[Federal Register Volume 73, Number 86 (Friday, May 2, 2008)]
[Proposed Rules]
[Pages 24352-24487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 08-1186]
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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, 531, 533, 534, 536 and 537
Average Fuel Economy Standards, Passenger Cars and Light Trucks; Model
Years 2011-2015; Proposed Rule
Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed
Rules
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Parts 523, 531, 533, 534, 536 and 537
[Docket No. NHTSA-2008-0089]
RIN 2127-AK29
Average Fuel Economy Standards, Passenger Cars and Light Trucks;
Model Years 2011-2015
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).
ACTION: Notice of Proposed Rulemaking (NPRM).
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SUMMARY: This document proposes substantial increases in the Corporate
Average Fuel Economy (CAFE) standards for passenger cars and light
trucks that would enhance energy security by improving fuel economy.
Since the carbon dioxide (CO2) emitted from the tailpipes of
new motor vehicles is the natural by-product of the combustion of fuel,
the increased standards would also address climate change by reducing
tailpipe emissions of CO2. Those emissions represent 97
percent of the total greenhouse gas emissions from motor vehicles.
Implementation of the new standards would dramatically add to the
billions of barrels of fuel already saved since the beginning of the
CAFE program in 1975.
DATES: Comments must be received on or before July 1, 2008.
ADDRESSES: You may submit comments to the docket number identified in
the heading of this document by any of the following methods:
Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting
comments.
Mail: Docket Management Facility, M-30, U.S. Department of
Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New
Jersey Avenue, SE., Washington, DC 20590.
Hand Delivery or Courier: West Building Ground Floor, Room
W12-140, 1200 New Jersey Avenue, SE., between 9 a.m. and 5 p.m. Eastern
Time, Monday through Friday, except Federal holidays.
Fax: (202) 493-2251.
Regardless of how you submit your comments, you should mention the
docket number of this document.
You may call the Docket Management Facility at 202-366-9826.
Instructions: For detailed instructions on submitting comments and
additional information on the rulemaking process, see the Public
Participation heading of the Supplementary Information section of this
document. Note that all comments received will be posted without change
to http://www.regulations.gov, including any personal information
provided.
Privacy Act: Please see the Privacy Act heading under Rulemaking
Analyses and Notices.
FOR FURTHER INFORMATION CONTACT: For policy and technical issues: Ms.
Julie Abraham or Mr. Peter Feather, Office of Rulemaking, National
Highway Traffic Safety Administration, 1200 New Jersey Avenue, SE.,
Washington, DC 20590. Telephone: Ms. Abraham (202) 366-1455; Mr.
Feather (202) 366-0846.
For legal issues: Mr. Stephen Wood or Ms. Rebecca Schade, Office of
the Chief Counsel, National Highway Traffic Safety Administration, 1200
New Jersey Avenue, SE., Washington, DC 20590. Telephone: (202) 366-
2992.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive overview
A. Summary
B. Energy Independence and Security Act of 2007
C. Proposal
1. Standards
a. Stringency
b. Benefits
c. Costs
d. Flexibilities
2. Credits
II. Background
A. Contribution of fuel economy improvements to addressing
energy independence and security and climate change
1. Relationship between fuel economy and CO2 tailpipe
emissions
2. Fuel economy improvements/CO2 tailpipe emission
reductions since 1975
B. Chronology of events since the National Academy of Sciences
called for reforming and increasing CAFE standards
1. National Academy of Sciences CAFE report (February 2002)
a. Significantly increasing CAFE standards without reforming
them would adversely affect safety
b. Environmental and other externalities justify increasing the
CAFE standards
2. Final rule establishing reformed (attribute-based) CAFE
standards for MY 2008-2011 light trucks (March 2006)
3. Twenty-in-Ten Initiative (January 2007)
4. Request for passenger car and light truck product plans
(February 2007)
5. Supreme Court decision in Massachusetts v. EPA (April 2007)
6. Coordination between NHTSA and EPA on development of
rulemaking proposals (Summer-Fall 2007)
7. Ninth Circuit decision re final rule for MY 2008-2011 light
trucks (November 2007)
8. Enactment of Energy Independence and Security Act of 2007
(December 2007)
C. Energy Policy and Conservation Act, as amended
1. Vehicles subject to standards for automobiles
2. Mandate to set standards for automobiles
3. Structure of standards
4. Factors governing or considered in the setting of standards
5. Consultation in setting standards
6. Compliance flexibility and enforcement
III. Fuel economy enhancing technologies
A. Data sources for technology assumptions
B. Technologies and estimates of costs and effectiveness
1. Engine technologies
2. Transmission technologies
3. Vehicle technologies
4. Accessory technologies
5. Hybrid technologies
C. Technology synergies
D. Technology cost learning curve
E. Ensuring sufficient lead time
1. Linking to redesign and refresh
2. Technology phase-in caps
IV. Basis for attribute-based structure for setting fuel economy
standards
A. Why attribute-based instead of a single industry-wide
average?
B. Which attribute is most appropriate?
1. Footprint-based function
2. Functions based on other attributes
C. The continuous function
V. Volpe model/analysis/generic description of function
A. The Volpe model
1. What is the Volpe model?
2. How does the Volpe model apply technologies to manufacturers'
future fleets?
3. What effects does the Volpe model estimate?
4. How can the Volpe model be used to calibrate and evaluate
potential CAFE standards?
5. How has the Volpe model been updated since the April 2006
light truck CAFE final rule?
a. Technology synergies
b. Technology learning curves
c. Calibration of reformed CAFE standards
6. What manufacturer information does the Volpe model use?
7. What economic information does the Volpe model use?
a. Costs of fuel economy technologies
b. Potential opportunity costs of improved fuel economy
c. The on-road fuel economy `gap'
d. Fuel prices and the value of saving fuel
e. Consumer valuation of fuel economy and payback period
f. Vehicle survival and use assumptions
g. Growth in total vehicle use
h. Accounting for the rebound effect of higher fuel economy
i. Benefits from increased vehicle use
j. Added costs from congestion, crashes and noise
k. Petroleum consumption and import externalities
l. Air pollutant emissions
(i) Impacts on criteria air pollutant emissions
(ii) Reductions in CO2 emissions
(iii) Economic value of reductions in CO2 emissions
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m. The value of increased driving range
n. Discounting future benefits and costs
o. Accounting for uncertainty in benefits and costs
B. How has NHTSA used the Volpe model to select the proposed
standards?
1. Establishing a continuous function standard
2. Calibration of initial continuous function standards
3. Adjustments to address policy considerations
a. Curve crossings
b. Steep curve for passenger cars
c. Risk of upsizing
VI. Proposed fuel economy standards
A. Standards for passenger cars and light trucks
1. Proposed passenger car standards MY 2011-2015
2. Proposed light truck standards MY 2011-2015
3. Energy and environmental backstop
4. Combined fleet performance
B. Estimated technology utilization under proposed standards
C. Costs and benefits of proposed standards
D. Flexibility mechanisms
E. Consistency of proposed standards with EPCA statutory factors
1. Technological feasibility
2. Economic practicability
3. Effect of other motor vehicle standards of the Government on
fuel economy
4. Need of the U.S. to conserve energy
F. Other considerations in setting standards under EPCA
1. Safety
2. Alternative fuel vehicle incentives
3. Manufacturer credits
G. Environmental impacts of the proposed standards
H. Balancing the factors to determine maximum feasible CAFE
levels
VII. Standards for commercial medium- and heavy-duty on-highway
vehicles and ``work trucks''
VIII. Vehicle classification
A. Origins of the regulatory definitions
B. Rationale for the regulatory definitions in light of the
current automobile market
C. NHTSA is not proposing to change regulatory definitions at
this time
IX. Enforcement
A. Overview
B. CAFE credits
1. Credit trading
2. Credit transferring
3. Credit carry-forward/carry-back
C. Extension and phasing out of flexible-fuel incentive program
X. Regulatory alternatives
XI. Sensitivity and Monte Carlo analysis
XII. Public participation
XIII. Regulatory notices and analyses
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
XIV. Regulatory Text
I. Executive overview
A. Summary
This document is being issued pursuant to the Energy Independence
and Security Act of 2007 (EISA), which Congress passed in December
2007. EISA mandates the setting of separate maximum feasible standards
for passenger cars and for light trucks at levels sufficient to ensure
that the average fuel economy of the combined fleet of all passenger
cars and light trucks sold by all manufacturers in the U.S. in model
year (MY) 2020 equals or exceeds 35 miles per gallon. That is a 40
percent increase above the average of approximately 25 miles per gallon
for the current combined fleet.
Congress enabled NHTSA to require these substantial increases in
fuel economy by requiring that passenger car standards be reformed
through basing them on one or more vehicle attributes. The attribute-
based approach was originally recommended by the National Academy of
Sciences in 2002 and adopted by NHTSA for light trucks in 2006. The new
approach is a substantial improvement over the old approach of
specifying the same numerical standard for each manufacturer. It avoids
creating undue risks of adverse safety and employment impacts and
distributes compliance responsibilities among the vehicle manufacturers
more equitably.
This document proposes standards for MYs 2011-2015, the maximum
number of model years for which NHTSA can establish standards in a
single rulemaking under EISA. Since lead time is a significant
consideration in determining the stringency of future standards, the
agency needs to establish the standards as far in advance as possible
so as to maximize the amount of lead time for manufacturers to develop
and implement plans for making the vehicle design changes necessary to
achieve the requirements of EISA.
In developing the proposed standards, the agency considered the
four statutory factors underlying maximum feasibility (technological
feasibility, economic practicability, the effect of other standards of
the Government on fuel economy, and the need of the nation to conserve
energy) as well as other relevant considerations such as safety. After
assessing what fuel saving technologies would be available, how
effective they are, and how quickly they could be introduced, and then
factoring that information into the computer model its uses for
applying technologies to particular vehicle models, the agency then
balanced the factors relevant to standard setting. In its decision
making, the agency used a marginal benefit-cost analysis that placed
monetary values on relevant externalities (both energy security and
environmental externalities, including the benefits of reductions in
CO2 emissions). In the above process, the agency consulted
with the Department of Energy and particularly the Environmental
Protection Agency regarding a wide variety of matters, including, for
example, the cost and effectiveness of available technologies,
improvements to the computer model, and the selection of appropriate
analytical assumptions.
This document also proposes to add a new regulation designed to
give manufacturers added flexibility in using credits earned by
exceeding CAFE standards. The regulation would authorize the trading of
credits between manufacturers. In addition, it would permit a
manufacturer to transfer its credits from one of its compliance
categories to another of its categories.
NHTSA is also publishing two companion documents, one requesting
vehicle manufacturers to provide up-to-date product plans for the model
years covered by this document, and the other inviting Federal, State,
and local agencies, Indian tribes, and the public to participate in
identifying the environmental issues and reasonable alternatives to be
examined in an environmental impact statement.
B. Energy Independence and Security Act of 2007
The Energy Independence and Security Act of 2007 (EISA)\1\ builds
on the President's ``Twenty in Ten'' initiative, which was announced in
January 2007. That initiative sought to reduce gasoline usage by 20
percent in the next 10 years. The enactment of EISA represents a major
step forward in expanding the production of renewable fuels, reducing
oil consumption, and confronting global climate change.
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\1\ Pub. L. 110-140, 121 Stat. 1492 (Dec. 18, 2007).
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EISA will help reduce America's dependence on oil by reducing U.S.
demand for oil by setting a national fuel economy standard of at least
35 miles per gallon by 2020--which will increase fuel economy standards
by 40 percent and save billions of gallons of fuel. In January 2007,
the President called for the first statutory increase in fuel economy
standards for passenger
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automobiles (referred to below as ``passenger cars'') since those
standards were mandated in 1975, and EISA delivers on that request.
EISA also includes an important reform the President has called for
that allows the Transportation Department to issue ``attribute-based
standards,'' which will ensure that increased fuel efficiency does not
come at the expense of automotive safety. EISA also mandates increases
in the use of renewable fuels by setting a mandatory Renewable Fuel
Standard requiring fuel producers to use at least 36 billion gallons of
renewable fuels in 2022.
As the President noted in signing EISA, the combined effect of the
various actions required by the Act will be to produce some of the
largest CO2 emission reductions in our nation's history.
EISA made a number of important changes to the Energy Policy and
Conservation Act (EPCA) (Pub. L. 94-163), the 1975 statute that governs
the CAFE program. EISA:
Replaces the old statutory default standard of 27.5 mpg
for passenger cars with a mandate to establish separate passenger car
and light truck standards annually, beginning with MY 2011, set at the
maximum feasible level. The standards for MYs 2011-2020 must, as a
minimum, be set sufficiently high to ensure that the average fuel
economy of the combined industrywide fleet of all new passenger cars
and light trucks sold in the United States during MY 2020 is at least
35 mpg.\2\
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\2\ Although NHTSA established an attribute-based standard for
MY 2011 light trucks in its 2006 final rule, EISA mandates a new
rulemaking, reflecting new statutory considerations and a new, up-
to-date administrative record, and consistent with EPCA as amended
by EISA, to establish the standard for those light trucks.
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Limits to five the number of years for which standards can
be established in a single rulemaking. That requirement, in combination
with the requirement to start rulemaking with MY 2011, necessitates
limiting this rulemaking to MYs 2011-2015.
Mandates the reforming of CAFE standards for passenger
cars by requiring that all CAFE standards be based on one or more
vehicle attributes, thus ensuring that the improvements in fuel economy
do not come at the expense of safety. NHTSA pioneered that approach in
its last rulemaking on CAFE standards for light trucks.
Requires that for each model year, beginning with MY 2011,
the domestic passenger cars of each manufacturer of those cars must
achieve a measured average fuel economy that is not less than 92
percent of the average fuel economy of the combined fleet of domestic
and non-domestic passenger cars sold in the United States in that model
year.
Provides greater flexibility for automobile manufacturers
by (a) increasing from three to five the number of years that a
manufacturer can carry forward the compliance credits it earns for
exceeding CAFE standards, (b) allowing a manufacturer to transfer the
credits it has earned from one of its classes of automobiles to
another, and (c) authorizing the trading of credits between
manufacturers.
C. Proposal
1. Standards
a. Stringency
This document proposes to set attribute-based fuel economy
standards for passenger cars and light trucks consistent with the
Reformed CAFE approach that NHTSA used in establishing the light truck
standards for MY 2008-2011 light trucks. Separate passenger car
standards would be set for MYs 2011-2015, and light truck standards
would be set for MYs 2011-2015. As noted above, EISA limits the number
of model years for which standards may be established in a single
rulemaking to five. We are proposing to establish standards for five
years to maximize the amount of lead time that we can provide the
manufacturers. This is necessary to make it possible to achieve the
levels of average fuel economy required by MY 2020.
Each vehicle manufacturer's required level of CAFE would be based
on target levels of average fuel economy set for vehicles of different
sizes and on the distribution of that manufacturer's vehicles among
those sizes. Size would be defined by vehicle footprint. The level of
the performance target for each footprint would reflect the
technological and economic capabilities of the industry. The target for
each footprint 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
levels in a model year with a required fuel economy level calculated
using the manufacturer's actual production levels and the targets for
each footprint of the vehicles that it produces.
The proposed standards were developed using a computer model (known
as the ``Volpe Model'') that, for any given model year, applies
technologies to a manufacturer's fleet until the manufacturer reaches
compliance with the standard under consideration. The standards were
tentatively set at levels such that, considering the seven largest
manufacturers, the cost of the last technology application equaled the
benefits of the improvement in fuel economy resulting from that
application. We reviewed these proposed standards to consider the
underlying increased use of technologies and the associated impact on
the industry. This process recognizes that the relevance of costs in
achieving benefits, and uses benefit figures that include the value of
reducing the negative externalities (economic and environmental) from
producing and consuming fuel. These environmental externalities
include, among other things, reducing tailpipe emissions of CO2.\3\ In
view of the process used to develop the proposed standards, they are
also referred to as ``optimized standards.''
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\3\ The externalities included in our analysis do not, however,
include those associated with the reduction of the other GHG emitted
by automobiles, i.e., methane (CH4), nitrous oxide (N2O), and
hydroflurocarbons (HFCs). Actual air conditioner operation is not
included in the test procedures used to obtain both (1) emission
rates for purposes of determining compliance with EPA criteria
pollutant emission standards and (2) fuel economy values for
purposes of determining compliance with NHTSA CAFE standards,
although air conditioner operation is included in ``supplemental''
federal test procedures used to determine compliance with
corresponding and separate EPA criteria pollutant emission
standards.
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Compared to the 2006 rulemaking that established the MY 2008-11
CAFE standards for light trucks, this rulemaking much more fully
captures the value of the costs and benefits of setting CAFE standards.
This is important because assumptions regarding gasoline price
projections, along with assumptions for externalities, are based on
changed economic and environmental and energy security conditions and
play a big role in the agency's balancing of the statutory
considerations in arriving at a determination of maximum feasible. In
light of EISA and the need to balance the statutory considerations in a
way that reflects the current need of the nation to conserve energy,
including the current assessment of the climate change problem, the
agency revisited the various assumptions used in the Volpe Model to
determine the level of the standards. Specifically, in running the
Volpe Model and stopping at a point where marginal costs equaled
marginal benefits or where net benefits to society are maximized, the
agency used higher gasoline prices and higher estimates for energy
security values ($0.29 per gallon instead of $0.09 per gallon). The
agency also monetized carbon dioxide (at
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$7.00/ton), which it did not do in the previous rulemaking, and
expanded its technology list. In addition, the agency used cost
estimates that reflect economies of scale and estimated ``learning''-
driven reductions in the cost of technologies as well as quicker
penetration rates for advanced technologies. These changes to the
inputs to the model had a major impact on increasing the benefits in
certain model years by allowing for greater penetration of
technologies.
The agency cannot set out the exact level of CAFE that each
manufacturer will be required to meet for each model year under the
proposed passenger car or light truck standards since the levels will
depend on information that will not be available until the end of each
of the model years, i.e., the final actual production figures for each
of those years. The agency can, however, project what the industry wide
level of average fuel economy would be for passenger cars and for light
trucks if each manufacturer produced its expected mix of automobiles
and just met its obligations under the proposed ``optimized'' standards
for each model year. Adjacent to each average fuel economy figure is
the estimated associated level of tailpipe emissions of CO2 that would
be achieved.\4\
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\4\ Given the contributions made by CAFE standards to addressing
not only energy independence and security, but also to reducing
tailpipe emissions of CO2, fleet performance is stated in the above
discussion both in terms of fuel economy and the associated
reductions in tailpipe emissions of CO2 since the CAFE standard will
have the practical effect of limiting those emissions approximately
to the indicated levels during the official CAFE test procedures
established by EPA. The relationship between fuel consumption and
carbon dioxide emissions is discussed ubiquitously, such as at
www.fueleconomy.gov, a fuel economy-related Web site managed by DOE
and EPA (see http://www.fueleconomy.gov/feg/contentIncludes/co2_inc.htm, which provides a rounded value of 20 pounds of CO2 per
gallon of gasoline). (Last accessed April 20, 2008.) The CO2
emission rates shown are based on gasoline characteristics. Because
diesel fuel contains more carbon (per gallon) than gasoline, the
presence of diesel engines in the fleet--which NHTSA expects to
increase in response to the proposed CAFE standards--will cause the
actual CO2 emission rate corresponding to any given CAFE level to be
slightly higher than shown here. (The agency projects that 4 percent
of the MY 2015 passenger car fleet and 10 percent of the MY 2015
light truck fleet will have diesel engines.) Conversely (and
hypothetically), applying the same CO2 emission standard to both
gasoline and diesel vehicles would discourage manufacturers from
improving diesel engines, which show considerable promise as a means
to improve fuel economy.
For passenger cars:
MY 2011: 31.2 mpg (285 g/mi of tailpipe emissions of CO2)
MY 2012: 32.8 mpg (271 g/mi of tailpipe emissions of CO2)
MY 2013: 34.0 mpg (261 g/mi of tailpipe emissions of CO2)
MY 2014: 34.8 mpg (255 g/mi of tailpipe emissions of CO2)
MY 2015: 35.7 mpg (249 g/mi of tailpipe emissions of CO2)
For light trucks:
MY 2011: 25.0 mpg (355 g/mi of tailpipe emissions of CO2)
MY 2012: 26.4 mpg (337 g/mi of tailpipe emissions of CO2)
MY 2013: 27.8 mpg (320 g/mi of tailpipe emissions of CO2)
MY 2014: 28.2 mpg (315 g/mi of tailpipe emissions of CO2)
MY 2015: 28.6 mpg (310 g/mi of tailpipe emissions of CO2)
The combined industry wide average fuel economy (in miles per
gallon, or mpg) levels (in grams per mile, or g/mi) for both cars and
light trucks, if each manufacturer just met its obligations under the
proposed ``optimized'' standards for each model year, would be as
follows:
MY 2011: 27.8 mpg (2.5 mpg increase above MY 2010; 320 g/mi CO2)
MY 2012: 29.2 mpg (1.4 mpg increase above MY 2011; 304 g/mi CO2)
MY 2013: 30.5 mpg (1.3 mpg increase above MY 2012; 291 g/mi CO2)
MY 2014: 31.0 mpg (0.5 mpg increase above MY 2013; 287 g/mi CO2)
MY 2015: 31.6 mpg (0.6 mpg increase above MY 2014; 281 g/mi CO2)
The annual average increase during this five year period is
approximately 4.5 percent. Due to the uneven distribution of new model
introductions during this period and to the fact that significant
technological changes can be most readily made in conjunction with
those introductions, the annual percentage increases are greater in the
early years in this period.
Given a starting point of 31.8 mpg in MY 2015, the average annual
increase for MYs 2016-2020 would need to be only 2.1 percent in order
for the projected combined industry wide average to reach at least 35
mpg by MY 2020, as mandated by EISA.
In addition, per EISA, each manufacturer's domestic passenger fleet
is required in each model year to achieve 27.5 mpg or 92 percent of the
CAFE of the industry wide combined fleet of domestic and non-domestic
passenger cars \5\ for that model year, whichever is higher. This
requirement results in the following alternative minimum standard (not
attribute-based) for domestic passenger cars:
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\5\ Those numbers set out several paragraphs above.
MY 2011: 28.7 mpg (310 g/mi of tailpipe emissions of CO2)
MY 2012: 30.2 mpg (294 g/mi of tailpipe emissions of CO2)
MY 2013: 31.3 mpg (284 g/mi of tailpipe emissions of CO2)
MY 2014: 32.0 mpg (278 g/mi of tailpipe emissions of CO2)
MY 2015: 32.9 mpg (270 g/mi of tailpipe emissions of CO2)
The agency is also issuing, along with this document, 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
late spring of 2007 in response to an early 2007 request for
information--may already be outdated in some respects. We fully expect
that manufacturers have revised those plans to reflect subsequent
developments, especially the enactment of EISA.
We solicit comment on all aspects of this proposal, including the
methodology, economic assumptions, analysis and tentative conclusions.
In particular, we solicit comment on whether the proposed levels of
CAFE satisfy EPCA, e.g., reflect an appropriate balancing of the
explicit statutory factors and other relevant factors. 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,\6\ the standards adopted in the
final rule could well be different from those proposed in this
document.
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\6\ The proposed standards are, in the first instance, based on
the confidential product plans submitted by the manufacturers in the
spring of 2006. The final rule will be based on the confidential
plans submitted in the next several months. The agency anticipates
that those new plans, which presumably will reflect in some measure
the enactment of EISA and the issuance of this proposal, will
project higher levels of average fuel economy than the 2006 product
plans.
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b. Benefits
We estimate that the proposed standards for passenger cars would
save approximately 18.7 billion gallons of fuel and avoid tailpipe
CO2 emissions by 178 billion metric tons over the lifetime
of the passenger cars sold during those model years, compared to the
fuel savings and emissions reductions that would occur if the standards
remained at the adjusted baseline (i.e., the higher of manufacturer's
plans and the manufacturer's required level of average fuel economy for
MY 2010).
We estimate that the value of the total benefits of the proposed
passenger car standards would be approximately $31 billion \7\ over the
lifetime of the 5 model
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years combined. This estimate of societal benefits includes direct
impacts from lower fuel consumption as well as externalities and also
reflects offsetting societal costs resulting from the rebound effect.
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\7\ The $22 billion estimate is based on a 7% discount rate for
valuing future impacts. NHTSA estimated benefits using both 7% and
3% discount rates. Under a 3% rate, net consumer benefits for
passenger car CAFE improvements total $28 million.
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We estimate that the proposed standards for light trucks would save
approximately 36 billion gallons of fuel and prevent the tailpipe
emission of 343 million metric tons of CO2 over the lifetime
of the light trucks sold during those model years, compared to the fuel
savings and emissions reductions that would occur if the standards
remained at the adjusted baseline. We estimate that the value of the
total benefits of the proposed light truck standards would be
approximately $57 billion \8\ over the lifetime of the 5 model years of
light trucks combined. This estimate of societal benefits includes
direct impacts from lower fuel consumption as well as externalities and
also reflects offsetting societal costs resulting from the rebound
effect.
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\8\ The $56 billion estimate is based on a 7% discount rate for
valuing future impacts. NHTSA estimated benefits using both 7% and
3% discount rates. Under a 3% rate, net consumer benefits for light
truck CAFE improvements total $70 million.
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c. Costs
The total costs for manufacturers just complying with the standards
for MY 2011-2015 passenger cars would be approximately $16 billion,
compared to the costs they would incur if the standards remained at the
adjusted baseline. The resulting vehicle price increases to buyers of
MY 2015 passenger cars would be recovered or paid back \9\ in
additional fuel savings in an average of 56 months, assuming fuel
prices ranging from $2.26 per gallon in 2016 to $2.51 per gallon in
2030.\10\
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\9\ See Section V.A.7 below for discussion of payback period.
\10\ The fuel prices (shown here in 2006 dollars) used to
calculate the length of the payback period are those projected
(Annual Energy Outlook 2008, revised early release) by the Energy
Information Administration over the life of the MY 2011-2015 light
trucks, not current fuel prices.
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The total costs for manufacturers just complying with the standards
for MY 2011-2015 light trucks would be approximately $31 billion,
compared to the costs they would incur if the standards remained at the
adjusted baseline. The resulting vehicle price increases to buyers of
MY 2015 light trucks would be paid back in additional fuel savings in
an average of 50 months, assuming fuel prices ranging from $2.26 to
$2.51 per gallon.
d. Flexibilities
The agency's benefit and cost estimates do not reflect the
availability and use of flexibility mechanisms, such as compliance
credits and credit trading because EPCA prohibits NHTSA from
considering the effects of those mechanisms in setting CAFE standards.
EPCA has precluded consideration of the FFV adjustments ever since it
was amended to provide for those adjustments. The prohibition against
considering compliance credits was added by EISA.
The benefit and compliance cost estimates used by the agency in
determining the maximum feasible level of the CAFE standards assume
that manufacturers will rely solely on the installation of fuel economy
technology to achieve compliance with the proposed standards. In
reality, however, manufacturers are likely to rely to some extent on
flexibility mechanisms provided by EPCA (as described in Section VI)
and will thereby reduce the cost of complying with the proposed
standards to a meaningful extent.
2. Credits
NHTSA is also proposing a new Part 536 on use of ``credits'' earned
for exceeding applicable CAFE standards. Part 536 will implement the
provisions in EISA authorizing NHTSA to establish by regulation a
credit trading program and directing it to establish by regulation a
credit transfer program.\11\ Since its enactment, EPCA has permitted
manufacturers to earn credits for exceeding the standards and to apply
those credits to compliance obligations in years other than the model
year in which it was earned. EISA extended the ``carry-forward'' period
to five model years, and left the ``carry-back'' period at three model
years. Under the proposed Part 536, credit holders (including, but not
limited to, manufacturers) will have credit accounts with NHTSA, and
will be able to hold credits, apply them to compliance with CAFE
standards, transfer them to another ``compliance category'' for
application to compliance there, or trade them. A credit may also be
cancelled before its expiry date, if the credit holder so chooses.
Traded credits will be subject to an ``adjustment factor'' to ensure
total oil savings are preserved, as required by EISA. EISA also
prohibits credits earned before MY 2011 from being transferred, so
NHTSA has developed several regulatory restrictions on trading and
transferring to facilitate Congress' intent in this regard. Additional
information on the proposed Part 536 is available in section IX below.
---------------------------------------------------------------------------
\11\ Congress required that DOT establish a credit
``transferring'' regulation, to allow individual manufacturers to
move credits from one of their fleets to another (e.g., using a
credit earned for exceeding the light truck standard for compliance
in the domestic passenger car standard). Congress allowed DOT to
establish a credit ``trading'' regulation, so that credits may be
bought and sold between manufacturers and other parties.
---------------------------------------------------------------------------
II. Background
A. Contribution of Fuel Economy Improvements to Addressing Energy
Independence and Security and Climate Change
1. Relationship Between Fuel Economy and CO2 Tailpipe Emissions
Improving fuel economy reduces the amount of tailpipe emissions of
CO2. CO2 emissions are directly linked to fuel consumption because CO2
is the ultimate end product of burning gasoline. The more fuel a
vehicle burns, the more CO2 it emits. Since the CO2 emissions are
essentially constant per gallon of fuel combusted, the amount of fuel
consumption per mile is directly related to the amount of CO2 emissions
per mile. Thus, requiring improvements in fuel economy indirectly, but
necessarily requires reductions in tailpipe emissions of CO2 emissions.
This can be seen in the table below. To take the first value of fuel
economy from the table below as an example, a standard of 21.0 mpg
would indirectly place substantially the same limit on tailpipe CO2
emissions as a tailpipe CO2 emission standard of 423.2 g/mi of CO2, and
vice versa.\12\
---------------------------------------------------------------------------
\12\ To the extent that manufacturers comply with a CAFE
standard with diesel automobiles instead of gasoline ones, the level
of CO2 tailpipe emissions would be less. As noted above, the agency
projects that 4 percent of the MY 2015 passenger car fleet and 10
percent of the MY 2015 light truck fleet will have diesel engines.
The CO2 tailpipe emissions of a diesel powered passenger car are 15
percent higher than those of a comparable gasoline power passenger
car.
[[Page 24357]]
Table II-1.--CAFE Standards (mpg) and the Limits They Indirectly Place on Tailpipe Emissions of CO2 (g/mi)*
--------------------------------------------------------------------------------------------------------------------------------------------------------
CAFE Std CO2 CAFE Std CO2 CAFE Std CO2 CAFE Std CO2 CAFE Std CO2 CAFE Std CO2
--------------------------------------------------------------------------------------------------------------------------------------------------------
21.0....................................... 444.4 26.0 341.8 31.0 286.7 36.0 246.9 41.0 216.8 46.0 193.2
22.0....................................... 404.0 27.0 329.1 32.0 277.7 37.0 240.2 42.0 211.6 47.0 188.3
23.0....................................... 386.4 28.0 317.4 33.0 269.3 38.0 233.9 43.0 206.7 48.0 189.1
24.0....................................... 370.3 29.0 306.4 34.0 261.4 39.0 227.9 44.0 202.0 49.0 181.4
25.0....................................... 355.5 30.0 296.2 35.0 253.9 40.0 222.2 45.0 197.5 50.0 177.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
This table is based on calculations that use the figure of 8,887 grams of CO2 per gallon of gasoline consumed, based on characteristics of gasoline
vehicle certification fuel. To convert a mpg value into CO2 g/mi, divide 8,887 by the mpg value.
2. Fuel Economy Improvements/CO2 Tailpipe Emission
Reductions Since 1975
The need to take action to reduce greenhouse gas emissions, e.g.,
motor vehicle tailpipe emissions of CO2, in order to forestall and even
mitigate climate change is well recognized.\13\ Less well recognized
are two related facts. First, improving fuel economy is the only method
available to motor vehicle manufacturers for making significant
reductions in the CO2 tailpipe emissions of motor vehicles and thus
must be the core element of any effort to achieve those reductions.
Second, the significant improvements in fuel economy since 1975, due to
the CAFE standards and in some measure to market conditions as well,
have directly caused reductions in the rate of CO2 tailpipe emissions
per vehicle.
---------------------------------------------------------------------------
\13\ IPCC (2007): Climate Change 2007: Mitigation of Climate
Change. Contribution of Working Group III to the Fourth Assessment
Report of the Intergovernmental Panel on Climate Change [B. Metz, O.
Davidson, P. Bosch, R. Dave, and L. Meyer (eds.)]. Cambridge
University Press, Cambridge, United Kingdom and New York, NY, USA.
---------------------------------------------------------------------------
In 1975, passenger cars manufactured for sale in the U.S. averaged
only 15.8 mpg (562.5 grams of CO2 per mile or 562.5 g/mi of CO2). By
2007, the average fuel economy of passenger cars had increased to 31.3
mpg, causing g/mi of CO2 to fall to 283.9. Similarly, in 1975, light
trucks averaged 13.7 mpg (648.7 g/mi of CO2). By 2007, the average fuel
economy of light trucks had risen to 23.1 mpg, causing g/mi of CO2 to
fall to 384.7.
Table II-2.--Improvements in MPG/Reductions in G/MI of CO2 Passenger
Cars
[1975-2007]
------------------------------------------------------------------------
MPG G/MI of CO2
------------------------------------------------------------------------
1975.......................................... 15.8 562.5
2007.......................................... 31.3 283.9
------------------------------------------------------------------------
Table II-3.--Improvements in MPG/Reductions in G/MI of CO2 Light Trucks
[1975-2007]
------------------------------------------------------------------------
MPG G/MI of CO2
------------------------------------------------------------------------
1975.......................................... 13.7 648.7
2007.......................................... 23.1 384.7
------------------------------------------------------------------------
If fuel economy had not increased above the 1975 level, cars and
light trucks would have emitted an additional 11 billion metric tons of
CO2 into the atmosphere between 1975 and 2005. That is nearly the
equivalent of emissions from all U.S. fossil fuel combustion for two
years (2004 and 2005). The figure below shows the amount of CO2
emissions avoided due to increases in fuel economy.
BILLING CODE 4910-59-P
[[Page 24358]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.000
[[Page 24359]]
B. Chronology of Events Since the National Academy of Sciences Called
for Reforming and Increasing CAFE Standards
1. National Academy of Sciences CAFE Report (February 2002)
a. Significantly Increasing CAFE Standards Without Reforming Them Would
Adversely Affect Safety
In the congressionally-mandated report entitled ``Effectiveness and
Impact of Corporate Average Fuel Economy (CAFE) Standards,'' \14\ a
committee of the National Academy of Sciences (NAS) (``2002 NAS
Report'') concluded that the then-existing form of passenger car and
light truck CAFE standards created an incentive for vehicle
manufacturers to comply in part by downweighting and even downsizing
their vehicles and that these actions had led to additional fatalities.
The committee explained that these problems arose because the CAFE
standards subjected all passenger cars to the same fuel economy target
and all light trucks to the same target, regardless of their weight,
size, or load-carrying capacity. The committee said that this
experience suggests that consideration should be given to developing a
new system of fuel economy targets that reflects differences in such
vehicle attributes.
---------------------------------------------------------------------------
\14\ National Research Council, ``Effectiveness and Impact of
Corporate Average Fuel Economy (CAFE) Standards,'' National Academy
Press, Washington, DC (2002). Available at http://www.nap.edu/openbook.php?isbn=0309076013 (last accessed April 20, 2008). The
conference committee report for the Department of Transportation and
Related Agencies Appropriations Act for FY 2001 (Pub. L. 106-346)
directed NHTSA to fund a study by NAS to evaluate the effectiveness
and impacts of CAFE standards (H. Rep. No. 106-940, p. 117-118). In
response to the direction from Congress, NAS published this lengthy
report.
---------------------------------------------------------------------------
Looking to the future, the committee said that while it is
technically feasible and potentially economically practicable to
improve fuel economy without reducing vehicle weight or size and,
therefore, without significantly affecting the safety of motor vehicle
travel, the actual strategies chosen by manufacturers to improve fuel
economy will depend on a variety of factors. In the committee's
judgment, the extensive downweighting and downsizing that occurred
after fuel economy requirements were established in the 1970s suggested
that the likelihood of a similar response to further increases in fuel
economy requirements must be considered seriously. Any reduction in
vehicle size and weight would have safety implications.
The committee cautioned that the safety effects of downsizing and
downweighting are likely to be hidden by the generally increasing
safety of the light-duty vehicle fleet.\15\ It said that some might
argue that this improving safety picture means that there is room to
improve fuel economy without adverse safety consequences; however, such
an approach would not achieve the goal of avoiding the adverse safety
consequences of fuel economy increases. Rather, the safety penalty
imposed by increased fuel economy (if weight reduction is one of the
measures) will be more difficult to identify in light of the continuing
improvement in traffic safety. Although it is anticipated that these
safety innovations will improve the safety of vehicles of all sizes,
that does not mean that downsizing to achieve fuel economy improvements
will not have any safety costs. If two vehicles of the same size are
modified, one both by downsizing it and adding the safety innovations
and the other just by adding the safety innovations, the latter vehicle
will in all likelihood be safer.
---------------------------------------------------------------------------
\15\ Two of the 12 members of the committee dissented from the
majority's safety analysis and conclusions.
---------------------------------------------------------------------------
The committee concluded that if an increase in fuel economy were
implemented pursuant to standards that are structured in a way that
encourages either downsizing or the increased production of smaller
vehicles, some additional traffic fatalities would be expected. Without
a thoughtful restructuring of the program, there would be the trade-
offs that must be made if CAFE standards were increased by any
significant amount.\16\
---------------------------------------------------------------------------
\16\ NAS, p. 9.
---------------------------------------------------------------------------
In response to these conclusions, NHTSA began issuing attribute-
based CAFE standards for light trucks and sought legislative authority
to issue attribute-based CAFE standards for passenger cars before
undertaking to raise the car standards. Congress went a step further in
enacting EISA, not only authorizing the issuance of attribute-based
standards, but also mandating them.
Fully realizing all of the safety and other \17\ benefits of these
reforms will depend in part on whether the unreformed, non-attribute
based greenhouse standards adopted by California and other states are
implemented. Apart from issues of relative stringency, the effects on
vehicle manufacturers of implementing those state emission standards
should be substantially similar to the effects of implementing non-
attribute-based CAFE standards, given the nearly identical nature of
most aspects of those emission standards and CAFE standards in terms of
technological means of compliance and methods of measuring performance.
---------------------------------------------------------------------------
\17\ Reformed CAFE has several advantages compared to Unreformed
CAFE:
First, Reformed CAFE increases energy savings. The energy-saving
potential of Unreformed CAFE is limited because only a few full-line
manufacturers are required to make improvements. Under Reformed
CAFE, which accounts for size differences in product mix, virtually
all manufacturers will be required to use advanced fuel-saving
technologies to achieve the requisite fuel economy for their
automobiles.
Second, Reformed CAFE reduces the chances of adverse safety
consequences. Downsizing of vehicles as a CAFE compliance strategy
is discouraged under Reformed CAFE since as vehicles become smaller,
the applicable fuel economy target becomes more stringent.
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
nearly exclusively on the full-line manufacturers.
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 although they can make adjustments if that is what
consumers are demanding. Instead, it allows the manufacturers to
adjust the mix of their product offerings in response to the market
place.
---------------------------------------------------------------------------
b. Environmental and Other Externalities Justify Increasing the CAFE
Standards
The 2002 NAS report also concluded that the CAFE standards have
contributed to increased fuel economy, which in turn has reduced
dependence on imported oil, improved the nation's terms of trade, and
reduced emissions of carbon dioxide (a principal greenhouse gas),
relative to what they otherwise would have been. If fuel economy had
not improved, gasoline consumption (and crude oil imports) would be
about 2.8 million barrels per day (mmbd) greater than it is.\18\
Reducing fuel consumption in vehicles also reduces carbon dioxide
emissions. If the nation were using 2.8 mmbd more gasoline, carbon
emissions would be more than 100 million metric tons of carbon (mmtc)
higher. Thus, improvements in light-duty vehicle (4 wheeled motor
vehicles under 10,000 pounds gross vehicle weight rating) fuel economy
have reduced overall U.S. emissions by about 7 percent.\19\
---------------------------------------------------------------------------
\18\ NAS, pp. 3 and 20.
\19\ NAS, p. 20.
---------------------------------------------------------------------------
The report concluded that technologies exist that could
significantly further reduce fuel consumption by passenger cars and
light trucks within 15 years, while maintaining vehicle size, weight,
utility and performance.\20\ Light duty trucks
[[Page 24360]]
were said to offer the greatest potential for reducing fuel
consumption.\21\ 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'' based on the direct benefits
(value of saved fuel) to the consumer--``that is, the committee
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.'' \22\
---------------------------------------------------------------------------
\20\ NAS, p. 3 (Finding 5).
\21\ NAS, p. 4 (Finding 5).
\22\ NAS, pp. 4 (Finding 6) and 64.
---------------------------------------------------------------------------
The committee emphasized that it is critically important to be
clear about the reasons for considering improved fuel economy. While
the dollar value of the saved fuel would be largest portion of the
potential benefits, the committee noted that there is theoretically
insufficient reason for the government to issue higher standards just
to obtain those direct benefits since consumers have a wide variety of
opportunities to buy a fuel-efficient vehicle.\23\
---------------------------------------------------------------------------
\23\ NAS, pp. 8-9.
---------------------------------------------------------------------------
The committee said that there are two compelling concerns that
justify a government mandated increase in fuel economy, both relating
to externalities. The most important concern, it argued, is the one
about the accumulation in the atmosphere of greenhouse gases,
principally carbon dioxide.\24\
---------------------------------------------------------------------------
\24\ NAS, pp. 2, 13, and 83.
---------------------------------------------------------------------------
A second concern is that petroleum imports have been steadily
rising because of the nation's increasing demand for gasoline without a
corresponding increase in domestic supply. The high cost of oil imports
poses two risks: Downward pressure on the strength of the dollar (which
drives up the cost of goods that Americans import) and an increase in
U.S. vulnerability to macroeconomic shocks that cost the economy
considerable real output.
To determine how much the fuel economy standards should be
increased, the committee urged that all social benefits be considered.
That is, it urged not only that the dollar value of the saved fuel be
considered, but also that the dollar value to society of the resulting
reductions in greenhouse gas emissions and in dependence on imported
oil should be calculated and considered. The committee said that if it
is possible to assign dollar values to these favorable effects, it
becomes possible to make at least crude comparisons between the
socially beneficial effects of measures to improve fuel economy on the
one hand, and the costs (both out-of-pocket and more subtle) on the
other. The committee chose a value of about $0.30/gal of gasoline for
the externalities associated with the combined impacts of fuel
consumption on greenhouse gas emissions and on world oil market
conditions.\25\
---------------------------------------------------------------------------
\25\ NAS, pp. 4 and 85-86.
---------------------------------------------------------------------------
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.\26\ Further, the committee 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.'' \27\ Specifically, it 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.'' \28\
---------------------------------------------------------------------------
\26\ NAS, pp. 4-5 (Finding 10).
\27\ NAS, p. 29.
\28\ NAS, p. 3 (Finding 2).
---------------------------------------------------------------------------
To address those structural problems, the report suggested various
possible reforms. 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.'' \29\ 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. NAS stated that targets could vary among passenger cars and among
trucks, based on some attribute of these vehicles such as weight, size,
or load-carrying capacity. The report explained that 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.\30\
---------------------------------------------------------------------------
\29\ NAS, p. 5 (Finding 12).
\30\ NAS, p. 87.
---------------------------------------------------------------------------
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.''
2. Final Rule Establishing Reformed (Attribute-Based) CAFE Standards
for MY 2008-2011 Light Trucks (March 2006)
The 2006 final rule reformed the structure of the CAFE program for
light trucks and established higher CAFE standards for MY 2008-2011
light trucks.\31\ Reforming the CAFE program enables it to achieve
larger fuel savings, while enhancing safety and preventing adverse
economic consequences.
---------------------------------------------------------------------------
\31\ 71 FR 17566; April 6, 2006.
---------------------------------------------------------------------------
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 permits manufacturers and the agency to gain
experience with implementing the Reformed CAFE standards. Under the
2006 rule, all manufacturers were required to comply with a Reformed
CAFE standard in MY 2011.
Under Reformed CAFE, fuel economy standards were restructured so
that they are based on a measure of vehicle size called ``footprint,''
which is the product of multiplying a vehicle's wheelbase by average
its track width. A target level of fuel economy was established for
each increment in footprint (0.1 ft\2\). Trucks with smaller footprints
have higher fuel economy targets; conversely, larger ones have lower
targets. A particular manufacturer's compliance obligation for a model
year will be calculated as the harmonic average of the fuel economy
targets for the manufacturer's vehicles, weighted by the distribution
of manufacturer's production volumes among the footprint increments.
Thus, each manufacturer will be required to comply with a single
overall average fuel economy level for each model year of production.
The approach for determining the fuel economy targets was to set
them just below the level where the increased cost of technologies that
could be adopted by manufacturers to improve fuel economy would first
outweigh the added benefits that would result from such technology.
These targets translate into required levels of average fuel economy
that are technologically feasible because manufacturers can achieve
them using available technologies. Those levels also reflect the need
of the nation to reduce
[[Page 24361]]
energy consumption because they reflect the economic value of the
savings in resources, as well as of the reductions in economic and
environmental externalities that result from producing and using less
fuel.
The 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. To aid the
transition to Reformed CAFE, the Reformed CAFE standards for those
years were 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 was set at the level that maximizes
net benefits. Net benefits include the increase in light truck prices
due to technology improvements, the decrease in fuel consumption, and a
number of other factors. All of the standards were set at the maximum
feasible level, while accounting for technological feasibility,
economic practicability and other relevant factors.
We carefully balanced the costs of the rule with the benefits of
reducing energy consumption. Compared to Unreformed CAFE, Reformed CAFE
enhances overall fuel savings while providing vehicle manufacturers
with the flexibility they need to respond to changing market
conditions. Reformed CAFE will 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 were particularly encouraged that Reformed CAFE will eliminate the
incentive to downsize some of their fleet as a CAFE compliance
strategy, thereby reducing the adverse safety risks associated with the
Unreformed CAFE program.
3. Twenty-in-Ten Initiative (January 2007)
In his January 2007 State of the Union address, the President
announced his Twenty-in-Ten initiative for increasing the supply of
renewable and alternative fuels and reforming and increasing the CAFE
standards. Consistent with the NAS report, he urged the authority be
provided to reform CAFE for passenger cars by adopting an attribute-
based system (for example, a size-based system) reduces the risk that
vehicle safety is compromised, helps preserve consumer choice, and
helps spread the burden of compliance across all product lines and
manufacturers. He also urged that authority be provided to set the CAFE
standards, based on cost/benefit analysis, using sound science, and
without impacting safety.
4. Request for Passenger Car and Light Truck Product Plans (February
2007)
In late February 2007, NHTSA published a notice to acquire new and
updated information regarding vehicle manufacturers' future product
plans to aid in implementing the President's plan for reforming and
increasing CAFE standards for passenger cars and further increasing the
already reformed light truck standards. More specifically, the agency
said:
* * * we are seeking information related to fuel economy
improvements for MY 2007-2017 passenger cars and MY 2010-2017 light
trucks. The agency is seeking information in anticipation of
obtaining statutory authority to reform the passenger car CAFE
program and to set standards under that structure for MY 2010-2017
passenger cars. The agency is also seeking this information in
anticipation of setting standards for MY 2012-2017 light trucks.\32\
---------------------------------------------------------------------------
\32\ 72 FR 8664; February 27, 2007.
---------------------------------------------------------------------------
5. Supreme Court Decision in Massachusetts v. EPA (April 2007)
On April 2, 2007, the U.S. Supreme Court issued its opinion in
Massachusetts v. EPA.\33\ The Court ruled that the state of
Massachusetts had standing because it had already lost a small amount
of land and stood to lose more due to global warming induced increases
in sea level; that some portion of this harm was traceable to the
absence of a regulation issued by EPA requiring reductions in GHG
emissions (CO2 emissions, most notably) by motor vehicles;
and that issuance of such an EPA regulation by EPA would reduce the
risk of further harm to Massachusetts. On the merits, the Court ruled
that greenhouse gases are ``pollutants'' under the Clean Air Act and
that the Act therefore authorizes EPA to regulate greenhouse gas
emissions from motor vehicles if EPA makes the necessary findings and
determinations under section 202 of the Act.
---------------------------------------------------------------------------
\33\ 127 S.Ct. 1438 (2007).
---------------------------------------------------------------------------
The Court considered EPCA briefly, noting that it and the Clean Air
Act have different overall purposes. It noted further that the two acts
overlap, but did not define the nature or extent of that overlap. It
concluded that EPCA did not relieve EPA of its statutory obligations
and expressed confidence that the two acts could be consistently
administered. The Court did not address the express preemption
provision in EPCA.
6. Coordination Between NHTSA and EPA on Development of Rulemaking
Proposals (Summer-Fall 2007)
In the wake of the Supreme Court's decision and in the absence of
the legislation he called for in his 2007 State of the Union message,
the President called on NHTSA and EPA to take the first steps toward
regulations that would cut gasoline consumption and greenhouse gas
emissions from motor vehicles, using his Twenty-in-Ten initiative as a
starting point. He asked them ``to listen to public input, to carefully
consider safety, science, and available technologies, and evaluate the
benefits and costs before they put forth the new regulation.'' He also
issued an executive order directing all of the departments and agencies
to work together on the proposal.
Pursuant to the President's directive, NHTSA and EPA staff jointly
assessed which technologies would be available and their effectiveness
and cost. They also jointly assessed the key economic and other
assumptions affecting the stringency of future standards. Finally, they
worked together in updating and further improving the Volpe model that
had been used to help determine the stringency of the MY 2008-2011
light truck CAFE standards. Much of the work between NHTSA and EPA
staff was reflected in rulemaking proposals being developed by NHTSA
prior to the enactment of EISA and was substantially retained when
NHTSA revised its proposals to be consistent with that legislation.
Ultimately, the proposals being published today are based on NHTSA's
assessments of how they meet EPCA, as amended by EISA.
7. Ninth Circuit Decision Re Final Rule for MY 2008-2011 Light Trucks
(November 2007)
On November 15, 2007, the United States Court of Appeals for the
Ninth Circuit issued its decision in Center for Biological Diversity v.
NHTSA,\34\ the challenge to the MY 2008-11 light truck CAFE rule. The
Court rejected the petitioners' argument that EPCA precludes the use of
a marginal cost-benefit analysis that attempted to weigh all of the
social benefits (i.e., externalities as well as direct benefits to
consumers) of improved fuel savings in determining the stringency of
the CAFE standards. It cautioned, however, that it had not reviewed
whether the agency's balancing of the statutory factors in setting
those standards was arbitrary and capricious. In that regard, it noted
that much had changed since a court of appeals had last (i.e., in the
late 1980's) reviewed the agency's balancing of those factors in a
rulemaking. Specifically, it noted increases in scientific knowledge of
climate change
[[Page 24362]]
and in the need to reduce importation of petroleum since that time.
---------------------------------------------------------------------------
\34\ 508 F.3d 508.
---------------------------------------------------------------------------
Further, the Court found that NHTSA had been arbitrary and
capricious in its treatment of the following issues:
NHTSA's decision not to monetize the benefit of reducing
CO2 emissions and use that value in conducting its marginal
benefit-cost analysis based on its view that the value of the benefit
of CO2 emission reductions resulting from fuel consumption
reductions was too uncertain to permit the agency to determine a value
for those emission reductions;\35\
---------------------------------------------------------------------------
\35\ The agency has developed a value for those reductions and
used it in the analyses underlying the standards proposed in this
NPRM. For further discussion, see section V of this preamble.
---------------------------------------------------------------------------
NHTSA's decision not to establish a ``backstop'' (i.e., a
fixed minimum CAFE standard applicable to manufacturers); \36\
---------------------------------------------------------------------------
\36\ EISA's requirement that standards be based on one or more
vehicle attributes and its specification for domestic passenger
cars, but not for nondomestic passenger cars or light trucks of an
absolute CAFE level appear to preclude the specification of such a
backstop standard for the latter two categories of automobiles. For
further discussion, see Section VI of this preamble.
---------------------------------------------------------------------------
NHTSA's decision not to proceed to revise the regulatory
definitions for the passenger car and light truck categories of
automobiles so that some vehicles currently classified as light trucks
are instead classified as passenger cars; \37\
---------------------------------------------------------------------------
\37\ In this NPRM, NHTSA examines the legislative history of the
statutory definitions of ``automobile'' and ``passenger automobile''
and the term ``nonpassenger automobile'' and analyses the impact of
that moving any vehicles out of the nonpassenger automobile (light
truck) category into the passenger automobile (passenger car)
category would have the level of standards for both groups of
automobiles. For further discussion, see Section VIII of this
preamble.
---------------------------------------------------------------------------
NHTSA's decision not to subject most medium- and heavy-
duty pickups and most medium- and heavy-duty cargo vans (i.e., those
between 8,500 and 10,000 pounds gross vehicle weight rating (GVWR,) to
the CAFE standards; \38\
---------------------------------------------------------------------------
\38\ EISA removed these vehicles from the statutory definition
of ``automobile'' and mandated the establishment of CAFE standards
for them following the completion of reports by the National Academy
of Sciences and NHTSA.
---------------------------------------------------------------------------
NHTSA's limited assessment of cumulative impacts and
regulatory alternatives in its Environmental Assessment (EA) under the
National Environmental Policy Act (NEPA), and its decision to prepare
and publish an EA, coupled with a finding of no significant impact,
instead of an Environmental Impact Statement (EIS).\39\
---------------------------------------------------------------------------
\39\ On February 9, NHTSA filed a petition with the Ninth
Circuit for rehearing en banc on the issue of whether the panel in
CBD acted within its authority in ordering the agency to prepare an
EIS instead of remanding the issue to the agency and directing it to
conduct a new, fuller environmental analysis and decide whether an
EIS is required. In addition, NHTSA has published a notice of intent
to prepare an environmental impact statement, thus beginning the EIS
process for this rulemaking, as discussed in Section XIII.B. of this
NPRM.
---------------------------------------------------------------------------
The Court did not vacate the standards, but instead said it would
remand the rule to NHTSA to promulgate new standards consistent with
its opinion ``as expeditiously as possible and for the earliest model
year practicable.\40\ Under the decision, the standards established by
the April 2006 final rule would remain in effect unless and until
amended by NHTSA.
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\40\ The deadline in EPCA for issuing a final rule establishing,
for the first time, a CAFE standard for a model year is 18 months
before the beginning of that model year. 49 U.S.C. 32902(g)(2). The
same deadline applies to issuing a final rule amending an existing
CAFE standard so as to increase its stringency. Given that the
agency has long regarded October 1 as the beginning of a model year,
the statutory deadline for increasing the MY 2009 standard was March
30, 2007, and the deadline for increasing the MY 2010 standard is
March 30, 2008. Thus, the only model year for which there is
sufficient time to gather all of the necessary information, conduct
the necessary analyses and complete a rulemaking is MY 2011. As
noted earlier in this document, however, EISA requires that a new
standard be established for that model year. This rulemaking is
being conducted pursuant to that requirement.
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On February 6, 2008, the Government petitioned for en banc
rehearing by the Ninth Circuit on the limited issue of whether it was
appropriate for the panel, having held that the agency insufficiently
explored the environmental implications of the MY 2008-11 rulemaking in
its EA, to order the agency to prepare an EIS rather than simply
remanding the matter to the agency for further analysis.
As of the date of the issuance of this proposal, the Court has not
yet issued its mandate in this case.
8. Enactment of Energy Security and Independence Act of 2007 (December
2007)
As noted above in section I.B., EISA significantly changed the
provisions of EPCA governing the establishment of future CAFE
standards. These changes made it necessary for NHTSA to pause in its
efforts so that it could assess the implications of the amendments made
by EISA and then, as required, revise some aspects of the proposals it
had been developing (e.g., the model years covered and credit issues).
C. Energy Policy and Conservation Act, as Amended
EPCA, which was enacted in 1975, mandates a motor vehicle fuel
economy regulatory program to improve the nation's energy security and
energy efficiency. It gives the authority under EPCA to regulate fuel
economy to DOT, which has delegated that authority to NHTSA at 49 CFR
1.50. EPCA allocates the responsibility for implementing the program as
follows: NHTSA sets CAFE standards for passenger cars and light trucks;
EPA calculates the average fuel economy of each manufacturer's
passenger cars and light trucks; and NHTSA enforces the standards based
on EPA's calculations.
We have summarized below EPCA, as amended by EISA. We request
comment on how EPCA should be implemented to achieve the goals and meet
the requirements of EISA. For example, what assumptions, methodologies
and computations should be used in establishing and implementing the
new standards?
1. Vehicles Subject to Standards for Automobiles
With two exceptions, all four-wheeled motor vehicles with a gross
vehicle weight rating of 10,000 pounds or less will be subject to the
CAFE standards, beginning with MY 2011. The exceptions will be work
trucks \41\ and multi-stage vehicles. Work trucks are defined as
vehicles that are:
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\41\ While EISA excluded work trucks from ``automobiles,'' it
did not exclude them from regulation under EPCA. EISA requires that
work trucks be subjected to CAFE standards, but only first after the
National Academy of Sciences completes a study and then after NHTSA
completes a follow-on study. Congress thus recognized and made
allowances for the practical difficulties that led NHTSA to decline
to include work trucks in its final rule for MY 2008-11 light
trucks.
--rated at between 8,500 and 10,000 pounds gross vehicle weight; and
--are not a medium-duty passenger vehicle (as defined in section
86.1803-01 of title 40, Code of Federal Regulations, as in effect on
the date of the enactment of the Ten-in-Ten Fuel Economy Act).\42\
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\42\ 49 U.S.C. 32902(a)(19).
Medium-duty passenger vehicles (MDPV) include 8,500 to 10,000 lb. GVWR
sport utility vehicles (SUVs), short bed pick-up trucks, and passenger
vans, but exclude pickup trucks with longer beds and cargo vans rated
at between 8,500 and 10,000 lbs GVWR. It is those excluded pickup
trucks and cargo vans that are work trucks. ``Multi-stage vehicle''
includes any vehicle manufactured in different stages by 2 or more
manufacturers, if no intermediate or final-stage manufacturer of that
vehicle manufactures more than 10,000 multi-stage vehicles per
year.\43\
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\43\ 49 U.S.C. 32902(a)(3).
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Under EPCA, as it existed before EISA, the agency had discretion
whether to regulate vehicles with a GVWR between 6,000 and 10,000 lbs.,
GVWR. It could regulate the fuel
[[Page 24363]]
economy of vehicles with a GVWR within that range under CAFE if it
determined that (1) standards were feasible for these vehicles, and (2)
either (a) that these vehicles were used for the same purpose as
vehicles rated at not more than 6,000 lbs. GVWR, or (b) that their
regulation would result in significant energy conservation.
EISA eliminated the need for administrative determinations in order
to subject vehicles between 6,000 and 10,000 lbs. GVWR to the CAFE
standards for automobiles. Congress did so by making the determination
itself that all vehicles within that GVWR range should be included,
with the exceptions noted above.
2. Mandate To Set Standards for Automobiles
As amended by EISA, EPCA requires that the agency establish
standards for all new automobiles for each model year at the maximum
feasible levels for that model year. A manufacturer's individual
passenger cars and light trucks are not required to meet a particular
fuel economy level. Instead, the harmonically averaged fuel economy of
a manufacturer's production of passenger cars (or light trucks) in a
particular model year must meet the standard for those automobiles for
that model year.
For model years 2011-2020, several special requirements, in
addition to the maximum feasible requirement, are specified.\44\ Each
of the requirements must be interpreted in light of the other
requirements. For those model years, separate standards for passenger
cars and for light trucks must be set at high enough levels to ensure
that the CAFE of the industry wide combined fleet of new passenger cars
and light trucks for MY 2020 is not less than 35 mpg. The 35 mpg figure
is not a standard applicable to any individual manufacturer. It is a
requirement, applicable to the agency, regarding the combined effect of
the separate standards for passenger cars and light trucks that NHTSA
is to establish for MY 2020. EISA does not specify precisely how
compliance with this requirement is to be ensured or how or when the
CAFE of the industry wide combined fleet for MY 2020 is to be
calculated for purposes of determining compliance. As a practical
matter, to ensure that this level is achieved, the standard for MY 2020
passenger cars would have to be above 35 mpg and the one for MY 2020
light trucks might or might not be below 35 mpg. Similarly, the CAFE of
some manufacturers' combined fleet of passenger cars and light trucks
would be above 35 mpg, while the combined fleet of others might or
might not be below 35 mpg. The standards for passenger cars and those
for light trucks must increase ratably each year. The CAFE of each
manufacturer's fleet of domestic passenger cars must meet a sliding,
absolute minimum level in each model year: 27.5 mpg or 92 percent of
the projected CAFE of the industry wide fleet of new domestic passenger
cars for that model year.
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\44\ Under EPCA, prior to its amendment by EISA, the standard
for passenger cars was 27.5 mpg unless amended to a higher or lower
level by DOT. Per EISA, the standard will remain at 27.5 mpg through
MY 2010.
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EPCA, as it existed before EISA, EPCA required that light truck
standards be set at the maximum feasible level for each model year, but
simply specified a default standard of 27.5 mpg for passenger cars for
MY 1985 and thereafter. It permitted, but did not require that NHTSA
establish a higher or lower standard for passenger cars if the agency
found that the maximum feasible level of fuel economy is higher or
lower than 27.5 mpg.
3. Structure of Standards
The standards for passenger cars and light trucks must be based on
one or more vehicle attributes and expressed in terms of a mathematical
function. This makes it possible to increase the CAFE standards for
both passenger cars and light trucks significantly without creating
incentives to improve fuel economy in ways that reduce safety.
Formerly, EPCA provided authority for this approach for light trucks,
but not passenger cars.
4. Factors Governing or Considered in the Setting of Standards
In determining the maximum feasible level of average fuel economy
for a model year, EPCA requires that the agency consider four factors:
technological feasibility, economic practicability, the effect of other
standards of the Government on fuel economy, and the need of the nation
to conserve energy. EPCA does not define these terms or specify what
weight to give each concern in balancing them; thus, NHTSA defines them
and determines the appropriate weighting based on the circumstances in
each CAFE standard rulemaking.
``Technological feasibility'' means whether a particular method of
improving fuel economy can be available for commercial application in
the model year for which a standard is being established.
``Economic practicability'' means whether a standard is one
``within the financial capability of the industry, but not so stringent
as to'' lead to ``adverse economic consequences, such as a significant
loss of jobs or the unreasonable elimination of consumer choice.'' \45\
In an attempt to ensure the economic practicability of attribute based
standards, the agency considers a variety of factors, including the
annual rate at which manufacturers can increase the percentage of its
fleet that has a particular type of fuel saving technology, and cost to
consumers. Since consumer acceptability is an element of economic
practicability, the agency has limited its consideration of fuel saving
technologies to be added to vehicles to those that provide benefits
that match their costs. Disproportionately expensive technologies are
not likely to be accepted by consumers.
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\45\ 67 FR 77015, 77021; December 16, 2002.
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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 for EPCA, as enacted in 1975, makes clear, and the
case law affirms, ``(A) determination of maximum feasible average fuel
economy should not be keyed to the single manufacturer which might have
the most difficulty achieving a given level of average fuel
economy.''\46\ 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 law
permits CAFE standards exceeding the projected capability of any
particular manufacturer as long as the standard is economically
practicable for the industry as a whole. Thus, while a particular CAFE
standard may pose difficulties for one manufacturer, it may also
present opportunities for another. The CAFE program is not necessarily
intended to maintain the competitive positioning of each particular
company. Rather, it is intended to enhance fuel economy of the vehicle
fleet on American roads, while protecting motor vehicle safety and the
totality of American jobs and the overall United States economy.
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\46\ CEI-I, 793 F.2d 1322, 1352 (DC Cir. 1986).
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``The effect of other motor vehicle standards of the Government on
fuel economy'' means ``the unavoidable adverse effects on fuel economy
of compliance with emission, safety, noise, or damageability
standards.'' In the case of emission standards, this includes standards
adopted by the Federal government and can include standards adopted by
the States as well, since in certain circumstances the Clean Air Act
[[Page 24364]]
permits States to adopt and enforce State standards in lieu of the
Federal ones. It does not, however, include State standards expressly
preempted by EPCA.\47\
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\47\ 49 U.S.C. 32919 and 71 FR 17566, 17654-70; April 6, 2006.
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``The need of the United States to conserve energy'' means ``the
consumer cost, national balance of payments, environmental, and foreign
policy implications of our need for large quantities of petroleum,
especially imported petroleum.'' Environmental implications principally
include reductions in emissions of criteria pollutants and carbon
dioxide. A prime example of foreign policy implications are energy
independence and security concerns.
The agency has considered environmental issues in making decisions
about the setting of standards from the earliest days of the CAFE
program. As the three courts of appeal have noted in decisions
stretching over the last 20 years,\48\ the agency defined the ``need of
the Nation to conserve energy'' in the late 1970's as including ``the
consumer cost, national balance of payments, environmental, and foreign
policy implications of our need for large quantities of petroleum,
especially imported petroleum.'' \49\ Pursuant to that view, the agency
declined to include diesel engines in determining the maximum feasible
level of average fuel economy for passenger cars and for light trucks
because particulate emissions from diesels were then both a source of
concern and unregulated.\50\ In the late 1980's, NHTSA cited concerns
about climate change as one of its reasons for limiting the extent of
its reduction of the CAFE standard for MY 1989 passenger cars \51\ and
for declining to reduce the standard for MY 1990 passenger cars.\52\
Since then, DOT has considered the indirect benefits of reducing
tailpipe carbon dioxide emissions in its fuel economy rulemakings
pursuant to the statutory requirement to consider the nation's need to
conserve energy by reducing consumption. In this rulemaking, consistent
with the Ninth Circuit's decision and its observations about the
potential effect of changing information about climate change on the
balancing of the EPCA factors and aided by the 2007 reports of the
United Nations Intergovernmental Panel on Climate Change \53\ and other
information, NHTSA is monetizing the reductions in tailpipe emissions
of CO2 that will result from the CAFE standards and is
proposing to set the MY 2011-15 CAFE standards at levels that reflect
the value of those reductions in CO2. as well as the value
of other benefits of those standards. In setting CAFE standards, NHTSA
also considers environmental impacts under NEPA, 42 U.S.C. 4321-4347.
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\48\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 n. 12
(DC Cir. 1986); Public Citizen v. NHTSA, 848 F.2d 256, 262-3 n. 27
(DC Cir. 1988) (noting that ``NHTSA itself has interpreted the
factors it must consider in setting CAFE standards as including
environmental effects''); and Center for Biological Diversity v.
NHTSA, 508 F.3d 508, 529 (9th Cir. 2007).
\49\ 42 FR 63,184, 63,188 (Dec. 15, 1977) (emphasis added).
\50\ For example, the final rules establishing CAFE standards
for MY 1981-84 passenger cars, 42 FR 33,533, 33,540-1 and 33,551;
June 30, 1977, and for MY 1983-85 light trucks, 45 FR 81,593,
81,597; December 11, 1980.
\51\ 53 FR 39,275, 39,302; October 6, 1988.
\52\ 54 FR 21985,
\53\ The IPCC 2007 reports can be found at http://www.ipcc.ch/.
(Last accessed April 20, 2008.)
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In addition, the agency is permitted to consider additional
relevant societal considerations. For example, historically, it has
considered the potential for adverse safety consequences when deciding
upon a maximum feasible level. This practice is sanctioned in case
law.\54\
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\54\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F. 2d
1322 (DC 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 (DC
Cir. 1990).
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EPCA requires that the MY 2011-2019 CAFE standards for passenger
cars and for light trucks must both increase ratably to at least the
levels necessary to meet 35 mpg requirement for MY 2020. NHTSA
interprets this to mean that the standards must make steady progress
toward the levels necessary for the average fuel economy of the
combined industry wide fleet of all new passenger cars and light trucks
sold in the United States during MY 2020 to reach at least 35 mpg.
Finally, EPCA provides that in determining the level at which it
should set CAFE standards for a particular model year, NHTSA may not
consider the ability of manufacturers to take advantage of several EPCA
provisions that facilitate compliance with the CAFE standards and
thereby reduce the costs of compliance. As noted below in Section II,
manufacturers can earn compliance credits by exceeding the CAFE
standards and then use those credits to achieve compliance in years in
which their measured average fuel economy falls below the standards.
Manufacturers can also increase their CAFE levels through MY 2019 by
producing alternative fuel vehicles. EPCA provides an incentive for
producing these vehicles by specifying that their fuel economy is to be
determined using a special calculation procedure that results in those
vehicles being assigned a high fuel economy level.
5. Consultation in Setting Standards
EPCA provides that NHTSA is to consult with the Department of
Energy (DOE) and Environmental Protection Agency in prescribing CAFE
standards. It provides further that NHTSA is to provide DOE with an
opportunity to provide written comments on draft proposed and final
CAFE standards.\55\
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\55\ In addition, Executive Order No. 13432 provides that a
Federal agency undertaking a regulatory action that can reasonably
be expected to directly regulate emissions, or to substantially and
predictably affect emissions, of greenhouse gases from motor
vehicles, shall act jointly and consistently with other agencies to
the extent possible and to consider the views of other agencies
regarding such action.
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6. Compliance Flexibility and Enforcement
EPCA specifies a precise formula for determining the amount of
civil penalties for failure to comply with a standard. The penalty, as
adjusted for inflation by law, is $5.50 for each tenth of a mpg that a
manufacturer's average fuel economy falls short of the standard for a
given model year multiplied by the total volume of those vehicles in
the affected fleet (i.e., import or domestic passenger car, or light
truck), manufactured for that model year. The amount of the penalty may
not be reduced except under the unusual or extreme circumstances
specified in the statute.
Likewise, EPCA provides that manufacturers earn credits for
exceeding a standard. The amount of credit earned is determined by
multiplying the number of tenths of a mpg by which a manufacturer
exceeds a standard for a particular category of automobiles by the
total volume of automobiles of that category manufactured by the
manufacturer for a given model year.
EPA is responsible for measuring automobile manufacturers' CAFE so
that NHTSA can determine compliance with the CAFE standards. In making
these measurements for passenger cars, EPA is required by EPCA \56\ to
use the EPA test
[[Page 24365]]
procedures in place as of 1975 (or procedures that give comparable
results), which are the city and highway tests of today, with
adjustments for procedural changes that have occurred since 1975.
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\56\ 49 U.S.C. 32904(c).
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EPA's fuel economy test procedures specify equations for
calculating fuel economy. These equations are based on the carbon
balance technique which allows fuel economy to be determined from
measurement of exhaust emissions. This technique relies upon the
premise that the quantity of carbon in a vehicle's exhaust gas is equal
to the quantity of carbon consumed by the engine as fuel.
When NHTSA finds that a manufacturer is not in compliance, it
notifies the manufacturer. Surplus credits generated from the five
previous years can be used to make up the deficit. If there are no (or
not enough) credits available, then the manufacturer can either pay the
fine, or submit a carry back plan to the agency. A carry back plan
describes what the manufacturer plans to do in the following three
model years to make up for the deficit in credits. NHTSA must examine
and determine whether to approve the plan.
III. Fuel Economy Enhancing Technologies
In the Agency's last two rulemakings covering light truck CAFE
standards for MYs 2005-2007 and MYs 2008-2011, the agency relied on the
2002 National Academy of Sciences' report, Effectiveness and Impact of
Corporate Average Fuel Economy Standards (``the 2002 NAS Report'') \57\
for estimating potential fuel economy benefits and associated retail
costs of applying combinations of technologies in 10 classes of
production vehicles. The NAS cost and effectiveness numbers were the
best available estimates at this time, determined by a panel of experts
formed by the National Academy of Sciences, and the report had been
peer reviewed by individuals chosen for their diverse perspectives and
technical expertise in accordance with procedures approved by the
Report Review Committee of the National Research Council. However,
since the publication of the 2002 NAS Report, there has been
substantial advancement in fuel-saving technologies, including
technologies not discussed in the NAS Report that are expected to
appear on vehicles in the MY 2011-2015 timeframe. There also have been
reports issued and studies conducted by several other organizations and
companies that discuss fuel economy technologies and their benefits and
costs. NHTSA has contracted with the NAS to update the fuel economy
section, Chapter 3, of the 2002 NAS Report. However, this update will
not be available in time for this rulemaking. Due to the expedited
nature of this rulemaking, NHTSA, in consultation with the
Environmental Protection Agency (EPA), developed an updated technology
cost and effectiveness list to be used in this document.
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\57\ National Research Council, ``Effectiveness and Impact of
Corporate Average Fuel Economy (CAFE) Standards,'' National Academy
Press, Washington, DC (2002). Available at http://www.nap.edu/openbook.php?isbn=0309076013 (last accessed April 20, 2008).
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This list presents NHTSA and EPA technical staff's current
assessment of the costs and effectiveness from a broad range of
technologies which can be applied to cars and light-duty trucks. EPA
published the results of this collaboration in a report and submitted
it to the NAS committee.\58\ A copy of the report and other studies
used in the technology update will be placed in NHTSA's docket.
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\58\ EPA Staff Technical Report: Cost and Effectiveness
Estimates of Technologies Used to Reduce Light-duty Vehicle Carbon
Dioxide Emissions. EPA420-R-08-008, March, 2008.
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NHTSA believes that the estimates used for this document, which
rely on the best available public and confidential information, are
defensible and reasonable predictions for the next five years.
Nevertheless, NHTSA still believes that the ideal source for this
information comes from a peer reviewed process such as the NAS. NHTSA
will continue to work with NAS to update this list on a five year
interval as required by the Energy Independence and Security Act of
2007.
The majority of the technologies discussed in this section are in
production and available on vehicles today, either in the United
States, Japan, or Europe. A number of the technologies are commonly
available, while others have only recently been introduced into the
market. In a few cases, we provide estimates on technologies which are
not currently in production, but are expected to be so in the next few
years. These are technologies which can be applied to cars and trucks
that are capable of achieving significant improvements in fuel economy
and reductions in carbon dioxide emissions, and improve vehicle fuel
economy, at reasonable costs.
NHTSA and EPA conducted the technology examination using concepts
from the 2002 NAS report which constituted a starting point for the
analysis. In the NAS Report, there were three exemplary technology
paths or scenarios identified for each class of production vehicles,
which lead to successively greater improvements in fuel consumption and
greater costs. Path I included production-intent technologies that will
be available within 10 years and could be implemented under current
economic and regulatory conditions. Path II included more costly
production-intent technologies that are technically feasible for
introduction within 10 years if economic and regulatory conditions
justify their use. Path III included emerging technologies that will be
available within 10 to 15 years but that may require further
development prior to commercial introduction. These three paths
represented vehicle development steps that would offer increasing
levels of fuel economy gains (as incremental gains) at incrementally
increasing cost. As stated earlier, since the publication of the 2002
NAS Report, automotive technology has continued to advance and many of
the technologies that were identified in the report as emerging have
already entered the marketplace.
In this rulemaking, NHTSA in consultation with EPA have examined a
variety of technologies, looking beyond path I and path II to path III
and to emerging technologies beyond path III. These technologies were
in their infancy when the 2002 NAS Report was being formulated. In
addition, unlike for past rulemakings where NHTSA projected the use of
different variants of a technology as a combined technology, in this
rulemaking, NHTSA working with EPA examined advanced forms and
subcategories of existing technologies and reflected the effectiveness
and cost for each of the variants separately for all ten vehicle
classes. The specific technologies affected are variable valve timing
(VVT), variable valve lift and timing (VVLT) and cylinder deactivation.
Manufacturers are currently using many different types of VVTs and
VVLTs, which have a variety of different names and methods. This
rulemaking employs specific cost and effectiveness estimates for
variants of VVT, including Intake Camshaft Phasing (ICP), Coupled
Camshaft Phasing (CCP), and Dual (Independent) Camshaft Phasing (DCP).
It also employs specific cost and effectiveness estimates for variants
of VVLT, including Discrete Variable Valve Lift (DVVL) and Continuous
Variable Valve Lift (CVVL). We also now include the effectiveness and
cost estimates for each of the variants of cylinder deactivation. The
most common type of cylinder deactivation is one in which an eight-
cylinder overhead
[[Page 24366]]
valve engine disables four of its cylinders under light loads. Cylinder
deactivation could be incorporated on overhead cam engines, and can be
applied to four and six cylinder engines as well (we have restricted
application to 6 and 8 cylinder engines). Thus, the variants of
cylinder deactivation that now have specific cost and effectiveness
estimates include both overhead valve engine cylinder deactivation and
overhead cam engine cylinder deactivation.
The update also revisited technology lead time issues and took a
fresh look at technology application rates, how to link certain
technologies to certain redesign and refresh patterns, synergistic
impacts resulting from adding technology packaging, and learning costs.
A. Data Sources for Technology Assumptions
A large number of technical reports and papers are available which
contain data and estimates of the fuel economy improvements of various
vehicle technologies. In addition to specific peer-reviewed papers
respecting individual technologies, we also utilized a number of recent
reports which had been utilized by various State and Federal Agencies
and which were specifically undertaken for the purpose of estimating
future vehicle fuel economy reduction effectiveness or improvements in
fuel economy. The reports we utilized most frequently were:
2002 National Academy of Science (NAS) report titled
``Effectiveness and Impact of Corporate Average Fuel Economy
Standards''. At the time it was published, the NAS report was
considered by many to be the most comprehensive summary of current and
future fuel efficiencies improvements which could be obtained by the
application of individual technologies. The focus of this report was
fuel economy, which can be directly correlated with CO2
emissions. The 2002 NAS report contains effectiveness estimates for ten
different vehicle classifications (small car, mid-SUV, large truck,
etc), but did not differentiate these effectiveness values across the
classes. Where other sources or engineering principles indicated that a
differentiation was warranted, we utilized the 2002 NAS effectiveness
estimates as a starting point and further refined the estimate to one
of the vehicle classes using engineering judgment or by consulting
additional reliable sources.
2004 Northeast States Center for a Clean Air Future
(NESCCAF) report ``Reducing Greenhouse Gas Emissions from Light-Duty
Motor Vehicles''. This report, which was utilized by the California Air
Resources Board for their 2004 regulatory action on vehicle
CO2 emissions, includes a comprehensive vehicle simulation
study undertaken by AVL, a world-recognized leader in automotive
technology and engineering. In addition, the report included cost
estimates developed by the Martec Group, a market-based research and
consulting firm which provides services to the automotive industry. The
NESCCAF report considered a number of technologies not examined in the
2002 NAS report. In addition, through the use of vehicle simulation
modeling, the 2004 NESCCAF report provides a scientifically rigorous
estimation of the synergistic impacts of applying multiple fuel economy
technologies to a given vehicle.
2006 Energy and Environmental Analysis Inc (EEA) report
``Technology to Improve the Fuel Economy of Light Duty Trucks to 2015''
Prepared for The U.S. Department of Energy and The U.S. Department of
Transportation. This update of technology characteristics is based on
new data obtained by EEA from technology suppliers and auto-
manufacturers, and these data are compared to data from studies
conducted earlier by EEA, the National Academy of Sciences (NAS), the
Northeast States Center for a Clean Air future (NESCCAF) and California
Air Resources Board (CARB).
Data from Vehicle Manufacturers, Component Suppliers, and
other reports. We also evaluated confidential data from a number of
vehicle manufacturers as well as a number of technology component
suppliers. In February of 2007, the NHTSA published a detailed Request
for Comment (RFC) in the Federal Register. This RFC included, among
other items, a request for information from automotive manufacturers
and the public on the fuel economy improvement potential of a large
number of vehicle technologies. The manufacturer's submissions to this
RFC were supplemented by confidential briefing and data provided by
vehicle component suppliers, who for many of the technologies
considered are the actual manufacturers of the specific technology and
often undertake their own development and testing efforts to
investigate the fuel economy improvement potential of their products.
Manufacturers that provided NHTSA and EPA with fuel economy cost and
effectiveness estimates include BMW, Chrysler, Ford, General Motors,
Honda, Nissan, Toyota and Volkswagen. The major suppliers that provided
NHTSA with fuel economy cost and effectiveness estimates include Borg-
Warner, Bosch, Corning, Delphi, and Siemens.
Finally, to verify that the fuel economy cost and
effectiveness estimates for each of the technologies was reasonable and
within currently available estimates for these technologies, NHTSA
examined those estimates provided by other reports or sources, such as
the Martec (contained in the 2004 NESCAFF report) and Sierra Research
reports.\59\
B. Technologies and Estimates of Costs and Effectiveness
This section describes each technology and associated cost and
effectiveness numbers. The technologies can be classified into five
main groups similar to how they were classified in the NAS Report:
engine technologies; transmission technologies; accessory technologies;
vehicle technologies; and hybrid technologies.
While NHTSA and EPA followed the general approach taken by the NAS
in estimating the cost and effectiveness numbers, we decided to update
some of these estimates to reflect better the changed marketplace and
regulatory environment, as well as the advancement in and greater
penetration of some production-intent and emerging technologies, which
have led to lower costs. The values contained in the 2002 NAS report
were used to establish a baseline for the fuel economy cost and
effectiveness estimates for each of the technologies. We then examined
all other estimates provided by manufacturers and major suppliers or
other sources. In examining these values, we gave more weight to values
or estimates provided by manufacturers that have already implemented
these technologies in their fleet, especially those that have
introduced them in the largest quantities. Likewise, for technologies
that have not penetrated the fleet to date, but will by early in the
next decade (according to confidential manufacturer plans), we gave
more weight to values or estimates provided by manufacturers that have
stated that they will be introducing these technologies in their fleet,
especially those that plan to introduce them in the largest quantities.
In addition, for the technologies that will appear on vehicles by early
in the next decade, we carefully examined the values provided
[[Page 24367]]
by those suppliers who have developed these technologies and may have
contracts in place to provide them to manufacturers.
Because not all technologies can be applied on all types of
vehicles, engines or transmissions, we separately evaluated 10 classes
of vehicles to estimate fuel economy cost and effectiveness for each of
the technologies. As discussed above, these ten classes, also used in
NHTSA's 2006 light truck CAFE rule, were derived from the 2002 NAS
Report, which estimated the feasibility, potential incremental fuel
consumption benefit and the incremental cost of three product
development paths for the following ten vehicle classes: Subcompact
passenger cars, compact passenger cars, midsize passenger cars, large
passenger cars, small sport utility vehicles, midsize sport utility
vehicles, large sport utility vehicles, small pickups, large pickups,
and minivans.
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\59\ ``Alternative and Future Technologies for Reducing
Greenhouse Gas Emission from Road Vehicles'' Sierra Research Report
for Environment Canada, 1999 (SR99-07-01). http://www.sierraresearch.com/ReportListing.htm (Last accessed April 20,
2008.)
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The application of technologies to a vehicle class is limited not
only by whether the manufacturer is capable of applying it within a
particular development cycle, but also by whether the technology may
physically be applied to the vehicle. For example, continuously
variable transmissions (CVTs) were only allowed to be projected on
vehicles with unibody construction, which includes all passenger cars
and minivans and some small and midsize SUVs. CVTs could not be
projected for use on vehicles with ladder-frame construction, which
includes all pickups and large SUVs and some small and midsize SUVs.
Another example is cylinder deactivation being limited to vehicles with
6- or 8-cylinder engines. To simplify the analysis, NHTSA assumed that
each class of vehicles would typically have vehicle construction and
engines with a specific number of cylinders that is most representative
of that vehicle class.
Although we looked at ten vehicle classes separately, for some
technologies the estimated incremental fuel consumption benefit and
incremental cost were the same across all vehicle classes (as for
engine accessory improvement), while for other technologies the
estimated incremental fuel consumption benefit and incremental cost
differed across classes (as for hybrid drivetrains). The main
difference was with which path(s) each technology was expected to be
associated.
The exact cost and benefit of a given technology depends on
specific vehicle characteristics (size, weight, base engine, etc.) and
the existence of additional technologies that were already applied to
the vehicle. In the section below, ranges of incremental cost and fuel
consumption reduction values are listed where the values depend on
vehicle characteristics and are independent of the order in which they
are applied to a vehicle. All costs, which are reflective of estimated
retail price equivalents (RPEs) were inflated by the producer price
index (if needed) and are presented in year 2006 dollars, because this
is the last year for which final economic indexing is available. Some
cost estimates are based on supplier costs. In those instances,
multipliers were included in those costs so that they would be treated
in the same manner as cost estimates that are based on manufacturer
costs. These incremental values were calculated by subtracting out all
same-path synergies associated with a given technology and any
preceding items on the same path. Essentially, the incremental percent
reduction in fuel consumption and cost impacts represent improvements
beyond the ones realized due to technologies already applied to the
vehicle. As an example, a 5-speed automatic transmission could
incrementally reduce fuel consumption by 2 to 3 percent at an
incremental cost of $75 to $165 per vehicle, relative to a 4-speed
automatic transmission. In turn, a 6-speed automatic transmission could
incrementally reduce fuel consumption by 4.5 to 6.5 percent at an
incremental cost of $10 to $20 per vehicle, relative to a 5-speed
transmission.
NHTSA acknowledges that this approach is different from the one it
followed in establishing the reformed light truck standards for MYs
2008-2011, where we relied nearly exclusively on the 2002 NAS report's
estimates. Our preference remains to rely upon peer-review and credible
studies, such as the 2002 NAS report; however we believe that the
estimates made by the joint EPA/NHTSA team are accurate and defensible.
The agency seeks comments on our assumptions and the cost,
effectiveness and availability estimates provided. NHTSA also seeks
comments on whether the order in which these technologies was applied
by the Volpe model is proper and whether we have accurately accounted
for technologies already included on vehicles and whether we have
accurately accounted for technologies that are projected to be applied
to vehicles. The agency also seeks comments on the ``synergy'' factors
(discussed below) it has applied in order to adjust the estimated
incremental effectiveness of some pairs of technology and on whether
similar adjustments to the estimated incremental cost of some
technologies should be made. In preparation for a final rule, NHTSA
intends to update its technology-related methodologies and estimates,
and expects that these anticipated updates will affect the form and
stringency of the final standards.
a. Engine Technologies
Low-Friction Lubricants
The use of lower viscosity engine and transmission lubricants can
reduce fuel consumption. More advanced multi-viscosity engine and
transmission oils are now available with improved performance in a
wider temperature band, with better lubricating properties. However,
even without any changes to fuel economy standards, most MY 2011-2015
vehicles are likely to use 5W-30 motor oil, and some will use even less
viscous oils, such as 5W-20 or possibly even 0W-20 to reduce cold start
friction. This may directionally benefit the fuel economy improvements
of valvetrain technologies such as cylinder deactivation, which rely on
a minimum oil temperature (viscosity) for operation. Most manufacturers
therefore attributed smaller potential fuel economy reductions and cost
increases to lubricant improvements.
The NAS Report estimated that low-friction lubricants could
incrementally reduce fuel consumption by 1 percent at an incremental
cost of $8 to $11.\60\ The NESCCAF study projected that low-friction
lubricants could incrementally reduce fuel consumption by 1 percent at
an incremental cost of $5 to $15; while the EEA report projected that
low-friction lubricants could incrementally reduce fuel consumption by
1 percent at an incremental cost of $10 to $20. In contrast,
manufacturer data projected an estimated fuel consumption potential of
0 percent to 1 percent at an incremental cost that ranged from $1 to
$11, with many of them stating the costs as ranging from $1 to $5.
NHTSA believes that these manufacturer estimates are more accurate and
estimates that low-friction lubricants could reduce fuel consumption by
0.5 percent for all vehicle types at an incremental cost of $3, which
represents the mid-point of $2.50, rounded up to the next dollar.
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\60\ The price increases noted in this chapter are slightly
higher than shown in the NAS study, since they have been converted
into calendar year 2006 prices.
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Reduction of Engine Friction Losses
All reciprocating and rotating components in the engine are
candidates for friction reduction, and minute improvements in several
[[Page 24368]]
components can add to a measurable fuel economy improvement. The amount
of energy an engine loses to friction can be reduced in a variety of
ways. Improvements in the design of engine components and subsystems
will result in friction reduction, improved engine operation, greater
fuel economy and reduced emissions. Examples include low-tension piston
rings, roller cam followers, crankshaft design, improved material
coatings, material substitution, more optimal thermal management,
piston surface treatments, and as lubricant friction reduction.
Additionally, as computer-aided modeling software continues to improve,
more opportunities for incremental friction reduction might become
apparent. Even without any changes to fuel economy standards, most MY
2010-2015 vehicles are likely to employ one or more such techniques to
reduce engine friction and other mechanical and hydrodynamic losses.
The NAS Report estimated that such technologies could incrementally
reduce fuel consumption by 1 to 5 percent at an incremental cost of $36
to $146. NESCCAF predicted that such technologies could incrementally
reduce fuel consumption by 0.5 percent at an incremental cost of $5 to
$15; while the EEA report predicted that such technologies could reduce
fuel consumption at an incremental cost of $10 to $55. Confidential
manufacturer data indicates that engine friction reduction could
incrementally reduce fuel consumption by 1 to 3 percent at an
incremental cost of $0 to $168. Based on available information from
these reports and confidential manufacturer data, NHTSA estimates that
friction reduction could reduce fuel consumption for all vehicles by 1
to 3 percent at a cost of $21 per cylinder. Thus, the incremental cost
of engine friction reduction for a 4-cylinder engine is $0 to $84
(applicable to subcompact and compact cars); for a 6-cylinder engine is
$0 to $126 (applicable to midsize cars, large cars, small pickups,
small SUVs, minivans and midsize SUVs); and for an 8-cylinder engine is
$0 to $168 (applicable to large pickups and SUVs).
Multi-Valve Overhead Camshaft Engine
It appears likely that many vehicles would still use overhead valve
(OHV) engines with pushrods and one intake and one exhaust valve per
cylinder during the early part of the next decade. Engines with
overhead cams (OHC) and more than two valves per cylinder achieve
increased airflow at high engine speeds and reductions of the valve
train's moving mass and enable central positioning of spark plugs. Such
engines, which are already used in some light trucks, typically develop
higher power at high engine speeds. The NAS Report projected that
multi-valve OHC engines could incrementally reduce fuel consumption by
2 percent to 5 percent at an incremental cost of $109 to $146, and
NHTSA found no sources to update these projections.
For purposes of this rule, OHV engines and OHC engines were
considered separately, and the model was generally not allowed to apply
multivalve OHC technology to OHV engines, except where continuous
variable valve timing and lift (CVVL) is applied to OHV engines. In
that case, the model assumes conversion to DOHC valvetrain, because
DOHC valvetrains are prerequisites for the application of any advanced
engine technology over and above CVVL. Since applying CVVL to an OHV is
the last improvement that could be made to such an engine, it's logical
to assume that manufacturers would redesign that engine as a DOHC and
include CVVL as part of that redesign.
For 4-cylinder engines we estimated that the cost to redesign an
OHV engine as a DOHC that includes CVVL would be $599 ($169 for
conversion to DVVL, $254 for conversion to CVVL, and $176 for
conversion to DOHC, which comprises an additional camshaft and valves),
with estimated fuel consumption reduction of 2 to 3 percent. For 6-
cylinder engines we estimated that the cost to redesign an OHV engine
as a DOHC that includes CVVL would be $1262 ($246 for conversion to
DVVL, $488 for conversion to CVVL, and $550 for conversion to DOHC,
which comprises an additional camshaft and valves), with estimated fuel
consumption reduction of 1 to 4 percent. For 8-cylinder engines we
estimated that the cost to redesign an OHV engine as a DOHC that
includes CVVL would be $1380 ($322 for conversion to DVVL, $508 for
conversion to CVVL, and $550 for conversion to DOHC, which comprises an
additional camshaft and valves), with estimated fuel consumption
reduction of 2 to 3 percent. Incremental cost estimates for DVVL and
CVVL are discussed below.
NHTSA believes that the NESCCAF report and confidential
manufacturer data are more accurate, and thereby estimates that a
conversion of an OHV engine to a DOHC engine with CVVL could
incrementally reduce fuel consumption by 1 to 4 percent at an
incremental cost of $599 to $1,380 compared to an OHV with VVT.
Cylinder Deactivation
For the vast majority of vehicles, each cylinder is always active
while the engine is running. Under partial load conditions, the
engine's specific fuel consumption could be reduced if some cylinders
could be disabled, such that the active cylinders operate at higher
load. In cylinder deactivation, some (usually half) of the cylinders
are ``shut down'' during light load operation--the valves are kept
closed, and no fuel is injected--as a result, the trapped air within
the deactivated cylinders is simply compressed and expanded as an air
spring, with minimal friction and heat losses. The active cylinders
combust at almost double the load required if all of the cylinders were
operating. Pumping losses are significantly reduced as long as the
engine is operated in this ``part-cylinder'' mode.
The theoretical engine operating region for cylinder deactivation
is limited to no more than roughly 50 percent of peak power at any
given engine speed. In practice, however, cylinder deactivation is
employed primarily at lower engine cruising loads and speeds, where the
transitions in and out of deactivation mode are less apparent to the
operator and where the noise and vibration (NVH) associated with fewer
firing cylinders may be less of an issue. Manufacturers are exploring
the possibilities of increasing the amount of time that part-cylinder
mode might be suitable to a vehicle with more refined powertrain and
NVH treatment strategies.
General Motors and Chrysler Group have incorporated cylinder
deactivation across a substantial portion of their V8-powered lineups.
Honda (Odyssey, Pilot) and General Motors (Impala, Monte Carlo) offer
V6 models with cylinder deactivation.
There are two variants of cylinder deactivation. The most common
type of cylinder deactivation is one in which an eight-cylinder
overhead valve engine disables four cylinders under light loads. Thus
an eight-cylinder engine could disable four cylinders under light
loads, such as when the vehicle is cruising at highway speed. This
technology could be applied to four and six cylinder engines as well.
General Motors and Chrysler Group have incorporated cylinder
deactivation across a substantial portion of their V8-powered overhead
valve lineups.
Cylinder deactivation could be incorporated on overhead cam engines
and can be applied to four and six cylinder engines as well. Honda has
already begun offering three V6 models
[[Page 24369]]
with cylinder deactivation (Accord, Odyssey, and Pilot) and GM will
soon release cylinder deactivation on its 3.9L 6-cylinder engine. Fuel
economy improvement potential scales roughly with engine displacement-
to-vehicle weight ratio: the higher displacement-to-weight vehicles,
operating at lower relative loads for normal driving, have the
potential to operate in part-cylinder mode more frequently.
Honda's technology includes the use of active engine mounts and
noise damping amongst other items added to its V6 engines with cylinder
deactivation. This, of course, increases the cost relative to a four or
eight cylinder OHC engine.
Some manufacturers are getting results in excess of 6 percent and
most are at the high end of the range. This higher number is supported
by official fuel economy test data on a V6 Honda Odyssey with cylinder
deactivation compared to the same vehicle (and engine displacement)
without cylinder deactivation and by confidential manufacturer
information.
The NAS Report projected that cylinder deactivation could
incrementally reduce fuel consumption by 3 percent to 6 percent at an
incremental cost of $112 to $252. The NESCCAF study projected that
cylinder deactivation could incrementally reduce fuel consumption by
1.7 percent to 4.2 percent at an incremental cost of $161 to $210;
while the EEA report projected that cylinder deactivation could
incrementally reduce fuel consumption by 5.2 percent to 7.2 percent at
an incremental cost of $105 to $135. Confidential manufacturer data and
official fuel economy test data indicates that cylinder deactivation
could incrementally reduce fuel consumption by at least 6 percent at an
incremental cost of $203 to $229. NHTSA believes that these
manufacturer estimates are more accurate and thus estimates that
cylinder deactivation could reduce fuel consumption by 4.5 percent to 6
percent at an incremental cost of $203 to $229.
Variable Valve Timing
Variable valve timing is a classification of valvetrain designs
that alter the timing of the intake valve, exhaust valve, or both,
primarily to reduce pumping losses, increase specific power, and
control residual gases. VVT reduces pumping losses when the engine is
lightly loaded by positioning the valve at the optimum position needed
to sustain horsepower and torque. VVT can also improve thermal
efficiency at higher engine speeds and loads. Additionally, VVT can be
used to alter (and optimize) the effective compression ratio where it
is advantageous for certain engine operating modes.
Variable valve timing has been available in the market for quite a
while. By the early 1990s, VVT had made a significant market
penetration with the arrival of Honda's ``VTEC'' line of engines. VVT
has now become a widely adopted technology: for the 2007 model year,
over half of all new cars and light trucks have engines with some
method of variable valve timing. Therefore, the degree of further
improvement across the fleet is limited to vehicles that have not
already implemented this technology.
Manufacturers are currently using many different types of variable
valve timing, which have a variety of different names and methods. The
major types of VVT are listed below:
Intake Camshaft Phasing (ICP)
Valvetrains with ICP--the simplest type of cam phasing--can modify
the timing of the intake valve while the exhaust valve timing remains
fixed. This requires the addition of a cam phaser for each bank of
intake valves on the engine. An in-line 4-cylinder engine has one bank
of intake valves, while V-configured engines would have two banks of
intake valves. The NAS Report projected that ICP could incrementally
reduce fuel consumption by 3 percent to 6 percent at an incremental
cost of $35; while the EEA report projected that ICP could reduce fuel
consumption at an incremental cost of $35. The NESCCAF study projected
that ICP could incrementally reduce fuel consumption by 1 percent to 2
percent at an incremental cost of $49. Consistent with the EEA report
and NESCCAF study, we have used this $35 manufacturer cost to arrive at
incremental cost of $59 per cam phaser or $59 for an in-line 4 cylinder
and $119 for a V-type, thus NHTSA estimates that ICP could
incrementally reduce fuel consumption by 1 to 2 percent at an
incremental cost of $59 to $119.
Coupled Camshaft Phasing (CCP)
Coupled (or coordinated) cam phasing is a design in which both the
intake and exhaust valve timing are varied with the same cam phaser.
For an overhead cam engine, the same phaser added for ICP would be used
for CCP control. As a result, its costs should be identical to those
for ICP. For an overhead valve engine, only one phaser would be
required for both inline and V-configured engines since only one
camshaft exists. Therefore, for overhead valve engines, the cost is
estimated at $59 regardless of engine configuration, using the logic
provided for ICP.
The NESCCAF study projected that CCP could incrementally reduce
fuel consumption by 1 percent to 3 percent above that obtained by ICP.
Confidential manufacturer data also projects that that CCP could
incrementally reduce fuel consumption by 1 percent to 3 percent above
that obtained by ICP. According to the NESCCAF report and confidential
manufacturer data, NHTSA estimates that CCP could incrementally reduce
fuel consumption by 1 to 3 percent at an incremental cost of $59 to
$119 above ICP valvetrains.
Dual (Independent) Camshaft Phasing (DCP)
The most flexible VVT design is dual cam phasing, where the intake
and exhaust valve opening and closing events are controlled
independently. This design allows the option of controlling valve
overlap, which can be used as an internal EGR strategy. Our estimated
incremental compliance cost for this technology is built upon that for
VVT-ICP where an additional cam phaser is added to control each bank of
exhaust valves less the cost to the manufacturer of the removed EGR
valve. The incremental compliance cost for a 4-cylinder engine is
estimated to be $59 for each bank of valves, plus an estimated piece
cost of $30 for the valves, for a total incremental compliance cost of
$89. The incremental compliance cost for a V6 or a V8 engine is
estimated to be $59 for each bank of intake valves (i.e., two banks
times $59/bank = $119), $59 for each bank of exhaust valves (i.e.,
another $119) minus an estimated $29 incremental compliance cost for
the removed EGR valve; the total incremental compliance cost being
$209.
According to the NESCCAF report and confidential manufacturer data,
it is estimated that DCP could incrementally reduce fuel consumption by
1 to 3 percent at an incremental cost of $89 to $209 compared to
engines with ICP or CCP.
Because ICP and CCP have the same cost and similar effectiveness,
it is assumed that manufacturers will choose the technology that best
fits the specific engine architecture and application.
Variable Valve Lift and Timing
Some vehicles have engines for which both valve timing and lift can
be at least partially optimized based on engine operating conditions.
Engines with variable valve timing and lift (VVLT) can achieve further
reductions in pumping losses and further increases in thermal
efficiency. Controlling the lift
[[Page 24370]]
height of the valves provides additional flexibility and potential for
further fuel consumption reduction. By reducing the valve lift, engines
can decrease the volumetric flow at lower operating loads, improving
fuel-air mixing and in-cylinder mixture motion which results in
improved thermodynamic efficiency and also potentially reduced overall
valvetrain friction. Also, by moving the throttling losses further
downstream of the throttle valve, the heat transfer losses that occur
from the throttling process are directed into the fresh charge-air
mixture just prior to compression, delaying the onset of knock-limited
combustion processes. At the same time, such systems may also incur
increased parasitic losses associated with their actuation mechanisms.
The NAS report projected that VVLT could incrementally reduce fuel
consumption by 1 to 2 percent over VVT alone at an incremental cost of
$73 to 218.
Manufacturers are currently using many different types of variable
valve lift and timing, which have a variety of different names and
methods. The major types of VVLT are listed below:
Discrete Variable Valve Lift
Discrete variable valve lift (DVVL) is a method in which the
valvetrain switches between multiple cam profiles, usually 2 or 3, for
each valve. These cam profiles consist of a low and a high-lift lobe,
and may include an inert or blank lobe to incorporate cylinder
deactivation (in the case of a 3-step DVVL system). According to the
NESCCAF report and confidential manufacturer data, it is estimated that
DVVL could incrementally reduce fuel consumption by 0.5 to 3 percent at
an incremental cost of $169 to $322 compared to VVT depending on engine
size and overhead cam versus overhead valve engines. Included in this
cost estimate is $25 for controls and associated oil supply needs
(these costs not reflected in the NESCCAF study). We also project that
a single valve lifter could control valve pairs, thus engines with dual
intake and/or dual exhaust valves would require only one lifter per
pair of valves. Due to this, the estimated costs for applying DVVL to
overhead cam and overhead valve engines are the same.
Continuous Variable Valve Lift
Continuous variable valve lift (CVVL) employs a mechanism that
varies the pivot point in the rocker arm. This design is realistically
limited to overhead cam engines. Currently, BMW has implemented this
type of system in its Valvetronic engines, which employs fully flexible
valve timing to allow an extra set of rocker arms to vary the valve
lift height. CVVL enables intake valve throttling in engines, which
allows for the use of more complex systems of sensors and electronic
controls to enable further optimization of valve lift.
The NESCCAF study projected incremental costs from $210 to $420,
depending on vehicle class, while the EEA report projected incremental
costs of $180 to $350, depending on vehicle class. Confidential
manufacturer data projects that CVVL could incrementally reduce fuel
consumption by 1.5 by 4 percent at an incremental cost of $200 to $515.
NHTSA believes that these manufacturer estimates are more accurate than
NESCCAF estimates, thus it gives more weight to them. According to the
NESCCAF report and confidential manufacturer data, NHTSA estimates that
CVVL could incrementally reduce fuel consumption by 1.5 by 4 percent at
an incremental cost of $254 to $508 compared to VVT with cost estimates
varying from $254, $466, and $508 for a 4-, 6-, and 8-cylinder engine,
respectively.
Camless Valve Actuation
Camless valve actuation relies on electromechanical actuators
instead of camshafts to open and close the cylinder valves. When
electromechanical actuators are used to replace cams and coupled with
sensors and microprocessor controls, valve timing and lift can be
optimized over all conditions. An engine valvetrain that operates
independently of any mechanical means provides the ultimate in
flexibility for intake and exhaust timing and lift optimization. With
it comes infinite valve overlap variability, the rapid response
required to change between operating modes (such as HCCI and GDI),
intake valve throttling, cylinder deactivation, and elimination of the
camshafts (reduced friction). This level of control can enable even
further incremental reductions in fuel consumption.
Camless valvetrains have been under research for many decades due
to the design flexibility and the attractive fuel economy improvement
potential they might provide. Despite the promising features of camless
valvetrains, significant challenges remain. High costs and design
complexity have reduced manufacturers' enthusiasm for camless engines
in light of other competing valvetrain technologies. The advances in
VVT, VVLT, and cylinder deactivation systems demonstrated in recent
years have reduced the potential efficiency advantage of camless
valvetrains.
The NAS Report projected that camless valve actuation could
incrementally reduce fuel consumption by 5 to 10 percent over VVLT at
an incremental cost of $336 to $673. Confidential manufacturer
information provides incremental fuel consumption losses that range
from 2 to 10 percent at costs that range from $300 to $1,100. The
NESCCAF study projected that camless valve actuation could
incrementally reduce fuel consumption by 11 to 13 percent at an
incremental cost of $805 to $1,820; while the EEA report projected that
camless valve actuation could incrementally reduce fuel consumption by
10 to 14 percent at an incremental cost of $210 to $600. These benefits
and costs are believed to be incremental to engines with VVT.
In reviewing our sources for costs, we have determined that the
adjusted costs presented in the 2002 NAS study, which ranged from $336
to $673--depending on vehicle class--represent the best available
estimates. Subtracting out the improvements associated with the
application of VVLT provides an estimated fuel consumption reduction of
2.5 percent.
Stoichiometric Gasoline Direct Injection Technology
Gasoline direct injection (GDI, or SIDI) engines inject fuel at
high pressure directly into the combustion chamber (rather than the
intake port in port fuel injection). Direct injection improves cooling
of the air/fuel charge within the cylinder, which allows for higher
compression ratios and increased thermodynamic efficiency. Injector
design advances and increases in fuel pressure have promoted better
mixing of the air and fuel, enhancing combustion rates, increasing
exhaust gas tolerance and improving cold start emissions. GDI engines
achieve higher power density and match well with other technologies,
such as boosting and variable valvetrain designs.
Several manufacturers (Audi, BMW, and Volkswagen) have recently
released GDI engines while General Motors and Toyota will be
introducing GDI engines. In addition, BMW and GM have announced their
plans to dramatically increase the number of GDI engines in their
portfolios.
The NESCCAF report projected that the incremental cost for GDI of
$189 to $294; while the EEA report projected an incremental cost of $77
to $135. Confidential manufacturer data provides data with higher upper
end costs than these estimates, with incremental fuel consumption
estimates ranging from 1
[[Page 24371]]
to 2 percent. For our analysis, we have estimated the costs of
individual components of a GDI system and used a ``bottom up'' approach
looking at incremental costs for injectors, fuel pumps, etc., to arrive
at system incremental compliance costs ranging from $122 to $420 for
small cars and up to $228 to $525 for large trucks. The lower end of
the ranges represents our best estimate using a bottom up approach
while the upper end of the ranges represent levels more consistent with
the manufacturer CBI submittals. As a result, we estimate that
stoichiometric GDI could incrementally reduce fuel consumption by 1 to
2 percent at an incremental cost of $122 to $525 compared to engines of
similar power output.
Gasoline Engine Turbocharging and Engine Downsizing
The specific power of a naturally aspirated engine is limited, in
part, by the rate at which the engine is able to draw air into the
combustion chambers. Turbocharging and supercharging are two methods to
increase the intake manifold pressure and cylinder charge-air mass
above naturally aspirated levels. By increasing the pressure
differential between the atmosphere and the charging cylinders,
superchargers and turbochargers increase this available airflow, and
thus increase the specific power level, and with it the ability to
reduce engine size while maintaining performance. This effectively
reduces the pumping losses at lighter loads in comparison to a larger,
naturally aspirated engine, while at the same time reducing net
friction losses
Almost every major manufacturer currently markets a vehicle with
some form of boosting. While boosting has been a common practice for
increasing performance for several decades, it has considerable fuel
economy potential when the engine displacement is reduced. Specific
power levels for a boosted engine often exceed 100 hp/L--compared to
average naturally aspirated engine power density of roughly 70 hp/L. As
a result, engines can conservatively be downsized roughly 30 percent to
achieve similar peak output levels.
In the last decade, improvements to turbine design have improved
their reliability and performance across the entire engine operating
range. New variable geometry turbines spool up to speed faster
(eliminating the once-common ``turbo lag'') while maintaining high flow
rates for increased boost at high speeds.
Turbocharging and downsizing involve the addition of a boost
system, removal of two cylinders in most cases (from an 8-cylinder to a
6, or a 6 to a 4) and associated valves, and the addition of some form
of cold start control system (e.g., air injection) to address possible
cold start emission control. The NAS Report projected that
turbocharging and downsizing could incrementally reduce fuel
consumption by 5 to 7 percent at an incremental cost of $364 to $582.
The EEA report projected turbocharging and downsizing could
incrementally reduce fuel consumption by 5.2 to 7.8 percent.
In developing estimated costs for turbocharging and downsizing an
engine, NHTSA, in conjunction with EPA, relied upon piece cost
estimates contained in the NESCCAF report. The cost estimates provided
by the NESCCAF report are as follows: $600 for the turbocharger and
associated parts; $90 for an air injection pump and associated parts
(each turbocharger requires an air injection pump); $75 per cylinder
and associated components; $15 per each valve and associated
components; and $150 per camshaft.
In developing the cost estimates for each of the 10 classes of
vehicles, we determined the most logical type of downsizing that would
occur for each class and starting with the turbocharger and air
injector cost, either added or deleted cost, depending on the
situation. For subcompact and compact cars, we determined that the
downsizing wouldn't involve the removal of any cylinders, valves and
camshafts, but instead would result in a manufacturer using a smaller
displacement 4-cylinder engine and adding the turbocharger and the air
injector to the smaller engine. Thus, for subcompact and compact cars,
we estimated the cost of turbocharging and downsizing to be $690 ($600
for the turbocharger plus $90 for the air injector).
For large trucks and large SUVs we determined that the most logical
engine downsizing would involve replacing an 8-cylinder overhead valve
engine with a turbocharged 6-cylinder dual overhead cam engine. This
change would result in the removal of 2 cylinders, and the addition of
a turbocharger, an air injector, 8 valves and 2 camshafts. Thus, we
have estimated the cost of turbocharging and downsizing to be $810
($600 for the turbocharger plus $90 for the air injector, plus $120 for
eight valves plus $150 for a camshaft and minus $150 for the removal of
two cylinders).
For midsize cars, large cars, small trucks, small SUVs, midsize
SUVs and minivans, we determined that the most logical engine
downsizing would involve replacing a 6-cylinder dual overhead cam
engine with a turbocharged 4-cylinder dual overhead cam engine. This
change would result in the removal of 2 cylinders, 8 valves and 2
camshafts and the addition of a turbocharger and air injector. Thus, we
have estimated the cost of turbocharging and downsizing to be $120
($600 for the turbocharger plus $90 for the air injector, minus $150
for the removal of two cylinders, minus $120 for the removal of eight
valves and minus $300 for the removal of two camshafts).
Thus, we have estimated the cost for a boosted/downsized engine
system at $690 for small cars, $810 for large trucks, and $120 for
other vehicle classes. Projections of the fuel consumption reduction
potential of a turbocharged and downsized engine from the NAS Report
are backed by EEA estimates and confidential manufacturer data.
According to the NAS Report, the EEA report, cost estimates developed
in conjunction with EPA and confidential manufacturer data, NHTSA
estimates that downsized turbocharged engines could incrementally
reduce fuel consumption from 5 to 7.5 percent at an incremental cost of
$120 to $810.
Diesel Engine
Diesel engines have several characteristics that give them superior
fuel efficiency to conventional gasoline, spark-ignited engines.
Pumping losses are greatly reduced due to lack of (or greatly reduced)
throttling. The diesel combustion cycle operates at a higher
compression ratio, with a very lean air/fuel mixture, and typically at
much higher torque levels than an equivalent-displacement gasoline
engine. Turbocharged light-duty diesels typically achieve much higher
torque levels at lower engine speeds than equivalent-displacement
naturally-aspirated gasoline engines. Additionally, diesel fuel has
higher energy content per gallon. However, diesel engines have
emissions characteristics that present challenges to meeting Tier 2
emissions standards.
Compliance strategies are expected to include a combination of
combustion improvements and after-treatment. Several key advances in
diesel technology have made it possible to reduce emissions coming from
the engine (prior to after-treatment). These technologies include
improved fuel systems (higher pressures and more responsive injectors),
advanced controls and sensors to optimize combustion and emissions
performance, higher EGR levels to reduce NOX, lower
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compression ratios and advanced turbocharging systems.
For after-treatment, the traditional 3-way catalyst found on
gasoline-powered vehicles is ineffective due to the lean-burn
combustion of a diesel. All diesels will require a particulate filter,
an oxidation catalyst, and a NOX reduction strategy to
comply with Tier 2 emissions standards.
The NOX reduction strategies most common are outlined
below:
Lean NOX Trap Catalyst After-Treatment
A lean NOX trap (LNT) operates, in principle, by storing
NOX (NO and NO2) when the engine is running in
its normal (lean) state. When the control system determines (via
mathematical model or a NOX sensor) that the trap is
saturated with NOX, it switches to a rich operating mode.
This rich mode produces excess hydrocarbons that act as a reducing
agent to convert the stored NOX to N2 and water,
thereby ``regenerating'' the LNT and opening up more locations for
NOX to be stored. LNTs are sensitive to sulfur deposits
which can reduce catalytic performance, but periodically undergo a
desulfation engine operating mode to clean it of sulfur buildup.
According to confidential manufacturer data, NHTSA estimates that
LNT-based diesels can incrementally reduce fuel consumption by 8 to 15
percent at an incremental cost of $1,500 to $1,600 compared to a direct
injected turbocharged and downsized internal combustion engine. These
costs are based on a ``bottom up'' cost analysis that was performed
with EPA which then subtracted the costs of all previous steps on the
decision tree prior to diesel engines.
Selective Catalytic Reduction NOX After-Treatment
SCR uses a reductant (typically, ammonia derived from urea)
continuously injected into the exhaust stream ahead of the SCR
catalyst. Ammonia combines with NOX in the SCR catalyst to
form N2 and water. The hardware configuration for an SCR
system is more complicated than that of an LNT, due to the onboard urea
storage and delivery system (which requires a urea pump and injector
into the exhaust stream). While there is no required rich engine
operating mode prescribed for NOX reduction, the urea is
typically injected at a rate of 3 to 4 percent of that of fuel
consumed. Manufacturers designing SCR systems are intending to align
urea tank refills with standard maintenance practices such as oil
changes. Incremental fuel consumption reduction estimates for diesel
engines with an SCR system range from 11 to 20 percent at an
incremental cost of $2,051 to $2,411 compared to a direct injected
turbocharged and downsized internal combustion engine. These costs are
based on a ``bottom up'' cost analysis that was performed with EPA,
which then subtracted the costs of all previous steps on the decision
tree prior to diesel engines.
Based on public information and on recent discussions that NHTSA
and EPA have had with auto manufacturers and aftertreatment device
manufacturers, NHTSA has received strong indications that LNT systems
would probably be used on smaller vehicles while the SCR systems would
be used on larger vehicles and trucks. The primary reason given for
this choice is the trade off between the rhodium needed for the LNT and
the urea injection system needed for SCR. The breakeven point between
these two cost factors appears to occur around 3.0 liters. Thus, it is
believed that it is cheaper to manufacture diesel engines smaller than
3.0 liters with an LNT system, and that conversely, it is cheaper to
manufacture diesel engines larger than 3.0 liters with a SCR system. Of
course, there are other factors that influence a manufacturer's
decision on which system to use, but we have used this rule-of-thumb
for our analysis.
b. Transmission Technologies
Five-, Six-, Seven-, and Eight-Speed Automatic Transmissions
The number of available transmission speeds influences the width of
gear ratio spacing and overall coverage and, therefore, the degree of
transmission ratio optimization available under different operating
conditions. In general, transmissions can offer a greater available
degree of engine optimization and can therefore achieve higher fuel
economy when the number of gears is increased. However, potential gains
may be reduced by increases in transmission weight and rotating mass.
Regardless of possible changes to fuel economy standards, manufacturers
are increasingly introducing 5- and 6-speed automatic transmissions on
their vehicles. Additionally, some manufacturers are introducing 7-,
and 8-speed automatic transmissions, with 7-speed automatic
transmissions appearing with increasing frequency.
Automatic 5-Speed Transmissions
As automatic transmissions have been developed over the years, more
forward speeds have been added to improve fuel efficiency and
performance. Increasing the number of available ratios provides the
opportunity to optimize engine operation under a wider variety of
vehicle speeds and load conditions. Also, additional gears allow for
overdrive ratios (where the output shaft of the transmission is turning
at a higher speed than the input shaft) which can lower the engine
speed at a given road speed (provided the engine has sufficient power
at the lower rpm point) to reduce pumping losses. However, additional
gears can add weight, rotating mass, and friction. Nevertheless,
manufacturers are increasingly adding 5-speed automatic transmissions
to replace 3- and 4-speed automatic transmissions.
The 2002 NAS study projected that 5-speed automatic transmissions
could incrementally reduce fuel consumption by 2 to 3 percent at an
incremental cost of $76 to $167. The NESCCAF study projected that 5-
speed automatic transmissions could incrementally reduce fuel
consumption by 1 percent at an incremental cost of $140; while the EEA
report projected that 5-speed automatic transmissions could
incrementally reduce fuel consumption by 2 to 3 percent at an
incremental cost of $130. Confidential manufacturer data projected that
5-speed automatic transmissions could incrementally reduce fuel
consumption by 1 to 6 percent at an incremental cost of from $60 to
$281. NHTSA believes that the NAS study's estimates are still valid and
estimates that 5-speed automatic transmissions could incrementally
reduce fuel consumption by 2.5 percent at an incremental cost of $76 to
$167 (relative to a 4-speed automatic transmission).
Automatic 6-, 7-, and 8-Speed Transmissions
In addition to 5-speed automatic transmissions, manufacturers can
also choose to utilize 6-, 7-, or 8-speed automatic transmissions.
Additional ratios allow for further optimization of engine operation
over a wider range of conditions, but this is subject to diminishing
returns as the number of speeds increases. As additional planetary gear
sets are added (which may be necessary in some cases to achieve the
higher number of ratios), additional weight and friction are
introduced. Also, the additional shifting of such a transmission can be
perceived as bothersome to some consumers, so manufacturers need to
develop strategies for smooth shifts. Some manufacturers are replacing
4-speed automatics with 6-speed automatics (there are also increasing
numbers of 5-speed automatic transmissions that are
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being replaced by 6-speed automatic transmissions), and 7-, and 8-speed
automatics have entered production, albeit in lower-volume
applications.
The NAS study projected that 6-, 7- or 8-speed transmissions could
incrementally reduce fuel consumption by 1 to 2 percent at an
incremental cost of $70 to $126. Confidential manufacturer data
projected that 6-, 7-or 8-speed transmissions could incrementally
reduce fuel consumption by 1 to 3 percent at an incremental cost of $20
to $120. However, according to the EEA report, a Lepelletier gear set
design provides for 6-speeds at the same cost as a 5-speed automatic.
Based on that analysis, we have estimated the cost of a 6-speed
automatic to be equivalent to that for a 5-speed automatic. We have not
developed any estimate costs for 7-or 8-speed transmissions because of
the diminishing returns in efficiency versus the costs for
transmissions beyond 6-speeds. NHTSA estimates that 6-, 7-, or 8-speed
automatic transmissions could incrementally reduce fuel consumption by
0.5 to 2.5 percent at an incremental cost of $0 to $20 (relative to a
5-speed automatic transmission). We are estimating up to an additional
$20 in costs because we have tried to account for the engineering
effort in addition to the hardware which we believe the EEA did not and
we wanted to capture some of the higher costs reported by
manufacturers.
Aggressive Shift Logic
In operation, an automatic transmission's controller decides when
to upshift or downshift based on a variety of inputs such as vehicle
speed and throttle position according to programmed logic. Aggressive
shift logic (ASL) can be employed so that a transmission is engineered
in such a way as to maximize fuel efficiency by upshifting earlier and
inhibiting downshifts under some conditions. Through partial lock-up
under some operating conditions and early lock-up under others,
automatic transmissions can achieve some reduction in overall fuel
consumption. Aggressive shift logic is applicable to all vehicle types
with automatic transmissions, and since in most cases it would require
no significant hardware modifications, it can be adopted during vehicle
redesign or refresh or even in the middle of a vehicle's product cycle.
The application of this technology does, however, require a
manufacturer to confirm that driveability, durability, and noise,
vibration, and harshness (NVH) are not significantly degraded.
The NAS study projected that aggressive shift logic could
incrementally reduce fuel consumption by 1 to 2 percent at an
incremental cost of $0 to $70. Confidential manufacturer data projected
that aggressive shift logic could incrementally reduce fuel consumption
by 0.5 to 3 percent at an incremental cost of $18 to $70. The NAS study
estimates and confidential manufacturer data are within the same
ranges, thus NHTSA believes that the NAS estimates are still accurate.
Thus, NHTSA estimates aggressive shift logic could incrementally reduce
fuel consumption by 1 to 2 percent at an incremental cost of $38, which
is approximately the average of the midpoint of the NAS cost range and
the manufacturer cost range.
Early Torque Converter Lockup
A torque converter is a fluid coupling located between the engine
and transmission in vehicles with automatic transmissions and
continuously-variable transmissions (CVTs). This fluid coupling allows
for slip so the engine can run while the vehicle is idling in gear,
provides for smoothness of the powertrain, and also provides for torque
multiplication during acceleration. During light acceleration and
cruising, this slip causes increased fuel consumption, so modern
automatic transmissions utilize a clutch in the torque converter to
lock it and prevent this slippage. Fuel consumption can be further
reduced by locking up the torque converter early, and/or by using
partial-lockup strategies to reduce slippage.
Some torque converters will require upgraded clutch materials to
withstand additional loading and the slipping conditions during partial
lock-up. As with aggressive shift logic, confirmation of acceptable
driveability, performance, durability and NVH characteristics is
required to successfully implement this technology.
The 2002 NAS study did not include any estimates for this
technology. The NESCCAF study projected that early torque converter
lockup could incrementally reduce fuel consumption by 0.5 percent at an
incremental cost of $0 to $10; while the EEA report projected that low-
friction lubricants could incrementally reduce fuel consumption by 0.5
percent at an incremental cost of $5. NHTSA estimates the cost of this
technology (i.e., the calibration effort) at $30 based in part on
NESCCAF and the CBI submissions which provided costs with a midpoint of
$30. We have used a higher value here than NESCCAF and EEA because we
have tried to account for the engineering effort in addition to the
hardware which we believe NESCCAF and EEA did not do and which were
captured in the manufacturers' higher costs.
NHTSA estimates that early torque converter lockup could
incrementally reduce fuel consumption by approximately 0.5 percent at
an incremental cost of approximately $30.
Automated Shift Manual Transmissions
An automated manual transmission (AMT) is mechanically similar to a
conventional transmission, but shifting and launch functions are
controlled by the vehicle. There are two basic types of AMTs, single-
clutch and dual-clutch. A single-clutch AMT is essentially a manual
transmission with automated clutch and shifting. Because there are some
shift quality issues with single-clutch designs, dual-clutch AMTs are
more common. A dual-clutch AMT uses separate clutches for the even-
numbered gears and odd-numbered gears. In this way, the next expected
gear is pre-selected, which allows for faster and smoother shifting.
Overall, AMTs likely offer the greatest potential for fuel
consumption reduction among the various transmission options presented
in this report because they offer the inherently lower losses of a
manual transmission with the efficiency and shift quality advantages of
computer control. AMTs offer the lower losses of a manual transmission
with the efficiency advantages of computer control. The lower losses
stem from the elimination of the conventional lock-up torque converter
and a greatly reduced need for high pressure hydraulic circuits to hold
clutches to maintain gear ratios (in automatic transmissions) or hold
pulleys in position to maintain gear ratio (in continuously variable
transmissions, discussed below). However, the lack of a torque
converter will affect how the vehicle launches from rest, so an AMT
will most likely be paired with an engine that offers enough torque in
the low-RPM range to allow for adequate launch performance.
An AMT is mechanically similar to a conventional manual
transmission, but shifting and launch functions are controlled by the
vehicle rather than the driver. A switch from a conventional automatic
transmission with torque converter to an AMT incurs some costs but also
allows for some cost savings. Savings can be realized through
elimination of the torque converter which is a very costly part of a
traditional automatic transmission, and through reduced need for high
pressure hydraulic circuits to hold clutches (to maintain gear ratios
in automatic transmissions) or hold pulleys (to maintain gear ratios in
Continuously
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Variable Transmissions). Cost increases would be incurred in the form
of calibration efforts since transmission calibrations would have to be
redone, and the addition of a clutch assembly for launce and gear
changes.
The NESCCAF study projected that AMTs could incrementally reduce
fuel consumption by 5 to 8 percent at an incremental cost of $0 to
$280; while the EEA report projected that low-friction lubricants could
incrementally reduce fuel consumption by 6 to 7 percent at an
incremental cost of $195 to $225. Confidential manufacturer data
projected that AMTs could incrementally reduce fuel consumption by 2 to
5 percent at an incremental cost of $70 to $400.
Taking all these estimates into consideration, NHTSA estimates that
AMTs could incrementally reduce fuel consumption by 4.5 to 7.5 percent
at an incremental cost of approximately $141. We believe that, overall,
the hardware associated with an AMT, whether single clutch or dual
clutch, is no more costly than that for a traditional automatic
transmission given the savings associated with removal of the torque
converter and high pressure hydraulic circuits, which is estimated to
amount to at least $30. Nonetheless, given the need for engineering
effort (e.g., calibration and vehicle integration work) when
transitioning from a traditional automatic to an AMT, we have estimated
the incremental compliance cost at $141, independent of vehicle class,
which is the midpoint of the NESCCAF estimates and within the range
provided confidential manufacturer data.
Continuously Variable Transmission
A Continuously Variable Transmission (CVT) is unique in that it
does not use gears to provide ratios for operation. Unlike manual and
automatic transmissions with fixed transmission ratios, CVTs provide,
within their operating ranges, fully variable transmission ratios with
an infinite number of gears. This enables even finer optimization of
the transmission ratio under different operating conditions and,
therefore, some reduction of pumping and engine friction losses. CVTs
use either a belt or chain on a system of two pulleys.
The main advantage of a CVT is that the engine can operate at its
most efficient point more often, since there are no fixed ratios. Also,
CVTs often have a wider range of ratios than conventional automatic
transmissions.
The most common CVT design uses two V-shaped pulleys connected by a
metal belt. Each pulley is split in half and a hydraulic actuator moves
the pulley halves together or apart. This causes the belt to ride on
either a larger or smaller diameter section of the pulley which changes
the effective ratio of the input to the output shafts.
It is assumed that CVTs will only be used on cars, small SUVs,
midsize crossover vehicles and minivans because they are currently used
mainly in lower-torque applications. While a high-torque CVT could be
developed for small pickup trucks and large pickup trucks and large
SUVs, it would likely have to be treated separately in terms of
effectiveness. We do not see development in the area of high-torque
CVTs and therefore did not include this type in our analysis.
The 2002 NAS study projected that CVTs could incrementally reduce
fuel consumption by 4 to 8 percent at an incremental cost of $140 to
$350. The NESCCAF study projected that CVTs could incrementally reduce
fuel consumption by 4 percent at an incremental cost of $210 to $245.
Confidential manufacturer data projected that CVTs could incrementally
reduce fuel consumption by 3 to 9 percent at an incremental cost of
$140 to $800. These values are incremental to a 4-speed transmission.
Based on an aggregation of manufacturers' information, we estimate
a CVT benefit of about 6 percent over a 4-speed automatic. This is
above the NESCCAF value, but in the range of NAS. In reviewing our
sources for costs, we have determined that the adjusted costs presented
in the 2002 NESCCAF study represent the best available estimates.
Subtracting the estimated fuel consumption reduction and costs of
replacing a 4-speed automatic transmission with a 5-speed automatic
transmission results in NHTSA's projecting that CVTs could
incrementally reduce fuel consumption by 3.5 percent when compared to a
conventional 5-speed automatic transmission at an incremental cost of
$100 to $139.
Manual 6-, 7-, and 8-Speed Transmissions
As with automatic transmissions, increasing the number of available
ratios in a manual transmission can improve fuel economy by allowing
the driver to select a ratio that optimizes engine operation at a given
speed. Typically, this is achieved through adding additional overdrive
ratios to reduce engine speed (which saves fuel through reduced pumping
losses). Six-speed manual transmissions have already achieved
significant market penetration, so manufacturers have considerable
experience with them and the associated costs. For those vehicles with
five-speed manual transmissions, an upgrade to a six-speed could
incrementally reduce fuel consumption by 0.5 percent. Based on CBI
submissions, which provided costs with a midpoint of $107, NHTSA
estimates that 6-speed manual transmissions could incrementally reduce
fuel consumption by 0.5 percent when compared to 5-speed automatic
transmission at an incremental cost of $107.
c. Vehicle Technologies
Rolling Resistance Reduction
Tire characteristics (e.g., materials, construction, and tread
design) influence durability, traction control, vehicle handling, and
comfort. They also influence rolling resistance--the 30 frictional
losses associated mainly with the energy dissipated in the deformation
of the tires under load--and therefore, CO2 emissions. This
technology is applicable to all vehicles, except for body-on-frame
light trucks and performance vehicles (described in the next section).
Based on a 2006 NAS/NRC report, a 10 percent rolling resistance
reduction would provide an increase in fuel economy of 1 to 2 percent.
The same report estimates a $1 per tire cost for low rolling resistance
tires. For four tires, our incremental compliance cost estimate is $6
per vehicle, independent of vehicle class, although not applicable to
large trucks.
Low Drag Brakes
Low drag brakes reduce the sliding friction of disc brake pads on
rotors when the brakes are not engaged because the brake shoes are
pulled away from the rotating drum. While most passenger cars have
already adopted this technology, there are indications that this
technology is still available for body-on-frame trucks. According to
confidential manufacturer data, low drag brakes could incrementally
reduce fuel consumption by 1 to 2 percent at an incremental cost of $85
to $90. NHTSA has adopted these values for its analysis.
Front or Secondary Axle Disconnect for Four-Wheel Drive Systems
To provide shift-on-the-fly capabilities, many part-time four-wheel
drive systems use some type of axle disconnect: Front axle disconnect
in ladder-frame vehicles, and secondary (i.e., either front or rear)
axle disconnect in unibody vehicles. Front and secondary axle
disconnects serve two basic purposes. Using front axle
[[Page 24375]]
disconnect as an example, in two-wheel drive mode, the technology
disengages the front axle from the front driveline so the front wheels
do not turn the front driveline at road speed, saving wear and tear.
Then, when shifting from two- to four-wheel drive ``on the fly'' (while
moving), the front axle disconnect couples the front axle to the front
differential side gear only when the transfer case's synchronizing
mechanism has spun the front driveshaft up to the same speed as the
rear driveshaft.
Four-wheel drive systems that have axle disconnect typically do not
have either manual- or automatic-locking hubs. To isolate (for example)
the front wheels from the rest of the front driveline, front axle
disconnects use a sliding sleeve to connect or disconnect an axle shaft
from the front differential side gear.
This technology has been used by ladder-frame vehicles for some
time, but has only started to appear on unibody vehicles recently. The
incremental costs and benefits of applying front axle disconnect
differ, depending on the vehicle's type of construction. According to
confidential manufacturer data, front axle disconnects for ladder frame
vehicles could achieve incremental fuel consumption reductions of 1.5
percent at an incremental cost of $114, while secondary axle
disconnects for unibody vehicles could achieve incremental fuel
consumption reductions of 1 percent at an incremental cost of $676.
NHTSA has adopted these estimates for its analysis.
Aerodynamic Drag Reduction
A vehicle's size and shape determine the amount of power needed to
push the vehicle through the air at different speeds. Changes in
vehicle shape or frontal area can therefore reduce CO2
emissions. Areas for potential aerodynamic drag improvements include
skirts, air dams, underbody covers, and more aerodynamic side view
mirrors. NHTSA and EPA estimate a fleet average of 20 percent total
aerodynamic drag reduction is attainable for passenger cars, whereas a
fleet average of 10 percent reduction is more realistic for trucks
(with a caveat for ``high-performance'' vehicles, described below).
These drag reductions equate to increases in fuel economy of 2 percent
and 3 percent for trucks and cars, respectively. These numbers are in
agreement with the technical literature and supported by confidential
manufacturer information. The CBI submittals generally showed the RPE
associated with these changes at less than $100. NHTSA and EPA estimate
that the incremental compliance cost to range from $0 to $75,
independent of vehicle class.
Aerodynamic drag reduction technologies are readily available
today, although the phase-in time required to distribute over a
manufacturer's fleet is relatively long (6 years or so).
Weight Reduction
The term weight reduction encompasses a variety of techniques with
a variety of costs and lead times. These include lighter-weight
materials, higher strength materials, component redesign, and size
matching of components. Lighter-weight materials involve using lower
density materials in vehicle components, such as replacing steel parts
with aluminum or plastic. The use of higher strength materials involves
the substitution of one material for another that possesses higher
strength and less weight. An example would be using high strength alloy
steel versus cold rolled steel. Component redesign is an on-going
process to reduce costs and/or weight of components, while improving
performance and reliability. An example would be a subsystem replacing
multiple components and mounting hardware.
The cost of reducing weight is difficult to determine and is
dependent upon the methods used. For example, a change in design that
reduces weight on a new model may or may not save money. On the other
hand, material substitution can result in an increase in price per
application of the technology if more expensive materials are used.
For purposes of this proposed rule, NHTSA has considered only
vehicles weighing greater than 5,000 pounds for weight reduction
through materials substitution. Provided that those vehicles remain
above 5,000 pounds weight, vehicles may realize up to roughly 2 percent
incremental fuel consumption through materials substitution
(corresponding to a 3 percent reduction in vehicle weight) at
incremental costs of $0.75 to $1.25 per pound reduced.
d. Accessory Technologies
Electric Power Steering
Electric power steering (EPS) is advantageous over hydraulic
steering in that it only draws power when the wheels are being turned,
which is only a small percentage of a vehicle's operating time. EPS may
be implemented on many vehicles with a standard 12V system; however,
for heavier vehicles, a 42V system may be required, which adds cost and
complexity.
The NAS study projected that a 12V EPS system could incrementally
reduce fuel consumption by 1.5 to 2.5 percent at an incremental cost of
$105 to $150. The NESCCAF study projected that a 12V EPS could
incrementally reduce fuel consumption by 1 percent at an incremental
cost of $28 to $56; while the EEA report projected that a 12V EPS could
incrementally reduce fuel consumption by 1.5 to 1.9 percent at an
incremental cost of $70 to $90. According to confidential manufacturer
data, electric power steering could achieve incremental fuel
consumption reductions of 1.5 to 2.0 percent at an incremental cost of
$118 to $197.
NHTSA believes that these manufacturer estimates are more accurate
and thus estimates that a 12V EPS system could incrementally reduce
fuel consumption by 1.5 to 2 percent at an incremental cost of $118 to
$197, independent of vehicle class.
Engine Accessory Improvement
The accessories on an engine, like the alternator, coolant, and oil
pumps, are traditionally driven by the accessory belt. Improving the
efficiency or outright electrification (12V) of these accessories (in
the case of the mechanically driven pumps) would provide an opportunity
to reduce the accessory loads on the engine. However, the potential for
such replacement will be greater for vehicles with 42V electrical
systems. Some large trucks also employ mechanical fans, some of which
could also be improved or electrified. Additionally, there are now
higher efficiency alternators which require less of an accessory load
to achieve the same power flow to the battery.
According to the NAS Report engine accessory improvement could
achieve incremental fuel consumption reductions of 1 to 2 percent at an
incremental cost of $124 to $166. Confidential manufacturer information
is also within these ranges. The NESCCAF study estimated a cost of $56,
but that estimate included only a high efficiency generator and did not
include electrification of other accessories. In reviewing our sources
for costs, we have determined that the adjusted costs presented in the
2002 NAS study, which ranged from $124 to $166--depending on vehicle
class--represent the best available estimates. Based on the NAS study
and confidential manufacturer information, NHTSA estimates that
accessory improvement could incrementally reduce fuel consumption by 1
to 2 percent at an incremental cost of $124 to $166.
[[Page 24376]]
Forty-Two Volt (42V) Electrical System
Most vehicles today (aside from hybrids) operate on 12V electrical
systems. At higher voltages, which appear to be under consideration to
meet expected increases in on-board electrical demands, the power
density of motors, solenoids, and other electrical components may
increase to the point that new and more efficient systems, such as
electric power steering, may be feasible. A 42V system can also
accommodate an integrated starter generator. According to the NAS
Report, 42V engine accessory improvement could achieve incremental fuel
consumption reductions of 1 to 2 percent at an incremental cost of $194
to $259. According to confidential manufacturer data, a 42V system
could achieve incremental fuel consumption reductions of 0 to 4 percent
at an incremental cost of $62 to $280.
We believe that the state of 42V technology has evolved to where it
is on par with the incremental costs and benefits of 12V engine
accessory improvement. In reviewing our sources, we have determined
that the numbers provided in the 2002 NAS study, which estimated that
engine accessory improvement could achieve incremental fuel consumption
reductions of 1 to 2 percent at an incremental cost of $124 to $166--
depending on vehicle class--represent the best available estimates for
both 12V and 42V systems. Thus, we are estimating that a 42V electrical
system could achieve incremental fuel consumption reductions of 1 to 2
percent at an incremental cost of $124 to $166. These estimates are
independent of vehicle class and exclusive of improvements to the
efficiencies or electrification of 12V accessories. These estimates are
incremental to a 12V system, regardless of whether the 12V system has
improved efficiency or not.
e. Hybrid Technologies
A hybrid describes a vehicle that combines two or more sources of
propulsion energy, where one uses a consumable fuel (like gasoline) and
one is rechargeable (during operation, or by another energy source).
Hybrids reduce fuel consumption through three major mechanisms: by
optimizing the operation of the internal combustion engine (through
downsizing, or other control techniques) to operate at or near its most
efficient point more of the time; by recapturing lost braking energy
and storing it for later use; and by turning off the engine when it is
not needed, such as when the vehicle is coasting or when stopped.
Hybrid vehicles utilize some combination of the above three
mechanisms to reduce fuel consumption. The effectiveness of a hybrid
depends on the utilization of the above mechanisms and how aggressively
they are pursued. Different hybrid concepts utilize these mechanisms
differently, so they are treated separately in this analysis. Below is
a discussion of the major hybrid concepts judged to be available for
use within the timeframe of this rulemaking.
Integrated Starter-Generator With Idle-Off
Integrated Starter-Generator (ISG) systems are the most basic of
hybrid systems and offer mainly idle-stop capability. They offer the
least power assist and regeneration capability of the hybrid
approaches, but their low cost and easy adaptability to existing
powertrains and platforms can make them attractive for some
applications. ISG systems operate at around 42V and so have smaller
electric motors and less battery capacity than other HEV designs
because of their lower power demand.
ISG systems replace the conventional belt-driven alternator with a
belt-driven, higher power starter-alternator. The starter-alternator
starts the engine during idle-stop operation, but often a conventional
12V gear-reduction starter is retained to ensure cold-weather
startability. Also, during idle-stop, some functions such as power
steering and automatic transmission hydraulic pressure are lost with
conventional arrangements, so electric power steering and an auxiliary
transmission pump are added. These components are similar to those that
would be used in other hybrid designs. An ISG system could be capable
of providing some launch assist, but it would be limited in comparison
to other hybrid concepts. According to the NAS Report, an EEA report
and confidential manufacturer data, ISG systems could achieve
incremental fuel consumption reductions that range from 5 to 10
percent.
In addition, when idle-off is used (i.e., the petroleum fuelled
engine is shut off during idle operation), an electric power steering
and auxiliary transmission pump are added to provide for functioning of
these systems which, in a traditional vehicle, were powered by the
petroleum engine. The 2002 NAS study estimated the cost of these
systems at $210 to $350 with a 12V electrical system and independent of
vehicle class, while the NESCCAF study estimated the cost for these
systems at $280 with a 12 Volt electrical system for a small car. The
2002 NAS study estimated the cost of these systems to be $210 to $350
with a 12 volt electrical system and independent of vehicle class,
while the NESCCAF study estimated the cost for these systems of $280
with a 12 volt electrical system for a small car. Confidential
manufacturer information provides cost estimates for ISGs that range
from $418 to $800. We believe that the NAS and the NESCCAF estimates
are still accurate for ISGs with a 12V system. Thus, if you add these
cost estimates to those we estimated for 42V systems plus associated
equipment, which results an estimated incremental compliance cost of
these systems, including the costs associated with upgrading to a 42
volt electrical system of $563 to $600, depending on vehicle class.
Therefore, NHTSA estimates that ISG systems could achieve
incremental fuel consumption reductions of 5 to 10 percent at
incremental costs of $563 to $600, depending on vehicle class (this
includes the costs associated with upgrading to a 42 volt electrical
system).
Integrated Motor Assist (IMA)/Integrated Starter-Alternator-Dampener
(ISAD) Hybrid
Honda is the only manufacturer that uses Integrated Motor Assist
(IMA), which utilizes a thin axial electric motor bolted to the
engine's crankshaft and connected to the transmission through a torque
converter or clutch. This electric motor acts as both a motor for
helping to launch the vehicle and a generator for recovering energy
while slowing down. It also acts as the starter for the engine and the
electrical system's main generator. Since it is rigidly fixed to the
engine, if the motor turns, the engine must turn also, but combustion
does not necessarily need to occur. The Civic Hybrid uses cylinder
deactivation on all four cylinders for decelerations and some cruise
conditions.
The main advantage of the IMA system is that it is relatively low
cost and adapts readily to conventional vehicles and powertrains, while
providing excellent efficiency gains. Packaging space is a concern for
the physically longer engine-motor-transmission assembly as well as the
necessary battery pack, cabling and power electronics. According to EPA
test data and confidential manufacturer data, the IMA system could
achieve incremental fuel consumption reductions of 3.5 to 8.5
percent.\61\ NHTSA has adopted these estimates for its analysis.
---------------------------------------------------------------------------
\61\ The cost estimates are protected as confidential business
information.
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[[Page 24377]]
The 2002 NAS study did not consider this technology while the
NESCCAF study estimated the cost for these systems at $2,310 to $2,940
for a small car and large car, respectively. We have used these
estimates combined with confidential manufacturer data as the basis for
our incremental compliance costs of $1,636 for the small car and $2,274
for the large car, expressed in 2006 dollars. We have not estimated
incremental compliance costs for the other vehicle classes because we
do not believe those classes would use this technology and would,
instead, use the hybrid technologies discussed below.
2-Mode Hybrids
GM, DaimlerChrysler, and BMW have formed a joint venture to develop
a new HEV system based on HEV transmission technology originally
developed by GM's Allison Transmission Division for heavy-duty vehicles
like city buses. This technology uses an adaptation of a conventional
stepped-ratio automatic transmission by replacing some of the
transmission clutches with two electric motors, which makes the
transmission act like a CVT. Like Toyota's Power Split design, these
motors control the ratio of engine speed to vehicle speed. But unlike
the Power Split system, clutches allow the motors to be bypassed, which
improves both the transmission's torque capacity for heavy-duty
applications and fuel economy at highway speeds. According to
confidential manufacturer data, 2-mode hybrids could achieve
incremental fuel consumption reductions of 25 to 40 percent. NHTSA
estimates that 2-mode hybrids could achieve fuel reductions of 3.5
percent to 7 percent incremental to an Integrated Motor Assist (IMA)/
Integrated Starter-Alternator-Dampener (ISAD) Hybrid.
The 2002 NAS study did not consider this technology, while the
NESCCAF study estimated the costs to range from $4,340 to $5,600,
depending on vehicle class. These estimates are not incremental to an
Integrated Motor Assist (IMA)/Integrated Starter-Alternator-Dampener
(ISAD) Hybrid. To accurately project the cost of 2-mode hybrids when
they were applied to midsize and large cars, we subtracted the
estimated costs of an Integrated Motor Assist (IMA)/Integrated Starter-
Alternator-Dampener (ISAD) Hybrid. We have used the NESCCAF estimates
as the basis for our incremental compliance costs of $1,501 to $5,127
in 2006 dollars, incremental to an Integrated Motor Assist (IMA)/
Integrated Starter-Alternator-Dampener (ISAD) Hybrid or an ISG system
depending on vehicle class.\62\ We have not estimated incremental
compliance costs for small cars because we believe that this ISG or
IMA/ISAD technology is a better fit for small cars.
---------------------------------------------------------------------------
\62\ GM's cost estimates are protected as confidential business
information.
---------------------------------------------------------------------------
Power Split Hybrid
Toyota's Hybrid Synergy Drive system as used in the Prius is a
completely different approach than Honda's IMA system and uses a
``Power Split'' device in place of a conventional transmission. The
Power Split system replaces the vehicle's transmission with a single
planetary gear and a motor/generator. A second, more powerful motor/
generator is permanently connected to the vehicle's final drive and
always turns with the wheels. The planetary gear splits the engine's
torque between the first motor/generator and the drive motor. The first
motor/generator uses its engine torque to either charge the battery or
supply additional power to the drive motor. The speed of the first
motor/generator determines the relative speed of the engine to the
wheels. In this way, the planetary gear allows the engine to operate
completely independently of vehicle speed, much like a CVT.
The Power Split system allows for outstanding fuel economy in city
driving. The vehicle also avoids the cost of a conventional
transmission, replacing it with a much simpler single planetary and
motor/generator. However, it is less efficient at highway speeds due to
the requirement that the first motor/generator must be constantly
spinning at a relatively high speed to maintain the correct ratio.
Also, load capacity is limited to the first motor/generator's capacity
to resist the reaction torque of the drive train.
A version of Toyota's Power Split system is also used in the Lexus
RX400h and Toyota Highlander sport utility vehicles. This version has
more powerful motor/generators to handle higher loads and also adds a
third motor/generator on the rear axle of four-wheel-drive models. This
provides the vehicle with four wheel drive capability and four wheel
regenerative braking capability. Ford's eCVT system used in the hybrid
Escape is another version of the Power Split system, but four-wheel-
drive models use a conventional transfer case and drive shaft to power
the rear wheels.
Other versions of this system are used in the Lexus GS450h and
Lexus LS600h luxury sedans. These systems have modifications and
additional hardware for sustained high-speed operation and/or all-
wheel-drive capability. However, the Power Split system isn't planned
for usage on full-size trucks and SUVs due to its limited ability to
provide the torque needed by these vehicles. It's anticipated that
full-size trucks and SUVs would use the 2-mode hybrid system. The 2002
NAS study didn't consider this technology, while the NESCCAF study
estimated the incremental costs at to be $3,500 prior to any cost
adjustment. Based on the NESCCAF study and fuel economy test data from
EPA's certification database which shows these systems being capable of
reducing fuel consumption by 25 to 35 percent, NHTSA estimates that
Power Split hybrids can achieve incremental fuel consumption reductions
of 25 to 35 percent over conventionally powered vehicles at an
incremental cost of $3,700 to $3,850. Because NHTSA applies
technologies incrementally to the technologies preceding them on our
decision trees, the incremental fuel consumption reductions for Power
Split hybrids are estimated to be 5 to 6.5 percent incremental to 2-
Mode Hybrids (the technology that precedes Power Split hybrids on the
decision tree), because the technologies applied prior to and including
2-Mode hybrids are estimated to have incremental fuel consumption
reductions of 20 to 28.5 percent over conventionally powered vehicles.
The technologies discussed below were not projected for use during the
MY 2011 to 2015 timeframes because NHTSA isn't aware that any
manufacturer is including these technologies in any vehicle for which
we have production plans for nor has any manufacturer publicly stated
that any of these technologies will definitively be included on future
products. If NHTSA receives such information regarding one or more
technologies, it will revisit this decision for the final rule. NHTSA
is including its discussion of these technologies and their estimated
costs and fuel consumption reductions as a reference for commenters and
in anticipation of their possible inclusion in the final rule.
Variable Compression Ratio
A spark-ignited engine's specific power is limited by the engine's
compression ratio, which is, in turn, currently limited by the engine's
susceptibility to knock, particularly under high load conditions.
Engines with variable compression ratio (VCR) improve fuel economy by
the use of higher compression ratios at lower loads and lower
compression ratios under higher loads. The NAS Report projected that
VCR could incrementally reduce
[[Page 24378]]
fuel consumption by 2 to 6 percent over 4-valve VVT at an incremental
cost of $218 to $510. NHTSA has no information which suggests that VCR
will be included on any vehicles during the MY 2011-2015 timeframe,
thus NHTSA does not use this technology in its analysis. Additionally,
no updates to these estimates were sought.
Lean-Burn Gasoline Direct Injection Technology
One way to improve dramatically an engine's thermodynamic
efficiency is by operating at a lean air-fuel mixture (excess air).
Fuel system improvements, changes in combustion chamber design and
repositioning of the injectors have allowed for better air/fuel mixing
and combustion efficiency. There is currently a shift from wall-guided
injection to spray guided injection, which improves injection precision
and targeting towards the spark plug, increasing lean combustion
stability. Combined with advances in NOX after-treatment,
lean-burn GDI engines may be a possibility in North America. However, a
key technical requirement for lean-burn GDI engines to meet EPA's Tier
2 NOX emissions levels is the availability of low-sulfur
gasoline, which is projected to be unavailable during MY 2011-2015.
According to the NESCCAF report and confidential manufacturer data
NHTSA estimates that lean-burn GDI engines could incrementally reduce
fuel consumption from 9 to 16 percent at an incremental cost of $500 to
$750 compared to a port-fueled (stoichiometric) engine. NHTSA did not
project the use of this technology during the time frame covered by
this proposal, due to large uncertainties surrounding the availability
of low-sulfur gasoline. Nonetheless, we have estimated the incremental
compliance cost for these systems at $750, independent of vehicle
class, and incremental to a stoichiometric GDI engine.
Homogeneous Charge Compression Ignition
Homogeneous charge compression ignition (HCCI), also referred to as
controlled auto ignition (CAI), is an alternate engine operating mode
that does not rely on a spark event to initiate combustion. The
principles are more closely aligned with a diesel combustion cycle, in
which the compressed charge exceeds a temperature and pressure
necessary for spontaneous ignition. The resulting burn is much shorter
in duration with higher thermal efficiency.
An HCCI engine has inherent advantages in its overall efficiency
for several reasons. An extremely lean fuel/air charge increases
thermodynamic efficiency. Shorter combustion times and higher EGR
tolerance permit very high compression ratios (which also increase
thermodynamic efficiency). Additionally, pumping losses are reduced
because the engine can run unthrottled.
However, due to the nature of its combustion process, HCCI is
difficult to control, requiring in-cylinder pressure sensors and very
fast engine control logic to optimize combustion timing, especially
considering the variable nature of operating conditions seen in a
vehicle. To be used in a commercially acceptable vehicle application,
an HCCI-equipped engine would most likely be ``dual-mode,'' in which
HCCI operation is complemented with a traditional SI combustion process
at idle and at higher loads and speeds.
Until recently, HCCI technology was considered to still be in the
research phase. However, several manufacturers have made public
statements about the viability of incorporating HCCI into production
vehicles over the next 10 years. The NESCCAF study estimated the cost
to range from $560 to $840, depending on vehicle class, including the
costs for a stoichiometric GDI system with DVVL. We have based our
estimated incremental compliance cost on the NESCCAF estimates and,
after subtracting out the estimated incremental cost for a
stoichiometric GDI system with DVVL, we estimate the incremental cost
for HCCI to be from $263 to $685, depending on vehicle class. This
estimated incremental compliance cost is incremental to a
stoichiometric GDI engine.
According to the NESCCAF report and confidential manufacturer data,
NHTSA estimates that gasoline HCCI/GDI dual-mode engines could
incrementally reduce fuel consumption from 10 to 12 percent at an
incremental cost of $233 to $606, compared to a comparable GDI engine.
Advanced CVT
Advanced CVTs have the ability to deliver higher torques than
existing CVTs and have the potential for broader market penetration.
These new designs incorporate toroidal friction elements or cone-and-
ring assemblies with varying diameters. According to the NAS Report,
advanced CVT could incrementally reduce fuel consumption by up to 2
percent at an incremental cost of $364 to $874. NHTSA has no
information which suggests that VCR will be included on any vehicles
during the MY 2011-2015 timeframe, thus NHTSA does not use this
technology in its analysis. Additionally, no updates to these estimates
were sought.
Plug-in Hybrids
Plug-In Hybrid Electric Vehicles (PHEVs) are very similar to hybrid
electric vehicles, but with three significant functional differences.
The first is the addition of a means to charge the battery pack from an
outside source of electricity (usually the electric grid). Second, a
PHEV would have a larger battery pack with more energy storage, and a
greater capability to be discharged. Finally, a PHEV would have a
control system that allows the battery pack to be significantly
depleted during normal operation.
Deriving some of their propulsion energy from the electric grid
provides several advantages for PHEVs. PHEVs offer a significant
opportunity to replace petroleum used for transportation energy with
domestically-produced electricity. The reduction in petroleum usage
does, of course, depend on the amount of electric drive the vehicle is
capable of under its duty cycle.
The fuel consumption reduction potential of PHEVs depends on many
factors, the most important being the electrical capacity designed into
the battery pack. To estimate the fuel consumption reduction potential
of PHEVs, EPA has developed an in-house vehicle energy model (PEREGRIN)
which is based on the PERE (Physical Emission Rate Estimator) physics-
based model used as a fuel consumption input for EPA's MOVES mobile
source emissions modelB.
EPA modeled the PHEV small car, large car, minivan and small trucks
using parameters from a midsize car similar to today's hybrids and
scaled to each vehicle's weight. The large truck PHEV was modeled
separately assuming very little engine downsizing. Each PHEV was
assumed to have enough battery capacity for a 20-mile-equivalent all-
electric range and a power requirement to provide similar performance
to a hybrid vehicle. A twenty mile range was selected because it offers
a good compromise for vehicle performance, weight, battery packaging
and cost.
To calculate the total energy use of a PHEV, a vehicle can be
thought of as operating in two distinct modes, electric (EV) mode, and
hybrid (HEV) mode. The energy consumed during EV operation can be
accounted for and calculated in terms of gasoline-equivalent MPG by
using 10CFR474, Electric and Hybrid Vehicle Research, Development, and
Demonstration Program; Petroleum-Equivalent Fuel Economy Calculation.
The EV mode fuel economy can then be
[[Page 24379]]
combined with the HEV mode fuel economy using the Utility Factor
calculation in SAE J1711 to determine a total MPG value for the
vehicle. Calculating a total fuel consumption reduction based on model
outputs, gasoline-equivalent calculations, and the Utility Factor
calculations, results in a 28 percent fuel consumption reduction for
small cars, large cars, minivans, and small trucks and a 31 percent
fuel consumption reduction for large trucks.
The fuel consumption reduction potential of PHEVs will vary based
on the electrical capacity designed into the battery pack. Assuming a
20-mile ``all-electric range'' design, a PHEV might incrementally
reduce fuel consumption by 28 to 31 percent.\63\ Based on discussions
with EPA, we have estimated the incremental cost of PHEVs to be from
$4,500 to $10,200, depending on vehicle class.
---------------------------------------------------------------------------
\63\ This estimate is based on the EPA test cycle. We are unable
to provide cost estimates for PHEV technology due to the great
amount of uncertainty in deciding the appropriate battery chemistry
to be used.
---------------------------------------------------------------------------
However, all indications suggest that any PHEVs that may be
available within the time frame of this rulemaking will be concept
vehicles and not production vehicles. Additionally, NHTSA is unaware of
the existence of any batteries that are deemed acceptable for the
performance characteristics necessary for a plug-in hybrid. Therefore,
although we discuss them here, the model does not apply them.
NHTSA would like to note that if it receives new and/or updated
information from manufacturers regarding the likelihood of PHEV
production during the MY 2011 to 2015 timeframe, it will make every
effort to include PHEVs as a technology in its final rule. To enable
the possible inclusion of PHEVs as a technology, NHTSA would also have
to configure the Volpe model to account for the estimated source(s)
that would supply the electricity for electrical grid charging of the
battery. Work has started on this effort, but has not yet been
completed.
Tables III-1 through III-3 below summarize for each of the 10
classes of vehicles the cost and effectiveness assumptions used in this
rulemaking as well as the year of availability of each technology. The
agency seeks comments on our assumptions and the cost and effectiveness
estimates provided.
Table III-1.--Technology Cost Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Vehicle technology incremental retail price equivalent per vehicle ($) by vehicle class
-----------------------------------------------------------------------------------------------------
Technologies Subcompact Compact Midsize Large Small Small Midsize Large Large
car car car car pickup SUV Minivan SUV pickup SUV
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low friction lubricants--incremental to base 3 3 3 3 3 3 3 3 3 3
engine...........................................
Engine friction reduction--incremental to base 0-84 0-84 0-126 0-126 0-126 0-126 0-126 0-126 0-168 0-168
engine...........................................
Overhead Cam Branch............................... .......... ........ ........ ........ ........ ........ ........ ........ ........ ........
VVT--intake cam phasing........................... 59 59 119 119 119 119 119 119 119 119
VVT--coupled cam phasing.......................... 59 59 119 119 119 119 119 119 119 119
VVT--dual cam phasing............................. 89 89 209 209 209 209 209 209 209 209
Cylinder deactivation............................. n.a. n.a. 203 203 203 203 203 203 229 229
Discrete VVLT..................................... 169 169 246 246 246 246 246 246 322 322
Continuous VVLT................................... 254 254 466 466 466 466 466 466 508 508
Overhead Valve Branch............................. .......... ........ ........ ........ ........ ........ ........ ........ ........ ........
Cylinder deactivation............................. n.a. n.a. 203 203 203 203 203 203 229 229
VVT--coupled cam phasing......................... 59 59 59 59 59 59 59 59 59 59
Discrete VVLT.................................... 169 169 246 246 246 246 246 246 322 322
Continuous VVLT (includes conversion to Overhead 599 599 1262 1262 1262 1262 1262 1262 1380 1380
Cam).............................................
Camless valvetrain (electromagnetic).............. 336-673 336-673 336-673 336-673 336-673 336-673 336-673 336-673 336-673 336-673
GDI--stoichiometric.............................. 122-420 122-420 204-525 204-525 204-525 204-525 204-525 204-525 228-525 228-525
GDI--lean burn.................................... 750 750 750 750 750 750 750 750 750 750
Gasoline HCCI dual-mode........................... 263 263 390 390 390 390 390 390 685 685
Turbocharge & downsize............................ 690 690 120 120 120 120 120 120 810 810
Diesel--Lean NOX trap............................. 1586 1586 ........ ........ ........ ........ ........ ........ ........ ........
Diesel--urea SCR.................................. .......... ........ 2051 2051 2411 2411 2126 2411 2261 2261
Aggressive shift logic............................ 38 38 38 38 38 38 38 38 38 38
Early torque converter lockup..................... 30 30 30 30 30 30 30 30 30 30
5-speed automatic................................. 76-167 76-167 76-167 76-167 76-167 76-167 76-167 76-167 76-167 76-167
6-speed automatic................................. 76-187 76-187 76-187 76-187 76-187 76-187 76-187 76-187 76-187 76-187
6-speed AMT....................................... 141 141 141 141 141 141 141 141 141 141
6-speed manual.................................... 107 107 107 107 107 107 107 107 107 107
CVT............................................... 100 100 139 139 n.a. 139 139 139 n.a. n.a.
Stop-Start with 42 volt system.................... 563 563 600 600 600 600 600 600 600 600
IMA/ISA/BSG (includes engine downsize)............ 1636 1636 2274 2274 n.a n.a n.a n.a n.a n.a
2-Mode hybrid electric vehicle.................... n.a. n.a. 4655 4655 4655 4655 4655 4655 6006 6006
Power-split hybrid electric vehicle (P-S HEV)..... 3700-3850 3700-385 3700-385 3700-385 3700-385 3700-385 3700-385 3700-385 ........ ........
0 0 0 0 0 0 0
Plug-in hybrid electric vehicle (PHEV)........... 4500 4500 6750 6750 6750 6750 6750 6750 10200 10200
Improved high efficiency alternator & 124-166 124-166 124-166 124-166 124-166 124-166 124-166 124-166 124-166 124-166
electrification of accessories (12 volt).........
Electric power steering (12 or 42 volt)........... 118-197 118-197 118-197 118-197 118-197 118-197 118-197 118-197 118-197 118-197
Improved high efficiency alternator & 124-166 124-166 124-166 124-166 124-166 124-166 124-166 124-166 124-166 124-166
electrification of accessories (42 volt).........
Aero drag reduction (20% on cars, 10% on trucks).. 0-75 0-75 0-75 0-75 0-75 0-75 0-75 0-75 0-75 0-75
Low rolling resistance tires (10%)................ 6 6 6 6 6 6 6 6 ........ ........
Low drag brakes (ladder frame only)............... .......... ........ ........ ........ 87 87 ........ 87 87 87
Secondary axle disconnect (unibody only).......... 676 676 676 676 676 676 676 676 ........ ........
Front axle disconnect (ladder frame only)......... .......... ........ ........ ........ 114 114 ........ 114 114 114
Weight reduction (1%)--above 5,000 lbs only....... .......... ........ ........ ........ ........ ........ ........ ........ \1\ \1\
Weight reduction (2%)--incremental to 1%.......... .......... ........ ........ ........ ........ ........ ........ ........ \1\ \1\
[[Page 24380]]
Weight reduction (3%)--incremental to 2%.......... .......... ........ ........ ........ ........ ........ ........ ........ \2\ \2\
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ 2/pound.
\2\ 3/pound.
Table III-2.--Technology Percent Effectiveness Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Vehicle technology incremental fuel consumption reduction (%) by vehicle class
-----------------------------------------------------------------------------------------------------
Technologies Subcompact Compact Midsize Large Small Small Midsize Large Large
car car car car pickup SUV Minivan SUV pickup SUV
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low friction lubricants--incremental to base 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5
engine...........................................
Engine friction reduction--incremental to base 1-3 1-3 1-3 1-3 1-3 1-3 1-3 1-3 1-3 1-3
engine...........................................
Overhead Cam Branch
VVT--intake cam phasing........................... 2 2 1 1 1 1 1 1 2 2
VVT--coupled cam phasing.......................... 1 1 3 3 2 2 1 1 2 2
VVT--dual cam phasing............................. 1 1 3 3 1 1 1 1 2 2
Cylinder deactivation............................. n/a n/a 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5
Discrete VVLT..................................... 3 3 1.5 1.5 1.5 1.5 0.5 0.5 1.5 1.5
Continuous VVLT................................... 4 4 3.5 3.5 2.5 2.5 1.5 1.5 2.5 2.5
Overhead Valve Branch
Cylinder deactivation............................. n/a n/a 6 6 6 6 6 6 6 6
VVT--coupled cam phasing.......................... 3 3 2.5 2.5 1.5 1.5 0.5 0.5 2.5 2.5
Discrete VVLT..................................... 1.5 1.5 1.5 1.5 1.5 1.5 0.5 0.5 1.5 1.5
Continuous VVLT (includes conversion to Overhead 2.5 2.5 3.5 3.5 2.5 2.5 1.5 1.5 2.5 2.5
Cam).............................................
Camless valvetrain (electromagnetic).............. 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5
GDI--stoichiometric............................... 1-2 1-2 1-2 1-2 1-2 1-2 1-2 1-2 1-2 1-2
GDI--lean burn.................................... -- -- -- -- -- -- -- -- -- --
Gasoline HCCI dual-mode........................... 10-12 10-12 10-12 10-12 10-12 10-12 10-12 10-12 10-12 10-12
Turbocharge & Downsize............................ 5.0-7.5 5.0-7.5 5.0-7.5 5.0-7.5 5.0-7.5 5.0-7.5 5.0-7.5 5.0-7.5 5.0-7.5 5.0-7.5
Diesel--Lean NOx trap............................. 11.5 11.5 n/a n/a n/a n/a n/a n/a n/a n/a
Diesel--urea SCR.................................. n/a n/a 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5
Aggressive shift logic............................ 1-2 1-2 1-2 1-2 1-2 1-2 1-2 1-2 1-2 1-2
Early torque converter lockup..................... 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5
5-speed automatic................................. 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5
6-speed automatic................................. 0.5-2.5 0.5-2.5 0.5-2.5 0.5-2.5 0.5-2.5 0.5-2.5 0.5-2.5 0.5-2.5 0.5-2.5 0.5-2.5
6-speed AMT....................................... 4.5-7.5 4.5-7.5 4.5-7.5 4.5-7.5 4.5-7.5 4.5-7.5 4.5-7.5 4.5-7.5 4.5-7.5 4.5-7.5
6-speed manual.................................... 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5
CVT............................................... 3.5 3.5 3.5 3.5 n/a 3.5 3.5 3.5 n/a n/a
Stop-Start with 42 volt system.................... 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5
IMA/ISA/BSG (includes engine downsize)............ 8.5 8.5 3.5 3.5 n/a n/a n/a n/a n/a n/a
2-Mode hybrid electric vehicle.................... n/a n/a 3.5 3.5 7 7 7 7 3.5 3.5
Power-split hybrid electric vehicle (P-S HEV)..... 5 5 6.5 6.5 6.5 6.5 6.5 6.5 n/a n/a
Plug-in hybrid electric vehicle (PHEV)............ 28 28 28 28 28 28 28 28 31 31
Improved high efficiency alternator & 1-2 1-2 1-2 1-2 1-2 1-2 1-2 1-2 1-2 1-2
electrification of accessories (12 volt).........
Electric power steering (12 or 42 volt)........... 1.5 1.5 1.5-2 1.5-2 2 2 2 2 2 2
Improved high efficiency alternator & 1-2 1-2 1-2 1-2 1-2 1-2 1-2 1-2 1-2 1-2
electrification of accessories (42 volt).........
Aero drag reduction (20% on cars, 10% on trucks).. 3 3 3 3 2 2 3 3 2 2
Low rolling resistance tires (10%)................ 1-2 1-2 1-2 1-2 1-2 1-2 1-2 1-2 n/a n/a
Low drag brakes (ladder frame only)............... n/a n/a n/a n/a 1 1 n/a n/a 1 1
Secondary axle disconnect (unibody only).......... 1 1 1 1 1 1 1 1 n/a n/a
Front axle disconnect (ladder frame only)......... n/a n/a n/a n/a 1.5 1.5 n/a n/a 1.5 1.5
Weight reduction (1%)--above 5,000 lbs only....... n/a n/a n/a n/a n/a n/a n/a n/a 0.7 0.7
Weight reduction (2%)--incremental to 1%.......... n/a n/a n/a n/a n/a n/a n/a n/a 0.7 0.7
Weight reduction (3%)--incremental to 2%.......... n/a n/a n/a n/a n/a n/a n/a n/a 0.7 0.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 24381]]
Table III-3.--Year of Availability
------------------------------------------------------------------------
Technologies Year of availability
------------------------------------------------------------------------
Low friction lubricants--incremental to Present.
base engine.
Engine friction reduction--incremental to Present.
base engine.
Overhead Cam Branch
VVT--intake cam phasing.............. Present.
VVT--coupled cam phasing............. Present.
VVT--dual cam phasing................ Present.
Cylinder deactivation................ Present.
Discrete VVLT........................ Present.
Continuous VVLT...................... Present.
Overhead Valve Branch
Cylinder deactivation................ Present.
VVT--coupled cam phasing............. Present.
Discrete VVLT........................ Present.
Continuous VVLT (includes conversion Present.
to Overhead Cam).
Camless valvetrain (electromagnetic)..... 2020.
GDI--stoichiometric...................... Present.
GDI--lean burn........................... 2020.
Gasoline HCCI dual-mode.................. 2016.
Turbocharging & Downsizing............... 2010.
Diesel--Lean NOX trap.................... 2010.
Diesel--urea SCR......................... 2010.
Aggressive shift logic................... Present.
Early torque converter lockup............ Present.
5-speed automatic........................ Present.
6-speed automatic........................ Present.
6-speed AMT.............................. 2010.
6-speed manual........................... Present.
CVT...................................... Present.
Stop-Start with 42 volt system........... 2014.
IMA/ISA/BSG (includes engine downsize)... 2014.
2-Mode hybrid electric vehicle........... 2014.
Power-split hybrid electric vehicle (P-S 2014.
HEV).
Full-Series hydraulic hybrid............. NA.
Plug-in hybrid electric vehicle (PHEV)... NA.
Full electric vehicle (EV)............... NA.
Improved high efficiency alternator & Present.
electrification of accessories (12 volt).
Electric power steering (12 or 42 volt).. Present.
Improved high efficiency alternator & Present.
electrification of accessories (42 volt).
Aero drag reduction (20% on cars, 10% on Present.
trucks).
Low rolling resistance tires (10%)....... Present.
Low drag brakes (ladder frame only)...... Present.
Secondary axle disconnect (unibody only). 2012.
Front axle disconnect (ladder frame only) Present.
Weight reduction (1%)--above 6,000 lbs Present.
only.
Weight reduction (2%)--incremental to 1%. Present.
Weight reduction (3%)--incremental to 2%. Present.
------------------------------------------------------------------------
C. Technology Synergies
When two or more technologies are added to a particular vehicle
model to improve its fuel efficiency, the resultant fuel consumption
reduction may sometimes be higher or lower than the product of the
individual effectiveness values for those items. This may occur because
one or more technologies applied to the same vehicle partially address
the same source or sources of engine or vehicle losses. Alternately,
this effect may be seen when one technology shifts the engine operating
points, and therefore increases or reduces the fuel consumption
reduction achieved by another technology or set of technologies. The
difference between the observed fuel consumption reduction associated
with a set of technologies and the product of the individual
effectiveness values in that set is sometimes referred to as a
``synergy.'' Synergies may be positive (increased fuel consumption
reduction compared to the product of the individual effects) or
negative (decreased fuel consumption reduction).
The NAS committee which authored the 2002 Report was aware of
technology synergies and considered criticisms as part of the peer-
review process that its analysis was ``judgment-simplified,'' but
concluded overall that its approach was ``sufficiently rigorous'' for
purposes of the report.\64\ After examining its analysis again, the
committee stated that ``* * * the path 1 and path 2 estimate average
fuel consumption improvements * * * appear quite reasonable, although
the uncertainty in the analysis grows as more technology features are
considered.''\65\ In essence, as more technology features are
considered, the features are more likely to overlap and result in
synergies. Because NAS did not expect vehicle manufacturers to reach
``path 3'' in the timeframe considered, it did not concern itself
deeply with the effect of technology synergies in its analysis.
---------------------------------------------------------------------------
\64\ NAS Report, p. 151.
\65\ Id.
---------------------------------------------------------------------------
NHTSA's rulemaking regarding CAFE standards for MY 2008-MY 2011
light trucks made significant use of NAS' ``path 2'' estimates of the
effectiveness and cost of available technologies. In part because its
analysis did not extend to the more aggressive ``path 3,'' the agency
concluded that the NAS-based multiplicative approach it followed when
aggregating these technologies was reasonable. In contrast, the
agency's current proposal is based on an analysis that includes a
broader range of technologies than was considered by NAS in 2001 and
2002. Also, the extent to which technologies are included in the
current analysis is more consistent with NAS' prior ``path 3''
approach. Therefore, the agency's current analysis uses estimated
``synergies'' to address the uncertainties mentioned in the 2002 NAS
report.
The Volpe model has been modified to estimate the interactions of
technologies using estimates of incremental synergies associated with a
number of technology pairs identified by NHTSA, Volpe Center, and EPA
staff. The use of discrete technology pair incremental synergies is
similar to that in DOE's National Energy Modeling System (NEMS).\66\
Inputs to the Volpe model incorporate NEMS-identified pairs, as well as
additional pairs from the set of technologies considered in the Volpe
model. However, to maintain an approach that was consistent with the
technology sequencing developed by NHTSA, Volpe Center, and EPA staff,
new incremental synergy estimates for all pairs were obtained from a
first-order ``lumped parameter'' analysis tool created by EPA.\67\
Results of this analysis were generally consistent with those of full-
scale vehicle simulation modeling performed by Ricardo, Inc.\68\
NHTSA's analysis applies these incremental synergy values, obtained
from the tool using baseline passenger car engine and vehicle inputs,
to all vehicle classes.
---------------------------------------------------------------------------
\66\ U.S. Department of Energy, Energy Information
Administration, Transportation Sector Module of the National Energy
Modeling System: Model Documentation 2007, May 2007, Washington, DC,
DOE/EIA-M070(2007), pp. 29-30.
\67\ This tool is a simple spreadsheet model that represents
energy consumption in terns of average performance over the fuel
economy test procedure, rather than explicitly analyzing specific
drive cycles. The tool begins with an apportionment of fuel
consumption across several loss mechanisms, and accounts for the
average extent to which different technologies affect these loss
mechanisms, using estimates of engine and motor characteristics and
other variables that are averaged over a driving cycle.
\68\ EPA contracted with Ricardo, Inc. (an independent
consulting firm) to study the potential effectiveness of carbon
dioxide-reducing (and thus, fuel economy-improving) vehicle
technologies. The Ricardo study is available in the docket for this
NPRM.
---------------------------------------------------------------------------
Incremental synergy values are specified in Volpe model input files
in two ways: as part of the incremental effectiveness values table
(same path technologies) and in a separate incremental synergies table
(separate path technologies). In the case of same path technologies,
each technology's incremental effectiveness value was obtained from the
technical literature and manufacturers' submitted information, and then
the sum of all
[[Page 24382]]
incremental synergies associated with that technology and each
technology located higher on the same path was subtracted to determine
the incremental effectiveness. For example, all engine technologies
take into account incremental synergy factors of preceding engine
technologies; all transmission technologies take into account
incremental synergy factors of preceding transmission technologies.
These factors are expressed in the fuel consumption improvement factors
in the input files used by the Volpe model.
For applying incremental synergy factors in separate path
technologies, the Volpe model uses an input table which lists
technology pairings and incremental synergy factors associated with
those pairings, most of which are between engine technologies and
transmission technologies. When a technology is applied to a vehicle by
the Volpe model, all instances of that technology in the incremental
synergy table which match technologies already applied to the vehicle
(either pre-existing or previously applied by the Volpe model) are
summed and applied to the fuel consumption improvement factor of the
technology being applied. When the Volpe model applies incremental
synergies, the fuel consumption improvement factors cannot be reduced
below zero.
Incremental synergy values were calculated assuming the prior
application (implying succession in some cases) of all technologies
located higher along both paths than the pair considered. This is
usually a true reflection of a given vehicle's equipment at any point
in the model run and thus the method is expected to produce reasonable
results in most cases.
NHTSA considered other methods for estimating interactions between
technologies. For example, the agency has considered integrating
detailed simulation of individual vehicles' performance into the Volpe
model.\69\ However, while application of such simulation techniques
could provide a useful source of information when developing inputs to
the Volpe model, the agency believes that applying detailed simulation
when analyzing the entire fleet of future vehicles is neither necessary
nor feasible. NHTSA is charged with setting standards at the maximum
feasible level. To understand the potential impacts of its standards,
the agency analyzes entire fleets of vehicles expected to be produced
in the future. Although some expected engineering characteristics of
these vehicles are available, the level of detail needed for full
vehicle simulation--a level of detail that would be important if NHTSA
were actually designing vehicles--is not available.
---------------------------------------------------------------------------
\69\ In other words, this would mean having the Volpe model run
a full vehicle simulation every time the Volpe model is evaluating
the potential effect of applying a specific technology to a specific
vehicle model.
---------------------------------------------------------------------------
As another possible alternative to using ``synergy'' factors, NHTSA
has also considered modifying the Volpe model to accept as inputs
different measures of efficiency for each engine, transmission, and
vehicle model in the product plans. For instance, manufacturers could
provide estimates of mechanical and drivetrain efficiencies. Mechanical
efficiency (usually between 70 and 90 percent) gives an estimate of the
amount of fuel consumed by engine friction and pumping losses.
Drivetrain efficiency (usually between 80 and 90 percent) gives an
estimate of the amount of fuel consumed by parasitic loads, gearbox
friction, and torque converter losses. From these efficiencies along
with other inputs such as compression ratio, aerodynamic drag, rolling
resistance, and vehicle mass, the model could estimate the fuel
consumption associated with each loss mechanism and enforce a maximum
fuel consumption reduction for each vehicle model based on those
estimates and the technologies applied. Like the use of incremental
synergies, this method could help the model avoid double counting fuel
consumption benefits when applying multiple technologies to the same
vehicle model.\70\ The agency believes that this approach, like the use
of ``synergy'' factors currently used by the Volpe model, could
conceivably provide a means of addressing uncertainty in fuel
consumption estimation within the context of CAFE analysis. However,
the agency is not confident that model-by-model estimates of baseline
fuel consumption partitioning would be available. Also, partitioned
estimates of the effects of all the technologies considered in the
analysis of this proposal were not available. If both of these concerns
could be addressed, NHTSA believes it would be possible to implement
partitioned accounting of fuel consumption. However, the agency is
unsure whether and, if so, to what extent doing so would represent an
improvement over our current approach of using incremental synergy
factors.
---------------------------------------------------------------------------
\70\ This approach was proposed in a paper criticizing NAS'
approach to synergies in the 2001-02 peer-review process for the NAS
Report. See Patton, et al., ``Aggregating Technologies for Reduced
Fuel Consumption: A Review of the Technical Content in the 2002
National Research Council Report on CAFE'', SAE 2002-01-0628, March
2002.
---------------------------------------------------------------------------
The agency solicits comments on its use of incremental synergy
factors to address uncertainty in the estimation of the extent to which
fuel consumption is reduced by applying technologies. For additional
detail on the synergies used, please see Section V of this document. In
particular, the agency solicits comment on (a) the values of the
factors the agency has applied, (b) possible variations across the ten
categories of vehicles the agency has considered, and (c) additional
technology pairs that may involve such interactions. The proposal of
any additional methodologies, such as prototyping and testing, full
vehicle simulation, or partitioned accounting, should address
information and resource requirements, particularly as related to the
analysis of entire fleets of future vehicles expected to be produced
through MY 2015. Synergies used for this analysis can be found in
Section V of this document.
D. Technology Cost Learning Curve
In past rulemaking analyses, NHTSA did not explicitly account for
the cost reductions a manufacturer may realize through learning
achieved from experience in actually applying a given technology. NHTSA
understood technology cost-estimates to reflect already the full
learning costs of technology. EPA felt that for some of the newer,
emerging technologies, cost estimates did not reflect the full impact
of learning. NHTSA tentatively agreed, but is seeking comment on the
impact of learning on cost and the production volumes where it occurs.
NHTSA has modified its previous approach in this rulemaking for that
reason. In this rulemaking we have included a learning factor for some
of the technologies. The ``learning curve'' describes the reduction in
unit incremental production costs as a function of accumulated
production volume and small redesigns that reduce costs.
NHTSA implemented technology learning curves by using three
parameters: (1) The initial production volume that must be reached
before cost reductions begin to be realized (referred to as ``threshold
volume''); (2) the percent reduction in average unit cost that results
from each successive doubling of cumulative production volume (usually
referred to as the ``learning rate''); and (3) the initial cost of the
technology. Section V below describing the Volpe model contains
additional information on learning curve functions.
Figure III-1 illustrates a learning curve for a vehicle technology
with an
[[Page 24383]]
initial average unit cost of $100 and a learning rate of approximately
20 percent. In this hypothetical example, the initial production volume
before cost reductions begin to be realized is set at 12,000 units and
the production volume at the cost floor is set at roughly 50,000 units
with a cost of $64.
[GRAPHIC] [TIFF OMITTED] TP02MY08.001
Most studies of the effect of the learning curve on production
costs appear to assume that cost reductions begin only after some
initial volume threshold has been reached, but not all of these studies
specify what this threshold volume is. The rate at which costs decline
beyond the initial threshold is usually expressed as the percent
reduction in average unit cost that results from each successive
doubling of cumulative production volume, sometimes referred to as the
learning rate. Many estimates of learning experience curves do not
specify a cumulative production volume beyond which cost reductions no
longer occur, instead depending on the asymptotic behavior of the above
expression of (CQ) for learning rates below 100 percent to establish a
floor on costs.
For this analysis, NHTSA has applied learning curve cost reductions
on a manufacturer-specific basis, and has assumed that learning-based
reductions in technology costs occur at the point that a manufacturer
applies the given technology to the first 25,000 cars or trucks, and
are repeated a second time as it produces another 25,000 cars or trucks
for the second learning step (car and truck volumes are treated
separately for determining these sales volumes). The volumes chosen
represent our best estimate for where learning would occur. As such, we
believe that these estimates are better suited to this analysis than a
more general approach of a single number for the learning curve factor,
because each manufacturer would be implementing technologies at its own
pace in this rule, rather than assuming that all manufacturers
implement identical technology at the same time. NHTSA is aware that
some of the cost estimates that it has relied upon were derived from
suppliers and has added multipliers so that these costs are reflective
of what manufacturers would pay for this technology. NHTSA seeks
comments on the estimated level of price markups that manufacturers pay
for technologies purchased from suppliers and whether different
learning curves should be applied to those types of technologies. In
addition, NHTSA seeks comments on how learning curves should be
adjusted if a supplier supplies more than one manufacturer.
Ideally, we would know the development production cycle and
maturity level for each technology so that we could calculate learning
curves precisely. Without that knowledge, we have to use engineering
judgment. After having produced 25,000 cars or trucks with a specific
part or system, we believe that sufficient learning will have taken
place such that costs will be lower by 20 percent for some technologies
and 10 percent for others. After another 25,000 units, it is expected
that, for some technologies, such as 6-speed AMTs, another cost
reduction will have been realized.
For each of the technologies, we have considered whether we could
project future cost reductions due to manufacturer learning. In making
this determination, we considered whether or not the technology was in
wide-spread use today or expected to be by the model year 2011-2012
time frame, in which case no future learning curve would apply because
the technology would already be in wide-spread production by the
automotive industry by that timeframe, e.g., on the order of multi-
millions of units per year. (Examples of these include 5-speed
automatic transmissions and intake-cam phasing variable valve timing.
These technologies have been in production for light-duty vehicles for
more than 10 years.) In addition, we carefully considered the
underlying source data for our cost estimates. If the source data
specifically stated that manufacturer cost reduction from future
learning would occur, we took that information into account in
determining whether we would apply manufacturer learning in our cost
projections. Thus, for many of the technologies, we have not applied
any future cost reduction learning curve.
However, there are a number of technologies which are not yet in
mass production for which we have applied a learning curve. As
indicated in Table III-4 below, we have applied the learning curve
beginning in MY 2011 to one set of technologies, and for a number of
additional technologies we did not apply manufacturer learning until MY
2014. The distinction between MYs 2011 and 2014 is due to our source
data for our cost estimates. For those technologies where we have
applied manufacturer learning in MY 2011, the source of our cost
estimate did not rely on manufacturer learning to develop the initial
cost estimate we have used--therefore we apply the manufacturer
[[Page 24384]]
learning methodology beginning in MY 2011.
Table III.-4.--Learning Curve Application to Technologies
------------------------------------------------------------------------
First year Learning
Technology of factor
application (percent)
------------------------------------------------------------------------
Overhead Cam Branch Cylinder deactivation..... 2014 20
Continuous VVLT............................... 2014 20
Camless valvetrain (electromagnetic).......... 2011 20
GDI--lean burn................................ 2011 20
Gasoline HCCI dual-mode....................... 2011 20
Turbocharging & downsizing.................... 2014 20
Diesel--Lean NOX trap*........................ 2011 10
Diesel--urea SCR*............................. 2011 10
6-speed AMT................................... 2011 20
Stop-Start with 42 volt system................ 2014 20
IMA/ISA/BSG (includes engine downsize)........ 2014 20
2-Mode hybrid electric vehicle................ 2014 20
Power-split hybrid electric vehicle (P-S HEV). 2014 20
Plug-in hybrid electric vehicle (PHEV)........ 2011 20
Improved high efficiency alternator & 2011 20
electrification of accessories (42 volt).....
Secondary axle disconnect (unibody only)...... 2011 20
Weight reduction (1%)--above 6,000 lbs only... 2011 20
Weight reduction (2%)--incremental to 1%...... 2011 20
Weight reduction (3%)--incremental to 2%...... 2011 20
------------------------------------------------------------------------
* For diesel technologies, learning is only applied to the cost of the
emission control equipment, not the cost for the entire diesel system.
The technologies for which we do not begin applying learning until
2014 all have the same reference source, the 2004 NESCCAF study, for
which the sub-contractor was The Martec Group. In the work done for the
2004 NESCCAF report, Martec relied upon actual price quotes from Tier 1
automotive suppliers to develop automotive manufacturer cost estimates.
Based on information presented by Martec to the National Academy of
Sciences (NAS) Committee during their January 24, 2008, public meeting
in Dearborn, Michigan,\71\ we understand that the Martec cost estimates
incorporated some element of manufacturer learning. Martec stated that
the Tier 1 suppliers were specifically requested to provide price
quotes which would be valid for three years (2009-2011), and that for
some components the Tier 1 supplier included cost reductions in years
two and three which the supplier anticipated could occur, and which
they anticipated would be necessary in order for their quote to be
competitive with other suppliers. Therefore, for this analysis, we did
not apply any learning curve to any of the Martec-sourced costs for the
first three years of this proposal (2011-2013). However, the theory of
manufacturer learning is that it is a continuous process, though the
rate of improvement decreases as the number of units produced
increases. While we were not able to gain access to the detailed
submissions from Tier 1 suppliers which Martec relied upon for their
estimates, we do believe that additional cost reductions will occur in
the future for a number of the technologies for which we relied upon
the Martec cost estimates for the reasons stated above in reference to
the general learning curve effect. For those technologies we applied a
learning curve beginning in 2014. Martec has recently submitted a study
to the NAS Committee comparing the 2004 NESCCAF study with new updated
cost information. Given that this study had just been completed, the
agency could not take it into consideration for the NPRM. However, the
agency will review the new study and consider its findings in time for
the final rule.
---------------------------------------------------------------------------
\71\ ``Variable Costs of Fuel Economy Technologies'' Martec
Group, Inc Report Presented to: Committee to Assess Technologies for
Improving Light-Duty Vehicle Fuel Economy. Division on Engineering
and Physical Systems, Board on Energy and Environmental Systems, the
National Academy of Sciences, January 24, 2008.
---------------------------------------------------------------------------
Manufacturers' actual costs for applying these technologies to
specific vehicle models are likely to include significant additional
outlays for accompanying design or engineering changes to each model,
development and testing of prototype versions, recalibrating engine
operating parameters, and integrating the technology with other
attributes of the vehicle. Manufacturers may also incur additional
corporate overhead, marketing, or distribution and selling expenses as
a consequence of their efforts to improve the fuel economy of
individual vehicle models and their overall product lines.
In order to account for these additional costs, NHTSA has applied
an indirect cost multiplier of 1.5 to its estimate of the vehicle
manufacturers' direct costs for producing or acquiring each fuel
economy-improving technology to arrive at a consumer cost. This
estimate was developed by Argonne National Laboratory in a recent
review of vehicle manufacturers' indirect costs. The Argonne study was
specifically intended to improve the accuracy of future cost estimates
for production of vehicles that achieve high fuel economy by employing
many of the same advanced technologies considered in the agency's
analysis.\72\ Thus, its recommendation that a multiplier of 1.5 be
applied to direct manufacturing costs to reflect manufacturers'
increased indirect costs for deploying advanced fuel economy
technologies appears to be appropriate for use in the current analysis.
Historically, NHTSA has used almost the exact same multiplier, a
multiplier of 1.51, as the markup from variable costs or direct
manufacturing costs to consumer costs. This markup takes into account
fixed costs, burden, manufacturer's profit, and dealer's profit. Table
VII-2 of the PRIA shows the estimated incremental consumer costs for
each vehicle type.\73\
---------------------------------------------------------------------------
\72\ Vyas, Anant, Dan Santini, and Roy Cuenca, Comparison of
Indirect Cost Multipliers for Vehicle Manufacturing, Center for
Transportation Research, Argonne National Laboratory, April 2000.
\73\ PRIA, VII-9.
---------------------------------------------------------------------------
[[Page 24385]]
E. Ensuring Sufficient Lead Time
In analyzing potential technological improvements to the product
offerings for each manufacturer with a substantial share of the market,
NHTSA added technologies based on our engineering judgment and
expertise about possible adjustments to the detailed product plans
submitted to NHTSA. 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.
NHTSA recognizes that vehicle manufacturers must have sufficient lead
time to incorporate changes and new features into their vehicles and
hence added technologies in a cost-minimizing fashion. That is, we
generally added technologies that were most cost-effective and took
into account the year of availability of the technologies.
NHTSA realizes that not all technologies will be available
immediately or could be applied immediately and that there are
different phase-in rates (how rapidly a technology is able to be
applied across a manufacturer's fleet of vehicles) applicable to each
technology as well as windows of opportunities when certain
technologies could be applied (i.e., when a product is redesigned or
refreshed).
a. Linking To Redesign and Refresh
In the automobile industry there are two terms that describe when
changes to vehicles occur: redesign and refresh. In projecting the
technologies that could be applied to specific vehicle models, NHTSA
tied the application of the majority of the technologies to a vehicle's
refresh/redesign cycle. Vehicle redesign usually encompasses changes to
a vehicle's appearance, shape, dimensions, and powertrain and is
traditionally associated with the introduction of ``new'' vehicles into
the market, and often is characterized as the next generation of a
vehicle. In contrast vehicle refresh usually only encompasses changes
to a vehicle's appearance, and may include an upgraded powertrain and
is traditionally associated with mid-cycle cosmetic changes to a
vehicle within its current generation to make it appear ``fresh.''
Vehicle refresh traditionally occurs no earlier than two years after a
vehicle redesign or at least two years before a scheduled redesign.
Table III-5 below contains a complete list of the technologies that
were applied and whether NHTSA allowed them to be applied during a
redesign year, a refresh year or during any model year is shown in the
table below.
Table III-5.--Technology Refresh and Redesign Application
----------------------------------------------------------------------------------------------------------------
Can be Can be
applied applied Can be
during during a applied
Technology Abbr. redesign redesign or during any
model year refresh model year
only model year
----------------------------------------------------------------------------------------------------------------
Low Friction Lubricants................... LUB....................... ............ X X
Engine Friction Reduction................. EFR....................... ............ X ............
Variable Valve Timing (ICP)............... VVTI...................... ............ X ............
Variable Valve Timing (CCP)............... VVTC...................... ............ X ............
Variable Valve Timing (DCP)............... VVTD...................... ............ X ............
Cylinder Deactivation..................... DISP...................... ............ X ............
Variable Valve Lift & Timing (CVVL)....... VVLTC..................... X ............ ............
Variable Valve Lift & Timing (DVVL)....... VVLTD..................... X ............ ............
Cylinder Deactivation on OHV.............. DISPO..................... ............ X ............
Variable Valve Timing (CCP) on OHV........ VVTO...................... ............ X ............
Multivalve Overhead Cam with CVVL......... DOHC...................... X ............ ............
Variable Valve Lift & Timing (DVVL) on OHV VVLTO..................... X ............ ............
Camless Valve Actuation................... CVA....................... X ............ ............
Stoichiometric GDI........................ SIDI...................... X ............ ............
Lean Burn GDI............................. LBDI...................... X ............ ............
Turbocharging and Downsizing.............. TURB...................... X ............ ............
HCCI...................................... HCCI...................... X ............ ............
Diesel with LNT........................... DSLL...................... X ............ ............
Diesel with SCR........................... DSLS...................... X ............ ............
5 Speed Automatic Transmission............ 5SP....................... ............ X ............
Aggressive Shift Logic.................... ASL....................... ............ X X
Early Torque Converter Lockup............. TORQ...................... ............ X ............
6 Speed Automatic Transmission............ 6SP....................... ............ X ............
Automatic Manual Transmission............. AMT....................... X ............ ............
Continuously Variable Transmission........ CVT....................... X ............ ............
6 Speed Manual............................ 6MAN...................... X ............ ............
Improved Accessories...................... IACC...................... ............ ............ X
Electronic Power Steering................. EPS....................... ............ X ............
42-Volt Electrical System................. 42V....................... X ............ ............
Low Rolling Resistance Tires.............. ROLL...................... ............ ............ X
Low Drag Brakes........................... LDB....................... ............ ............ X
Secondary Axle Disconnect--Unibody........ SAXU...................... ............ X ............
Secondary Axle Disconnect--Ladder Frame... SAXL...................... ............ X ............
Aero Drag Reduction....................... AERO...................... ............ X ............
Material Substitution (1%)................ MS1....................... X ............ ............
Material Substitution (2%)................ MS2....................... X ............ ............
Material Substitution (5%)................ MS5....................... X ............ ............
ISG with Idle-Off......................... ISGO...................... X ............ ............
IMA/ISAD/BSG Hybrid (includes engine IHYB...................... X ............ ............
downsizing).
2-Mode Hybrid............................. 2HYB...................... X ............ ............
[[Page 24386]]
Power Split Hybrid........................ PHYB...................... X ............ ............
----------------------------------------------------------------------------------------------------------------
As can be seen in the above table, most technologies would only be
applied by the Volpe model when a specific vehicle was due for a
redesign or refresh. However, for a limited set of technologies, the
model was not restricted to applying them during a refresh/redesign
year and thus they were made available for application at any time.
These specific technologies are:
Low Friction Lubricants
Improved Accessories
Low Rolling Resistance Tires
Low Drag Brakes
All of these technologies are very cost-effective, can apply to
multiple vehicle models/platforms and can be applied across multiple
vehicle models/platforms in one year. Although they can also be applied
during a refresh/redesign year, they are not restricted to that
timeframe because their application is not viewed as necessitating a
major engineering redesign and testing/calibration.
There is an additional technology whose application is not tied to
refresh/redesign, which is Aggressive Shift Logic (ASL). ASL is
accomplished through reprogramming the shift points for a transmission
to be more like a manual transmission. Upgrading a transmission to
utilize ASL can happen at refresh/redesign, but because it is not a
hardware change, it can also occur at other points in a vehicle's
design cycle. If a model that is scheduled for refresh/redesign has a
transmission that is being upgraded to ASL, it is possible that all
other vehicles that utilize the same transmission (which is usually
produced at the same manufacturing plant) could be upgraded at the same
time to incorporate ASL and that ASL could permeate other vehicle
models in years other than a refresh/redesign year.
NHTSA based the redesign rates used in the Volpe Model on a
combination of the manufacturers' confidential product plans and
NHTSA's engineering judgment. In most instances, NHTSA has accepted the
projected redesign periods from the companies who provided them through
MY 2013. If companies did not provide product plan date, NHTSA used
publicly available data about vehicle redesigns to establish the
redesign rates for the vehicles produced by these companies.
NHTSA assumes that passenger cars will be redesigned every 5 years,
based on the trend over the last 10-15 years for passenger cars to be
redesigned every 5 years. These trends are reflected in the
manufacturer production plans that NHTSA received in response to its
request for product plan information and was confirmed by many
automakers in meetings held with NHTSA to discuss various issues with
manufacturers.
NHTSA believes that the vehicle design process has progressed and
improved rapidly over the last decade and these improvements have
resulted in the ability of manufacturers to shorten the design process
and to introduce vehicles more frequently to respond to competitive
market forces. Almost all passenger cars will be on a 5-year redesign
cycle by the end of the decade, with the exception being some high
performance vehicles and vehicles' with specific market niches.
Currently, light trucks are redesigned every 5 to 7 years, with
some vehicles having longer redesign periods (e.g., full-size vans). In
the most competitive SUV and crossover vehicle segments, the redesign
cycle currently averages slightly above 5 years. It is expected that
the light truck redesign schedule will be shortened in the future due
to competitive market forces and in response to fuel economy and other
regulatory requirements. It is expected that by MY 2014, almost all
light trucks will be redesigned on a 5-year cycle. Thus, for almost all
vehicles scheduled for a redesign in model year 2014 and later, NHTSA
estimated that all vehicles would be redesigned on a 5-year cycle.
Exceptions were made for high performance vehicles and other vehicles
that traditionally had longer than average design cycles (e.g., 2-
seater sports cars). For those vehicles, NHTSA attempted to preserve
the historic redesign cycle rates.
b. Technology Phase-in Caps
In analyzing potential technological improvements to the product
offerings for each manufacturer with a substantial share of the market,
NHTSA added technologies based on our engineering judgment and
expertise about possible adjustments to the detailed product plans
submitted to NHTSA. 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.
NHTSA recognizes that vehicle manufacturers must have sufficient
lead time to incorporate changes and new features into their vehicles
and that these changes cannot occur all at once, but must be phased in
over time. As discussed above, our analysis addresses these realities
in part by timing the estimated application of most technologies to
coincide with anticipated vehicle redesigns and/or freshenings. We have
estimated that future vehicle redesigns can be implemented on a 5-year
cycle with mid-cycle freshening, except where manufacturers have
indicated plans for shorter redesign cycles.
However, the agency further recognizes that engineering, planning
and financial constraints prohibit most technologies from being applied
across an entire fleet of vehicles within a year. Thus, as for the
analysis supporting its 2006 rulemaking regarding light truck CAFE, the
agency is employing overall constraints on the rates at which each
technology can penetrate a manufacturer's fleet. The Volpe model
applies these ``phase-in caps'' by ceasing to add a given technology to
a manufacturer's fleet in a specific model year once it has increased
the corresponding penetration rate by at least amount of the cap.
Having done so, the model proceeds to apply other technologies in lieu
of the ``capped'' technology.
For its regulatory analysis in 2006, NHTSA applied phase-in caps
expected to be consistent with NAS' indication in its 2002 report that
even existing technologies would require 4 to 8 years to achieve
widespread penetration of the fleet. The NAS report, which is believed
to be the only peer-reviewed source which provides phase-in rates, was
relied upon for establishing the phase-in caps that we used for all
[[Page 24387]]
technologies, except diesels and hybrids, for which the report didn't
include that information. Most of the phase-in caps applied by the
agency in 2006 ranged from 25 percent (4 year introduction) to 17
percent (approximately 6 years, the midpoint of the NAS estimate). The
agency assumed shorter implementation rates for technologies that did
not require changes to the manufacturing line. For other technologies
(e.g., hybrid and diesel powertrains), the agency employed phase-in
caps as low as 3 percent, to reflect the major redesign efforts and
capital investments required to implement these technologies.
Considerable changes have occurred since NHTSA's 2006 analysis, and
even more since the 2002 NAS report. Not only have fuel prices
increased, but official forecasts of future fuel prices have increased,
as well. This suggests a market environment in which consumers are more
likely to demand fuel-saving technologies than previously anticipated,
and it suggests a financial environment in which investors are more
likely to invest in companies developing and producing such
technologies. Indeed, some technologies have penetrated the marketplace
more quickly than projected in 2006. Confidential product plan
information submitted to NHTSA in 2007 and information from suppliers
confirm that the rate of technology penetration has increased as
compared to 2006.
Also, the statutory environment has changed since 2006. With the
enactment of EISA, Congress has adopted the specific objectives of
increasing new vehicle fuel economy to at least 35 mpg by 2020 and
making ratable progress toward that objective in earlier model years.
This reduces manufacturers' uncertainty about the general direction of
future fuel economy standards in the United States. Moreover,
developments in other regions (e.g., Europe) and countries (e.g.,
Canada and China) suggest that the generalized expectation that future
vehicles will perform well with respect to energy efficiency is not
unique to the United States. Discussions with manufacturers in late
2007 and early 2008 indicate that the industry is highly sensitive to
all of these developments and has been anticipating the need to
accelerate the rate of technology deployment in response to the passage
of major energy legislation in the U.S.
Considering these developments, the agency revisited the phase-in
caps it had applied in 2006 and determined that it would be appropriate
to relax many of them. In our judgment, most of the engine technologies
could penetrate the fleet in as quickly as five years--rather than in
the six we previously estimated--as long as they are applied during
redesign. Low friction lubricants are already widely used, and our
expectation is that they can quickly penetrate the remainder of the
fleet. Therefore, we relaxed the 25 percent (4-year) phase-in cap to 50
percent (2 years). Similarly, product plans indicate that transmissions
with 5 or more forward gears will widely penetrate the fleet even
without the current proposal. Also, given the technology cost and
effectiveness estimates discussed above, the Volpe model frequently
estimates that manufacturers will ``leapfrog'' past 5-speed
transmissions to apply more advanced transmissions (e.g., 6-speed or
AMT). We have therefore increased the phase-in cap for 5-speed
transmissions from 25 percent (4 years) to 100 percent (1 year).
However, in our judgment, phase-in caps of 17 percent (6 years) are
currently still appropriate for most other transmission technologies.
Although NHTSA has applied phase-in caps of 25 percent (4 years)
for most remaining technologies, we continue to anticipate that phase-
in caps of 3 percent are appropriate for some advanced technologies,
such as hybrids and diesels. Although engine, vehicle, and exhaust
aftertreatment manufacturers have, more recently, expressed greater
optimism than before regarding the outlook for light vehicle diesel
engines, our expectation is that the phase-in cap that we have chosen
is appropriate at this time. We also estimate that a 3 percent rate is
appropriate for hybrid technologies, which are very complex, require
significant engineering resources to implement, but are just now
starting to penetrate the market.
Table III-6 below presents the phase-in caps applied in the current
analysis, with rates from the analysis of the 2006 final rule provided
for comparison. NHTSA requests comments on the phase-in caps shown
here, and on whether slower or faster rates would be more appropriate
and, if so, why.
Table III.--6. Phase-In Cap Application
------------------------------------------------------------------------
2006 final Current
Technology rule NPRM
------------------------------------------------------------------------
Low Friction Lubricants....................... 25 50
Engine Friction Reduction..................... 17 20
Variable Valve Timing (ICP)................... 17 20
Variable Valve Timing (CCP)................... 17 20
Variable Valve Timing (DCP)................... 17 20
Cylinder Deactivation......................... 17 20
Variable Valve Lift & Timing (CVVL)........... 17 20
Variable Valve Lift & Timing (DVVL)........... 17 20
Cylinder Deactivation on OHV.................. 17 20
Variable Valve Timing (CCP) on OHV............ 17 20
Multivalve Overhead Cam with CVVL............. 17 20
Variable Valve Lift & Timing (DVVL) on OHV.... 17 20
Camless Valve Actuation....................... 10 20
Stoichiometric GDI............................ 3 20
Diesel following GDI-S (SIDI)................. 3 3
Lean Burn GDI................................. ........... 20
Turbocharging and Downsizing.................. 17 20
Diesel following Turbo D/S.................... 3 3
HCCI.......................................... ........... 13
Diesel following HCCI......................... 3 3
5 Speed Automatic Transmission................ 17 100
Aggressive Shift Logic........................ 17 25
Early Torque Converter Lockup................. ........... 25
6 Speed Automatic Transmission................ 17 17
[[Page 24388]]
Automated Manual Transmission................. 17 17
Continuously Variable Transmission............ 17 17
6 Speed Manual................................ ........... 17
Improved Accessories.......................... 25 25
Electric Power Steering....................... 17 25
42-Volt Electrical System..................... 17 25
Low Rolling Resistance Tires.................. 25 25
Low Drag Brakes............................... 17 25
Secondary Axle Disconnect--Unibody............ 17 17
Secondary Axle Disconnect--Ladder Frame....... 17 17
Aero Drag Reduction........................... 17 17
Material Substitution (1%).................... 17 17
Material Substitution (2%).................... 17 17
Material Substitution (5%).................... 17 17
ISG with Idle-Off............................. 5 3
IMA/ISAD/BSG Hybrid (includes engine 5 3
downsizing)..................................
2-Mode Hybrid................................. 5 3
Power Split Hybrid............................ 5 3
Plug-in Hybrid................................ ........... 3
------------------------------------------------------------------------
IV. Basis for Attribute-Based Structure for Setting Fuel Economy
Standards
A. Why attribute-based instead of a single industry-wide average?
NHTSA is obligated under 49 U.S.C. 32902(a)(3)(A), recently added
by Congress, to set attribute-based fuel economy standards for
passenger cars and light trucks. NHTSA welcomes Congress' affirmation
through EISA of the value of setting attribute-based fuel economy
standards, because we believe that an attribute-based structure is
preferable to a single industry-wide average standard for the following
reasons. First, attribute-based standards increase fuel savings and
reduce emissions when compared to an equivalent industry-wide standard
under which each manufacturer is subject to the same numerical
requirement. Under such a single industry-wide average standard, there
are always some manufacturers that are not required to make any
improvements for any given year because they already exceed the
standard. Under an attribute-based system, in contrast, every
manufacturer can potentially be required to continue improving each
year. Because each manufacturer produces a different mix of vehicles,
attribute-based standards are individualized for each manufacturer's
different product mix. All manufacturers must ensure they have used
available technologies to enhance fuel economy levels of the vehicles
they sell. Therefore, fuel savings and emissions reductions will always
be higher under an attribute-based system than under a comparable
industry-wide standard.
Second, attribute-based standards eliminate the incentive for
manufacturers to respond to CAFE standards in ways harmful to
safety.\74\ Because each vehicle model has its own target (based on the
attribute chosen), attribute-based standards provide no incentive to
build smaller vehicles simply to meet a fleet-wide average, because the
smaller vehicles will be subject to more stringent fuel economy and
emissions targets.
---------------------------------------------------------------------------
\74\ The 2002 NAS Report, on which NHTSA relied in reforming the
CAFE program for light trucks, described at length and quantified
the potential safety problem with average fuel economy standards
that specify a single numerical requirement for the entire industry.
See National Academy of Sciences, ``Effectiveness and Impact of
Corporate Average Fuel Economy (CAFE) Standards,'' (``NAS Report'')
National Academy Press, Washington, DC (2002), 5, finding 12.
Available at http://www.nap.edu/openbook.php?record_id=10172page=R1 id=10172page=R1 (last accessed April 20, 2008).
---------------------------------------------------------------------------
Third, attribute-based standards provide a more equitable
regulatory framework for different vehicle manufacturers.\75\ A single
industry-wide average standard imposes disproportionate cost burdens
and compliance difficulties on the manufacturers that need to change
their product plans and no obligation on those manufacturers that have
no need to change their plans. Attribute-based standards spread the
regulatory cost burden for fuel economy more broadly across all of the
vehicle manufacturers within the industry.
---------------------------------------------------------------------------
\75\Id. at 4-5, finding 10.
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And fourth, attribute-based standards respect economic conditions
and consumer choice, instead of having the government mandate a certain
fleet mix. Manufacturers are required to invest in technologies that
improve the fuel economy achieved by the vehicles they sell, regardless
of their size.
B. Which attribute is most effective?
Although NHTSA previously set the MY 2008-2011 light truck fuel
economy standards based on vehicle footprint as the relevant attribute,
the agency took a fresh look for purposes of this rulemaking. Although
several attributes offer benefits, NHTSA has preliminarily concluded
that a footprint-based function will again be the most effective and
efficient for both passenger car and light truck standards. The
discussion below explains our conclusion in favor of footprint, and
also examines the relative benefits and drawbacks of the other
attributes considered.
1. Footprint-Based Function
NHTSA is proposing to set fuel economy standards for manufacturers
according to vehicle footprint, as light truck CAFE standards are
currently set by NHTSA. A vehicle's ``footprint'' is the product of the
average track width (the distance between the centerline of the tires
\76\ ) and wheelbase (basically, the distance between the centers of
the axles \77\ ). Each vehicle footprint value is assigned a mile per
gallon target specific to that footprint value. Footprint-based
[[Page 24389]]
standards have a number of benefits, as described below.
---------------------------------------------------------------------------
\76\ The proposed definition for track width is the same as that
used in NHTSA's April 2006 light truck CAFE rule, which is ``the
lateral distance between the centerlines of the base tires at
ground, including camber angle.'' 49 CFR 523.2, 71 FR 19450 (Apr.
14, 2006).
\77\ The proposed definition for wheelbase is also the same as
that used in NHTSA's April 2006 light truck CAFE rule. Wheelbase is
``the longitudinal distance between front and rear wheel
centerlines.'' Id.
---------------------------------------------------------------------------
First, NHTSA tentatively concludes that use of the footprint-
attribute helps us achieve greater fuel economy/emissions reductions
without having a potentially negative impact on safety. While past
analytic work \78\ 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 \79\ have begun
to consider whether the relationship between vehicle size and safety
differs. To the extent that reduction of mass 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.
---------------------------------------------------------------------------
\78\ See Kahane, Charles J., PhD, DOT HS 809 662, ``Vehicle
Weight, Fatality Risk and Crash Compatibility of Model Year 1991-99
Passenger Cars and Light Trucks,'' October 2003. Available at http://www.nhtsa.dot.gov/cars/rules/regrev/Evaluate/809662.html (last
accessed April 20, 2008). See also 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. Available at Docket No.
NHTSA-2003-16318-2.
\79\ 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. Available at Docket No. NHTSA-2003-16318-17.
---------------------------------------------------------------------------
Overall, use of vehicle footprint is ``weight-neutral'' and thus
does not exacerbate the vehicle compatibility safety problem.\80\ A
footprint-based system does not encourage manufacturers to add weight
to move vehicles to a higher footprint category, because additional
weight makes no difference to the required target. Nor would the system
penalize manufacturers for making limited weight reductions. By using
vehicle footprint in lieu of a weight-based metric, the standards would
also 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 emissions reductions, vehicle safety, and fuel economy.\81\
---------------------------------------------------------------------------
\80\ The vehicle compatibility safety problem refers to the
disparity in effects experienced by smaller lighter vehicles in
crashes with larger heavier vehicles.
\81\ For example, the Aluminum Association indicated in the
April 2006 light truck CAFE rulemaking that using aluminum to
decrease a vehicle's weight by 10 percent could improve its fuel
economy (and thus, reduce its CO2 emissions) by 5-8
percent, without reducing performance in frontal barrier crash
tests. See comments provided by the Aluminum Association, Inc., at
Docket No. NHTSA-2003-16128-1120, pp. 5 and 12.
---------------------------------------------------------------------------
Finally, vehicle footprint is more difficult to modify than other
attributes. It 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 lifecycle. 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,
difficulty, and therefore unlikelihood of short-term changes.
Concurrent with the NPRM, NHTSA will develop a test procedure for
measuring wheelbase and track width and for calculating footprint. This
test procedure will be available on NHTSA's Web site. We note that the
test procedure will be used to validate the corresponding wheelbase,
track width, and footprint data provided to us by the manufacturers in
their pre-model year reports but could include other CAFE-related
enforcement activities in the future. We seek comment on the test
procedure.
2. Functions Based on Other Attributes
Although NHTSA has concluded that footprint is the best attribute
for CAFE standards, we considered a number of other attributes on which
to base the standards, including, but not limited to, curb weight,
engine displacement, interior volume, passenger capacity, towing
capability, and cargo hauling capability. Below we have described the
relative merits and drawbacks of the other attributes considered.
Curb weight: One of the benefits of choosing curb weight as the
relevant attribute for the standards is that it correlates with fuel
economy and emissions controls better than vehicle footprint.
Additionally, because reductions in weight would lead to higher
targets, weight-based standards prevent the systemic downweighting of
vehicles and the associated detriment to safety. However, weight-based
standards also discourage the down-weighting of vehicles through the
use of lightweight materials that could improve fuel economy and safety
and reduce emissions. Weight-based standards are also more susceptible
to gaming and creep, because weight can be altered very easily compared
to other attributes. Weight is also only rarely considered by
consumers, in contrast to size (which is reflected in footprint and
shadow), and can be raised considerably (thus decreasing fuel economy/
increasing CO2 emissions) without consumers being aware of
the change.
Engine displacement: The primary benefit of choosing engine
displacement as the relevant attribute for the standards is that it
correlates well with fuel economy, since a larger engine consumes fuel
at a faster rate. However, engine-displacement-based standards would be
highly susceptible to gaming and creep, given that many vehicle
manufacturers already offer identical models with different size
engines. Additionally, engine-displacement-based standards would
discourage the use of small turbo-charged engines, which have the
potential to improve fuel economy without sacrificing the engine power
that American consumers generally seek.
Interior volume: Standards based on interior volume would have
virtually no correlation with fuel economy, so they were not
extensively considered. Such standards would have the advantage of not
encouraging downsizing, so they could have a positive impact on safety
in that respect, but few other benefits were discerned.
Passenger capacity: Besides having virtually no correlation with
fuel economy, passenger capacity has the disadvantage of being
identical for a substantial portion of the light-duty vehicle
population (i.e., many vehicles have five seats). Thus, using passenger
capacity as the attribute on which to base fuel economy standards would
essentially result in a single industry-wide average standard, which is
precisely what Congress sought to avoid in requiring attribute-based
standards.
Towing or cargo-hauling capability: In its light truck rulemaking
for MYs 2008-2011, NHTSA sought comment on whether towing or cargo-
hauling capability should be used as an attribute in addition to
footprint--in other words, whether the footprint attribute should be
modified in any way due to towing or cargo-hauling capability. The
reason that NHTSA sought comment was that two vehicles with equal
footprint would nevertheless achieve different fuel economies if one's
towing or cargo-hauling capability was greater, because engineering a
vehicle to provide that kind of power occurs at the expense of
engineering for fuel economy. NHTSA posited that perhaps for vehicle
manufacturers that have a product mix weighted toward vehicles with
superior towing and/or cargo-hauling capabilities, a footprint-based
Reformed CAFE standard might not provide a
[[Page 24390]]
fully equitable competitive environment. Based on comments to the final
rule for the MY 2008-2011 light truck rulemaking, however, NHTSA
concluded that the lack of an objective measure for tow rating and the
potential for gaming of a system based on this attribute made towing or
cargo-hauling capacity an inappropriate attribute at that time. NHTSA
tentatively concludes that such is still the case.
In summary, then, NHTSA has tentatively decided that a footprint-
based system will be optimal for this rulemaking. However, we seek
comment on whether the proposed standards should be based on vehicle
footprint alone, or whether other attributes such as the ones described
above 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-duty
vehicles covered by this rulemaking.
C. The Continuous Function
NHTSA considered this issue of how to set attribute-based functions
in its 2006 light truck CAFE rulemaking, and examined the relative
merits of both step functions and continuous functions. In the CAFE
context, a step function would separate the vehicle models along the
spectrum of attribute magnitudes into discrete groups, and each group
would be assigned a fuel economy target (that end up looking like
steps), so that the average of the groups would be the average fleet
fuel economy. A continuous function, in contrast, would not separate
the vehicles into a set of discrete categories. Each vehicle model
produced by a manufacturer would have its own fuel economy target,
based on its particular footprint. In other words, a continuous
function is a mathematical function that defines attribute-based
targets across the entire range of possible footprint values, and
applies them through a harmonically weighted formula to derive
regulatory obligations for fleet averages.
In proposing the current standards in this rulemaking, NHTSA relied
on its experience in the last light truck rulemaking. In that
rulemaking, NHTSA decided in favor of the continuous function for three
main reasons.
First, under a step function, manufacturers who build
vehicle models whose footprints fall near the upper boundary of a step
have a considerable incentive to upsize the vehicle in order to receive
the lower target of the next step. A continuous function reduces the
incentive created by a step function to upsize a vehicle whose
footprint is near a category boundary, because on an uninterrupted
spectrum, upsizing slightly can never cause a drastic decrease in the
stringency of the applicable target.
Second, the continuous function minimizes the incentive to
downsize a vehicle as a way to meet the standards, because any
downsizing results in higher targets being applicable.
And finally, the continuous function provides
manufacturers with greater regulatory certainty, because there are no
category boundaries that could be redefined in future rulemaking.
The considerations in favor of NHTSA's decision to base the MY
2008-11 light truck CAFE standards on a continuous function are also
applicable to the current rulemaking, which would set footprint-based
fuel economy standards for both light trucks and passenger cars. Thus,
NHTSA has tentatively decided that a continuous function is the best
choice for applying the footprint-based standards.
We note, however, that there are a variety of mathematical forms
available to estimate the relationship between vehicle footprint and
fuel economy that could be used as a continuous function. In the MY
2008-11 light truck CAFE rule, NHTSA considered a simple linear
(straight-line) function, a quadratic (U-shaped) function, an
exponential (curve that continuously becomes steeper or shallower)
function, and an unconstrained logistic (S-shaped) function. Each of
these relationships was estimated in gallons per mile (gpm) rather than
in miles per gallon (mpg), because the relationship between fuel
economy measured in mpg and fuel savings is not linear.\82\ NHTSA
plotted the optimized fleets in terms of footprint versus gpm, and once
a shape of a function was determined in terms of gpm, the agency then
converted the functions to mpg for the purpose of evaluating the
potential target values. See 71 FR 17600-17607 (Apr. 6, 2006) for a
fuller discussion of the agency's process.
---------------------------------------------------------------------------
\82\ That is to say, an increase of one mpg in a vehicle with
low fuel economy (e.g., 20 mpg to 21 mpg) results in higher fuel
savings than if the change occurs in a vehicle with high fuel
economy (e.g., 30 mpg to 31 mpg). Increasing fuel economy by equal
increments of gallons per mile provides equal fuel savings
regardless of the fuel economy of a vehicle. For example, increasing
the fuel economy of a vehicle from 0.06 gpm to 0.05 gpm saves
exactly the same amount of fuel as increasing the fuel economy of a
vehicle from 0.03 gpm to 0.02 gpm.
---------------------------------------------------------------------------
Ultimately, NHTSA decided in the light truck CAFE rule that none of
those four functional forms as presented would be appropriate for the
CAFE program because they tended toward excessively high stringency
levels at the smaller end of the footprint range, excessively low
stringency levels at the larger end of the footprint range, or both.
Too high stringency levels for smaller vehicles could potentially
result in target values beyond the technological capabilities of
manufacturers, while too low levels for larger vehicles would reduce
fuel savings below that of the optimized fleet. NHTSA determined that a
constrained logistic function \83\ provided a relatively good fit to
the data points without creating problems associated with some or all
of the other forms, i.e., excessively high targets for small vehicles,
excessively low targets for large vehicles, or regions in which targets
for large vehicles exceeded those for small vehicles. The constrained
logistic function also limited the potential for the curve to be
disproportionately influenced by a single vehicle model located at
either end of the range (i.e., by outliers). Because most vehicle
models are clustered in the middle of the footprint range, models
toward either end have a greater influence on their target value, and
thus on the overall shape of the curve that fits the data points. The
constrained logistic function minimizes this problem.
---------------------------------------------------------------------------
\83\ A ``constrained'' logistic function is still S-shaped, like
an unconstrained logistic function, but plateaus at the top and
bottom rather than continuing to increase or decrease to infinity.
---------------------------------------------------------------------------
NHTSA's constrained logistic function in the light truck rule was
defined by four parameters. Two parameters established the function's
upper and lower bounds (asymptotes), respectively. A third parameter
specified the footprint at which the function was halfway between the
upper and lower bounds. The last parameter established the rate or
``steepness'' of the function's transition between the upper (at low
footprint) and lower (at high footprint) boundaries.\84\
[[Page 24391]]
The resulting curve was an elongated reverse ``S'' shape, with fuel
economy targets decreasing as footprint increased.
---------------------------------------------------------------------------
\84\ NHTSA determined the values of the parameters establishing
the upper and lower asymptotes by calculating the sales-weighted
harmonic average values of optimized fuel economy levels for light
trucks with footprints below 43 square feet and above 65 square
feet, respectively. Because these ranges respectively included the
smallest and largest models represented at that time in the light
truck fleet, the agency determined that these two segments of the
light truck fleet were appropriate for establishing the upper and
lower fuel economy bounds of a continuous function.
The remaining two parameters (i.e., the ``midpoint'' and
``curvature'' parameters) were estimated using production-weighted
nonlinear least-squares regression to achieve the closest fit to
data on footprint and optimized fuel economy for all light truck
models expected to be produced during each of the model years 2008-
2011. More precisely, these two parameters determine the range
between the vehicle footprints where the upper and lower limits of
fuel economy are reached, and the value of footprint for which the
value of fuel economy is midway between its upper and lower bounds.
---------------------------------------------------------------------------
NHTSA has tentatively concluded that a constrained logistic
function would continue to be appropriate for setting CAFE standards
for both passenger cars and light trucks. We have reached that
conclusion because the concerns that prevented NHTSA from choosing
another mathematical function in the light truck CAFE rule continue to
be relevant to the new standards. The description below of the Volpe
model and how it works explains in much more detail how the constrained
logistic function has been updated for purposes of this rulemaking.
NHTSA seeks comment on whether another mathematical function might
result in improved standards consistent with EPCA and EISA.
V. Volpe Model/Analysis/Generic Description of Function
A. The Volpe model
1. What is the Volpe model?
As it did for the development and analysis of the April 2006 light
truck final rule, in developing this proposal NHTSA made significant
use of a peer-reviewed modeling system developed by the Department of
Transportation's Volpe National Transportation Systems Center (Volpe
Center). The CAFE Compliance and Effects Modeling System (referred to
herein as the Volpe model) serves two fundamental purposes: Identifying
technologies each manufacturer could apply in order to comply with a
specified set of CAFE standards, and calculating the costs and effects
of manufacturers' application of technologies.
Before working with the Volpe Center to develop and apply this
model, NHTSA had considered other options, including other modeling
systems. NHTSA was unable to identify any other system that could
operate at a sufficient level of detail with respect to manufacturers'
future products, which involve thousands of unique vehicle models using
hundreds of unique engines and hundreds of unique transmissions. NHTSA
was also unable to identify any other system that could simulate a
range of different possible reforms to CAFE standards. The Volpe model
provides these and other capabilities, and helps NHTSA examine
potential regulatory options.
2. How does the Volpe model apply technologies to manufacturers' future
fleets?
The Volpe model begins with an ``initial state'' of the domestic
vehicle market, which in this case is the market for passenger cars and
light trucks to be sold during the period covered by the proposed rule.
The vehicle market is defined on a model-by-model, engine-by-engine,
and transmission-by-transmission basis, such that each defined vehicle
model refers to a separately-defined engine and a separately-defined
transmission.
For the model years covered by the current proposal, the light
vehicle (passenger car and light truck) market forecast included more
than 3,000 vehicle models, more than 400 specific engines, and nearly
400 specific transmissions.\85\ This level of detail in the
representation of the vehicle market is vital to an accurate analysis
of manufacturer-specific costs and the analysis of reformed CAFE
standards, and is much greater than the level of detail used by many
other models and analyses relevant to light vehicle fuel economy.
Because CAFE standards apply to the average performance of each
manufacturer's fleets of cars and light trucks, the impact of potential
standards on individual manufacturers cannot be credibly estimated
without analysis of manufacturers' planned fleets. NHTSA has used this
level of detail in CAFE analysis throughout the history of the program.
Furthermore, because required CAFE levels under an attribute-based CAFE
standard depend on manufacturers' fleet composition, the stringency of
an attribute-based standard cannot be predicted without performing
analysis at this level of detail.
---------------------------------------------------------------------------
\85\ The market forecast is an input to the Volpe model
developed by NHTSA using product plan information provided to the
agency by individual vehicle manufacturers in response to NHTSA's
requests. The submitted product plans contain confidential business
information (CBI), which the agency is prohibited by federal law
from disclosing. As the agency receives new product plan information
in response to future requests, the market forecast is updated.
---------------------------------------------------------------------------
Examples of other models and analyses that NHTSA and Volpe Center
staff have considered include DOE's NEMS, Oak Ridge National
Laboratory's (ORNL) Transitional Alternative Fuels and Vehicles (TAFV)
model, and the California Air Resources Board's (CARB) analysis
supporting California's adopted greenhouse gas emissions standards for
light vehicles.
DOE's NEMS represents the light-duty fleet in terms of four
``manufacturers'' (domestic cars, imported cars, domestic light trucks,
and imported light trucks), twelve vehicle market classes (e.g.,
``standard pickup''), and sixteen power train/fuel combinations (e.g.,
methanol fuel-cell vehicle).\86\ Therefore, as currently structured,
NEMS is unable to estimate manufacturer-specific implications of
attribute-based CAFE standards.
---------------------------------------------------------------------------
\86\ U.S. Department of Energy, ``Transportation Sector Module
of the National Energy Modeling System: Model Documentation 2007,''
DOE/EIA-M070, May 2007. Available at http://tonto.eia.doe.gov/FTPROOT/modeldoc/m070(2007).pdf (last accessed April 20, 2008).
NEMS's Manufacturers Technology Choice Submodule (MTCS) is believed
to have logical structures similar to those in Energy and
Environmental Analysis, Inc.'s (EEA's) Fuel Economy Regulatory
Analysis Model (FERAM). However, FERAM documentation and source code
have not been made available to NHTSA or Volpe Center staff.
---------------------------------------------------------------------------
TAFV accounts for many power train/fuel combinations, having been
originally designed to aid understanding of possible transitions to
alternative fueled vehicles, but it represents the light-duty fleet as
four aggregated (i.e., industry-wide) categories of vehicles: Small
cars, large cars, small light trucks, and large light trucks.\87\ Thus,
again, as currently structured, TAFV is unable to estimate
manufacturer-specific implications of attribute-based CAFE standards.
---------------------------------------------------------------------------
\87\ Greene, David. ``TAFV Alternative Fuels and Vehicles Choice
Model Documentation,'' ORNL//TM-2001//134, July 2001. Available at
http://www-cta.ornl.gov/cta/Publications/Reports/ORNL_TM_2001_134.pdf (last accessed April 20, 2008).
---------------------------------------------------------------------------
CARB's analysis of light vehicle GHG emissions standards uses two
levels of accounting. First, based on a report prepared for Northeast
States Center for a Clean Air Future (NESCCAF), CARB represents the
light-duty fleet in terms of five ``representative'' vehicles. Use of
these ``representative'' vehicles ignores the fact that the engineering
characteristics of individual vehicle models vary widely both among
manufacturers and within manufacturers' individual fleets. For each of
these five vehicles, NESCCAF's report contains the results of full
vehicle simulation given several pre-specified technology
``packages.''\88\ Second, to evaluate manufacturer-specific regulatory
costs, CARB essentially reduces each manufacturer's fleet to only two
average test weights, one for each of California's two regulatory
[[Page 24392]]
classes.\89\ Even for a flat standard such as considered by California,
NHTSA would not base its analysis of manufacturer-level costs on this
level of aggregation. Use of CARB's methods would not enable NHTSA to
estimate manufacturer-specific implications of the attribute-based CAFE
standards proposed today.\90\
---------------------------------------------------------------------------
\88\ Northeast States Center for a Clean Air Future (NESCCAF),
Reducing Greenhouse Gases from Light-Duty Vehicles (2004). Available
at http://bronze.nescaum.org/committees/mobile/rpt040923ghglightduty.pdf (last accessed April 20, 2008).
\89\ California Environmental Protection Agency, Air Resources
Board, Staff Report: Initial Statement of Reasons (CARB ISOR)
(2004), at 111-114. Available at http://www.arb.ca.gov/regact/grnhsgas/isor.pdf (last accessed April 20, 2008). We note that
California has adopted these standards but is currently unable to
enforce them, due to EPA's February 29, 2008, denial of California's
request for waiver of federal preemption under Section 209 of the
Clean Air Act. For information on EPA's decision, see http://www.epa.gov/otaq/ca-waiver.htm. (Last accessed April 20, 2008.)
California filed a petition in the Ninth Circuit Court of Appeals
challenging EPA's denial of the waiver on January 2, 2008.
\90\ Although CARB's analysis covered a wider range of model
years than does NHTSA's analysis, this does not lessen the
importance of a detailed representation of manufacturers' fleets.
---------------------------------------------------------------------------
The Volpe model also uses several additional categories of data and
estimates provided in various external input files:
One input file specifies the characteristics of fuel-saving
technologies to be represented, and includes, for each technology, the
first year in which the technology is expected to be ready for
commercial application; upper and lower estimates of the effectiveness
and cost (retail price equivalent) of the technology; coefficients
defining the extent to which costs are expected to decline as a result
of ``learning effects'' (discussed below); inclusion or exclusion of
the technology on up to three technology ``paths''; and constraints
(``phase-in caps'') on the annual rate at which manufacturers are
estimated to be able to increase the technology's penetration rate.
These technology characteristics and estimates are specified separately
for each of the following categories of vehicles: Small sport/utility
vehicles (SUVs), midsize SUVs, large SUVs, small pickups, large
pickups, minivans, subcompact cars, compact cars, midsize cars, and
large cars. In addition, the input file defining technology
characteristics can (but need not) contain specified ``synergies''
between technologies--that is, differences in a given technology's
effect on fuel consumption that result from the presence of other
technologies.
Another input file specifies vehicular emission rates for the
following pollutants: Carbon monoxide (CO), volatile organic compounds
(VOCs), nitrogen oxides (NOX), particulate matter (PM), and
sulfur dioxide (SO2). These rates are defined on a model
year-by-model year and calendar year-by-calendar year basis, and are
used to estimate changes in emissions that result from changes in
vehicular travel (i.e., vehicle-miles traveled or VMT).
A third input file specifies a variety of economic and other data
and estimates. The model can accommodate vehicle survival (i.e.,
percent of vehicles of a given vintage that remain in service) and
mileage accumulation (i.e., annual travel by vehicles of a given
vintage) rates extending as many years beyond the year of sale as for
which estimates are available and use those for estimating VMT, fuel
consumption, and emissions. The model can also accommodate forecasts of
price and fuel taxation rates for up to seven fuels (e.g., gasoline,
diesel) over a similar period. The model uses pump prices (i.e.,
including taxes) to estimate the value manufacturers expect vehicle
purchasers to place on saved fuel, because they indicate the amount by
which the manufacturer is expected to consider itself able to increase
the retail price of the vehicle based on the purchaser's consideration
of the vehicle's increased fuel economy. However, the model uses pretax
fuel prices to estimate the monetized societal benefits of reduced fuel
consumption, because fuel taxes represent transfers of resources from
fuel buyers to government agencies rather than real resources that are
consumed in the process of supplying or using fuel, so their value must
be deducted from retail fuel prices to determine the value of fuel
savings to the U.S. economy.
Other economic inputs include the rebound effect coefficient (i.e.,
the elasticity of VMT with respect to the per-mile cost of fuel); the
discount rate; the ``payback period'' (i.e., the number of years
manufacturers are estimated to assume vehicle purchasers consider when
taking into account fuel savings); the ``gap'' between laboratory and
actual fuel economy; the per-vehicle value of travel time (in dollars
per hour); the economic costs (in dollars per gallon) of petroleum
consumption; various external costs (all in dollars per mile)
associated with changes in vehicle use; damage costs (all on a dollar
per ton basis) for each of the above-mentioned criteria pollutants; and
the rate at which noncompliance causes civil penalties. Section V below
describes in much more detail how these inputs are included and used by
the model.
The model also accommodates input data and estimates addressing the
properties of different fuels. These include upstream carbon dioxide
and criteria pollutant emission rates (i.e., U.S. emissions resulting
from the production and distribution of each fuel), density (pounds/
gallon), energy density (BTU/gallon), carbon content, shares of fuel
savings leading to reduced domestic refining, and relative shares of
different gasoline blends. These fuel properties and related estimates
are used to calculate changes in domestic upstream emissions resulting
from changes in fuel consumption.
Coefficients defining the probability distributions to apply when
performing sensitivity analysis (i.e., Monte Carlo simulation) are also
specified in this input file.\91\ These coefficients determine the
likelihood that any given value will be selected when performing this
type of analysis (e.g., the likelihood that a rebound effect of -0.1
will be tested). High and low fuel price forecasts are also specified
in this input file for this purpose.
---------------------------------------------------------------------------
\91\ The sensitivity analysis and its usefulness are explained
more fully below.
---------------------------------------------------------------------------
The final input file contains CAFE scenarios to be examined. The
model accommodates a baseline (i.e., business-as-usual) scenario and
different alternative scenarios. Effects of the alternative scenarios
are calculated relative to results for the baseline scenario. Each
scenario defines the coverage, structure, and stringency of CAFE
standards for each of the covered model years.
With all of the above input data and estimates, the modeling system
develops an estimate of a set of technologies each manufacturer could
apply in response to each specified CAFE scenario. Because
manufacturers have many choices regarding how to respond to CAFE
standards, it is impossible to predict precisely how a given
manufacturer would respond to a given set of standards. The modeling
system begins with the ``initial state'' (i.e., business-as-usual) of
each manufacturer's future vehicles, and accumulates the estimated
costs of progressive additions of fuel-saving technologies. Within a
set of specified constraints, the system adds technologies following a
cost-minimizing approach, because this is what NHTSA expects a
manufacturer would do in real life. At each step, the system evaluates
the effective cost of applying available technologies to individual
vehicle models, engines, or transmissions, and selects the application
of technology that produces the lowest effective cost. The effective
cost estimated to be considered by the manufacturer is calculated by
adding the total incurred technology costs (in retail price equivalent
or RPE), subtracting the reduction in civil
[[Page 24393]]
penalties owed for noncompliance with the CAFE standard, subtracting
the estimated value \92\ of the reduction in fuel costs, and dividing
the result by the number of affected vehicles.
---------------------------------------------------------------------------
\92\ The estimated value of the reduction in fuel costs
represents the amount by which the manufacturer is expected to
consider itself able to increase the retail price of the vehicle
based on the purchaser's consideration of the vehicle's increased
fuel economy. This calculation considers the change in the
discounted outlays for fuel (and fuel taxes) during a ``payback
period'' specified as an input to the model.
---------------------------------------------------------------------------
In representing manufacturer decision-making in response to a given
CAFE standard, the modeling system accounts for the fact that
historically some manufacturers have been unwilling to pay penalties
and some have been willing to do so. Thus, the system applies
technologies until any of the following conditions are met: the
manufacturer no longer owes civil penalties for failing to meet the
applicable standard, the manufacturer has exhausted technologies
expected to be available in that model year, or the manufacturer is
estimated to be willing to pay civil penalties, and doing so is
estimated to be less expensive than continuing to add technologies. The
system then progresses to the next model year (if included in the
vehicle market and scenario input files), ``carrying over''
technologies where vehicle models are projected to be succeeded by
other vehicle models.\93\
---------------------------------------------------------------------------
\93\ For example, if Honda is expected to produce the Civic in
2012 and 2013, a version of the Civic estimated to be produced in
2013 may carry over technologies from a version of the Civic
produced in 2012 if the latter is identified as a ``predecessor'' of
the former.
---------------------------------------------------------------------------
In the modeling system, this ``compliance simulation'' is
constrained in several ways. First, technologies are defined as being
applicable or not applicable to each of the ten vehicle categories
listed above. The vehicle market forecast input file may also define
some technologies as being already present or not applicable to
specific vehicles, engines or transmissions. For example, a
manufacturer may have indicated it plans to use low-drag brakes on some
specific vehicle model, or NHTSA may expect that another manufacturer
is not likely to apply a 7- or 8-speed transmission after it installs a
6-speed transmission on a vehicle. Second, some technologies are
subject to specific ``engineering constraints.'' For example,
secondary-axle disconnect can only be applied to vehicles with four-
wheel (or all-wheel) drive. Third, some technologies (e.g., conversion
from pushrod valve actuation to overhead cam actuation) are nearly
always applied only when the vehicle is expected to be redesigned and
others (e.g., cylinder deactivation) are applied only when the vehicle
is expected to be refreshed or redesigned, so the model will only apply
them at those particular points. Fourth, once the system applies a
given technology to a percentage of a given manufacturers' fleet
exceeding a specified phase-in cap, the system instead applies other
technologies. The third and fourth of these constraints are intended to
produce results consistent with manufacturers' product planning
practices and with limitations on how quickly technologies can
penetrate the fleet.
One important aspect of this compliance simulation is that it does
not attempt to account for either CAFE credits or intentional over-
compliance. In the real world, manufacturers may earn CAFE credits by
selling flex-fueled vehicles (FFVs) and/or by exceeding CAFE standards,
and may, within limitations, count those credits toward compliance in
future or prior model years. However, EPCA and EISA do not allow NHTSA
to consider these flexibilities in setting the standards. Therefore,
the Volpe model does not attempt to account for these flexibilities.
Another possibility NHTSA and Volpe Center staff have considered,
but do not yet know how to analyze, is the potential that manufacturers
might ``pull ahead'' the implementation of some technologies in
response to CAFE standards that they know will be steadily increasing
over time. For example, if a manufacturer plans to redesign many
vehicles in MY2011 and not in MY2013, but the standard for MY2013 is
considerably higher than that for MY2011, the manufacturer might find
it less expensive during MY2011-MY2013 (taken together) to apply more
technology in MY2011 than is necessary for compliance with the MY2011
standard. Under some circumstances, doing so might make sense even
without regard to the potential to earn and bank CAFE credits.
NHTSA and Volpe Center staff have discussed the potential to
represent this type of response, but have thus far encountered two
challenges. First, NHTSA is not certain that in determining the maximum
feasible standard in a given model year, it would be appropriate to
count on manufacturers overcomplying with standards in preceding model
years. Second, considering other inter-model year dependencies (e.g.,
technologies that carry over between model years, phase-in caps that
accumulate across model years, volume-based learning curves), Volpe
Center staff currently anticipate that some iterative procedure would
likely be necessary. Also, the agency wonders whether trying to
represent this type of response would require make undue implicit
assumptions regarding manufacturers' ability to predict future market
conditions. Although NHTSA and Volpe Center staff will continue to
explore the potential to represent inter-model year timing, it is not
yet clear that it will be appropriate and feasible to do so in the near
term.
The agency requests comment on the appropriateness under EPCA of
considering (in the standard-setting context) this type of anticipatory
application of technology. The agency further requests comment on
appropriate methodologies for projecting and representing such
decisions by manufacturers.
3. What effects does the Volpe model estimate?
Having completed this compliance simulation for all manufacturers
and all model years, the system calculates the total cost of all
applied technologies, as well as a variety of effects of changes in
fuel economy. The system calculates year-by-year mileage accumulation,
taking into account any increased driving estimated to result from the
rebound effect. Based on the calculated mileage accumulation and on
fuel economy and the estimated gap between laboratory and actual fuel
economy, the system calculates year-by-year fuel consumption. Based on
calculated mileage accumulation and fuel consumption, and on specified
emission factors, the system calculates future full fuel-cycle domestic
carbon dioxide and criteria pollutant emissions. The system calculates
total discounted and undiscounted national societal costs of year-by-
year fuel consumption, taking into account estimated future fuel prices
(before taxes) and the estimated economic externalities of fuel
consumption. Based on changes in year-by-year mileage accumulation, the
system calculates changes in consumer surplus related to additional
travel, as well as economic externalities related to additional
congestion, accidents, and noise stemming from additional travel. The
system calculates the value of time saved because increases in fuel
economy produce increases in driving range, thereby reducing the
frequency with which some vehicles require refueling. The system
calculates the monetary value of damages resulting from criteria
pollutants. Finally, the system accumulates all discounted and
undiscounted societal benefits of each scenario as compared to the
baseline
[[Page 24394]]
scenario. For each model year, the system compares total incurred
technology costs to the total present value of societal benefits for
each model year, calculating net societal benefits (i.e., discounted
societal benefits minus total incurred technology costs) and the
benefit-cost ratio (i.e., discounted societal benefits divided by total
incurred technology costs).
One effect not currently estimated by the Volpe model is the market
response to CAFE-induced changes in vehicle prices and fuel economy
levels. NHTSA and Volpe Center staff have worked to try and develop and
apply a market share model capable of estimating changes in sales of
individual vehicle models. Doing so would allow estimation of the
feedback between market shifts and CAFE requirements. For example, if
the relative market share of vehicles with small footprints increases,
the average required CAFE level under a footprint-based standard will
also increase.
In an early experimental version of the Volpe model, Volpe Center
staff included a market share model using a nested multinomial logit
specification to calculate model-by-model changes in sales volumes.
This allowed the Volpe model to calculate the resulting changes in
manufacturers' required CAFE levels, and to seek iteratively a solution
at which prices, fuel economy levels, sales volumes, and required CAFE
levels converged to stable values. Although the market share model
appeared to operate properly (and to converge rapidly), Volpe Center
staff suspended its development because of three challenges:
First, Volpe Center staff were not successful in calibrating a
logically consistent set of coefficients for the underlying multinomial
logit model. The analysis, performed using information from a known
(2002 model year) fleet, consistently yielded one or more coefficients
that were either directionally incorrect (e.g., indicating that some
attributes actually detract from value) or implausibly large (e.g.,
indicating that some attributes were of overwhelming value). Although
Volpe Center staff tested many different specifications of the market
share model, none produced results that appeared to merit further
consideration.
Second, NHTSA and Volpe Center staff are not confident that
baseline sales prices for individual vehicle models, which would be
required by a market share model, can be reliably predicted. Although
NHTSA requests that manufacturers include planned MSRPs in product
plans submitted to NHTSA, MSRPs do not include the effect of various
sales incentives that can change actual selling prices. The
availability and dollar value of such incentives have been observed to
vary considerably, but not necessarily predictably.
Finally, before applying a market share model, it would be
necessary to estimate how manufacturers would allocate compliance costs
among vehicle models. Although one obvious approach would be to assume
that all costs would be passed through in the form of higher prices for
those vehicle models with improved fuel economy, other approaches are
perhaps equally plausible. For example, a manufacturer might shift
compliance costs toward high-demand vehicles in order to compete better
in certain market segments. Although the above-mentioned experimental
version of the Volpe model included a ``cost allocation'' model that
offered several different allocation options, NHTSA and Volpe Center
staff never achieved confidence that these aspects of manufacturer
decisions could be reasonably estimated.
NHTSA and Volpe Center staff are continuing to explore options for
including these types of effects. At the same time, EPA has contracted
with Resources for the Future (RFF) to develop a potential market share
model. Depending on the extent to which these efforts are successful,
the Volpe model could at some point be modified to include cost
allocation and market share models. NHTSA seeks comments on possible
methodologies for incorporating market responses to CAFE-induced
changes in vehicle price and fuel economy in the Volpe model. In
particular, NHTSA seeks comments addressing the concerns identified
above regarding the formulation and calibration of a market share
model, the estimation of future vehicle prices, and the estimation of
manufacturers' decisions regarding the allocation of compliance costs.
4. How can the Volpe model be used to calibrate and evaluate potential
CAFE standards?
The modeling system can also be applied in a more highly-automated
mode whereby the optimal shape of an attribute-based CAFE standard may
be estimated and its stringency may be set at a level that produces a
specified total technology cost or average required CAFE level among a
specified set of manufacturers, or that is estimated to maximize net
societal benefits. The first step in this operating mode involves
identifying manufacturer-by-manufacturer CAFE levels at which societal
benefits are estimated to be maximized. The second step involves
combining the resultant fleets and statistically fitting a constrained
logistic curve of the following form:
[GRAPHIC] [TIFF OMITTED] TP02MY08.002
Here, TARGET is the fuel economy target (in mpg) applicable to
vehicles of a given footprint (FOOTPRINT, in square feet), LIMITLOWER
and LIMITUPPER are the function's lower and upper asymptotes (also in
mpg), e is approximately equal to 2.718,\94\ MIDPOINT is the footprint
(in square feet) at which the inverse of the fuel economy target falls
halfway between the inverses of the lower and upper asymptotes, and
WIDTH is a parameter (in square feet) that determines how gradually the
fuel economy target transitions from the upper toward the lower
asymptote as the footprint increases. Figure V-1 below shows an example
of a logistic target function, where LIMITLOWER = 20 mpg, LIMITUPPER =
30 mpg, MIDPOINT = 40 square feet, and WIDTH = 5 square feet:
---------------------------------------------------------------------------
\94\ The number e is one of the most important numbers in
mathematics and statistics. The function has a hockey stick
appearance when plotted. The value of e itself is a never ending
number whose first 8 digits equal 2.7182818. NHTSA uses it here
because it occurs in many natural processes and tends to fit data
well. In the last light truck rulemaking, NHTSA examined several
functional forms that did not rely on e, but they were judged not to
provide as good a fit for the data. We are using the same conclusion
here.
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[[Page 24395]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.003
The lower asymptote is determined by calculating the average fuel
economy of the largest vehicles in the ``optimized'' fleet discussed
above, where the percentage of the fleet to consider is specified
externally. Similarly, the upper asymptote is determined by calculating
the average fuel economy of the smallest vehicles in the same fleet.
Initial values of the other two coefficients of the logistic function
are determined through a standard statistical technique (nonlinear
least-square regression), except as discussed in sections V and VI
below regarding the adjusting of the original curve for the passenger
car function.
Following this initial calibration of the target function, the
system adjusts the lower and upper asymptotes uniformly (on a gallon
per mile basis) until one of the following externally specified
conditions is met: the average CAFE level required of the included
manufacturers approximately equals an externally specified goal; net
societal benefits (i.e., total benefits minus total costs) are
maximized, or total benefits are as close as observed (among evaluated
stringency levels) to total costs. Due to rounding of fuel economy and
CAFE levels, the first condition can only be satisfied on an
approximate basis.
The modeling system provides another type of higher-level
automation--the ability to perform uncertainty analysis, also referred
to as Monte Carlo simulation. For some input parameters, such as
technology costs, values can be tested over a specified continuous
probability distribution. For others, such as fuel prices, discrete
scenarios (e.g., high, low, and reference cases), each with a specified
probability, can be tested. The system performs sensitivity analysis by
randomly selecting values for parameters to be varied, performing the
compliance simulation and effects calculations, repeating these results
many times and recording results for external analysis. This operating
mode enables the examination of the uncertainty of high-level results
(e.g., total costs, fuel savings, or net societal benefits), as well as
their sensitivity to variations in the model's input parameters.
5. How has the Volpe model been updated since the April 2006 light
truck CAFE final rule?
Several changes were made to the Volpe model between the analysis
reported in the April 2006 light truck final rule and the analysis of
the current NPRM. As discussed above, the set of technologies
represented was updated, the logical sequence for progressing
[[Page 24396]]
through these technologies was changed, methods to account for
``synergies'' (i.e., interactions) between technologies and technology
cost reductions associated with a manufacturer's ``learning'' were
added, the effective cost calculation used in the technology
application algorithm was modified, and the procedure for calibrating a
reformed standard was changed, as was the procedure for estimating the
optimal stringency of a reformed standard.
As discussed in Section III above, the set of technologies
considered by the agency has evolved since the previous light truck
CAFE rulemaking. The set of technologies now included in the Volpe
model is shown below in Table V-1, with codes used by the model to
refer to each technology.
Table V-1.--Revised Technology Set for Volpe Model
------------------------------------------------------------------------
Technology Code (for Model)
------------------------------------------------------------------------
Low Friction Lubricants..................... LUB
Engine Friction Reduction................... EFR
Variable Valve Timing (Intake Cam Phasing).. VVTI
Variable Valve Timing (Coupled Cam Phasing). VVTC
Variable Valve Timing (Dual Cam Phasing).... VVTD
Cylinder Deactivation....................... DISP
Variable Valve Lift & Timing (Continuous VVLTC
VVL).
Variable Valve Lift & Timing (Discrete VVL). VVLTD
Cylinder Deactivation on Overhead Valve DISPO
(OHV).
Variable Valve Timing (CCP) on OHV.......... VVTO
Multivalve Overhead Cam with CVVL........... DOHC
Variable Valve Lift & Timing (DVVL) on OHV.. VVLTO
Camless Valve Actuation..................... CVA
Stoichiometric Gasoline Direct Injection SIDI
(GDI).
Lean Burn GDI............................... LBDI
Turbocharging and Downsizing................ TURB
Homogeneous Charge Compression Ignition..... HCCI
Diesel with Lean NOX Trap (LNT)............. DSLL
Diesel with Selective Catalytic Reduction DSLS
(SCR).
5 Speed Automatic Transmission.............. 5SP
Aggressive Shift Logic...................... ASL
Early Torque Converter Lockup............... TORQ
6 Speed Automatic Transmission.............. 6SP
Automatic Manual Transmission............... AMT
Continuously Variable Transmission.......... CVT
6 Speed Manual.............................. 6MAN
Improved Accessories........................ IACC
Electronic Power Steering................... EPS
42-Volt Electrical System................... 42V
Low Rolling Resistance Tires................ ROLL
Low Drag Brakes............................. LDB
Secondary Axle Disconnect--Unibody.......... SAXU
Secondary Axle Disconnect--Ladder Frame..... SAXL
Aero Drag Reduction......................... AERO
Material Substitution (1%).................. MS1
Material Substitution (2%).................. MS2
Material Substitution (5%).................. MS5
Integrated Starter/Generator (ISG) with Idle- ISGO
Off.
IMA/ISAD/BSG Hybrid (includes engine IHYB
downsizing).
2-Mode Hybrid............................... 2HYB
Power Split Hybrid.......................... PHYB
Full Diesel Hybrid.......................... DHYB
------------------------------------------------------------------------
The logical sequence for progressing between these technologies has
also been changed. As in the previous version of the Volpe model,
technologies are assigned to groups (e.g., engine technologies) and the
model follows a cost-minimizing approach to selecting technologies.
However, the model now includes some ``branch points'' at which it
selects from two or more technologies within the same group. This
enables a more detailed representation of some technologies that have
multiple variants (e.g., variable valve timing) and, as relevant to the
applicability of different technologies, more specific differentiation
between technologies that have already been applied to vehicles (e.g.,
single versus dual overhead cam engines). This revised logical
sequencing is expected to produce results that are more realistic in
terms of the application of technologies to different vehicle models.
For example, in this analysis OHV engines and OHC engines were
considered separately, and the model was generally not allowed to apply
multivalve OHC technology to OHV engines (except where continuous
variable valve timing and lift is applied to OHV engines, in which case
the model assumes conversion to DOHC valvetrain).
Figure V-2 below shows the resultant ``decision tree'' for the
group of engine technologies. As an example of the ``branching''
mentioned above, having applied cylinder deactivation and coupled cam
phasing to an overhead valve engine, the Volpe model selects either
discrete valve lift or an engine redesign to multivalve overhead cam
with continuous variable valve lift. Figure V-3 shows the decision tree
for transmission technologies, and Figure V-4 shows the decision trees
for other technologies.
BILLING CODE 4910-59-P
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[GRAPHIC] [TIFF OMITTED] TP02MY08.004
[[Page 24398]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.005
[[Page 24399]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.006
Each time the model applies a technology to a vehicle in the fleet,
it considers the next available technology on every available path. An
available technology is one that is not included in the base vehicle,
has not been applied by the model, and is not disqualified due to the
vehicle's characteristics (discussed below). For a given path, the next
available technology is the first available item (if no technologies on
the path have yet been applied) or the first available item following
the most recently applied technology on that path. An available path is
any path that includes available technologies.
The engine and transmission paths contain several forks where the
model may choose among two or more same-path items along with items
from other paths. At some of these forks, conditions on the connecting
arrows require the model to follow a particular branch. These
conditions are based on previously applied technologies or vehicle
characteristics. For example, ladder frame vehicles must follow the
left branch of the transmission technology path, while unibody vehicles
can follow either the right or left branch. The consequence is that the
model considers both aggressive shift logic (ASL) and CVT for unibody
vehicles, but only ASL for ladder frame vehicles. Conditions along the
engine technologies path are based on valvetrain design (OHV, OHC,
SOHC, and DOHC).
Other conditions require the model to discontinue considering
technologies along a given path. For example, 2-Mode Hybrid and Power
Split Hybrid drivetrains can be applied only to vehicles equipped with
automatic transmissions. If the model has already chosen a manual
transmission and IMA/ISAD/BSG Hybrid drivetrain (or if the base vehicle
is equipped with these), the hybrid path becomes unavailable and the
model must choose subsequent technologies from other paths.
a. Technology Synergies
In some cases, the change in fuel economy achieved by applying a
given technology depends on what other technologies are already
present. The Volpe model has been modified to provide the ability to
represent such ``synergies'' between technologies, as discussed above.
These effects are specified in one of the model's input files. As shown
below in Table V-2, which uses technology codes listed in Table V-1
above, most of the synergies represented in the analysis of this
proposal are negative. In other words, most of the interactions are
such that a given technology has a smaller effect on fuel economy if
some other technologies have already been applied. The inclusion of
such effects in the model is
[[Page 24400]]
expected to produce more realistic estimates of the benefit of applying
various technologies.
Table V-2.--``Synergies'' from Technology Input File for Volpe Model
[In percent]
----------------------------------------------------------------------------------------------------------------
Synergies Synergy values by vehicle class. Positive values are
------------------------------------------------ synergies, negative values are dissynergies.
----------------------------------------------------------------
Technology A Technology B Pickup-
SUV-Small SUV-Mid SUV-Large Minivan Small
----------------------------------------------------------------------------------------------------------------
VVTI......................... 5SP............. -0.50 -0.50 -0.50 -0.50 -0.50
VVTI......................... ISGO............ -0.50 -0.50 -0.50 -0.50 -0.50
VVTC......................... 5SP............. -0.50 -0.50 -0.50 -0.50 -0.50
VVTC......................... CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
VVTC......................... ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
DISP......................... 5SP............. -1.00 -1.00 -1.00 -1.00 -1.00
DISP......................... CVT............. -1.00 -1.00 -1.00 -1.00 -1.00
DISP......................... ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
DISP......................... ISGO............ -0.50 -0.50 -0.50 -0.50 -0.50
VVLTC........................ 5SP............. -0.50 -0.50 -0.50 -0.50 -0.50
VVLTC........................ CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
VVLTC........................ ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
VVLTC........................ 6MAN............ -0.50 -0.50 -0.50 -0.50 -0.50
VVLTD........................ CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
VVLTD........................ 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
DISPO........................ 5SP............. -1.50 -1.50 -1.50 -1.50 -1.50
DISPO........................ CVT............. -1.00 -1.00 -1.00 -1.00 -1.00
DISPO........................ ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
DISPO........................ 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
DISPO........................ ISGO............ -1.00 -1.00 -1.00 -1.00 -1.00
VVTO......................... CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
VVTO......................... 6MAN............ 0.50 0.50 0.50 0.50 0.50
DOHC......................... 5SP............. -1.00 -1.00 -1.00 -1.00 -1.00
DOHC......................... CVT............. -1.00 -1.00 -1.00 -1.00 -1.00
DOHC......................... ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
DOHC......................... 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
DOHC......................... 6MAN............ -0.50 -0.50 -0.50 -0.50 -0.50
DOHC......................... ISGO............ 0.50 0.50 0.50 0.50 0.50
VVLTO........................ 5SP............. -0.50 -0.50 -0.50 -0.50 -0.50
VVLTO........................ CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
VVLTO........................ 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
----------------------------------------------------------------------------------------------------------------
[In percent]
----------------------------------------------------------------------------------------------------------------
Synergies Synergy values by vehicle class Positive values are synergies,
------------------------------------------------ negative values are dissynergies.
----------------------------------------------------------------
Technology A Technology B Pickup-
SUV-Small SUV-Mid SUV-Large Minivan Small
----------------------------------------------------------------------------------------------------------------
CVA.......................... 5SP............. -0.50 -0.50 -0.50 -0.50 -0.50
CVA.......................... CVT............. -1.00 -1.00 -1.00 -1.00 -1.00
CVA.......................... ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
CVA.......................... 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
CVA.......................... 6MAN............ 0.50 0.50 0.50 0.50 0.50
HCCI......................... CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
HCCI......................... 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
TURB......................... 5SP............. -1.00 -1.00 -1.00 -1.00 -1.00
TURB......................... CVT............. -1.00 -1.00 -1.00 -1.00 -1.00
TURB......................... ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
TURB......................... 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
TURB......................... 6MAN............ -0.50 -0.50 -0.50 -0.50 -0.50
E25.......................... 5SP............. 0.50 0.50 0.50 0.50 0.50
E25.......................... 6MAN............ 0.50 0.50 0.50 0.50 0.50
E25.......................... ISGO............ -0.50 -0.50 -0.50 -0.50 -0.50
ISGO......................... IACC............ -0.50 -0.50 -0.50 -0.50 -0.50
ISGO......................... EPS............. -1.00 -1.00 -1.00 -1.00 -1.00
ISGO......................... 42V............. -1.00 -1.00 -1.00 -1.00 -1.00
DSLT......................... 5SP............. 0.50 0.50 0.50 0.50 0.50
DSLT......................... CVT............. 0.50 0.50 0.50 0.50 0.50
DSLT......................... ISGO............ 0.50 0.50 0.50 0.50 0.50
DSLT......................... ASL............. 0.50 0.50 0.50 0.50 0.50
DSLH......................... 5SP............. 0.50 0.50 0.50 0.50 0.50
DSLH......................... CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
DSLH......................... 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
[[Page 24401]]
DSLH......................... 6MAN............ 0.50 0.50 0.50 0.50 0.50
DSLH......................... ISGO............ 0.50 0.50 0.50 0.50 0.50
DSLS......................... 5SP............. -0.50 -0.50 -0.50 -0.50 -0.50
DSLS......................... CVT............. -2.50 -2.50 -2.50 -2.50 -2.50
DSLS......................... 6SP............. -1.00 -1.00 -1.00 -1.00 -1.00
DSLS......................... 6MAN............ -0.50 -0.50 -0.50 -0.50 -0.50
DSLS......................... ISGO............ 0.50 0.50 0.50 0.50 0.50
----------------------------------------------------------------------------------------------------------------
[In percent]
----------------------------------------------------------------------------------------------------------------
Synergies Synergy values by vehicle class. Positive values are
------------------------------------------------ synergies, negative values are dissynergies.
----------------------------------------------------------------
Technology A Technology B Pickup-
Large Subcompact Compact Midsize Large
----------------------------------------------------------------------------------------------------------------
VVTI......................... 5SP............. -0.50 -0.50 -0.50 -0.50 -0.50
VVTI......................... ISGO............ -0.50 -0.50 -0.50 -0.50 -0.50
VVTC......................... 5SP............. -0.50 -0.50 -0.50 -0.50 -0.50
VVTC......................... CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
VVTC......................... ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
DISP......................... 5SP............. -1.00 -1.00 -1.00 -1.00 -1.00
DISP......................... CVT............. -1.00 -1.00 -1.00 -1.00 -1.00
DISP......................... ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
DISP......................... ISGO............ -0.50 -0.50 -0.50 -0.50 -0.50
VVLTC........................ 5SP............. -0.50 -0.50 -0.50 -0.50 -0.50
VVLTC........................ CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
VVLTC........................ ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
VVLTC........................ 6MAN............ -0.50 -0.50 -0.50 -0.50 -0.50
VVLTD........................ CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
VVLTD........................ 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
DISPO........................ 5SP............. -1.50 -1.50 -1.50 -1.50 -1.50
DISPO........................ CVT............. -1.00 -1.00 -1.00 -1.00 -1.00
DISPO........................ ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
DISPO........................ 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
DISPO........................ ISGO............ -1.00 -1.00 -1.00 -1.00 -1.00
VVTO......................... CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
VVTO......................... 6MAN............ 0.50 0.50 0.50 0.50 0.50
DOHC......................... 5SP............. -1.00 -1.00 -1.00 -1.00 -1.00
DOHC......................... CVT............. -1.00 -1.00 -1.00 -1.00 -1.00
DOHC......................... ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
DOHC......................... 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
DOHC......................... 6MAN............ -0.50 -0.50 -0.50 -0.50 -0.50
DOHC......................... ISGO............ 0.50 0.50 0.50 0.50 0.50
VVLTO........................ 5SP............. -0.50 -0.50 -0.50 -0.50 -0.50
VVLTO........................ CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
VVLTO........................ 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
----------------------------------------------------------------------------------------------------------------
[In percent]
----------------------------------------------------------------------------------------------------------------
Synergies Synergy values by vehicle class. Positive values are
------------------------------------------------ synergies, negative values are dissynergies.
----------------------------------------------------------------
Technology A Technology B Pickup-
Large Subcompact Compact Midsize Large
----------------------------------------------------------------------------------------------------------------
CVA.......................... 5SP............. -0.50 -0.50 -0.50 -0.50 -0.50
CVA.......................... CVT............. -1.00 -1.00 -1.00 -1.00 -1.00
CVA.......................... ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
CVA.......................... 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
CVA.......................... 6MAN............ 0.50 0.50 0.50 0.50 0.50
HCCI......................... CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
HCCI......................... 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
TURB......................... 5SP............. -1.00 -1.00 -1.00 -1.00 -1.00
TURB......................... CVT............. -1.00 -1.00 -1.00 -1.00 -1.00
TURB......................... ASL............. -0.50 -0.50 -0.50 -0.50 -0.50
TURB......................... 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
TURB......................... 6MAN............ -0.50 -0.50 -0.50 -0.50 -0.50
E25.......................... 5SP............. 0.50 0.50 0.50 0.50 0.50
E25.......................... 6MAN............ 0.50 0.50 0.50 0.50 0.50
[[Page 24402]]
E25.......................... ISGO............ -0.50 -0.50 -0.50 -0.50 -0.50
ISGO......................... IACC............ -0.50 -0.50 -0.50 -0.50 -0.50
ISGO......................... EPS............. -1.00 -1.00 -1.00 -1.00 -1.00
ISGO......................... 42V............. -1.00 -1.00 -1.00 -1.00 -1.00
DSLT......................... 5SP............. 0.50 0.50 0.50 0.50 0.50
DSLT......................... CVT............. 0.50 0.50 0.50 0.50 0.50
DSLT......................... ISGO............ 0.50 0.50 0.50 0.50 0.50
DSLT......................... ASL............. 0.50 0.00 0.00 0.50 0.50
DSLH......................... 5SP............. 0.50 0.50 0.50 0.50 0.50
DSLH......................... CVT............. -0.50 -0.50 -0.50 -0.50 -0.50
DSLH......................... 6SP............. -0.50 -0.50 -0.50 -0.50 -0.50
DSLH......................... 6MAN............ 0.50 0.50 0.50 0.50 0.50
DSLH......................... ISGO............ 0.50 0.50 0.50 0.50 0.50
DSLS......................... 5SP............. -0.50 -0.50 -0.50 -0.50 -0.50
DSLS......................... CVT............. -2.50 -2.50 -2.50 -2.50 -2.50
DSLS......................... 6SP............. -1.00 -1.00 -1.00 -1.00 -1.00
DSLS......................... 6MAN............ -0.50 -0.50 -0.50 -0.50 -0.50
DSLS......................... ISGO............ 0.50 0.50 0.50 0.50 0.50
----------------------------------------------------------------------------------------------------------------
b. Technology learning curves
The Volpe model has also been modified to provide the ability to
account for cost reductions a manufacturer may realize through learning
achieved from experience in actually applying a given technology. Thus,
for some of the technologies, we have included a learning factor.
Stated another way, the ``learning curve'' describes the reduction in
unit production costs as a function of accumulated production volume
and small redesigns that reduce costs.
As explained above, a typical learning curve can be described by
three parameters: (1) The initial production volume before cost
reductions begin to be realized; (2) the rate at which cost reductions
occur with increases in cumulative production beyond this initial
volume (usually referred to as the ``learning rate''); and (3) the
production volume after which costs reach a ``floor,'' and further cost
reductions no longer occur. Over the region where costs decline with
accumulating production volume, an experience curve can be expressed as
C(Q) = aQ-\b\, where a is a constant coefficient, Q
represents cumulative production, and b is a coefficient corresponding
to the assumed learning rate. In turn, the learning rate L, which is
usually expressed as the percent by which average unit cost declines
with a doubling of cumulative production, and is related to the value
of the coefficient b by L = 100*(1 - 2-\b\).\95\
---------------------------------------------------------------------------
\95\ See, e.g., Robert H. Williams, ``Toward Cost Buydown via
Learning-by-Doing for Environmental Energy Technologies,'' paper
presented at Workshop on Learning-by-Doing in Energy Technologies,
Resources for the Future, Washington, DC, June 17-18, 2003, pp. 1-2.
Another common but equivalent formulation of the relationship
between L and b is (1-L) = 2\-b\, where (1-L) is referred to as the
progress ratio; see Richard P. Rumelt, ``Note on Strategic Cost
Dynamics,'' POL 2001-1.1, Anderson School of Business, University of
California, Los Angeles, California, 2001, pp. 4-5.
---------------------------------------------------------------------------
The new learning curves are described in greater detail above in
Section III. We seek comment on the assumptions used to develop the new
proposed learning curves.
c. Calibration of reformed CAFE standards
The procedure used by the Volpe model to develop (i.e., calibrate)
the initial shape of a reformed standard was also modified. In the
version of the model used to analyze NHTSA's April 2006 light truck
final rule, the asymptotes for the constrained logistic function
defining fuel economy targets were assigned based on the set of
vehicles that would have been assigned to the lowest and highest bins
defined in that rule's 2005 NPRM. The Volpe model has been modified to
accept specified percentages (in terms of either models or sales) of
the fleet to include when assigning asymptotes.
The procedure used by the Volpe model to estimate the ``optimized''
stringency of a reformed standard was also modified. In the version of
the model used to analyze the 2006 light truck final rule, the shape of
the function (i.e., the constrained logistic function) defining fuel
economy targets was recalibrated every model year and then shifted up
and down to estimate the stringency at which marginal costs begin to
exceed marginal benefits or, equivalently, the point at which net
societal benefits are maximized. However, analysis conducted by the
agency to prepare for the current rulemaking revealed several
opportunities to refine the procedure described above before applying
it to an action that spans several model years. The first refinement is
a method for gradually transforming the shape of the continuous
function between model years and guarding against erratic fluctuations
in the shape (though not necessarily the stringency) of the continuous
function. The second is the implementation of several anti-backsliding
measures that prevents the average required CAFE level from falling
between model years and prevents the continuous function for a given
model from crossing or falling below that of the preceding model year.
The third, applied to passenger cars only, is an option to specify a
fixed relationship between the function's midpoint and width
coefficients. These refinements are discussed in greater detail in
Section V.B below.
6. What manufacturer information does the Volpe model use?
For purposes of determining and analyzing CAFE standards, NHTSA has
historically made significant use of detailed product plan information
provided to the agency by individual manufacturers, supplementing this
information where appropriate with information from other sources, such
as data submitted to the agency in relation to CAFE compliance. Such
information is considered confidential business
[[Page 24403]]
information (CBI) under federal law. Although NHTSA shares the
information with other agencies (Volpe, EPA, and DOE) involved in CAFE
activities, neither NHTSA nor any other agency may release the
information to the public.
Consistent with this practice, the Volpe model uses detailed
representations of (i.e., model-by-model, linked to specific engines
and transmissions) the fleets manufacturers are expected to produce for
sale in the U.S. In preparation for today's action, the agency issued
in the spring of 2006 a request that manufacturers provide updated
product plans for passenger cars and light trucks.
NHTSA received product plan information from Chrysler, Ford, GM,
Honda, Nissan, Mitsubishi, Porsche and Toyota. The agency did not
receive any product plan information from BMW, Ferrari, Hyundai,
Mercedes or VW.
Chrysler, Ford, GM, Honda, Nissan, Mitsubishi, Porsche and Toyota
provided information covering multiple model years. However, only
Chrysler and Mitsubishi provided us with product plans that showed
differing production quantities, vehicle introductions, vehicle
redesigns/refreshes changes, without any carryover production
quantities, from MY 2007 to MY 2015. The agency incorporated their
product plan information as part of the input file to the model without
the need to project or carryover any vehicle production data.
For the other companies that provided data, the agency carried over
production quantities for their vehicles, allowing for growth, starting
with the year after their product plan data showed changes in
production quantities or showed the introduction or redesign/refresh of
vehicles. Product plan information was provided until MY 2013 for Ford
and Toyota, thus the first year that we started to carry over
production quantities for those companies was MY 2014. Product plan
information was provided until MY 2012 for GM and Nissan, thus the
first year that we started to carry over production quantities for
those companies was MY 2013. Product plan information was provided by
Honda until MY 2008. Honda asked the agency to carry over those plans
and also provided data for the last redesign of a vehicle and asked us
to carry them forward.
Product plan information was provided until MY 2008 for Porsche,
thus the first year that we started to carry over production quantities
for Porsche was MY 2009.
For Hyundai, given that it is one of the largest 7 manufacturers,
the agency used the mid-year 2007 data contained in the agency's CAFE
database to establish the baseline models and production quantities for
their vehicles. For the other manufacturers, because of the time
constraint the agency was under to meet the statutory deadline, we used
the 2005 information from our database, which is the latest information
used in the current analysis. To the extent possible, because, the CAFE
database does not capture all of the product plan data that we request
from companies, we supplemented the CAFE database information with
information on public Web sites, from commercial information sources
and for Hyundai, from the MY 2008-2011 light truck rule.
In all cases, manufacturers' respective sales volumes were
normalized to produce passenger car and light truck fleets that
reflected manufacturers' MY2006 market shares and to reflect passenger
car and light truck fleets of projected aggregate volume consistent
with forecasts in the EIA's 2007 Annual Energy Outlook. The agency
requests comment on whether alternative methods should be used to
estimate manufacturers' market shares and the overall sizes of the
future passenger car and light truck fleets.
In a companion notice, the agency is requesting updated product
plan information from all companies, and as in previous fuel economy
rulemakings, we will be using those plans for the final rule. These
plans will impact the standards for the final rule. To that end, the
agency is requesting that these plans be as detailed and as accurate as
possible.
7. What economic information does the Volpe model use?
NHTSA's preliminary analysis of alternative CAFE standards for the
model years covered by this proposed rulemaking relies on a range of
information, economic estimates, and input parameters. This section
describes this information and each assumption and specific parameter
values, and discusses the rationale for tentatively choosing each one.
Like the product plan information, these economic assumptions play a
role in the determination of the level of the standards, with some
having greater impacts than others. The cost of technologies and as
discussed below, the price of gasoline and discount rate used for
discounting future benefits have the greatest influence over the level
of the standards. The agency seeks comment on the economic assumptions
presented below. On the first question, based on the comparisons of the
side cases to the base case that Jim did on Friday, the order of impact
for the economic assumptions is: (1) Technology cost and effectiveness;
(2) fuel prices; (3) discount rate; (4) oil import externalities; (5)
rebound effect; (6) criteria air pollutant damage costs; (7) carbon
costs. This reflects the base case assumptions, and could change
slightly if we used different assumptions to start, but 1st through 3rd
should stay the same.
For the reader's reference, Table V-3 below summarizes the values
used to calculate the impacts of each scenario:
Table V-3.--Economic Values for Benefits Computations (2006$)
------------------------------------------------------------------------
------------------------------------------------------------------------
Rebound Effect (VMT Elasticity w/respect to Fuel Cost per -0.15
Mile).....................................................
Discount Rate Applied to Future Benefits................... 7%
Payback Period (years)..................................... 5.0
``Gap'' between Test and On-Road mpg....................... 20%
Value of Travel Time per Vehicle ($/hour).................. $24.00
Economic Costs of Oil Imports ($/gallon)
``Monopsony'' Component................................ $0.176
Price Shock Component.................................. $0.109
Military Security Component............................ $--
Total Economic Costs ($/gallon).......................... $0.285
Total Economic Costs ($/BBL)........................... $11.97
External Costs from Additional Automobile Use Due to
``Rebound'' Effect ($/vehicle-mile)
Congestion............................................. $0.047
Accidents.............................................. $0.025
Noise.................................................. $0.001
External Costs from Additional Light Truck Use Due to
``Rebound'' Effect ($/vehicle-mile)
[[Page 24404]]
Congestion............................................. $0.052
Accidents.............................................. $0.023
Noise.................................................. $0.001
Emission Damage Costs
Carbon Monoxide ($/ton)................................ $--
Volatile Organic Compounds ($/ton)..................... $1,700
Nitrogen Oxides ($/ton)................................ $3,900
Particulate Matter ($/ton)............................. $164,000
Sulfur Dioxide ($/ton)................................. $16,000
Carbon Dioxide ($/metric ton).......................... $7.00
Annual Increase in CO\2\ Damage Cost............... 2.4%
------------------------------------------------------------------------
a. Costs of Fuel Economy Technologies
We developed detailed estimates of the costs of applying fuel
economy-improving technologies to vehicle models for use in analyzing
the impacts of alternative standards considered in this rulemaking. The
estimates were based on those reported by the 2002 NAS Report analyzing
costs for increasing fuel economy, but were modified for purposes of
this analysis as a result of extensive consultations among engineers
from NHTSA, EPA, and the Volpe Center. As part of this process, the
agency also developed varying cost estimates for applying certain fuel
economy technologies to vehicles of different sizes and body styles. We
may adjust these cost estimates based on comments received to this
NPRM.
The technology cost estimates used in this analysis are intended to
represent manufacturers' direct costs for high-volume production of
vehicles with these technologies and sufficient experience with their
application so that all cost reductions due to ``learning curve''
effects have been fully realized. However, NHTSA recognizes that
manufacturers' actual costs for applying these technologies to specific
vehicle models are likely to include additional outlays for
accompanying design or engineering changes to each model, development
and testing of prototype versions, recalibrating engine operating
parameters, and integrating the technology with other attributes of the
vehicle. Manufacturers may also incur additional corporate overhead,
marketing, or distribution and selling expenses as a consequence of
their efforts to improve the fuel economy of individual vehicle models
and their overall product lines.
In order to account for these additional costs, NHTSA applies an
indirect cost multiplier of 1.5 to the estimate of the vehicle
manufacturers' direct costs for producing or acquiring each fuel
economy-improving/CO2 emission-reducing technology.
Historically, NHTSA has used an almost identical multiplier, 1.51, for
the markup from variable costs or direct manufacturing costs to
consumer costs. This markup takes into account fixed costs, burden,
manufacturer's profit, and dealers' profit. NHTSA's methodology for
determining this markup was recently peer reviewed.\96\
---------------------------------------------------------------------------
\96\ See Docket No. NHTSA-2007-27454, Item 4.
---------------------------------------------------------------------------
This estimate was confirmed by Argonne National Laboratory in a
recent review of vehicle manufacturers' indirect costs. The Argonne
study was specifically intended to improve the accuracy of future cost
estimates for production of vehicles that achieve high fuel economy/low
CO2 emissions by employing many of the same advanced
technologies considered in our analysis.\97\ Thus, we believe that its
recommendation that a multiplier of 1.5 be applied to direct
manufacturing costs to reflect manufacturers' increased indirect costs
for deploying advanced fuel economy technologies is appropriate for use
in the analysis for this rulemaking.
---------------------------------------------------------------------------
\97\ Vyas, Anant, Dan Santini, and Roy Cuenca, Comparison of
Indirect Cost Multipliers for Vehicle Manufacturing, Center for
Transportation Research, Argonne National Laboratory, April 2000.
Available at http://www.transportation.anl.gov/pdfs/TA/57.pdf (last
accessed April 20, 2008).
---------------------------------------------------------------------------
b. Potential Opportunity Costs of Improved Fuel Economy
An important concern is whether achieving the fuel economy
improvements required by alternative CAFE standards would require
manufacturers to compromise the performance, carrying capacity, safety,
or comfort of their vehicle models. If it did so, the resulting
sacrifice in the value of these attributes to consumers would represent
an additional cost of achieving the required improvements in fuel
economy, and thus of manufacturers' compliance with stricter CAFE
standards. While exact dollar values of these attributes to consumers
are difficult to infer from vehicle purchase prices, changing vehicle
attributes can affect the utility that vehicles provide to their
owners, and thus their value to potential buyers.
NHTSA has approached this potential problem by developing tentative
cost estimates for fuel economy-improving technologies that include any
additional manufacturing costs that would be necessary to maintain the
product plan levels of performance, comfort, capacity, or safety of any
light-duty vehicle model to which those technologies are applied. In
doing so, we primarily followed the precedent established by the 2002
NAS Report, although we updated its assumptions as necessary for the
purposes of the current rulemaking. The NAS study estimated ``constant
performance and utility'' costs for fuel economy technologies, and
NHTSA has used these as the basis for their further efforts to develop
the technology costs employed in analyzing manufacturer's costs for
complying with alternative light truck standards.
NHTSA acknowledges the difficulty of estimating technology costs
that include costs for the accompanying changes in vehicle design that
are necessary to maintain performance, capacity, and utility. However,
we believe that our tentative cost estimates for fuel economy/
CO2 emission-reduction technologies should be generally
sufficient to prevent significant reductions in consumer welfare
provided by vehicle models to which manufacturers apply those
technologies. Nevertheless, we seek comments on alternative ways to
deal with these issues.
c. The On-Road Fuel Economy ``Gap''
Actual fuel economy levels achieved by light-duty vehicles in on-
road driving fall somewhat short of their levels measured under the
laboratory-like test conditions used by EPA to establish its published
fuel economy ratings for different models. In analyzing the fuel
savings from alternative CAFE standards, NHTSA has previously adjusted
the actual fuel economy performance of each light truck model downward
from its rated value to reflect the expected size of this on-road fuel
[[Page 24405]]
economy ``gap.'' On December 27, 2006, EPA adopted changes to its
regulations on fuel economy labeling, which were intended to bring
vehicles' rated fuel economy levels closer to their actual on-road fuel
economy levels.\98\
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\98\ 71 FR 77871 (Dec. 27, 2006).
---------------------------------------------------------------------------
In its Final Rule, EPA estimated that actual on-road fuel economy
for light-duty vehicles averages 20 percent lower than published fuel
economy levels. For example, if the overall EPA fuel economy rating of
a light truck is 20 mpg, the on-road fuel economy actually achieved by
a typical driver of that vehicle is expected to be 16 mpg (20*.80).
NHTSA has employed EPA's revised estimate of this on-road fuel economy
gap in its analysis of the fuel savings resulting from alternative CAFE
standards proposed in this rulemaking.
d. Fuel Prices and the Value of Saving Fuel
Projected future fuel prices are a critical input into the
preliminary economic analysis of alternative CAFE standards, because
they determine the value of fuel savings both to new vehicle buyers and
to society. NHTSA relied on the most recent fuel price projections from
the U.S. Energy Information Administration's (EIA) Annual Energy
Outlook (AEO) for this analysis. Specifically, we used the AEO 2008
Early Release forecasts of inflation-adjusted (constant-dollar) retail
gasoline and diesel fuel prices, which represent the EIA's most up-to-
date estimate of the most likely course of future prices for petroleum
products.\99\ Federal government agencies generally use EIA's
projections in their assessments of future energy-related policies.
---------------------------------------------------------------------------
\99\ Energy Information Administration, Annual Energy Outlook
2008, Early Release, Reference Case Table 12. Available at http://www.eia.doe.gov/oiaf/aeo/pdf/aeotab_12.pdf (last accessed April 20,
2008). EIA says that it will release the complete version of AEO
2008--including the High and Low Price and other side cases--at the
end of April. The agency will use those figures for the final rule.
---------------------------------------------------------------------------
The retail fuel price forecasts presented in AEO 2008 span the
period from 2008 through 2030. Measured in constant 2006 dollars, the
Reference Case forecast of retail gasoline prices during calendar year
2020 is $2.36 per gallon, rising gradually to $2.51 by the year 2030
(these values include federal, state and local taxes). However, valuing
fuel savings over the 36-year maximum lifetime of light trucks assumed
in this analysis requires fuel price forecasts that extend through
2050, the last year during which a significant number of MY 2015
vehicles will remain in service.\100\ To obtain fuel price forecasts
for the years 2031 through 2050, the agency assumes that retail fuel
prices forecast in the Reference Case for 2030 will remain constant (in
2006 dollars) through 2050.
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\100\ The agency defines the maximum lifetime of vehicles as the
highest age at which more than 2 percent of those originally
produced during a model year remain in service. In the case of
light-duty trucks, for example, this age has typically been 36 years
for recent model years.
---------------------------------------------------------------------------
The value of fuel savings resulting from improved fuel economy/
reduced CO2 emissions to buyers of light-duty vehicles is
determined by the retail price of fuel, which includes federal, state,
and any local taxes imposed on fuel sales. Total taxes on gasoline
averaged $0.47 per gallon during 2006, while those levied on diesel
averaged $0.53. State fuel taxes are weighted by sales. Because fuel
taxes represent transfers of resources from fuel buyers to government
agencies, however, rather than real resources that are consumed in the
process of supplying or using fuel, their value must be deducted from
retail fuel prices to determine the value of fuel savings resulting
from more stringent CAFE standards to the U.S. economy as a whole.
In estimating the economy-wide or ``social'' value of fuel savings
of increasing CAFE/reducing CO2 emissions levels, NHTSA
assumes that current fuel taxes will remain constant in real or
inflation-adjusted terms over the lifetimes of the vehicles proposed to
be regulated. In effect, this assumes that the average value per gallon
of taxes on gasoline and diesel fuel levied by all levels of government
will rise at the rate of inflation over that period. This value is
deducted from each future year's forecast of retail gasoline and diesel
prices reported in AEO 2008 to determine the social value of each
gallon of fuel saved during that year as a result of improved fuel
economy/reduced CO2 emissions. Subtracting fuel taxes
results in a projected value for saving gasoline of $1.83 per gallon
during 2020, rising to $2.02 per gallon by the year 2030.
In conducting the preliminary uncertainty analysis of benefits and
costs from alternative CAFE standards, as required by OMB, NHTSA also
considered higher and lower forecasts of future fuel prices. The
results of the sensitivity runs can be found in the PRIA. EIA includes
``High Price Case'' and ``Low Price Case'' in AEO analyses that reflect
uncertainties regarding future levels of oil production, but those
cases are not meant to be probabilistic, and simply illustrate the
range of uncertainty that exists. Because AEO 2008 Early Release
included only a Reference Case of forecast of fuel prices and did not
include the High and Low Price cases, the agency estimated high and low
fuel prices corresponding to the AEO 2008 Reference Case forecast by
assuming that high and low price forecasts would bear the same
relationship to the Reference Case forecast as reported in AEO
2007.\101\ These alternative scenarios project retail gasoline prices
that range from a low of $1.94 per gallon to a high of $3.26 per gallon
during 2020, and from $2.03 to $3.70 per gallon during 2030. In
conjunction with our assumption that fuel taxes will remain constant in
real or inflation-adjusted terms over this period, these forecasts
imply social values of saving fuel ranging from $1.47 to $2.79 per
gallon during 2020, and from $1.56 to $3.23 per gallon in 2030.
---------------------------------------------------------------------------
\101\ Energy Information Administration, Annual Energy Outlook
2007, High Price Case, Table 12, http://www.eia.doe.gov/oiaf/aeo/pdf/aeohptab_12.pdf (last accessed April 20, 2008) and Energy
Information Administration, Annual Energy Outlook 2007 Low Price
Case, Table 12, http://www.eia.doe.gov/oiaf/aeo/pdf/aeolptab_12.pdf
(last accessed April 20, 2008).
---------------------------------------------------------------------------
EIA is widely-recognized as an impartial and authoritative source
of analysis and forecasts of U.S. energy production, consumption, and
prices. The agency has published annual forecasts of energy prices and
consumption levels for the U.S. economy since 1982 in its Annual Energy
Outlook (AEO). These forecasts have been widely relied upon by federal
agencies for use in regulatory analysis and for other purposes. Since
1994, EIA's annual forecasts have been based upon the agency's National
Energy Modeling System (NEMS), which includes detailed representation
of supply pathways, sources of demand, and their interaction to
determine prices for different forms of energy.
From 1982 through 1993, EIA's forecasts of world oil prices--the
primary determinant of prices for gasoline, diesel, and other
transportation fuels derived from petroleum--consistently overestimated
actual prices during future years, often very significantly. Of the
total of 119 forecasts of future world oil prices for the years 1985
through 2005 that EIA reported in its 1982-1993 editions of AEO, 109
overestimated the subsequent actual values for those years, on average
exceeding their corresponding actual values by 75 percent.
Since that time, however, EIA's forecasts of future world oil
prices show a more mixed record for accuracy. The 1994-2005 editions of
AEO reported 91 separate forecasts of world oil prices for the years
1995-2005, of which 33 have subsequently proven too high while the
[[Page 24406]]
remaining 58 have underestimated actual prices. The average absolute
error (i.e., regardless of its direction) of these forecasts has been
21 percent, but over- and underestimates have tended to offset one
another, so that on average EIA's more recent forecasts have
underestimated actual world oil prices by 7 percent. Although both its
overestimates and underestimates of future world oil prices for recent
years have often been large, the most recent editions of AEO have
significantly underestimated petroleum prices during those years for
which actual prices are now available.
However, NHTSA does not regard EIA's recent tendency to
underestimate future prices for petroleum and refined products or the
high level of current fuel prices as adequate justification to employ
forecasts that differ from the Reference Case forecast presented in
EIA's Annual Energy Outlook 2008 Revised Early Release. This is
particularly the case because this forecast has been revised upward
significantly since the initial release of AEO 2008, which in turn
represented a major upward revision from EIA's fuel price forecast
reported previously in AEO 2007. NHTSA also notes that retail gasoline
prices across the U.S. have averaged $2.94 per gallon (expressed in
2005 dollars) for the first three months of 2008, slightly below EIA's
recently revised forecast that gasoline prices will average $2.98 per
gallon (also in 2005 dollars) throughout 2008.
Comparing different forecasts of world oil prices also shows that
EIA's Reference Case forecast reported in Annual Energy Outlook 2007
(AEO 2007) was actually the highest of all six publicly-available
forecasts of world oil prices over the 2010-30 time horizon.\102\
Because world petroleum prices are the primary determinant of retail
prices for refined petroleum products such as transportation fuels,
this suggests that the Reference Case forecast of U.S. fuel prices
reported in AEO 2007 is likely to be the highest of those projected by
major forecasting services. Further, as indicated above, EIA's most
recent fuel price forecasts have been revised significantly upward from
those previously projected in AEO 2007.
---------------------------------------------------------------------------
\102\ See http://www.eia.doe.gov/oiaf/archive/aeo07/pdf/forecast.pdf, Table 19, p. 106.
---------------------------------------------------------------------------
e. Consumer Valuation of Fuel Economy and Payback Period
In estimating the value of fuel economy improvements that would
result from alternative CAFE standards to potential vehicle buyers,
NHTSA assumes that buyers value the resulting fuel savings over only
part of the expected lifetime of the vehicles they purchase.
Specifically, we assume that buyers value fuel savings over the first
five years of a new vehicle's lifetime, and that buyers behave as if
they do not discount the value of these future fuel savings. The five-
year figure represents the current average term of consumer loans to
finance the purchase of new vehicles. We recognize that the period over
which individual buyers finance new vehicle purchases may not
correspond to the time horizons they apply in valuing fuel savings from
higher fuel economy. However, NHTSA believes that five years represents
a reasonable estimate of the average period over which buyers who
finance their purchases of new vehicle receive--and thus must
recognize--the monetary value of future fuel savings resulting from
higher fuel economy.
The value of fuel savings over the first five years of a vehicle
model's lifetime that would result under each alternative fuel economy
standard is calculated using the projections of retail fuel prices
described above. It is then deducted from the technology costs incurred
by its manufacturer to produce the improvement in that model's fuel
economy estimated for each alternative standard, to determine the
increase in the ``effective price'' to buyers of that vehicle model.
The Volpe model uses these estimates of effective costs for increasing
the fuel economy of each vehicle model to identify the order in which
manufacturers would be likely to select models for the application of
fuel economy-improving technologies in order to comply with stricter
standards. The average value of the resulting increase in effective
cost from each manufacturer's simulated compliance strategy is also
used to estimate the impact of alternative standards on its total sales
for future model years.
However, it is important to recognize that NHTSA estimates the
aggregate value to the U.S. economy of fuel savings resulting from
alternative standards--or their ``social'' value--over the entire
expected lifetimes of vehicles manufactured under those standards,
rather than over this shorter ``payback period'' we assume for their
buyers. This is discussed directly below in section f on ``Vehicle
survival and use assumptions.'' As indicated previously, the maximum
vehicle lifetimes used to analyze the effects of alternative fuel
economy standards are estimated to be 25 years for automobiles and 36
years for light trucks.
f. Vehicle Survival and Use Assumptions
NHTSA's preliminary analysis of fuel/CO2 emissions
savings and related benefits from adopting alternative standards for MY
2011-2015 passenger cars and light trucks is based on estimates of the
resulting changes in fuel use over their entire lifetimes in the U.S.
vehicle fleet. The first step in estimating lifetime fuel consumption
by vehicles produced during a model year is to calculate the number
that is expected to remain in service during each future year after
they are produced and sold.\103\ This number is calculated by
multiplying the number of vehicles originally produced during a model
year by the proportion expected to remain in service at the age they
will have reached during each subsequent year, often referred to as a
``survival rate.''
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\103\ Vehicles are defined to be of age 1 during the calendar
year corresponding to the model year in which they are produced;
thus for example, model year 2000 vehicles are considered to be of
age 1 during calendar year 2000, age 1 during calendar year 2001,
and to reach their maximum age of 26 years during calendar year
2025. NHTSA considers the maximum lifetime of vehicles to be the age
after which less than 2% of the vehicles originally produced during
a model year remain in service. Applying these conventions to
vehicle registration data indicates that passenger cars have a
maximum age of 26 years, while light trucks have a maximum lifetime
of 36 years. See Lu, S., NHTSA, Regulatory Analysis and Evaluation
Division, ``Vehicle Survivability and Travel Mileage Schedules,''
DOT HS 809 952, 8-11 (January 2006). Available at http://www-nrd.nhtsa.dot.gov/pdf/nrd-30/NCSA/Rpts/2006/809952.pdf (last
accessed April 20, 2008).
---------------------------------------------------------------------------
The agency relies on projections of the number of passenger cars
and light trucks that will be produced during future years reported by
the EIA in its AEO Reference Case forecast.\104\ It uses updated values
of age-specific survival rates for cars and light trucks estimated from
yearly registration data for vehicles produced during recent model
years, to ensure that forecasts of the number of vehicles in use
reflect recent increases in the durability and expected life spans of
cars and light trucks.\105\
---------------------------------------------------------------------------
\104\ The most recent edition is Energy Information
Administration, Annual Energy Outlook 2008: Early Release. Available
at http://www.eia.doe.gov/oiaf/aeo/index.html (last accessed April
20, 2008).
\105\ Lu, S., NHTSA, Regulatory Analysis and Evaluation
Division, ``Vehicle Survivability and Travel Mileage Schedules,''
DOT HS 809 952, 8-11 (January 2006). Available at http://www-nrd.nhtsa.dot.gov/pdf/nrd-30/NCSA/Rpts/2006/809952.pdf (last
accessed April 20, 2008). These updated survival rates suggest that
the expected lifetimes of recent-model passenger cars and light
trucks are 13.8 and 14.5 years.
---------------------------------------------------------------------------
The next step in estimating fuel use is to calculate the total
number of miles that the cars and light trucks produced in each model
year affected by the proposed CAFE standards will be driven during each
year of their lifetimes. To
[[Page 24407]]
estimate total miles driven, the number of cars and light trucks
projected to remain in use during each future year (calculated as
described above) is multiplied by the average number of miles they are
expected to be driven at the age they will have reached in that year.
The agency estimated the average number of miles driven annually by
cars and light trucks of each age using data from the Federal Highway
Administration's 2001 National Household Transportation Survey
(NHTS).\106\
---------------------------------------------------------------------------
\106\ For a description of the Survey, see http://nhts.ornl.gov/quickStart.shtml (last accessed April 20, 2008).
---------------------------------------------------------------------------
Finally, fuel consumption during each year of a model year's
lifetime is estimated by dividing the total number of miles its
surviving vehicles are driven by the fuel economy they are expected to
achieve under each alternative CAFE standard. Each model year's total
lifetime fuel consumption is the sum of fuel use by the cars or light
trucks produced during that model year that are projected to remain in
use during each year of their maximum life spans. In turn, the savings
in a model year's lifetime fuel use that will result from each
alternative CAFE standard is the difference between its lifetime fuel
use at the fuel economy level it attains under the Baseline
alternative, and its lifetime fuel use at the higher fuel economy level
it is projected to achieve under that alternative standard.
To illustrate these calculations, the most recent edition of the
AEO projections that 8.52 million light trucks will be produced during
2012, and the agency's updated survival rates show that slightly more
than half of these --50.1 percent, or 4.27 million--are projected to
remain in service during the year 2027, when they will have reached an
age of 14 years. At that age, light trucks achieving the fuel economy
level required under the Baseline alternative are driven an average of
about 10,400 miles, so model year 2012 light trucks will be driven a
total of 44.4 billion miles (= 4.27 million surviving vehicles x 10,400
miles per vehicle) during 2027. Summing the results of similar
calculations for each year of their 36-year maximum lifetime, model
year 2012 light trucks will be driven a total of 1,502 billion miles
under the Baseline alternative. Under that alternative, they are
projected to achieve a test fuel economy level of 23.8 mpg, which
corresponds to actual on-road fuel economy of 19.0 mpg (= 23.8 mpg x 80
percent). Thus their lifetime fuel use under the Baseline alternative
is projected to be 79.0 billion gallons (= 1,502 billion miles divided
by 19.0 miles per gallon).
g. Growth in Total Vehicle Use
By assuming that the annual number of miles driven by cars and
light trucks at any age will remain constant over the future, NHTSA's
procedure for estimating the number of miles driven by cars and light
trucks over their lifetimes in effect assumes that all future growth in
total vehicle-miles driven stems from increases in the number of
vehicles in service, rather than from increases in the average number
of miles they are driven each year. Similarly, because the survival
rates used to estimate the number of cars and light trucks remaining in
service to various ages are assumed to remain fixed for future model
years, growth in the total number of cars and light trucks in use is
effectively assumed to result only from increasing sales of new
vehicles. In order to determine the validity of these assumptions, the
agency conducted a detailed analysis of the causes of recent growth in
car and light truck use.
From 1985 through 2005, the total number of miles driven (usually
referred to as vehicle-miles traveled, or VMT) by passenger cars
increased 35 percent, equivalent to a compound annual growth rate of
1.5 percent.\107\ During that time, the total number of passenger cars
registered for in the U.S. grew by about 0.3 percent annually, almost
exclusively as a result of increasing sales of new cars.\108\ Thus
growth in the average number of miles automobiles are driven each year
accounted for the remaining 1.2 percent (= 1.5 percent--0.3 percent)
annual growth in total automobile use.\109\
---------------------------------------------------------------------------
\107\ Calculated from data reported in FHWA, Highway Statistics,
Summary to 1995, Table vm201at http://www.fhwa.dot.gov/ohim/summary95/vm201a.xlw, (last accessed April 20, 2008).and annual
editions 1996-2005, Table VM-1 at http://www.fhwa.dot.gov/policy/ohpi/hss/hsspubs.htm (last accessed April 20, 2008).
\108\ A slight increase in the fraction of new passenger cars
remaining in service beyond age 10 has accounted for a small share
of growth in the U.S. automobile fleet. The fraction of new
automobiles remaining in service to various ages was computed from
R.L. Polk vehicle registration data for 1977 through 2005 by the
agency's Center for Statistical Analysis.
\109\ See supra note [2 above here]
---------------------------------------------------------------------------
Over this same period, total VMT by light trucks increased much
faster, growing at an annual rate of 5.1 percent. In contrast to the
causes of growth in automobile use, however, nearly all growth in light
truck use over these two decades was attributable to rapid increases in
the number of light trucks in use.\110\ In turn, growth in the size of
the nation's light truck fleet has resulted almost exclusively from
rising sales of new light trucks, since the fraction of new light
trucks remaining in service to various ages has remained stable or even
declined slightly over the past two decades.\111\
---------------------------------------------------------------------------
\110\ FHWA data show that growth in total miles driven by ``Two-
axle, four-tire trucks,'' a category that includes most or all light
trucks used as passenger vehicles, averaged 5.1% annually from 1985
through 2005. However, the number of miles light trucks are driven
each year averaged 11,114 during 2005, almost unchanged from the
average figure of 11,016 miles during 1985. Id.
\111\ Unpublished analysis of R.L. Polk vehicle registration
data conducted by NHTSA Center for Statistical Analysis, 2005.
---------------------------------------------------------------------------
On the basis of this analysis, the agency tentatively concludes
that its projections of future growth in light truck VMT account fully
for the primary cause of its recent growth, which has been the rapid
increase in sales of new light trucks during recent model years.
However, the assumption that average annual use of passenger cars will
remain fixed over the future appears to ignore an important source of
recent growth in their total use, the gradual increase in the average
number of miles they are driven. To the extent that this factor
continues to represent a significant source of growth in future
passenger car use, the agency's analysis is likely to underestimate the
reductions in fuel use and related environmental impacts resulting from
stricter CAFE standards for passenger cars.\112\ The agency plans to
account explicitly for potential future growth in average annual use of
both cars and light trucks in the analysis accompanying its Final Rule
establishing CAFE standards for model years 2011-15.
---------------------------------------------------------------------------
\112\ Assuming that average annual miles driven per automobile
will continue to increase over the future would increase the
agency's estimates of total lifetime mileage for MY 2011-18
passenger cars. Their estimated lifetime fuel use would also
increase under each alternative standard considered in this
analysis, but in inverse relation to their fuel economy. Thus
lifetime fuel use will increase by more under the No Increase
alternative than under any of the alternatives that would increase
passenger car CAFE standards, and by progressively less for the
alternatives that impose stricter standards. Taking account of this
factor would thus increase the agency's estimates of fuel savings
for those alternatives, and omitting it will cause the agency's
analysis to underestimate those fuel savings.
---------------------------------------------------------------------------
h. Accounting for the Rebound Effect of Higher Fuel Economy
The rebound effect refers to the tendency for owners to increase
the number of miles they drive a vehicle in response to an increase in
its fuel economy, as would result from more stringent fuel economy
standards. The rebound effect occurs because an increase in a vehicle's
fuel economy reduces its owner's fuel cost for driving each mile, which
is typically the largest
[[Page 24408]]
single component of the cost of operating a vehicle. Even with the
vehicle's higher fuel economy, this additional driving uses some fuel,
so the rebound effect will reduce the net fuel savings that result when
the fuel economy standards require manufacturers to increase fuel
economy. The rebound effect is usually expressed as the percentage by
which annual vehicle use increases when average fuel cost per mile
driven decreases in response to a change in the marginal cost of
driving an extra mile, due either an increase in fuel economy or a
reduction in the price of fuel.
The magnitude of the rebound effect is one of the determinants of
the actual fuel savings that are likely to result from adopting
stricter standards, and thus an important parameter affecting NHTSA's
evaluation of alternative standards for future model years. The rebound
effect can be measured directly by estimating the elasticity of vehicle
use with respect to fuel economy itself, or indirectly by the
elasticity of vehicle use with respect to fuel cost per mile
driven.\113\ When expressed as a positive percentage, either of these
parameters gives the fraction of fuel savings that would otherwise
result from adopting stricter standards, but is offset by the increase
in fuel consumption that results when vehicles with increased fuel
economy are driven more.
---------------------------------------------------------------------------
\113\ Fuel cost per mile is equal to the price of fuel in
dollars per gallon divided by fuel economy in miles per gallon, so
this figure declines when a vehicle's fuel economy increases.
---------------------------------------------------------------------------
Research on the magnitude of the rebound effect in light-duty
vehicle use dates to the early 1980s, and almost unanimously concludes
that a statistically significant rebound effect occurs when vehicle
fuel efficiency improves.\114\ The most common approach to estimating
its magnitude has been to analyze statistically household survey data
on vehicle use, fuel consumption, fuel prices (often obtained from
external sources), and other determinants of household travel demand to
isolate the response of vehicle use to higher fuel economy. Other
studies have relied on econometric analysis of annual U.S. data on
vehicle use, fuel economy, fuel prices, and other variables to identify
the response of total or average vehicle use to changes in fleet-wide
average fuel economy and its effect of fuel cost per mile driven. Two
recent studies analyzed yearly variation in vehicle ownership and use,
fuel prices, and fuel economy among individual states over an extended
time period in order to measure the response of vehicle use to changing
fuel economy.\115\
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\114\ Some studies estimate that the long-run rebound effect is
significantly larger than the immediate response to increased fuel
efficiency. Although their estimates of the adjustment period
required for the rebound effect to reach its long-run magnitude
vary, this long-run effect is most appropriate for evaluating the
fuel savings and emissions reductions resulting from stricter
standards that would apply to future model years.
\115\ In effect, these studies treat U.S. states as a data
``panel'' by applying appropriate estimation procedures to data
consisting of each year's average values of these variables for the
separate states.
---------------------------------------------------------------------------
An important distinction among studies of the rebound effect is
whether they assume that the effect is constant, or varies over time in
response to the absolute levels of fuel costs, personal income, or
household vehicle ownership. Most studies using aggregate annual data
for the U.S. assume a constant rebound effect, although some of these
studies test whether the effect can vary as changes in retail fuel
prices or average fuel economy alter fuel cost per mile driven. Many
studies using household survey data estimate significantly different
rebound effects for households owning varying numbers of vehicles,
although they arrive at differing conclusions about whether the rebound
effect is larger among households that own more vehicles. One recent
study using state-level data concludes that the rebound effect varies
directly in response to changes in personal income and the degree of
urbanization of U.S. cities, as well as fuel costs.
In order to arrive at a preliminary estimate of the rebound effect
for use in assessing the fuel savings, emissions reductions, and other
impacts of alternative standards, NHTSA reviewed 22 studies of the
rebound effect conducted from 1983 through 2005. We then conducted a
detailed analysis of the 66 separate estimates of the long-run rebound
effect reported in these studies, which is summarized in the table
below.\116\ As the table indicates, these 66 estimates of the long-run
rebound effect range from as low as 7 percent to as high as 75 percent,
with a mean value of 23 percent.
---------------------------------------------------------------------------
\116\ In some cases, NHTSA derived estimates of the overall
rebound effect from more detailed results reported in the studies.
For example, where studies estimated different rebound effects for
households owning different numbers of vehicles but did not report
an overall value, we computed a weighted average of the reported
values using the distribution of households among vehicle ownership
categories.
---------------------------------------------------------------------------
Limiting the sample to 50 estimates reported in the 17 published
studies of the rebound effect yields the same range but a slightly
higher mean (24 percent), while focusing on the authors' preferred
estimates from published studies narrows this range and lowers its
average only slightly. The median estimate of the rebound effect in all
three samples, which is generally regarded as a more reliable indicator
of their central tendency than the average because it is less
influenced by unusually small and large estimates, is 22 percent. As
Table V-4 indicates, approximately two-thirds of all estimates
reviewed, of all published estimates, and of authors' preferred
estimates fall in the range of 10-30 percent.
Table V-4.--Summary of Rebound Effect Estimates
----------------------------------------------------------------------------------------------------------------
Number of Range Distribution
Category of estimates Number of ------------------------------------------------------
studies estimates Low High Median Mean Std. Dev.
----------------------------------------------------------------------------------------------------------------
All Estimates...................... 22 66 7% 75% 22% 23% 14%
Published Estimates................ 17 50 7% 75% 22% 24% 14%
Authors' Preferred Estimates....... 17 17 9% 75% 22% 22% 15%
U.S. Time-Series Estimates........ 7 34 7% 45% 14% 18% 9%
Household Survey Estimates......... 13 23 9% 75% 31% 31% 16%
Pooled U.S. State Estimates........ 2 9 8% 58% 22% 25% 14%
Constant Rebound Effect (1)........ 15 37 7% 75% 20% 23% 16%
Variable Rebound Effect: (1).......
Reported Estimates................. 10 29 10% 45% 23% 23% 10%
Updated to 2006 (2)................ 10 29 6% 46% 16% 19% 12%
----------------------------------------------------------------------------------------------------------------
(1) Three studies estimate both constant and variable rebound effects.
[[Page 24409]]
(2) Reported estimates updated to reflect 2006 values of vehicle use, fuel prices, fleet fuel efficiency,
household income, and household vehicle ownership.
The type of data used and authors' assumption about whether the
rebound effect varies over time have important effects on its estimated
magnitude. The 34 estimates derived from analysis of U.S. annual time-
series data produce a median estimate of 14 percent for the long-run
rebound effect, while the median of 23 estimates based on household
survey data is more than twice as large (31 percent), and the median of
9 estimates based on pooled state data matches that of the entire
sample (22 percent). The 37 estimates assuming a constant rebound
effect produce a median of 20 percent, while the 29 originally reported
estimates of a variable rebound effect have a slightly higher median
value (23 percent).
In selecting a single value for the rebound effect to use in
analyzing alternative standards for future model years, NHTSA
tentatively attaches greater significance to studies that allow the
rebound effect to vary in response to changes in the various factors
that have been found to affect its magnitude. However, it is also
important to update authors' originally-reported estimates of variable
rebound effects to reflect current conditions. Recalculating the 29
original estimates of variable rebound effects to reflect current
(2006) values for retail fuel prices, average fuel economy, personal
income, and household vehicle ownership reduces their median estimate
to 16 percent.\117\ NHTSA also tentatively attaches greater
significance to the recent study by Small and Van Dender (2005), which
finds that the rebound effect tends to decline as average fuel economy,
personal income, and suburbanization of U.S. cities increase, but--in
accordance with previous studies--rises with increasing fuel
prices.\118\
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\117\ As an illustration, Small and Van Dender (2005) allow the
rebound effect to vary over time in response to changes in real per
capita income as well as average fuel cost per mile driven. While
their estimate for the entire interval (1966-2001) they analyze is
22 percent, updating this estimate using 2006 values of these
variables reduces the rebound effect to approximately 10 percent.
Similarly, updating Greene's 1992 original estimate of a 15 percent
rebound effect to reflect 2006 fuel prices and average fuel economy
reduces it to 6 percent. See David L. Greene, ``Vehicle Use and Fuel
Economy: How Big is the Rebound Effect?'' The Energy Journal, 13:1
(1992), 117-143. In contrast, the distribution of households among
vehicle ownership categories in the data samples used by Hensher et
al. (1990) and Greene et al. (1999) are nearly identical to the most
recent estimates for the U.S., so updating their original estimates
to current U.S. conditions changes them very little. See David A.
Hensher, Frank W. Milthorpe, and Nariida C. Smith, ``The Demand for
Vehicle Use in the Urban Household Sector: Theory and Empirical
Evidence,'' Journal of Transport Economics and Policy, 24:2 (1990),
119-137; and David L. Greene, James R. Kahn, and Robert C. Gibson,
``Fuel Economy Rebound Effect for Household Vehicles,'' The Energy
Journal, 20:3 (1999), 1-21.
\118\ In the most recent light truck CAFE rulemaking, NHTSA
chose not to preference the Small and Van Dender study over other
published estimates of the value of the rebound effect, stating that
since it ``remains an unpublished working paper that has not been
subjected to formal peer review, ``the agency does not yet consider
the estimates it provides to have the same credibility as the
published and widely-cited estimates it relied upon.'' See 71 FR
17633 (Apr. 6, 2006). The study has subsequently been published and
peer-reviewed, so NHTSA is now prepared to ``consider it in
developing its own estimate of the rebound effect for use in
subsequent CAFE rulemakings.''
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Considering the empirical evidence on the rebound effect as a
whole, but according greater importance to the updated estimates from
studies allowing the rebound effect to vary--particularly the Small and
Van Dender study--NHTSA has selected a rebound effect of 15 percent to
evaluate the fuel savings and other effects of alternative standards
for the time period covered by this rulemaking. However, we do not
believe that evidence of the rebound effect's dependence on fuel prices
or household income is sufficiently convincing to justify allowing its
future value to vary in response to forecast changes in these
variables. A range extending from 10 percent to at least 20 percent--
and perhaps as high as 25 percent--appears to be appropriate for the
required analysis of the uncertainty surrounding these estimates. While
the agency selected 15 percent, it also ran sensitivity analyses at 10
and 20 percent. The results are shown in the PRIA.
i. Benefits From Increased Vehicle Use
The increase in vehicle use from the rebound effect provides
additional benefits to their owners, who may make more frequent trips
or travel farther to reach more desirable destinations. This additional
travel provides benefits to drivers and their passengers by improving
their access to social and economic opportunities away from home. As
evidenced by their decisions to make more frequent or longer trips when
improved fuel economy reduces their costs for driving, the benefits
from this additional travel exceed the costs drivers and passengers
incur in making more frequent or longer trips.
The amount by which the benefits from this additional travel exceed
its costs (for fuel and other operating expenses) measures the net
benefits that drivers receive from the additional travel, usually
referred to as increased consumer surplus. NHTSA's analysis estimates
the economic value of the increased consumer surplus provided by added
driving using the conventional approximation, which is one half of the
product of the decline in vehicle operating costs per vehicle-mile and
the resulting increase in the annual number of miles driven. The
magnitude of these benefits represents a small fraction of the total
benefits from the alternative fuel economy standards considered.
j. Added Costs From Congestion, Crashes and Noise
Although it provides some benefits to drivers, increased vehicle
use associated with the rebound effect also contributes to increased
traffic congestion, motor vehicle accidents, and highway noise.
Depending on how the additional travel is distributed over the day and
on where it takes place, additional vehicle use can contribute to
traffic congestion and delays by increasing traffic volumes on
facilities that are already heavily traveled during peak periods. These
added delays impose higher costs on drivers and other vehicle occupants
in the form of increased travel time and operating expenses. Because
drivers do not take these added costs into account in deciding when and
where to travel, they must be accounted for separately as a cost of the
added driving associated with the rebound effect.
Increased vehicle use due to the rebound effect may also increase
the costs associated with traffic accidents. Drivers may take account
of the potential costs they (and their passengers) face from the
possibility of being involved in an accident when they decide to make
additional trips. However, they probably do not consider all of the
potential costs they impose on occupants of other vehicles and on
pedestrians when accidents occur, so any increase in these ``external''
accident costs must be considered as another cost of additional
rebound-effect driving. Like increased delay costs, any increase in
these external accident costs caused by added driving is likely to
depend on the traffic conditions under which it takes place, since
accidents are more frequent in heavier traffic (although their severity
may be reduced by the slower speeds at which heavier traffic typically
moves).
Finally, added vehicle use from the rebound effect may also
increase traffic noise. Noise generated by vehicles
[[Page 24410]]
causes inconvenience, irritation, and potentially even discomfort to
occupants of other vehicles, to pedestrians and other bystanders, and
to residents or occupants of surrounding property. Because these
effects are unlikely to be taken into account by the drivers whose
vehicles contribute to traffic noise, they represent additional
externalities associated with motor vehicle use. Although there is
considerable uncertainty in measuring their value, any increase in the
economic costs of traffic noise resulting from added vehicle use must
be included together with other increased external costs from the
rebound effect.
NHTSA relies on estimates of congestion, accident, and noise costs
caused by automobiles and light trucks developed by the Federal Highway
Administration to estimate the increased external costs caused by added
driving due to the rebound effect.\119\ These estimates are intended to
measure the increases in costs from added congestion, property damages
and injuries in traffic accidents, and noise levels caused by
automobiles and light trucks that are borne by persons other than their
drivers (or ``marginal'' external costs). Updated to 2006 dollars,
FHWA's ``Middle'' estimates for marginal congestion, accident, and
noise costs caused by automobile use amount to 5.2 cents, 2.3 cents,
and 0.1 cents per vehicle-mile (for a total of 7.6 cents per mile),
while those for pickup trucks and vans are 4.7 cents, 2.5 cents, and
0.1 cents per vehicle-mile (for a total of 7.3 cents per mile).\120\,
\121\ These costs are multiplied by the annual increases in automobile
and light truck use from the rebound effect to yield the estimated
increases in congestion, accident, and noise externality costs during
each future year.
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\119\ These estimates were developed by FHWA for use in its 1997
Federal Highway Cost Allocation Study; see http://www.fhwa.dot.gov/policy/hcas/final/index.htm (last accessed April 20, 2008).
\120\ See Federal Highway Administration, 1997 Federal Highway
Cost Allocation Study, http://www.fhwa.dot.gov/policy/hcas/final/index.htm, Tables V-22, V-23, and V-24 (last accessed April 20,
2008).
\121\ The Federal Highway Administration's estimates of these
costs agree closely with some other recent estimates. For example,
recent published research conducted by Resources for the Future
(RFF) estimates marginal congestion and external accident costs for
increased light-duty vehicle use in the U.S. to be 3.5 and 3.0 cents
per vehicle-mile in year-2002 dollars. See Ian W.H. Parry and
Kenneth A. Small, ``Does Britain or the U.S. Have the Right Gasoline
Tax?'' Discussion Paper 02-12, Resources for the Future, 19 and
Table 1 (March 2002). Available at http://www.rff.org/rff/Documents/RFF-DP-02-12.pdf (last accessed April 20, 2008).
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k. Petroleum Consumption and Import Externalities
U.S. consumption and imports of petroleum products also impose
costs on the domestic economy that are not reflected in the market
price for crude petroleum, or in the prices paid by consumers of
petroleum products such as gasoline. In economics literature on this
subject, these costs include (1) higher prices for petroleum products
resulting from the effect of U.S. oil import demand on the world oil
price; (2) the risk of disruptions to the U.S. economy caused by sudden
reductions in the supply of imported oil to the U.S.; and (3) expenses
for maintaining a U.S. military presence to secure imported oil
supplies from unstable regions, and for maintaining the strategic
petroleum reserve (SPR) to cushion against resulting price
increases.\122\ Higher U.S. imports of crude oil or refined petroleum
products increase the magnitude of these external economic costs, thus
increasing the true economic cost of supplying transportation fuels
above the resource costs of producing them. Conversely, reducing U.S.
imports of crude petroleum or refined fuels or reducing fuel
consumption can reduce these external costs. Any reduction in their
total value that results from improved light truck fuel economy
represents an economic benefit of setting more stringent CAFE standards
in addition to the value of fuel savings and emissions reductions
itself.
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\122\ See, e.g., Bohi, Douglas R. and W. David Montgomery
(1982). Oil Prices, Energy Security, and Import Policy Washington,
DC: Resources for the Future, Johns Hopkins University Press; Bohi,
D. R., and M. A. Toman (1993). ``Energy and Security: Externalities
and Policies,'' Energy Policy 21:1093-1109; and Toman, M. A. (1993).
``The Economics of Energy Security: Theory, Evidence, Policy,'' in
A. V. Kneese and J. L. Sweeney, eds. (1993). Handbook of Natural
Resource and Energy Economics, Vol. III. Amsterdam: North-Holland,
pp. 1167-1218.
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Increased U.S. oil imports can impose higher costs on all
purchasers of petroleum products, because the U.S. is a sufficiently
large purchaser of foreign oil supplies that changes in U.S. demand can
affect the world price. The effect of U.S. petroleum imports on world
oil prices is determined by the degree of OPEC monopoly power over
global oil supplies, and the degree of monopsony power over world oil
demand exerted by the U.S. The combination of these two factors means
that increases in domestic demand for petroleum products that are met
through higher oil imports can cause the price of oil in the world
market to rise, which imposes economic costs on all other purchasers in
the global petroleum market in excess of the higher prices paid by U.S.
consumers.\123\ Conversely, reducing U.S. oil imports can lower the
world petroleum price, and thus generate benefits to other oil
purchasers by reducing these ``monopsony costs.''
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\123\ For example, if the U.S. imports 10 million barrels of
petroleum per day at a world oil price of $20 per barrel, its total
daily import bill is $200 million. If increasing imports to 11
million barrels per day causes the world oil price to rise to $21
per barrel, the daily U.S. import bill rises to $231 million. The
resulting increase of $31 million per day ($231 million minus $200
million) is attributable to increasing daily imports by only 1
million barrels. This means that the incremental cost of importing
each additional barrel is $31, or $10 more than the newly-increased
world price of $21 per barrel. This additional $10 per barrel
represents a cost imposed on all other purchasers in the global
petroleum market by U.S. buyers, in excess of the price they pay to
obtain those additional imports.
---------------------------------------------------------------------------
Although the degree of current OPEC monopoly power is subject to
debate, the consensus appears to be that OPEC remains able to exercise
some degree of control over the response of world oil supplies to
variation in world oil prices, so that the world oil market does not
behave completely competitively.\124\ The extent of U.S. monopsony
power is determined by a complex set of factors including the relative
importance of U.S. imports in the world oil market, and the sensitivity
of petroleum supply and demand to its world price among other
participants in the international oil market. Most evidence appears to
suggest that variation in U.S. demand for imported petroleum continues
to exert some influence on world oil prices, although this influence
appears to be limited.\125\
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\124\ For a summary see Leiby, Paul N., Donald W. Jones, T.
Randall Curlee, and Russell Lee, Oil Imports: An Assessment of
Benefits and Costs, ORNL-6851, Oak Ridge National Laboratory,
November 1, 1997, 17. Available at http://pzl1.ed.ornl.gov/ORNL6851.pdf (last accessed April 20, 2008).
\125\ Id. 18-19.
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The second component of external economic costs imposed by U.S.
petroleum imports arises partly because an increase in oil prices
triggered by a disruption in the supply of imported oil reduces the
level of output that the U.S. economy can produce. The reduction in
potential U.S. economic output depends on the extent and duration of
the increases in petroleum product prices that result from a disruption
in the supply of imported oil, as well as on whether and how rapidly
these prices return to pre-disruption levels. Even if prices for
imported oil return completely to their original levels, however,
economic output will be at least temporarily reduced from the level
that would have been possible without a disruption in oil supplies.
Because supply disruptions and resulting price increases tend to
occur
[[Page 24411]]
suddenly rather than gradually, they can also impose costs on
businesses and households for adjusting their use of petroleum products
more rapidly than if the same price increase had occurred gradually
over time. These adjustments impose costs because they temporarily
reduce economic output even below the level that would ultimately be
reached once the U.S. economy completely adapted to higher petroleum
prices. The additional costs to businesses and households reflect their
inability to adjust prices, output levels, and their use of energy and
other resources quickly and smoothly in response to rapid changes in
prices for petroleum products.
Since future disruptions in foreign oil supplies are an uncertain
prospect, each of these disruption costs must be adjusted by the
probability that the supply of imported oil to the U.S. will actually
be disrupted. The ``expected value'' of these costs-- the product of
the probability that an oil import disruption will occur and the costs
of reduced economic output and abrupt adjustment to sharply higher
petroleum prices--is the appropriate measure of their magnitude. Any
reduction in these expected disruption costs resulting from a measure
that lowers U.S. oil imports represents an additional economic benefit
beyond the direct value of savings from reduced purchases of petroleum
products.
While the vulnerability of the U.S. economy to oil price shocks is
widely thought to depend on total petroleum consumption rather than on
the level of oil imports, variation in imports is still likely to have
some effect on the magnitude of price increases resulting from a
disruption of import supply. In addition, changing the quantity of
petroleum imported into the U.S. may also affect the probability that
such a disruption will occur. If either the size of the likely price
increase or the probability that U.S. oil supplies will be disrupted is
affected by oil imports, the expected value of the costs from a supply
disruption will also depend on the level of imports.
Businesses and households use a variety of market mechanisms,
including oil futures markets, energy conservation measures, and
technologies that permit rapid fuel switching to ``insure'' against
higher petroleum prices and reduce their costs for adjusting to sudden
price increases. While the availability of these market mechanisms has
likely reduced the potential costs of disruptions to the supply of
imported oil, consumers of petroleum products are unlikely to take
account of costs they impose on others, so these costs are probably not
reflected in the price of imported oil. Thus changes in oil import
levels probably continue to affect the expected cost to the U.S.
economy from potential oil supply disruptions, although this component
of oil import costs is likely to be significantly smaller than
estimated by studies conducted in the wake of the oil supply
disruptions during the 1970s.
The third component of the external economic costs of importing oil
into the U.S. includes government outlays for maintaining a military
presence to secure the supply of oil imports from potentially unstable
regions of the world and to protect against their interruption. Some
analysts also include outlays for maintaining the U.S. Strategic
Petroleum Reserve (SPR), which is intended to cushion the U.S. economy
against the consequences of disruption in the supply of imported oil,
as additional costs of protecting the U.S. economy from oil supply
disruptions.
NHTSA believes that while costs for U.S. military security may vary
over time in response to long-term changes in the actual level of oil
imports into the U.S., these costs are unlikely to decline in response
to any reduction in U.S. oil imports resulting from raising future CAFE
standards for passenger cars and light trucks. U.S. military activities
in regions that represent vital sources of oil imports also serve a
broader range of security and foreign policy objectives than simply
protecting oil supplies, and as a consequence are unlikely to vary
significantly in response to changes in the level of oil imports
prompted by higher standards.
Similarly, while the optimal size of the SPR from the standpoint of
its potential influence on domestic oil prices during a supply
disruption may be related to the level of U.S. oil consumption and
imports, its actual size has not appeared to vary in response to recent
changes in oil imports. Thus while the budgetary costs for maintaining
the Reserve are similar to other external costs in that they are not
likely to be reflected in the market price for imported oil, these
costs do not appear to have varied in response to changes in oil import
levels.
In analyzing benefits from its recent actions to increase light
truck CAFE standards for model years 2005-07 and 2008-11, NHTSA relied
on a 1997 study by Oak Ridge National Laboratory (ORNL) to estimate the
value of reduced economic externalities from petroleum consumption and
imports.\126\ More recently, ORNL updated its estimates of the value of
these externalities, using the analytic framework developed in its
original 1997 study in conjunction with recent estimates of the
variables and parameters that determine their value.\127\ These include
world oil prices, current and anticipated future levels of OPEC
petroleum production, U.S. oil import levels, the estimated
responsiveness of oil supplies and demands to prices in different
regions of the world, and the likelihood of oil supply disruptions.
ORNL prepared its updated estimates of oil import externalities for use
by EPA in evaluating the benefits of reductions in U.S. oil consumption
and imports expected to result from its Renewable Fuel Standard Rule of
2007 (RFS).\128\
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\126\ Leiby, Paul N., Donald W. Jones, T. Randall Curlee, and
Russell Lee, Oil Imports: An Assessment of Benefits and Costs, ORNL-
6851, Oak Ridge National Laboratory, November 1, 1997. Available at
http://pzl1.ed.ornl.gov/ORNL6851.pdf (last accessed April 20, 2008).
\127\ Leiby, Paul N. ``Estimating the Energy Security Benefits
of Reduced U.S. Oil Imports,'' Oak Ridge National Laboratory, ORNL/
TM-2007/028, Revised July 23, 2007. Available at http://pzl1.ed.ornl.gov/energysecurity.html (click on link below ``Oil
Imports Costs and Benefits'') (last accessed April 20, 2008).
\128\ 72 FR 23899 (May 1, 2007).
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The updated ORNL study was subjected to a detailed peer review by
experts selected by EPA, and its estimates of the value of oil import
externalities were subsequently revised to reflect their comments and
recommendations.\129\ Specifically, reviewers recommended that ORNL
increase its estimates of the sensitivity of oil supply by non-OPEC
producers and oil demand by nations other than the U.S. to changes in
the world oil price, as well as reduce its estimate of the sensitivity
of U.S. gross domestic product (GDP) to potential sudden increases in
world oil prices.
---------------------------------------------------------------------------
\129\ Peer Review Report Summary: Estimating the Energy Security
Benefits of Reduced U.S. Oil Imports, ICF, Inc., September 2007.
---------------------------------------------------------------------------
After making the revisions recommended by peer reviewers, ORNL's
updated estimates of the monopsony cost associated with U.S. oil
imports range from $5.22 to $9.68 per barrel, with a most likely
estimate of $7.41 per barrel. These estimates imply that each gallon of
fuel saved as a result of adopting higher CAFE standards will reduce
the monopsony costs of U.S. oil imports by $0.124 to $0.230 per gallon,
with the actual value most likely to be $0.176 per gallon saved. ORNL's
updated and revised estimates of the increase in the expected costs
associated with oil supply disruptions to the U.S. and the resulting
rapid increase in prices for petroleum products amount to $4.54 to
$5.84 per barrel, although its
[[Page 24412]]
most likely estimate of $4.59 per barrel is very close to the lower end
of this range. According to these estimates, each gallon of fuel saved
will reduce the expected costs disruptions to the U.S. economy by
$0.108 to $0.139, with the actual value most likely to be $0.109 per
gallon.
The updated and revised ORNL estimates suggest that the combined
reduction in monopsony costs and expected costs to the U.S. economy
from oil supply disruptions resulting from lower fuel consumption total
$0.232 to $0.370 per gallon, with a most likely estimate of $0.286 per
gallon. This represents the additional economic benefit likely to
result from each gallon of fuel saved by higher CAFE standards, beyond
the savings in resource costs for producing and distributing each
gallon of fuel saved. NHTSA employs this midpoint estimate in its
analysis of the benefits from fuel savings projected to result from
alternative CAFE standards for model years 2011-15. It also analyzes
the effect on these benefits estimates from variation in this value
over the range from $0.232 to $0.370 per gallon of fuel saved.
NHTSA's analysis of benefits from alternative CAFE standards does
not include cost savings from either reduced outlays for U.S. military
operations or maintaining a smaller SPR among the external benefits of
reducing gasoline consumption and petroleum imports by means of
tightening future standards. This view concurs with that of both the
original ORNL study of economic costs from U.S. oil imports and its
recent update, which conclude that savings in government outlays for
these purposes are unlikely to result from reductions in consumption of
petroleum products and oil imports on the scale of those likely to
result from the alternative increases in CAFE standards considered for
model years 2011-15.
l. Air Pollutant Emissions
(i) Impacts on Criteria Air Pollutant Emissions
While reductions in domestic fuel refining and distribution that
result from lower fuel consumption will reduce U.S. emissions of
criteria pollutants, additional vehicle use associated with the rebound
effect from higher fuel economy will increase emissions of these
pollutants. Thus the net effect of stricter CAFE standards on emissions
of each criteria pollutant depends on the relative magnitudes of its
reduced emissions in fuel refining and distribution, and increases in
its emissions from vehicle use. Because the relationship between
emissions rates (emissions per gallon refined of fuel or mile driven)
in fuel refining and vehicle use is different for each criteria
pollutant, the net effect of fuel savings from the proposed standards
on total emissions of each pollutant is likely to differ. Criteria air
pollutants emitted by vehicles and during fuel production include
carbon monoxide (CO), hydrocarbon compounds (usually referred to as
``volatile organic compounds,'' or VOC), nitrogen oxides
(NOX), fine particulate matter (PM2.5), and sulfur oxides
(SOX).
The increase in emissions of these pollutants from additional
vehicle use due to the rebound effect is estimated by multiplying the
increase in total miles driven by vehicles of each model year and age
by age-specific emission rates per vehicle-mile for each pollutant.
NHTSA developed these emission rates using EPA's MOBILE6.2 motor
vehicle emissions factor model.\130\ Emissions of these pollutants also
occur during crude oil extraction and transportation, fuel refining,
and fuel storage and distribution. The reduction in total emissions
from each of these sources thus depends on the extent to which fuel
savings result in lower imports of refined fuel, or in reduced domestic
fuel refining. To a lesser extent, they also depend on whether any
reduction in domestic gasoline refining is translated into reduced
imports of crude oil or reduced domestic extraction of petroleum.
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\130\ U.S. Environmental Protection Agency, MOBILE6 Vehicle
Emission Modeling Software, available at http://www.epa.gov/otaq/m6.htm#m60 (last accessed April 20, 2008).
---------------------------------------------------------------------------
Based on analysis of changes in U.S. gasoline imports and domestic
gasoline consumption forecast in AEO's 2008 Early Release, NHTSA
tentatively estimates that 50 percent of fuel savings resulting from
higher CAFE standards will result in reduced imports of refined
gasoline, while the remaining 50 percent will reduce domestic fuel
refining.\131\ The reduction in domestic refining is assumed to leave
its sources of crude petroleum unchanged from the mix of 90 percent
imports and 10 percent domestic production projected by AEO.
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\131\ Estimates of the response of gasoline imports and domestic
refining to fuel savings from stricter standards are variable and
highly uncertain, but our preliminary analysis indicates that under
any reasonable assumption about these responses, the magnitude of
the net change in criteria pollutant emissions (accounting for both
the rebound effect and changes in refining emissions) is extremely
low relative to their current total.
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NHTSA proposes to estimate reductions in criteria pollutant
emissions from gasoline refining and distribution using emission rates
obtained from Argonne National Laboratories' Greenhouse Gases and
Regulated Emissions in Transportation (GREET) model.\132\ The GREET
model provides separate estimates of air pollutant emissions that occur
in four phases of fuel production and distribution: crude oil
extraction, crude oil transportation and storage, fuel refining, and
fuel distribution and storage.\133\ We tentatively assume that
reductions in imports of refined fuel would reduce criteria pollutant
emissions during fuel storage and distribution only. Reductions in
domestic fuel refining using imported crude oil as a feedstock are
tentatively assumed to reduce emissions during crude oil transportation
and storage, as well as during gasoline refining, distribution, and
storage, because less of each of these activities would be occurring.
Similarly, reduced domestic fuel refining using domestically-produced
crude oil is tentatively assumed to reduce emissions during all phases
of gasoline production and distribution.\134\
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\132\ Argonne National Laboratories, The Greenhouse Gas and
Regulated Emissions from Transportation (GREET) Model, Version 1.8,
June 2007, available at http://www.transportation.anl.gov/software/GREET/index.html (last accessed April 20, 2008).
\133\ Emissions that occur during vehicle refueling at retail
gasoline stations (primarily evaporative emissions of volatile
organic compounds, or VOCs) are already accounted for in the
``tailpipe'' emission factors used to estimate the emissions
generated by increased light truck use. GREET estimates emissions in
each phase of gasoline production and distribution in mass per unit
of gasoline energy content; these factors are then converted to mass
per gallon of gasoline using the average energy content of gasoline.
\134\ In effect, this assumes that the distances crude oil
travels to U.S. refineries are approximately the same regardless of
whether it travels from domestic oilfields or import terminals, and
that the distances that gasoline travels from refineries to retail
stations are approximately the same as those from import terminals
to gasoline stations.
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The net changes in emissions of each criteria pollutant are
calculated by adding the increases in their emissions that result from
increased vehicle use and the reductions that result from lower
domestic fuel refining and distribution. The net change in emissions of
each criteria pollutant is converted to an economic value using
estimates of the economic costs per ton emitted (which result primarily
from damages to human health) developed by EPA and submitted to the
federal Office of Management and Budget for review. For certain
criteria pollutants, EPA estimates different per-ton costs for
emissions from vehicle use than for emissions of the same pollutant
during fuel production, reflecting differences in their typical
geographic distributions,
[[Page 24413]]
contributions to ambient pollution levels, and resulting population
exposure.
(ii) Reductions in CO2 Emissions
Fuel savings from stricter CAFE standards also result in lower
emissions of carbon dioxide (CO2), the main greenhouse gas emitted as a
result of refining, distribution, and use of transportation fuels.\135\
Lower fuel consumption reduces carbon dioxide emissions directly,
because the primary source of transportation-related CO2
emissions is fuel combustion in internal combustion engines. NHTSA
tentatively estimates reductions in carbon dioxide emissions resulting
from fuel savings by assuming that the entire carbon content of
gasoline, diesel, and other fuels is converted to carbon dioxide during
the combustion process.\136\
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\135\ For purposes of this rulemaking, NHTSA estimated emissions
of vehicular CO2 emissions, but did not estimate vehicular emissions
of methane, nitrous oxide, and hydroflourocarbons. Methane and
nitrous oxide account for less than 3 percent of the tailpipe GHG
emissions from passenger cars and light trucks, and CO2
emissions accounted for the remaining 97 percent. Of the total
(including non-tailpipe) GHG emissions from passenger cars and light
trucks, tailpipe CO2 represents about 93.1 percent,
tailpipe methane and nitrous oxide represent about 2.4 percent, and
hydroflourocarbons (i.e., air conditioner leaks) represent about 4.5
percent. Calculated from U.S CO2. EPA, Inventory of U.S>
Greenhouse Gas Emissions and Sinks 1990-2006, EPA430-R-08-05, April
15, 2008. Available at http://www.epa.gov/climatechange/emissions/downloads/08_CR.pdf, Table 215. (Last accessed April 20, 2008.)
\136\ This assumption results in a slight overestimate of carbon
dioxide emissions, since a small fraction of the carbon content of
gasoline is emitted in the forms of carbon monoxide and unburned
hydrocarbons. However, the magnitude of this overestimate is likely
to be extremely small. This approach is consistent with the
recommendation of the Intergovernmental Panel on Climate Change for
``Tier 1'' national greenhouse gas emissions inventories. Cf.
Intergovernmental Panel on Climate Change, 2006 Guidelines for
National Greenhouse Gas Inventories, Volume 2, Energy, p. 3.16.
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Reduced fuel consumption also reduces carbon dioxide emissions that
result from the use of carbon-based energy sources during fuel
production and distribution.\137\ NHTSA currently estimates the
reductions in CO2 emissions during each phase of fuel
production and distribution using CO2 emission rates
obtained from the GREET model, using the previous assumptions about how
fuel savings are reflected in reductions in each phase. The total
reduction in CO2 emissions from the improvement in fuel
economy under each alternative CAFE standard is the sum of the
reductions in emissions from reduced fuel use and from lower fuel
production and distribution.
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\137\ NHTSA did not, for purposes of this proposed rulemaking,
attempt to estimate changes in ``upstream'' emissions of greenhouse
gases (GHGs) other than CO2. This was because carbon
dioxide from final combustion itself accounts for nearly 97 percent
of the total CO2-equivalent emissions from petroleum
production and use, even with other GHGs that result from those
activities (principally methane and nitrous oxide) weighted by their
higher global warming potentials (GWPs) relative to CO2.
Calculated from U.S. EPA, Inventory of U.S. Greenhouse Gas Emissions
and Sinks 1990-2006, EPA430-R-08-05, April 15, 2008. Available at
http://epa.gov/climatechange/emissions/downloads/08_CR.pdf, Tables
3-3, 3-39, and 3-41. (Last accessed April 20, 2008.)
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NHTSA has not attempted to estimate changes in emissions of other
greenhouse gases, in particular methane, nitrous oxide, and
hydrofluorocarbons. The agency invites comment on the importance and
potential implications of doing so under NEPA.
(iii) Economic value of reductions in CO2 emissions
NHTSA has taken the economic benefits of reducing CO2
emission into account in this rulemaking, both in developing proposed
CAFE standards and in assessing the economic benefits of each
alternative that was considered. As noted above, the Ninth Circuit
found in CBD that NHTSA had been arbitrary and capricious in deciding
not to monetize the benefit of reducing CO2 emissions,
saying that the agency had not substantiated the conclusion in its
April 2006 final rule that the appropriate course was not to monetize
(i.e., quantify the value of) carbon emissions reduction at all.
To this end, NHTSA reviewed published estimates of the ``social
cost of carbon emissions'' (SCC). The SCC refers to the marginal cost
of additional damages caused by the increase in expected climate
impacts resulting from the emission of each additional metric ton of
carbon, which is emitted in the form of CO2.\138\ It is
typically estimated as the net present value of the impact over some
time period (100 years or longer) of one additional ton of carbon
emitted into the atmosphere. Because accumulated concentrations of
greenhouse gases in the atmosphere and the projected impacts on global
climate are increasing over time, the economic damages resulting from
each additional ton of CO2 emissions in future years are
believed to be greater as a result. Thus estimates of the SCC are
typically reported for a specific year, and these estimates are
generally larger for emissions in more distant future years.
---------------------------------------------------------------------------
\138\ Carbon itself accounts for 12/44, or about 27%, of the
mass of carbon dioxide (12/44 is the ratio of the molecular weight
of carbon to that of carbon dioxide). Thus each ton of carbon
emitted is associated with 44/12, or 3.67, tons of carbon dioxide
emissions. Estimates of the SCC are typically reported in dollars
per ton of carbon, and must be divided by 3.67 to determine their
equivalent value per ton of carbon dioxide emissions.
---------------------------------------------------------------------------
There is substantial variation among different authors' estimates
of the SCC, much of which can be traced to differences in their
underlying assumptions about several variables. These include the
sensitivity of global temperatures and other climate attributes to
increasing atmospheric concentrations of greenhouse gases, discount
rates applied to future economic damages from climate change, whether
damages sustained by developing regions of the globe should be weighted
more heavily than damages to developed nations, how long climate
changes persist once they occur, and the economic valuation of specific
climate impacts.\139\
---------------------------------------------------------------------------
\139\ For a discussion of these factors, see Yohe, G.W., R.D.
Lasco, Q.K. Ahmad, N.W. Arnell, S.J. Cohen, C. Hope, A.C. Janetos
and R.T. Perez, 2007: Perspectives on climate change and
sustainability. Climate Change 2007: Impacts, Adaptation and
Vulnerability. Contribution of Working Group II to the Fourth
Assessment Report of the Intergovernmental Panel on Climate Change,
M.L. Parry, O.F. Canziani, J.P. Palutikof, P.J. van der Linden and
C.E. Hanson, Eds., Cambridge University Press, Cambridge, UK, pp.
821-824.
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Taken as a whole, recent estimates of the SCC may underestimate the
true damage costs of carbon emissions because they often exclude
damages caused by extreme weather events or climate response scenarios
with low probabilities but potentially extreme impacts, and may
underestimate the climate impacts and damages that could result from
multiple stresses on the global climatic system. At the same time,
however, many studies fail to consider potentially beneficial impacts
of climate change, and do not adequately account for how future
development patterns and adaptations could reduce potential impacts
from climate change or the economic damages they cause.
Given the uncertainty surrounding estimates of the SCC, the use of
any single study may not be advisable since its estimate of the SCC
will depend on many assumptions made by its authors. The Working Group
II's contribution to the Fourth Assessment Report of the United Nations
Intergovernmental Panel on Climate Change (IPCC)\140\ notes that:
---------------------------------------------------------------------------
\140\ Climate Change 2007--Impacts, Adaptation and
Vulnerability, Contribution of Working Group II to the Fourth
Assessment Report of the IPCC, 17. Available at http://www.ipcc-wg2.org (last accessed ).
The large ranges of SCC are due in the large part to differences
in assumptions regarding climate sensitivity, response lags, the
treatment of risk and equity, economic and non-economic impacts, the
---------------------------------------------------------------------------
inclusion of potentially catastrophic losses, and discount rates.
[[Page 24414]]
Although the IPCC does not recommend a single estimate of the SCC,
it does cite the Tol (2005) study on four separate occasions (pages 17,
65, 813, 822) as the only available survey of the peer-reviewed
literature that has itself been subjected to peer review. Tol developed
a probability function using the SCC estimates of the peer reviewed
literature and found estimates ranging from less than zero to over $200
per metric ton of carbon. In an effort to resolve some of the
uncertainty in reported estimates of climate damage costs from carbon
emissions, Tol (2005) reviewed and summarized one hundred and three
estimates of the SCC from 28 published studies. He concluded that when
only peer-reviewed studies published in recognized journals are
considered, ``* * * climate change impacts may be very uncertain but is
unlikely that the marginal damage costs of carbon dioxide emissions
exceed $50 per [metric] ton carbon [about $14 per metric ton of
CO2].'' \141\ He also concluded that the costs may be less
than $14.
---------------------------------------------------------------------------
\141\ Tol, Richard. The marginal damage costs of carbon dioxide
emissions: an assessment of the uncertainties. Energy Policy 33
(2005) 2064-2074, 2072. The summary SCC estimates reported by Tol
are assumed to be denominated in U.S. dollars of the year of
publication, 2005.
---------------------------------------------------------------------------
Because of the number of assumptions required by each study, the
wide range of uncertainty surrounding these assumptions, and their
critical influence on the resulting estimates of climate damage costs,
some studies have undoubtedly produced estimates of the SCC that are
unrealistically high, while others are likely to have estimated values
that are improbably low. Using a value for the SCC that reflects the
central tendency of estimates drawn from many studies reduces the
chances of relying on a single estimate that subsequently proves to be
biased.
It is important to note that estimates of the SCC almost invariably
include the value of worldwide damages from potential climate impacts
caused by carbon dioxide emissions, and are not confined to damages
likely to be suffered within the U.S. In contrast, the other estimates
of costs and benefits of increasing fuel economy included in this
proposal include only the economic values of impacts that occur within
the U.S. For example, the economic value of reducing criteria air
pollutant emissions from overseas oil refineries is not counted as a
benefit resulting from this rule, because any reduction in damages to
health and property caused by overseas emissions are unlikely to be
experienced within the U.S.
In contrast, the reduced value of transfer payments from U.S. oil
purchasers to foreign oil suppliers that results when lower U.S. oil
demand reduces the world price of petroleum (the reduced ``monopsony
effect'') is counted as a benefit of reducing fuel use.\142\ If the
agency's analysis was conducted from a worldwide rather than a U.S.
perspective, however, the benefit from reducing air pollution overseas
would be included, while reduced payments from U.S. oil consumers to
foreign suppliers would not.
---------------------------------------------------------------------------
\142\ The reduction in payments from U.S. oil purchasers to
domestic petroleum producers is not included as a benefit, since it
represents a transfer that occurs entirely within the U.S. economy.
---------------------------------------------------------------------------
In order to be consistent with NHTSA's use of exclusively domestic
costs and benefits in prior CAFE rulemakings, the appropriate value to
be placed on changes climate damages caused by carbon emissions should
be one that reflects the change in damages to the United States alone.
Accordingly, NHTSA notes that the value for the benefits of reducing
CO2 emissions might be restricted to the fraction of those
benefits that are likely to be experienced within the United States.
Although no estimates of benefits to the U.S. itself that are
likely to result from reducing CO2 emissions are currently
available, NHTSA expects that if such values were developed, the agency
would employ those rather than global benefit estimates in its
analysis. NHTSA also anticipates that if such values were developed,
they would be lower than comparable global values, since the U.S. is
likely to sustain only a fraction of total global damages resulting
from climate change.
In the meantime, the agency has elected to use the IPCC estimate of
$43 per metric ton of carbon as an upper bound on the benefits
resulting from reducing each metric ton of U.S. emissions.\143\ This
corresponds to approximately $12 per metric ton of CO2 when
expressed in 2006 dollars. This estimate is based on the 2005 Tol
study.\144\ The Tol study is cited repeatedly as an authoritative
survey in various IPCC reports, which are widely accepted as
representing the general consensus in the scientific community on
climate change science. Since the IPCC estimate includes the worldwide
costs of potential damages from carbon dioxide emissions, NHTSA has
elected to employ it as an upper bound on the estimated value of the
reduction in U.S. domestic damage costs that is likely to result from
lower CO2 emissions.\145\
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\143\ The estimate of $43 per ton of carbon emissions is
reported by Tol (p. 2070) as the mean of the ``best'' estimates
reported in peer-reviewed studies (see fn. 144). It thus differs
from the mean of all estimates reported in the peer-reviewed studies
surveyed by Tol. The $43 per ton value is also attributed to Tol by
IPCC Working Group II (2007), p. 822.
\144\ Tol's more recent (2007) and inclusive survey has been
published online with peer-review comments. The agency has elected
not to rely on the estimates it reports, but will consider doing so
in its analysis of the final rule if the survey has been published,
and will also consider any other newly-published evidence.
\145\ For purposes of comparison, we note that in the rulemaking
to establish CAFE standards for MY 2008-11 light trucks, NRDC
recommended a value of $10 to $25 per ton of CO2
emissions reduced by fuel savings and both Environmental Defense and
Union of Concerned Scientists recommended a value of $50 per ton of
carbon (equivalent to about $14 per ton of CO2
emissions).
---------------------------------------------------------------------------
The IPCC Working Group II Fourth Assessment Report (2007, p. 822)
further suggests that the SCC of carbon is growing at an annual 2.4
percent growth rate, based on estimated increases in damages from
future emissions reported in published studies. NHTSA has also elected
to apply this growth rate to Tol's original 2005 estimate. Thus by
2011, the agency estimates that the upper bound on the benefits of
reducing CO2 emissions will have reached about $14 per
metric ton of CO2, and will continue to increase by 2.4
percent annually thereafter.
In setting a lower bound, the agency agrees with the IPCC Working
Group II (2007) report that ``significant warming across the globe and
the locations of significant observed changes in many systems
consistent with warming is very unlikely to be due solely to natural
variability of temperatures or natural variability of the systems''
(pp. 9). Although this finding suggests that the global value of
economic benefits from reducing carbon dioxide emissions is unlikely to
be zero, it does not necessarily rule out low or zero values for the
benefit to the U.S. itself from reducing emissions.
For most of the analysis it performed to develop this proposal,
NHTSA required a single estimate for the value of reducing
CO2 emissions. The agency thus elected to use the midpoint
of the range from $0 to $14 (or $7.00) per metric ton of CO2
as the initial value for the year 2011, and assumed that this value
would grow at 2.4 percent annually thereafter. This estimate is
employed for the analyses conducted using the Volpe CAFE model to
support development of the proposed standards. The agency also
conducted sensitivity analyses of the benefits from reducing
CO2 emissions using both the upper ($14 per metric ton) and
lower ($0 per metric ton) bounds of this range.
NHTSA seeks comment on its tentative conclusions for the value of
[[Page 24415]]
the SCC, the use of a domestic versus global value for the economic
benefit of reducing CO2 emissions, the rate at which the
value of the SCC grows over time, the desirability of and procedures
for incorporating benefits from reducing emissions of greenhouse gases
other than CO2, and any other aspects of developing a
reliable SCC value for purposes of establishing CAFE standards.
m. The Value of Increased Driving Range
Improving vehicles' fuel economy may also increase their driving
range before they require refueling. By reducing the frequency with
which drivers typically refuel their vehicles, and by extending the
upper limit of the range they can travel before requiring refueling,
improving fuel economy thus provides some additional benefits to their
owners. (Alternatively, if manufacturers respond to improved fuel
economy by reducing the size of fuel tanks to maintain a constant
driving range, the resulting cost saving will presumably be reflected
in lower vehicle sales prices.)
No direct estimates of the value of extended vehicle range are
readily available, so NHTSA's analysis calculates the reduction in the
annual number of required refueling cycles that results from improved
fuel economy, and applies DOT-recommended values of travel time savings
to convert the resulting time savings to their economic value.\146\ As
an illustration of how the value of extended refueling range is
estimated, a typical small light truck model has an average fuel tank
size of approximately 20 gallons. Assuming that drivers typically
refuel when their tanks are 20 percent full (i.e., 4 gallons in
reserve), increasing this model's actual on-road fuel economy from 24
to 25 mpg would extend its driving range from 384 miles (= 16 gallons x
24 mpg) to 400 miles (= 16 gallons x 25 mpg). Assuming that it is
driven 12,000 miles/year, this reduces the number of times it needs to
be refueled each year from 31.3 (= 12,000 miles per year/384 miles per
refueling) to 30.0 (= 12,000 miles per year/400 miles per refueling),
or by 1.3 refuelings per year.
---------------------------------------------------------------------------
\146\ See Department of Transportation, Guidance Memorandum,
``The Value of Saving Travel Time: Departmental Guidance for
Conducting Economic Evaluations,'' Apr. 9, 1997. Available at http://ostpxweb.dot.gov/policy/Data/VOT97guid.pdf (last accessed October
20, 2007); update available at http://ostpxweb.dot.gov/policy/Data/VOTrevision1_2-11-03.pdf (last accessed October 20, 2007).
---------------------------------------------------------------------------
Weighted by the nationwide mix of urban (about 2/3) and rural
(about 1/3) driving and average vehicle occupancy for all driving trips
(1.6 persons), the DOT-recommended value of travel time per vehicle-
hour is $24.00 (in 2006 dollars).\147\ Assuming that locating a station
and filling up requires ten minutes, the annual value of time saved as
a result of less frequent refueling amounts to $5.20 (calculated as 10/
60 x 1.3 x $24.00). This calculation is repeated for each future
calendar year that vehicles of each model year affected by the
alternative CAFE standards proposed in this rule would remain in
service. Like fuel savings and other benefits, however, the value of
this benefit declines over a model year's lifetime, because a smaller
number of vehicles originally produced during that model year remain in
service each year, and those remaining in service are driven fewer
miles.
n. Discounting Future Benefits and Costs
---------------------------------------------------------------------------
\147\ The hourly wage rate during 2006 is estimated to be
$24.00. Personal travel (94.4 percent of urban travel) is valued at
50 percent of the hourly wage rate. Business travel (5.6 percent or
urban travel) is valued at 100 percent of the hourly wage rate. For
intercity travel, personal travel (87 percent) is valued at 70
percent of the wage rate, while business travel (13 percent) is
valued at 100 percent of the wage rate. The resulting values of
travel time are $12.67 for urban travel and $17.66 for intercity
travel, and must be multiplied by vehicle occupancy (1.6) to obtain
the estimate value of time per vehicle hour.
---------------------------------------------------------------------------
Discounting future fuel savings and other benefits is intended to
account for the reduction in their value to society when they are
deferred until some future date rather than received immediately. The
discount rate expresses the percent decline in the value of these
benefits--as viewed from today's perspective--for each year they are
deferred into the future. NHTSA uses a rate of 7 percent per year to
discount the value of future fuel savings and other benefits to analyze
the potential impacts of alternative CAFE standards. However, the
agency also performed an alternative analysis of benefits from
alternative increases in CAFE standards using a 3 percent discount
rate, and seeks comment on whether the standards should be set using a
3 percent rate instead of a 7 percent rate.
There are several reasons that NHTSA relies primarily on 7 percent
as the appropriate rate for discounting future benefits from increased
CAFE standards. First, OMB Circular A-4 indicates that this rate
reflects the economy-wide opportunity cost of capital.\148\ It also
states that this ``is the appropriate discount rate whenever the main
effect of a regulation is to displace or alter the use of capital in
the private sector.''\149\ We believe that a substantial portion of the
cost of this regulation may come at the expense of other investments
the auto manufacturers might otherwise make. Several large
manufacturers are resource-constrained with respect to their
engineering and product-development capabilities. As a result, other
uses of these resources will be foregone while they are required to be
applied to technologies that improve fuel economy.
---------------------------------------------------------------------------
\148\ Office of Management and Budget, Circular A-4,
``Regulatory Analysis,'' September 17, 2003, 33. Available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf (last accessed Feb.
14, 2008).
\149\ Id.
---------------------------------------------------------------------------
Second, 7 percent also appears to be an appropriate rate to the
extent that the costs of the regulation come at the expense of
consumption as opposed to investment. NHTSA believes that financing
rates on vehicle loans represent an appropriate discount rate, because
they reflect the opportunity costs faced by consumers when buying
vehicles with greater fuel economy and a higher purchase price. Most
new and used vehicle purchases are financed, and because most of the
benefits from higher fuel economy standards accrue to vehicle
purchasers in the form of fuel savings, the appropriate discount rate
is the interest rate buyers pay on loans to finance their vehicle
purchases.\150\
---------------------------------------------------------------------------
\150\ Some empirical evidence also demonstrates that used car
purchasers are willing to pay higher prices for greater fuel
economy; see, e.g., James A. Kahn, ``Gasoline Price Expectations and
the Used Automobile Market: A Rational Expectations Asset Price
Approach,'' Quarterly Journal of Economics, Vol. 101 (May 1986),
323-339.
---------------------------------------------------------------------------
According to the Federal Reserve, the interest rate on new car
loans made through commercial banks has closely tracked the rate on 10-
year treasury notes, but exceeded it by about 3 percent.\151\ The
official Administration forecast is that real (or inflation-adjusted)
interest rates on 10-year treasury notes will average about 3 percent
through 2016, implying that 6 percent is a reasonable forecast for the
real interest rate on new car loans.\152\ In turn, the interest rate on
used car loans
[[Page 24416]]
made through automobile financing companies has closely tracked the
rate on new car loans made through commercial banks, but exceeded it by
about 3 percent.\153\ (We consider rates on loans that finance used car
purchases, because some of the fuel savings resulting from improved
fuel economy accrue to used car buyers.) Given the 6 percent estimate
for new car loans, a reasonable forecast for used car loans is thus 9
percent.
---------------------------------------------------------------------------
\151\ See Federal Reserve Bank, Statistical Release H.15,
Selected Interest Rates (Weekly) (click on ``Historical Data,'' then
``Treasury constant maturities,'' then ``10-year, monthly''),
available at http://www.federalreserve.gov/Releases/H15/data/Monthly/H15_TCMNOM_Y10.txt (last accessed February 13, 2008); and
Federal Reserve Bank, Statistical Release G.19, Consumer Credit,
(click on ``Historical Data,'' then ``Terms of Credit'') available
at http://www.federalreserve.gov/releases/g19/hist/cc_hist_tc.html
(last accessed February 13, 2008).
\152\ See The White House, Joint Press Release of the Council of
Economic Advisors, the Department of the Treasury, and the Office of
Management and Budget, November 29, 2007, available at http://www.whitehouse.gov/news/releases/2007/11/20071129-4.html (last
accessed February 13, 2008).
\153\ See supra [2 above here] and Federal Reserve Bank,
Statistical Release G.20, Finance Companies, (click on ``Historical
Data,'' then ``Terms of Credit'') available at http://www.federalreserve.gov/releases/g20/hist/fc_hist_tc.html (last
accessed February 13, 2008).
---------------------------------------------------------------------------
Because the benefits of fuel economy accrue to both new and used
car owners, a discount rate between 6 percent and 9 percent is thus
appropriate for evaluating future benefits resulting from more
stringent fuel economy standards. Assuming that new car buyers discount
fuel savings at 6 percent for 5 years (the average duration of a new
car loan) \154\ and that used car buyers discount fuel savings at 9
percent for 5 years (the average duration of a used car loan), \155\
the single constant discount rate that yields equivalent present value
fuel savings is very close to 7 percent.
---------------------------------------------------------------------------
\154\ Id.
\155\ Id.
---------------------------------------------------------------------------
However, NHTSA also seeks comment on whether a discount rate of 3
percent would be more appropriate for this proposed rulemaking. OMB
Circular A-4 also states that when regulation primarily and directly
affects private consumption (e.g., through higher consumer prices for
goods and services), instead of primarily affecting the allocation of
capital, a lower discount rate may be appropriate. The alternative
discount rate that is most appropriate in this case is the social rate
of time preference, which refers to the rate at which society discounts
future consumption to determine its value at the present time. The rate
that savers are willing to accept to defer consumption into the future
when there is no risk that borrowers will fail to pay them back offers
one possible measure of the social rate of time preference. As noted
above, the real rate of return on long-term government debt, which has
averaged around 3 percent over the last 30 years, provides a reasonable
estimate of this value.
In the context of CAFE standards for motor vehicles, the
appropriate discount rate depends on one's view of how the costs and
benefits of more stringent standards are distributed between vehicle
manufacturers and consumers. Given that the discount rate plays a
significant role in determining the level of the standards under a
``social optimization'' context, NHTSA conducted an analysis of what
the standards and associated costs and benefits would be if the future
benefits were discounted at 3 percent. The results of this analysis can
be found in the PRIA. We estimated that following the same methods and
criteria discussed below, but applying a 3 percent discount rate rather
than a 7 percent discount rate, would suggest standards reaching about
33.6 mpg (average required fuel economy among both passenger cars and
light trucks) in MY2015, 2 mpg higher than the 31.6 mpg average
resulting from the standards we are proposing based on a 7 percent
discount rate. The more stringent standards during MY2011-MY2015 would
reduce CO2 emissions by 672 million metric tons (mmt), or 29 percent
more than the 521 mmt achieved by the proposed standards. On the other
hand, we estimated that standards increasing at this pace would require
about $85b in technology outlays during MY2011-MY2015, or 89 percent
more than the $45b in technology outlays associated with the standards
proposed today.
Thus, although our proposed standards are based on a 7 percent
discount rate, NHTSA seeks comment on whether it should set standards
based on discount rate assumptions of 3 percent, instead of 7 percent.
o. Accounting for Uncertainty in Benefits and Costs
In analyzing the uncertainty surrounding its estimates of benefits
and costs from alternative CAFE standards, NHTSA has considered
alternative estimates of those assumptions and parameters likely to
have the largest effect. These include the projected costs of fuel
economy-improving technologies and their expected effectiveness in
reducing vehicle fuel consumption, forecasts of future fuel prices, the
magnitude of the rebound effect, the reduction in external economic
costs resulting from lower U.S. oil imports, the value to the U.S.
economy of reducing carbon dioxide emissions, and the discount rate
applied to future benefits and costs. The range for each of these
variables employed in the uncertainty analysis is presented in the
section of this document discussing each variable.
The uncertainty analysis was conducted by assuming independent
normal probability distributions for each of these variables, using the
low and high estimates for each variable as the values below which 5
percent and 95 percent of observed values are believed to fall. Each
trial of the uncertainty analysis employed a set of values randomly
drawn from each of these probability distributions, assuming that the
value of each variable is independent of the others. Benefits and costs
of each alternative standard were estimated using each combination of
variables. A total of 1,000 trials were used to establish the likely
probability distributions of estimated benefits and costs for each
alternative standard.
B. How Has NHTSA Used the Volpe Model To Select the Proposed Standards?
1. Establishing a Continuous Function Standard
NHTSA's analysis supporting determination of the proposed
continuous function standard builds on the analysis that supported the
determination of the standards in NHTSA's 2006 light truck final rule.
That process involved three steps.\156\
---------------------------------------------------------------------------
\156\ See 71 FR 17596-97 (Apr. 6, 2006) for a more complete
discussion of this process.
---------------------------------------------------------------------------
In ``phase one,'' NHTSA added fuel saving technologies to each
manufacturer's fleet, model by model, for a model year until the net
benefit from doing so reached its maximum value (i.e., until the
incremental cost of improving its fuel economy further just equals the
incremental value of fuel savings and other benefits from doing so).
This was done for each of the seven largest manufacturers. Data points
representing each vehicle's size and ``optimized'' fuel economy from
the light truck fleets of those manufacturers were then combined into a
single data set.
In ``phase two,'' a preliminary continuous function was
statistically fitted through these data points, subject to constraints
at the upper and lower ends of the footprint range.
Once a preliminary continuous function was statistically fitted to
the data for a model year, ``phase three'' was performed. In that
phase, the level of the function was adjusted to maximize net benefits,
that is, the preliminary continuous function was raised or lowered
until industry-wide (limited to the seven largest manufacturers)
benefits were maximized.
For NHTSA's 2006 light truck rulemaking, the optimization procedure
was applied in its entirety only for MY 2011. The levels of the
functions for MYs 2008-2010 were set at levels producing incremental
costs approximately equivalent to those produced by the alternative
Unreformed
[[Page 24417]]
CAFE standards promulgated for those model years in the same
rulemaking.
Analysis conducted by NHTSA to prepare for the current proposed
rulemaking revealed several opportunities to refine the procedure
described above before applying it to this action, which spans several
model years. The resultant procedure is described below.
2. Calibration of Initial Continuous Function Standards
For the optimized standards, the first step in the current
procedure involves all three phases described above. Separately, for
each of the seven largest manufacturers, the agency determined the
level of additional technology that would maximize net benefits. The
agency then combined the resultant fleets and used standard statistical
analysis procedures to specify a continuous function (i.e., a function
without abrupt changes) with asymptotes \157\ set at the average fuel
economy levels of the smallest and largest vehicles in this
``optimized'' fleet.\158\
---------------------------------------------------------------------------
\157\ Some functions are not bounded. For example, a line that
is not flat will increase in one direction without limit and will,
in the other direction, decrease without limit. The continuous
function applied by the agency is of a form with upper and lower
boundaries. Even as vehicle footprint declines or increases, the
function's value (in mpg or grams/mile) will never exceed or fall
below a specific value. These upper and lower limits are called
asymptotes.
\158\ Consistent with EPCA, the passenger car and light truck
fleets were analyzed separately. For passenger cars, the agency
determined the asymptotes of the continuous function by calculating
the average fuel economy of the smallest 8 percent and the largest 5
percent of the fleet. For light trucks, the agency considered the
smallest 11 percent and the largest 10 percent of the fleet. These
cohorts were determined by identifying gaps in the distribution of
vehicles according to footprint.
---------------------------------------------------------------------------
In the 2006 light truck final rule, NHTSA created an attribute-
based fuel economy standard based upon a continuous function using a
logistic curve. The 2006 rulemaking, and its antecedent advanced notice
of proposed rulemaking, contain an extended discussion of alternative
approaches, including a bin-based system and different potential
curves. As discussed below, that final rule explains NHTSA's decision
to promulgate a standard based on a logistic (``S shaped'') curve with
constrained asymptotes (upper and lower limits).
Although we did not explicitly discuss it in the MY 2008-2011 light
truck rulemaking, NHTSA now wishes to explain that any continuous
function with lower asymptotes, as was promulgated in the last
rulemaking and is proposed in this rulemaking, provides an absolute
lower fuel economy level which guards against manufacturers having an
unlimited economic incentive to upsize their vehicles in order to lower
their fuel economy requirement. As vehicle footprint continues to
increase, decreases in the corresponding fuel economy target become
progressively smaller, such that the target approaches but never
reaches the value of the lower asymptote. Because the required level of
CAFE is the harmonic average of targets applicable to a manufacturer's
vehicle models, the value of the standard can approach but will never
fall to the value of this lower asymptote, no matter how far the
manufacturer's product mix shifts toward larger vehicles. This will
limit any loss of fuel savings due to manufacturer decisions to upsize
their vehicles.
In a perfect world, NHTSA would develop the continuous functions
for setting passenger car and light truck standards by letting the
vehicle attribute (footprint) completely control the shape of the
curves used for the functions in a way that provides the clearest
observed relationship between this attribute and its fuel economy. But,
NHTSA must balance many real world practical and public policy aspects
in order to ensure that the standards are achieving the purpose set
forth by EPCA and EISA. In developing the Agency's last light truck
rule, the curve used to fit the data (attribute versus fuel economy)
was a sales-weighted least-squares logistic curve. During this
rulemaking, as NHTSA continued to look for ways to improve its standard
setting methodology, consideration was given to other methods that
could be used to develop the continuous functions. One such method that
NHTSA explored and is using in this proposal is unweighted analysis of
the data using the Mean Absolute Deviation (MAD) statistical procedure.
Unweighted regression involves counting each vehicle model once, rather
than as many times as vehicles included in that model are to be
produced. MAD involves weighting deviations from predicted values based
on their absolute rather than squared magnitude. As discussed below,
NHTSA has tentatively concluded that, compared to sales-weighted least-
squares analysis, unweighted MAD is better suited to data with wide
disparities in weight (i.e., sales volumes) and with many outliers.
In establishing footprint-based CAFE standards, the agency does not
have the sole objective of seeking to reflect a clear engineering
relationship between footprint and fuel economy. Attributes other than
footprint would be more closely correlated with fuel economy. The
agency's objective is to make CAFE regulations more consistent with
public policy goals, in particular (1) a rebalancing of requirements
such that full-line manufacturers are not disproportionately burdened
and (2) the establishment of an incentive that discourages
manufacturers from responding to CAFE standards in ways that could
compromise occupant protection and highway safety. While it is helpful
that the attribute--in this case footprint--has an observed
relationship to fuel economy, it is not necessary that this
relationship be isolated from accompanying relationships (e.g., between
weight and fuel economy) that can be better related to estimable
physical processes. Similarly, it is more important that the functional
form for the attribute-based standard yield desirable outcomes than
that it singly seek a clear foundation in estimable physical processes.
In general, public policy considerations and available vehicle data
combine to suggest that the fuel economy standard should be generally
downward sloping (on a fuel economy basis) with respect to NHTSA's
chosen attribute, vehicle footprint. The arguments that favor an
attribute-based system (maintaining consumer choice, protecting safety,
more equitable distribution of costs, reducing the cost of regulation)
all argue for a downward sloping curve. Larger vehicles should, in
principle, have higher drag, weigh more, and therefore have greater
inertia than otherwise identical smaller vehicles. Hence, all other
factors remaining equal, larger vehicles should have lower fuel economy
than smaller vehicles. Therefore, the selection of vehicle footprint as
the reference attribute should produce downward sloping curves. Also,
the tendency of larger vehicles to have lower fuel economy than smaller
vehicles should provide some disincentive to shift to larger vehicles
rather than adding technology; although doing so would tend to reduce
the required CAFE level, it would also tend to reduce the achieved CAFE
level.
However, vehicle data, by itself, does not necessarily define what
functional form that the curve ought to take. In the 2006 light truck
rulemaking, NHTSA considered linear, quadratic, exponential,
unconstrained logistic, and constrained logistic functions as possible
alternatives. For light trucks, the various approaches produced broadly
similar standards through the most commonly used vehicle sizes, but
drastically different standards at the high and low ends of the range.
Linear functions produced very high fuel economy standards
for the
[[Page 24418]]
smallest vehicles, and low standards for the largest vehicles.
The quadratic function generated a minimum at about 75
square feet, and then perversely turned upward for vehicles with larger
footprints. The standard for very small vehicles was unreasonably high.
The exponential and unconstrained logistic functions
produced unreasonably high standards for small vehicles, but flattened
out for larger vehicles.
The constrained logistic function provided a broadly
linear downward-sloping through the most commonly used vehicle sizes,
along with basically flat standards for very large and very small
vehicles.
On this basis, NHTSA believed that, while the data did not dictate
a particular functional form, public policy considerations made the
constrained logistic function particularly attractive. The
considerations include:
A relatively flat standard for larger vehicles acts as a
de facto `backstop' for the standard in the event that future market
conditions encourage manufacturers to build very large vehicles.
Nothing prevents manufacturers from building larger vehicles. With a
logistic curve, however, vehicles upsizing beyond some limit face a
flat standard that is increasingly difficult to meet.
A constrained logistic curve doesn't impose unachievable
fuel economy standards on vehicles that have unusually small
footprints, thus continuing to keep manufacturing fuel-efficient small
vehicles available as a compliance option.
A curve fitted without upper and lower constraints could
reach very high fuel economy levels for small vehicles and very low
fuel economy vehicles for large vehicles. While such a curve might
produce similar required CAFE levels for the industry as a whole, it
could have a particular adverse impact on manufacturers that specialize
in very small vehicles, for example, two-seater sports cars. By the
same token, it could require little or nothing of manufacturers
specializing in very large vehicles.
The transition from the `flat' portions of the curve to
the `slope' portions of the curve is smooth and gradual, reducing the
incentive for manufacturers to achieve compliance through marginal
changes in vehicle size.
The inflection points are set by the data and can
potentially vary from year to year, rather than being chosen by NHTSA.
On the other hand, a constrained logistic curve shares with other
functional forms a risk of an excessively steep or excessively flat
slope. The slope of the compliance curve may be considered as `too
steep' for public policy purposes when manufacturers can achieve
appreciable reductions in compliance costs by marginally increasing the
size of a vehicle's footprint--e.g., the cost of compliance from
upsizing is lower than other cost-effective compliance methods open to
manufacturers.
A slope is `too flat' for public policy purposes when it negates
the advantages of an attribute-based system: Where the standard doesn't
meaningfully vary with respect to changes in the underlying attribute,
it cannot be said to be an attribute-based system within the meaning of
the statute.
NHTSA chose footprint as the best attribute for an attribute-based
standard in part because we believed changing a vehicle's footprint
would involve significant costs for manufacturers, probably requiring a
redesign of the vehicle.
While ``too steep'' or ``too flat'' inevitably cannot be defined
with precision, they need to be kept in mind.
For the proposed standards, the agency defined the continuous
function using the following formula:
[GRAPHIC] [TIFF OMITTED] TP02MY08.007
Where:
T = the fuel economy target (in mpg)
a = the maximum fuel economy target (in mpg)
b = the minimum fuel economy target (in mpg)
c = the footprint value (in square feet) at which the fuel economy
target is midway between a and b \159\
---------------------------------------------------------------------------
\159\ That is, the midpoint.
---------------------------------------------------------------------------
d = the parameter (in square feet) defining the rate at which the
value of targets decline from the largest to smallest values
e = 2.718\160\
---------------------------------------------------------------------------
\160\ For the purpose of the Reformed CAFE standard, we are
carrying e out to only three decimal places.
---------------------------------------------------------------------------
x = footprint (in square feet, rounded to the nearest tenth) of the
vehicle model
NHTSA invites comment regarding the relative importance of the
curve as a means of (1) providing a basis for describing the observed
relationship between footprint and fuel economy, (2) providing a basis
for describing a theoretical physical relationship (assuming one can be
defined) between footprint and fuel economy, and (3) providing socially
desirable incentives to manufacturers. The agency further invites
comment on functional forms that would be consistent with each of these
purposes.
As for analysis of the light truck rule promulgated in 2006, NHTSA
constrained this function by determining the maximum and minimum
targets (a and b) and then holding those targets constant while using
statistical techniques to fit the other two coefficients (c and d) in
this equation.
In the current analysis for passenger cars, the upper and lower
asymptotes are based on the smallest three percent and largest four
percent, respectively, of the fleet. These reflect footprint values
defining distinct cohorts outside the bulk of the fleet, and correspond
to footprint values of less than 39.5 square feet (i.e., up to the
approximate size of a Honda Fit) and greater than 52.5 square feet
(i.e., at least as great as the approximate size of a Toyota Avalon),
respectively:
[[Page 24419]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.008
For light trucks, the upper asymptote (i.e., the highest mpg value
of the continuous function defining fuel economy targets) is based on
the smallest (in terms of footprint) eleven percent of the fleet, and
the lower asymptote is based on the largest six percent of the fleet.
These cohorts correspond to footprint values of less than 44.5 square
feet (i.e., up to the approximate size of a Honda CR-V) and greater
than 72.5 square feet (i.e., comprised primarily of extended vans and
long-bed pickup trucks), respectively:
[[Page 24420]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.009
NHTSA invites comment on the identification of vehicle cohorts for
purposes of establishing upper and lower limits (asymptotes) bounding
the attribute-based standard. After updating its baseline market
forecast in consideration of new product plan information from
manufacturers, the agency plans to reevaluate these cohorts for both
passenger cars and light trucks before promulgating a final rule, and
notes that changes in approach could lead to changes in stringency.
Given the above asymptotes, fitting the above functional form to
the ``optimized'' passenger car fleet resulted in the following initial
continuous functions:
[[Page 24421]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.010
For each model year, NHTSA then raised or lowered the resultant
continuous function until net benefits were maximized for the seven
largest manufacturers (in total). Without subsequent recalibrations
discussed below, this produced the following continuous functions for
passenger cars:
[[Page 24422]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.011
The agency followed the same procedures for setting light truck
standards and doing so resulted in the following continuous functions:
[[Page 24423]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.012
In fitting the continuous function, NHTSA considered a range of
statistical estimation techniques. In the 2006 light truck rulemaking,
NHTSA estimated the parameters of the logistic function using fuel
consumption (measured in gallons per mile) for each vehicle produced in
a particular model year, weighted by sales.
For this rulemaking, we observed that estimated fuel consumption
functions for passenger cars were significantly affected by several
outliers--a small number of popular vehicles that had significantly
higher fuel economy than the fleet as a whole and, even more so, than
vehicles of similar footprint. For passenger cars, the function, as
estimated by weighted ordinary least squares, was exceptionally steep
within the range considered. This observation, in turn, led NHTSA to
consider alternative approaches to statistically fitting the continuous
function.
Among the options considered by NHTSA were the following: dropping
the outlying vehicles from the estimation process, weighted and
unweighted ordinary least squares, and weighted and unweighted mean
absolute deviation (MAD). MAD is a statistical procedure that has been
demonstrated to produce more efficient parameter estimates in the
presence of significant outliers.\161\ As examples, the following two
charts show the MY2015 passenger car and light truck fleets after the
application of technologies to each manufacturer's fleet. These charts
reveal numerous outliers for the passenger car fleet and, to a lesser
extent, the light truck fleet:
---------------------------------------------------------------------------
\161\ In the case of a dataset not drawn from a sample with a
Gaussian, or normal, distribution, there is often a need to employ
robust estimation methods rather than rely on least-squares approach
to curve fitting. The least-squares approach has, as an underlying
assumption, that the data are drawn from a normal distribution, and
hence fits a curve using a sum-of-squares method to minimize errors.
This approach will, in a sample drawn from a non-normal
distribution, give excessive weight to outliers by making their
presence felt in proportion to the square of their distance from the
fitted curve, and, hence, distort the resulting fit. With outliers
in the sample, the typical solution is to use a robust method such
as a minimum absolute deviation, rather than a squared term, to
estimate the fit (see, e.g., ``AI Access: Your Access to Data
Modeling,'' at http://www.aiaccess.net/English/Glossaries/GlosMod/e_gm_O_Pa.htm#Outlier). The effect on the estimation is to let
the presence of each observation be felt more uniformly, resulting
in a curve more representative of the data (see, e.g., Peter
Kennedy, A Guide to Econometrics, 3rd edition, 1992, MIT Press,
Cambridge, MA).
---------------------------------------------------------------------------
[[Page 24424]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.013
[[Page 24425]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.014
NHTSA requests comment on the best method for statistically fitting
the continuous function.
There are good theoretical arguments for using an unweighted
(rather than weighted) analysis. Although the purpose of the attribute-
based standard is to discourage downsizing (because of safety
implications) and more equitably distribute compliance burdens among
manufacturers, we strive to develop the curves based on the observed
physical relationship between vehicle size (i.e., footprint) and fuel
economy. The curve developed using unweighted sales data better
reflects this relationship.
However, the process by which we select the stringency (as distinct
from the form) of the standard must consider sales volumes because the
standards are based on sales-weighted average performance. Therefore,
even if we use unweighted analysis develop the form of the standard, we
would continue to evaluate the standard's stringency (and, therefore,
its costs and benefits) based on sales-weighted average calculations
done on a manufacturer-by-manufacturer basis.
There is already precedent for using unweighted data to produce
curves that are descriptive of engineering relationships. In NHTSA's
Preliminary Regulatory Impact Analysis for FMVSS 216 roof crush
standards, a series of force-versus-deflection curves were produced for
individual vehicle models and then averaged together. In that case, the
agency was seeking observed relationships that reflect engineering
possibilities, rather than a profile of the existing sales fleet.
In terms of relative emphasis on different vehicle models, the
distinction between unweighted and weighted analysis is profound in the
light vehicle market, in part because of the way ``models'' are defined
for purposes of CAFE. The highest-selling passenger car model
represents 356,000 units, and the lowest-selling model represents only
5 units. As a group, the five lowest-selling models represent only 305
units. Thus, weighted analysis places more than 1,000 times the
emphasis on the highest-selling model than on the five lowest-selling
models, and more than 70,000 times the emphasis than on the single
lowest-selling model. The following histograms show the broader
distributions of models and sales with respect to model-level sales
(first for passenger cars, then for light trucks):
[[Page 24426]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.015
[[Page 24427]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.016
For purposes of setting the stringency of the corporate average
fuel economy standard, this is vital because enforcement is based on
the sales-weighted average. However, for purposes of developing a curve
intended to represent fuel economy levels achieved at a given
footprint, weighted analysis effectively ignores many models.
On the other hand, unweighted estimation is depending on the
definition of a ``model''. Manufacturers will sometimes offer
substantially similar vehicles with different badges (i.e., Ford
Taurus/Mercury Sable) as two different models. The distinction between
differing ``options packages'' on a single model and two distinct
models is inevitably a bit blurry. When estimating fuel economy
standards using a sales-weighted regression, this distinction is not
material, since the estimation process will produce substantially the
same results independently of the number of distribution of those sales
into larger or smaller numbers of models. In unweighted estimation,
however, dividing a particular vehicle family into a larger number of
distinct models give that family some extra influence in the analysis.
Nonetheless, considering that such parsing less than does sales
weighting. NHTSA has tentatively concluded that unweighted estimation
remains preferable to sales-weighted estimation, but invites comment on
whether and, if so how substantially similar vehicles should be
combined for purposes of fitting an attribute-based function when using
unweighted estimation.
The following charts show, for MY2015 passenger cars and light
trucks, how the use of sales-weighted least-squares estimation compares
to the proposed approach, which uses unweighted mean absolute
deviation. For passenger cars, the curve resulting from proposed
approach is somewhat shallower than the curve resulting from sales-
weighted least squares estimation. For light trucks, the curve
resulting from proposed approach is somewhat steeper:
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[[Page 24428]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.017
NHTSA invites comment on the relative merits of unweighted and
weighted estimation, as well as on the other curve fitting options
(e.g., the use of mean absolute deviation) raised here. The agency
plans to reevaluate curve fitting approaches for both passenger cars
and light trucks before promulgating a final rule, and notes that
changes in approach could lead to changes in stringency and impacts on
different manufacturers.
[[Page 24429]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.018
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3. Adjustments To Address Policy Considerations
NHTSA believes that the resultant curve characteristics discussed
above are empirically correct in that they correspond to the footprint
and fuel economy values of the fleet obtained by adding fuel saving
technologies to each manufacturer's fleet until the net benefit from
doing so reached its maximum value.
However, there are three issues (described above) which may tend to
reduce the effectiveness of fuel economy regulation over time. These
concerns are:
Curve crossings;
Excessive steepness of the passenger car curve;
Risk of upsizing.
In this rule, NHTSA proposes a solution to the curve crossing
issue, requests comment on various methods of reducing the steepness of
the passenger car, and examines the potential for upsizing generally
under the provisions of this proposed rule.
a. Curve Crossings
For both passenger cars and light trucks, NHTSA observed some curve
crossings from one model year to the next (i.e., for the same
footprint, some targets fell below the levels attained in the previous
model year), as revealed in the above charts. The upper limit of the MY
2012 passenger car curve falls slightly (about 0.1 mpg) below the MY
2011 value. For light trucks, the lower asymptote in MY 2012 is 0.9 mpg
below the lower asymptote in MY 2011. This was not observed during the
last round of light truck rulemaking because reformed CAFE was fully
implemented only in MY 2011. During the transition period (MYs 2008-
2010), the standards were set at levels equivalent in cost to
unreformed CAFE. However, for this rulemaking, because the projected
fleet composition changes between model years and the fuel economy
target function is optimized in every model year, the initial
continuous functions do not change monotonically (i.e., in only one
direction--increasing) from year to
[[Page 24430]]
year at every footprint value. Given the availability of lead time and
the importance of improving fuel economy, NHTSA has decided that, in
the setting of the standards, we should ensure that the fuel economy
targets do not fall from one year to the next at any footprint value.
To address the year-to-year fluctuations in the functions, which
may lead to these curve crossings, NHTSA recalibrated each continuous
function to prevent it from crossing the continuous function from any
previous model year. In doing so, the agency attempted to avoid
continuous functions that would artificially encourage the product mix
to approximate that of earlier years. Instead, the agency recalibrated
by gradually shifting the initial continuous functions for each model
year toward the initial continuous function determined above for the
product mix for MY 2015. For both passenger cars and light trucks, the
agency adjusted each of the four coefficients in the formula
determining the continuous function such that regular steps were taken
year by year between the values determined above for MY 2011 and those
for MY 2015. For example, the inflection point (the coefficient
determining the footprint at which the target falls halfway between its
minimum and maximum values) defining the light truck target function
was increased by 0.034 square feet annually from 51.9 square feet in MY
2011 to 52.1 square feet in MY 2015.
NHTSA also recalibrated the continuous function for each model year
by adding, as needed, anti-backsliding constraints that prevent the
function from either (a) yielding an industry wide average level of
CAFE lower than that for the preceding model year, (b) for a given
footprint, having targets that fall below the level of previous year,
and (c) having an asymptote lower than that of the preceding model
year. The ``decision tree'' for determining for each model year the
need for each of these constraints is summarized below in Figure V 16.
[[Page 24431]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.019
The industry-wide average CAFE is prevented from decreasing between
model years in order to prevent standards from falling below the level
that was determined to be achievable for the model year before. To
allow the industry-wide CAFE level to fall between successive model
years would be to promulgate a standard that, notwithstanding
maximizing net benefits, falls below what the agency has determined to
be feasible in previous years. In a model year in which simple
maximization of net benefits would have caused this to occur, NHTSA
shifted the resultant curve upward (without changing the curve's shape)
in order to produce an industry-wide CAFE equal to that of the
preceding model year.
Application of the decision tree shown above results in the
following target functions for passenger cars and light trucks,
respectively. These target functions are identical to those shown below
in Section VI, which discusses the standards proposed today by NHTSA:
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[[Page 24432]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.020
[[Page 24433]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.021
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b. Steep Curves for Pasenger Cars
NHTSA has developed a set of attribute-based curves for passenger
cars for this proposal consistent with the methodology used in the
2008-2011 light duty truck rule. However, unlike the relatively
gradually sloped curve related fuel economy to footprint for trucks,
our analysis for cars when utilizing a constained logistic curve
produces a comparatively steep ``S''-shaped curve for passenger cars.
This occurs primarily because--unlike trucks--current passenger car
sales include vehicles with a wide range of fuel economy spanning a
relatively narrow footprint range. Consequently, there is a relatively
steep curve applied to the middle range of footprint values with a more
rapid change of slope in the tails to flatten curve and thus satisfy
the constrained logistic functional form.
In this rule, NHTSA is proposing a relatively ``steep'' curve. The
agency has considered and experimented with several methods of reducing
the steepness of the passenger car curve. However, each of these
approaches has created challenges that may potentially be worse than
the problem they are trying to cure. The Agency is questioning whether
the steep slope portion of the curve could potentially motivate vehicle
manufacturers to reduce their compliance obligation under the standard
by slightly increasing its footprint when they redesign their vehicles.
We do not know the extent to which this is a real problem, but the
agency has considered this possibility and has worked to minimize
steepness of the slope while maintaining the scientific integrity
behind our methodology.
However, any attempt to ``fix'' the steepness of the passenger car
curve appears to come at a price: First, flattening the curve by any
particular method will move the curve away from the actual vehicle
data. Second, flatter curves are generally place greater compliance
burdens on full-line manufacturers than comparatively stringent (in
terms of average require CAFE) standards. Furthermore, NHTSA believes
that this could increase the overall costs required to achieve a given
amount of fuel savings and societal
[[Page 24434]]
benefits, and it increases the risk that NHTSA would need to return to
a ``least capable manufacturer'' approach in order to ensure economic
practicability. Doing so would likely reduce stringency, and reduce
fuel savings. In deciding on a particular approach, NHTSA must balance
the certainty of high costs and lost fuel savings through a less
``efficient'' standard against the risk that the steepness of the curve
might stimulate manufacturers to evade the standard over time by
redesigning their vehicles over time.
In proposing the steep curve for this rule, NHTSA has tentatively
decided that the cures that we have identified come at too high a
price, i.e., lost stringency or undesirable side effects. However,
NHTSA requests comment on these and other potential solutions to reduce
the steepness of the proposed car curves for passenger cars.
Some of the approaches considered or tested by NHTSA include:
Linear standards. When the fuel consumption of vehicles with added
technologies is plotted against footprint, we note a roughly linear
relationship over the existing range of footprint values. Hence, a
simple alternative to the current constrained logistic function would
be to estimate a linear form of the curve with the sales data. However,
NHTSA is concerned that such an approach may result in very low fuel
economy standards for the largest footprint vehicles, very high fuel
economy standards for the smallest vehicles, and loss of the inherent
backstop properties of the constrained logistic function.
In addition, the slope of a line estimated through a ``cloud'' of
data may be very sensitive to the exact characteristics of vehicles
with the largest and smallest footprints. It may turn out that small
changes in vehicle characteristics in the tails could shift the slope
of a linear estimate. Further, it may be impossible to materially
adjust the slope of a linear standard in future years without accepting
curve crossing. The following two charts compare linear regression
results for MY2015 to the curves proposed today by NHTSA. The result
for passenger cars illustrates the concern regarding behavior at large
and small footprints. Over the range of footprints in which light
trucks are expected to be offered in MY2015, the result for light
trucks shows less difference from the proposed curve.
[GRAPHIC] [TIFF OMITTED] TP02MY08.022
[[Page 24435]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.023
Constrained linear standards. Another possible approach would be to
retain the flattened tails proposed today but reduce the steepness of
the middle portion by allowing it to directly reflect a linear
relationship. This approach could be likened to a simplification or
linearization of the constrained logistic function. The same minima and
maxima would be used to bound the vertical extent of the linear form.
The following two charts suggest that, at least for the MY2015
passenger car and light truck fleets considered today, a constrained
linear standard would, compared to the standard proposed today, likely
result in a similar distribution of compliance burdens among
manufacturers (because the stringency at each footprint would be
similar):
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[GRAPHIC] [TIFF OMITTED] TP02MY08.024
[[Page 24437]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.025
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However, the agency remains concerned that the slope could exhibit
greater year-to-year variation than the proposed logistic form
(although further analysis would be required in order to address this
concern). Also, as discussed in the preamble to the 2006 Federal
Register notice regarding light truck CAFE standards, the agency
remains concerned that the upper and lower ``kinks'' in the function
could offer unexpected incentives for manufacturers to redesign
vehicles with footprints close to the kink-point.
Dual Attribute Approaches. A third possible solution would be to
use additional attribute-based information to spread out the
distribution of passenger cars across the x-axis. In effect, this
approach uses a second attribute to normalize the footprint-fuel
economy relationship. This second attribute might be horsepower,
weight, or horsepower-to-weight.
In analyzing the expected passenger car market, NHTSA observes that
the ratio of engine horsepower to vehicle weight generally increases
with increasing footprint. Higher power-to-weight ratios tend to imply
lower fuel economy, as the engine is typically larger and operating
less efficiently under driving conditions applicable to certification.
Thus, the fuel consumption versus footprint curves for passenger cars
reflect this relationship. For trucks, there does not appear to be a
relationship between footprint and the power-to-weight ratio. For
passenger cars, then, adjusting fuel consumption values to normalize
for differences in power-to-weight ratio may produce a flatter curve
providing less of an upsizing incentive for middle footprint values.
NHTSA has experimented with normalizing footprint by horsepower-to-
weight ratio. The result was a nearly flat standard with respect to
footprint across the most popular size ranges. This did not appear to
deliver the benefits of an attribute-based system. In addition, it
involves significant downward adjustments to the fuel economy of hybrid
electric vehicles (such as the Toyota Prius), for which the engine is
not the sole source of motive power. Also, it involves significant
upward adjustments to the fuel economy of
[[Page 24438]]
vehicles with high power-to-weight ratios (such as the Chevrolet
Corvette). Some of these upward and downward adjustments are large
enough to suggest radical changes in the nature of the original
vehicles. Furthermore, insofar as such normalization implies that NHTSA
should adopt a two-attributed standard (e.g., in which the target
depends on footprint and power-to-weight ratio), it may be challenging
and time consuming to come up with a sufficiently precise vehicle-by-
vehicle definition of horsepower or horsepower-to-weight to be used for
regulatory purposes.
[GRAPHIC] [TIFF OMITTED] TP02MY08.026
Shape Based on Combined Fleet. A fourth possible solution would be
to combine the passenger car and light truck fleet to determine the
shape of the constrained logistic curve, and then determine the
stringency (i.e., height) of that curve separately for each fleet. On
one hand, this approach would base the curve's shape on the widest
available range of information. On the other, the resultant initial
shape for each fleet would be based on vehicles from the other fleet.
For example, the initial shape applied to passenger cars would be
based, in part, on large SUVs and pickup trucks, and the initial shape
applied to light trucks would be based, in part, on subcompact cars.
Stringency would still be determined separately for passenger cars and
light trucks. NHTSA invites comments on the consistency of this
approach with the requirement in EPCA to establish separate standards
for passenger cars and light trucks.
NHTSA performed a preliminary analysis of this approach.
Considering the very wide range of fuel consumption levels in the
combined fleet, NHTSA developed the asymptotes based on the average
fuel consumption of all passenger cars and light trucks, respectively,
rather than on the smallest passenger cars and the largest light
trucks. The resultant MY2015 curve, shown below, is similar in
curvature to the proposed curve for passenger cars
[[Page 24439]]
and notably steeper than the proposed curve for light trucks.
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[GRAPHIC] [TIFF OMITTED] TP02MY08.027
[[Page 24440]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.028
Ignoring Outliers. A fifth possible solution would be to ignore
outliers (data points that are unique and skew the curve). Lacking an
objective means of classifying specific vehicle models as outliers that
should be excluded from the analysis, NHTSA explored the possibility of
excluding all hybrid electric vehicles (HEVs). The Japanese government
also excluded HEVs for purposes of developing Japan's light vehicle
efficiency standards. However, doing so yields initial curves of shapes
similar to those proposed, but displaced slightly in the direction of
lower fuel consumption. The similarity of the shapes of these curves
suggests that optimization against the full fleet (with HEVs) would
produce standards whose stringency is similar to that of those proposed
today.
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[[Page 24441]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.029
[[Page 24442]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.030
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NHTSA invites comments on the importance of addressing the relative
steepness of the proposed curves for passenger cars, and on the
feasibility of, technical basis for, and implications of any options
for doing so. The agency plans to reevaluate standards for both
passenger cars and light trucks before promulgating a final rule, and
notes that changes in approach--including measures to address the
steepness of the passenger car curves--could lead to changes in
stringency as well as different impacts on different manufacturers.
c. Risk of Upsizing
The steepness of the proposed curve for passenger cars presents a
localized risk that manufacturers will respond in ways that compromise
expected fuel savings. That is, although the constrained logistic curve
has a steep region, that region does not cover a wide range of
footprints. However, any attribute-based system involves the broader
risk that manufacturers will shift toward vehicles with the lowest fuel
economy targets to the extent that upsizing can be accomplished
sufficiently cheaply and without so much weight increase as to nullify
the effect of a lower target. As mentioned above, the constrained
logistic curve proposed by NHTSA provides an absolute floor. That is,
even if manufacturers discontinue all but the very largest known
passenger cars and light trucks, they would still be required to meet
CAFE standards no lower than the lower asymptote (on an mpg basis) of
the constrained logistic curve. Also, for domestic passenger cars, EISA
establishes a floor or ``backstop'' equal to 92 percent of the average
required CAFE level for passenger cars. This backstop is discussed
below in Section VI.
It is difficult to assess the risk that manufacturers may shift the
mix of vehicles enough to approach the EISA floor for domestic
passenger cars, or to approach the lower asymptotes for light trucks or
imported passenger cars. However, considering the footprint
distribution of vehicles (as indicated by the various histograms and
scatter plots shown above in this section) expected to be covered by
the proposed rule,
[[Page 24443]]
NHTSA anticipates that manufacturers would not be able to approach
these reductions in stringency without dramatically altering product
mix. The agency doubts that manufacturers could do so unless consumer
preferences for larger vehicles also shift dramatically.
NHTSA also notes that under attribute-based CAFE standards such as
the agency is proposing today, shifts in consumer preferences could
cause manufacturers' required CAFE levels and, therefore, achieved fuel
savings (and perhaps costs) to increase. For example, if changes in
fuel prices combine with demographic and/or other factors to cause
market preferences to shift significantly toward vehicles with smaller
footprints, manufacturers shifting (relative to current estimates) in
that direction will face higher required CAFE levels than the agency
has estimated.
VI. Proposed Fuel Economy Standards
A. Standards for Passenger Cars and Light Trucks
For both passenger cars and light trucks, the agency is proposing
CAFE standards estimated, as for the previously-promulgated reformed MY
2008-2011 light truck standards, to maximize net benefits to society.
However, as discussed in Section V, the agency considered and analyzed
modified approaches to calibrating the continuous function and fitting
the data in order to address characteristics of the data (vehicles with
outlying fuel economy, footprint, and or sales), and to address the
issues of backsliding, steepness of the curve, and curve crossings from
one model year to the next. While the agency is proposing the curves
below, we continue to be concerned about the steepness of the passenger
car curve and about gaming potential and are seeking comments on
different approaches to address the steepness, as discussed in Section
V. The proposed curves below and their respective shapes are calibrated
using unweighted mean absolute deviation (MAD) regression and
determined through a gradual transformation of curves to guard against
erratic fluctuations and through a series of anti-backsliding measures
that prevents the average required CAFE level from falling between
model years and prevents the continuous function for a given model from
crossing or falling below that of the preceding model year. These
refinements are discussed in greater detail in Section V of the notice.
1. Proposed Passenger Car Standards MY 2011-2015
We have tentatively determined that the proposed standards for MY
2011-2015 passenger cars would result in required fuel economy levels
that are technologically feasible, economically practicable, and set by
taking into account both the effect of other motor vehicle standards of
the Government on fuel economy and the need of the United States to
conserve energy. Values for the parameters defining the target
functions defining these proposed standards for cars are as follows:
----------------------------------------------------------------------------------------------------------------
Model year
Parameter ----------------------------------------------------------------
2011 2012 2013 2014 2015
----------------------------------------------------------------------------------------------------------------
a.............................................. 38.2 40.0 40.8 41.2 41.7
b.............................................. 25.9 27.4 28.7 29.9 31.2
c.............................................. 45.9 45.8 45.7 45.6 45.5
d.............................................. 1.6 1.5 1.5 1.4 1.4
----------------------------------------------------------------------------------------------------------------
Where, per the adjusted continuous function formula above in Section
V:
a = the maximum fuel economy target (in mpg)
b = the minimum fuel economy target (in mpg)
c = the footprint value (in square feet) at which the fuel
economy target is midway between a and b
d = the parameter (in square feet) defining the rate at which
the value of targets decline from the largest to smallest values
The resultant target functions have the following shapes:
Based on the product plan information provided by manufacturers in
response to the February 2007 request for information and the
incorporation of publicly available supplemental data and information,
NHTSA has estimated the required average fuel economy levels under the
proposed adjusted standards for MYs 2011-2015 as follows:
[[Page 24444]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.031
Table VI-1.--Required CAFE Levels (mpg) for Passenger Cars
----------------------------------------------------------------------------------------------------------------
Manufacturer MY 2011 MY 2012 MY 2013 MY 2014 MY 2015
----------------------------------------------------------------------------------------------------------------
BMW............................................ 33.3 35.0 36.0 36.8 37.7
Chrysler....................................... 28.7 29.3 32.2 32.6 33.6
Ferrari........................................ 30.4 32.0 33.1 33.9 34.9
Ford........................................... 31.0 32.7 33.7 34.5 35.5
Fuji (Subaru).................................. 36.9 38.7 39.6 40.1 40.8
General Motors................................. 30.0 31.7 32.8 33.7 34.7
Honda.......................................... 32.1 33.8 34.8 35.5 36.4
Hyundai........................................ 33.4 35.1 36.0 36.7 37.5
Lotus.......................................... 38.1 40.0 40.8 41.2 41.7
Maserati....................................... 28.9 30.6 31.8 32.8 34.0
Mercedes....................................... 31.7 33.3 34.4 35.3 36.2
Mitsubishi..................................... 33.0 35.1 35.9 37.0 37.9
Nissan......................................... 31.2 33.2 34.2 35.0 35.9
Porsche........................................ 37.6 39.4 40.3 40.7 41.3
Suzuki......................................... 37.3 39.2 40.1 40.6 41.2
Toyota......................................... 30.1 31.5 32.7 33.6 34.6
Volkswagen..................................... 35.4 37.2 38.2 38.8 39.5
----------------------------------------------------------------
Total/Average.............................. 31.2 32.8 34.0 34.8 35.7
----------------------------------------------------------------------------------------------------------------
[[Page 24445]]
2. Proposed Standards for Light Trucks MY 2011-2015
NHTSA is proposing light truck fuel economy standards for MYs 2011
through 2015. In taking a fresh look at what truck standard should be
established for MY 2011, as required by EISA, NHTSA used the newer set
of assumptions that it had developed for the purpose of this
rulemaking. These assumptions differ from those used by the agency in
setting the MY 2008-2011 light truck standards in early 2006, and
result in an increase in the projected overall average fuel economy for
MY 2011. The agency used the most up-to-date EIA projections for
available gasoline prices. These projections are, on average, at
approximately $0.25 per gallon higher than the projections used in the
last light truck rulemaking. Other differences in assumptions include
more current product plan information (i.e., spring 2007 product plans
reflecting persistently higher fuel prices, instead of the fall 2005
plans used in the 2006 final rule), an updated technology list and
updated costs estimates and penetration rates for technologies, and
updated values for externalities such as energy security and placing a
value of carbon dioxide emission reductions.
NHTSA is proposing ``optimized'' standards for MY 2011-2015 light
trucks, the process for establishing which is described at length
above, but which may be briefly described as maximizing net social
benefits plus anti-backsliding measures. We have tentatively determined
that the proposed light truck standards for MYs 2011-2015 represent the
maximum feasible fuel economy level for that approach. In reaching this
tentative conclusion, we have balanced the express statutory factors
and other relevant considerations, such as safety and effects on
employment, and we will also consider our NEPA analysis in the agency's
final action.
The proposed standards are determined by a continuous function
specifying fuel economy targets applicable at different vehicle
footprint sizes, the equation for which is given above in Section V
Values for the parameters defining the target functions defining these
proposed standards for light trucks are as follows:
----------------------------------------------------------------------------------------------------------------
Model year
Parameter ----------------------------------------------------------------
2011 2012 2013 2014 2015
----------------------------------------------------------------------------------------------------------------
A.............................................. 30.9 32.7 34.1 34.1 34.3
B.............................................. 21.5 22.8 23.8 24.3 24.8
C.............................................. 51.9 52.0 52.0 52.1 52.1
D.............................................. 3.8 3.8 3.8 3.9 3.9
----------------------------------------------------------------------------------------------------------------
Where:
a = the maximum fuel economy target (in mpg)
b = the minimum fuel economy target (in mpg)
c = the footprint value (in square feet) at which the fuel
economy target is midway between a and b
d = the parameter (in square feet) defining the rate at which
the value of targets decline from the largest to smallest values
The resultant target functions have the following shapes:
[[Page 24446]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.032
Based on the product plans provided by manufacturers in response to
the February 2007 request for information and the incorporation of
publicly available supplemental data and information, the agency has
estimated the required average fuel economy levels under the proposed
optimized standards for MYs 2011-2015 as follows:
Table VI-2.--Required CAFE Levels (mpg) for Light Trucks
----------------------------------------------------------------------------------------------------------------
Manufacturer MY 2011 MY 2012 MY 2013 MY 2014 MY 2015
----------------------------------------------------------------------------------------------------------------
BMW............................................ 28.2 29.9 31.2 31.4 31.7
Chrysler....................................... 25.2 26.6 28.0 28.5 29.1
Ford........................................... 24.7 26.1 28.0 28.3 28.8
Fuji (Subaru).................................. 30.0 31.7 33.1 33.2 33.4
General Motors................................. 23.9 25.4 26.5 27.0 27.4
Honda.......................................... 26.1 27.7 28.9 29.2 29.6
Hyundai........................................ 27.5 29.1 30.4 30.6 31.0
Mercedes....................................... 28.4 30.1 31.4 31.6 31.9
Mitsubishi..................................... 29.4 30.8 32.2 32.3 32.6
Nissan......................................... 24.9 26.2 27.3 27.7 28.2
Porsche........................................ 25.9 27.4 28.7 29.0 29.4
Suzuki......................................... 30.3 32.1 33.5 33.5 33.7
Toyota......................................... 24.9 26.0 27.2 27.6 28.0
Volkswagen..................................... 26.2 27.8 29.0 29.3 29.7
----------------------------------------------------------------------------------------------------------------
[[Page 24447]]
Total/Average.............................. 25.0 26.4 27.8 28.2 28.6
----------------------------------------------------------------------------------------------------------------
We recognize that the manufacturer product plans that we used in
developing the manufacturers' required fuel economy levels for both
passenger cars and light trucks will be updated in some respects before
the final rule is published. To that end, the agency is publishing a
separate request for product plans at the same time as this NPRM to
obtain whatever updates have been made already. Further, we note that a
manufacturer's required fuel economy level for a model year under the
adjusted standards 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 targets for each vehicle footprint 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.
3. Energy and Environmental Backstop
EISA requires each manufacturer to meet a minimum fuel economy
standard for domestically manufactured passenger cars in addition to
meeting the standards set by NHTSA. The minimum standard ``shall be the
greater of (A) 27.5 miles per gallon; or (B) 92 percent of the average
fuel economy projected by the Secretary for the combined domestic and
non-domestic passenger automobile fleets manufactured for sale in the
United States by all manufacturers in the model year. * * *'' \162\ The
agency must publish the projected minimum standards in the Federal
Register when the passenger car standards for the model year in
question are promulgated.
---------------------------------------------------------------------------
\162\ 49 U.S.C. 32902(b)(4).
---------------------------------------------------------------------------
NHTSA calculated 92 percent of the proposed projected passenger car
standards as the minimum standard, which is presented below. The
calculated minimum standards will be updated for the final rule to
reflect any changes in the projected passenger car standards.
------------------------------------------------------------------------
Minimum
Model year standard
------------------------------------------------------------------------
2011....................................................... 28.7
2012....................................................... 30.2
2013....................................................... 31.3
2014....................................................... 32.0
2015....................................................... 32.9
------------------------------------------------------------------------
The agency would like to note that EISA requires the minimum
domestic passenger car standard to be the greater of 27.5 mpg or the
calculated 92 percent, the calculated minimum standard. In all five
model years, the percentage-based value exceeded 27.5 mpg. We also note
that the minimum standards apply only to domestically manufactured
passenger cars, not to non-domestically manufactured passenger cars or
to light trucks.
In CBD, the Ninth Circuit agreed with the agency that EPCA, as it
was then written, did not explicitly require the adoption of a
backstop, i.e., a minimum CAFE standard that is fixed. A fixed minimum
standard is one that does not change in response to changes in a
manufacturer's vehicle mix.
The Court said, however, that the issue was not whether the
adoption was expressly required, but whether it was arbitrary and
capricious for the agency to decline to adopt a backstop. The Court
said that Congress was silent in EPCA on this issue. The Court
concluded that it was arbitrary and capricious for the agency to
decline to adopt a backstop because it did not, in the view of the
Court, address the statutory factors for determining the maximum
feasible level of average fuel economy.
NHTSA believes that it considered and discussed the express
statutory factors such as technological feasibility and economic
practicability and related factors such as safety in deciding not to
adopt a backstop. We do not believe that further discussion is
warranted because Congress has spoken directly on this issue since the
Ninth Circuit's decision.
The enactment of EISA resolved this issue. Congress expressly
mandated that CAFE standards for automobiles be attribute-based. That
is, they must be based on an attribute related to fuel economy, e.g.,
footprint and they must adjust in response to changes in vehicle mix.
Taken by itself, this mandate precludes the agency from adopting a
fixed minimum standard. The only exception to that mandate is the
provision in which Congress mandated a fixed and flat \163\ minimum
standard for one of the three compliance categories. It required one
for domestic passenger cars, but not for either nondomestic passenger
cars or light trucks.
---------------------------------------------------------------------------
\163\ A flat standard is one that requires each manufacturer to
achieve the same numerical level of CAFE.
---------------------------------------------------------------------------
Given the clarity of the requirement for attribute-based standards
and the equally clear narrow exception to that requirement, the agency
tentatively concludes that had Congress intended backstops to be
established for either of the other two compliance categories, it would
have required them. Congress did not, however, do so. Absent explicit
statutory language that provides the agency authority to set flat
standards, the agency believes that the setting of a supplementary
minimum flat standard for the other two compliance categories would be
contrary to the requirement to set an attribute-based standard under
EISA.
Regardless, the agency notes that the curve of an attribute-based
standard has features that limit backsliding. Some of these features,
which are fully described in Section V.B of the notice, were added as
the agency refined and modified the Volpe model for the purpose of this
rulemaking. Others, such as the lower asymptote, which serves as a
backstop, are inherent in the logistic function. We believe that these
features help address the concern that has been expressed regarding the
possibility of vehicle upsizing without compromising the benefits of
reform. In addition, the agency notes that the 35 mpg requirement in
and of itself serves as a backstop. The agency must set the standards
high enough to ensure that the average fuel economy level of the
combined car and light fleet is making steady progress toward and
achieves the statutory requirement of at least 35 mpg by 2020. If the
agency finds that this requirement might not be achieved, it will
consider setting standards for model years 2016 through 2015 early
enough and in any event high enough to ensure reaching the 35 mpg
requirement.
4. Combined Fleet Performance
The combined industry wide average fuel economy (in miles per
gallon, or mpg) levels for both cars and light
[[Page 24448]]
trucks, if each manufacturer just met its obligations under the
proposed ``optimized'' standards for each model year, would be as
follows:
MY 2011: 27.8 mpg
MY 2012: 29.2 mpg
MY 2013: 30.5 mpg
MY 2014: 31.0 mpg
MY 2015: 31.6 mpg
The annual average increase during this five year period is
approximately 4.5 percent. Due to the uneven distribution of new model
introductions during this period and to the fact that significant
technological changes can be most readily made in conjunction with
those introductions, the annual percentage increases are greater in the
early years in this period. In order for the combined industry wide
average fuel economy to reach at least 35 mpg by MY 2020, it would have
to increase an average of 2.1 percent per year for MYs 2016 through
2020.
B. Estimated Technology Utilization Under Proposed Standards
NHTSA anticipates that manufacturers will significantly increase
the use of fuel-saving technologies in response to the standards we are
proposing for passenger cars. Although it is impossible to predict
exactly how manufacturers will respond, the Volpe model provides
estimates of technologies manufacturers could apply in order to comply
with the proposed standards. The preliminary Regulatory Impact Analysis
(PRIA) presents estimated increases in the industry-wide utilization of
each technology included in agency's analysis. Tables VI-3 and VI-4
show rates at which the seven largest manufacturers' product plans
indicated plans to use some selected technologies, as well as rates at
which the Volpe model estimated that the same technologies might
penetrate these manufacturers' passenger car fleet in response to the
baseline and proposed standards.
The average penetration rate is the percentage of the entire fleet
to which the technology is applied. For example, tables VI-3 and VI-4
show that these manufacturers could apply hybrid powertrains to 15
percent of the entire passenger car fleet in MY 2015, as opposed to the
5 percent shown in their product plans. However, not all manufacturers
begin with the same technology penetration rates, and not all
manufacturers are affected equally by the proposed standards. The next
column shows the maximum penetration rate among the seven manufacturers
with a significant market share (Chrysler, Ford, GM, Honda, Hyundai,
Nissan, and Toyota). For example, the Volpe model estimated that one of
these manufacturers would apply hybrid powertrains to 19 percent of its
passenger car fleet to comply with the proposed MY 2015 standard.
As tables VI-3 and VI-4 demonstrate, the Volpe model estimated that
manufacturers might need to apply significant numbers of advanced
engines, advanced transmissions, and hybrid powertrains in order to
comply with the proposed standards. (Most of the hybrids are integrated
starter generators, although significant numbers of IMA and power-split
hybrids also penetrate the fleet.) For example, the Volpe model
estimated that one of the seven largest light truck manufacturers could
be including diesel engines in 45 percent of its light trucks by MY2015
in response to the proposed standards.
Table VI.--3. Estimated Technology Penetration Rates in MY2015 for Passenger Cars
[In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average among seven largest manufacturers Maximum among seven largest manufacturers
-----------------------------------------------------------------------------------------------
Technology Under Under
Product plan Adjusted proposed Product plan Adjusted proposed
baseline standard baseline standard
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger Cars
--------------------------------------------------------------------------------------------------------------------------------------------------------
Automatically Shifted Manual Transmission............... 10 10 39 59 59 86
Spark Ignited Direct Injection.......................... 22 22 30 76 76 82
Turbocharging & Engine Downsizing....................... 5 5 17 11 11 51
Diesel Engine........................................... 0 0 2 0 0 5
Hybrid Electric Vehicles................................ 5 5 15 14 14 19
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table VI.--4. Estimated Technology Penetration Rates in MY2015 for Light Trucks
[In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Maximum among seven largest manufacturers Maximum among seven largest manufacturers
-----------------------------------------------------------------------------------------------
Technology Adjusted Under proposed Adjusted Under proposed
Product plan baseline standard Product plan baseline standard
--------------------------------------------------------------------------------------------------------------------------------------------------------
Automatically Shifted Manual Transmission............... 10 14 55 41 41 72
Spark Ignited Direct Injection.......................... 23 24 40 46 46 73
Turbocharing & Engine Downsizing........................ 9 11 31 32 32 44
Diesel Engine........................................... 3 6 10 7 29 45
Hybrid Electric Vehicles................................ 2 6 25 5 13 32
--------------------------------------------------------------------------------------------------------------------------------------------------------
The agency uses Volpe model analysis of technology application
rates as a way of determining the economic practicability and
technological feasibility of the proposed standards, but we note that
manufacturers may always comply with the standards by applying
different technologies in different orders and at different rates.
[[Page 24449]]
Insofar as our conclusion of what the maximum feasible standards would
be is predicated on our analysis, however, the agency requests comment
on the feasibility of these rates of increase in the penetration of
these advanced technologies, and for other technologies discussed in
the PRIA.
C. Benefits and Costs of Proposed Standards
1. Benefits
We estimate that the proposed standards for passenger cars would
save approximately 19 billion gallons of fuel and prevent 178 billion
metric tons of tailpipe CO2 emissions over the lifetime of
the passenger cars sold during those model years, compared to the fuel
savings and emissions reductions that would occur if the standards
remained at the adjusted baseline (i.e., the higher of manufacturer's
plans and the manufacturer's required level of average fuel economy for
MY 2010).\164\
---------------------------------------------------------------------------
\164\ See supra text accompanying note 103.
---------------------------------------------------------------------------
We estimate that the value of the total benefits of the proposed
passenger car standards would be approximately $31 billion \165\ over
the lifetime of the 5 model years combined. This estimate of societal
benefits includes direct impacts from lower fuel consumption as well as
externalities, and also reflects offsetting societal costs resulting
from the rebound effect. Direct benefits to consumers, including fuel
savings, account for 85 percent ($29.5 billion) of the roughly $35
billion in gross \166\ consumer benefits resulting from increased
passenger car CAFE. Petroleum market externalities account for roughly
10 percent ($3.6 billion). Environmental externalities, i.e., reduction
of air pollutants accounts for roughly 5 percent ($1.8 billion). Over
half of this $1.8 billion figure is the result of greenhouse gas
(primarily CO2) reduction ($1.0 billion). Increased
congestion, noise and accidents from increased driving will offset
roughly $3.8 billion of the $35 billion in consumer benefits, leaving
net consumer benefits of $31 billion.
---------------------------------------------------------------------------
\165\ The $31 billion estimate is based on a 7% discount rate
for valuing future impacts. NHTSA estimated benefits using both 7%
and 3% discount rates. Under a 3% rate, total consumer benefits for
passenger car CAFE improvements total $36 billion.
\166\ Gross consumer benefits are benefits measured prior to
accounting for the negative impacts of the rebound effect. They
include fuel savings, consumer surplus from additional driving,
reduced refueling time, reduced criteria pollutants, and reduced
greenhouse gas production. Negative impacts from the rebound effect
include added congestion, noise, and crash costs due to additional
driving.
---------------------------------------------------------------------------
The following table sets out the relative dollar value of the
various benefits of this rulemaking on a per gallon saved basis:
Table VI-5.--Economic Benefits and Costs per Gallon of Fuel Saved
[Undiscounted]
------------------------------------------------------------------------
Value (2006 $
Category Variable per gallon)
------------------------------------------------------------------------
Benefits....................... Savings in Fuel $1.99
Production Cost.
Reduction in Oil Import .28
Externalities.
Value of Additional .24
Rebound-Effect Driving.
Reduction in Criteria .16
Pollutant Emissions.
Value of Reduced .12
Refueling Time.
Reduction in CO2 \167\ .02
Emissions.
---------------
Gross Benefits......... 2.81
Costs.......................... Externalities from 0.30
Additional Rebound-
Effect Driving.
---------------
Net Benefits................... Net Benefits........... 2.51
------------------------------------------------------------------------
We estimate that the proposed standards for light trucks would save
approximately 36 billion gallons of fuel and prevent 343 million metric
tons of tailpipe CO2 emissions over the lifetime of the
light trucks sold during those model years, compared to the fuel
savings and emissions reductions that would occur if the standards
remained at the adjusted baseline.
---------------------------------------------------------------------------
\167\ Based on a value of $7.00 per ton of carbon dioxide.
---------------------------------------------------------------------------
We estimate that the value of the total benefits of the proposed
light truck standards would be approximately $57 billion \168\ over the
lifetime of the 5 model years of light trucks combined. This estimate
of societal benefits includes direct impacts from lower fuel
consumption as well as externalities and also reflects offsetting
societal costs resulting from the rebound effect. Direct benefits to
consumers, including fuel savings, account for 84 percent ($52.7
billion) of the roughly $63 billion in gross consumer benefits
resulting from increased light truck CAFE. Petroleum market
externalities account for roughly 10 percent ($6.5 billion).
Environmental externalities, i.e., reduction of air pollutants accounts
for roughly 6 percent ($3.5 billion). Over half of this figure is the
result of greenhouse gas (primarily CO2) reduction ($1.9
billion). Increased congestion, noise and accidents from increased
driving will offset roughly $5.4 billion of the $63 billion in consumer
benefits, leaving net consumer benefits of $57 billion.
---------------------------------------------------------------------------
\168\ The $57 billion estimate is based on a 7% discount rate
for valuing future impacts. NHTSA estimated benefits using both 7%
and 3% discount rates. Under a 3% rate, total consumer benefits for
light truck CAFE improvements are $72 billion.
---------------------------------------------------------------------------
2. Costs
The total costs for manufacturers just complying with the standards
for MY 2011-2015 passenger cars would be approximately $16 billion,
compared to the costs they would incur if the standards remained at the
adjusted baseline. The resulting vehicle price increases to buyers of
MY 2015 passenger cars would be recovered or paid back \169\ in
additional fuel savings in an average of 56 months, assuming fuel
prices ranging from $2.26 per gallon in 2016 to $2.51 per gallon in
2030.\170\
---------------------------------------------------------------------------
\169\ See Section V.A.7 below for discussion of payback period.
\170\ The fuel prices (shown here in 2006 dollars) used to
calculate the length of the payback period are those projected
(Annual Energy Outlook 2008, revised early release) by the Energy
Information Administration over the life of the MY 2011-2015 light
trucks, not current fuel prices.
---------------------------------------------------------------------------
The total costs for manufacturers just complying with the standards
for MY 2011-2015 light trucks would be approximately $31 billion,
compared to the costs they would incur if the standards remained at the
adjusted
[[Page 24450]]
baseline. The resulting vehicle price increases to buyers of MY 2015
light trucks would be paid back in additional fuel savings in an
average of 50 months, assuming fuel prices ranging from $2.26 to $2.51
per gallon.
Comparison of Estimated Benefits to Estimated Costs
The table below compares the incremental benefits and costs for the
car and light truck CAFE standards, in millions of dollars.
Table VI-6.--Passenger Cars
--------------------------------------------------------------------------------------------------------------------------------------------------------
Model year Total
-----------------------------------------------------------------------------------------------
2011 2012 2013 2014 2015 2011-2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits................................................ 2,596 4,933 6,148 7,889 9,420 30,986
Costs................................................... 1,884 2,373 2,879 3,798 4,862 15,796
Net Benefits............................................ 712 2,560 3,269 4,091 4,558 15,190
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table VI-7.--Light Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
Model Year Total
-----------------------------------------------------------------------------------------------
2011 2012 2013 2014 2015 2011-2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits................................................ 3,909 8,779 13,560 14,915 16,192 57,355
Costs................................................... 1,649 4,986 7,394 8,160 8,761 30,949
Net Benefits............................................ 2,260 3,793 6,166 6,755 7,431 26,406
--------------------------------------------------------------------------------------------------------------------------------------------------------
The average annual per vehicle cost increases are shown in the
PRIA.
D. Flexibility Mechanisms
The agency's benefit and cost estimates do not reflect the
availability and use of flexibility mechanisms, such as compliance
credits and credit trading because EPCA prohibits NHTSA from
considering the effects of those mechanisms in setting CAFE standards.
EPCA has precluded consideration of the FFV adjustments ever since it
was amended to provide for those adjustments. The prohibition against
considering compliance credits was added by EISA.
The benefit and compliance cost estimates used by the agency in
determining the maximum feasible level of the CAFE standards assume
that manufacturers will rely solely on the installation of fuel economy
technology to achieve compliance with the proposed standards. In
reality, however, manufacturers are likely to rely to some extent on
three flexibility mechanisms provided by EPCA and will thereby reduce
the cost of complying with the proposed standards. First, some
manufacturers will rely on a combination of technology and compliance
credits that they earn (including credits transferred from one
compliance category to another) as their compliance strategy. Second,
they may also supplement their technological efforts by relying on the
special fuel economy adjustment procedures provided by EPCA as an
incentive for manufacturers to produce flexible fuel vehicles (FFV).
Third, the agency is instituting a credit trading program that, if
taken advantage of, would further provide flexibility.
The agency believes that manufacturers are likely to take advantage
of these flexibility mechanisms, thereby reducing benefits and costs
meaningfully, but does not have any reliable basis for predicting which
manufacturers might use compliance credits, how they might use them or
the extent to which they might do so.
With respect to earned credits through over-compliance NHTSA notes
that while the manufacturers have relatively few light truck credits,
several manufacturers already have a substantial amount of banked
passenger car credits earned under the long term 27.5 mpg flat or
nonattributed-based standard for those automobiles. Further, they will
earn significant additional passenger car credits through MY 2010, the
last year before the passenger car standards are increased and the
first year in which those standards will be attribute-based. These pre-
MY 2011 passenger car credits can be carried forward into the MY 2011-
2015 period.
While manufacturers might use credits to a significant extent,
thereby reducing benefits and costs to a meaningful level, the agency
believes it important to note that the potential effect of these
flexibility mechanisms is largely limited to MY 2011-2015. The earning
of credits will become more difficult in MY 2011. MY 2011 is the first
year in which all manufacturers will be required to comply with
attribute-based CAFE standards for passenger cars and light trucks. The
earning of compliance credits will be more challenging under attribute-
based standards since each manufacturer's legal obligation to improve
CAFE will be based, in part, on that manufacturer's own product mix.
Further, the standards will significantly increase every year. On the
other hand, credits earned in MY 2011 or thereafter can be transferred
across fleets to a limited extent, adding additional flexibility to the
system.
With respect to overcompliance through production of FFV vehicles,
EISA also extended the FFV adjustment through 2019. Manufacturers can
build enough FFV vehicles to raise the CAFE of their fleets. FFVs are
assigned high fuel economy values using a formula specified in the
Alternative Motor Fuels Act (AMFA). For example, a Ford Taurus has a
fuel economy of 26.39 mpg--if it is converted to a FFV, its fuel
economy increases to 44.88 mpg. Converting a vehicle into an FFV is
more cost-effective than converting it, for example, into a diesel,
which is more costly and achieves lower fuel economy. However, the
maximum extent to which the adjustments can be used to raise the CAFE
of a manufacturer's fleet is 1.2 mpg in MY 2011-2014. In MY 2015, the
cap begins to decline. The cap continues to decline each year
thereafter by 0.2 mpg until it reaches 0 mpg in MY 2020 and beyond.
Given that there will be considerably less opportunity to use
credits in lieu of installing fuel saving technologies after MY 2015,
the manufacturers may elect to apply technology early in the MY 2011-
2020 period when redesign
[[Page 24451]]
opportunities arise rather than relying on credits or FFV adjustments,
but then face being limited compliance options in later years. The
declining influence of the flexibility mechanisms during this period
guarantees that the standards for that year will be met almost entirely
through the use of technology, thus helping to ensure the 35.0 mpg goal
of EISA will be achieved.
Finally, with respect to cost reduction through reliance on credit
trading, credits earned in MY 2011 or thereafter can be traded. There
is a study in which the Congressional Budget Office estimated that
credit trading would cut the costs of achieving a combined 27.5 mpg
standard by 16 percent.\171\ This study assumed that manufacturer
compliance costs varied widely and that manufacturers were willing to
engage in trading. While some manufacturers have expressed reluctance
to trade with competitors, we believe that the credit trading program
has the potential to reduce compliance costs meaningfully without any
impact on overall fuel savings.
---------------------------------------------------------------------------
\171\ ``The Economic Costs of Fuel Economy Standards Versus a
Gasoline Tax'', Report from the Congressional Budget Office,
December, 2003.
---------------------------------------------------------------------------
E. Consistency of Proposed Passenger Car and Light Truck Standards With
EPCA Statutory Factors
As explained above, EPCA requires the agency to set fuel economy
standards for each model year and for each fleet separately at the
maximum feasible level for that model year and fleet. In determining
the ``maximum feasible'' level of average fuel economy, the agency
considers the four statutory factors: Technological feasibility,
economic practicability, the effect of other motor vehicle standards of
the Government on fuel economy, and the need of the United States to
conserve energy, along with additional relevant factors such as safety.
In determining how to weigh these considerations, we are mindful of
EPCA's overarching purpose of energy conservation. NHTSA's NEPA
analysis for this rulemaking (see Section XIII.B of this document) also
will inform the agency's final action.
The section above proposes footprint-based CAFE standards for MY
2011-2015 passenger cars and light truck. The agency has considered
this set of standards in light of both the relevant factors and EPCA's
overarching purpose of energy conservation, and seeks comment on
whether the public agrees that the agency's analysis is sound or should
have considered the factors differently or considered additional
factors.
We have tentatively determined that the proposed passenger car and
light truck standards are at the maximum feasible level for passenger
car and light truck manufacturers for MY 2011-2015. As discussed above,
the standards are basically determined by following the same procedure
as for setting the optimized light truck standards for 2008-2011.
1. Technological Feasibility
We tentatively conclude that the proposed standards are
technologically feasible. Whether a technology may be feasibly applied
in a given model year is not simply a function of whether the
technology will exist in that model year, but also whether the data
sources reviewed by the agency indicate that the technology is mature
enough to be applied in that year, whether it will conflict with other
technologies being applied, and so on. The Volpe model maximizes net
benefits by applying fuel-saving technologies to vehicle models in a
cost-effective manner, which generally prevents it from applying
technologies to vehicles before manufacturers would be ready to do so.
Thus, we tentatively conclude that standards that maximize net benefits
based on Volpe model analysis are technologically feasible.
We described above how we tentatively conclude that the additional
measures used to set the optimized standards do not take the standards
out of the realm of technological feasibility, because if targets are
feasible in one year, they will continue to be feasible.
2. Economic Practicability
NHTSA 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.'' See,
e.g., Public Citizen v. NHTSA, 848 F.2d 256, 264 (DC Cir. 1988). We
tentatively conclude that the proposed standards are economically
feasible. Making appropriate assumptions about key factors such as
leadtime and using them in the Volpe model provides a benchmark for
assessing the economic practicability of a proposed standard, because
it avoids applying technologies at an infeasible rate and avoids
application of technologies whose benefits are insufficient to justify
their costs when the agency determines a manufacturer's capability. In
other words, this approach ensures that each identified private
technology investment projected by the model produces marginal benefits
at least equal to marginal cost. The Volpe model also takes into
account other factors closely associated with economic practicability,
such as lead time and phase-in rates for technologies that it applies.
By limiting the consideration of technologies to those that will be
available and limiting their rate of application using these
assumptions, the cost-benefit analysis assumes that manufactures will
make improvements that are cost-justified.
In addition to carefully making these assumptions and using cost-
benefit analysis, the agency also performs sales and employment impacts
analysis on individual manufacturers. The sales analysis looks at a
purchasing decision from the eyes of a knowledgeable and rational
consumer, comparing the estimated cost increases versus the payback in
fuel savings over 5 years (the average new vehicle loan) for each
manufacturer. This relationship depends on the cost-effectiveness of
technologies available to each manufacturer. Overall, based on a 7
percent discount rate for future fuel savings, we expect there would be
no significant sales or job losses for these proposed standards.
Therefore, we tentatively conclude that the proposed standards are
economically practicable.
3. Effect of Other Motor Vehicle Standards of the Government on Fuel
Economy
We tentatively conclude that the proposed standards for passenger
cars and light trucks account for the effect of other motor vehicle
standards of the Government 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
pollutant emissions. The primary influence of many of these regulations
is the addition of weight to the vehicle, with the commensurate
reduction in fuel economy. Manufacturers incorporate this information
in their product plans, which are accounted for as part of the Volpe
model analysis used to set the standards. Because the addition of
weight to the vehicle is only relevant if it occurs within the
timeframe of the regulations (i.e., MY 2011-2015), we consider the
Federal Motor Vehicle Safety Standards set by NHTSA and the Federal
Motor Vehicle Emissions Standards set by EPA which become effective
during the timeframe.
[[Page 24452]]
Federal Motor Vehicle Safety Standards
NHTSA has completed a preliminary evaluation of the impact of the
Federal motor vehicle safety standards (FMVSSs) using MY 2010 vehicles
as a baseline for passenger cars. We have issued or proposed to issue a
number of FMVSSs that become effective between the baselines and MY
2015. These have been analyzed for their potential impact on vehicle
weights for vehicles manufactured in these years: 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 the new FMVSSs.
The average test weight (curb weight plus 300 pounds) of the
passenger car fleet is currently 3,570 lbs. During the time period
addressed by this rulemaking, the average test weight is the passenger
car fleet is projected to be between 3,608 and 3,635 lbs. The average
test weight of Chrysler's passenger car fleet is currently 3,928 lbs.
The average test weight of Chrysler's passenger car fleet is projected
to be between 3,844 and 3,993 lbs in the future. For Ford, the average
test weight of the passenger car fleet is currently 3,660 lbs, and is
projected to be between 3,649 and 3,677 lbs. For GM, the average test
weight of the passenger car fleet is currently 3,649 lbs, and is
projected to be between 3,768 and 3,855 lbs. For Toyota, the average
test weight of the passenger car fleet is currently 3,330 lbs, and is
projected to be between 3,416 and 3,451 lbs.
The average test weight (curb weight plus 300 pounds) of the light
truck fleet is 4,727 pounds, and during the time period addressed by
this rulemaking, the average test weight of the light truck fleet is
projected to be between 4,824 and 4,924 lbs. The average test weight of
Chrysler's light truck fleet is currently 4,673 lbs, while during the
time period addressed by this rulemaking, the average test weight of
Chrysler's light truck fleet is projected to be between 4,830 and 4,906
lbs. For Ford, the light truck fleet's average test weight is currently
4,887 lbs, while during the time period addressed by this rulemaking,
the average test weight is projected to be between 4,619 and 4,941 lbs.
For GM, the light truck fleet's average test weight is currently 5,024
lbs, while during the time period addressed by this rulemaking, the
average test weight is projected to be between 5,324 and 5,415 lbs. For
Toyota, the light truck fleet's average test weight is currently 4,567
lbs, while during the time period addressed by this rulemaking, the
average test weight is projected to be between 4,535 and 4,583 lbs.
Thus, overall, the four largest manufacturers of light-duty
vehicles expect the average weight of their vehicles to remain mostly
unchanged, with slight weight increases projected 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 model years in
question would have a negligible impact on fuel economy of their
vehicles.
Weight Impacts of Required Safety Standards (Final Rules)
NHTSA has issued two final rules on safety standards that become
effective for passenger cars and light trucks between MY 2011 and MY
2015. These have been analyzed for their potential impact on passenger
car and light truck weights, using MY 2010 as a baseline.
1. FMVSS No. 126, Electronic Stability Control
2. FMVSS No. 214, Side Impact Oblique Pole Test
FMVSS No. 126, Electronic Stability Control:
The phase-in schedule for vehicle manufacturers is:
----------------------------------------------------------------------------------------------------------------
Model year Production beginning date Requirement
----------------------------------------------------------------------------------------------------------------
2009................................... September 1, 2008.......................... 55% with carryover credit.
2010................................... September 1, 2009.......................... 75% with carryover credit.
2011................................... September 1, 2010.......................... 95% with carryover credit.
2012................................... September 1, 2011.......................... All light vehicles.
----------------------------------------------------------------------------------------------------------------
The final rule requires 75 percent of all light vehicles to meet
the ESC requirement for MY 2010, 95 percent of all light vehicles to
meet the ESC requirements by MY 2011, and all light vehicles to meet
the requirements by MY 2012. Thus, in MY 2010, manufacturers must add
ESC to 20 percent of vehicles; in MY 2011, to an additional 20 percent
of vehicles; and in MY 2012, to another 5 percent of vehicles.
The agency's analysis of weight impacts found that ABS adds 10.7
lbs. and ESC adds 1.8 lbs. per vehicle for a total of 12.5 lbs. Based
on manufacturers' plans for voluntary installation of ESC, 85 percent
of passenger cars in MY 2010 would have ABS and 52 percent would have
ESC. Thus, the total added weight in MY 2011 for passenger cars would
be about 2.5 lbs. (0.15 x 10.7 + 0.48 x 1.8), and in MY 2012 would be
about 0.6 lbs. For light trucks, manufacturers' plans indicate that 99
percent of all light trucks would have ABS by MY 2011 and that 52
percent would have ESC by that time. Thus for light trucks, the
incremental weight impacts of adding ESC would be slightly less than 1
pound (0.01 x 10.7 + 0.48 x 1.8).
FMVSS No. 214, Side Impact Protection
NHTSA recently issued a final rule to incorporate a dynamic pole
test into FMVSS No. 214, ``Side Impact Protection.'' \172\ The rule
will lead to the installation of new technologies, such as side curtain
air bags and torso side air bags, which are capable of improving head
and thorax protection to occupants of vehicles and that crash into
poles and trees and vehicles that are laterally struck by a higher
vehicle. The phase-in requirements for the side impact test are as
shown below: \173\
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\172\ 72 FR 51907 (Sept. 11, 2007).
\173\ Id. 51971-72.
------------------------------------------------------------------------
Percent of each manufacturer's light
Phase-in date vehicles that must comply during the
production period
------------------------------------------------------------------------
September 1, 2009 to August 20 percent (excluding vehicles GVWR >
31, 2010. 8,500 lbs.).
September 1, 2010 to August 50 percent of vehicles (excluding
31, 2011. vehicles GVWR > 8,500 lbs.).
September 1, 2011 to August 75 percent of vehicles (excluding
31, 2012. vehicles GVWR > 8,500 lbs.).
[[Page 24453]]
September 1, 2012 to August All vehicles including limited line
31, 2013. vehicles, except vehicles with GVWR >
8,500 lbs., alterers, and multi-stage
manufacturers.
On or after September 1, 2013 All vehicles, including vehicles with
GVWR > 8,500 lbs., alterers and multi-
stage manufacturers.
------------------------------------------------------------------------
Based on manufacturers' plans to provide window curtains and torso
bags voluntarily, we estimate that 90 percent of passenger cars and
light trucks would have window curtains and 72 percent would have torso
bags for MY 2010. A very similar percentage is estimated for MY 2011. A
teardown study of 5 thorax air bags resulted in an average weight
increase per vehicle of 4.77 pounds (2.17 kg).\174\ A second study
performed teardowns of 5 window curtain systems.\175\ 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), a figure which is assumed to be average for all
vehicles in the future.
---------------------------------------------------------------------------
\174\ 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.
\175\ Ludtke & Associates, ``Perform Cost and Weight Analysis,
Head Protection Air Bag Systems, FMVSS 201'', page 4-3 to 4-5, DOT
HS 809 842.
---------------------------------------------------------------------------
Assuming in the future that the typical system used to comply with
the requirements of FMVSS No. 214 will be thorax bags with a window
curtain, the average weight increase would be 2 pounds (0.10 x 6.78 +
0.28 x 4.77). However, there is the potential that some light trucks
might need to add structure to meet the test. The agency has no
estimate of this potential weight impact for structure.
Weight Impacts of Proposed/Planned Standards
Proposed FMVSS No. 216, Roof Crush
On August 23, 2005, NHTSA proposed amending the roof crush standard
to increase the roof crush standard from 1.5 times the vehicle weight
to 2.5 times the vehicle weight.\176\ The NPRM proposed to extend the
standard to vehicles with a GVWR of 10,000 pounds or less, thus
including many light trucks that had not been required to meet the
standard in the past. The proposed effective date was the first
September 1 occurring three years after publication of the final rule.
Thus, it is still possible that the final rule could be effective with
MY 2011. In the PRIA, the average light truck weight was estimated to
increase by 6.1 pounds for a 2.5 strength to weight ratio. Based on
comments on the NPRM, the agency believes that this weight estimate is
likely to increase. However, the agency does not yet have an estimate
for the final rule.
---------------------------------------------------------------------------
\176\ 70 FR 49223 (Aug. 23, 2005). The PRIA for this NPRM is
available at Docket No. NHTSA-2005-22143-2.
---------------------------------------------------------------------------
Planned NHTSA Initiative on Ejection Mitigation
The agency is planning on issuing a proposal on ejection
mitigation. The likely result of the planned proposal is for window
curtain side air bags to be made larger and for a rollover sensor to be
installed. The likely result will be an increase in weight of at least
1 pound; however, this analysis is not completed. In addition, advanced
glazing is one alternative that manufacturers might pursue for specific
window applications (possibly for fixed windows for third row
applications) or more broadly. Advanced glazing is likely to have
weight implications. Again, the agency has not made an estimate of the
likelihood that advanced glazing might be used or its weight
implications.
Summary--Overview of Anticipated Weight Increases
The following table summarizes estimates made by NHTSA regarding
the weight added in MY 2010 or later to institute the above discussed
standards or likely rulemakings. In summary, NHTSA estimates that
weight additions required by final rules and likely NHTSA regulations
effective in MY 2011 and beyond for passenger cars, compared to the MY
2010 fleet, will increase passenger car weight by an average of 12.2
pounds or more (5.5 kg or more). The agency estimates that weight
additions required by final rules and likely NHTSA regulations
effective in MY 2011 and beyond for light trucks, compared to the MY
2010 fleet, will increase light truck weight by an average of 10.1
pounds or more.
Table VI-8.--Minimum Weight Additions Due to Final Rules or Likely NHTSA
Regulations Compared to MY 2010 Baseline Fleet
------------------------------------------------------------------------
Added weight Added weight
Standard no. in pounds in kilograms
------------------------------------------------------------------------
126..................................... 3.1 1.4
214..................................... 2.0 0.9
216..................................... 6.1-? 2.8-?
Ejection Mitigation..................... 1.0-? 0.4-?
-------------------------------
Total............................... 12.2-? 5.5-?
------------------------------------------------------------------------
Based on NHTSA's weight-versus-fuel-economy algorithms, a 3-4 pound
increase in weight equates to a loss of 0.01 mpg in fuel economy. Thus,
the agency's estimate of the safety/weight effects is 0.025 to 0.04 mpg
or more for already issued or likely future safety standards.
Federal Motor Vehicle Emissions Standards
EPA's Fuel Economy Labeling Rule employs a new vehicle-specific, 5-
cycle approach to calculating fuel economy
[[Page 24454]]
labels which incorporates estimates of the fuel efficiency of each
vehicle during high speed, aggressive driving, air conditioning
operation and cold temperatures into each vehicle's fuel economy
label.\177\ The rule became effective January 26, 2007, and will take
effect starting with MY 2008.
---------------------------------------------------------------------------
\177\ See 71 FR 77872 (December 26, 2006).
---------------------------------------------------------------------------
The new testing procedures will combine measured fuel economy over
the two current fuel economy tests, the FTP and HFET, as well as that
over the US06, SC03 and cold FTP tests into estimates of city and
highway fuel economy for labeling purposes. The test results from each
cycle will be weighted to represent the contribution of each cycle's
attributes to onroad driving and fuel consumption. The labeling rule
does not alter the FTP and HFET driving cycles, the measurement
techniques, or the calculation methods used to determine CAFE.
The EPA Labeling Rule will not impact CAFE standards or test
procedures or other USG regulations.\178\ Rather, the changes to
existing test procedures will allow for the collection of appropriate
fuel economy data to ensure that existing test procedures better
represent real-world conditions.\179\ Further, the labeling rule does
not have a direct effect upon a vehicle's weight, nor on the fuel
economy level that a vehicle can achieve. Instead, the labeling rule
serves to provide consumers with a more accurate estimate of fuel
economy based on more comprehensive factors reflecting real-world
driving use.
---------------------------------------------------------------------------
\178\ Id. section I.F.
\179\ Id. sections II, IV.
---------------------------------------------------------------------------
There are two groups of State emissions standards do not qualify
under 49 U.S.C. 32902(f), and therefore are not considered. One is
consists of State standards that cannot be adopted and enforced by any
State because there has been no waiver granted by the EPA under the
preemption waiver provision in the Clean Air Act.\180\ The other
consists of State emissions standards that are expressly or impliedly
preempted under EPCA, regardless of whether or not they have received
such a waiver. Preempted standards include, for example:
\180\ 42 U.S.C. 7543 (a).
---------------------------------------------------------------------------
(1) A fuel economy standard; and
(2) A law or regulation that has essentially all of the effects
of a fuel economy standard, but is not labeled as one (i.e., a State
tailpipe CO2 standard).
4. Need of the U.S. To Conserve Energy
Congress' requirement to set standards at the maximum feasible
level and inclusion of the need of the nation to conserve energy as a
factor to consider in setting CAFE standards ensures that standard
setting decisions are made with this purpose and all of the associated
benefits in mind. As discussed above, ``the need of the United States
to conserve energy'' means ``the consumer cost, national balance of
payments, environmental, and foreign policy implications of our need
for large quantities of petroleum, especially imported petroleum.''
Environmental implications principally include reductions in emissions
of criteria pollutants and carbon dioxide.
The need to conserve energy is, from several different standpoints,
more crucial today as it was at the time of EPCA's enactment in the
late 1970s. U.S. energy consumption has been outstripping U.S. energy
production at an increasing rate. Crude oil prices are currently around
$100 per barrel, despite having averaged about $13 per barrel as
recently as 1998, and gasoline prices have doubled in this period.\181\
Net petroleum imports now account for 60 percent of U.S. domestic
petroleum consumption.\182\ World crude oil production continues to be
highly concentrated, exacerbating the risks of supply disruptions and
their negative effects on both the U.S. and global economies. Figure
VI-3 below shows the increase of crude oil imports and the decline of
U.S. oil production since 1920.
---------------------------------------------------------------------------
\181\ Energy Information Administration, Annual Energy Review
2006, Table 5.21, p. 171. Available at http://www.eia.doe.gov/emeu/aer/pdf/pages/sec5_51.pdf (last accessed Nov. 29, 2007).
\182\ Energy Information Administration, Annual Energy Review
2006, Table 5.1, p. 125. Available at http://www.eia.doe.gov/emeu/aer/pdf/pages/sec5_5.pdf (last accessed Nov. 29, 2007).
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[[Page 24455]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.034
The need to conserve energy is also more crucial today because of
growing greenhouse gas emissions from petroleum consumption by motor
vehicles and growing concerns about the effects of those emissions.
Since 1999, the transportation sector has led all U.S. end-use sectors
in emissions of carbon dioxide. Transportation sector CO2
emissions in 2006 were 407.5 million metric tons higher than in 1990,
an increase that represents 46.4 percent of the growth in unadjusted
energy related carbon dioxide emissions from all sectors over the
period. Petroleum consumption, which is directly related to fuel
economy, is the largest source of carbon dioxide emissions in the
transportation sector.\183\ Moreover, transportation sector emissions
from gasoline and diesel fuel combustion generally parallel total
vehicle miles traveled. The need of the nation to conserve energy also
encompasses all of these issues, insofar as carbon dioxide emissions
from passenger cars and light trucks decrease as fuel economy improves
and more energy is conserved.\184\
---------------------------------------------------------------------------
\183\ However, increases in ethanol fuel consumption have
mitigated the growth in transportation-related emissions somewhat
(emissions from energy inputs to ethanol production plants are
counted in the industrial sector).
\184\ The above statistics are derived from Energy Information
Administration, ``Emissions of Greenhouse Gases Report,'' Report
DOE/EIA-0573 (2006), released November 28, 2007. Available
at http://www.eia.doe.gov/oiaf/1605/ggrpt/carbon.html (last accessed
Feb. 3, 2008).
---------------------------------------------------------------------------
The need of the nation to reduce energy consumption would be
properly reflected in the buying decisions of vehicle purchasers, if:
Vehicle buyers behave as if they have unbiased
expectations of their future driving patterns and fuel prices; and
The public social, economic, security, and environmental
impacts of petroleum consumption are fully identified, quantified and
reflected in current and future gasoline prices; and
Vehicle buyers behave as if they account for the impact of
fuel economy
[[Page 24456]]
on their future driving costs in their purchasing decisions.
Basic economic theory suggests that the price of vehicles should
reflect the value that the consumer places on the fuel economy
attribute of his or her vehicle. It is not clear that consumers have
the information or inclination to value the impact of fuel economy in
their vehicle purchasing decisions. Consumers generally have no direct
incentive to value benefits that are not included in the price of
fuel--for example, benefits such as energy security and limiting global
climate change. These are the market failures which EPCA requires NHTSA
to address.
By accounting for the need of the nation to conserve energy in
setting CAFE standards, NHTSA helps to mitigate the risks posed by
petroleum consumption. In its analysis, NHTSA quantifies the need of
the nation to conserve energy by calculating how much fuel economy a
vehicle buyer ought to purchase, or rather, how much a vehicle buyer
ought to value fuel economy, based both on fuel prices and potentially
estimable externalities (including energy security, the benefits of
mitigating a ton of CO2 emissions, criteria pollutant
emissions, noise, safety, and others).
The Volpe model uses values for these effects in helping to
determine each model year's CAFE standards. Thus, each model year's
CAFE standards are set based on an attempt to quantify the need of the
United States to conserve energy, balanced against the other factors
considered in the Volpe model, such as the technology inputs that help
the model establish economically practicable and technologically
feasible standards.
Also, as Congress intended, by accounting for the need of the
nation to conserve energy in setting CAFE standards, NHTSA fulfills
EPCA's overall goal of improving energy conservation. Factors that
increase the need of the nation to conserve energy, such as rising oil
prices or environmental concerns, may be reflected in more stringent,
but still demonstrably economically practicable fuel economy standards.
Balancing the EPCA factors against each other, and considering NHTSA's
NEPA analysis for this rulemaking (see Section XIII.B. of this
document), NHTSA may decide to set higher CAFE standards, and achieve
more fuel savings and CO2 emissions reduction, by expressly
including the quantifiable values of the factors that affect the need
of the nation to conserve energy.
These standards will enhance the normal market response to higher
fuel prices, and will reduce light duty vehicle fuel consumption and
CO2 tailpipe emissions over the next several decades,
responding to the need of the nation to conserve energy, as EPCA
intended. More specifically, the proposed standards will save 55
billion gallons of fuel and 521 million metric tons of CO2
over the lifetime of the regulated vehicles. NHTSA will evaluate the
potential environmental impacts associated with such CO2
emissions reductions and other environmental impacts of the proposed
standards through the NEPA process.
F. Other Considerations in Setting Standards Under EPCA
As explained above, EPCA requires NHTSA to balance the four factors
of technological feasibility, economic practicability, the effect of
other motor vehicle standards of the Government on fuel economy, and
the need of the United States to conserve energy in setting CAFE
standards for passenger cars and light trucks. As discussed above, EPCA
also prohibits NHTSA from considering certain factors (e.g., credits)
in setting CAFE standards. The next section highlights some of the
issues that NHTSA may (and does) and may not take into account in
setting CAFE standards under EPCA.
1. Safety
NHTSA has historically included the potential for adverse safety
consequences when deciding upon a maximum feasible level, and has been
upheld by courts in doing so.\185\ Currently, we account for safety in
the model as we develop the standards: Because downweighting is a
common compliance strategy, and because the agency believes that
downweighting of lighter vehicles makes them less safe, our model does
not rely on weight reductions to achieve the standards for vehicles
under 5,000 pounds GVWR,\186\ and then only up to 5 percent. As
explained above, 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.
---------------------------------------------------------------------------
\185\ See, e.g., Competitive Enterprise Institute v. NHTSA (CEI
I), 901 F.2d 107, 120 at n. 11 (DC Cir. 1990) (``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.'')
\186\ Kahane study, supra note 78.
---------------------------------------------------------------------------
2. Alternative Fuel Vehicle Incentives
49 U.S.C. 32902(h) expressly prohibits NHTSA from considering the
fuel economy of ``dedicated'' automobiles in setting CAFE standards.
Dedicated automobiles are those that operate only on an alternative
fuel, like all-electric or natural gas vehicles.\187\ Dedicated
vehicles often achieve higher mile per gallon (or equivalent) ratings
than regular gasoline vehicles, so this prohibition prevents NHTSA from
raising CAFE standards by averaging these vehicles into our
determination of a manufacturer's maximum feasible fuel economy level.
---------------------------------------------------------------------------
\187\ 49 U.S.C. 32901(a)(7).
---------------------------------------------------------------------------
Section 32902(h) also directs NHTSA to ignore the fuel economy
incentives for dual-fueled (e.g., E85-capable) automobiles in setting
CAFE standards. Sec. 32905(b) and (d) use special calculations for
determining the fuel economy of dual-fueled automobiles that give those
vehicles higher fuel economy ratings than identical regular
automobiles. Through MY 2014, manufacturers may use this ``dual-fuel''
incentive to raise their average fuel economy up to 1.2 miles a gallon
higher than it would otherwise be; after MY 2014, Congress has set a
schedule by which the dual-fuel incentive diminishes ratably until it
is extinguished after MY 2019.\188\ Although manufacturers may use this
additional credit for their CAFE compliance, NHTSA may not consider it
in setting standards. As above, this prohibition prevents NHTSA from
raising CAFE standards by averaging these vehicles into our
determination of a manufacturer's maximum feasible fuel economy level.
---------------------------------------------------------------------------
\188\ 49 U.S.C. 32906(a).
---------------------------------------------------------------------------
3. Manufacturer Credits
Section 32903 was recently revised by EISA, and allows
manufacturers to earn credits for exceeding CAFE standards in a given
year and to apply them to CAFE compliance for up to three model years
before and five model years after the year in which they were earned.
However, section 32903(a) states expressly that fuel economy standards
must be ``determined * * * without regard to credits under this
section.'' Thus, NHTSA may not raise CAFE standards because
manufacturers have enough credits to meet the higher standards, nor may
NHTSA lower standards because manufacturers do not have enough credits
to meet existing standards.
[[Page 24457]]
G. Environmental Impacts of the Proposed Standards
As noted above, environmental concerns are among the issues bearing
on the need of the nation to conserve energy. They are also relevant
under the National Environmental Policy Act (NEPA), 42 U.S.C. 4321-
4347. Requiring improvements in fuel economy will necessarily reduce
CO2 emissions, because the less fuel a vehicle burns, the
less CO2 it emits. Reductions in CO2 emissions,
in turn, may slow or mitigate climate change and associated
environmental impacts. Increased fuel economy also may affect other
aspects of the environment, such as emissions of criteria air
pollutants and air quality.\189\ In order to inform its consideration
of the proposed standards, NHTSA has initiated an environmental review
of the proposed standards and reasonable alternatives pursuant to NEPA.
On March 28, 2008, NHTSA published a notice of intent to prepare an
environmental impact statement and requested scoping comments (73 FR
16615). NHTSA is publishing a supplemental notice of public scoping and
request for scoping comments that invites Federal, State, and local
agencies, Indian tribes, and the public to participate in the scoping
process and to help identify the environmental issues and reasonable
alternatives to be examined in the EIS. The scoping notice also
provides information about the proposed standards, the alternatives
NHTSA expects to consider in its NEPA analysis, and the scoping
process.
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\189\ Because CO2 accounts for such a large fraction
of total greenhouse gases (GHG) emitted during fuel production and
use--more than 95%, even after accounting for the higher global
warming potentials of other GHG--NHTSA's analysis of the GHG impacts
of increasing CAFE standards focuses on reductions in CO2
emissions resulting from the savings in fuel use that accompany
higher fuel economy.
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As discussed in the scoping notice, in preparing an EIS for this
rulemaking, NHTSA expects to consider potential environmental impacts
of the proposed standards and reasonable alternatives, including
impacts associated with CO2 emissions and climate change.
NHTSA expects that its NEPA analysis will include: direct impacts
related to fuel and energy use and emissions of CO2 and air
pollutants; indirect impacts related to emissions and climate change,
such as impacts on air quality and temperature and resulting impacts on
natural resources and on the human environment; and other indirect
impacts. NHTSA's NEPA analysis will inform its decisions on the
proposed standards, consistent with NEPA and EPCA.
H. Balancing the Factors to Determine Maximum Feasible CAFE Levels
While the agency carefully considered alternative stringencies as
discussed in section X, it tentatively concludes that in stopping at
the point that maximizes net benefits, it has achieved the best
balancing of all of the statutory requirements, including the 35 mpg
requirement. In striking that balance, the agency was mindful of the
growing need of the nation to conserve energy for reasons that include
increasing energy independence and security and protecting the
environment. It was mindful also that this is the first rulemaking in
which the agency has simultaneously proposed to raise both passenger
car and light truck standards, and that it was doing so in the context
of statutory requirements for significant annual increases over an
extended period of years.
Among the steps it took in its analysis and balancing were the
following:
First, the agency pushed many of the manufacturers in
their application of technology. NHTSA is proposing standards that it
estimates will entail risk that some manufacturers will exhaust
available technologies in some model years. However, the agency has
tentatively concluded that the additional risk is outweighed by the
significant increase in estimated net benefits to society.
Second, as observed in the technology penetration table
above, the agency believes that more and more advanced, but expensive
fuel economy technologies will penetrate the fleet by 2015. However,
the agency was careful to ensure that those technologies are applied in
an economically and technologically feasible manner by focusing on
linking certain expensive technologies to redesign and refresh dates
and by phasing in technologies over time as it is difficult for
companies to implement many of the technologies on 100 percent of their
vehicles all at once. Sections III and V describe in fuller detail how
the agency addressed these issues in its modeling.
Third, in assessing costs and benefits, the agency took
into account the private and social benefits, including environmental
and energy security benefits (e.g., it monetized important
externalities, such as energy security and CO2) and ensured
that for every dollar of investment the country gets at least 1 dollar
of benefits.
Fourth, in setting attribute based standards as required
by EISA, the agency will minimize safety implications and preserve
consumer choice. Further, through its choice of footprint as an
attribute, the agency minimized the risk of upsizing as it is more
difficult to change the footprint than to simply add weight to the
vehicle.
Fifth, the agency evaluated the costs and benefits
described above and ensured that the standards were achievable without
the industry's being economically harmed through significant sales
losses.
Sixth, the agency weighed those costs and benefits vis-a-
vis the need of the nation to conserve energy for reasons that include
increasing energy independence and security and protecting the
environment and compared the results for a wide variety of alternatives
as discussed in Chapter X.
NHTSA tentatively concludes that it has exercised sound
judgment and discretion in considering degrees of technology
utilization and degrees of risk, and has appropriately balanced these
considerations against estimates of the resultant costs and benefits to
society, thereby arriving at standards that represent the maximum
feasible standards as required by EPCA. The agency invites comment
regarding whether it has struck a proper balance and, if not, how it
should do so.
VII. Standards for Commercial Medium- and Heavy-Duty On-Highway
Vehicles and ``Work Trucks''
NHTSA is not promulgating standards for commercial medium- and
heavy-duty on-highway vehicles or ``work trucks'' \190\ as part of this
proposed rule. EISA added a new provision to 49 U.S.C. 32902 requiring
DOT, in consultation with the Department of Energy and the EPA, to
examine the fuel efficiency of commercial medium- and heavy-duty on-
highway vehicles and work trucks, and determine the appropriate test
procedures and methodologies for measuring the fuel efficiency of these
vehicles, as well as the appropriate metric for measuring and
expressing their fuel efficiency performance and the range of factors
that affect their fuel efficiency. This study would need to be
performed within 1 year of the publication of the NAS study required by
section 108 of EISA.\191\
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\190\ ``Work trucks'' are vehicles rated between 8,500 and
10,000 lbs GVWR and which are not medium-duty passenger vehicles. 49
U.S.C. 32901(a)(19).
\191\ 49 U.S.C. 32902(k)(1).
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Within 2 years of the completion of the study, DOT would need to
undertake rulemaking to ``determine''
[[Page 24458]]
* * * how to implement a commercial medium- and heavy-duty on-highway
vehicle and work truck fuel efficiency improvement program designed to
achieve the maximum feasible improvement, and * * * adopt and implement
appropriate test methods, measurement metrics, fuel economy standards,
and compliance and enforcement protocols that are appropriate, cost-
effective, and technologically feasible'' for these vehicles.\192\ EISA
also requires a four-year lead time for fuel economy standards
promulgated under this section, and would allow separate standards to
be prescribed for different classes of vehicles.\193\
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\192\ 49 U.S.C. 32902(k)(2).
\193\ 49 U.S.C. 32902(k)(2) and (3).
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VIII. Vehicle Classification
A. Origins of the Regulatory Definitions
NHTSA developed the regulatory definitions for passenger cars and
light trucks based on our interpretation of EPCA's language and of
Congress' intent as evidenced through the legislative history. The
statutory language is clear that some vehicles must be passenger
automobiles and some must be non-passenger automobiles. Passenger
automobiles were defined as ``any automobile (other than an automobile
capable of off-highway operation) which the Secretary [i.e., NHTSA]
decides by rule is manufactured primarily for use in the transportation
of not more than 10 individuals.'' EPCA Sec. 501(2), 89 Stat. 901.
Thus, under EPCA, there are two general groups of automobiles that
qualify as non-passenger automobiles: (1) Those defined by NHTSA in its
regulations as other than passenger automobiles due to their having not
been manufactured ``primarily'' for transporting up to ten individuals;
and (2) those expressly excluded from the passenger category by statute
due to their capability for off-highway operation regardless of whether
they were manufactured primarily for passenger transportation. NHTSA's
classification rule directly tracks those two broad groups of non-
passenger automobiles in subsections (a) and (b), respectively, of 49
CFR 523.5.
EPCA also defined vehicle ``capable of off-highway operation'' as
one that NHTSA decides by regulation:
has a ``significant feature'' (other than 4-wheel drive) which is
designed to equip such automobile for off-highway operation, and
either (i) is a 4-wheel drive automobile or (ii) is rated at more
than 6,000 pounds gross vehicle weight.''
Thus under the statute, any vehicle that has a ``significant
feature'' and also is either 4-wheel drive or over 6,000 lbs GVWR can
never be a passenger vehicle. Generally speaking, the ``significant
feature'' that NHTSA's regulation focuses on relates to high ground
clearance. EPCA does not prohibit us from choosing other or additional
significant features, but Congress has had multiple opportunities to
disagree with our interpretation and has not done so.
In its final rule establishing its vehicle classification
regulation, NHTSA noted the ambiguity of the statutory definitions of
``automobile'' and ``passenger automobile'' and considered at length
the legislative history of those definitions.\194\ The agency concluded
that ``* * * both houses of Congress had expressed an intent that
vehicles classed by EPA as light duty vehicles be subject to average
fuel economy standards separate from the standards imposed on passenger
cars.''\195\ The agency thus found it necessary to analyze what
Congress meant by ``primarily.''
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\194\ 42 FR 38362, 38365-67; July 28, 1977.
\195\ Id. 38366.
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In establishing 49 CFR part 523 in the 1970s, we determined that
Congress intended ``primarily'' to mean ``chiefly'' [or firstly, in the
first place], not ``substantially'' [or largely, in large part],\196\
for two main reasons. First, if ``primarily'' meant ``substantially''
or ``in large part,'' ``then almost every automobile would be a
passenger automobile, since a substantial function of almost all
automobiles is to transport at least two persons. The only non-
passenger automobiles under this interpretation would be those
specifically excluded by the definition * * * ''\197\ Because Congress
gave NHTSA authority to develop the definitions by regulation, it did
not make sense to read ``primarily'' as limiting the category of non-
passenger automobiles to just those specifically excluded by the
precise language of the statute.
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\196\ We stated that ``the word `primarily' has two ordinary,
everyday meanings in legal usage--`chiefly' and `substantially.' ''
See Board of Governors of the Federal Reserve System v. Agnew, 329
U.S. 441, 446 (1947).
\197\ 42 FR 38362, 38365 (Jul. 28, 1977).
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And second, we concluded that considering ``primarily'' ``against a
legislative backdrop of other statutes using the identical phrase, and
the remedial purposes of this Act,'' justified a broad interpretation
of ``non-passenger automobile.''\198\ The remedial purposes of EPCA--to
improve fuel efficiency and increase fuel savings--do not require all
vehicles to be classified as passenger automobiles. Since non-passenger
automobile CAFE standards must still be set at the maximum feasible
level, fuel economy of all vehicles would be improved regardless of how
the vehicles were classified.\199\ Additionally, interpreting ``non-
passenger automobile'' broadly was determined to be consistent with the
Vehicle Safety Act \200\ and EPA emissions regulations promulgated
under the Clean Air Act. A broad interpretation of ``non-passenger
automobile'' served to ``minimize the possibility of inconsistent
regulatory requirements.''\201\ And finally, analyzing the legislative
history, NHTSA concluded that ``By using existing terms with existing
applications [such as ``light duty truck'' as used by EPA], Congress
gave a clear indication of the types of automobiles that were intended
to be treated separately from passenger
automobiles.''202 203
---------------------------------------------------------------------------
\198\ Id. at 38365-66.
\199\ Id. at 38366.
\200\ The Vehicle Safety Act distinguished between ``passenger
cars'' and ``trucks.''
\201\ 42 FR 38362, 38366.
\202\ Id.
\203\ We note that the 2003 ANPRM that preceded the 2006 CAFE
rule incorrectly summarized the agency's review of the legislative
history in the late 1970s. The 2003 ANPRM erroneously stated that
Congress intended that passenger automobiles be defined as those
used primarily for the transport of individuals. 68 FR 74926 (Dec.
29, 2003)
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Thus, as NHTSA developed the regulatory definitions, we kept these
indications from Congress in mind, which resulted in four basic types
of non-passenger automobiles:
(1) Automobiles designed primarily to transport more than 10
persons.
As a practical matter, this category basically encompasses large
passenger vans.
(2) Automobiles designed primarily for purposes of
transportation of property.
NHTSA has included in this category both vehicles with open beds
like pickup trucks, and vehicles which provide greater cargo-carrying
than passenger-carrying volume. As we stated in the 1977 final rule,
pickup trucks are not ``manufactured chiefly to transport individuals,
since well over half of the available space on those automobiles
consists of the cargo bed, which is exclusively cargo-carrying area.
Further, this type of automobile is designed to carry heavy loads.''
\204\ Regarding vehicles which provide greater cargo-carrying than
passenger-carrying volume, we stated that ``Since more of the space
inside the vehicle has been dedicated to transporting cargo, and such
vehicles are typically designed to carry heavy loads, this agency
[[Page 24459]]
concludes that the chief consideration in designing the vehicle was the
ability to transport property.'' This included, for example, cargo vans
and multistop vehicles.
---------------------------------------------------------------------------
\204\ Id. at 38367.
(3) Automobiles which are derivatives of automobiles designed
---------------------------------------------------------------------------
primarily for the transportation of property.
This could include vehicles in which the cargo-carrying area has
been converted to provide temporary living quarters, because they would
typically be a derivative of a cargo van or a pickup truck.
Additionally, these could include a passenger van with seating
positions for less than 10 people. Such a vehicle would be basically a
cargo van with readily removable seats, so removing the seats would
create more cargo-carrying than passenger-carrying volume. These
vehicles would be distinguished from station wagons, which have seats
that can fold down to create a flat cargo space, but are not
``derivatives,'' in that their parent vehicle is not a non-passenger
automobile, and do not have the same chassis, springs, or suspension
system as a non-passenger automobile.
(4) Automobiles which are capable of off-highway operation.
NHTSA generally defines ``capable of off-highway operation'' as
meeting the high ground clearance characteristics of Sec. 523.5(b)(2)
and either having 4-wheel drive or being rated at more than 6,000
pounds gross vehicle weight, or both. We note that a vehicle is
considered as having 4-wheel drive only if it is manufactured with 4-
wheel drive. The fact that the same model is available in 4-wheel drive
would not be sufficient to classify a 2-wheel drive vehicle as one that
``has'' 4-wheel drive under Sec. 523.5(b)(1)(i).
B. The Rationale for the Regulatory Definitions in Light of the Current
Automobile Market
The categories listed above make up the various criteria which
allow classification of a vehicle as a light truck under Part 523.
However, as the 2002 NAS Report noted, the national vehicle market has
evolved, and the fleets have changed. Until the passage of the Energy
Independence and Security Act of 2007, Congress had provided no further
insight since EPCA's enactment into how new types of vehicles that have
developed since the 1970s should be classified. NHTSA had to classify
these vehicles based on the words of the statute and on its own
interpretation of what Congress appears to have wanted. The following
section identifies the main vehicle types currently classified as light
trucks, and explains the agency's reasoning for each.
Pickup trucks were among the original automobiles identified by
Congress in EPCA's legislative history as vehicles that would not be
passenger automobiles.\205\ As mentioned earlier, we originally
identified automobiles ``which can transport property on an open bed''
as ones ``not manufactured chiefly to transport individuals, since well
over half of the available space on those automobiles consists of the
cargo bed, which is exclusively cargo carrying area.'' \206\ We stated
further that ``this type of automobile is designed to carry heavy
loads,'' and is therefore properly a non-passenger automobile or light
truck.
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\205\ EPA included pickup trucks as ``light duty trucks,'' and
the Senate bill which became EPCA used EPA's definition of light
duty trucks as examples of vehicles that would be non-passenger
automobiles. 42 FR 38362, 38366 (Jul. 28, 1977).
\206\ Id. 38367.
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NHTSA recognizes that pickup trucks have evolved since the 1970s,
and that some now come with extended cabs for extra passenger room and
smaller open beds. These features, however, do not change the fact that
pickup trucks are designed to carry loads. Moreover, even with an
extended cab and a smaller open bed, the fact that the open bed is
still present indicates to us that the vehicle was manufactured chiefly
for transporting cargo. If the manufacturer intended the vehicle's
first purpose to be the carrying of passengers, it could have enclosed
the entire vehicle. Thus, as 49 CFR 523.5(a)(3) indicates, a pickup
truck with an open bed is to be classified as a light truck regardless
of any other features it may possess.
Sport utility vehicles (SUVs), which possess a substantial market
share today, had not yet developed when EPCA was enacted or when NHTSA
first promulgated Part 523, although their forebears like the AMC Jeep
and other off-road and military style vehicles were known at the time.
These vehicles originally tended to be classified as light trucks
because they were capable of off-highway operation, and possessed
either the necessary high ground clearance characteristics or 4-wheel
drive or both. They may also be greater than 6,000 pounds GVWR, and/or
manufactured to permit expanded use of the automobile for cargo-
carrying or other nonpassenger-carrying purposes.
Part of the overall popularity of SUVs is due to the great variety
of forms in which they are available. For example, consumer demand has
led manufacturers to offer smaller SUVs (i.e., less than 6,000 pounds
GVWR) with features such as the high ground clearance that many drivers
enjoy. These vehicles may come with two or even three rows of seats as
standard. If these smaller vehicles actually have 4-wheel drive and the
requisite number of clearance characteristics, they would properly be
classified as light trucks under Sec. 523.5(b) without regard to
functional considerations such as cargo volume.
However, if these lighter vehicles (i.e., under 6,000 pounds) have
2-wheel drive, they would not qualify as light trucks under Sec.
523.5(b) despite having the clearance characteristics. Such vehicles
may nevertheless be classified as light trucks if they meet one or more
of the functional criteria in Sec. 523.5(a). For example, if a vehicle
has three standard rows of seats, it should be classified in accordance
with Sec. 523.5(a)(5)(ii), on the same basis as many minivans are
currently classified--that it provides a certain minimum potential
cargo-carrying capacity that NHTSA has believed is consistent with what
Congress had in mind when it originally considered the distinction
between passenger and non-passenger automobiles. Alternatively, a 2-
wheel drive automobile may properly be classified as a light truck
under Sec. 523.5(a)(4) if it provides ``greater cargo-carrying than
passenger-carrying volume'' as discussed in one of NHTSA's longstanding
interpretations.\207\
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\207\ In 1981, General Motors asked NHTSA whether a 2-wheel
drive utility vehicle would be properly classified as a light truck
as long as the cargo-carrying volume exceeded the passenger-carrying
volume. We agreed in a letter of interpretation responding to GM
that ``two-wheel drive utility vehicles which are truck derivatives
and which, in base form, have greater cargo-carrying volume than
passenger-carrying volume should be classified as light trucks for
fuel economy purposes.'' (Emphasis added.) This letter of
interpretation indicates that in order to be properly classified as
a light truck under Sec. 523.5(a)(4), a 2-wheel drive SUV must have
greater cargo-carrying volume than passenger-carrying volume ``in
base form.'' Base form means the version of the vehicle sold as
``standard,'' without optional equipment installed, and does not
include a version that would meet the cargo volume criterion only if
``delete options'' were exercised to remove standard equipment. For
example, a base vehicle that comes equipped with a standard second-
row seat would not be classified as a light truck merely because the
purchaser has an option to delete the second-row seat.
---------------------------------------------------------------------------
Minivans are another general category of vehicles that essentially
developed after the enactment of EPCA and the promulgation of Part 523
are minivans. Minivans are classified as light trucks under the ``flat
floor'' provision of Sec. 523.5(a)(5), because their seats may be
easily removed or folded down to create a large flat level surface for
cargo-carrying. The flat floor provision was originally based on the
agency's
[[Page 24460]]
determination that passenger vans with removable seats and a flat load
floor were derived from cargo vans, and should therefore be classified
as light trucks.\208\
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\208\ 42 FR 38362, 38367 (Jul. 28, 1977).
---------------------------------------------------------------------------
In the preamble to the final rule establishing the MY 1983-1985
light truck fuel economy standards, in response to a comment by
Chrysler, we explained that the regulations classified ``large
passenger vans as light trucks based on the ability of passenger van
users to readily remove the rear seats to produce a flat, floor level
cargo-carrying space.'' \209\ Manufacturers generally responded to
NHTSA's statement by building compact passenger vans--i.e., minivans--
with readily removable rear seats in order to qualify as light trucks
under the flat floor provision. In short, because minivans often have
removable seats and a flat floor, they have traditionally been
classified as light trucks for fuel economy purposes. EPA also
classifies minivans as light duty trucks for emissions purposes, as
derivatives of light trucks.
---------------------------------------------------------------------------
\209\ 45 FR 81593, 81599 (Dec. 11, 1980).
---------------------------------------------------------------------------
In recent years, many minivans have been designed with seats that
fold down flat or into the floor pan, rather than being completely
removable. In the 2006 light truck CAFE final rule, NHTSA revised Sec.
523.5(a)(5) to allow these minivans to continue to qualify for
classification as light trucks, requiring ``vehicles equipped with at
least 3 rows of seats'' to be able to create a ``flat, leveled cargo
surface'' instead of a ``flat, floor level, surface.'' We believe that
this is consistent with Congress' intent that vehicles manufactured
with the capacity to permit expanded use of the automobile for cargo-
carrying or other nonpassenger-carrying purposes be classified as light
trucks. Minivans have this capacity just as passenger vans do. In order
to distinguish them from other vehicles like station wagons that also
arguably have this capacity, we require vehicles to have three rows of
seats in order to qualify as light trucks on this basis. This helps to
guarantee a certain amount of potential cargo-carrying volume, since
manufacturers will not be able to fit an additional row of seats in a
vehicle under a certain size. Congress did not specify how much cargo
volume was necessary for a vehicle to be classified as a light truck.
We believe that this requirement for light truck classification is both
consistent with Congress' intent that light trucks permit expanded use
for cargo-carrying purposes, and accommodates the evolution of this
section of the modern vehicle fleet.
The latest vehicle type growing rapidly in the U.S. market today is
the ``crossover'' vehicle. Crossover vehicles are generally designed on
passenger car-like platforms (unibody construction), but are also
designed with the functionality of SUVs and minivans. Crossover
vehicles blur the typical divisions between passenger cars, SUVs and
minivans (higher ground clearance, two or three rows of seats, and
varying amounts of cargo space). These vehicles can come in any shape
or size, they may or may not look like traditional passenger cars, SUVs
or minivans, and they may be available in a variety of drive
configurations (2WD, 4WD, AWD, or some combination). As more and more
of these vehicles become available it will become more difficult to
categorize them into one particular vehicle category. The majority of
existing crossover vehicles have been categorized by vehicle
manufacturers as light trucks under section 523.5(b) if they are off-
highway capable, or under section 523.5(a) due to their functional
characteristics. NHTSA plans to continue to allow these vehicles to be
classified as light trucks as long as they continue to meet the light
truck classification requirements as specified in part 523. As with
SUVs, when determining off road capability, a vehicle ``has'' 4-wheel
drive (or AWD) if it is actually equipped with it; a 2-wheel drive
vehicle is counted as a 2-wheel drive vehicle regardless of whether the
same model is available in 4-wheel drive. Furthermore, when evaluating
the functional capabilities against the requirements of section
523.5(a), vehicles should be classified by model, including all
vehicles of a particular model. When the light truck determination is
made based upon the functional characteristics requirements of section
523.5(a), the base or standard vehicle (vehicle with no options) is
used to classify the associated model. For example, if a vehicle model
does not come standard with a third row of seats, but can be purchased
with an optional third row seat, the vehicle, and all the vehicles
within that model line, cannot be classified as a light truck under
523.5(a)(5), which requires vehicles to be equipped, as standard
equipment, with at least 3 rows of seats and able to create a ``flat,
leveled cargo'' surface.
C. NHTSA Is Not Proposing To Change the Regulatory Definitions at This
Time
As explained above, NHTSA's regulations defining vehicle
classifications for fuel economy purposes (49 CFR part 523) are based
on the underlying statute. We continue to believe that they are valid,
as discussed above. In addition, EISA Congress specifically addressed
the vehicle classification issue. It redefined ``automobile,'' added a
definition of ``commercial medium- and heavy-duty on-highway vehicle,''
defined non-passenger automobile and defined ``work truck.''
Significantly, it did not change other definitions and its new
definition of ``non-passenger automobile,'' which is most relevant in
this context, in no way contradicted how NHTSA has long construed that
term. In enacting EISA, Congress demonstrated its full awareness of how
NHTSA classifies vehicles for fuel economy purposes and chose not to
alter those classifications. That strongly suggests Congressional
approval of the agency's 30-year approach to vehicle classification.
Accordingly, other than by incorporating EISA's new and revised
definitions, we are not proposing to change the agency's regulations
defining vehicle classification. Congress has indicated no need for us
to do so and such changes would not help achieve Congress' objectives.
Moreover, Congress has given clear direction that overall
objectives must be obtained regardless of vehicle classification. The
EISA adds a significant requirement to EPCA--the combined car and light
truck fleet must achieve at least 35 mpg in the 2020 model year. Thus,
regardless of whether the entire fleet is classified as cars or light
trucks, or any proportion of each, the result must still be a fleet
performance of at least 35 mpg in 2020. This suggests that Congress did
not want to spend additional time on the subject of whether vehicles
are cars or light trucks. Instead, Congress focused on mandating fuel
economy performance, regardless of classifications.
With respect to the impact on fuel savings, our tentative
conclusion is that moving large numbers of vehicles from the light
truck to the passenger car category would not increase fuel savings or
stringency of the standards. Under a Reformed attribute-based CAFE
system, passenger car and light truck CAFE standards will simply be
reoptimized if vehicles are moved from one category to another. To the
extent that some relatively fuel-efficient vehicles are moved out of
the light truck category, the optimization for the remainder of the
group would likely result in lower standards, because there would now
be fewer higher performers in the light truck category. However, when
these trucks are moved into the car category, they are likely to be
less fuel-efficient than similarly sized cars. Thus,
[[Page 24461]]
including those vehicles could well drag down the optimized targets for
the car category. Preliminary analyses have suggested that this is what
happens, but the agency specifically requests comments on this and any
supporting data for the commenter's position. Further, since EISA now
permits manufacturers to transfer CAFE credits earned for their
passenger car fleet to their light truck fleet and vice versa, it makes
even less difference how a vehicle is classified, because the benefit a
manufacturer gets for exceeding a standard may be applied anywhere. If
there is no fuel savings benefit to be gained from revising the
regulatory definitions, NHTSA does not see how doing so would
facilitate achieving EPCA's overarching goal of improving fuel savings.
Although NHTSA does not propose to change the vehicle classification
standards, the agency does intend to apply those definitions strictly
and in accordance with agency interpretations, as set out above, and
the standards presented in the final rule will reflect this. NHTSA
seeks comment on its reading of the statute with regard to vehicle
classification and its decision not to change its definitions.
IX. Enforcement
A. Overview
NHTSA's enforcement under the CAFE program essentially consists of
gauging a manufacturer's compliance in each model year with the
passenger car and light truck standards against their credit status. If
a manufacturer's average miles per gallon for a given fleet falls below
the relevant standard, and the manufacturer cannot make up the
difference by using credits earned previously or anticipated to be
earned for over-compliance, the manufacturer is subject to penalties.
The penalty, as adjusted for inflation by law,\210\ is $5.50 for each
tenth of a mpg that a manufacturer's average fuel economy falls short
of the standard for a given model year multiplied by the total volume
of those vehicles in the affected fleet (i.e., import or domestic
passenger car, or light truck), manufactured for that model year. NHTSA
has collected $735,422,635.50 to date in CAFE penalties, the largest
ever being paid by DaimlerChrysler for its MY 2006 import passenger car
fleet, $30,257,920.00. For their MY 2006 fleets, six manufacturers paid
CAFE fines for not meeting an applicable standard--Ferrari, Maserati,
BMW, Porsche, Volkswagen, and DaimlerChrysler--for a total of
$43,170,896.50.
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\210\ Federal Civil Penalties Inflation Adjustment Act of 1990,
28 U.S.C. 2461 note, as amended by the Debt Collection Improvement
Act of 1996, Pub. L. 104-134, 110 Stat. 1320, Sec. 31001(s).
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EPCA authorizes increasing the civil penalty up to $10.00,
exclusive of inflationary adjustments, if NHTSA decides that the
increase in the penalty--
(i) Will result in, or substantially further, substantial energy
conservation for automobiles in model years in which the increased
penalty may be imposed; and
(ii) Will not have a substantial deleterious impact on the
economy of the United States, a State, or a region of a State.\211\
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\211\ 49 U.S.C. 32912(c).
The agency requests comment on whether it should initiate a
proceeding to consider raising the civil penalty. Paying civil
penalties represents a substantial less expensive alternative to
installing fuel saving technology in order to achieve compliance with
the CAFE standards or buying credits from another manufacturer. (See
discussion of credit trading below.)
Manufacturers can earn CAFE credits to offset deficiencies in their
CAFE performances under 49 U.S.C. 32903. Specifically, when the average
fuel economy of either the domestic or imported passenger car or light
truck fleet for a particular model year exceeds the established
standard for that category of vehicles, the manufacturer earns credits.
The amount of credit a manufacturer earns is determined by multiplying
the tenths of a mile per gallon that the manufacturer exceeded the CAFE
standard in that model year by the number of vehicles in that category
it manufactured in that model year. Credits are discussed at much
greater length in the section below.
NHTSA begins to determine CAFE compliance by considering pre- and
mid-model year reports submitted by manufacturers pursuant to 49 CFR
part 537, Automotive Fuel Economy Reports. The reports for the current
model year are submitted to NHTSA every December and July. Although the
reports are used for NHTSA's reference only, they help the agency, and
the manufacturers who prepare them, anticipate potential compliance
issues as early as possible, and help manufacturers plan compliance
strategies.
NHTSA makes its ultimate determination of manufacturers' CAFE
compliance based on EPA's official calculations, which are in turn
based on final model year data submitted by manufacturers to EPA
pursuant to 40 CFR 600.512, Model Year Report, no later than 90 days
after the end of the calendar year. EPA then verifies the data
submitted by manufacturers and issues final CAFE reports to
manufacturers and to NHTSA between April and October of each year (for
the previous model year). NHTSA identifies the manufacturers' fleets
that have failed to meet the applicable CAFE fleet standards, and
issues enforcement letters to manufacturers not meeting one or more of
the standards. Letters are generally issued within one to two weeks of
receipt of EPA's final CAFE reports.
For the enforcement letters, NHTSA calculates a cumulative credit
status for each of a manufacturer's vehicle categories according to 49
U.S.C. 32903. If sufficient credits are available, NHTSA determines a
carry-forward credit allocation plan. If the manufacturer does not have
enough credits to offset the shortfall, NHTSA requests payment of a
corresponding civil penalty unless the manufacturer submits a carry-
back credit allocation plan. We note that any penalties paid are paid
to the U.S. Treasury and not to NHTSA itself.
After enforcement letters are sent, NHTSA continues to monitor
civil penalty payments that are due within 60 days from the date of
receipt of the letter by the vehicle manufacturer, and takes further
action if the manufacturer is delinquent in payment. NHTSA also
monitors receipt of carry-back plans from manufacturers who choose this
compliance alternative. Plans are required within 60 days from the date
of receipt of the enforcement letter by the vehicle manufacturer.
B. CAFE Credits
The ability to earn and apply credits has existed since EPCA's
original enactment,\212\ but the issue of the ability to trade credits,
i.e., to sell credits to other manufacturers or buy credits from them,
was first raised in the 2002 NAS Report. NAS found that
---------------------------------------------------------------------------
\212\ The credit provision (currently codified at 49 U.S.C.
32903) was originally section 508 of EPCA's Public Law version.
changing the current CAFE system to one featuring tradable fuel
economy credits and a ``cap'' on the price of these credits appears
to be particularly attractive. It would provide incentives for all
manufacturers, including those that exceed the fuel economy targets,
to continually increase fuel economy, while allowing manufacturers
flexibility to meet consumer preferences.\213\
---------------------------------------------------------------------------
\213\ NAS, Finding 11, 113.
After receiving the 2002 NAS Report, Secretary of Transportation Mineta
wrote to Congress asking for authority to implement all of NAS''
recommendations.
While waiting for that express authority, NHTSA raised the issue of
[[Page 24462]]
credit trading in both its 2002 Request for Comments \214\ and its 2003
ANPRM.\215\ The initial response to the idea was mixed: environmental
and consumer groups expressed concern that vehicle manufacturers would
use a credit trading system in lieu of increasing fuel economy to meet
the CAFE standards, while vehicle manufacturers generally supported the
prospect of increased flexibility in the CAFE program.\216\ However,
without clear authority to implement a credit trading program, NHTSA
was unable to take further action at the time.
---------------------------------------------------------------------------
\214\ 67 FR 5767, 5772 (Feb. 7, 2002).
\215\ 68 FR 74908, 74915-16 (Dec. 29, 2003).
\216\ Id.
---------------------------------------------------------------------------
NHTSA raised the issue of credit transfer, i.e., the application of
credits earned by manufacturer in one compliance category to another
compliance category, in its 2005 NPRM \217\ and 2006 final rule for the
MY 2008-11 light truck standards, but concluded that it would interfere
with the transition to Reformed CAFE by making it more difficult for
manufacturers to determine their compliance obligations.\218\ The 2006
final rule also stated that the agency would not adopt a credit trading
program, again on the basis that its authority to do so was
unclear.\219\ However, NHTSA submitted several draft bills to Congress
during this time period and after, most recently in February 2007. In
an address to the Senate Committee on Commerce, Science, and
Transportation on March 6, 2007 regarding the February 2007 bill,
Administrator Nason stated that credit trading was a ``natural
extension'' of the existing EPCA credit framework, and that trading
would be ``purely voluntary, and [that] we believe[d] it will help
lower the industry's cost of complying with CAFE.'' \220\
---------------------------------------------------------------------------
\217\ 70 FR 51414, 51439-40 (Aug. 30, 2005).
\218\ 71 FR 17566, 17616 (Apr. 6, 2006).
\219\ Id. 17653-54.
\220\ Transcript available at http://commerce.senate.gov/public/index.cfm?FuseAction=Hearings.TestimonyHearing_ID=1827_Witness_ID=2362 (last accessed Feb. 2, 2008).
---------------------------------------------------------------------------
EISA provided express authority for both credit trading and
transferring and made other changes as well to EPCA regarding credits:
Authorizing the establishment of a credit trading program;
Requiring the establishment of a credit transferring
program; and
Extending the carry-forward period from 3 to 5 years.
NHTSA has developed a proposal for a new Part 536 setting up these
two credit programs. We believe that our proposal is consistent with
Congress' intent. The agency seeks comment generally on the following
three topics with respect to the proposed Part 536: (1) Whether the
agency has correctly interpreted Congress' intent; (2) whether there
are any ways to improve the proposed credit trading and transferring
system consistent with EISA and Congress' intent that the agency might
have overlooked; and (3) whether any of the aspects of the programs
proposed by the agency are either inconsistent with EISA and Congress'
intent or the rest of the CAFE regulations, or are otherwise
unworkable. The following section describes the proposed credit trading
and transfer programs, as well as several other related ideas that the
agency is considering.
1. Credit Trading
EPCA, as amended by EISA, states
The Secretary of Transportation [by delegation, the
Administrator of NHTSA] may establish by regulation a fuel economy
credit trading program to allow manufacturers whose automobiles
exceed the average fuel economy standards prescribed under section
32902 to earn credits to be sold to manufacturers whose automobiles
fail to achieve the prescribed standards such that the total oil
savings associated with manufacturers that exceed the prescribed
standards are preserved when trading credits to manufacturers that
fail to achieve the prescribed standards.\221\
---------------------------------------------------------------------------
\221\ 49 U.S.C. 32903(f)(1).
EISA also prevents traded credits from being used by a manufacturer to
meet the minimum fuel economy standard for domestically-manufactured
passenger cars.\222\
---------------------------------------------------------------------------
\222\ 49 U.S.C. 32903(f)(2).
---------------------------------------------------------------------------
Proposed new part 536 would permit credit trading, beginning with
credits earned in MY 2011. Although only manufacturers may earn credits
and apply them toward compliance, NHTSA would allow credits to be
purchased and traded by both manufacturers and non-manufacturers in
order to facilitate greater flexibility in the credit market.
NHTSA proposes that credit trading be conducted as follows: If a
credit holder wishes to trade credits to another party, the current
credit holder and the receiving party must jointly issue an instruction
to NHTSA, identifying the specific credits to be traded by quantity,
vintage (model year of origin), compliance category of origin (domestic
passenger cars, imported passenger cars, or light trucks), and
originating manufacturer. These identification requirements are
intended to help ensure accurate calculation for preserving total oil
savings. If the credit recipient is not already an account holder, it
must provide sufficient information for NHTSA to establish an account
for them. Once an account has been established or identified, NHTSA
will complete the trade by debiting the transferor's account and
crediting the recipient's account. NHTSA will track the quantity,
vintage, compliance category, and originator of all credits held or
traded by all account-holders.
Manufacturers need not restrict their use of traded credits to the
compliance category from which the credits were earned. However, if a
manufacturer wishes to transfer a credit received by trade to another
compliance category, it must instruct NHTSA of its intention so that
NHTSA can apply an adjustment factor in order to preserve ``total oil
savings,'' as required by EISA.\223\ EISA requires total oil savings to
be preserved because one credit is not necessarily equal to another, as
Congress realized. For example, the fuel savings lost if the average
fuel economy of a manufacturer falls one-tenth of a mpg below the level
of a relatively low standard are greater than the fuel savings gained
by raising the average fuel economy of a manufacturer one-tenth of a
mpg above the level of a relatively high CAFE standard.
---------------------------------------------------------------------------
\223\ 49 U.S.C. 32903(f)(1).
---------------------------------------------------------------------------
Table IX-1 shows a simple numerical example of this on an
individual vehicle level. Vehicle A has a fuel economy of 30 mpg and is
driven 150,000 miles over its lifetime, consuming 5,000 gallons of
fuel. Increasing the fuel economy of vehicle A by one mpg lowers the
lifetime fuel consumption by 161 gallons to 4,839 gallons. Vehicle B
has a fuel economy of 15 mpg and is driven 150,000 miles over its
lifetime, consuming 10,000 gallons of fuel. Increasing the fuel economy
of vehicle B by one mpg lowers the lifetime fuel consumption by 625
gallons to 9,375 gallons. Both vehicles' fuel economy rises by the same
amount, one mpg, but much more fuel is saved by vehicle B because it
uses much more gas per mile than does vehicle A.
[[Page 24463]]
Table IX-I.--Comparison of Fuel Savings at Different Fuel Economy
Baselines
------------------------------------------------------------------------
Vehicle A Vehicle B
------------------------------------------------------------------------
Lifetime Miles Driven................... 150,000 150,000
Initial Fuel Economy.................... 30 15
Initial Lifetime Fuel Consumption....... 5,000 10,000
Final Fuel Economy...................... 31 16
Final Lifetime Fuel Consumption......... 4,839 9,375
Savings................................. 161 625
------------------------------------------------------------------------
To preserve total oil savings in credit trading, NHTSA would apply
an adjustment factor to traded credits. More specifically, the agency
would multiply the value of each credit (with a nominal value of 0.1
mpg per vehicle) by an adjustment factor calculated by the following
formula:
[GRAPHIC] [TIFF OMITTED] TP02MY08.033
Where:
A = adjustment factor applied to traded credits by multiplying mpg
for a particular credit;
VMTe = lifetime vehicle miles traveled for the compliance
category in which the credit was earned (152,000 miles for domestic
and imported passenger cars; 179,000 miles for light trucks);
VMTu = lifetime vehicle miles traveled for the compliance
category in which the credit is used for compliance (152,000 miles
for domestic and imported passenger cars; 179,000 miles for light
trucks);
MPGe = fuel economy standard for the originating
manufacturer, compliance category, and model year in which the
credit was earned;
MPGu = fuel economy standard for the manufacturer,
compliance category, and model year in which the credit will be
used.
The effect of applying this formula would be to increase the value
of credits that were earned for exceeding a relatively low CAFE
standard and are to be applied to a compliance category with a
relatively high CAFE standard and decrease the value of credits that
were earned for exceeding a relatively high CAFE standard and are to be
applied to a compliance category with a relatively low CAFE standard.
NHTSA is proposing to use the fuel economy standard in the formula
rather than the actual fuel economy or some average of the two,
primarily because we believe it will be more predictable for credit
holders and traders. However, we seek comment on those two
alternatives, since they may be more precise in their ability to
account for fuel savings.
Congress also restricted the use of credit trading in EISA by
providing that manufacturers must comply with the minimum domestic
passenger car standard specified in 49 U.S.C. 32902(b)(4) without the
aid of credits obtained through trading. The minimum standard equals
the greater of 27.5 mph or 92 percent of the projected average fuel
economy level for all passenger cars for the model year in question. 49
U.S.C. 32903(f)(2) states that trading and transferring of credits to
the domestic passenger car compliance category are limited to the
extent that the fuel economy of such automobiles shall comply with the
minimum standard without regard to trading or transferring of credits
from other compliance categories. Thus, our proposed credit trading
regulation prevents the use of traded credits to comply with the
minimum domestic passenger car standard.
In developing this regulation, NHTSA has proposed additional
restrictions on the use of credits as necessary for consistency with
Congress' intent in EISA. For example, a credit that has been traded
and is then traded back to the originating manufacturer is deemed never
to have been traded, to avoid manufacturers gaining value from the same
credit twice.
2. Credit Transferring
If a credit holding manufacturer wishes to transfer credits that it
has earned, it need simply instruct NHTSA which credits to transfer to
which alternate compliance category, identifying the quantity, vintage,
and original compliance category in which the credits were earned.
NHTSA will then transfer the credits. As explained above, if a credit
holding manufacturer wishes to transfer credits that it has received by
trade, it must similarly instruct NHTSA. NHTSA will apply an adjustment
factor to the traded credits to ensure, pursuant to EISA, that total
oil (fuel) savings are preserved.
Credit transfers are limited by EISA both in the extent to which
they may increase a manufacturer's average fuel economy in a compliance
category, and when they may be begun to be used. Section 32903(g)(3)
states that a manufacturer's average fuel economy in a compliance
category cannot be increased through the use of transferred credits by
more than 1 mpg in MYs 2011-2013, more than 1.5 mpg in MYs 2014-2017,
or more than 2 mpg in MYs 2018 and after. Section 32903(g)(5) also
states that credits can only be transferred if they are earned after MY
2010. Our proposed credit transferring regulation reflects these
limitations.
Congress also restricted the use of credit transferring in EISA by
providing that manufacturers must comply with the minimum domestic
passenger car standard without the aid of credits obtained through
transfer. 49 U.S.C. 32903(g)(4) states that transferring of credits to
the domestic passenger car compliance category is limited to the extent
that the fuel economy of such automobiles shall comply with the minimum
standard without regard to transferring of credits from other
compliance categories. Thus, our proposed credit transferring
regulation prevents the use of transferred credits to comply with the
minimum domestic passenger car standard.
NHTSA is proposing to denominate credits in miles per gallon (mpg),
not in gallons. NHTSA requests comments, however, on whether
transferred credits
[[Page 24464]]
should be denominated in gallons, because doing so would ensure that no
transfers result in any loss of fuel savings or in a missed opportunity
to reduce CO2 emissions.\224\ The risk of fuel savings loss
can be illustrated by the following example. Suppose there were a
manufacturer that produces the same number of automobiles in two
different compliance categories. Each of the two categories is required
to meet the same level of CAFE. If the manufacturer exceeds the
standard for one category by one mile per gallon and falls short of the
other standard by the same amount, the additional fuel saved by the
automobiles subject to the first standard would be less than the
additional fuel consumed by the automobiles subject to the second
standard. The risk is even greater if the example is changed so that
the standards are different and the manufacturer exceeds the higher
standard and falls short of the lower standard.
---------------------------------------------------------------------------
\224\ NHTSA previously addressed this issue in the 2006 final
rule establishing CAFE standards for MY 2008-2011 light trucks. See
71 FR 17566, 17616.
---------------------------------------------------------------------------
3. Credit Carry-Forward/Carry-Back
Credit lifespan has always been dictated by statute. A manufacturer
may only use credits for a certain number of model years before and
after the year in which it was earned. Congress intended credits to
provide manufacturers greater compliance flexibility, but did not wish
that flexibility to be so great as to obviate the need to continue
improving fleet fuel economy. Before EISA's enactment, EPCA permitted
credits to be used for 3 model years before and after the model year in
which a credit was earned; EISA extended the ``carry-forward'' time to
5 model years. Because EISA was enacted in the middle of model year
2008,\225\ NHTSA concluded that the best interpretation of this change
in lifespan was to apply it only to vehicles manufactured in or after
MY 2009; the alternative of finding some way to prorate the change in
lifespan presents considerable administrative difficulties, especially
since credits are denominated by year of origin, not month and year of
origin. Thus, credits earned for MYs 2008 and earlier will continue to
have a 3-year carry-forward/carry-back lifespan; credits earned in MY
2009 or thereafter will have a 5-year carry-forward and a 3-year carry-
back lifespan.
---------------------------------------------------------------------------
\225\ EISA's effective date was December 20, 2007; the 2008
model year began on October 1, 2007.
---------------------------------------------------------------------------
C. Extension and Phasing Out of Flexible-Fuel Incentive Program
EPCA encourages manufacturers to build alternative-fueled and dual-
fueled vehicles. This is accomplished by using a special, statutorily
specified calculation procedure for determining the fuel economy of
these vehicles. The specially calculated fuel economy figure is based
on the assumption that the vehicle operates on the alternative fuel a
significant portion of the time. This approach gives such vehicles a
much-higher fuel economy level compared to similar gasoline-fueled
vehicles. These vehicles can then be factored into a manufacturer's
general fleet fuel economy calculation, thus raising the average fuel
economy level of the fleet. EPCA limited the extent to which a
manufacturer could raise its fuel economy level due to the incentive to
1.2 mpg per compliance category.
Prior to the enactment of EISA, this incentive was only available
through MY 2010. EISA extended the incentive, but also provided for
phasing it out between MYs 2015 and 2019, by progressively reducing the
amount by which fleet fuel economy could be raised due to the
incentive.\226\ Thus, the maximum fuel economy increase which may be
attributed to the incentive is as follows for:
---------------------------------------------------------------------------
\226\ 49 U.S.C. 32906.
------------------------------------------------------------------------
mpg
------------------------------------------------------------------------
MYs 1993-2014................................................ 1.2
MY 2015...................................................... 1.0
MY 2016...................................................... 0.8
MY 2017...................................................... 0.6
MY 2018...................................................... 0.4
MY 2019...................................................... 0.2
After MY 2019................................................ 0
------------------------------------------------------------------------
NHTSA promulgated 49 CFR part 538 to implement the statutory
alternative-fueled and dual-fueled vehicle manufacturing incentive. We
are not now proposing to amend Part 538 to reflect the EISA changes,
due to the already-large scope of the current rulemaking, but will do
so in an upcoming rulemaking.
X. Regulatory Alternatives
As noted above, in developing the proposed standards, the agency
considered the four statutory factors underlying maximum feasibility
(technological feasibility, economic practicability, the effect of
other standards of the Government on fuel economy, and the need of the
nation to conserve energy) as well as other relevant considerations
such as safety. NHTSA assessed what fuel saving technologies would be
available, how effective they are, and how quickly they could be
introduced. This assessment considered technological feasibility,
economic practicability and associated energy conservation. We also
considered other standards to the extent captured by EPCA \227\ and
environmental and safety concerns. This information was factored into
the computer model used by NHTSA for applying technologies to
particular vehicle models. The agency then balanced the factors
relevant to standard setting. NHTSA's NEPA analysis, discussed in
Section XIII.B. of this document, also will inform NHTSA's
consideration of the proposed standards and reasonable alternatives in
developing a final rule.
---------------------------------------------------------------------------
\227\ 71 FR 17566, 17669-70; April 6, 2006.
---------------------------------------------------------------------------
In balancing these factors, NHTSA generally observes that the
increasing application of technologies increases fuel economy and
associated benefits, but it also increases costs. Initial applications
of technologies provide far more fuel savings per dollar of expenditure
on them than applications of remaining technologies, which provide less
incremental fuel savings at greater cost and, with progressive
additions of technologies, eventually far greater cost. At some stage,
the increasing application of technologies is not justified. A
significant question is what methodology and decisionmaking criteria
are used in the balancing to determine when to cease adding
technologies and thus arrive at regulatory fuel economy targets.
In developing its proposed standards, the agency used a net
benefit-maximizing analysis that placed monetary values on relevant
externalities (both energy security and environmental externalities,
including the benefits of reductions in CO2 emissions) and
produced what is called the ``optimized scenario.'' The optimized
standards reflect levels such that, considering the seven largest
manufacturers, net benefits (that is, total benefits minus total costs)
are higher than at every other examined level of stringency. The agency
also reviewed the results of the model's estimates of stringencies
maximizing net benefits to assure that the results made sense in terms
of balancing EPCA's statutory factors and in meeting EISA's
requirements for improved fuel economy.
In addition to the optimized scenario, NHTSA considered and
analyzed five additional regulatory alternatives that do not rely upon
marginal benefit-cost
[[Page 24465]]
analysis. In ascending order of stringency, the six alternatives are:
Standards that fall below the optimized scenario by the
same absolute amount by which the +25 percent alternative exceeds the
optimized scenario (``25 percent below optimized'' alternative),
Standards based on applying technologies until net
benefits are maximized (optimized scenario), and
Standards that exceed the optimized scenario by 25 percent
of the interval between the optimized scenario and the TC = TB
alternative (see below) (``25 percent above optimized'' alternative),
Standards that exceed the optimized scenario by 50 percent
of the interval between the optimized scenario and the TC = TB
alternative (``50 percent above optimized'' alternative),
Standards based on applying technologies until total costs
equal total benefits (zero net benefits) (TC = TB alternative),\228\
and
---------------------------------------------------------------------------
\228\ The agency considered the ``TC = TB'' alternative because
one or more commenters in the rulemaking on standards for MY 2008-
2011 light trucks urged NHTSA to consider setting the standards on
this basis rather than on the basis of maximizing net benefits. In
addition, while the Ninth Circuit Court of Appeals concluded that
EPCA neither requires nor prohibits the setting of standards at the
level at which net benefits are maximized, the Court raised the
possibility of tilting the balance more toward reducing energy
consumption and CO2.
---------------------------------------------------------------------------
Standards based on applying all feasible technologies
without regard to cost (technology exhaustion alternative).\229\
---------------------------------------------------------------------------
\229\ This was accomplished by determining the stringency at
which a reformed standard would require every manufacturer to apply
every technology estimated to be potentially available. At such
stringencies, all but one manufacturer would be expected to fail to
comply with the standard, and many manufacturers would owe large
civil penalties as a result. The agency considered this alternative
because the agency wished to explore the stringency and consequences
of standards based solely on the potential availability of
technologies at the individual manufacturer level.
---------------------------------------------------------------------------
NHTSA chose these alternatives in order to consider and evaluate
the impacts of balancing the EPCA factors differently in determining
maximum feasibility than the agency has in prior rulemakings. In Center
for Biological Diversity v. NHTSA, the Ninth Circuit Court recognized
that ``EPCA gives NHTSA discretion to decide how to balance the
statutory factors--as long as NHTSA's balancing does not undermine the
fundamental purpose of EPCA: Energy conservation.'' 508 F.3d 508, 527
(9th Cir. 2007). The Court also raised the possibility that NHTSA's
current balancing of the statutory factors might be different from the
agency's balancing in the past, given the greater importance today of
the need of the nation to conserve energy and more advanced
understanding of climate change. Id. at 530-31.
Given EPCA's mandate that NHTSA consider four specific factors in
setting CAFE standards and NEPA's instruction that agencies give effect
to NEPA's policies as well, NHTSA recognizes that numerous alternative
CAFE levels are theoretically conceivable and that the alternatives
described above essentially represent only several on a continuum of
alternatives. Along the continuum, each alternative represents a
different way in which NHTSA conceivably could assign weight to each of
the four EPCA factors and NEPA's policies. For the alternatives that
fall above the optimized scenario (the +25, +50 and TC = TB
alternatives), the agency would evaluate policies that put increasingly
more emphasis on reducing energy consumption and CO2
emissions, given their impact on global warming, and less on the other
factors, including the economic impacts on the industry. Conversely,
for the alternative that falls below the optimum scenario, the agency
would evaluate policies that place relatively more weight on the
economic situation of the industry and less on reducing energy
consumption and CO2 emissions.
The graphs below show, for passenger cars, light trucks, and the
combined fleet, the average annual fuel economy levels for the four
alternatives as compared to the proposed standards. Subsequent graphs
and tables present their estimated costs, benefits, and net benefits
(in billions of dollars). In addition, tables that are provided
summarized the average extent to which manufacturers' CAFE levels are
projected to fall short of CAFE standards--i.e., the average
shortfall--under each of these alternatives. Manufacturer-specific
shortfall is shown for the proposed and TC=TB alternative.
BILLING CODE 4910-59-P
[[Page 24466]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.035
[[Page 24467]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.036
[[Page 24468]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.037
[[Page 24469]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.038
[[Page 24470]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.039
[[Page 24471]]
[GRAPHIC] [TIFF OMITTED] TP02MY08.040
BILLING CODE 4910-59-C
For the proposal and each regulatory alternative, the Tables X-1
and X-3 show the total net benefits in millions of dollars at a 7
percent discount rate for the projected fleet of sales for each model
year.
Table X-1.--Total Benefits Over the Vehicle's Lifetime--Present Value
[Millions of 2006 dollars, discounted 7%]
----------------------------------------------------------------------------------------------------------------
MY 2011 MY 2012 MY 2013 MY 2014 MY 2015
----------------------------------------------------------------------------------------------------------------
Passenger Cars:
25% Below................... 1,156 2,104 3,235 5,197 6,799
Optimized................... 2,596 4,933 6,148 7,889 9,420
25% Above................... 3,755 7,280 8,454 10,638 12,083
50% Above................... 4,274 8,825 10,213 12,576 14,495
TC = TB..................... 5,769 10,878 12,087 14,644 16,492
Technology Exhaust.......... 5,834 11,282 12,968 15,930 18,061
Light Trucks:
25% Below................... 3,508 7,910 12,603 12,433 12,441
Optimized................... 3,909 8,779 13,560 14,915 16,192
25% Above................... 4,201 9,990 14,236 16,587 19,457
50% Above................... 4,642 10,507 15,011 17,687 20,892
TC = TB..................... 5,027 11,453 16,330 19,515 22,367
[[Page 24472]]
Technology Exhaust.......... 5,088 11,512 19,395 22,074 24,779
Combined PC+LT:
25% Below................... 4,664 10,014 15,838 17,630 19,240
Optimized................... 6,505 13,712 19,708 22,804 25,612
25% Above................... 7,956 17,270 22,690 27,225 31,540
50% Above................... 8,916 19,331 25,224 30,263 35,387
TC = TB..................... 10,796 22,331 28,417 34,159 38,860
Technology Exhaust.......... 10,922 22,795 32,363 38,004 42,820
----------------------------------------------------------------------------------------------------------------
Table X-2.--Total Costs
[Millions of 2006 dollars, discounted 7%]
----------------------------------------------------------------------------------------------------------------
MY 2011 MY 2012 MY 2013 MY 2014 MY 2015
----------------------------------------------------------------------------------------------------------------
Passenger Cars:
25% Below................... 835 818 1,253 2,153 3,209
Optimized................... 1,884 2,373 2,879 3,798 4,862
25% Above................... 3,387 5,653 6,445 8,240 9,084
50% Above................... 4,010 7,885 8,986 11,207 12,981
TC = TB..................... 5,913 10,796 12,303 15,403 17,398
Technology Exhaust.......... 6,079 12,595 14,701 18,759 21,110
Light Trucks:
25% Below................... 1,349 4,296 6,329 6,212 6,326
Optimized................... 1,649 4,986 7,394 8,160 8,761
25% Above................... 2,072 7,034 9,815 11,903 14,781
50% Above................... 2,922 8,098 11,586 14,386 17,969
TC = TB..................... 3,788 10,525 15,196 18,762 21,364
Technology Exhaust.......... 3,933 10,670 18,275 21,051 23,479
Combined PC+LT:
25% Below................... 2,184 5,114 7,582 8,365 9,534
Optimized................... 3,534 7,358 10,273 11,957 13,623
25% Above................... 5,459 12,687 16,261 20,143 23,865
50% Above................... 6,932 15,983 20,572 25,593 30,950
TC = TB..................... 9,702 21,321 27,499 34,164 38,761
Technology Exhaust.......... 10,013 23,266 32,976 39,810 44,589
----------------------------------------------------------------------------------------------------------------
Table X-3.--Net Total Benefits Over the Vehicle's Lifetime--Present Value *
[Millions of 2006 dollars, discounted 7%]
----------------------------------------------------------------------------------------------------------------
MY 2011 MY 2012 MY 2013 MY 2014 MY 2015
----------------------------------------------------------------------------------------------------------------
Passenger Cars:
25% Below................... 321 1,285 1,982 3,045 3,590
Optimized................... 711 2,560 3,269 4,092 4,558
25% Above................... 368 1,627 2,009 2,398 2,999
50% Above................... 264 940 1,226 1,370 1,514
TC = TB..................... -144 82 -216 -759 -906
Technology Exhaust.......... -245 -1,313 -1,733 -2,829 -3,049
Light Trucks:
25% Below................... 2,154 3,633 6,348 6,288 6,258
Optimized................... 2,260 3,793 6,167 6,755 7,432
25% Above................... 2,129 2,956 4,421 4,684 4,676
50% Above................... 1,720 2,408 3,426 3,301 2,924
TC = TB..................... 1,239 928 1,134 753 1,003
Technology Exhaust.......... 1,155 843 1,120 1,023 1,280
Combined PC+LT:
25% Below................... 2,476 4,919 8,330 9,333 9,848
Optimized................... 2,971 6,353 9,435 10,847 11,989
25% Above................... 2,497 4,583 6,430 7,082 7,675
50% Above................... 1,984 3,349 4,652 4,670 4,437
TC = TB..................... 1,094 1,010 918 -5 98
Technology Exhaust.......... 909 -471 -613 -1,806 -1,769
----------------------------------------------------------------------------------------------------------------
* Negative values mean that costs exceed benefits.
[[Page 24473]]
In tentatively deciding which alternative to propose, the agency
looked at a variety of factors. The agency notes that once stringency
levels exceed the point at which net benefits are maximized, the
societal costs of each incremental increase in stringency exceed the
accompanying societal benefits. If we have valued benefits
appropriately, it does not make economic sense to mandate the spending
of more money than society receives in return. The resources used to
meet overly stringent CAFE standards, instead of the optimized scenario
standards, would better be allocated to other uses such as technology
research and development, or improvements in vehicle safety.
The agency considered the burden placed on specific manufacturers,
consumers and employment. As CAFE standards increase, the incremental
benefits are approximately constant while the incremental costs
increase rapidly. Figure X-5 above shows that as stringency is
increased, costs rise out of proportion compared to the benefits or the
fuel savings. Increasingly higher costs have a negative impact on sales
and employment. Each of the alternatives that is more stringent than
the optimized alternative negatively impact sales and employment.
The agency also considered technological feasibility. The Volpe
model assumes that major manufacturers will exhaust all available
technology before paying noncompliance civil penalties, even though the
latter is often less costly. Historically, the large manufacturers have
never paid civil penalties. In the more stringent alternatives, the
Volpe model predicts that increasing numbers of manufacturers will run
out of technology to apply and, theoretically, resort to penalty
payment. NHTSA provisionally believes that setting standards this high
is not technologically feasible, nor does it serve the need of the
nation to conserve fuel. Paying a CAFE penalty does not result in any
fuel savings.
In analyzing the ``-25 percent below optimized'' alternative, the
agency notes that these standards are more aggressive than the
standards that the agency has proposed since the first years of the
program and would impose unprecedented costs on manufacturers. The
agency also recognizes that even this pace of increase in the standards
may burden some of the manufacturers, particularly since the agency is
now increasing car and light truck standards simultaneously. However,
in light of the need of the nation to conserve energy and reduce global
warming, the agency does not believe that this alternative would be
maximum feasible under the statute. The agency is also concerned that
the combined fleet might not reach the 35 mpg requirement by 2020 under
EISA.
Underlying the differences in costs, benefits, and net benefits for
the other alternatives are differences in the degree to which NHTSA has
estimated that technologies might be applied in response to the
standards corresponding to each of these alternatives. The following
tables show estimates of the average penetration rates of some selected
technologies in the MY2015 passenger car and light truck fleets under
each of the alternatives discussed here:
Table X-4.--Estimated Average Technology Penetration (Largest Seven Manufacturers) MY2015 Passenger Cars
[In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average among seven largest manufacturers
-------------------------------------------------------------------------------------------------------
Technology Product Adjusted 25% Below Proposed 25% Above 50% Above Tech.
plan baseline proposed standard proposed proposed TC = TB exhaustion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Automatically Shifted Manual Transmissions...... 10 10 23 39 47 55 63 69
Spark Ignited Direct Injection Engines.......... 22 22 22 30 37 48 68 63
Turbocharging & Engine Downsizing............... 5 5 8 17 30 40 62 57
Diesel Engines.................................. 0 0 3 2 7 13 18 21
Hybrid Electric Vehicles........................ 5 5 14 15 22 28 35 38
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table X-5.--Estimated Average Technology Penetration (Largest Seven Manufacturers) MY2015 Light Trucks
[In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average among seven largest manufacturers
-------------------------------------------------------------------------------------------------------
Technology Product Adjusted 25% Below Proposed 25% Above 50% Above Tech.
plan baseline proposed standard proposed proposed TC = TB exhaustion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Automatically Shifted Manual Transmissions...... 10 14 42 55 58 60 59 70
Spark Ignited Direct Injection Engines.......... 23 24 31 40 42 55 60 69
Turbocharging & Engine Downsizing............... 9 11 21 31 38 51 54 65
Diesel Engines.................................. 3 6 8 10 20 23 26 28
Hybrid Electric Vehicles........................ 2 6 15 25 29 31 30 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
As the first of the above tables indicates, the Volpe model
estimated that, under the standards proposed today, manufacturers might
triple the planned utilization of turbochargers and hybrid electric
powertrains in the
[[Page 24474]]
passenger car fleet. This table also indicates that the use of
turbochargers in passenger cars might increase by an additional factor
of two under the ``25% above proposed'' alternative.
Similarly, the second table indicates that manufacturers might
triple the planned utilization of diesel engines in the light truck
fleet, and increase the utilization of hybrid electric powertrains by
more than an order of magnitude. This table also shows a significant
difference between the proposed and ``25% above proposed'' alternative,
including an additional doubling in the utilization of diesel engines.
NHTSA has examined the extent to which each alternative would (as
estimated by the Volpe model and using the input information discussed
in preceding sections) cause manufacturers to exhaust technologies
projected to be available during MY2011-MY2015. The following chart
summarizes the frequency with which this was estimated to occur--i.e.,
the number of instances in which an individual manufacturer exhausted
technologies and thus fell below a standard in individual model years
divided by 35 (seven manufacturers times five model years).
[GRAPHIC] [TIFF OMITTED] TP02MY08.041
As this analysis indicates, the ``25% below proposed'' alternative
caused technologies to be exhausted 3 percent of the time for passenger
cars, and 17 percent of the time for light trucks. Under the proposed
standards, the rate
[[Page 24475]]
of technology exhaustion increased to 11 percent for passenger cars,
but did not change for light trucks. However, under the ``25% above
proposed'' alternative, the corresponding rates increased to 26 percent
and 37 percent, respectively. In other words, under this alternative,
the Volpe model estimated that, more than a quarter of the time,
manufacturers would be unable to comply with the passenger car
standards solely using technologies expected to be available, and that
they would be unable to comply with the light truck standards using
available technologies more than a third of the time. These rates were
estimated to be considerably higher for the remaining three
alternatives.
These estimates of technology utilization and the exhaustion of
available technologies indicate that all of the alternatives NHTSA has
considered entail risk that one or more manufacturers would not be able
to comply with both the passenger car and light truck standards in
every model year solely by applying technology. This risk is mitigated
somewhat by the fact that our analysis may not encompass every
technology that will potentially be available during MY2011-MY2015. For
example, some manufacturers have made public statements regarding hopes
to offer ``plug-in'' HEVs before MY2015, but such vehicles are not
represented in our analysis.\230\ Nonetheless, the agency has
tentatively concluded that the scope of technologies it has included is
comprehensive enough that the analysis shown above indicates that under
some alternatives, there is considerable risk that some manufacturers
would exhaust available technologies in some model years.
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\230\ If included in the new product plans that the agency is
requesting, these vehicles will be included in our analysis for the
final rule.
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In tentatively concluding that the proposed standards are the
maximum feasible standards, NHTSA has balanced this risk against the
other considerations it must take into account, in particular the need
of the nation to conserve energy, which encompasses concerns regarding
carbon dioxide emissions. The agency's analysis includes economic
measures of these needs--that is, economic measures of the
externalities of petroleum consumption and the damages associated with
carbon dioxide emissions. These measures are reflected in the agency's
estimates of the total and net benefits of each of the alternatives.
NHTSA is proposing standards that it estimates will entail risk
that some manufacturers will exhaust available technologies in some
model years. However, relative to the less stringent ``25% below
proposed'' alternative, the agency has tentatively concluded that the
additional risk is outweighed by the significant increase in estimated
net benefits to society, ranging from an additional $0.5b in MY2011 to
an additional $2.1b in MY2015. Conversely, the agency has tentatively
concluded that, relative to the proposed standards, the more than
doubling of risk posed by the ``25% above proposed'' alternative is not
warranted, especially considering that this alternative is estimated to
significantly reduce net benefits, by $0.5b in MY2011 and, eventually,
$4.3b in MY2015.
NHTSA tentatively concludes that it has exercised reasonable
judgment in considering degrees of technology utilization and degrees
of risk, and has appropriately balanced these considerations against
estimates of the resultant costs and benefits to society.
Notwithstanding the tentative conclusions described above, NHTSA
seeks comment on these and other regulatory alternatives to aid in
determining what standards to adopt in the final rule.\231\ The agency
invites comment regarding whether it has struck a proper balance and,
if not, how it should do so. The alternatives identified by the agency
are intended to aid public commenters in helping the agency to explore
that issue. NHTSA's NEPA analysis also will inform its further action
on today's proposal and may influence the final standards.
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\231\ In assessing the alternatives set out in this document,
commenters may find it useful to examine the approaches being taken
by other countries to improving fuel economy and reducing tailpipe
CO2 emissions, e.g., Canada, http://www.tc.gc.ca/pol/en/environment/FuelConsumption/index.html (last accessed April 20, 2008); European
Union, http://ec.europa.eu/environment/co2/co2_home.htm (last
accessed April 20, 2008); and Japan, http://www.eccj.or.jp/top_runner/pdf/vehicles_gasdiesel_feb2007.pdf (last accessed April 20,
2008).
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Specific sensitivity runs that vary fuel prices, the rebound
effect, CO2 and discount rate were conducted for the proposed Optimized
standards. These analyses have an impact on the standards, costs and
benefits. For example, in analyzing the ``optimized alternative'', we
estimated that following the same methods and criteria for setting the
standards, but applying a 3 percent discount rate rather than a 7
percent discount rate, would suggest standards reaching about 33.6 mpg
(average required fuel economy among both passenger cars and light
trucks) in MY2015, 2 mpg higher than the 31.6 mpg average resulting
from the standards we are proposing based on a 7 percent discount rate.
The more stringent standards during MY2011-MY2015 would reduce CO2
emissions by 672 million metric tons (mmt), or 29 percent more than the
521 mmt achieved by the proposed standards. On the other hand, we
estimate that standards increasing at this pace would require about
$85b in technology outlays during MY2011-MY2015, or 89 percent more
than the $45b in technology outlays associated with the standards
proposed today. The impact of the 3 percent rate is shown in the body
of the PRIA along with the 6 formal alternatives. All other sensitivity
analyses are shown in Chapter IX of the PRIA.
XI. Sensitivity and Monte Carlo Analysis
NHTSA is proposing fuel economy standards that maximize net
societal benefits, based on the Volpe model. That is, where the
estimated benefits to society exceed the estimated cost of the rule by
the highest amount. This analysis is based, among other things, on many
underlying estimates, all of which entail uncertainty. Future fuel
prices, the cost and effectiveness of available technologies, the
damage cost of carbon dioxide emissions, the economic externalities of
petroleum consumption, and other factors cannot be predicted with
certainty.
Recognizing these uncertainties, NHTSA has used the Volpe model to
conduct both sensitivity analyses, by changing one factor at a time,
and a probabilistic uncertainty analysis (a Monte Carlo analysis that
allows simultaneous variation in these factors) to examine how key
measures (e.g., mpg levels of the standard, total costs and total
benefits) vary in response to changes in these factors.
However, NHTSA has not conducted a probabilistic uncertainty
analysis to evaluate how optimized stringency levels respond to such
changes in these factors. The Volpe model currently does not have the
capability to integrate Monte Carlo simulation with stringency
optimization.
The results of the sensitivity analyses indicate that the value of
CO2, the value of externalities, and the value of the rebound effect
have almost no impact on the level of the standards. Assuming a higher
price of gasoline has the largest impact of the sensitivity analyses
examined (raising the MY 2015 passenger car standard level by 6.7 mpg
and the light truck level by 0.8 mpg). It appears that the light truck
levels are not as sensitive as the passenger car levels to changes in
the estimated benefits. This can occur because the technologies that
have not been used
[[Page 24476]]
under the Optimized alternative, and are still available for light
trucks, are not that close to being cost effective and it takes a
larger increase in benefits to bring them over the cost-benefit
threshold.
NHTSA's sensitivity analysis found that changes in the damage cost
of carbon dioxide emissions and the economic externalities of petroleum
consumption had very little impact on the stringency levels of the
proposed standards (at most 0.1 mpg per year). The agency varied
estimated carbon dioxide damage costs over a range of $0 to $14 per
metric ton and varied the economic externalities of petroleum
consumption over a range of $0.120 to $0.504 per gallon.
However, the sensitivity analysis did show significant changes in
the stringency of the standards in response to large increases in the
projected future cost of gasoline. By increasing the price of gasoline
by an average of $0.88 in 2016 to $1.22 in 2020 per gallon, the
passenger car standard that maximized net societal benefits for MY 2015
increased from 35.7 mpg to 42.4 mpg and the light truck standard for MY
2015 increases from 28.6 mpg to 29.4 mpg. NHTSA notes that, unlike
carbon dioxide damage costs and the economic externalities of petroleum
consumption, the price of gasoline is not an externality. The Volpe
model assumes manufacturers consider fuel prices when selecting among
available technologies.
OMB Circular A-4 requires formal probabilistic uncertainty analysis
of complex rules where there are large, multiple uncertainties whose
analysis raises technical challenges or where effects cascade and where
the impacts of the rule exceed $1 billion. The agency identified and
quantified the major uncertainties in the preliminary regulatory impact
analysis and estimated the probability distribution of how those
uncertainties affect the benefits, costs, and net benefits of the
alternatives considered in a Monte Carlo analysis. The results of that
analysis, summarized for the combined passenger car and light truck
fleet across both the 7 percent (typically the lower range) and 3
percent (typically upper range) discount rates \232\ are as follows:
---------------------------------------------------------------------------
\232\ In a few cases the upper range results were obtained from
the 7% rate and the lower range results were obtained from the 3%
rate. While this may seem counterintuitive, it results from the
random selection process that is inherent in the Monte Carlo
technique.
---------------------------------------------------------------------------
Fuel Savings: The analysis indicates that MY 2011 vehicles (both
passenger cars and light trucks) will experience between 3,370 million
and 4,735 million gallons of fuel savings over their useful lifespan.
MY 2012 vehicles will experience between 7,476 million and 9,639
million gallons of fuel savings over their useful lifespan. MY 2013
vehicles will experience between 10,863 million and 13,763 million
gallons of fuel savings over their useful lifespan. MY 2014 vehicles
will experience between 12,568 and 15,664 million gallons of fuel
savings over their useful lifespan. MY 2015 vehicles will experience
between 14,188 and 17,659 million gallons of fuel savings over their
useful lifespan. Over the combined lifespan of the five model years,
between 48.5 billion and 61.4 billion gallons of fuel will be saved.
Total Costs: The analysis indicates that owners of MY 2011
passenger cars and light trucks will pay between $2,447 million and
$5,256 million in higher vehicle prices to purchase vehicles with
improved fuel efficiency. MY 2012 owners will pay between $5,817
million and $10,427 million more. MY 2013 owners will pay between
$7,942 million and $15,288 million more. MY 2014 owners will pay
between $9,338 million and $17,189 million more. MY 2015 owners will
pay between $10,940 million and $19,842 million more. Owners of all
five model years vehicles combined will pay between $36.5 billion and
$67.9 billion in higher vehicle prices to purchase vehicles with
improved fuel efficiency.
Societal Benefits: The analysis indicates that changes to MY 2011
passenger cars and light trucks to meet the proposed CAFE standards
will produce overall societal benefits valued between $4,375 million
and $13,041 million. MY 2012 vehicles will produce benefits valued
between $9,363 million and $28,214 million. MY 2013 vehicles will
produce benefits valued between $13,370 million and $41,027 million. MY
2014 vehicles will produce benefits valued between $15,586 million and
$47,087 million. MY 2015 vehicles will produce benefits valued between
$17,486 million and $53,708 million. Over the combined lifespan of the
five model years, societal benefits valued between $60.1 billion and
$183.1 billion will be produced.
Net Benefits: The uncertainty analysis indicates that the net
impact of the higher CAFE requirements for MY 2011 passenger cars and
light trucks will be a net benefit of between $937 million and $9,678
million. There is at least a 99.3 percent certainty that changes made
to MY 2011 vehicles to achieve the higher CAFE standards will produce a
net benefit. The net impact of the higher CAFE requirements for MY 2012
will be a net benefit of between $283 million and a net benefit of
$21,139 million. There is at least a 99.6 percent certainty that
changes made to MY 2012 vehicles to achieve the CAFE standards will
produce a net benefit. The net impact of the higher CAFE requirements
for MY 2013 will be a net benefit of between $494 million and a net
benefit of $31,311 million. There is at least a 99.6 percent certainty
that changes made to MY 2013 vehicles to achieve the higher CAFE
standards will produce a net benefit. The net impact of the higher CAFE
requirements for MY 2014 will be a net benefit of between $711 million
and $35,746 million. There is 100 percent certainty that changes made
to MY 2014 vehicles to achieve the CAFE standards will produce a net
benefit. The net impact of the higher CAFE requirements for MY 2015
will be a net benefit of between $654 million and $40,703 million.
There is 100 percent certainty that changes made to MY 2015 vehicles to
achieve the CAFE standards will produce a net benefit. Over all five
model years, the higher CAFE standards will produce net benefits
ranging from $3.1 billion to $138.6 billion. There is at least a 99.3
percent certainty that higher CAFE standards will produce a net
societal benefit in each of the model years covered by this final rule.
In most years, this probability is 100 percent.
XII. Public Participation
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.\233\ 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.
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\233\ See 49 CFR 553.21.
---------------------------------------------------------------------------
Please submit your comments by any of the following methods:
Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting
comments.
Mail: Docket Management Facility, M-30, U.S. Department of
Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New
Jersey Avenue, SE., Washington, DC 20590.
Hand Delivery or Courier: West Building Ground Floor, Room
W12-140, 1200 New Jersey Avenue, SE., between
[[Page 24477]]
9 a.m. and 5 p.m. Eastern Time, Monday through Friday, except Federal
holidays.
Fax: (202) 493-2251.
If you are submitting comments electronically as a PDF (Adobe)
file, we ask that the documents submitted be scanned using the Optical
Character Recognition (OCR) process, thus allowing the agency to search
and copy certain portions of your submissions.\234\
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\234\ Optical character recognition (OCR) is the process of
converting an image of text, such as a scanned paper document or
electronic fax file, into computer-editable text.
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Please note that pursuant to the Data Quality Act, in order for
substantive data to be relied upon and used by the agency, it must meet
the information quality standards set forth in the OMB and DOT Data
Quality Act guidelines. Accordingly, we encourage you to consult the
guidelines in preparing your comments. OMB's guidelines may be accessed
at http://www.whitehouse.gov/omb/fedreg/reproducible.html. DOT's
guidelines may be accessed at http://dmses.dot.gov/submit/DataQualityGuidelines.pdf.
How can I be sure that my comments were received?
If you submit your comments by mail and wish Docket Management to
notify you upon its receipt of your comments, enclose a self-addressed,
stamped postcard in the envelope containing your comments. Upon
receiving your comments, Docket Management will return the postcard by
mail.
How do I submit confidential business information?
If you wish to submit any information under a claim of
confidentiality, you should submit three copies of your complete
submission, including the information you claim to be confidential
business information, to the Chief Counsel, NHTSA, at the address given
above under FOR FURTHER INFORMATION CONTACT. When you send a comment
containing information claimed to be confidential business information,
you should include a cover letter setting forth the information
specified in our confidential business information regulation.\235\
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\235\ See 49 CFR 512.
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In addition, you should submit a copy, from which you have deleted
the claimed confidential business information, to the Docket by one of
the methods set forth above.
Will the agency consider late comments?
We will consider all comments received before the close of business
on the comment closing date indicated above under DATES. To the extent
possible, we will also consider comments received after that date. If
interested persons believe that any new information the agency places
in the docket affects their comments, they may submit comments after
the closing date concerning how the agency should consider that
information for the final rule. However, the agency's ability to
consider late comments in this rulemaking will be limited as the agency
anticipates issuing a final rule this fall.
If a comment is received too late for us to consider in developing
a final rule (assuming that one is issued), we will consider that
comment as an informal suggestion for future rulemaking action.
How can I read the comments submitted by other people?
You may read the materials placed in the docket for this document
(e.g., the comments submitted in response to this document by other
interested persons) at any time by going to http://www.regulations.gov.
Follow the online instructions for accessing the dockets. You may also
read the materials at the Docket Management Facility by going to the
street address given above under ADDRESSES. The Docket Management
Facility is open between 9 a.m. and 5 p.m. Eastern Time, Monday through
Friday, except Federal holidays.
XIII. Regulatory Notices and Analyses
A. Executive Order 12866 and DOT Regulatory Policies and Procedures
Executive Order 12866, ``Regulatory Planning and Review'' (58 FR
51735, Oct. 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;
(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.
The benefits and costs of this proposal are described above.
Because the proposed rule would, if adopted, be economically
significant under both the Department of Transportation's procedures
and OMB guidelines, the agency has prepared a Preliminary Regulatory
Impact Analysis (PRIA) and placed it in the docket and on the agency's
Web site. Further, pursuant to OMB Circular A-4, we have prepared a
formal probabilistic uncertainty analysis for this proposal. The
circular requires such an analysis for complex rules where there are
large, multiple uncertainties whose analysis raises technical
challenges or where effects cascade and where the impacts of the rule
exceed $1 billion. This proposal meets these criteria on all counts.
B. National Environmental Policy Act
In litigation concerning NHTSA's 2006 final rule, ``Average Fuel
Economy Standards for Light Trucks, Model Years 2008-2011,'' 71 FR
17566, April 6, 2006 (Final Rule), the U.S. Court of Appeals for the
Ninth Circuit ordered NHTSA to prepare an Environmental Impact
Statement (EIS) for that rule. Center for Biological Diversity v.
NHTSA, 508 F.3d 508, 558 (9th Cir. 2007). The Government is seeking
rehearing on the appropriateness of that remedy, instead of a remand of
the agency's Environmental Assessment (EA) and Finding of No
Significant Impact (FONSI) for further consideration.
Simultaneously, NHTSA has initiated the EIS process under the
National Environmental Policy Act (NEPA), 42 U.S.C. 4321-4347, and
implementing regulations issued by the Council on Environmental Quality
(CEQ), 40 CFR part 1500, and NHTSA, 49 CFR part 520. On March 28, 2008,
NHTSA published a notice of intent to prepare an EIS for this
rulemaking and requested scoping comments. (73 FR 16615) NHTSA is
publishing a supplemental notice of public scoping and request for
scoping comments that invites Federal, State, and local agencies,
Indian tribes, and the public to participate in the scoping process and
to help identify the environmental issues and reasonable alternatives
to be examined in the EIS. The scoping notice also provides information
about the proposed standards, the alternatives
[[Page 24478]]
NHTSA expects to consider in its NEPA analysis, and the scoping
process.
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 rule would not have a significant
economic impact on a substantial number of small entities. The
following is NHTSA's statement providing the factual basis for the
certification (5 U.S.C. 605(b)).
If adopted, the proposal would directly affect seventeen large
single stage motor vehicle manufacturers.\236\ The proposal would also
affect four small domestic single stage motor vehicle
manufacturers.\237\ According to the Small Business Administration's
small business size standards (see 13 CFR 121.201), a single stage
automobile or light truck manufacturer (NAICS code 336111, Automobile
Manufacturing; 336112, Light Truck and Utility Vehicle Manufacturing)
must have 1,000 or fewer employees to qualify as a small business. All
four of the vehicle manufacturers have less than 1,000 employees and
make less than 1,000 vehicles per year. We believe that the rulemaking
would not have a significant economic impact on the small vehicle
manufacturers because under Part 525, passenger car manufacturer making
less than 10,000 vehicles per year can petition NHTSA to have
alternative standards set for those manufacturers. These manufacturers
currently don't meet the 27.5 mpg standard and must already petition
the agency for relief. If the standard is raised, it has no meaningful
impact on these manufacturers, they still must go through the same
process and petition for relief. Given that there already is a
mechanism for handling small businesses, which is the purpose of the
Regulatory Flexibility Act, a regulatory flexibility analysis was not
prepared.
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\236\ BMW, Mercedes, Chrysler, Ferrari, Ford, Subaru, General
Motors, Honda, Hyundai, Lotus, Maserati, Mitsubishi, Nissan,
Porsche, Suzuki, Toyota, and Volkswagen.
\237\ The Regulatory Flexibility Act only requires analysis of
small domestic manufacturers. There are four passenger car
manufacturers we know of and no light truck manufacturers: Avanti,
Panoz, Saleen, and Shelby.
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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.'' The Order 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
the Order, 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.
The agency has complied with Order's requirements.
The issue of preemption of State emissions standard under EPCA is
not a new one; there is an ongoing public dialogue regarding the
preemptive impact of CAFE standards whose beginning pre-dates this
rulemaking. This dialogue has involved a variety of parties (i.e., the
States, the federal government and the general public) and has taken
place through a variety of means, including several rulemaking
proceedings. NHTSA first addressed the issue in its rulemaking on CAFE
standards for MY 2005-2007 light trucks \238\ and explored it at great
length, after receiving extensive public comment, in its rulemaking for
MY 2008-2011 light trucks.\239\ Throughout this time, NHTSA has
consistently taken the position that state regulations regulating
CO2 tailpipe emissions from automobiles are expressly and
impliedly preempted.
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\238\ 67 FR 77015, 77025; December 16, 2002, and 68 FR 16868,
16895; April 7, 2003.
\239\ 70 FR 51414, 51457; August 30, 2005, and 71 FR 17566,
17654-17670; April 6, 2006.
---------------------------------------------------------------------------
NHTSA's position remains unchanged, notwithstanding the occurrence
of several significant events since the issuance of the final rule for
MY 2008-2011 light trucks in April 2006. In 2007, the Supreme Court
ruled Massachusetts v. EPA that carbon dioxide is an ``air pollutant''
within the meaning of the Clean Air Act and thus potentially subject to
regulation under that statute. Later that year, two Federal district
courts ruled in Vermont and California that the GHG motor vehicle
emission standards adopted by those states are not preempted under
EPCA. Still later that year, Congress enacted EISA, amending EPCA by
mandating substantial and sustained annual increases in the passenger
car and light truck CAFE standards. As further amended by EISA, EPCA
also mandates that standards be attribute-based and established and
implemented separately for passenger cars and light trucks. As it did
before EISA, EPCA permits manufacturers to adjust their product mix on
a national basis in order to achieve compliance while meeting consumer
demand.
NHTSA has carefully considered those events and reexamined the
detailed technological and scientific analyses and conclusions it
presented in its 2006 final rule. The agency reaffirms those analyses
and conclusions.
The Supreme Court did not consider the issue of preemption under
EPCA of state regulations regulating CO2 tailpipe emissions
from automobiles. Instead, it addressed the relationship of EPA and
NHTSA rulemaking.
We respectfully disagree with the two district court rulings. We
note that an appeal has been filed concerning the Vermont decision and
that the appellants' briefs have already been filed. EPCA's express
preemption provision preempts state standards ``related to'' average
fuel economy standards. Under the relatedness test, preemption is not
dependent on the existence or nonexistence of any inconsistency or any
difference between those State standards and the CAFE standards.
Likewise, it is not dependent upon a state standard or a portion of a
state standard's being identical to or equivalent to a CAFE standard.
The enactment of EISA has increased the conflict between state
regulations regulating CO2 tailpipe emissions from
automobiles and EPCA. A conflict between state and federal law arises
when compliance with both federal and state regulations is a physical
impossibility or when state law stands as an obstacle to the
accomplishment and execution of the full purposes and objectives of
Congress. Contrary to the recommendations of NAS, the judgment of
NHTSA, and the mandate of
[[Page 24479]]
Congress, the state regulations regulating CO2 tailpipe
emissions, which are equivalent in effect to fuel economy standards,
are not attribute-based, thus presenting risks to safety and
employment. Contrary also to EISA, the state regulations do not
establish separate standards.
In reaffirming its position, NHTSA fully appreciates the great
importance to the environment of addressing and reducing GHG emissions.
Given that substantially reducing CO2 tailpipe emissions
from automobiles is unavoidably and overwhelmingly dependent upon
substantially increasing fuel economy through installation of engine
technologies; transmission technologies; accessory technologies;
vehicle technologies; and hybrid technologies, increases in fuel
economy will produce commensurate reductions in CO2 tailpipe
emissions. And as noted above, through EISA, Congress has ensured that
there will be substantial and sustained, long term improvements in fuel
economy.
Given the importance of an effective, smooth functioning national
program to improve fuel economy and in light of the fact that district
court considered this agency's analysis and carefully crafted position
on preemption, NHTSA is considering taking the further step of
summarizing that position in appendices to be added to the parts in the
Code of Federal Regulations setting forth the passenger car and light
truck CAFE standards. That summary is as follows:
(a) To the extent that any state regulation regulates tailpipe
carbon dioxide emissions from automobiles, such a regulation relates
to average fuel economy standards within the meaning of 49 U.S.C.
32919.
1. Automobile fuel economy is directly and very substantially
related to automobile tailpipe emissions of carbon dioxide.
2. Carbon dioxide is the natural by-product of automobile fuel
consumption.
3. The most significant and controlling factor in making the
measurements necessary to determine the compliance of automobiles
with the fuel economy standards in this Part is their rate of
tailpipe carbon dioxide emissions.
4. Most of the technologically feasible reduction of tailpipe
emissions of carbon dioxide is achievable only through improving
fuel economy, thereby reducing both the consumption of fuel and the
creation and emission of carbon dioxide.
5. Accordingly, as a practical matter, regulating fuel economy
controls the amount of tailpipe emissions of carbon dioxide to a
very substantial extent, and regulating the tailpipe emissions of
carbon dioxide controls fuel economy to a very substantial extent.
(b) As a state regulation related to fuel economy standards, any
state regulation regulating tailpipe carbon dioxide emissions from
automobiles is expressly preempted under 49 U.S.C. 32919.
(c) A state regulation regulating tailpipe carbon dioxide
emissions from automobiles, particularly a regulation that is not
attribute-based and does not separately regulate passenger cars and
light trucks, conflicts with
1. The fuel economy standards in this Part,
2. The judgments made by the agency in establishing those
standards, and
3. The achievement of the objectives of the statute (49 U.S.C.
Chapter 329) under which those standards were established, including
objectives relating to reducing fuel consumption in a manner and to
the extent consistent with manufacturer flexibility, consumer
choice, and automobile safety.
(d) Any state regulation regulating tailpipe carbon dioxide
emissions from automobiles is impliedly preempted under 49 U.S.C.
Chapter 329.
We have closely examined our authority and obligations under EPCA
and that statute's express preemption provision. For those rulemaking
actions undertaken at an agency's discretion, Section 3(a) of Executive
Order 13132 instructs agencies to closely examine their statutory
authority supporting any action that would limit the policymaking
discretion of the States and assess the necessity for such action. This
is not such a rulemaking action. NHTSA has no discretion not to issue
the CAFE standards proposed in this document. EPCA mandates that the
issuance of CAFE standards for passenger cars and light trucks for
model years 2011-2015. Given that a State regulation for tailpipe
emissions of CO2 is the functional equivalent of a CAFE
standard, there is no way that NHTSA can tailor a fuel economy standard
so as to avoid preemption. Further, EPCA itself precludes a State from
adopting or enforcing a law or regulation related to fuel economy (49
U.S.C. 32919(a)).
E. Executive Order 12988 (Civil Justice Reform)
Pursuant to Executive Order 12988, ``Civil Justice Reform,'' \240\
NHTSA has considered whether this rulemaking would have any retroactive
effect. This proposed rule does not have any retroactive effect.
---------------------------------------------------------------------------
\240\ 61 FR 4729 (Feb. 7, 1996).
---------------------------------------------------------------------------
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 a proposed or final rule that includes 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). Adjusting this amount by the implicit gross domestic
product price deflator for 2006 results in $126 million (116.043/92.106
= 1.26). Before promulgating a rule for which a written statement is
needed, section 205 of 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 proposed rule will not result in the expenditure by State,
local, or tribal governments, in the aggregate, of more than $126
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 a variety of alternative
average fuel economy standards lower and higher than those proposed.
NHTSA is statutorily required to set standards at the maximum feasible
level achievable by manufacturers and has tentatively concluded that
the proposed fuel economy standards are the maximum feasible standards
for the passenger car fleet for MYs 2011-2015 and for the light truck
fleet for MYs 2011-2015 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 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, passenger
car manufacturers would also be required to provide data on vehicle
footprint. Manufacturers and other persons wishing to trade fuel
economy credits would be required to provide an instruction to NHTSA on
the credits to be traded.
In compliance with the PRA, we announce that NHTSA is seeking
comment on the proposed revisions to the collection.
[[Page 24480]]
Agency: National Highway Traffic Safety Administration (NHTSA).
Title: 49 CFR part 537, Automotive Fuel Economy (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
NHTSA is proposing that manufacturers would be required to provide
data on vehicle (including passenger car) 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. NHTSA is also proposing that
manufacturers and other persons wishing to trade fuel economy credits
would be required to provide an instruction to NHTSA on the credits to
be traded.
Description of the Need for the Information and Proposed Use of the
Information
NHTSA would need the footprint information to determine a
manufacturer's required fuel economy level and its compliance with that
level. NHTSA would need the credit trading instruction to ensure that
its records of a manufacturer's available credits are accurate in order
to determine whether a manufacturer has sufficient credits available to
offset any non-compliance with the CAFE requirements in a given year.
Description of the Likely Respondents (Including Estimated Number, and
Proposed Frequency of Response to the Collection of Information)
NHTSA estimates that 20 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
For footprint, NHTSA estimates that each passenger car manufacturer
would incur an additional 10 burden hours per year. This estimate is
based on the fact that data collection would involve only computer
tabulation. Thus, each passenger car manufacturer would incur an
additional burden of 10 hours or a total on industry of an additional
200 hours a year (assuming there are 20 manufacturers). At an assumed
rate of $21.23 an hour, the annual, estimated cost of collecting and
preparing the additional passenger car footprint information is $4,246.
For credit trading, NHTSA estimates that each instruction would
incur an additional burden hour per year. This estimate is based on the
fact that the data required is already available and thus the only
burden is the actual preparation of the instruction. NHTSA estimates
that the maximum instructions it would receive each year is 20. While
non-manufacturers may also participate in credit trading, NHTSA does
not believe that every manufacturer would need to, or be able to,
participate in credit trading every year. NHTSA does not, at this time,
have a way of estimating how many non-manufacturers may wish to
participate in credit trading. Therefore NHTSA believes that the total
number of manufacturers is a reasonable estimate, for a total annual
additional burden of 20 hours a year. At an assumed rate of $21.23 an
hour, the annual estimated cost of collecting and preparing the credit
trading instruction is $425.
NHTSA estimates that the recordkeeping burden resulting from the
collection of information would be 0 hours because the information
would be retained on each manufacturer's existing computer systems for
each manufacturer's internal administrative purposes. 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 record
keepers.
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 document, and to Ken Katz, Lead Engineer, Fuel Economy
Division, Office of International Policy, Fuel Economy, and Consumer
Programs, National Highway Traffic Safety Administration, 1200 New
Jersey Avenue, SE., Washington, DC 20590. You may also contact him by
phone at (202) 366-0846, by fax at (202) 493-2290, or by e-mail at
[email protected]. Comments are due by July 1, 2008.
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 1A \241\ 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 proposed rule on
children, and explain why the proposed regulation is preferable to
other potentially effective and reasonably feasible alternatives
considered by us.
---------------------------------------------------------------------------
\241\ 62 FR 19885 (Apr. 23, 1997).
---------------------------------------------------------------------------
This proposed rule does not pose such a risk for children. The
primary effects of this proposal are to conserve energy and to reduce
tailpipe emissions of CO2, the primary greenhouse gas, by
setting fuel economy standards for motor vehicles.
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.''
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
[[Page 24481]]
consensus standards, we are required by the Act to provide Congress,
through OMB, an explanation of the reasons for not using such
standards.
The document proposes to categorize passenger cars according to
vehicle footprint (average track width X wheelbase). For purposes of
this calculation, NHTSA proposes to base these measurements on those
developed by the automotive industry. Determination of wheelbase would
be consistent with L101-wheelbase, defined in SAE J1100 MAY95, Motor
vehicle dimensions. NHTSA'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 \242\ 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 proposed
rule and explain why the proposed regulation is preferable to other
potentially effective and reasonably feasible alternatives considered
by us.
---------------------------------------------------------------------------
\242\ 66 FR 28355 (May 18, 2001).
---------------------------------------------------------------------------
The proposed rule seeks to establish passenger car and light truck
fuel economy standards that will reduce the consumption of petroleum
and will not have any adverse energy effects. Accordingly, this
proposed rulemaking action is not designated as a significant energy
action.
L. Department of Energy Review
In accordance with 49 U.S.C. 32902(j)(1), 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 organization, 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://www.dot.gov/privacy.html.
XIV. Regulatory Text
List of Subjects in 49 CFR Parts 523, 531, 533, 534, 535, 536, and
537
Fuel economy and Reporting and recordkeeping requirements.
In consideration of the foregoing, under the authority of 49 U.S.C.
32901, 32902, 32903, and 32907, and delegation of authority at 49 CFR
1.50, NHTSA proposes to amend 49 CFR Chapter V as follows:
PART 523--VEHICLE CLASSIFICATION
1. Amend the authority citation for part 523 by revising to read as
follows:
Authority: 49 U.S.C. 32901, delegation of authority at 49 CFR
1.50.
2. Amend Sec. 523.2 by adding, in alphabetical order, definitions
of ``light truck'' and ``work truck'' to read as follows:
Sec. 523.2 Definitions.
* * * * *
Light truck means a non-passenger automobile as defined in Sec.
523.5.
* * * * *
Work truck means a vehicle that is rated at more than 8,500 and
less than or equal to 10,000 pounds gross vehicle weight, and is not a
medium-duty passenger vehicle as defined in 40 CFR 86.1803-01 as in
effect on December 20, 2007.
3. Amend Sec. 523.3 by revising paragraph (a) to read as follows:
Sec. 523.3 Automobile.
(a) An automobile is any 4-wheeled vehicle that is propelled by
fuel, or by alternative fuel, manufactured primarily for use on public
streets, roads, and highways and rated at less than 10,000 pounds gross
vehicle weight, except:
(1) A vehicle operated only on a rail line;
(2) A vehicle manufactured in different stages by 2 or more
manufacturers, if no intermediate or final-stage manufacturer of that
vehicle manufactures more than 10,000 multi-stage vehicles per year; or
(3) A work truck.
* * * * *
4. Amend Sec. 523.5 by revising the introductory text, and
paragraphs (a) introductory text, (b) introductory text, (b)(1), and
(b)(2) introductory text to read as follows:
Sec. 523.5 Non-passenger automobile.
A non-passenger automobile means an automobile that is not a
passenger automobile or a work truck and includes vehicles described in
paragraphs (a) or (b) of this section:
(a) An automobile designed to perform at least one of the following
functions:
* * * * *
(b) An automobile capable of off-highway operation, as indicated by
the fact that it:
(1)(i) Has 4-wheel drive or
(ii) Is rated at more than 6,000 pounds gross vehicle weight; and
(2) Has at least four of the following characteristics--
* * * * *
PART 531--PASSENGER AUTOMOBILE AVERAGE FUEL ECONOMY STANDARDS
5. The authority citation for part 531 continues to read as
follows:
Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR
1.50.
6. Amend Sec. 531.5 by revising paragraph (a), redesignating
paragraph (b) as paragraph (d), and adding paragraphs (b) and (c) to
read as follows:
Sec. 531.5 Fuel economy standards.
(a) Except as provided in paragraph (d) of this section, each
manufacturer of passenger automobiles shall comply with the average
fuel economy standards in Table I, expressed in miles per gallon, in
the model year specified as applicable:
[[Page 24482]]
Table I
------------------------------------------------------------------------
Model year Standard
------------------------------------------------------------------------
1978.................................................... 18.0
1979.................................................... 19.0
1980.................................................... 20.0
1981.................................................... 22.0
1982.................................................... 24.0
1983.................................................... 26.0
1984.................................................... 27.0
1985.................................................... 27.5
1986.................................................... 26.0
1987.................................................... 26.0
1988.................................................... 26.0
1989.................................................... 26.5
1990-2010............................................... 27.5
------------------------------------------------------------------------
(b) For each of model years 2011 through 2015, a manufacturer's
passenger automobile fleet shall comply with the fuel economy level
calculated for that model year according to Figure 1 and the
appropriate values in Table II.
[GRAPHIC] [TIFF OMITTED] TP02MY08.042
Where:
N is the total number (sum) of passenger automobiles produced by
a manufacturer,
Ni is the number (sum) of the ith model
passenger automobile produced by the manufacturer, and
Ti is fuel economy target of the ith model
passenger automobile, which is determined according to the following
formula, rounded to the nearest hundredth:
[GRAPHIC] [TIFF OMITTED] TP02MY08.043
Where,
Parameters a, b, c, and d are defined in Table II;
e = 2.718; and
x = footprint (in square feet, rounded to the nearest tenth) of
the vehicle model.
Table II.--Parameters for the Passenger Automobile Fuel Economy Targets
----------------------------------------------------------------------------------------------------------------
Parameters
Model year ---------------------------------------------------
a b c d
----------------------------------------------------------------------------------------------------------------
2011........................................................ 38.20 25.80 45.88 1.60
2012........................................................ 40.00 27.40 45.79 1.54
2013........................................................ 40.80 28.70 45.70 1.48
2014........................................................ 41.20 29.90 45.61 1.42
2015........................................................ 41.70 31.20 45.51 1.36
----------------------------------------------------------------------------------------------------------------
(c) In addition to the requirement of paragraph (b) of this
section, each manufacturer shall also meet the minimum standard for
domestically manufactured passenger automobiles expressed in Table III:
Table III
------------------------------------------------------------------------
Minimum
Model year standard
------------------------------------------------------------------------
2011....................................................... 28.7
2012....................................................... 30.2
2013....................................................... 31.3
2014....................................................... 32.0
2015....................................................... 32.9
------------------------------------------------------------------------
* * * * *
7. Part 531 is amended by adding the following new Appendix A at
the end:
Appendix A to Part 531--Preemption of State Regulations Regulating
Tailpipe Carbon Dioxide Emissions From Automobiles
(a) To the extent that any state regulation regulates tailpipe
carbon dioxide emissions from automobiles, such a regulation relates
to average fuel economy standards within the meaning of 49 U.S.C.
32919.
1. Automobile fuel economy is directly and very substantially
related to automobile tailpipe emissions of carbon dioxide.
2. Carbon dioxide is the natural by-product of automobile fuel
consumption.
3. The most significant and controlling factor in making the
measurements necessary to determine the compliance of automobiles
with the fuel economy standards in this Part is their rate of
tailpipe carbon dioxide emissions.
4. Most of the technologically feasible reduction of tailpipe
emissions of carbon dioxide is achievable only through improving
fuel economy, thereby reducing both the consumption of fuel and the
creation and emission of carbon dioxide.
5. Accordingly, as a practical matter, regulating fuel economy
controls the amount of tailpipe emissions of carbon dioxide to a
very substantial extent, and regulating the tailpipe emissions of
carbon dioxide controls fuel economy to a very substantial extent.
(b) As a state regulation related to fuel economy standards, any
state regulation regulating tailpipe carbon dioxide emissions from
automobiles is expressly preempted under 49 U.S.C. 32919.
(c) A state regulation regulating tailpipe carbon dioxide
emissions from automobiles, particularly a regulation that is not
attribute-based and does not separately regulate passenger cars and
light trucks, conflicts with
1. The fuel economy standards in this Part,
2. The judgments made by the agency in establishing those
standards, and
3. The achievement of the objectives of the statute (49 U.S.C.
Chapter 329) under which those standards were established, including
objectives relating to reducing fuel consumption in a manner and to
the extent consistent with manufacturer flexibility, consumer
choice, and automobile safety.
(d) Any state regulation regulating tailpipe carbon dioxide
emissions from automobiles is impliedly preempted under 49 U.S.C.
Chapter 329.
PART 533--LIGHT TRUCK FUEL ECONOMY STANDARDS
8. The authority citation for part 533 continues to read as
follows:
Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR
1.50.
9. Amend Sec. 533.5 by revising Table V of paragraph (a) and
revising paragraph (h) to read as follows:
[[Page 24483]]
Sec. 533.5 Requirements.
(a) * * *
Table V.--Parameters for the Light Truck Fuel Economy Targets
----------------------------------------------------------------------------------------------------------------
Parameters
Model year ---------------------------------------------------------------
a b c d
----------------------------------------------------------------------------------------------------------------
2008............................................ 28.56 19.99 49.30 5.58
2009............................................ 30.07 20.87 48.00 5.81
2010............................................ 29.96 21.20 48.49 5.50
2011............................................ 30.90 21.50 51.94 3.80
2012............................................ 32.70 22.80 51.98 3.82
2013............................................ 34.10 23.80 52.02 3.84
2014............................................ 34.10 24.30 52.06 3.86
2015............................................ 34.30 24.80 52.11 3.87
----------------------------------------------------------------------------------------------------------------
* * * * *
(h) For each of model years 2011-2015, a manufacturer's light truck
fleet shall comply with the fuel economy level calculated for that
model year according to Figure 1 and the appropriate values in Table V.
10. Part 533 is amended by adding the following new Appendix B at
the end:
Appendix B to Part 533--Preemption of state regulations regulating
tailpipe carbon dioxide emissions from automobiles
(a) To the extent that any state regulation regulates tailpipe
carbon dioxide emissions from automobiles, such a regulation relates
to average fuel economy standards within the meaning of 49 U.S.C.
32919.
1. Automobile fuel economy is directly and very substantially
related to automobile tailpipe emissions of carbon dioxide.
2. Carbon dioxide is the natural by-product of automobile fuel
consumption.
3. The most significant and controlling factor in making the
measurements necessary to determine the compliance of automobiles
with the fuel economy standards in this Part is their rate of
tailpipe carbon dioxide emissions.
4. Most of the technologically feasible reduction of tailpipe
emissions of carbon dioxide is achievable only through improving
fuel economy, thereby reducing both the consumption of fuel and the
creation and emission of carbon dioxide.
5. Accordingly, as a practical matter, regulating fuel economy
controls the amount of tailpipe emissions of carbon dioxide to a
very substantial extent, and regulating the tailpipe emissions of
carbon dioxide controls fuel economy to a very substantial extent.
(b) As a state regulation related to fuel economy standards, any
state regulation regulating tailpipe carbon dioxide emissions from
automobiles is expressly preempted under 49 U.S.C. 32919.
(c) A state regulation regulating tailpipe carbon dioxide
emissions from automobiles, particularly a regulation that is not
attribute-based and does not separately regulate passenger cars and
light trucks, conflicts with
1. The fuel economy standards in this Part,
2. The judgments made by the agency in establishing those
standards, and
3. The achievement of the objectives of the statute (49 U.S.C.
Chapter 329) under which those standards were established, including
objectives relating to reducing fuel consumption in a manner and to
the extent consistent with manufacturer flexibility, consumer
choice, and automobile safety.
(d) Any state regulation regulating tailpipe carbon dioxide
emissions from automobiles is impliedly preempted under 49 U.S.C.
Chapter 329.
PART 534--RIGHTS AND RESPONSIBILITIES OF MANUFACTURERS IN THE
CONTEXT OF CHANGES IN CORPORATE RELATIONSHIPS
11. The authority citation for part 534 continues to read as
follows:
Authority: 49 U.S.C. 32901; delegation of authority at 49 CFR
1.50.
12. Amend Sec. 534.4 by revising paragraphs (c) and (d) to read as
follows:
Sec. 534.4 Successors and predecessors.
* * * * *
(c) Credits earned by a predecessor before or during model year
2008 may be used by a successor, subject to the availability of credits
and the general three-year restriction on carrying credits forward and
the general three-year restriction on carrying credits backward.
Credits earned by a predecessor after model year 2008 may be used by a
successor, subject to the availability of credits and the general five-
year restriction on carrying credits forward and the general three-year
restriction on carrying credits backward.
(d) Credits earned by a successor before or during model year 2008
may be used to offset a predecessor's shortfall, subject to the
availability of credits and the general three-year restriction on
carrying credits forward and the general three-year restriction on
carrying credits backward. Credits earned by a successor after model
year 2008 may be used to offset a predecessor's shortfall, subject to
the availability of credits and the general five-year restriction on
carrying credits forward and the general three-year restriction on
carrying credits backward.
13. Amend Sec. 534.5 by revising paragraphs (c) and (d) to read as
follows:
Sec. 534.5 Manufacturers within control relationships.
* * * * *
(c) Credits of a manufacturer within a control relationship may be
used by the group of manufacturers within the control relationship to
offset shortfalls, subject to the agreement of the other manufacturers,
the availability of the credits, and the general three-year restriction
on carrying credits forward or backward prior to or during model year
2008, or the general five-year restriction on carrying credits forward
and the general three-year restriction on carrying credits backward
after model year 2008.
(d) If a manufacturer within a group of manufacturers is sold or
otherwise spun off so that it is no longer within that control
relationship, the manufacturer may use credits that were earned by the
group of manufacturers within the control relationship while the
manufacturer was within that relationship, subject to the agreement of
the other manufacturers, the availability of the credits, and the
general three-year restriction on carrying credits forward or backward
prior to or during model year 2008, or the general five-year
restriction on carrying credits forward and the general three-year
restriction on carrying credits backward after model year 2008.
* * * * *
PART 535--[REMOVED]
14. Remove Part 535.
15. Part 536 is added to read as follows:
[[Page 24484]]
PART 536--TRANSFER AND TRADING OF FUEL ECONOMY CREDITS
Sec.
536.1 Scope.
536.2 Application.
536.3 Definitions.
536.4 Credits.
536.5 Trading infrastructure.
536.6 Treatment of credits earned prior to model year 2011.
536.7 Treatment of carryback credits.
536.8 Conditions for trading of credits.
536.9 Use of credits with regard to the domestically manufactured
passenger automobile minimum standard.
536.10 Treatment of dual-fuel and alternative fuel vehicles--
consistency with 49 CFR Part 538.
Authority: 49 U.S.C. 32903; delegation of authority at 49 CFR
1.50.
Sec. 536.1 Scope.
This part establishes regulations governing the use and application
of CAFE credits up to three model years before and five model years
after the model year in which the credit was earned. It also specifies
requirements for manufacturers wishing to transfer fuel economy credits
between their fleets and for manufacturers and other persons wishing to
trade fuel economy credits to achieve compliance with prescribed fuel
economy standards.
Sec. 536.2 Application.
This part applies to all credits earned (and transferable and
tradable) for exceeding applicable average fuel economy standards in a
given model year for domestically manufactured passenger cars, imported
passenger cars, and light trucks.
Sec. 536.3 Definitions.
(a) Statutory terms. In this part, all terms defined in 49 U.S.C.
32901(a) are used in their statutory meaning.
(b) Other terms. As used in this part:
Above standard fuel economy means, with respect to a compliance
category, that the automobiles manufactured by a manufacturer in that
compliance category in a particular model year have greater average
fuel economy (calculated in a manner that reflects the incentives for
alternative fuel automobiles per 49 U.S.C. 32905) than that
manufacturer's fuel economy standard for that compliance category and
model year.
Adjustment factor means a factor used to adjust the value of a
traded credit for compliance purposes to ensure that the compliance
value of the credit reflects the total volume of oil saved when the
credit was earned.
Below standard fuel economy means, with respect to a compliance
category, that the automobiles manufactured by a manufacturer in that
compliance category in a particular model year have lower average fuel
economy (calculated in a manner that reflects the incentives for
alternative fuel automobiles per 49 U.S.C. 32905) than that
manufacturer's fuel economy standard for that compliance category and
model year.
Compliance. (1) Compliance means a manufacturer achieves compliance
in a particular compliance category when:
(i) The average fuel economy of the vehicles in that category
exceed or meet the fuel economy standard for that category, or
(ii) The average fuel economy of the vehicles in that category do
not meet the fuel economy standard for that category, but the
manufacturer proffers a sufficient number of valid credits, adjusted
for total oil savings, to cover the gap between the average fuel
economy of the vehicles in that category and the required average fuel
economy.
(2) A manufacturer achieves compliance for its fleet if conditions
(1)(i) or (1)(ii) of this definition are simultaneously met for all
compliance categories.
Compliance category means any of three categories of automobiles
subject to Federal fuel economy regulations. The three compliance
categories recognized by 49 U.S.C. 32903(g)(6) are domestically
manufactured passenger automobiles, imported passenger automobiles, and
non-passenger automobiles (``light trucks'').
Credit holder (or holder) means a legal person that has valid
possession of credits, either because they are a manufacturer who has
earned credits by exceeding an applicable fuel economy standard, or
because they are a designated recipient who has received credits from
another holder. Credit holders need not be manufacturers, although all
manufacturers may be credit holders.
Credits (or fuel economy credits) means an earned or purchased
allowance recognizing that the average fuel economy of a particular
manufacturer's vehicles within a particular compliance category and
model year exceeds that manufacturer's fuel economy standard for that
compliance category and model year. One credit is equal to \1/10\ of a
mile per gallon above the fuel economy standard per one vehicle within
a compliance category. Credits are denominated according to model year
in which they are earned (vintage), originating manufacturer, and
compliance category.
Expiry date means the model year after which fuel economy credits
may no longer be used to achieve compliance with fuel economy
regulations. Expiry Dates are calculated in terms of model years: For
example, if a manufacturer earns credits for model year 2011, these
credits may be used for compliance in model years 2008-2016.
Fleet means all automobiles that are manufactured by a manufacturer
in a particular model year and are subject to fuel economy standards
under 49 CFR Part 531 and 533. For the purposes of this regulation, a
manufacturer's fleet means all domestically manufactured and imported
passenger automobiles and non-passenger automobiles (``light trucks'').
``Work trucks'' and medium and heavy trucks are not included in this
definition for purposes of this regulation.
Light truck means the same as ``non-passenger automobile,'' as that
term is defined in 49 U.S.C. 32901(a)(17), and as ``light truck,'' as
that term is defined at 49 CFR 523.5.
Originating manufacturer means the manufacturer that originally
earned a particular credit. Each credit earned will be identified with
the name of the originating manufacturer.
Trade means the receipt by NHTSA of an instruction from a credit
holder to place one of its credits in the account of another credit
holder. A credit that has been traded can be identified because the
originating manufacturer will be a different party than the current
credit holder. If a credit has been traded to another credit holder and
is subsequently traded back to the originating manufacture, it will be
deemed not to have been traded for compliance purposes.
Transfer means the application by a manufacturer of credits earned
by that manufacturer in one compliance category or credits acquired by
trade (and originally earned by another manufacturer in that category)
to achieve compliance with fuel economy standards with respect to a
different compliance category. For example, a manufacturer may purchase
light truck credits from another manufacturer, and transfer them to
achieve compliance in the manufacturer's domestically manufactured
passenger car fleet.
Vintage means, with respect to a credit, the model year in which
the credit was earned.
Sec. 536.4 Credits.
(a) Type and vintage. All credits are identified and distinguished
in the accounts by originating manufacturer, compliance category, and
model year of origin (vintage).
(b) Application of credits. All credits earned and applied are
calculated, per 49 U.S.C. 32903(c), in tenths of a mile per gallon by
which the average fuel economy of vehicles in a particular
[[Page 24485]]
compliance category manufactured by a manufacturer in the model year in
which the credits are earned exceeds the applicable average fuel
economy standard, multiplied by the number of vehicles sold in that
compliance category. However, credits that have been traded, defined as
credits that are used for compliance by a manufacturer other than the
originating manufacturer, are valued for compliance purposes using the
adjustment factor specified in paragraph (c) of this section, pursuant
to the ``total oil savings'' requirement of 49 U.S.C. 32903(f)(1).
(c) Adjustment factor. Vehicle fuel economy, measured in miles per
gallon (mpg), is adjusted to ensure constant oil savings when traded
between manufacturers. Adjusted mpg is shown by multiplying the value
of each credit (with a nominal value of 0.1 mpg per vehicle) by an
adjustment factor calculated by the following formula:
[GRAPHIC] [TIFF OMITTED] TP02MY08.044
Where:
A = Adjustment Factor applied to traded credits by multiplying mpg
for a particular credit;
VMTe = Lifetime vehicle miles traveled for the compliance category
in which the credit was earned: 152,000 miles for domestically
manufactured and imported passenger cars, 179,000 miles for light
trucks;
VMTu = Lifetime vehicle miles traveled for the compliance category
in which the credit is used for compliance: 152,000 miles for
domestically manufactured and imported passenger cars, 179,000 miles
for light trucks;
MPGe = Fuel economy standard for the originating manufacturer,
compliance category, and model year in which the credit was earned;
MPGu = Fuel economy standard for the manufacturer, compliance
category, and model year in which the credit will be used.
Sec. 536.5 Trading Infrastructure.
(a) Accounts. NHTSA maintains ``accounts'' for each credit holder.
The account consists of a balance of credits in each compliance
category and vintage held by the holder.
(b) Who may hold credits. Every manufacturer subject to fuel
economy standards under 49 CFR parts 531 or 533 is automatically an
account holder. If the manufacturer earns credits pursuant to this
part, or receives credits from another party, so that the
manufacturer's account has a non-zero balance, then the manufacturer is
also a credit holder. Any party designated as a recipient of credits by
a current credit holder will receive an account from NHTSA and become a
credit holder, subject to the following conditions:
(1) A designated recipient must provide name, address, contacting
information, and a valid taxpayer identification number or social
security number;
(2) NHTSA does not grant a request to open a new account by any
party other than a party designated as a recipient of credits by a
credit holder;
(3) NHTSA maintains accounts with zero balances for a period of
time, but reserves the right to close accounts that have had zero
balances for more than one year.
(c) Automatic debits and credits of accounts.
(1) Upon receipt of a verified instruction to trade credits from an
existing credit holder, NHTSA verifies the presence of sufficient
credits in the account of the trader, then debit the account of the
trader and credit the account of the recipient with credits of the
vintage, origin, and compliance category designated. If the recipient
is not a current account holder, NHTSA establishes the account subject
to the conditions described in paragraph (b) of this section, and
shifts the credits to the newly-opened account.
(2) NHTSA automatically deletes unused credits from holders'
accounts as they reach their expiry date.
(d) Compliance.
(1) NHTSA assesses compliance with fuel economy standards each
year, utilizing the certified and reported CAFE data provided by the
Environmental Protection Agency for enforcement of the CAFE program
pursuant to 49 U.S.C. 32904(e). Credit values are calculated based on
the CAFE data from the EPA. If a particular compliance category within
a manufacturer's fleet has above standard fuel economy, NHTSA adds
credits to the manufacturer's account for that compliance category and
vintage in the appropriate amount by which the manufacturer has
exceeded the applicable standard.
(2) If a manufacturer's vehicles in a particular compliance
category have below standard fuel economy, NHTSA automatically debits
the manufacturer's unexpired credits, earned or obtained through
trading, within the compliance category from the manufacturer's
account, beginning with the oldest credits held by the manufacturer.
(3) If there are insufficient credits within the compliance
category to enable the manufacturer to achieve compliance in that
category, NHTSA automatically transfers any available existing surplus
credits, including credits obtained through trading, from other
compliance categories to the extent permitted by 49 U.S.C. 32903(g)(3)
and this regulation, beginning with the oldest vintage of available
surplus credits.
(4) The value, when used for compliance, of any credits received
via trade is adjusted, using the adjustment factor described in Sec.
536.4(c), pursuant to 49 U.S.C. 32902(f)(1).
(5) If a manufacturer is still unable to comply with the applicable
standards for one or more compliance categories after NHTSA has applied
all available credits from within and without the compliance category,
NHTSA shall inform the manufacturer of its non-compliant status and
their liability for fines, which may be avoided by submitting
additional credits obtained through trading, or deferred by submitting
a carryback plan for NHTSA's approval pursuant to 49 U.S.C.
32903(b)(2).
(6) NHTSA will enforce the CAFE program using the certified and
reported CAFE values provided by the Environmental Protection Agency as
required by 49 U.S.C. 32904(c) and (e). Credit values will be
calculated from the CAFE numbers issued from EPA.
(e) Reporting.
(1) NHTSA periodically publishes the names and credit holdings of
all credit holders. NHTSA does not publish individual transactions, nor
respond to individual requests for updated balances from any party
other than the account holder.
[[Page 24486]]
(2) NHTSA issues an annual credit status letter to each party that
is a credit holder at that time. The letter to a credit holder includes
a credit accounting record that identifies the credit status of the
credit holder including any activity (earned, expired, transferred,
traded, carry-forward and carry-back credit transactions/allocations)
that took place during the identified activity period.
Sec. 536.6 Treatment of credits earned prior to model year 2011.
(a) Credits earned in a compliance category before and during model
year 2008 may be applied by the manufacturer that earned them to
carryback plans for that compliance category approved up to three model
years prior to the year in which the credits were earned, or may be
applied to compliance in that compliance category for up to three model
years after the year in which the credits were earned.
(b) Credits earned in a compliance category after model year 2008
may be applied by the manufacturer that earned them to carryback plans
for that compliance category approved up to three years prior to the
year in which the credits were earned, or may be held or applied for up
to five model years after the year in which the credits were earned.
(c) Credits earned in a compliance category prior to model year
2011 may not be transferred or traded by a manufacturer to another
compliance category.
Sec. 536.7 Treatment of carryback credits.
(a) Credits earned in a compliance category in any model year may
be used in carryback plans approved by NHTSA, pursuant to 49 U.S.C.
32903(b), for up to three model years prior to the year in which the
credit was earned.
(b) For purposes of this regulation, NHTSA will treat the use of
future credits for compliance, as through a carryback plan, as a
deferral of penalties for non-compliance with an applicable fuel
economy standard.
(c) If NHTSA receives and approves a manufacturer's carryback plan
to earn future credits within the following three model years in order
to comply with current regulatory obligations, NHTSA will defer levying
fines for non-compliance until the date(s) when the manufacturer's
approved plan indicates that credits will be earned or acquired to
achieve compliance, and upon receiving confirmed CAFE data from EPA. If
the manufacturer fails to acquire or earn sufficient credits by the
plan dates, NHTSA will initiate compliance proceedings.
(d) In the event that NHTSA fails to receive or approve a plan for
a non-compliant manufacturer, NHTSA will levy fines pursuant to
statute. If within three years, the non-compliant manufacturer earns or
acquires additional credits to reduce or eliminate the non-compliance,
NHTSA will reduce any fines owed, or repay fines to the extent that
credits received reduce the non-compliance.
(e) No credits from any source will be accepted in lieu of
compliance after three model years after the non-compliance.
(f) If a manufacturer is unable to comply in any compliance
category in any model year, NHTSA will automatically deduct and
extinguish any eligible credits subsequently held, earned, or acquired
to reduce the oldest instance of non-compliance before allowing credits
to accumulate or applying credits to achieve compliance in later years.
(g) A carryback plan may not include the use of credits earned
before model year 2011 that have been subsequently traded or
transferred to another party.
Sec. 536.8 Conditions for trading of credits.
(a) Trading of credits. If a credit holder wishes to trade credits
to another party, the current credit holder and the receiving party
must jointly issue an instruction to NHTSA, identifying the quantity,
vintage, compliance category, and originator of the credits to be
traded. If the recipient is not a current account holder, the recipient
must provide sufficient information for NHTSA to establish an account
for the recipient. Once an account has been established or identified
for the recipient, NHTSA completes the trade by debiting the
transferor's account and crediting the recipient's account. NHTSA will
track the quantity, vintage, compliance category, and originator of all
credits held or traded by all account-holders.
(b) Trading between and within compliance categories. For credits
earned in model year 2011 or thereafter, and used to satisfy compliance
obligations for model year 2011 or thereafter:
(1) Manufacturers may use credits originally earned by another
manufacturer in a particular compliance category to satisfy compliance
obligations within the same compliance category.
(2) Once a manufacturer acquires by trade credits originally earned
by another manufacturer in a particular compliance category, the
manufacturer may transfer the credits to satisfy its compliance
obligations in a different compliance category, but only to the extent
that the CAFE increase attributable to the transferred credits does not
exceed the limits in 49 U.S.C. 32903(g)(3). For any compliance
category, the sum of a manufacturer's transferred credits earned by
that manufacturer and transferred credits obtained by that manufacturer
through trade must not exceed that limit.
(c) Changes in corporate ownership and control. Manufacturers must
inform NHTSA of corporate relationship changes to ensure that credit
accounts are identified correctly and credits are assigned and
allocated properly.
(1) In general, if two manufacturers merge in any way, they must
inform NHTSA how they plan to merge their credit accounts. NHTSA will
subsequently assess corporate fuel economy and compliance status of the
merged fleet instead of the original separate fleets.
(2) If a manufacturer divides or divests itself of a portion of its
automobile manufacturing business, it must inform NHTSA how it plans to
divide the manufacturer's credit holdings into two or more accounts.
NHTSA will subsequently distribute holdings as directed by the
manufacturer, subject to provision for reasonably anticipated
compliance obligations.
(3) If a manufacturer is a successor to another manufacturer's
business, it must inform NHTSA how it plans to allocate credits and
resolve liabilities per 49 CFR part 534, Rights and Responsibilities of
Manufacturers in the Context of Corporate Relationships.
(d) No short or forward sales. NHTSA will not honor any
instructions to trade or transfer more credits than are currently held
in any account. NHTSA will not honor instructions to trade or transfer
credits from any future vintage (i.e., credits not yet earned). NHTSA
will not participate in or facilitate contingent trades.
(e) Cancellation of credits. A credit holder may instruct NHTSA to
cancel its currently held credits, specifying the originating
manufacturer, vintage, and compliance category of the credits to be
cancelled. These credits will be permanently null and void; NHTSA will
remove the specific credits from the credit holder's account, and will
not reissue them to any other party.
(f) Errors or fraud in earning credits. If NHTSA determines that a
manufacturer has been credited, through error or fraud, with earning
credits, NHTSA will cancel those credits if possible. If the
manufacturer credited with having earned those credits has already
traded them when the error or
[[Page 24487]]
fraud is discovered, NHTSA will hold the receiving manufacturer
responsible for returning the same or equivalent credits to NHTSA for
cancellation.
(g) Error or fraud in trading. In general, all trades are final and
irrevocable once executed, and may only be reversed by a new, mutually-
agreed transaction. If NHTSA executes an erroneous instruction to trade
credits from one holder to another through error or fraud, NHTSA will
reverse the transaction if possible. If those credits have been traded
away, the recipient holder is responsible for obtaining the same or
equivalent credits for return to the previous holder.
Sec. 536.9 Use of credits with regard to the domestically
manufactured passenger automobile minimum standard.
(a) Transferred or traded credits may not be used, pursuant to 49
U.S.C. 32903(g)(4), to meet the domestically manufactured passenger
automobile minimum standard specified in 49 U.S.C. 32902(b)(4).
(b) Each manufacturer is responsible for compliance with both the
minimum standard and the attribute-based standard.
(c) If a manufacturer's average fuel economy level for domestically
manufactured passenger automobiles is lower than the attribute-based
standard, but higher than the minimum standard, then the manufacturer
may achieve compliance with the attribute-based standard by applying
credits.
(d) If a manufacturer's average fuel economy level for domestically
manufactured passenger automobiles is lower than both the attribute-
based standard and the minimum standard, then the difference between
the attribute-based standard and the minimum standard may be relieved
by the use of credits, but the difference between the minimum standard
and the manufacturer's actual fuel economy level may not be relieved by
credits and will be subject to penalties.
Sec. 536.10 Treatment of dual-fuel and alternative fuel vehicles--
consistency with 49 CFR Part 538.
(a) Statutory alternative fuel and dual-fuel vehicle calculations
are treated as a change in the underlying fuel economy of the vehicle
for purposes of this regulation, not as a credit that may be
transferred or traded. Improvements in alternative fuel or dual fuel
vehicle fuel economy as calculated pursuant to 49 U.S.C. 32905 and
limited by 49 U.S.C. 32906 are therefore attributable only to the
particular compliance category and model year to which the alternative
or dual-fuel vehicle belongs.
(b) If a manufacturer's calculated fuel economy for a particular
compliance category, including any required calculations for
alternative fuel and dual fuel vehicles, is higher or lower than the
applicable fuel economy standard, manufacturers will earn credits or
must apply credits or pay fines equal to the difference between the
calculated fuel economy level in that compliance category and the
applicable standard. Credits earned are the same as any other credits,
and may be held, transferred, or traded by the manufacturer subject to
the limitations of the statute and this regulation.
(c) If a manufacturer builds enough alternative fuel or dual fuel
vehicles to improve the calculated fuel economy in a particular
compliance category by more than the limits set forth in 49 U.S.C.
32906(a), the improvement in fuel economy for compliance purposes is
restricted to the statutory limit. Manufacturers may not earn credits
nor reduce the application of credits or fines for calculated
improvements in fuel economy based on alternative or dual fuel vehicles
beyond the statutory limit.
PART 537--AUTOMOTIVE FUEL ECONOMY REPORTS
16. The authority citation for part 537 continues to read as
follows:
Authority: 49 U.S.C. 32907, delegation of authority at 49 CFR
1.50.
17. Amend Sec. 537.7 by revising paragraphs (b) and (c)(4)(xvi)(A)
to read as follows:
Sec. 537.7 Pre-model year and mid-model year reports.
* * * * *
(b) Projected average and target fuel economy. (1) State the
projected average fuel economy for the manufacturer's automobiles
determined in accordance with Sec. 537.9 and based upon the fuel
economy values and projected sales figures provided under paragraph
(c)(2) of this section.
(2) State the projected final average fuel economy that the
manufacturer anticipates having if changes implemented during the model
year will cause that average to be different from the average fuel
economy projected under paragraph (b)(1) of this section.
(3) State the projected target fuel economy for the manufacturer's
passenger automobiles and light trucks determined in accordance with 49
CFR 531.5(c) and 49 CFR 533.5(h) and based upon the projected sales
figures provided under paragraph (c)(2) of this section.
(4) State the projected final target fuel economy that the
manufacturer anticipates having if changes implemented during the model
year will cause the targets to be different from the target fuel
economy projected under paragraph (b)(3) of this section.
(5) State whether the manufacturer believes that the projections it
provides under paragraphs (b)(2) and (b)(4) of this section, or if it
does not provide an average or target under those paragraphs, the
projections it provides under paragraphs (b)(1) and (b)(3) of this
section, sufficiently represent the manufacturer's average and target
fuel economy for the current model year for purposes of the Act. In the
case of a manufacturer that believes that the projections are not
sufficiently representative for those purposes, state the specific
nature of any reason for the insufficiency and the specific additional
testing or derivation of fuel economy values by analytical methods
believed by the manufacturer necessary to eliminate the insufficiency
and any plans of the manufacturer to undertake that testing or
derivation voluntarily and submit the resulting data to the
Environmental Protection Agency under 40 CFR 600.509.
* * * * *
(c) * * *
(4) * * *
(xvi)(A) In the case of passenger automobiles:
(1) Interior volume index, determined in accordance with subpart D
of 40 CFR part 600,
(2) Body style,
(3) Beginning model year 2010, track width as defined in 49 CFR
523.2,
(4) Beginning model year 2010, wheelbase as defined in 49 CFR
523.2, and
(5) Beginning model year 2010, footprint as defined in 49 CFR
523.2.
* * * * *
Issued: April 22, 2008.
Nicole R. Nason,
Administrator.
[FR Doc. 08-1186 Filed 4-23-08; 9:16 am]
BILLING CODE 4910-59-P