggestion by
Mercedes Benz that we should set the standards at the level achievable
by very small manufacturers.\42\ In rejecting that suggestion, we cited
the language from the conference report about considering industry-wide
considerations and not basing the standards on the manufacturer with
the greatest difficulties.)
---------------------------------------------------------------------------
\42\ 61 FR 145, 154; January 3, 1996.
---------------------------------------------------------------------------
c. Relative position of the targets
The first phase in determining the footprint category targets was
to determine separately for each manufacturer the overall level of CAFE
that would maximize the net benefits for that manufacturer's vehicles.
In this phase, as noted above, we considered the fleet of each of
the seven largest manufacturers without respect to specific footprint
category to which each of their vehicles is assigned. To find the
socially optimal point for each of these seven manufacturers, i.e., the
point at which the incremental or marginal change in costs equals the
incremental or marginal change in benefits for that manufacturer, we
used the Volpe model to compute the total costs and total benefits of
exceeding the baseline \43\ CAFE by progressively larger increments. We
began by exceeding the baseline by 0.1 mpg. We then used the model to
calculate the total costs and total benefits of exceeding the baseline
by 0.2 mpg. The marginal costs and benefits were then computed as the
difference between the total costs and total benefits resulting from
exceeding the baseline by 0.1 mpg and the total costs and benefits
resulting from exceeding the baseline by 0.2 mpg. We then used the
Volpe model to calculate the total costs and total benefits of
exceeding the baseline by 0.3 mpg and computed the difference between
the total costs and benefits between 0.2 mpg and 0.3 mpg to determine
the marginal costs and benefits.
---------------------------------------------------------------------------
\43\ An important distinction needs to be made between the
baseline and the manufacturer's product plan mpg. As discussed
earlier, ``baseline'' is defined as the fuel economy that would
exist absent of the rulemaking, i.e., the model year 2007 standard
of 22.2 mpg. The 22.2 mpg baseline differs from the mpg level
reported in a manufacturer's product plan. Some manufacturers report
fuel economy levels that are below 22.2 mpg. In that case, the cost
and benefits of going from the product plan mpg to the baseline
(22.2) mpg are not counted as costs and benefits of the rulemaking,
as they were already counted in the MY 2005-2007 final rule. Only
costs and benefits associated with going from baseline mpg to a
higher standard are counted. It is important to note that since
technology is applied on a cost effective basis, the most cost
effective technologies will be used to get a manufacturer from the
product plan mpg to the baseline mpg.
---------------------------------------------------------------------------
We continued making similar iterations until marginal costs equaled
marginal benefits for that manufacturer. Performing this iterative
process individually for each manufacturer pushed each of the seven
largest manufacturers to a point at which net benefits are maximized
for each manufacturer's vehicles.
In the second phase, we took the results of phase one, i.e., each
manufacturer's vehicles as modified by the technologies added to them
in that phase, and placed the vehicles into the categories based on
their footprints. Then, for each category, we determined the average
fuel economy of each of the largest seven manufacturers that had
vehicles in that footprint category. We then calculated a single
harmonic mean for each footprint category based on the average fuel
economy of each of the manufacturers selling vehicles in that footprint
category.
The level of the single harmonic average or temporary target for
each footprint category relative to the levels of the temporary targets
for the other footprint categories defines the ``shape'' of the
function on which the standard is based. The shape remains unchanged
throughout the equal increment adjustments in phase three below since
the absolute differences (on a gallon per mile basis) between the
targets are unaffected by those adjustments.
Figure 2 provides an illustrative example. The figure depicts a
step or ``staircase'' function that steps down, left to right, from the
highest target (for the footprint category with the vehicles having the
smallest footprints, i.e., footprint category 1) to the lowest target
(for the footprint category with the vehicles having the largest
footprints, i.e., footprint category 6).\44\ For any value of footprint
within the range of footprints included in a particular category, the
fuel economy target is the same.
---------------------------------------------------------------------------
\44\ Although the height of each step in the hypothetical shown
in the figure is identical, it is unlikely that any two steps would
be identical in height.
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[[Page 51434]]
[GRAPHIC] [TIFF OMITTED] TP30AU05.004
d. Level of the targets
For each model year after the transition period of MYs 2008-2010,
i.e., beginning with MY 2011, the third phase involves determining the
level of the CAFE targets (and thus the level of the standard) that
would require the economically efficient amount of effort by the seven
largest manufacturers, as a group, to improve fuel economy. The process
for determining the targets that require that amount of overall effort
resembles, but is not identical to the process used in phase one for
determining the optimum levels of each individual manufacturer.
This third phase of adjustment is necessary because while the
economically efficient level of CAFE for each individual manufacturer
was determined in phase one, the calculation in phase two of the
category averages of those manufacturer-specific levels does not
necessarily result in values that correspond to the optimized level of
effort for the entire industry, as represented by the seven largest
manufacturers, as a group. To ensure that the step function is placed
at the level that results in a standard that is optimal for the seven
largest manufacturers, as a group, phase three involves the computation
of total and marginal costs and benefits across the entire industry
(using the combination of the largest seven manufacturers as a proxy
for the entire industry), instead of manufacturer by manufacturer.
We begin phase three where we began phase one, i.e., with each
manufacturer's baseline CAFE derived, where available, from its product
plans. For MY 2011, we used the same baselines as we did for MY 2010,
except for manufacturers for which we had MY 2011 product plans from
the manufacturer and thus had a MY 2011 baseline. After converting each
temporary target (determined in phase two) from miles per gallon to
gallons per mile so that we could adjust the footprint category targets
by a uniform increment of fuel savings,\45\ we adjusted all six targets
by an equal increment and then converted them back to miles per gallon.
We adjusted each category target by an equal increment so that the
final category target remained relatively close to each manufacturer's
individual optimal level in that category (i.e., the manufacturer-
specific levels determined in the first phase).
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\45\ The relationship between miles per gallon and fuel savings
is not linear. An increase from 20 mpg to 21 mpg results in a
greater fuel savings than an increase from 30 mpg to 31 mpg.
Conversely, the relationship between gallons per mile and fuel
savings is linear. A change from 0.10 gallons per mile to 0.09
gallons per mile provides the same fuel savings as going from 0.20
gallons per mile to 0.19 gallons per mile.
---------------------------------------------------------------------------
The direction of these adjustments can be either upward or
downward, depending on the marginal costs and benefits. An example of
the process of adjusting the targets, while maintaining the shape of
the step function, is illustrated in Figure 3:
[[Page 51435]]
[GRAPHIC] [TIFF OMITTED] TP30AU05.005
Using the Volpe model, we applied to each manufacturer's baseline
the technologies necessary for that manufacturer to reach the adjusted
targets. Based on each manufacturer's baseline, we then calculated
total costs and benefits for each manufacturer. Then we added the costs
for each of the seven manufacturers together. Likewise, we added the
benefits together.
We then adjusted each target a second time by the same increment.
Again we added the technologies to the baselines and again calculated
the total costs and benefits for the seven manufacturers. Then we
compared those totals (for the seven manufacturers) for the second
adjusted level to the totals for reaching the first adjusted level,
yielding the marginal costs and benefits of the adjustment. After each
additional adjustment in the targets, we determined marginal costs and
benefits. We stopped adjusting the targets when we reached the point
where marginal costs equaled marginal benefits for the industry as a
whole. This is the point at which industry-wide net benefits are
maximized. The required levels of CAFE that are determined for each
manufacturer based on this final adjustment of targets in phase three
differ from the levels of CAFE determined for each individual
manufacturer in phase one. The difference ranges from 1.2 mpg higher
for one manufacturer to 0.8 mpg lower for another manufacturer.
We are proposing this approach because we believe it can achieve
the maximum level of technologically feasible and economically
practicable fuel savings. We recognize that we are premising our
preliminary assessment of economic practicability on finding the level
of optimal economic efficiency. We also recognize that the agency in
the past has expressed its belief that the statutory consideration of
economic practicability differs from, but does not preclude
consideration of, cost/benefit analysis. (See, e.g., June 30, 1977; 42
FR 33534, at 33536-7)
We note, however, that the cost/benefit analyses conducted today
(especially in light of the more recent addition of an uncertainty
analysis required by OMB Circular A-4) are substantially more robust
than those conducted in decades past and provide a more substantial
basis for consideration of economic practicability. We also believe
that the structure of the proposed Reformed CAFE standard, which
respects the mix the manufacturer is able to sell, but demands
reasonable fuel economy increases for all vehicle sizes, reduces the
need to focus on more company-specific and short-term economic
considerations because it provides more flexibility for the CAFE
program to respond to changing economic and market conditions.
We note further that the regulatory philosophy set forth in
Executive Order 12866, ``Regulatory Planning and Review,'' is that a
rulemaking agency should set its regulatory requirements at the level
that maximizes net benefits unless its statute prohibits doing so. EPCA
neither requires nor prohibits the setting of standards at the level at
which net benefits are maximized.
The agency did identify and consider a variety of benefits and
costs that could not be monetized. On the benefit side, for example,
there is a significant reduction in carbon dioxide emissions. On the
cost side, for example, there is a risk of adverse safety impacts from
downweighting. Overall, the agency determined that there is no
compelling evidence that these unmonetized benefits and costs would,
taken together, alter its assessment of the level of the standard for
MY 2011 that would maximize net benefits. Thus, the agency determined
the stringency of that standard on the basis of monetized net benefits.
EPCA does, however, require that the maximum feasible level be
determined after considering economic practicability. Thus, it is
possible that, under certain circumstances, NHTSA might be required to
set CAFE standards below the level at which net benefits are maximized
if considerations of economic practicability make it necessary or
prudent to set standards at a lower level. The agency seeks comment on
the advisability and potential form of any supplementary methodological
approach--beyond economic efficiency--to ensuring that Reformed CAFE
standards are set at the level capable of achieving the maximum
feasible fuel savings, as determined after consideration of the
statutory and other relevant factors.
MYs 2008-2010. In each of the transition years, we did not adjust
the targets to the optimal level. Instead, we adjusted the footprint
category targets in equal increments until the total industry costs
under the Reformed program approximately equaled the total industry
costs under the Unreformed program. Cost equalization has several
important advantages. Since the Unreformed standards were judged to be
economically practicable and since the
[[Page 51436]]
Reformed standards spread the cost burden across the industry to a
greater extent, equalizing the costs between the two systems ensures
that the Reformed standards are within the realm of economic
practicability.\46\ Also, cost equalization promotes an orderly and
effective transition to the Reformed system by minimizing the cost
differences between the two choices.
---------------------------------------------------------------------------
\46\ We equalized aggregate industry costs between Reformed and
Unreformed CAFE. The costs are not borne by manufacturers in the
same way and costs for individual manufacturers may differ between
the two systems.
---------------------------------------------------------------------------
3. Standards and required CAFE levels for individual manufacturers
The Reformed CAFE standard is an equation for calculating
production-weighted, harmonically-averaged fuel economy in which the
footprint category targets are constants, total production and
footprint category production are variables, and the required level of
CAFE must be solved. The equation is separately solved for each
individual manufacturer, using its total production and its production
in each footprint category. The solution or answer is the
manufacturer's required level of CAFE.\47\
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\47\ In response to the agency's December 1979 proposal of light
truck standards for model years 1983-85, the Regulatory Analysis
Review Group (RARG) suggested a similar approach in March 1980:
``setting fuel economy targets for different categories of trucks,
and using a pre-determined fleet mix for each manufacturer to turn
these targets into a composite standard.'' See Report of the
Regulatory Analysis Review Group, Council on Wage and Price
Stability, March 31, 1980, submitted as attachment to letter from R.
Robert Russell, Director of the Council, to Joan Claybrook,
Administrator, NHTSA (FE-78-01-N01-175). The RARG was established by
President Carter to review up to 10 of the most important
regulations each year classified as significant under Executive
Order 12044. It was chaired by the Council of Economic Advisors
(CEA) and was composed of representatives of OMB and the economic
and regulatory agencies. It relied on the staff of Council on Wage
and Price Stability and the CEA to develop evaluations of agency
regulations and the associated economic analyses and to place these
analyses in the public record of the agency proposing to issue the
regulation.
---------------------------------------------------------------------------
The required level of CAFE for a manufacturer for a model year
would be the production-weighted harmonic average fuel economy of that
manufacturer's entire product line for that model year, as determined
by inserting the manufacturer's total production and production in each
footprint category into the formula. Each manufacturer would be subject
to the same fuel economy targets for the same footprint categories and
all manufacturers would be required to meet the level of CAFE
calculated for it under the same formula. Individual manufacturers
would face different required levels of CAFE only to the extent that
they produced different mixes of vehicle models. In this respect, the
proposal would be no different than if the agency established multiple
classes. Under a multiple class system, manufacturers would implicitly
have different requirements at the fleet level as a result of
differences in their fleet mixes.
The required level would then be compared to the production-
weighted harmonic average fuel economy of a manufacturer's entire
product line, based on the actual fuel economy levels achieved by each
model line. If the value based on the actual fuel economy levels were
at least equal to the required level of average fuel economy, then a
manufacturer would be in compliance. If it were greater than that
level, the manufacturer would earn credits usable in any of the three
preceding or following model years.
More specifically, the manner in which a manufacturer's required
overall CAFE for a model year is computed is similar to the way in
which a manufacturer's actual CAFE for a model year is calculated. The
required level is computed on the basis of the number of vehicles in
each footprint category and the footprint category targets as follows:
[GRAPHIC] [TIFF OMITTED] TP30AU05.006
This formula can be restated more compactly as follows:
Required CAFE Level =
[GRAPHIC] [TIFF OMITTED] TP30AU05.007
(Required CAFE level sum formula)
N is the total number (sum) of light trucks produced by a
manufacturer,
bi is the number (sum) of light trucks produced by that
manufacturer in the i-th light truck footprint category, and
Targeti is fuel economy target of the i-th footprint
category.
The required level is then compared to the CAFE that the
manufacturer actually achieves in the model year in question:
Actual CAFE =
[GRAPHIC] [TIFF OMITTED] TP30AU05.008
N is the total number (sum) of light trucks produced by the
manufacturer,
nj is the number (sum) of the j-th model light trucks
produced by the manufacturer,
mpgj is the fuel economy of the j-th model light truck,
and
m is the total number of light truck models produced.
A manufacturer is in compliance if the actual CAFE meets or exceeds
the required CAFE.
The method of assessing compliance under Reformed CAFE can be
further explained using an illustrative example of a manufacturer that
produces four models in two footprint categories with targets assumed
for the purposes of the example shown in Table 3:
Table 3.--Illustrative Example of Method of Assessing Compliance Under a Step Function Approach
----------------------------------------------------------------------------------------------------------------
Footprint
Fuel Production Footprint Footprint category
Model economy (units) (sq. ft.) category target
(mpg) (mpg)
----------------------------------------------------------------------------------------------------------------
A.............................................. 27 100,000 43 1 27.3
B.............................................. 24 100,000 42 1 27.3
C.............................................. 22 100,000 52 4 22.9
D.............................................. 19 100,000 54 4 22.9
----------------------------------------------------------------------------------------------------------------
[[Page 51437]]
Under Reformed CAFE, the manufacturer would be required to achieve
an average fuel economy level of:
[GRAPHIC] [TIFF OMITTED] TP30AU05.009
This fuel economy figure would be compared with the manufacturer's
actual CAFE for its entire fleet, i.e., the production-weighted
harmonic mean fuel economy level for four models in its fleet:
[GRAPHIC] [TIFF OMITTED] TP30AU05.010
In the illustrative example, the manufacturer's actual CAFE (22.6
mpg) is less than the required level (24.9 mpg), indicating that the
manufacturer is not in compliance.
4. Why this approach to reform and not another?
a. Step-function vs. continuous function
While manufacturers generally recognized the potential advantages
of an attribute-based system, several commenters (including
manufacturers) on the 2003 ANPRM stated that a continuous function
based on one or more vehicle attributes would be preferable to a multi-
class attribute-based system. Commenters stated that a system based on
a continuous function would remove the ``edge effects'' \48\ associated
with a multi-class system, that determination of the maximum feasible
standard for a continuous function would prove simpler than determining
maximum feasible standards for a series of classes, and that a
continuous function could be structured to eliminate concern regarding
the agency's authority to permit credit transfer between classes.\49\
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\48\ In the context of products placed in a multi-category or
multi-class system for regulatory purposes, the term ``edge
effects'' refers to the incentive for the manufacturers of those
products to modify them, particularly the ones located near the
boundary of an adjacent category or class, i.e., an ``edge,'' so as
to move them into a different category or class where they will
receive more favorable regulatory treatment.
\49\ Under a continuous function based on footprint, any
increase (or decrease) in footprint would result in a decrease (or
increase) in the fuel economy target. Under a step function based on
footprint, the fuel economy target does not change continuously in
response to changes in footprint. The target would increase only at
discrete points over the range of footprint. Under this proposal,
the targets increase only at the boundaries between adjacent
footprint categories.
---------------------------------------------------------------------------
The continuous function approach uses a statistically estimated
relationship between vehicle size and fuel economy to determine the
overall required level for each manufacturer. Compliance is calculated
in virtually the same manner. In the step-function approach, the
denominator of the required overall target is the sum of the number of
vehicles in each category divided by the required fuel economy of the
category. In the continuous function approach, the denominator of the
required overall target is the sum of the number of vehicle models
divided by the required fuel economy for that model derived from the
function.
Figure 4 shows an illustrative example of a continuous function.
[[Page 51438]]
[GRAPHIC] [TIFF OMITTED] TP30AU05.011
The illustrative continuous function shown in Error! Reference
source not found.4 is defined by the following mathematical function:
[GRAPHIC] [TIFF OMITTED] TP30AU05.012
In the illustrative function,
A = 20.0 mpg
B = 12.9 mpg
C = 15.3 square feet
The mechanics of defining the continuous function would be similar
to the procedure used to develop the proposed MY2011 standard. The
iterative process described above in ``phase one'' would be used to add
fuel saving technologies to the baseline technologies for each
manufacturer's vehicles. Data points representing each vehicle's size
and fuel economy (as improved through the phase one process) would then
be plotted on a graph. Using statistical techniques, a function would
then be fitted through the data to obtain the continuous function. The
last step would be the same as described above in ``phase three'' for
the step function, i.e., the function would be adjusted (raised or
lowered) until industry-wide net benefits are maximized, in the case of
MY 2011, or until industry-wide costs are equal to those of the
Unreformed standards, in the case of MYs 2008-2010.
Determination of the required level of CAFE (and of compliance with
that level) is accomplished under a continuous function system in
exactly the same fashion as under the step function system, except that
there are vehicle model-specific targets, instead of category targets.
For each vehicle model, the function shown above in Figure 4 is used to
define a target that depends on footprint. Examples are shown in the
last column of Table 4.
Table 4.--Ilustrative Example of Method of Assessing Compliance Under a Continuous Function Approach
----------------------------------------------------------------------------------------------------------------
Vehicle
Fuel Model
Model Economy Production Footprint Specific
(mpg) (units) (sq. ft.) Target
(mpg)
----------------------------------------------------------------------------------------------------------------
A........................................................... 27 100,000 43 26.8
B........................................................... 24 100,000 42 27.4
C........................................................... 22 100,000 52 23.3
D........................................................... 19 100,000 54 22.8
----------------------------------------------------------------------------------------------------------------
Under Reformed CAFE using this illustrative continuous function,
the manufacturer would be required to achieve a CAFE of:
[[Page 51439]]
[GRAPHIC] [TIFF OMITTED] TP30AU05.013
The manufacturer's required CAFE would be compared with the
manufacturer's actual CAFE, i.e., the production-weighted harmonic mean
fuel economy level for four models in its fleet:
[GRAPHIC] [TIFF OMITTED] TP30AU05.014
In the illustrative example in Figure 4, the manufacturer's actual
CAFE (22.6 mpg) is less than the required level (24.9 mpg), indicating
that the manufacturer is not in compliance.
A continuous function and a step function can have similar
properties. As the number of steps in a step function increases, the
difference between the step function and a continuous function
decreases. If the number of steps becomes large enough, a graph of the
step function approaches being a smooth straight or curved line. In
other words, the step function approaches being a continuous function
as the number of steps becomes large.
If the step function is composed of only a few categories, then the
incentive to upsize may be strong because the rewards for doing so will
be significant. The present car/light truck system is a good example.
This is a system with basically two steps and the burden of regulatory
compliance decreases if a vehicle can be designed to be classified as a
light truck instead of as a passenger car.
The same is true for mix shifting. When the number of categories is
large, the rewards for mix shifting are limited. This is because the
difference in fuel economy targets between two adjacent categories is
small and would diminish the credit that could be earned and used to
subsidize vehicles in other categories. In contrast, in the Unreformed
CAFE system with a single step from cars to light trucks, the rewards--
in terms of CAFE compliance--for mix shifting may be significant. A
small SUV can be used to subsidize a larger vehicle with lower fuel
economy. In the Reformed system, the rewards of mix shifting are
considerably less.
DaimlerChrysler, Ford, General Motors, Subaru, and Toyota argued
that the creation of multiple classes might encourage some
manufacturers to increase weight (or size) or to make other product
changes not desired by the market solely to optimize compliance with
the regulatory structure, resulting in edge effects. Environmental
Defense stated that product offerings would concentrate at points that
minimize the price of the design constraint imposed by the CAFE
regulations. Manufacturers argued that, under a continuous function
scheme, any change to the measured attribute would result in a vehicle
being subjected to a different standard. They then stated that because
each vehicle model would be subjected to a different standard,
manufacturers would be limited in their ability to redesign vehicles in
order to subject a vehicle to a less stringent standard. Manufacturers
further stated that a continuous weight based function would allow a
manufacturer to align its products more with the market.
Conversely, manufacturers stated that, as the number of classes
increased under a multi-class system, the ``edge effects'' of the
system would be amplified because more light trucks would be adjacent
to a boundary between adjacent classes. Manufacturers argued that the
likelihood of redesign in order to subject a vehicle to a less
stringent standard would increase. Environmental Defense stated that
even using a continuous or piecewise linear function would not
completely avoid the problem of manufacturers shifting vehicles to a
point with a less stringent standard to minimize compliance costs.
We note that most of the comments compared a continuous function to
a simple multi-class structure approach, as opposed to the multiple-
category approach we are proposing. We believe a step function is
easier for the public to understand than a continuous function, and
would facilitate product planning. We also believe our proposed
approach minimizes the potential disadvantages articulated by the
commenters. Specifically, both the number and the location of the
boundaries for the footprint categories are designed to minimize any
edge effects.
NHTSA remains interested in the concept of a continuous function
standard. This concept was explored both by NAS in its study (chapter 5
and attachment 5A) and by NHTSA in its 2003 ANPRM on CAFE reform. Now
that the agency has refined its potential approach to reforming light
truck CAFE, the agency believes that would be useful to seek more
detailed comments and analyses regarding the relative advantages of
step function standards and continuous function standards.
b. Categories and targets vs. classes and standards
We considered an approach under which we would establish each
footprint category as a separate class with its own standard. Thus, for
each model year under reform, there would have been six different
standards, depending upon the footprint size of the vehicle. However,
there were two primary shortcomings that led us to evaluate other
approaches for our Reformed CAFE.
First, transfers of credits earned in a footprint class in a model
year to a different footprint class in a different model year would
have required a complicated process of adjustments to ensure that fuel
savings are maintained.\50\ This is because credits earned under the
multiple classes and standards approach would have differing energy
value. Credits earned for exceeding the higher fuel economy standard
for the smaller footprint vehicles would have less energy value than
exceeding the lower fuel economy standard for the larger footprint
vehicles by an equal increment. In fact, if credits were generated in a
class with relatively high CAFE standards and transferred to another
class with relatively low CAFE standards, total fuel use by all
vehicles in the two classes might increase. That
[[Page 51440]]
result would undermine the entire reform effort by producing lessened
energy security.
---------------------------------------------------------------------------
\50\ The 2003 ANPRM on reforming CAFE noted that the agency had
previously concluded that the credits earned in one class could not
be transferred to another class, but re-examined the legislative
history of the CAFE statute and called that interpretation into
question.
---------------------------------------------------------------------------
One can calculate the appropriate adjustments for such a credit
transfer system to ensure no loss of fuel savings. This would ensure
equivalent energy savings. However, instituting a complicated new
process of credit adjustments would detract from the benefits of
reforming the CAFE program by making it more difficult to plan for and
determine compliance. Further, taking this step would not cure another
problem associated with credits. Credits earned by exceeding a standard
in a model year may be used in any of the three model years preceding
that model year and, to the extent not so used, in any of the three
model years following that model year (49 U.S.C. 32903(a)). They may
not, however, be used within the model year in which they were earned
(Ibid.).
Second, establishing separate standards for each footprint category
would needlessly restrict manufacturer flexibility in complying with
the CAFE program. A requirement for manufacturers to comply with six
separate standards, combined with the inability either to apply credits
within the same model year or to average performance across the classes
during a model year, could increase costs without saving fuel. This
would happen by forcing the use of technologies that might not be cost-
effective. Further, Congressional dialogue when considering the
enactment of the EPCA and amendments to it has repeatedly expressed the
view that manufacturers should have flexibility in complying with a
CAFE program so that they can ensure fuel savings, while still
responding to other external factors.
Our proposal avoids these shortcomings. Instead of establishing six
distinct standards for each footprint category, our proposal
establishes six targets and applies them through a harmonically
weighted formula to derive regulatory obligations. Credits are earned
and applied under our proposal in the same way as they are earned and
applied under Unreformed CAFE and in a manner fully consistent with the
statute. Thus, no complicated new provisions for credits are needed.
Further, the use of targets instead of standards allows us to retain
the benefits of a harmonically weighted fleet average for compliance.
This ensures that manufacturers must provide the requisite fuel economy
in their light truck fleet, while giving the manufacturers the ability
to average performance across their entire fleet and thus the
flexibility to provide that level of fuel economy in the most
appropriate manner.
c. Footprint vs. shadow or weight
In the 2003 ANPRM, we posited the possibility of establishing
classes of light trucks defined by various attributes. We focused our
discussion on vehicle weight and vehicle ``shadow'' (vehicle length x
width), but invited additional ideas.
Recognizing the links between weight and vehicle safety, the
Alliance, Daimler Chrysler, Ford, General Motors, Toyota, and Nissan
expressed a preference for using weight in an attribute-based system.
They also asserted that weight appears to have the best correlation to
fuel economy, and that weight is currently used in fuel economy
testing. Further, a weight-based system would distribute the burden of
reducing fuel consumption equally to all manufacturers, preventing the
systemic downsizing of vehicles and the associated detriment to safety.
Honda and other commenters identified other benefits of a weight
based system: weight based systems are less complex, have more readily
available data, and are conducive to grouping all light trucks together
in a single system. However, Honda stated that weight based systems
have potentially severe consequences on light truck safety design, are
more susceptible to erosion of fuel economy, and offer less potential
for cost-effective fuel economy gains.
Other manufacturers noted the weaknesses in a weight-based system.
DaimlerChrysler commented that a weight-based system would discourage
investments in weight reduction for material substitution, and result
in lost opportunities to improve real-world fuel economy. Volkswagen
believes a weight-based system will reduce the regulatory incentive to
reduce vehicle weight.
Honda considered the most constructive alternative to weight to be
a length x width (shadow) attribute-based system. Honda stated that
such a system would provide proper safety incentives. Honda and Rocky
Mountain Institute (RMI) stated that a size-based system would likely
be subject to less gaming than a weight-based system. As discussed
above, Honda determined that changes in size are readily apparent to
prospective buyers and change how they perceive a vehicle
competitively, while weight can be changed substantially without most
customers being aware of the change. Honda stated that when purchasing
vehicles, customers typically consider functional characteristics that
are more related to size and utility (such as passenger and hauling
capacity), rather than weight. Other commenters such as Environmental
Defense and Natural Resource Defense Council stated that if the agency
were to pursue attribute-based system, a size-based system would be
preferable to a weight-based system.
Toyota and Ford questioned the correlation between size and fuel
economy. Ford stated that there is a very poor correlation, unlike the
correlation with weight. Ford stated that as the mass of a vehicle
increases, more energy is required to move it, which results in
increased fuel consumption. However, Ford continued, the relationship
between size and fuel economy is not as clear; increases in size do not
necessarily require increased fuel consumption because a larger sized
vehicle can have a similar weight to a smaller sized vehicle. Further,
General Motors asserted that weight is the primary factor affecting
safety; therefore, NHTSA should not adopt a size-based system.
The agency recognizes that size and/or weight creep are legitimate
concerns about an attribute-based class system. There is the potential
under such a system for manufacturers to design vehicles toward the
larger or heavier categories that may have lower compliance
obligations.
We have decided against premising our proposal on vehicle weight or
vehicle shadow, and instead decided to premise it on vehicle footprint.
We share commenters' concern that vehicle weight could be tailored more
easily than size to move vehicles into heavier weight categories with
lower CAFE targets. Weight could be added to a vehicle near the edge of
a category with minimal impact on design or performance at relatively
low cost. Similarly, vehicle shadow (in a size based system) could be
tailored for the same purpose by the simple addition of bumpers or
other vehicle lengthening features. As a result, both of those
attributes, if used as the foundation of our program, could fail to
achieve our goals of enhancing fuel economy and safety with a Reformed
CAFE program.
We believe that vehicle footprint is a better vehicle attribute and
an appropriate foundation for reforming the CAFE program to advance
energy security and safety. Basing categories on footprint permits
grouping of vehicles in similar market segments, thus avoiding grouping
light trucks designed to carry large payloads or a large number of
passengers together with light trucks designed to carry smaller
payloads or a smaller number of passengers.
[[Page 51441]]
Vehicle footprint is more integral to a vehicle's design than
either vehicle weight or shadow and cannot easily be altered between
model years in order to move a vehicle into a different category with a
lower fuel economy target. Footprint is dictated by the vehicle
platform, which is typically used for a multi-year model life cycle.
Short-term changes to a vehicle's platform would be expensive and
difficult to accomplish without disrupting multi-year product planning.
In some cases, several models share a common platform, thus adding to
the cost and difficulty and therefore unlikelihood of short-term
changes.
Moreover, as Honda commented, the ability to change footprint would
be subject to the limits imposed by consumer acceptance and preference.
Changes in footprint result in perceptible changes in performance and
design (e.g., a longer and/or wider vehicle). The responsiveness of
consumers to those changes is pronounced, as is evidenced by the fact
that manufacturers market size variant models, e.g., pick-up trucks in
long and short beds, and light truck models in longer wheelbase
versions. Changes in footprint solely for the purpose of moving a
vehicle to a footprint category with a less stringent fuel economy
target could adversely impact consumer demand for that product and/or
increase cost to the manufacturer. These considerations regarding
footprint allow us to establish footprint category target levels and to
design our Reformed CAFE program with more certainty that we can
achieve our objectives.
We also believe that use of the vehicle footprint attribute helps
us achieve greater fuel economy without having a potential negative
impact on safety. While past analytic work \51\ focused on the
relationship between vehicle weight and safety, weight was understood
to encompass a constellation of size-related factors, not just weight.
More recent studies \52\ have begun to consider whether the
relationship between vehicle size and safety differs. To the extent
that mass reduction has historically been associated with reductions in
many other size attributes and given the construct of the current
fleet, we believe that the relationship between size or weight (on the
one hand) and safety (on the other) has been similar, except for
rollover risks.
---------------------------------------------------------------------------
\51\ See, Kahane (2003) and Van Auken, R.M. and J.W. Zellner, An
Assessment of the Effects of Vehicle Weight on Fatality Risk in
Model Year 1985-98 Passenger Cars and 1985-97 Light Trucks, Dynamic
Research, Inc. February 2002. Docket No. NHTSA 2003-16318-2.
\52\ See, Van Auken, R.M. and J.W. Zellner, Supplemental Results
on the Independent Effects of Curb Weight, Wheelbase, and Track on
Fatality Risk in 1985-1997 Model Year LTVs, Dynamic Research, Inc.
May 2005. Docket No. NHTSA 2003-16318-17.
---------------------------------------------------------------------------
Developing CAFE standards based on vehicle footprint could
encourage compliance strategies that would decrease rollover risk.
Manufacturers would be encouraged to maintain track width because
reducing it could subject the vehicle to a more stringent fuel economy
target. Maintaining track width would potentially allow some degree of
weight reduction without a decrease in overall safety. Moreover, by
setting fuel economy targets for small footprint light trucks that
approach (or exceeds) 27.5 mpg, the agency would provide little
incentive, or even a disincentive, to design vehicles to be classified
as light trucks in order to comply or offset the fuel economy of larger
light trucks.
The influence of Reformed CAFE on track width would be reinforced
by our NCAP rollover ratings. Track width is one of the elements of our
Static Stability Factor, which constitutes a significant part of our
NCAP rollover ratings and which correlates closely with real world
rollover risk. The rollover NCAP program (as well as real world
rollover risk) would reinforce Reformed CAFE by a separate disincentive
to decrease track width.
Overall, use of vehicle footprint would be ``weight neutral'' and
thus would not exacerbate the vehicle compatibility problem. A
footprint-based system would not encourage manufacturers to add weight
to move vehicles to a higher footprint category. Nor would the system
penalize manufacturers for making limited weight reductions. By using
vehicle footprint in lieu of a weight based metric, we intend to
facilitate the use of promising lightweight materials that, although
perhaps not cost-effective in mass production today, may ultimately
achieve wider use in the fleet, become less expensive, and enhance both
vehicle safety and fuel economy.\53\ In Reformed CAFE, lightweight
materials can be incorporated into vehicle design without moving a
vehicle into a footprint category with a more stringent average fuel
economy target.
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\53\ The Aluminum Association commented that using aluminum to
decrease a vehicle's weight by 10 percent could improve its fuel
economy by 5-8 percent. The commenter noted that the Honda Insight,
an all aluminum vehicle, is 40 percent lighter than a comparable
steel vehicle. It also provided data to demonstrate that all
aluminum vehicles have comparable performance in frontal barrier
crash tests as comparable steel vehicles. See comments provided by
the Aluminum Association, Inc. (Docket No. 2003-16128-1120, pp. 5
and 12).
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The agency is aware that basing the Reformed CAFE proposal solely
on footprint can be criticized on the grounds that it does not fully
account for other vehicle attributes that are valuable to consumers and
influence fuel economy. For example, vehicles A and B may have equal
footprint, but vehicle A may be designed to have superior towing and/or
cargo-hauling capabilities than vehicle B.\54\ Vehicle A may therefore
have lower fuel economy than vehicle B because it is designed to
provide greater utility for consumers. For vehicle manufacturers that
have a product mix weighted toward vehicles with superior towing and/or
cargo-hauling capabilities, even Reformed CAFE, based on a single size
attribute, may not provide a fully equitable competitive environment.
The agency is seeking comment on whether Reformed CAFE should be based
on vehicle size (footprint) alone, or whether other attributes, such as
towing capability and/or cargo hauling capability, should be
considered. If any commenters advocate one or more additional
attributes, the agency requests those commenters to supply a specific,
objective measure for each attribute that is accepted within the
industry and that can be applied to the full range of light-truck
products.
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\54\ We noted the importance of these capabilities in the ANPRM:
The market suggests that while some light trucks may be used
primarily to transport passengers, their ``peak use or value''
capability (towing boats, hauling heavy loads, etc.) may be a
critical factor in the purchase decision. In other words, a consumer
may require substantial towing capability only periodically, but
nevertheless may base his purchasing decision on a vehicle's ability
to meet that peak need rather than his daily needs. The motor
vehicle market has thus developed a demand for vehicles capable of
cross-servicing traditional needs--that is, for vehicles capable of
transporting people and cargo, for vehicles capable of servicing
personal transportation needs as well as recreational and commercial
ones, and for vehicles capable of substantial performance, even if
such performance is only needed periodically.
68 FR 74908, at 74913.
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d. Reformed standard vs. Reformed standard plus backstop
Several commenters argued that a backstop would be needed under
attribute-based Reformed CAFE. In the context of Reformed CAFE, NHTSA
understands the term ``backstop'' to mean an absolute minimum CAFE
requirement that would apply to a manufacturer's overall fleet if the
level of average fuel economy otherwise required of a manufacturer
under a Reformed CAFE standard fell below the level of that absolute
minimum requirement. Such a requirement would essentially be the same
as an Unreformed CAFE standard. Stated another way, the Reformed
standard with a backstop would require
[[Page 51442]]
compliance with the greater of the following fleet wide requirements:
average fuel economy level calculated under Reformed standard or an
equal cost Unreformed CAFE standard.
These commenters suggested that unless a backstop in the form of an
absolute fleet wide CAFE standard were established to supplement
attribute-based Reformed CAFE standards based on size or weight, there
might be an overall loss in fleet economy resulting from mix shifts or
from upward weight or size ``creep.'' For example, manufacturers might
redesign some of their vehicles to make them larger or heavier or they
might shift their production mix so as to increase their production of
vehicles subject to less stringent standards).
Environmental groups such as the NRDC and Environmental Defense
urged the agency to adopt a backstop as a part of any proposed reform.
These commenters suggested that a backstop would provide a guarantee
against any loss of fuel economy due to increase in vehicle weight or
size.
While some vehicle manufacturers noted some commenters were likely
to suggest that a backstop might be needed to prevent erosion of
overall fuel economy, the manufacturers opposed the concept.
DaimlerChrysler and General Motors stated that these commenters might
argue that a backstop would be necessary to ensure no loss in overall
economy. These manufacturers noted that a backstop would have disparate
impacts on manufacturers because of differences in their fleet mixes,
and that a backstop would lead to downweighting under a weight based
system. Ford opposed a backstop, stating that the ``assumption of
wholesale ``upsizing'' or ``upweighting'' ``is erroneous.'' General
Motors also said that the risk of such upsizing or upweighting was
overstated. Manufacturers expressed concern that a backstop would
unduly increase the complexity of the CAFE program by applying
essentially two different types of standards. General Motors argued
that establishing separate class standards as well as a fleet wide
standard would be contrary to legislative scheme established under the
Energy Policy and Conservation Act in which a vehicle is placed in a
single compliance fleet.
NHTSA is not proposing a backstop for the following reasons. First,
manufacturers cannot increase the size or weight of their vehicles or
introduce new, larger vehicles without regard to consumer demand. They
can make those changes only to the extent that there is market
acceptance of them. Absent a reliable indication of likely market
acceptance, manufacturers would be unlikely to assume the risks
involved in taking these actions. As Toyota noted, ``Manufacturers must
still be cognizant of other aspects of vehicle design, such as
acceleration, handling, cornering, and other factors. Adding weight
would be counterproductive to many of the attributes, and thus careful
consideration would be given by manufacturers before simply adding
weight for no otherwise apparent reason.''
Further, NHTSA believes that given the cost and difficulty of
increasing vehicle size, the agency's choice of footprint, instead of
weight or shadow, as the attribute used in Reformed CAFE would
significantly limit the possibility that manufacturers would increase
vehicle size beyond the extent sought by consumers. Increasing vehicle
footprint, like increasing vehicle weight, would require addressing the
other aspects of vehicle design mentioned in Toyota's comment.
Second, establishing a backstop would not preclude future mix
shifts and design changes. The comments urging the establishment of a
backstop appear to be premised on a misconception of how CAFE standards
have been set and adjusted over the life of the CAFE program. The
Unreformed CAFE program has not sought, and does not seek, to ignore
consumer demand and freeze the mix or design of vehicles. The agency
has set Unreformed CAFE standards with particular regard to the least
capable manufacturer's own projections about its mix and vehicle
designs in the years to which the standards will apply `` adjusted
according to the agency's determinations of available cost-effective,
fuel-efficient technologies that could be added to that company's
fleet. Thus, the standards are market based, set in a fashion that
accommodates that manufacturer's judgment, adjusted by the agency for
fuel economy improvements, as to how consumer demand will change
between the time of a light truck CAFE rulemaking and those future
model years.
Establishing a backstop would also not preclude the growth in
vehicle weight as a result of the manufacturers' continued introduction
of new mandatory and voluntary safety features and non-safety features
that would enhance vehicle utility and consumer choice. In fact, the
agency has consciously set Unreformed CAFE standards in the past so as
to accommodate any anticipated installation of mandatory and voluntary
safety features, as required by statute. Plans for the installation of
these features and items of equipment are reflected in the
manufacturers' baselines for the purpose of determining their future
capability to improve fuel economy. To the extent that new safety
requirements are implemented, and to the extent there is consumer
demand for voluntarily installed equipment, average weight may increase
further. The implementation of Reformed CAFE would not and should not
change the practice of accommodating those manufacturer actions.
In addition, the proponents of the backstop concept erroneously
assume that unreformed CAFE does not change when good faith compliance
efforts fall short. When manufacturer plans for complying with
established CAFE standards have proven insufficient because of factors
outside the control of the industry, the agency has revisited both
light truck and passenger car CAFE standards and adjusted them to
reflect more up-to-date, corrected projections of mix. NHTSA's actions
in this regard were twice reviewed and upheld by the U.S. Circuit Court
of Appeals for the District of Columbia, once with respect to light
trucks, and the other time with respect to passenger cars. See, CAS,
793 F.2d 1322; Public Citizen, 848 F.2d 256.
Third, the agency plans to periodically adjust the location of the
boundaries between footprint categories. Since the agency is likely to
adjust the boundaries each time a new round of CAFE standards is
established, there would be limited advantage to a manufacturer's
upsizing some of its vehicles. Further, it would be difficult for a
manufacturer to predict how category boundaries might change over the
four to eight year life of a vehicle design.
Fourth, the agency believes that supplementing the Reformed CAFE
standards with a backstop would negate the value of establishing the
attribute-based standards for some manufacturers and perpetuate the
shortcomings of Unreformed CAFE. The level of the backstop would
presumably be set at (or close to) the level of the manufacturer that
would be determined to be the least capable manufacturer under
Unreformed CAFE. Any manufacturer that, under Reformed CAFE, would have
a required level of average fuel economy less than the level of the
least capable manufacturer would have to comply with the backstop
instead.
Fifth, and finally, making vehicles larger for CAFE compliance
purposes is not cost-free. All else being equal, larger vehicles are
more costly to build and operate. Market forces or fuel price increases
will restrain consumer demand for large light trucks with low
[[Page 51443]]
fuel economy, unless the need for utility justifies the expense to the
manufacturers of producing and to the consumers of operating large
trucks.
5. Benefits of reform
a. Increased energy savings
The Reformed CAFE system would increase the energy savings of the
CAFE program over the longer term because fuel economy technologies
would be required to be applied to light trucks throughout the entire
industry, not just by a limited number of manufacturers. The energy-
saving potential of Unreformed CAFE is limited because only a few full-
line manufacturers are required to make improvements. In effect, the
capabilities of these full-line manufacturers, whose offerings include
larger and heavier light trucks, constrain the stringency of the
uniform, industry-wide standard. The Unreformed CAFE standard is
generally set below the capabilities of limited-line manufacturers, who
sell predominantly lighter and smaller light trucks. Under Reformed
CAFE, which accounts for size differences in product mix, virtually all
light-truck manufacturers will be required to improve the fuel economy
of their vehicles. Thus, Reformed CAFE will continue to require full-
line manufacturers to improve the overall fuel economy of their fleets,
while also requiring limited-line manufacturers to enhance the fuel
economy of the vehicles they sell.
Our estimates indicate that the Reformed CAFE system would result
in greater fuel savings than the Unreformed CAFE system during the
transition period, though the industry-wide compliance costs were
equalized for those model years:
Table 4.--Estimated Fuel Savings From Reformed and Unreformed CAFE
Systems for MYs 2008-2010
[In billions of gallons]
------------------------------------------------------------------------
MY 2008 MY 2009 MY 2010
------------------------------------------------------------------------
Reformed CAFE system......................... 0.9 2.2 2.9
Unreformed CAFE system....................... 0.8 1.9 2.7
------------------------------------------------------------------------
The improvement in fuel savings would be even greater beginning MY
2011 when targets are set at the level that maximizes net benefits. By
promoting improvements across the entire industry, without as much
influence imposed by the manufacturer that would be regarded as the
least capable manufacturer under the Unreformed CAFE system, the
Reformed CAFE system would allow for greater fuel savings at levels
that remain economically practicable. We believe that the Reformed CAFE
system would continue to increase overall fuel conservation
substantially over time.
b. Reduced incentive to respond to the CAFE program in ways harmful to
safety
To appreciate the potential safety impacts of reforming CAFE, it is
necessary first to understand the key trends in the light vehicle
population and in the crashes that produce serious and fatal injuries.
Today's light vehicle fleet is very different from the fleet of 30
years ago when EPCA was enacted and even from the fleet of 20 years
ago. A more complex and diverse fleet, including large numbers of
vehicles such as minivans and SUVs that scarcely existed before, has
replaced the fleet that was once dominated by passenger cars. There are
now over 102 million light trucks on the road, including pickups,
minivans, and SUVs, representing about 41 percent of registered light
vehicles in the United States. Since light trucks now account for more
than 50 percent of new light vehicle sales, their share of the total
fleet is growing steadily. SUVs account for about 35 percent of light
truck sales. While the overall light vehicle fleet is safer as a result
of the addition of many safety features, the new fleet composition
presents new safety issues.
Two issues stand out. Rollovers and crash compatibility. Both are
related to reforming CAFE.
Pickups and SUVs have a higher center of gravity than passenger
cars and thus are more susceptible to rolling over, if all other
variables are identical. Their rate of involvement in fatal rollovers
is higher than that for passenger cars--the rate of fatal rollovers for
pickups, like the rate for SUVs, is twice that for passenger cars.
Rollovers are a particularly dangerous type of crash. Overall, rollover
affects about three percent of light vehicles involved in crashes, but
accounts for 33 percent of light vehicle occupant fatalities. Single
vehicle rollover crashes account for nearly 8,500 fatalities annually.
Rollover crashes involving more than one vehicle account for another
1,900 fatalities, bringing the total annual rollover fatality count to
more than 10,000.
Crash compatibility is the other prominent issue. Light trucks are
involved in about half of all fatal two-vehicle crashes involving
passenger cars. In the crashes between light trucks and passenger cars,
over 80 percent of the fatally injured people are occupants of the
passenger cars.
The agency believes that the manner in which fuel economy is
regulated can have substantial effects on vehicle design and the
composition of the light vehicle fleet. Reforming CAFE is important for
vehicle safety because the current structure of the CAFE system
provides an incentive to manufacturers to reduce the weight and size of
vehicles, and to increase the production of vehicle types (particularly
pickup trucks and SUVs) that are more susceptible to rollover crashes
and are less compatible with other light vehicles. For these reasons,
reforming CAFE is a critical part of the agency's effort to address the
vehicle rollover and compatibility problems.
i. Reduces the incentive to offer smaller vehicles and to reduce
vehicle size
Fuel price increases and competitive pressures in the 1970's and
early 1980's induced vehicle manufacturers to shift their production
mix toward their smaller and lighter vehicles to offset the lower fuel
economy of larger and heavier vehicles and to redesign their vehicles
by reducing their size and/or weight.\55\ The need for manufacturers to
make rapid and substantial increases in passenger car and light truck
CAFE in response to the CAFE standards in late 1970's and early 1980's
provided an added incentive for them to take those actions. Those
actions contributed to many additional deaths and injuries.\56\ While
the adoption of additional safety performance requirements for those
vehicles has saved lives, even more lives would have been saved if the
shifting of production mix toward smaller vehicles and the reduction in
size and/or weight had not occurred.
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\55\ Shifting production mix down toward smaller vehicles
involves decreasing the production volumes of vehicles that are
heavier or larger and thus have relatively low fuel economy and
increasing the production volumes of lighter or smaller vehicles.
\56\ NAS, p. 3.
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Without CAFE reform, history is likely to repeat itself.
Significant increases in Unreformed light truck CAFE standards,
especially if accompanied by high fuel prices, would likely induce a
similar wave of shifting production mix toward smaller light trucks and
reducing the size and/or weight of light trucks.
By choosing to base Reformed CAFE on a measure of vehicle size
(footprint) instead of weight, the agency is aware that the CAFE
program will continue to permit and to some extent reward weight
reduction as a compliance strategy. The safety ramifications of
[[Page 51444]]
downweighting--especially downweighting that is not achieved through
downsizing--will need to be examined on a case-by-case basis in future
rulemakings. Historically, the size and weight of light-duty vehicles
have been so highly correlated that it has not been technically
feasible to fully disentangle their independent effects on safety.\57\
The agency remains concerned about compliance strategies that might
have adverse safety consequences. Fortunately, it is possible that some
of the lightweight materials used in a downweighting strategy may have
the strength and flexibility to retain or even improve the
crashworthiness of vehicles and the safety of occupants. Moreover, if
downweighting were concentrated among the heaviest of the light trucks,
any extra risk to the occupants of those vehicles might be more than
offset be lessened risk in multi-vehicle crashes to occupants of
smaller light trucks and cars. As manufacturers respond to the
requirements of Reformed CAFE, the agency intends to monitor whether
downweighting is chosen as a compliance strategy and, if so, how
downweighting is accomplished, which vehicles are downweighted, and
what the possible effects on safety (beneficial and adverse) may be.
---------------------------------------------------------------------------
\57\ Kahane, C.J., Response to Docket Comments on NHTSA
Technical Report, Vehicle Weight, Fatality Risk and Crash
Compatibility of Model Year 1991-99 Passenger Cars and Light Trucks,
Docket No. NHTSA-2003-16318-16, 2004 discusses the historic
correlation and difficulty of disaggregating weight and ``size.''
Except for a strong correlation of track width with rollover risk,
it shows weak and inconsistent relationships between fatality risk
and two specific ``size'' measures, track width and wheelbase, when
these are included with weight in the analyses. See also Kahane,
C.J., Vehicle Weight, Fatality Risk and Crash Compatibility of Model
Year 1991-99 Passenger Cars and Light Trucks, NHTSA Technical Report
No. DOT HS 809 662, Washington, 2003, pp. 2-6. Evans, L. and Frick,
M.C., Car Size or Car Mass--Which Has Greater Influence on Fatality
Risk? American Journal of Public Health 82:1009-1112, 1992,
discusses the intense historical correlation of mass and wheelbase
and finds that relative mass, not relative wheelbase is the
principal determinant of relative fatality risk in two-car
collisions. See also, Evans, L. ``Causal Influence of Car Mass and
Size on Driver Fatality Risk, `` American Journal of Public Health,
91:1076-81, 2001.
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Reforming CAFE by basing it on footprint categories would
discourage reductions in vehicle size and reduce the likelihood of any
new wave of mix shifting toward smaller vehicles. Reformed CAFE reduces
the incentive to take those actions because both mix shifting and
reducing vehicle size would increase the manufacturers' required level
of CAFE for that model year.
The way in which Reformed CAFE dilutes the effect of both of those
actions as compliance strategies can be seen by looking at a Reformed
CAFE standard. The target average fuel economy values for the footprint
categories are constants. Regardless of what compliance strategy is
chosen by a manufacturer, nothing that the manufacturer does will
change those values.
The distribution of vehicle models among the categories and the
production volume of each models, however, are variables under the
control of the manufacturers. Further, they are variables not only in
the formula for calculating a manufacturer's actual level of CAFE for a
model year, but also in the formula for calculating a manufacturer's
required level of CAFE for that model year.
Thus, by changing the distribution of its production among the
footprint categories, a manufacturer would change not only its actual
level of CAFE, but also its required level of CAFE. For example, all
other things being equal, if a manufacturer were to increase the
production of one of its higher fuel economy models and decrease the
production of one of its lower fuel economy models, both its actual
level of CAFE and its required level of CAFE would increase. Likewise,
again all other things being equal, if a manufacturer were to redesign
a model so as to decrease its footprint (thereby presumably also
decreasing its weight) sufficiently to move it into a smaller footprint
category, the model would become subject to a higher target. Again, as
a result, both the manufacturer's actual CAFE and required CAFE would
increase.
The reduced effectiveness of those actions as compliance strategies
under Reformed CAFE would make it more likely that the manufacturers
would choose two other actions as the primary means of closing the gap
between those two levels: reducing vehicle weight while keeping
footprint constant, and adding fuel-saving technologies. Both of those
actions would increase a manufacturer's actual CAFE without changing
its required CAFE. Nevertheless, since a move into other footprint
categories would result in a change in both actual and required CAFE,
manufacturers would have more flexibility to respond to consumer demand
for vehicles in other size categories without harming their ability to
comply with CAFE standards or adversely affecting safety.
Unreformed CAFE creates an incentive to reduce weight regardless of
whether footprint also is reduced. Reformed CAFE reduces that incentive
by linking the level of the average fuel economy targets to the size of
footprint so that there is an incentive to reduce weight only to the
extent one can do so while also preserving size. Reformed CAFE
discourages footprint reduction because as a vehicle model's footprint
is reduced, the vehicle moves into categories with smaller footprints
and higher targets.
We have designed the categories to increase the extent to which
Reformed CAFE standards will not affect vehicle size. First, we are
dividing the overall fleet of light trucks into a large enough number
of footprint categories that each category includes only a relatively
narrow range of footprint. This would ensure that only a fairly modest
decrease in a model's footprint would cause the model to move down into
the next footprint category and become subject to a higher target.
Second, as noted above, we set the boundaries between the footprint
categories so that a substantial portion of the vehicles in each
category is located near the lower end of that category. In that
location, any reduction in a vehicle's footprint would be sufficient to
move the vehicle into a lower footprint category and thus subject it to
a higher average fuel economy target.
ii. Effectively reduces the difference between car and light truck CAFE
standards
The average fuel economy targets for the smaller footprint
categories of light trucks would, by MY 2011, be at or near (and for
the smallest light trucks above) the level of the current 27.5 mpg CAFE
standard for cars. The reduction of the disparity between car and light
truck CAFE standards--the so-called ``SUV loophole''--would promote
increased safety because the disparity has created an incentive (beyond
that provided by the market by itself) to design vehicles to be
classified as light trucks instead of cars.\58\
---------------------------------------------------------------------------
\58\ NAS (p. 88) noted that that gap created an incentive to
design vehicles as light trucks instead of cars.
---------------------------------------------------------------------------
One way to design vehicles so that they are classified as light
trucks instead of passenger cars is to design them so that they have
higher ground clearance and higher approach angles.\59\ Designing
vehicles with higher ground clearance results in their having a higher
center of gravity. Generally speaking, light trucks have a higher
center of gravity than cars, and thus are more likely to rollover.
[[Page 51445]]
Moreover, in order to create a higher approach angle, it is necessary
to raise or minimize the front structure below the front bumper, which
increases the likelihood that a light truck will override a car in a
front or rear end crash with a car. It also increases the likelihood
that when a light truck crashes into the side of a car, its front end
will pass over the car's door sill and intrude farther into the car's
occupant compartment. In addition to not being structurally aligned
with cars, light trucks are generally heavier than cars, which adds to
their compatibility problems with cars.
---------------------------------------------------------------------------
\59\ The term ``approach angle'' is defined by NHTSA in 49 CFR
523.2 as meaning ``the smallest angle, in a plane side view of an
automobile, formed by the level surface on which the automobile is
standing and a line tangent to the front tire static loaded radius
arc and touching the underside of the automobile forward of the
front tire.''
---------------------------------------------------------------------------
c. More equitable regulatory framework
The Unreformed CAFE system does not provide an equitable regulatory
framework for different vehicle manufacturers. Regardless of their
product mix, all vehicle manufacturers are required to comply with the
same fleet-wide average CAFE requirement. For full-line manufacturers,
this creates an especially burdensome task. We note that these
manufacturers often offer vehicles that have high fuel economy
performance relative to others in the same size class, yet because they
sell many vehicles in the larger end of the light truck market, their
overall CAFE is low relative to those manufacturers that concentrate in
offering smaller light trucks. As a result, Unreformed CAFE is binding
for such full-line manufacturers, but not for limited-line
manufacturers that predominantly sell smaller light trucks. The full-
line vehicle manufacturers have expressed a legitimate competitive
concern that the part-line vehicle manufacturers are entering the
larger end of the light-truck market with an accumulation of CAFE
credits. While this concern has merit, it is also the case that some
part-line manufacturers (e.g., Toyota and Honda) have been industry
innovators in certain technological aspects of fuel-economy
improvement.
The reformed CAFE system will provide a more equitable regulatory
framework for full-line vehicle manufacturers without denying a level
playing field to the part-line vehicle makers. In order to test this
proposition empirically, the agency has presented simulations of
Reformed CAFE in chapter III of the PRIA for MYs 2002, 2003 and 2004.
The two largest full-line makers (General Motors and Ford) would have
achieved a significantly improved compliance outcome under Reformed
CAFE, while some part-line vehicle manufacturers would have faced a
more challenging compliance obligation.
d. More responsive to market changes
Reformed CAFE is more market-oriented because it respects economic
conditions and consumer choice. Reformed CAFE does not force vehicle
manufacturers to adjust fleet mix toward smaller vehicles unless that
is what consumers are demanding. As the industry's sales volume and mix
changes in response to economic conditions (e.g., gasoline prices and
household income) and consumer preferences (e.g., desire for seating
capacity or hauling capability), the expectations of manufacturers
under Reformed CAFE will, at least partially, adjust automatically to
these changes. Accordingly, Reformed CAFE may reduce the need for the
Agency to revisit previously established standards in light of changed
market conditions, a difficult process that undermines regulatory
certainty for the industry. In the mid-1980's, for example, the Agency
relaxed several unreformed CAFE standards because fuel prices fell more
than expected when those standards were established and, as a result,
consumer demand for small vehicles with high fuel economy did not
materialize as expected. By moving to a market-oriented system, the
agency may also be able to pursue more multi-year rulemakings that span
larger time frames than the agency has attempted in the past.
B. Authority for Reformed CAFE proposal
We believe the proposed CAFE program is both consistent with the
statute and better achieves the Congressional policy objectives
embedded within it. The proposed program conforms to the mandates to
establish maximum feasible fuel economy standards applicable on a fleet
average basis and to the Congressional intent to establish those
standards only after balancing the nation's need to conserve energy,
the effect of other standards on fuel economy, technological
feasibility, economic practicability and other public policy
considerations.
The statute provides considerable flexibility with regard to the
establishment and implementation of light truck standards. Congress
recognized that the universe of light trucks is comprised of varying
types of vehicles meeting different consumer needs. The CAFE statute
mandates that we issue one or more average fuel economy standards for
light trucks for each model year. Congress chose harmonic averaging
over standards applicable to individual vehicles so that the CAFE
statute's overriding goal of conserving energy would be pursued in a
manner that preserves manufacturer flexibility and consumer choice. H.
Rpt. 94-340, p. 87; S. Rpt. 94-179, p. 6.
An ``average fuel economy standard'' is defined as ``a performance
standard specifying a minimum level of average fuel economy applicable
to a manufacturer in a model year.'' 49 U.S.C. 32901(a)(6). The statute
directs NHTSA to prescribe through regulation average fuel economy
standards for automobiles (except passenger automobiles) manufactured
by a manufacturer in a model year. 49 U.S.C. 32902(a). The standard is
linked to ``automobiles manufactured by a manufacturer,'' which is
defined as including ``every automobile manufactured by a person that
controls, is controlled by, or is under common control with the
manufacturer, but does not include an automobile manufactured by the
person that is exported not later than 30 days after the end of the
model year in which the automobile is manufactured.'' 49 U.S.C.
32901(a)(4).
While NHTSA historically has established a light truck standard
with a single level common to all manufacturers, the statute does not
require us to do so. Indeed, the statute expressly defines ``an average
fuel economy standard'' as a performance standard applicable to ``a
manufacturer,'' and directly links the establishment of standards to
the manufacturer-specific definition of ``automobiles manufactured by a
manufacturer.'' It appears clear that Congress left to the agency's
discretion the determination of whether to establish a single standard
applicable collectively to all manufacturers or to set a series of
standards applicable to individual manufacturers to ensure that each
manufacturer achieves the maximum feasible level it can achieve, given
its product mix.
We note that the statutory text phrasing with regard to setting
``maximum feasible'' standards for light truck manufacturers is
susceptible to more than one interpretation. We are directed to
establish standards for each model year and instructed: ``each standard
shall be the maximum feasible average fuel economy level that the
Secretary decides the manufacturers can achieve in that model year.''
49 U.S.C. 32902(a). The use of the plural ``manufacturers,'' instead of
the singular, could be read to indicate that Congress intended that the
standard for any given model year collectively be the maximum feasible
level applicable to all manufacturers. When read in
[[Page 51446]]
conjunction with the other sentences in that provision, however, the
statutory phrasing could also indicate that, by using the plural,
Congress anticipated that the standards would reflect the different
product offerings of manufacturers, but that each standard would be the
maximum feasible for the manufacturer to which it applied.
Reference beyond the phrasing of that particular sentence does not
provide much additional clarity. The language used in the remainder of
Section 32902(a) suggests that Congress anticipated the possibility of
standards set at different levels for different manufacturers, yet a
discussion of industry-wide considerations in the legislative history
(conference report) suggests an expectation of a single CAFE level
applicable to all manufacturers.
We believe that Congress left to NHTSA the discretion to establish
light truck standards in the most effective way possible to achieve the
maximum level of fuel conservation that is feasible for each
manufacturer. NHTSA must, consistent with the statute, take industry-
wide considerations into account to ensure that the methodology used to
establish these levels ensures, on an industry-wide basis,
technological feasibility and economic practicability and accounts for
the impact of other regulatory activity.
Our proposal for an approach requiring improvement by most
manufacturers and resulting in higher overall fuel savings implements
better and more fully the statutory mandate to set maximum feasible
standards and adheres more faithfully to the guidance in the
legislative history to base the standards on industry-wide
considerations than an approach requiring improvement by only a few
manufacturers in the industry. On both an industry-wide basis and an
individual manufacturer basis, the former approach provides no less
assurance than the latter approach that the resulting standards are
technologically feasible or economically practicable. In fact, since
the former approach is based on a manufacturer's own product mix, it
ensures that the level of average fuel economy required of each
manufacturer is tailored to the circumstances and thus the capabilities
of that manufacturer.
The methodology proposed today is similar to an approach suggested
to, but not adopted by, NHTSA in a study submitted to the agency in
1980. See Report of the Regulatory Analysis Review Group, Council on
Wage and Price Stability, March 31, 1980, submitted as attachment to
letter from R. Robert Russell, Director of the Council, to Joan
Claybrook, Administrator, NHTSA. FE-78-01-No1-175 (Document 175 under
Notice 1 in Docket FE-78-01.) After considering a class-based CAFE
system, the RARG suggested a composite standard developed by setting
fuel economy targets for various categories of light trucks and then
using a predetermined fleet mix for each manufacturer to turn these
targets into a composite standard.
In assessing the permissibility of its suggested approach, the RARG
was considering the CAFE statute in the wake of its enactment and with
an eye toward developing a system that would best achieve the
Congressional objectives arising from the oil crisis of the 1970s. The
RARG noted its generally contemporaneous understanding of the statutory
parameters:
Nothing in the statute forbids this approach. The statute
requires that passenger car standards be the same for all
manufacturers. There is no similar requirement for the truck
standards. Indeed, the statute explicitly authorizes separate
standards for different classes of trucks, which would inevitably
result in varying effects on the different manufacturers. Since this
is explicitly permitted, it seems unlikely that composite standards,
which would result in similarly varying effects, are forbidden.
NHTSA's treatment of this issue in the preamble to its final truck
standards for model years 1980-81 suggests that it agrees. 43 FR
11997-8. There, NHTSA discussed a proposed fleet-average standard at
some length `` eventually rejecting it on policy grounds `` without
suggesting that it might be illegal.
RARG Report at 29.\60\
\60\ In considering a composite standard approach suggested by
Ford, the agency seemed to confuse that approach with a class based
approach. The agency noted its belief that a single all-inclusive
standard would provide more flexibility than class based standards.
45 FR 11997-98. In the final rule, the agency raised a question
about its authority to implement a composite standard, but did so
without reaching any conclusions and without offering any analysis
of its own or even adopting that of any participant in the
rulemaking. 45 FR 81593 at 81594. We have now conducted our own
legal analysis, which agrees with the RARG's analysis.
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We agree. In deciding which approach to propose in this rulemaking
for establishing standards for a model year, the agency narrowed its
choices to two approaches: establishing conventional average fuel
economy standards, one for each of several classes, with or without
credit transfer between classes in accordance with 49 U.S.C. 32903(a),
or establishing average fuel economy targets, one for each of several
attribute-based categories, and an overall average fuel economy
standard in the form of a production-weighted, harmonically averaged
step-function based on a combination of those targets and each
manufacturer's total production and product mix for that year. NHTSA
believes that either approach is permissible under the CAFE statute.
The agency also believes that a continuous function approach would
satisfy the statute.
The statute explicitly authorizes the former approach, separate
standards for different classes of light trucks. That class approach
would inevitably result in varying effects on the different
manufacturers, at least partially due to differences in product mix. If
each manufacturer exactly complied with the standard for each class, a
manufacturer's overall CAFE would differ from those of other
manufacturers solely as a function of each manufacturer's product mix.
Since the CAFE statute explicitly permits this, NHTSA believes that the
step-function approach, which would result in similarly varying
effects, is permissible. Nothing in the statute explicitly forbids the
step-function approach. While the statute requires that passenger car
standards be the same for all manufacturers, there is no similar
requirement for the light truck standards.
The step-function approach is thoroughly grounded in the CAFE
statute. Under that approach, the foundation of the standard for each
model year would be the targets for the categories. The target for each
footprint category would be the same for, and applicable to, all
manufacturers that produce vehicles in that footprint category. The
selection of the target for a footprint category would be based on
industry-wide considerations, as contemplated in the conference report.
Such determination [of maximum feasible average fuel economy
level] should take industry-wide considerations into account. For
example, a determination of maximum feasible average fuel economy
should not be keyed to the single manufacturer that might have the
most difficulty achieving a given level of average fuel economy.
Rather, the Secretary must weigh the benefits to the nation of a
higher average fuel economy standard against the difficulties of
individual manufacturers. Such difficulties, however, should be
given appropriate weight in setting the standard in light of the
small number of domestic manufacturers that currently exist and the
possible implications for the national economy and for reduced
competition association [sic] with a severe strain on any
manufacturer. * * *
S. Rep. No. 94-516, 94th Congress, 1st Sess. 154-155 (1975).
Specifically, the agency would select a target based on an average
of the levels of fuel economy improvement that are technologically
feasible and economically efficient for a much more substantial part of
the industry than is
[[Page 51447]]
focused upon in setting standards through the traditional method. Each
standard would rest in large part on a composite of determinations
regarding the average fuel economy achievable by the manufacturers in
each of the footprint categories. While CAFE traditionally gave
particular regard to the least capable of the largest three
manufacturers in determining fuel economy standards, this proposal
would use an average based on the largest seven manufacturers in
setting the targets. Reliance on a more substantial portion of the
industry for this purpose would build in a measure of assurance that
the targets are technologically feasible and economically practicable.
The step-function ultimately picked as the standard would also be
the result of further consideration of industry-wide considerations as
well as the careful balancing, as mandated by Congress, of the
statutory factors, including the economic practicability for the
industry. Since the product mix used to help determine a manufacturer's
required level of fuel economy for a particular model year would be the
manufacturer's actual mix in that model year, instead of in a prior
reference year, a manufacturer would have the flexibility necessary to
vary its mix in response to changes in consumer preferences. This
aspect of the step-function approach automatically builds in a further
measure of assurance that the standards will not necessitate product
restrictions and thus will be economically practicable.
Each step-function standard would apply equally to all
manufacturers. To the extent that different manufacturers have
different product mixes, they would be subject to different required
levels of average fuel economy. However, if two manufacturers had the
same product mix and thus were similarly situated, they would be
subject to the same required level of average fuel economy.
Each manufacturer's compliance obligation is determined through
application of the target numbers to the step function calculation. The
obligation remains premised on average fuel economy level for each
manufacturer's fleet and permits manufacturers to earn credits or
requires them to pay civil penalties for exceeding or failing to reach
the fuel economy level applicable to them. The footprint category
targets and standards would be established within the statutory lead
time of 18 months \61\ and, because the manufacturers know the formula
for compliance, they have the flexibility to ensure compliance by
monitoring and adjusting their product offerings. A manufacturer's
compliance would be determined at the end of each model year by
comparing the step function standard derived with the target numbers to
the step function standard derived with the company's actual production
weighted fuel economy performance.
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\61\ Under Reformed CAFE, as under Unreformed CAFE, the agency
is proposing to establish standards for future model years based, in
the first instance, on the manufacturers' own plans regarding the
types and sizes of vehicles they plan to produce in those years and
their projected production volumes of those vehicles. In determining
the level of the proposed standards, the agency also increases the
level of CAFE above that achievable under those plans through
identifying technologies that it deems feasible, practicable and
cost-effective.
If manufacturers follow their plans, enhanced to the extent
necessary by the incorporation of additional fuel savings
technologies, their required level of CAFE will not change. However,
under Reformed CAFE, if they depart from their plans regarding the
size of their vehicles and/or the distribution of their production
and thus produce vehicles whose size is, on average, larger or
smaller than that of the vehicles in their original plans, their
required level of CAFE will change. If they do depart from their
plans, they could determine, with a high degree of mathematical
precision, the magnitude of that change.
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We are proposing to permit manufacturers the option of complying
with either the Unreformed system or the Reformed system during the
three-model year transition period. We believe that the levels
established for each system constitute the maximum feasible levels for
each system. We recognize that, depending on manufacturer's choices,
the fuel savings (and cost burdens) associated with these three model
years may be lower than the fuel savings that would result if either
the Unreformed or Reformed program were used alone. NHTSA believes that
this is an acceptable outcome that is justified by ensuring an orderly
transition to a fully phased-in Reformed program in MY 2011.
We believe that this proposal presents an approach having the
potential over time to achieve substantially more overall fuel savings
than the historical approach to establishing CAFE standards. In order
to ensure both technological feasibility and economic practicability,
CAFE standards have traditionally been set with particular regard to
the capabilities of the least capable manufacturer with a significant
share of the market. This approach helps to account for the fact that
full-line manufacturers, with product offerings serving the full range
of consumer needs and demand, generally will have a fleet average fuel
economy level less than those manufacturers who choose to serve only
part of the market--typically offering products in the smaller and
lighter light truck category. The traditional approach to CAFE provides
no regulatory incentive for limited line manufacturers to incorporate
additional technologies because none are needed to meet CAFE standards
established at an appropriate level for full-line manufacturers.
Under the program proposed today, CAFE standards will ultimately be
established in a way that encourages technology use by all companies,
not just those with lower fleet average fuel economy levels. By
incorporating available technologies across all manufacturers, we
believe that the Reformed program will enhance overall fuel savings
over time. This is especially true after we transition fully to a
system in which the category targets are established at a level based
on maximizing net benefits.
However, we recognize the inequity of potentially implementing
unanticipated additional requirements and costs without providing
adequate lead-time. Just as the law permits us to consider motor
vehicle safety in addition to the express factors when setting CAFE
standards, we believe the need for transition is a factor that we
should take into account when moving toward the Reformed CAFE system.
Our preliminary determination is that providing a three-year transition
period with a compliance option will provide an opportunity for
experimentation by the manufacturers and effect a quicker transition to
a system likely to save more fuel savings over time than would either
implementing an abrupt change after providing appropriate lead time or
maintaining the status quo. The agency requests comments on whether a
transition period shorter than three years would be feasible.
Today's proposal seeks to ensure that either system remains
economically practicable and technologically feasible. By equating
overall industry costs during the transition period with the overall
costs associated with the traditional approach, we are confident that
the Reformed proposal will not impose industry costs beyond those
otherwise incurred. In addition, the same technologies are used in both
analyses, although applied somewhat differently.
We believe the Reformed proposal better incorporates the
Congressional intent that we establish CAFE obligations with an eye
toward industry-wide considerations. The category targets are
established not by focusing on one manufacturer, but rather by
averaging the manufacturer-specific levels derived through the marginal
[[Page 51448]]
cost/benefit analysis, thus including all complying companies in
determining CAFE responsibilities. The new program also provides better
flexibility--a significant Congressional concern when enacting and
later amending the CAFE statute--by better linking CAFE obligations to
each manufacturer's actual product sales.
Reformed CAFE continues all the essential elements required by the
statute. It states CAFE requirements in terms of miles per gallon,
retains the necessary fleet averaging, allows manufacturers to earn
credits and requires them to pay fines for shortfalls and applies a
consistent methodology to all manufacturers with equivalent category
target levels. Reformed CAFE provides manufacturers with adequate
notice of their responsibilities, complying with the 18-month lead time
for establishing a standard, while simultaneously providing the
flexibility to alter their product plans and offerings in response to
changes in market conditions (a problem that has required the agency at
times to lower previously established CAFE standards). Reformed CAFE
also enhances our ability to achieve maximum feasible fuel economy by
focusing on the addition of available technology to all product lines
and encouraging greater fuel savings and lower overall industry costs.
C. Comparison of estimated costs and estimated benefits
1. Costs
In order to comply with the proposed Reformed CAFE standards, we
estimate the average incremental cost per vehicle to be $54 for MY
2008, $142 for MY 2009, and $186 for MY 2010. In MY 2011, the
incremental cost would be $275. Under the Reformed CAFE system, a
greater number of manufacturers would be required to improve their
fleets and make additional expenditures than under the Unreformed CAFE
system. The total incremental cost (the cost necessary to bring the
corporate average fuel economy for light trucks from 22.2 mpg to the
proposed standards) is estimated to be $505 million for MY 2008, $1,332
million for MY 2009, and $1,802 million for MY 2010. In MY 2011, the
total incremental cost is estimated to be $2,656 million. The level of
additional expenditure that would be necessary beyond already planned
investment varies for each individual manufacturer. These individual
expenditures are discussed in more detail in the PRIA. However, as
stated above, because the costs are distributed across a greater share
of the industry, the costs required of the least capable manufacturer
with a significant share of the market are lower under the Reformed
system than under the Unreformed system.
2. Benefits
The benefits analysis applied to the proposed standards under the
Unreformed CAFE system was also applied to the standards proposed under
the Reformed CAFE system. Benefit estimates include both the benefits
from fuel savings and other economic benefits from reduced petroleum
use. The agency relied on the same factors and assumptions as discussed
above for the proposed Unreformed CAFE standards. A more detailed
discussion of the application of this analysis to the required fuel
economy levels under the Reformed CAFE system can be located in the
PRIA.
Adding benefits from fuel savings to other economic benefits from
reduced petroleum use as a result of the Reformed CAFE standards
produced an estimated incremental benefit to society, of $73 per
vehicle for MY 2008, $170 per vehicle for MY 2009 and $220 per vehicle
for MY 2010. In MY 2011, the incremental benefits were estimated to be
$315 per vehicle. The total value of these benefits is estimated to be
$694 million for MY 2008, $1,633 million for MY 2009, $2,144 million
for MY 2010, $3,069 million for MY 2011, based on fuel prices ranging
from $1.51 to $1.58 per gallon. The benefits analysis for Reformed CAFE
is based on the same assumptions as the benefits analysis for
Unreformed CAFE, as described above in III.D.2.
Based on the forecasted light truck sales from AEO 2005 and an
assumed baseline fuel economy of 22.2 mpg (the MY 2007 standard), we
estimated the fuel savings from the Reformed CAFE program. These
estimates are provided as present values determined by applying a 7
percent discount rate to the future impacts. We translated impacts
other than fuel savings into dollar values, where possible, and then
factored them into our total benefit estimates. This analysis resulted
in estimated lifetime fuel savings of 0.9 billion, 2.2 billion, and 2.9
billion gallons under the proposed Reformed CAFE standards for MY 2008,
2009, and 2010 respectively. We estimated the fuel savings for MY 2011
at 4.1 billion gallons.
NHTSA estimates that the direct fuel-savings to consumers account
for the majority of the total benefits, and by themselves exceed the
estimated costs of adopting more fuel-efficient technologies. In sum,
the total incremental costs by model year compared to the incremental
societal benefits by model year are as follows:
Table 5.--Comparison of Incremental Costs and Incremental Benefits for
the Proposed Reformed CAFE Standards
[In millions]
------------------------------------------------------------------------
MY 2008 MY 2009 MY 2010 MY 2011
------------------------------------------------------------------------
Total Incremental Costs *... $505 $1,332 $1,802 $2,656
Total Incremental Benefits * 694 1,633 2,144 3,069
------------------------------------------------------------------------
* Relative to the 22.2 mpg standard for MY 2007.
In light of these figures, we have tentatively concluded that the
standards proposed under the Reformed CAFE system serve the overall
interests of the American people and is consistent with the balancing
that Congress has directed us to do when establishing CAFE standards.
For all the reasons stated above, we believe the proposed Reformed CAFE
standards represent fuel economy levels that are economically
practicable and, independently, that are a cost beneficial advancement
for American society. A more detailed explanation of our analysis is
provided in the PRIA.
3. Uncertainty
The agency performed a probabilistic uncertainty analysis to
examine the variation in estimates of factors that determine the costs
and benefits of higher CAFE requirements. The analysis indicates that
the Agency is highly certain that the benefits of the proposed CAFE
levels will exceed their costs for all 4 model years of Reformed
standards included in the proposal.
[[Page 51449]]
D. Proposed standards
We have tentatively determined that the Reformed CAFE system and
associated target levels for MYs 2008-2011 would result in required
fuel economy levels that are both technologically feasible and
economically practicable for manufacturers. The proposed standard and
target levels are as follows:
BILLING CODE 4910-59-P
[[Page 51450]]
[GRAPHIC] [TIFF OMITTED] TP30AU05.015
BILLING CODE 4910-59-C
[[Page 51451]]
Table 6.--Proposed Targets
----------------------------------------------------------------------------------------------------------------
Category 1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
Range of vehicle footprint (sq. <=43.0 >43.0-47.0 >47.0-52.0 >52.0-56.5 >56.5-65.0 >65.0
ft.).............................
MY 2008 Targets................... 26.8 25.6 22.3 22.2 20.7 20.4
MY 2009 Targets................... 27.4 26.4 23.5 22.7 21.0 21.0
MY 2010 Targets................... 27.8 26.4 24.0 22.9 21.6 \62\ 20.8
MY 2011 Targets................... 28.4 27.1 24.5 23.3 21.9 21.3
----------------------------------------------------------------------------------------------------------------
These targets would result in the required fuel economy levels
increasing each successive year for all manufacturers except Hyundai.
Based on the product plans provided by manufacturers in response to the
December 2003 request for information and the incorporation of publicly
available supplemental data and information, the agency has estimated
the required fuel economy levels for the individual manufacturers as
follows:
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\62\ The reformed standards are a result of the product plan
data. If the distribution of vehicles or fuel economies of vehicles
changes from year to year, those changes will be reflected in the
category targets. Because of the process of determining the category
targets, sometimes the targets will not increase over time in a
specific category. This is the case for 20.8 in category 6 in
MY2010. The target goes from 21.0 in MY2009 to 20.8 in MY2010--a
decrease of 0.2 mpg. This is a result of the product plan data
changing.
Although this goes against intuition, the essential point is
that the overall fuel economy goal for each manufacturer increases
in each year. This type of phenomenon could be avoided through the
use of a continuous function. See IV.A.4.a. Step-function vs.
continuous function above.
Table 7.--Estimates of Required Fuel Economy Levels Based on the
Proposed Target Levels and Current Information
[in mpg]
------------------------------------------------------------------------
Manufacturer MY 2008 MY 2009 MY 2010 MY 2011
------------------------------------------------------------------------
BMW......................... 23.8 24.8 25.1 25.7
Suzuki...................... 26.0 26.7 26.8 27.5
Volkswagen.................. 22.7 23.9 24.3 24.8
General Motors.............. 22.2 22.8 23.2 23.7
Ford........................ 22.4 22.9 23.1 23.6
DaimlerChrysler............. 22.8 23.5 23.7 24.2
Honda....................... 23.1 24.0 24.2 24.8
Hyundai..................... 24.2 25.9 25.7 26.3
Nissan...................... 22.1 22.8 23.2 23.7
Toyota...................... 23.2 24.1 24.5 25.0
Fuji (Subaru)............... 24.8 25.6 25.8 26.4
Porsche..................... 22.3 23.5 24.0 24.5
Isuzu....................... 22.3 22.9 23.2 23.7
------------------------------------------------------------------------
As stated previously, we recognize that the manufacturer product
plans that we used in developing the manufacturers' required fuel
economy levels are likely already outdated in some respects. We fully
expect the manufacturers to revise those plans to reflect subsequent
developments. Further, we note that a manufacturer's required fuel
economy level for a model year under the Reformed CAFE system would be
based on its actual production numbers in that model year. Therefore,
its official required fuel economy level would not be known until the
end of that model year. However, because the category targets would be
established in advance of the model year, a manufacturer should be able
to estimate its required level accurately and develop a product plan
that would comply with that level.
V. Implementation of options
A. Choosing the Reformed or Unreformed CAFE system
As part of the transition to a fully phased-in Reform CAFE system
in MY 2011, the agency is proposing that for MYs 2008-2010,
manufacturers have the option of complying under the Reformed CAFE
system or the Unreformed CAFE system. Manufacturers would be required
to announce their selection for a model year in the mid-model year
report required for that model year in 49 CFR 537.7. The mid-model year
report is the most accurate report that the manufacturers currently
provide directly to NHTSA and does not differ significantly from their
final report. A manufacturer's selection would be irrevocable for that
MY. However, a manufacturer would be permitted to select the alternate
compliance option in the following MY. Beginning MY 2011, we are
proposing to permit compliance only under the Reformed CAFE system.
The proposed CAFE levels for both systems have been presented in
the above discussion. However, after receiving comments and reviewing
any additionally provided data, we may decide to set the standards at
different levels than those proposed. Factual uncertainties that could
result in lower standards include the possibility that planned
technological actions may not achieve anticipated fuel economy benefits
or may prove to be infeasible. Similarly, factual uncertainties that
could result in higher standards include the possibility that
manufacturers may be able to improve fuel economy in their fleets by
further technological advances beyond those currently planned.
B. Application of credits between compliance options
The EPCA credit provisions would operate under the Reformed CAFE
system in the same manner as they do under the Unreformed CAFE system.
[[Page 51452]]
The harmonic averages used to determine compliance under the Reformed
CAFE system permit the amount, if any, of credits earned to be
calculated as under the Unreformed CAFE system:
Credits = (Actual CAFE-Standard CAFE) * 10 * Total Production
Credits earned in a model year could be carried backward or forward
as currently done in the Unreformed CAFE system.
Further, credits would be transferable between the two systems.
Both Unreformed CAFE and Reformed CAFE use harmonic averaging to
determine fuel economy performance of a manufacturer's fleet. Under the
Reformed CAFE, fuel savings from under- and over-performance with each
category are generated and applied almost identically to the way in
which this occurs under the Unreformed CAFE system. As a result, the
two systems generate credits with equal fuel savings value. Therefore,
credits earned in a model year under Unreformed CAFE would be fully
transferable forward to a model year under the Reformed CAFE system, up
to the statutory limit of three years. Likewise, credits under Reformed
CAFE could be carried back to Unreformed CAFE.
VII. Impact of other Federal Motor Vehicle Standards
The statute specifically directs us to consider the impact of other
Federal vehicle standards on fuel economy. This statutory factor
constitutes an express recognition that fuel economy standards should
not be set without due consideration given to the effects of efforts to
address other regulatory concerns, such as motor vehicle safety and
emissions. The primary influence of many of these regulations is the
addition of weight to the vehicle, with the commensurate reduction in
fuel economy.
A. Federal Motor Vehicle Safety Standards
The agency has evaluated the impact of the Federal motor vehicle
safety standards (FMVSS) using MY 2007 vehicles as a baseline. We have
issued or proposed to issue a number of FMVSS that become effective
between the MY 2007 baseline and MY 2010. The fuel economy impact, if
any, of these new requirements will take the form of increased vehicle
weight resulting from the design changes needed to meet new FMVSSs.
The average test weights (curb weight plus 300 pounds) of the light
truck fleet for General Motors, Ford, and DaimlerChrysler in MY 2008,
MY 2009, and MY 2010 are 4,904, 4,897, and 4,909, respectively. Thus,
overall, the three largest manufacturers of light trucks expect weight
to remain almost unchanged during the time period addressed by this
rulemaking. The changes in weight include all factors, such as changes
in the fleet mix of vehicles, required safety improvements, voluntary
safety improvements, and other changes for marketing purposes. These
changes in weight over the three model years would have a negligible
impact on fuel economy.
NHTSA has issued a number of proposed and final rules on safety
standards that are proposed to be effective or are effective between
MYs 2008-2010. These have been analyzed for their potential impact on
light truck fuel economy weights for MYs 2008-2010:
1. FMVSS 138, tire pressure monitoring system
As required by the Transportation Recall Enhancement,
Accountability, and Documentation (TREAD) Act, NHTSA is requiring a
Tire Pressure Monitoring System (TPMS) be installed in all passenger
cars, multipurpose passenger vehicles, trucks and buses that have a
Gross Vehicle Weight Rating of 10,000 pounds or less. The effective
dates are based on the following phase-in schedule:
20 percent of light vehicles produced between September 1, 2005
and August 31, 2006,
70 percent of light vehicles produced between September 1, 2006
and August 31, 2007,
100 percent of light vehicles produced after September 1, 2007
are required to comply.
Thus, for MY 2008, an additional 30 percent of the fleet will be
required to meet the standard as compared to MY 2007. We estimate from
a cost teardown study that the added weight for an indirect system is
about 0.156 lbs. and for a direct system is 0.275 to 0.425 lbs.
Initially, direct systems will be more prevalent, thus, the increased
weight is estimated to be average 0.35 lbs. (0.16 kilograms). Beginning
in MY 2008, the weight increase from FMVSS No. 138 is anticipated to be
0.11 pounds (0.05 kilograms) [0.35 lbs. * 0.3 and 0.16 kg * 0.3].
As stated in the TPMS final rule,\63\ by promoting proper tire
inflation, the installation of TPMS will result in better fuel economy
for vehicle owners that previously had operated their vehicles with
under-inflated tires. However, this will not impact a manufacturer's
compliance under the CAFE program. Under the CAFE program, a vehicle's
fuel economy is calculated with the vehicle's tires at proper
inflation. Therefore, the fuel economy benefits of TPMS have not been
considered in this rulemaking.
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\63\ 70 FR 18136, 18139; April 8, 2005; Docket No. 2005-28506.
---------------------------------------------------------------------------
2. FMVSS 202, head restraints
The final rule requires an increase in the height of front seat
outboard head restraints in pickups, vans, and utility vehicles,
effective September 1, 2008 (MY 2009). If the vehicle has a rear seat
head restraint, it is required to be at least a certain height. The
initial head restraint requirement, established in 1969, resulted in
the average front seat head restraints being 3 inches taller than pre-
standard head restraints and adding 5.63 pounds \64\ to the weight of a
passenger car. With the new final rule, we estimate the increase in
height for the front seats to be 1.3 inches and for the rear seat to be
0.26 inch, for a combined average of 1.56 inches.\65\ Based on the
relationship of pounds to inches from current head restraints, we
estimate the average weight gain across light trucks would be 2.9
pounds (1.3 kilograms). (5.63/3 * 1.56 = 2.93 lbs.)
---------------------------------------------------------------------------
\64\ Tarbet, Marcia J., ``Cost and Weight Added by Federal Motor
Vehicle Safety Standards for Model Years 1968-2001 in Passenger Cars
and Light Trucks'', NHTSA, December 2004, DOT-HS-809-834. Pg. 51.
(http://www.nhtsa.dot.gov/cars/rules/regrev/evaluate/80934.html).
\65\ ``Final Regulatory Impact Analysis, FMVSS No. 202 Head
Restraints for Passenger Vehicles'', NHTSA, November 2004, Docket
No. 19807-1, pg. 74.
---------------------------------------------------------------------------
3. FMVSS 208, occupant crash protection
This final rule requires a lap/shoulder belt in the center rear
seat of light trucks. There are an estimated 5,061,079\66\ seating
positions in light trucks needing a shoulder belt, where they currently
have a lap belt. This estimate of seating positions is a combination of
light trucks, SUVs, minivans and 15 passenger vans that have either no
rear seat, or one to four rear seats that need shoulder belts. This
estimate was based on sales of 7,521,302 light trucks in MY 2000. Thus,
the average light truck needs 0.67 shoulder belts. The average weight
of a rear seat lap belt is 0.92 lbs. and the average weight of a manual
lap/shoulder belt with retractor is 3.56 lbs.\67\ Thus, the anticipated
weight gain is 2.64 pounds per shoulder belt. We estimate the
[[Page 51453]]
average weight gain per light truck for the shoulder belt would be 1.8
pounds (0.8 kilograms) (2.64 * .67 = 1.77 lbs.).
---------------------------------------------------------------------------
\66\ ``Final Economic Assessment and Regulatory Flexibility
Analysis, Cost and Benefits of Putting a Shoulder Belt in the Center
Seats of Passenger Cars and Light Trucks'', NHTSA, June 2004, Docket
No. 18726-2, pg. 33.
\67\ Tarbet 2004, p. 84.
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A second, potentially more important, weight increase depends upon
how the center seat lap/shoulder belt is anchored. The agency has
allowed a detachable shoulder belt in this seating position, which
could be anchored to the ceiling or other position, without a large
increase in weight (less than 1 lb.). If the center seat lap/shoulder
belt were anchored to the seat itself, typically the seat would need to
be strengthened to handle this load (the agency requests comments on
this weight increase). If the manufacturer decides to change all of the
seats to integral seats, having all three seating positions anchored
through the seat, then both the seat and flooring needs to be
strengthened (again the agency requests comments on this weight
increase, which could be 10 to 20 lbs.). The agency requests
manufacturer's plans in this area and predicted weight increases.
The effective dates are based on the following phase-in schedule:
50 percent of light vehicles produced between September 1, 2005
and August 31, 2006,
80 percent of light vehicles produced between September 1, 2006
and August 31, 2007,
100 percent of light vehicles produced after September 1, 2007.
Thus, for MY 2008, an additional 20 percent of the fleet will be
required to meet the standard. We estimate the average weight gain per
light truck for the shoulder belt would be 0.36 lbs (0.16 kg) [1.8
pounds (0.8 kilograms) * 0.2] compared to MY 2007. For the anchorage,
the average weight increase would be 0.2 pounds (0.09 kg) or more.
4. FMVSS 214, side impact protection
On May 17, 2004, NHTSA proposed to upgrade Federal Motor Vehicle
Safety Standard (FMVSS) No. 214, ``Side impact protection,'' to require
vehicle manufacturers to provide head protection to occupants involved
in side impacts with narrow fixed objects, such as telephone poles and
trees, and in vehicle-to-vehicle collisions. The Standard already
requires thoracic protection in a dynamic test (69 FR 27990). If this
proposal is adopted as a final rule, the agency anticipates, based on
current technology, that vehicle manufacturers would respond by
installing either a combination head/thorax side air bag or window
curtains.
A teardown study of 5 thorax air bags resulted in an average weight
increase per vehicle of 4.77 pounds (2.17 kg).\68\ A second teardown
study of 3 combination head/thorax air bags resulted in a similar
average weight increase per vehicle of 4.38 pounds (1.99 kg).\69\ This
second study also performed teardowns of 5 window curtain systems. One
of the window curtain systems was very heavy (23.45 pounds). The other
four window curtain systems had an average weight increase per vehicle
of 6.78 pounds (3.08 kg) and that increase is assumed to be the average
for all vehicles in the future.
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\68\ Khadilkar, et al. ``Teardown Cost Estimates of Automotive
Equipment Manufactured to Comply with Motor Vehicle Standard--FMVSS
214(D)--Side Impact Protection, Side Air Bag Features'', April 2003,
DOT HS 809 809.
\69\ Ludtke & Associates, ``Perform Cost and Weight Analysis,
Head Protection Air Bag Systems, FMVSS 201'', page 4-3 to 4-5, DOT
HS 809 842.
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If manufacturers install thorax bags with a window curtain, the
average weight increase would be 11.55 pounds (4.77 + 6.78) or 5.25 kg
(2.07 + 3.08). In MY 2003, about 17 percent of the fleet had thorax air
bags, 7 percent had combination air bags, and 10 percent had window
curtains. The combined average weight for these systems in MY 2003 was
1.8 pounds (0.82 kg). Thus, the future increase in weight for side
impact air bags and window curtains compared to MY 2003 installations
is 9.75 pounds (11.55-1.8) or 4.43 kg (5.25-0.82).
We recognize that many manufacturers are incorporating side impact
air bags on a voluntary basis. Therefore, we have included the weight
associated with the proposed FMVSS No. 214 upgrade in the impacts of
the voluntary improvements discussed below.
5. FMVSS 301, fuel system integrity
This final rule amends the testing standards for rear end crashes
and resulting fuel leaks. Many vehicles already pass the more stringent
standards, and those affected are not likely to be pick-up trucks or
vans. It is estimated that weight added will be only lightweight items
such as a flexible filler neck. We estimate the average weight gain
across this vehicle class would be 0.24 pounds (0.11 kilograms).
The effective dates are based on the following phase-in schedule:
40 percent of light vehicles produced between September 1, 2006
and August 31, 2007,
70 percent of light vehicles produced between September 1, 2007
and August 31, 2008,
100 percent of light vehicles produced after September 1, 2008
are required to comply.
Thus, 60 percent of the fleet must meet FMVSS 301 during the MY
2008-2010 time period. Thus, the average weight gain during this period
would be 0.14 pounds (0.07 kilograms).
6. Cumulative weight impacts of the FMVSSs
In summary, NHTSA estimates that weight additions required by FMVSS
regulations that will be effective in MYs 2008-2010, compared to the MY
2007 fleet will increase light truck weight by an average of 3.71
pounds (1.67 kg.). The agency recognizes that there are several safety
improvements being made voluntarily. Some of these are for marketing
purposes and others are to do better on government or insurance
industry tests involving vehicle ratings. Likely voluntary safety
improvements will add 11.75 pounds or more (5.34 kg or more) compared
to MY 2003 installations. A more detailed discussion of the impact of
voluntary safety improvements is provided in the PRIA.
B. Federal Motor Vehicle Emissions Standards
With input from EPA, NHTSA has evaluated the impact of a number of
vehicle related emissions standards on fuel economy. In addition,
NHTSA's draft Environmental Assessment examines how the CAFE standards
would impact air quality by affecting emissions of criteria pollutants.
Many of these standards and regulations are currently being implemented
through a multi-year phase-in. NHTSA believes there will not be any
fuel economy impact between the MY 2007 baseline and MY 2010 resulting
from federal or state emissions standards or regulations.
1. Tier 2 requirements
On February 10, 2000, the EPA published a final rule (65 FR 6698)
establishing new federal emissions standards for passenger cars and
light trucks. These new emissions standards, known as Tier 2 standards,
focus on reducing the emissions most responsible for the ozone and
particulate matter (PM) impact from these vehicles--nitrogen oxides
(NOX) and non-methane organic gases (NMOG), consisting
primarily of hydrocarbons (HC) and contributing to ambient volatile
organic compounds (VOC). Passenger cars, SUVs, pickups, vans, and
medium duty passenger vehicles (MDPVs) \70\ are subject to the same
national emission standards. Vehicles and fuels are treated
[[Page 51454]]
as a system, so cleaner vehicles will have low-sulfur gasoline to
facilitate greater emission reductions. The Tier 2 emission standards
apply to all passenger vehicles, regardless of whether they run on
gasoline or diesel fuel.
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\70\ For a definition and discussion of these vehicles, see
section IX, Applicability of the standards.
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Tier 2 standards are fully implemented for passenger cars and light
trucks (LDT1 and LDT2) in 2007, and for MDPVs by 2009 at the latest.
Thus, all vehicles subject to the 2008 light truck rulemaking are
affected.
When issuing the Tier 2 standards, EPA responded to comments
regarding the Tier 2 standard and its impact on CAFE by indicating that
it believed that the Tier 2 standards would not have an adverse effect
on fuel economy. The EPA stated that it saw no real energy impacts with
respect to the Tier 2 vehicle program and that the technologies needed
for conventional gasoline engines to meet the Tier 2 standards should
have no significant effect on fuel economy for those engines, which
represent over 99 percent of the current light-duty fleets. Similarly,
EPA states that it does not believe that the stringent Tier 2 emission
standards will preclude promising fuel efficient technologies.\71\ EPA
Tier 2 emission standards increase the stringency of the emission
standards of diesel engines starting in 2008. Several manufacturers
have stated that they have working diesel engines that will meet the
Tier 2 standards. In addition, the EPA test facility in Ann Arbor,
Michigan has a working prototype diesel engine that meets the Tier 2
standard. The agency did not apply diesel engines frequently as a CAFE
compliance technology because there were other technologies that were
more cost effective in meeting the standard.
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\71\ See, U.S. EPA, Tire 2 Motor Vehicle Emissions Standards and
Gasoline Sulfur Control Requirements: Response to Comments, EPA420-
R-99-024, December 20, 1999, pp. 26-11 and 26-12.
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2. Onboard vapor recovery
On April 6, 1994, EPA published a final rule (59 FR 16262)
controlling vehicle-refueling emissions through the use of onboard
refueling vapor recovery (ORVR) vehicle-based systems. These
requirements applied to light-duty vehicles beginning in MY 1998, and
phased-in over three model years. The ORVR requirements also apply to
light-duty trucks with a GVWR of 6,000 pounds or less beginning in MY
2001 and phasing-in over three model years. For light-duty trucks with
a GVWR of 6,001-8,500 lbs, the ORVR requirements first apply in MY 2004
and phase-in over three model years.
The ORVR requirements impose a weight penalty on vehicles as they
necessitate the installation of vapor recovery canisters and associated
tubing and hardware. However, the operation of the ORVR system results
in fuel vapors being made available to the engine for combustion while
the vehicle is being operated. As these vapors provide an additional
source of energy that would otherwise be lost to the atmosphere through
evaporation, the ORVR requirements do not have a negative impact on
fuel economy.
3. California Air Resources Board LEV II
The State of California Low Emission Vehicle II regulations (LEV
II) apply to passenger cars and light trucks as of MY 2004.\72\ The LEV
II amendments restructure the light-duty truck category so that trucks
with gross vehicle weight rating of 8,500 pounds or lower are subject
to the same low-emission vehicle standards as passenger cars. LEV II
requirements also include more stringent emission standards for
passenger car and light-duty truck LEVs and ultra low emission vehicles
(ULEVs), and establish a four-year phase-in requirement that begins in
2004.
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\72\ Title 13, California Code of Regulations Sec. Sec. 1900,
1956.8, 1960.1, 1960.5, 1961, 1962, 1962.1, 1965, 1976, 1978, 2062,
and 2101.
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The agency notes that compliance with increased emission
requirements is most often achieved through more sophisticated
combustion management. The improvements and refinement in engine
controls to achieve this end generally improve fuel economy.
In summary, the agency believes there will be no impact from
emissions standards on light truck fuel economy between the baseline MY
2007 and MY 2010 fleets.
C. Impacts on Manufacturers' Baselines
Based on NHTSA weight versus fuel economy algorithms, a 3-4 pound
increase in weight equates to 0.01 mpg fuel economy penalty. Thus, the
agency's estimate of the safety weight effects are 0.01 mpg or more for
required additions and 0.03 mpg or more for voluntary safety
improvements for a total of 0.04 mpg or more.
However, the agency is not certain whether the additional weight
associated with the FMVSSs that will (or may) take effect between MY
2007 and 2008, as well as the weight associated with voluntary safety
improvements, were incorporated into the manufacturers' product plans
submitted to the agency. Such increases may have been reflected in the
available data relied upon by the agency to supplement manufacturer
submissions. Therefore, the agency seeks clarification on this point.
VIII. Need for Nation to Conserve Energy
EPCA specifically directs the Department to balance the
technological and economic challenges with the nation's need to
conserve energy. While EPCA grew out of the energy crisis of the 1970s,
the United States still faces considerable energy challenges today.
Increasingly, U.S. energy consumption has been outstripping U.S. energy
production. This imbalance, if allowed to continue, will undermine our
economy, our standard of living, and our national security. (May 2001
National Energy Policy (NEP) Overview, p. viii)
As was made clear in the first chapter of the NEP, efficient energy
use and conservation are important elements of a comprehensive program
to address the nation's current energy challenges:
America's current energy challenges can be met with rapidly
improving technology, dedicated leadership, and a comprehensive
approach to our energy needs. Our challenge is clear--we must use
technology to reduce demand for energy, repair and maintain our
energy infrastructure, and increase energy supply. Today, the United
States remains the world's undisputed technological leader: but
recent events have demonstrated that we have yet to integrate 21st-
century technology into an energy plan that is focused on wise
energy use, production, efficiency, and conservation.
(Page 1-1)
The concerns about energy security and the effects of energy prices
and supply on national economic well-being that led to the enactment of
EPCA persist today. The demand for petroleum is steadily growing in the
U.S. and around the world.
The Energy Information Administration's International Energy
Outlook 2005 (IEO2005) \73\ and Annual Energy Outlook (2005) (AEO2005)
indicate growing demand for petroleum in the U.S. and around the world.
U.S. demand for oil is expected to increase from 20 million barrels per
day in 2003 to 28 million barrels per day in 2025. In the IEO2005
reference case, world oil demand increases through 2025 at a rate of
1.9 percent annually, from 78 million barrels per day in 2002 to 119
million barrels per day in 2025. Fifty-nine percent of the increase in
world demand is projected to occur in the North
[[Page 51455]]
America and emerging Asia. Most (61 percent) of the worldwide increases
would occur in the transportation sector.\74\
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\73\ See http://www.eia.doe.gov/oiaf/ieo/pdf/0484(2005).pdf.
\74\ U.S. oil use has become increasingly concentrated in the
transportation sector. In 1973, the U.S. transportation sector
accounted for 51 percent of total U.S. petroleum use (8.4 of 16.5
million barrels per day (mmbd)). By 2003, transportation's share of
U.S. oil had increased to 66 percent (13.2 out of 20.0 mmbd).
(USDOE/EIA, Monthly Energy Review, April 2005, Table 11.2) Energy
demand for transportation is projected to grow by over 67 percent
between 2003 and 2025. (USDOE/EIA, Annual Energy Outlook (Report
DOE/EIA-0383), January 2005) Demand for light-duty vehicle
fuels is projected to increase at a similar pace. (Id.)
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To meet this projected increase in demand, worldwide productive
capacity would have to increase by more than 42 million barrels per day
over current levels. OPEC producers are expected to supply 60 percent
of the increased production. In contrast, U.S. crude oil production is
projected to increase from 5.7 million barrels per day in 2003 to 6.2
million in 2009, and then begin declining in 2010, falling to 4.7
million barrels per day in 2025. By 2025, nearly 70 percent of the oil
consumed in the U.S. would be imported oil.
Energy is an essential input to the U.S. economy and having a
strong economy is essential to maintaining and strengthening our
national security. Secure, reliable, and affordable energy sources are
fundamental to economic stability and development. Rising energy demand
poses a challenge to energy security given increased reliance on global
energy markets. As noted above, U.S. energy consumption has
increasingly been outstripping U.S. energy production. Conserving
energy, especially reducing the nation's dependence on petroleum,
benefits the U.S. in several ways. Improving energy efficiency has
benefits for economic growth and the environment as well as other
benefits such reducing pollution and improving security of energy
supply. More specifically, reducing total petroleum use decreases our
economy's vulnerability to oil price shocks. Reducing dependence on oil
imports from regions with uncertain conditions enhances our energy
security and can reduce the flow of oil profits to certain states now
hostile to the U.S. Reducing the growth rate of oil use will help
relieve pressures on already strained domestic refinery capacity,
decreasing the likelihood of product price volatility.
We believe that the continued development of advanced technology,
such as fuel cell technology, and an infrastructure to support it, may
help in the long term to achieve reductions in foreign oil dependence
and stability in the world oil market. The continued infusion of
advanced diesels and hybrid propulsion vehicles into the U.S. light
truck fleet may also contribute to reduced dependence on petroleum. In
the shorter term, our Reformed CAFE proposal would encourage broader
use of fuel saving technologies, resulting in more fuel-efficient
vehicles and greater overall fuel economy.
We have concluded that the proposed increases in the light truck
CAFE standards would contribute appropriately to energy conservation
and the comprehensive energy program set forth in the NEP. In assessing
the impact of the standards, we accounted for the increased vehicle
mileage that accompanies reduced costs to consumers associated with
greater fuel economy and have concluded that the final rule will lead
to considerable fuel savings. While increasing fuel economy without
increasing the cost of fuel will lead to some additional vehicle
travel, the overall impact on fuel conservation remains decidedly
positive.
We acknowledge that, despite the CAFE program, the United States'
dependence on foreign oil and petroleum consumption has increased in
recent years. Nonetheless, data suggest that past fuel economy
increases have had a major impact on U.S. petroleum use. The NAS
determined that if the fuel economy of the vehicle fleet had not
improved since the 1970s, the U.S. gasoline consumption and oil imports
would be about 2.8 million barrels per day higher than they are today.
Increasing fuel economy by 10 percent would produce an estimated 8
percent reduction in fuel consumption. Increases in the fuel economy of
new vehicles eventually raise the fuel economy of all vehicles as older
cars and trucks are scrapped.
Further, we do not believe that the increases in the light truck
CAFE standards applicable to MYs 2008-2011 would unduly lead to so-
called ``energy waste.'' This theory, presented in public comments
during the rulemaking on the MY 2005-07 light truck standards, rests on
the notion that efforts to reduce energy use can result in negative
economic effects from losses in product values, profits and worker
incomes. As discussed above, the agency believes that the CAFE
standards could be achieved without significant adverse economic or
safety consequences. Within the bounds of technological feasibility and
economic practicability, the proposed standards would, in fact, enhance
``energy efficiency'' without significant adverse ancillary effects.
Our analysis in the Environmental Assessment indicates that
proposed Reformed standards will result in an estimated 37.4 million
metric tons of avoided greenhouse gas emissions (expressed in carbon
equivalents) over the lifetime of the vehicles. They will further
reduce the greenhouse gas emissions intensity of the transportation
sector of the national economy, consistent with the President's overall
climate change policies. In the past, NHTSA has received comments
regarding the monetary value of the benefit of avoided greenhouse gas
emissions. However, NHTSA has not monetized greenhouse gas reduction
benefits in this rule, given the scientific and economic uncertainties
associated with developing a proper estimation of avoided costs due to
climate change. We invite comments on this approach.
IX. Applicability of the CAFE Standards
A. MDPVs
In the 2003 ANPRM, the agency sought comment on whether to extend
the applicability of the CAFE program to include vehicles with a GVWR
between 8,500 lb. and 10,000 lb., especially those that are defined by
the EPA as medium duty passenger vehicles (MDPVs).\75\ Under EPCA, the
agency can regulate vehicles with a GVWR between 6,000 lb. and 10,000
lb. under CAFE if we determine that (1) Standards are feasible for
these vehicles, and (2) either that these vehicles are used for the
same purpose as vehicles rated at not more than 6,000 GVWR, or that
their regulation will result in significant energy conservation. The
MDPV category includes vehicles with a GVWR greater than 8,500 lb but
less than 10,000 lb. and that were designed primarily to transport
passengers, i.e., large vans and SUVs.
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\75\ EPA defines these vehicles as follows:
Medium-duty passenger vehicle (MDPV) means any heavy-duty
vehicle (as defined in this subpart) with a gross vehicle weight
rating (GVWR) of less than 10,000 pounds that is designed primarily
for the transportation of persons. The MDPV definition does not
include any vehicle which:
(1) Is an ``incomplete truck'' as defined in this subpart; or
(2) Has a seating capacity of more than 12 persons; or
(3) is designed for more than 9 persons in seating rearward of
the driver's seat; or
(4) Is equipped with an open cargo area (for example, a pick-up
truck box or bed) of 72.0 inches in interior length or more. A
covered box not readily accessible from the passenger compartment
will be considered an open cargo area for purposes of this
definition.
(40 CFR Sec. 86.1803-01.)
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In preparing the NPRM, the agency analyzed the feasibility of
including MDPVs and the impact of their
[[Page 51456]]
inclusion on the fuel savings of the CAFE standards. The agency
believes that fuel economy technologies applicable to vehicles with a
GVWR below 8,500 lb. might be applicable to MDPVs, e.g., low-friction
lubricants and cylinder deactivation. MDPVs are already required by EPA
to undergo a portion of the testing necessary to determine fuel economy
performance under the CAFE program. See, 40 CFR Part 600 Subpart F. If
MDPVs were included in the CAFE standards, manufacturers would be able
to rely on this testing to generate a portion of the data necessary to
determine fuel economy performance. A similar test procedure could be
used to generate the remaining necessary data. Accordingly, we do not
believe that, if MDPVs were included in the CAFE program, meeting the
additional testing requirements would be burdensome.
The agency's analysis of the impact of including MDPVs on fuel
savings indicated that their inclusion in MYs 2008-2010 would lead to a
net loss of industry-wide fuel savings. Under the Unreformed CAFE
structure, maximum feasible standards are set with particular
consideration given to the least capable manufacturer, which has been
determined to be General Motors for this proposed rule. Almost all of
the MDPVs are produced by General Motors and, due to their weight, have
very low fuel economy. The inclusion of these vehicles would lead to
greater fuel savings by General Motors, but less by the other
manufacturers. This would occur because the addition of the low fuel
economy MDPVs in MYs 2008-2010 would depress the level of General
Motors' CAFE and therefore depress the level of the Unreformed CAFE
standards. We calculate that the Unreformed CAFE standards for MYs
2008-2010 would be 0.3 mpg lower if MDPVs were included in those years.
This would affect not only General Motors, but also some other
manufacturers. Since the MY 2008-2010 Reformed CAFE standards would be
set so as to roughly equalize industry-wide costs with the MY 2008-2010
Unreformed CAFE standards, depressing the Unreformed CAFE standards for
MYs 2008-2010 would also depress the Reformed CAFE standards for those
years. The net effect of including MDPVs in the MY 2008-2010 Reformed
CAFE standards would be a reduction in overall fuel savings of almost
1.1 billion gallons.
The agency seeks comment on whether MDPVs should be included in
final rule for MY 2011. If the agency were to include MDPVs, we would
adopt essentially the EPA definition of ``medium duty passenger
vehicles.'' Inclusion of MDPVs in the MY 2011 Reformed CAFE standard
could save an additional 0.5 billion gallons of fuels. The associated
costs are $200 million with a per vehicle cost ranging from $900 to
$2800 per vehicle. Based on the product plans received, the compliance
costs would be borne primarily by one manufacturer. The agency seeks
comments on the merits of subjecting these vehicles to the MY 2011
standard.
If we do not regulate MDPVs, manufacturers could very well decide,
nevertheless, to install fuel-efficient technologies in their MDPVs as
they become more widely used in their non-MDPV fleet, and thereby less
expensive, in order to improve market demand for their vehicles. The
agency invites comment on whether ways, other than inclusion of 8,500-
10,000 lb GVWR light trucks in the CAFE standards, can be found in EPCA
to encourage the making of improvements in fuel economy of those
vehicles. Can the agency create mechanisms by which manufacturers who
improve the fuel economy of those vehicles can receive credit toward
compliance with the light truck CAFE standards? The provisions in EPCA
regarding credits for light trucks are less precise than those relating
to passenger cars, although EPCA does provide that credits for light
trucks are to be earned in the same way as credits for cars are earned.
If the agency can create such mechanisms, what requirements and
limitations should the agency establish? For example, in the absence of
an applicable standard, what reference level of CAFE could be used to
determine the amount of credit earned by a manufacturer?
B. ``Flat-Floor'' Provision
The agency has tentatively decided to amend the ``flat floor
provision'' in the light truck definition (49 CFR 523.5) to include
expressly vehicles with seats that fold and stow in a vehicle's floor
pan. The agency has tentatively determined that these seats are
functionally equivalent to removable seats and minimize safety concerns
that arise from the potential of improperly re-installed seats.
The current regulation classifies as a light truck any vehicle with
readily removable seats that, once removed, leave a flat, floor-level
surface extending from the forward most removable seat mount to the
rear of the vehicle (the flat floor provision). The flat floor
provision originally was based on the agency's determination that
passenger vans with removable seats and a flat load floor were derived
from cargo vans (42 FR 38367; July 28, 1977) and should be classified
as trucks. Because these passenger vans were derived from cargo vans,
the agency distinguished them from station wagons--which also had large
flat areas with their seats folded--and were based on a car chassis.
Currently, the vast majority of vehicles equipped with stowable
seats are minivans, which tend not to be based on car chassis and
typically perform very well in crash rating tests. The stowing of such
seats results in a flat, floor-level surface comparable to that if the
seats were removed. The cargo space created is functionally equivalent
between the stowable and removable seats.
Moreover, removable seats are heavy and cumbersome. The agency
recognizes that consumers could injure themselves while removing and
reinstalling these seats. Additionally, if the seats are improperly re-
installed, the seats and related occupant crash protection systems may
not provide the necessary protection in a collision. Stowable seats
minimize this concern.
The agency has tentatively determined that by including stowable
seats in the flat floor provision, we would facilitate the production
of vehicles that achieve high safety ratings, that have a degree of
consumer preference, and that minimize safety risks from improper
reinstallation/redeployment. The primary effect of this amendment would
be on the design of seating in mini-vans, which have traditionally been
classified as light trucks. With the adoption of this amendment, mini-
vans would be treated as light trucks regardless of whether they have
removable or fold down seating.
X. Rulemaking Analyses and Notices
A. Executive Order 12866 and DOT Regulatory Policies and Procedures
Executive Order 12866, ``Regulatory Planning and Review'' (58 FR
51735, October 4, 1993), provides for making determinations whether a
regulatory action is ``significant'' and therefore subject to OMB
review and to the requirements of the Executive Order. The Order
defines a ``significant regulatory action'' as one that is likely to
result in a rule that may:
(1) Have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or Tribal governments or communities;
[[Page 51457]]
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
The rulemaking proposed in this NPRM will be economically
significant if adopted. Accordingly, OMB reviewed it under Executive
Order 12866. The rule, if adopted, would also be significant within the
meaning of the Department of Transportation's Regulatory Policies and
Procedures.
We estimate that the total benefits under the Unreformed CAFE
standards for MYs 2008-2010 and the Reformed CAFE standard for MY 2011
would be approximately $7.0 billion at a 7 percent discount rate and at
fuel prices ranging from $1.51 to $1.58 per gallon: $605 million for MY
2008, $1,366 million for MY 2009, $2,007 million for MY 2010, and
$3,069 million for MY 2011. We estimate that the total cost under those
standards, as compared to the MY 2007 standard of 22.2 mpg, would be a
total of $6.2 billion: $528 million for MY 2008, $1,244 million for MY
2009, $1,798 million for MY 2010, and $2,656 million for MY 2011.
Under the Reformed CAFE standards for MYs 2008-2011, as compared to
the MY 2007 standard of 22.2 mpg, we estimate the total benefits under
the Reformed CAFE system for MYs 2008-2011 at $7.5 billion, at a 7
percent discount rate and at fuel prices ranging from $1.51 to $1.58
per gallon: $694 million for MY 2008, $1,633 million for MY 2009,
$2,144 million for MY 2010, and $3,069 million for MY 2011. We estimate
the total cost to be approximately the same as the cost under the
Unreformed CAFE system, $6.2 billion.
Because the proposed rule if adopted would be significant under
both the Department of Transportation's procedures and OMB's
guidelines, the agency has prepared a Preliminary Regulatory Impact
Analysis and placed it in the docket and on the agency's Web site.
B. National Environmental Policy Act
Consistent with the requirements of the National Environmental
Policy Act and the regulations of the Council on Environmental Quality,
the agency has prepared a Draft Environmental Assessment of this
proposed action, and has placed the analysis in the docket. Based on
the Draft Environmental Assessment, the agency does not, at this time,
anticipate that the proposed action would have a significant effect on
the quality of the human environment. The agency seeks comments on the
Draft Environmental Assessment.
C. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.,
as amended by the Small Business Regulatory Enforcement Fairness Act
(SBREFA) of 1996), whenever an agency is required to publish a notice
of rulemaking for any proposed or final rule, it must prepare and make
available for public comment a regulatory flexibility analysis that
describes the effect of the rule on small entities (i.e., small
businesses, small organizations, and small governmental jurisdictions).
The Small Business Administration's regulations at 13 CFR part 121
define a small business, in part, as a business entity ``which operates
primarily within the United States.'' (13 CFR 121.105(a)). No
regulatory flexibility analysis is required if the head of an agency
certifies the rule will not have a significant economic impact on a
substantial number of small entities.
I certify that the proposed amendment would not have a significant
economic impact on a substantial number of small entities. The
following is the agency's statement providing the factual basis for the
certification (5 U.S.C. 605(b)).
If adopted, the proposal would directly affect thirteen single
stage light truck manufacturers. According to the Small Business
Administration's small business size standards (see 5 CFR 121.201), a
single stage light truck manufacturer (NAICS code 336112, Light Truck
and Utility Vehicle Manufacturing) must have 1,000 or fewer employees
to qualify as a small business. None of the affected single stage light
truck manufacturers are small businesses under this definition. All of
the manufacturers of light trucks have thousands of employees. Given
that none of the businesses directly affected are small business for
purposes of the Regulatory Flexibility Act, a regulatory flexibility
analysis was not prepared.
D. Executive Order 13132 Federalism
Executive Order 13132 requires NHTSA to develop an accountable
process to ensure ``meaningful and timely input by State and local
officials in the development of regulatory policies that have
federalism implications.'' Executive Order 13132 defines the term
``Policies that have federalism implications'' to include regulations
that have ``substantial direct effects on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government.'' Under Executive Order 13132, NHTSA may not issue a
regulation that has federalism implications, that imposes substantial
direct compliance costs, and that is not required by statute, unless
the Federal government provides the funds necessary to pay the direct
compliance costs incurred by State and local governments, or NHTSA
consults with State and local officials early in the process of
developing the proposed regulation.
We reaffirm our view that a state may not impose a legal
requirement relating to fuel economy, whether by statute, regulation or
otherwise, that conflicts with this rule. A state law that seeks to
reduce motor vehicle carbon dioxide emissions is both expressly and
impliedly preempted.
Our statute contains a broad preemption provision making clear the
need for a uniform, federal system: ``When an average fuel economy
standard prescribed under this chapter is in effect, a State or a
political subdivision of a State may not adopt or enforce a law or
regulation related to fuel economy standards or average fuel economy
standards for automobiles covered by an average fuel economy standard
under this chapter.'' 49 U.S.C. 32919(a). Since the way to reduce
carbon dioxide emissions is to improve fuel economy, a state regulation
seeking to reduce those emissions is a ``regulation related to fuel
economy standards or average fuel economy standards.''
Further, such a regulation would be impliedly preempted, as it
would interfere with our implementation of the CAFE statute. For
example, it would interfere the careful balancing of various statutory
factors and other related considerations, as contemplated in the
conference report on EPCA, we must do in order to establish average
fuel economy standards at the maximum feasible level. It would also
interfere with our effort to reform CAFE so to achieve higher fuel
savings, while reducing the risk of adverse economic and safety
consequences.
E. Executive Order 12988 (Civil Justice Reform)
Pursuant to Executive Order 12988, ``Civil Justice Reform'' (61 FR
4729, February 7, 1996), the agency has considered whether this
rulemaking would have any retroactive effect. This final rule does not
have any retroactive effect.
[[Page 51458]]
F. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires Federal agencies to prepare a written assessment of the costs,
benefits, and other effects of proposed or final rules that include a
Federal mandate likely to result in the expenditure by State, local, or
tribal governments, in the aggregate, or by the private sector, of more
than $100 million in any one year (adjusted for inflation with base
year of 1995). Before promulgating a rule for which a written statement
is needed, section 205 of the UMRA generally requires NHTSA to identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, most cost-effective, or least burdensome alternative
that achieves the objectives of the rule. The provisions of section 205
do not apply when they are inconsistent with applicable law. Moreover,
section 205 allows NHTSA to adopt an alternative other than the least
costly, most cost-effective, or least burdensome alternative if the
agency publishes with the final rule an explanation why that
alternative was not adopted.
This final rule will not result in the expenditure by State, local,
or tribal governments, in the aggregate, of more than $100 million
annually, but it will result in the expenditure of that magnitude by
vehicle manufacturers and/or their suppliers. In promulgating this
proposal, NHTSA considered whether average fuel economy standards lower
and higher than those proposed would be appropriate. NHTSA is
statutorily required to set standards at the maximum feasible level
achievable by manufacturers and has tentatively concluded that the
proposed standards are the maximum feasible standards for the light
truck fleet for MYs 2008-2011 in light of the statutory considerations.
G. Paperwork Reduction Act
Under the procedures established by the Paperwork Reduction Act of
1995, a person is not required to respond to a collection of
information by a Federal agency unless the collection displays a valid
OMB control number. The proposed rule would amend the reporting
requirements under the 49 CFR part 537, Automotive Fuel Economy
Reports. In addition to the vehicle model information collected under
the approved data collection (OMB control number 2127-0019) in Part
537, light truck manufacturers would also be required provide data on
vehicle footprint. During the transition period, manufacturers would
also be required to specify with which CAFE system they were complying.
In compliance with the PRA, we announce that NHTSA is seeking
comment on the proposed revisions to the collection.
Agency: National Highway Traffic Safety Administration (NHTSA).
Title: 49 CFR part 537, Automotive Fuel Economy Reports (F.E.)
Reports.
Type of Request: Amend existing collection.
OMB Clearance Number: 2127-0019.
Form Number: This collection of information will not use any
standard forms.
Requested Expiration Date of Approval: Three years from the date of
approval.
Summary of the Collection of Information
For MYs 2008-2010, we are proposing to provide manufacturers an
option to comply with one of two CAFE systems. A manufacturer would be
required to report under which system it chose to comply during those
years. Manufacturers complying under the Reformed CAFE system would
also be required to provide data on vehicle footprint so that the
agency could determine a manufacturer's required fuel economy level.
This information collection would be included as part of the
existing fuel economy reporting requirements.
Description of the Need for the Information and Proposed Use of the
Information
NHTSA would require this information to ensure that vehicle
manufacturers were complying with the light truck fuel economy
standards. NHTSA would use this information to determine if a
manufacturer's fuel economy level should be calculated under the
Unreformed or Reformed CAFE system. NHTSA would use the footprint data
to determine a manufacturer's required fuel economy level under the
Reformed CAFE system.
Description of the Likely Respondents (Including Estimated Number, and
Proposed Frequency of Response to the Collection of Information)
NHTSA estimates that 13 light truck manufacturers would submit the
required information. The frequency of reporting would not change from
that currently authorized under collection number 2127-0019.
Estimate of the Total Annual Reporting and Recordkeeping Burden
Resulting from the Collection of Information
NHTSA estimates that each manufacturer will incur an increase of
two burden hours per year per report. This estimate is based on the
fact that data collection will involve only computer tabulation and
that manufacturers will provide the information to NHTSA in an
electronic (as opposed to paper) format.
NHTSA estimates that the recordkeeping burden resulting from the
collection of information will be 0 hours because the information will
be retained on each manufacturer's existing computer systems for each
manufacturer's internal administrative purposes.
NHTSA estimates that the total annual cost burden would be
increased by 551.58 dollars (2 additional burden hours per light truck
manufacturer x 13 light truck manufacturers x 21.23 dollars/hour).
There would be no capital or start-up costs as a result of this
collection. Manufacturers can collect and tabulate the information by
using existing equipment. Thus, there would be no additional costs to
respondents or recordkeepers.
NHTSA requests comment on its estimates of the total annual hour
and cost burdens resulting from this collection of information. Please
submit any comments to the NHTSA Docket Number referenced in the
heading of this notice or to: Ken Katz, Lead Engineer, Fuel Economy
Division, Office of International Policy, Fuel Economy, and Consumer
Programs, at 400 Seventh Street, SW., Washington, DC 20590. He can also
be contacted by phone, (202) 366-0846; facsimile (202) 493-2290; and
electronic mail, [email protected]. Comments are due by October 31,
2005.
H. Regulation Identifier Number (RIN)
The Department of Transportation assigns a regulation identifier
number (RIN) to each regulatory action listed in the Unified Agenda of
Federal Regulations. The Regulatory Information Service Center
publishes the Unified Agenda in April and October of each year. You may
use the RIN contained in the heading at the beginning of this document
to find this action in the Unified Agenda.
I. Executive Order 13045
Executive Order 13045 (62 FR 19885, April 23, 1997) applies to any
rule that: (1) Is determined to be economically significant as defined
under E.O. 12866, and (2) concerns an environmental, health or safety
risk that NHTSA has reason to believe may have a disproportionate
effect on children. If the regulatory action meets both criteria, we
must evaluate the environmental health or safety effects of the planned
[[Page 51459]]
rule on children, and explain why the planned regulation is preferable
to other potentially effective and reasonably feasible alternatives
considered by us.
This proposed rule does not have a disproportionate effect on
children. The primary effect of this proposal is to conserve energy
resources by setting fuel economy standards for light trucks.
J. National Technology Transfer and Advancement Act
Section 12(d) of the National Technology Transfer and Advancement
Act (NTTAA) requires NHTSA to evaluate and use existing voluntary
consensus standards in its regulatory activities unless doing so would
be inconsistent with applicable law (e.g., the statutory provisions
regarding NHTSA's vehicle safety authority) or otherwise impractical.
Voluntary consensus standards are technical standards developed or
adopted by voluntary consensus standards bodies. Technical standards
are defined by the NTTAA as ``performance-based or design-specific
technical specification and related management systems practices.''
They pertain to ``products and processes, such as size, strength, or
technical performance of a product, process or material.''
In meeting the requirement of the NTTAA, we are required to consult
with voluntary, private sector, consensus standards bodies. Examples of
organizations generally regarded as voluntary consensus standards
bodies include the American Society for Testing and Materials (ASTM),
the Society of Automotive Engineers (SAE), and the American National
Standards Institute (ANSI). If NHTSA does not use available and
potentially applicable voluntary consensus standards, we are required
by the Act to provide Congress, through OMB, an explanation of the
reasons for not using such standards.
The notice proposes to categorize light trucks according to vehicle
footprint (average track width X wheelbase). For the purpose of this
calculation, the agency proposes to base these measurements on those by
the automotive industry. Determination of wheelbase would be consistent
with L101-wheelbase, defined in SAE J1100 MAY95, Motor vehicle
dimensions. The agency's proposal uses a modified version of the SAE
definitions for track width (W101-tread-front and W102-tread-rear as
defined in SAE J1100 MAY95). The proposed definition of track width
reduces a manufacturer's ability to adjust a vehicle's track width
through minor alterations.
K. Executive Order 13211
Executive Order 13211 (66 FR 28355, May 18, 2001) applies to any
rule that: (1) Is determined to be economically significant as defined
under E.O. 12866, and is likely to have a significant adverse effect on
the supply, distribution, or use of energy; or (2) that is designated
by the Administrator of the Office of Information and Regulatory
Affairs as a significant energy action. If the regulatory action meets
either criterion, we must evaluate the adverse energy effects of the
planned rule and explain why the planned regulation is preferable to
other potentially effective and reasonably feasible alternatives
considered by us.
The proposed rule seeks to establish light truck fuel economy
standards that will reduce the consumption of petroleum and will not
have any adverse energy effects. Accordingly, this rulemaking action is
not designated as a significant energy action.
L. Department of Energy Review
In accordance with 49 U.S.C. 32902(j), we submitted this proposed
rule to the Department of Energy for review. That Department did not
make any comments that we have not addressed.
M. Plain Language
Executive Order 12866 requires each agency to write all rules in
plain language. Application of the principles of plain language
includes consideration of the following questions:
Have we organized the material to suit the public's needs?
Are the requirements in the rule clearly stated?
Does the rule contain technical language or jargon that
isn't clear?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the rule easier to understand?
Would more (but shorter) sections be better?
Could we improve clarity by adding tables, lists, or
diagrams?
What else could we do to make the rule easier to
understand?
If you have any responses to these questions, please include them
in your comments on this proposal.
N. Privacy Act
Anyone is able to search the electronic form of all comments
received into any of our dockets by the name of the individual
submitting the comment (or signing the comment, if submitted on behalf
of an association, business, labor union, etc.). You may review DOT's
complete Privacy Act Statement in the Federal Register published on
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit
http://dms.dot.gov.
XI. Comments
Submission of Comments
How Can I Influence NHTSA's Thinking on This Notice?
In developing this notice, we tried to address the concerns of all
our stakeholders. Your comments will help us determine what standards
should be set for light truck fuel economy. We invite you to provide
different views on questions we ask, new approaches and technologies we
did not ask about, new data, how this notice may affect you, or other
relevant information. We welcome your views on all aspects of this
notice, but request comments on specific issues throughout this notice.
We grouped these specific requests near the end of the sections in
which we discuss the relevant issues. Your comments will be most
effective if you follow the suggestions below:
Explain your views and reasoning as clearly as possible.
Provide empirical evidence, wherever possible, to support
your views.
If you estimate potential costs, explain how you arrived
at the estimate.
Provide specific examples to illustrate your concerns.
Offer specific alternatives.
Refer your comments to specific sections of the notice,
such as the units or page numbers of the preamble, or the regulatory
sections.
Be sure to include the name, date, and docket number of
the proceeding with your comments.
How Do I Prepare and Submit Comments?
Your comments must be written and in English. To ensure that your
comments are correctly filed in the Docket, please include the docket
number of this document in your comments.
Your comments must not be more than 15 pages long. (49 CFR 553.21).
We 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.
Please submit two copies of your comments, including the
attachments, to Docket Management at the address given above under
ADDRESSES.
Comments may also be submitted to the docket electronically by
logging onto the Dockets Management System Web site at http://dms.dot.gov. Click on
[[Page 51460]]
``Help'' to obtain instructions for filing the document electronically.
How Can I Be Sure That My Comments Were Received?
If you 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. Each electronic filer will
receive electronic confirmation that his or her submission has been
received.
How Do I Submit Confidential Business Information?
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. In addition, you should
submit two copies, from which you have deleted the claimed confidential
business information, to Docket Management at the address given above
under ADDRESSES. When you send a comment containing information claimed
to be confidential business information, you should include a cover
letter setting forth the information specified in our confidential
business information regulation. (49 CFR part 512.)
Will the Agency Consider Late Comments?
We will consider all timely submitted comments, i.e., those that
Docket Management receives before the close of business on the comment
closing date indicated above under DATES. Due to the statutory deadline
(April 1, 2006), we will be very limited in our ability to consider
late-filled comments. If Docket Management receives a comment too late
for us to consider it 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 comments received by Docket Management at the
address given above under ADDRESSES. The hours of the Docket are
indicated above in the same location.
You may also see the comments on the Internet. To read the comments
on the Internet, take the following steps:
(1) Go to the Docket Management System (DMS) Web page of the
Department of Transportation (http://dms.dot.gov/).
(2) On that page, click on ``search.''
(3) On the next page (http://dms.dot.gov/search/), type in the
five-digit docket number shown at the beginning of this document.
Example: If the docket number were ``NHTSA-2002-12345,'' you would type
``12345.'' After typing the docket number, click on ``search.''
(4) On the next page, which contains docket summary information for
the docket you selected, click on the desired comments. You may
download the comments. However, since the comments are imaged
documents, instead of word processing documents, the downloaded
comments are not word searchable.
Please note that even after the comment closing date, we will
continue to file relevant information in the Docket as it becomes
available. Further, some people may submit late comments. Accordingly,
we recommend that you periodically check the Docket for new material.
List of Subjects in 49 CFR Parts 523, 533, and 537
Fuel economy and Reporting and recordkeeping requirements.
In consideration of the foregoing, 49 CFR Chapter V would be
amended as follows:
PART 523--VEHICLE CLASSIFICATION
1. The authority citation for part 523 would continue to read as
follows:
Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR
1.50.
2. Section 523.2 would be amended by adding a definition of
``footprint'' to read as follows:
Sec. 523.2 Definitions.
* * *
Footprint means the product, in square feet, of multiplying a
vehicle's average track width by its wheelbase. For purposes of this
definition, track width is the lateral distance between the centerlines
of the tires at ground when the tires are mounted on rims with zero
offset. For purposes of this definition, wheelbase is the longitudinal
distance between front and rear wheel centerlines. In case of multiple
rear axles, wheelbase is measured to the midpoint of the centerlines of
the wheels on the rearmost axle.
* * * * *
3. Section 523.5(a) would be amended to read as follows:
Sec. 523.5 Light truck.
* * * * *
(a) * * *
(5) Permit expanded use of the automobile for cargo-carrying
purposes or other nonpassenger-carrying purposes through:
(i) The removal of seats by means installed for that purpose by the
automobile's manufacturer or with simple tools, such as screwdrivers
and wrenches, so as to create a flat, floor level, surface extending
from the forwardmost point of installation of those seats to the rear
of the automobile's interior; or
(ii) The stowing of foldable seats in the automobile's floor pan,
so as to create a flat, floor level, surface extending from the
forwardmost point of installation of those seats to the rear of the
automobile's interior.
* * * * *
PART 533--LIGHT TRUCK FUEL ECONOMY STANDARDS
4. The authority citation for part 533 would continue to read as
follows:
Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR
1.50.
5. Part 533.5 would be amended by:
A. In paragraph (a) by revising Table IV and adding Figure I and
Table V; and
B. Adding paragraphs (g) and (h).
The revisions and additions read as follows:
Sec. 533.5 Requirements.
(a) * * *
Table IV
------------------------------------------------------------------------
Model year Standard
------------------------------------------------------------------------
2001....................................................... 20.7
2002....................................................... 20.7
2003....................................................... 20.7
2004....................................................... 20.7
2005....................................................... 21.0
2006....................................................... 21.6
2007....................................................... 22.2
2008....................................................... 22.5
2009....................................................... 23.1
2010....................................................... 23.5
------------------------------------------------------------------------
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[[Page 51462]]
Table V.--Categories for MYs 2008-2011 Based on Vehicle Footprint (Foot\2\) and the Associated Target Fuel
Economy Levels (mpg)
----------------------------------------------------------------------------------------------------------------
Category 1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
Range of vehicle footprint........ <=43.0 >43.0-47.0 >47.0-52.0 >52.0-56.5 >56.5-65.0 >65.0
MY 2008 Targets................... 26.8 25.6 22.3 22.2 20.7 20.4
MY 2009 Targets................... 27.4 25.4 23.5 22.7 21.0 21.0
MY 2010 Targets................... 27.8 26.4 24.0 22.9 21.6 20.8
MY 2011 Targets................... 28.4 27.1 24.5 23.3 21.9 21.3
----------------------------------------------------------------------------------------------------------------
* * * * *
(g) For model years 2008-2010, at a manufacturer's option, a
manufacturer's light truck fleet may comply with the fuel economy level
calculated according to Figure I and the appropriate values in Table V,
with said option being irrevocably chosen for that model year and
reported at the time a mid-model year report is submitted under Sec.
537.7.
(h) For model year 2011, a manufacturer's light truck fleet shall
comply with the fuel economy level, calculated according to Figure I
and the appropriate values in Figures V and VI.
5a. Part 533 would be amended by adding Appendix A to read as
follows:
Appendix A--Example of Calculating Compliance Under Sec. 533.5
Paragraph (g)
Assume a hypothetical manufacturer (Manufacturer X) produces a
fleet of light trucks in MY 2008 as follows:
------------------------------------------------------------------------
Fuel Footprint
Model economy Volume (ft\2\) Category
------------------------------------------------------------------------
A........................... 27.0 1,000 42 1
B........................... 25.6 1,500 44 2
C........................... 25.4 1,000 46 2
D........................... 22.1 2,000 50 3
E........................... 22.4 3,000 55 4
F........................... 20.2 1,000 66 6
------------------------------------------------------------------------
Note to Appendix A Table 1. Manufacturer X's required corporate
average fuel economy level under Sec. 533.5(g) would be calculated
as illustrated in Appendix A Figure 1:
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Note to Appendix A Figure 1. Manufacturer X did not produce any
light trucks in Category 5 during MY 2005. Therefore calculation of
Manufacturer X's required
[[Page 51464]]
corporate average fuel economy level for MY 2008 would only
incorporate the fuel economy target levels for Categories 1, 2, 3,
4, and 6.
Manufacturer X's actual CAFE level would be calculated as
illustrated in Appendix A Figure 2.
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Note to Appendix A Figure 2. Manufacturer X's required fuel
economy level is 23.2 mpg. Its actual fuel economy level is 23.2
mpg.
[[Page 51466]]
Therefore, Manufacturer X complies with the CAFE requirement set
forth in Sec. 533.7(g).
PART 537--AUTOMOTIVE FUEL ECONOMY REPORTS
6. The authority citation for Part 537 would continue to read as
follows:
Authority: 15 U.S.C. 2005; 49 CFR 1.50.
7. Section 537.7 would be amended by revising paragraphs
(c)(4)(xvi) through (xxi) to read as follows:
Sec. 537.7 Pre-model year and mid-model year reports.
* * * * *
(c) Model type and configuration fuel economy and technical
information.
* * *
(4) * * *
(xvi)(A) In the case of passenger automobiles:
(1) Interior volume index, determined in accordance with subpart D
of 40 CFR part 600, and
(2) Body style;
(B) In the case of light trucks:
(1) Passenger-carrying volume,
(2) Cargo-carrying volume; and
(3) Footprint as defined in 49 CFR Sec. 523.2.
(xvii) Performance of the function described in Sec. 523.5(a)(5)
of this chapter (indicate yes or no);
(xviii) Existence of temporary living quarters (indicate yes or
no);
(xix) Frontal area;
(xx) Road load power at 50 miles per hour, if determined by the
manufacturer for purposes other than compliance with this part to
differ from the road load setting prescribed in 40 CFR 86.177-11(d);
(xxi) Optional equipment that the manufacturer is required under 40
CFR parts 86 and 600 to have actually installed on the vehicle
configuration, or the weight of which must be included in the curb
weight computation for the vehicle configuration, for fuel economy
testing purposes.
* * * * *
Issued: August 23, 2005.
Stephen R. Kratzke,
Associate Administrator for Rulemaking.
[FR Doc. 05-17006 Filed 8-24-05; 8:45 am]
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